The court has the power to impose costs penalties on parties who refuse to mediate.
The case of Halsey v Milton Keynes General NHS Trust  EWCA Civ 576 provides a non-exhaustive list of considerations to determine whether or not a successful party acted reasonably in refusing to mediate. Known as the Halsey principles, they are as follows:
- The nature of the dispute
- The merits of the case
- Other settlement options
- The costs of mediation
- Any delays
- The prospects of success at trial
- Other factors, including judicial encouragement (for example, where further expert evidence is required) and the impact of any Part 36 offers
It is for the unsuccessful party to show that the successful party acted unreasonably when refusing to mediate.
In most reported decisions regarding unreasonable refusal to mediate, it is the winning party which is penalised for unreasonably refusing to mediate. Two recent decisions, however, provide a warning to unsuccessful parties.
Reid v Buckinghamshire Healthcare NHS Trust  EWHC B21 (Costs)
In Reid v Buckinghamshire Healthcare NHS Trust  EWHC B21 (Costs) Master O'Hare held that costs sanctions for unreasonably refusing to mediate can apply equally to the unsuccessful party if that party unreasonably refuses to mediate.
The claimant brought a clinical negligence claim against the Trust. Having agreed liability, costs (except the costs of assessment) were determined by detailed assessment.
In reviewing the parties' conduct in the build up to the assessment, Master O'Hare noted that the Trust had, for six weeks, ignored a proposal for mediation made by Reid for the purposes of agreeing costs. When the Trust finally responded, it refused the proposal.
Reid then made two subsequent Part 36 offers of settlement to the Trust, with costs to be assessed. Each was swiftly refused by the Trust and the proceedings moved to a detailed assessment hearing.
Upon judgment, Master O'Hare confirmed that the Trust had failed to obtain a costs order which was more beneficial to it than the Part 36 offers made by Reid, and ordered the Trust to pay a penalty equivalent to 10% of the costs as assessed. Further, Master O'Hare considered the Trust's refusal to mediate to be unreasonable in the circumstances, and ordered that the Trust also pay Reid's costs on an indemnity basis from the date of the Trust's receipt of the offer to mediate.
The sanction was imposed because Master O'Hare disapproved of the Trust's conduct.
Bristow v The Princess Alexander Hospital NHS Trust and others  EWHC B22 (Costs)
Similarly, in the case of Bristow v Princess Alexander NHS Trust, the Trust, refused to agree to mediation proposed by the claimant who had sought its costs of a detailed assessment under CPR 47.20.
It Bristow it took three months for the Trust to refuse the mediation offer. Master Simons stated that in doing so, the Trust 'gave no good reason other than the case had already been set down for a detailed assessment', but, he also noted that the Trust had refused to mediate 'because the parties were so far apart'. He did not consider either reason to be a reasonable reason to refuse mediation, stating that parties 'should be encouraged to enter into mediation and if they fail to do so unreasonably then there should be a sanction'.
Accordingly, Master Simons ordered Bristow (the winning claimant) to receive the 80% of the costs awarded to it to be assessed on an indemnity basis. The indemnity costs sanction was imposed to show the court's disapproval of the defendant's conduct in unreasonably refusing to mediate.
The decisions of Reid and Bristow send a warning to those involved in litigation to take all proposals of alternative dispute resolution seriously, or risk being penalised with further costs sanctions.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.