Litigation Brief – can you reasonably refuse to mediate?

July 9, 2024

By: Sam Driver

Ai Law Legal Services
Introduction

Governing the Civil Procedure Rules is one overriding objective, expressed succinctly in CPR 1.1(1): “enabling the court to deal with cases justly and at proportionate cost.”

In furthering the overriding objective, the Civil Procedure Rules place great emphasis on Alternative Dispute Resolution (‘ADR’). There is even a duty on legal advisors to advise their clients of the need to try to settle. The words “see you in court” may lend some drama to the actions of TV lawyers and their clients, but in practice this approach is likely to lead to heavy cost sanctions against any party deemed to have refused ADR ‘unreasonably’.

Cost Sanctions

If the court decides that refusing mediation was unreasonable, it can penalise you when costs are assessed regardless of whether or not you won. This follows the overriding objective of maintaining proportionate cost: it ensures that one side does not lose out financially because of the stubborn insistence of the other side on going to court. Any costs penalty is likely to try to reflect the loss an unreasonable party has caused to the other side by insisting on a court hearing rather than ADR; this could be a considerable amount.

On the other hand, if the court finds refusing to mediate was reasonable, you will not be penalised in the assessment of costs.

This begs the question: when is it reasonable to refuse?

Reasonableness: The Test

The case of Halsey v Milton Keynes NHS Trust[1] lays out a list of factors that guide judges on when refusal to mediate is reasonable. These include:

  • The merits of the case
  • The nature of the dispute
  • Delays – would accepting the offer to mediate have caused unreasonable delays?
  • The prospect that mediation will succeed
  • Judicial encouragement – has a judge told the parties to try mediation?

In the judgment in Halsey, Dyson LJ stated that “in many cases no single factor will be decisive“, and that the factors are not “an exhaustive check-list”. Judges make the decision on whether refusal was reasonable “having regard to all the circumstances of the particular case”. So a good case of reasonable refusal might engage one factor strongly, or engage a number of factors less strongly. Even a case that engages all the factors weakly, though, might still be a case of unreasonable refusal. The court may believe that other factors not even mentioned in Halsey are relevant. This makes it difficult for a layperson to judge when it is reasonable to refuse.

Key Factors to Consider

Setting aside the complexities, you first need to assess your position using the Halsey factors. If you are accused of disreputable behaviour, you should carefully consider these three factors in particular:

  • The nature of the dispute – This factors covers situations where;
    • The parties want to determine points of law, or the meaning of an important document (e.g. a contract that continues to govern their commercial relationship).
  • Where the issues raised are “generally important for those working in a particular trade or market”.[2] This might, for example, include situations where a binding precedent would resolve an ambiguity in the law which causes problems for persons and organisations operating in a particular business.
  • Where one side has alleged that the other has committed fraud or engaged in commercially disreputable conduct. Judges are willing to accept that there are some rare circumstances in which a person needs their ‘day in court’ to clear their name where the claimant has accused them of disreputable conduct.
  • The prospect that the mediation will be successful – If the other side insists that you admit disreputable behaviour, mediation is unlikely to resolve the dispute. Refusing could therefore be reasonable. However, this factor is one of the most complex: the court’s view could be different to the view of the parties on this point. In Halsey, Dyson LJ thought that the court should take account of the fact that mediation often provides parties with a much more realistic view of the merits of their case, and thus often results in parties dropping unmeritorious accusations.[3]
  • The merits of the case – If you are certain to win in court, refusing may be reasonable. Dyson LJ said in Halsey: “The fact that a party reasonably believes that he has a watertight case may well be sufficient justification for a refusal to mediate.” The standard the court applies here is very high: Dyson LJ gives the example of someone who could have successfully applied for summary judgment under CPR 24.2, but did not do so. Summary judgment under CPR 24.2 is only granted to a party if the court believes the other party “has no real prospect of succeeding” in their claim.

The burden is on the unsuccessful party to the litigation to show the successful party was unreasonable in refusing mediation and should therefore be penalised in the costs they are awarded.

Defending a Reputation

These factors lay out some general principles of reasonableness. The detail of the judgment in Halsey gives at least one specific circumstance where the dispute is unsuitable for mediation by its nature: the dispute is unsuitable for mediation by nature if a party wants to defend their reputation. The court process is more suited to defending a reputation than mediation.

In Halsey, Dyson LJ cited the following extract from a report by The Commercial Court Working Party on ADR as evidence for this:

“The Working Party believes that there are many cases within the range of Commercial Court work which do not lend themselves to ADR procedures. […] There may […] be issues which involve allegations of fraud or other commercially disreputable conduct against an individual or group which most probably could not be successfully mediated.”

Since Halsey the courts have consistently agreed that a public court hearing is superior as a way of defending a commercial reputation from attack. This is especially the case when criminality or serious wrongdoing is alleged.

  • In Mason and others v Mills and Reeve (A Firm)[4], the defendants were a firm of solicitors. Davis LJ held that it was in fact reasonable for the defendants to refuse mediation since “Some professional defendants may, entirely reasonably, wish publicly to vindicate themselves at trial in respect of claims which will have been publicly aired by the commencement of proceedings” (Davis LJ at Para.74).
  • In PJSC Aeroflot – Russian Airlines v Leeds and another (Trustees of the estate of Berezovsky) and others[5], Rose LJ held that, where allegations of fraud and serious wrongdoing are made, the proceedings are intrinsically unsuitable for mediation”.

To summarise: if you have been accused of fraud or other criminality, or you otherwise have good cause to defend a commercial or professional reputation, refusing mediation is generally reasonable.

When the Accusations Are Not Enough

Even an accusation of disreputable conduct might not be enough to justify refusing mediation in the following two circumstances:

  1. If the accusation is true

The judgment in the case of Burchell v Bullard & Others[6] reiterated the principle in Halsey that A’s own intransigence cannot be used as a reason for refusing B’s offer of mediation. If A refuses mediation because A does not want to acknowledge B’s true allegation that they have behaved disreputably, the court may find that A has been intransigent, and therefore unreasonable.

  1. If the cost of a court case will be grossly disproportionate to the matter

In the case of Couwenbergh v Valkova[7], the defendants were accused of fraud relating to a will. Ward LJ said in Para. 52 of the judgment in this case that it was “crying out for alternative dispute resolution“, despite the accusation of fraud. Ward LJ’s main reason for strongly encouraging the parties to attend mediation seems to have been concern about the spiralling costs of the case. This is consistent with the judgment in McMillan Williams (a firm) v Range[8], where Tuckey LJ recommended mediation as an alternative to the disproportionate cost of further litigation.

Summary

If you are accused of disreputable behaviour, you might reasonably refuse mediation if:

  • The allegation makes successful mediation impossible
  • You need to protect your commercial or professional reputation
  • Your case is absolutely certain to be successful in court

However, you should be aware that refusal could be unreasonable if:

  • The accusation against you is true
  • Going to court will incur costs disproportionate to the matter

Deciding whether to mediate or not can have serious implications in terms of time, costs and damage to reputation. If you are trying to decide whether to agree to mediation, it is well worth seeking professional legal advice.

Contact Ai Law Today

Our dispute resolution team are on hand to assist you. We can assess the merits of your case and advise on their suitability for mediation. Find out more about our Dispute Resolution services here, or contact us today. 

Sources:

[1] [2004] EWCA Civ 576

[2] Per Dyson LJ, at para.17 of Halsey (citing a 1999 report by The Commercial Court Working Party on ADR)

[3] Dyson LJ quoted approvingly Lightman J’s remarks in Hurst v Leeming [2001] EWHC 1051 (CH) on assessing the prospect that mediation will be successful: “[The Court’s starting point] must surely be the fact that the mediation process itself can and does often bring about a more sensible and more conciliatory attitude on the part of the parties than might otherwise be expected to prevail before the mediation”.

[4] [2012] EWCA Civ 498

[5] [2018] EWHC 1735 (Ch)

[6] [2005] EWCA Civ 358

[7] [2004] EWCA 676

[8] [2004] EWCA Civ 294

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