Writings – Rejecting a proposal for Mediation

Rejecting a proposal for Mediation 

When might a court exercise its discretion to refuse costs to a party who, although successful in proceedings, refused to entertain such a proposal?

Note on the development of English case law prepared by Rebecca Graydon BL.

 

Dunnett v Railtrack [2002] 1 WLR 2434

In Dunnett the court considered the conduct of the defendant party, who was ultimately successful but had refused to contemplate alternative dispute resolution, in exercising its discretion to decide the question of costs.

Briefly, the case was brought by a claimant for damages in negligence arising out of the death of three of her horses, which had been struck by an express train operated by the defendant`s line. The action was dismissed, and the plaintiff appealed.  The plaintiff had acted initially as litigant in person, and it was only subsequently that she was represented under the bar’s pro bono scheme.  The defendant had made an offer, albeit one which the plaintiff did not consider to be reasonable or fair.  The court observed that, in the usual way, having dismissed the action, it would follow that she should pay the defendant’s costs.

The appeal court observed that the trial judge before whom she had appeared had advised her that she was to “explore the possibility of alternative dispute resolution, so as to get shot of this case as soon as possible. She has indicated that she is in favour of doing that, if the other side are also willing to do that. I can’t say any more than about that, beyond suggesting that she tries it.”

The defendant instructed their solicitors to turn this proposal down; they were not willing even to consider the possibility of alternative dispute resolution. The trial judge to whom the matter came back was critical of the defendant`s solicitors in opposing this.  The Appeal Court observed that passions were running very high on the claimant`s side in relation to the death of her horses and the attitude that Railtrack, no doubt on sound legal advice, were adopting. The court observed that this was a case in which it appeared a real effort should have made by way of alterative dispute resolution to see if the matter could be satisfactorily resolved by an experienced mediator, without the parties having to incur the no doubt heavy legal costs of contesting the matter at trial.

The Civil Procedure Rules (CPR) on alternative dispute resolution provides as follows

“the encouragement and facilitating of ADR by the court is an aspect of active case management which in turn is an aspect of achieving the overriding objective. The parties have a duty to help the court in furthering that objective and, therefore, they have a duty to consider seriously the possibility of ADR procedures being utilised for the purpose of resolving their claim or particular issues within it when encouraged by the court to do so. The discharge of the parties` duty in this respect may be relevant to the question of costs because, when exercising its discretion as to costs, the court must have regard to all of the circumstances, including the conduct of all the parties.”

When queried by the court as to why the defendants were not willing to contemplate alternative dispute resolution, it was submitted on behalf of the defendant that this would necessarily involve the payment of money, which the defendants were not willing to contemplate over and above the sum which they had already offered. The court remarked that this appeared to be a misunderstanding of the purpose of alternative dispute resolution, and went on to say that “skilled mediators are now able to achieve results satisfactory to both parties in many cases which are quite beyond the power of lawyers and courts to achieve.”  It said further that when parties are brought together on neutral soil with a skilled mediator to help them resolve their differences it may very well result in the parties shaking hands at the end and feeling that they have gone away having settled the dispute on terms with which they are happy to live.

Notably, the court remarked “a mediator may be able to provide solutions which are beyond the powers of the court to provide,” and the court referred to instances known to the court in claims against the police, which could give rise to as much passion as a claim of this kind where the claimant’s precious horses were killed on a railway line, in which an apology is all the claimant is really seeking and the money side of the matter falls away.  [As an observation, this may be particularly relevant to a discussion of mediation in the context of, for example, defamation proceedings.]

Ultimately, the court found that given the refusal of the defendant to contemplate alternative dispute resolution at a stage before the costs of the appeal started to flow, the court did not find it appropriate to take into account the offers made such that the defendant could recover costs from the unsuccessful plaintiff.  The court concluded that the appropriate order to make on appeal was ‘no order as to costs’.  In effect, the successful defendant was unsuccessful in recovering costs for reasons of their failure to contemplate alternative dispute resolution in accordance with the Civil Procedure Rules.

 

Rolf v De Guerin [2011] EWCA Civ 78

This was an appeal solely about costs. In the opening lines of its judgment the court referred to it as a sad case about lost opportunities for mediation, and suggested that it demonstrated, in a particular class of dispute, how wasteful and destructive litigation can be.

Briefly, the case concerned a small building contract between a homeowner and builder. Four days of evidence were heard before the trial judge, who referred to it as a “very distressing dispute.” The plaintiff had made an offer under the civil procedure rules to settle and/or mediate the action, which offer the defendant rejected until shortly before the commencement of the trial. At trial the court found in the plaintiff’s favour in respect of only a fraction of the claim, and otherwise dismissed her claim, ordering her to pay the defendant`s costs after the date of expiry of her offer (which offer the Court did not consider to be realistic). On appeal the court was asked to consider whether the trial judge erred in making a costs order.

It was submitted on behalf of the plaintiff that since she was not awarded more in damages by the judge`s decision the offer was essentially irrelevant, other than to show a willingness on her part to settle, as did her offer to mediate and to meet to discuss settlement. The court allowed the appeal and exercised its discretion anew, making no order as to costs.

No order as to costs was made on the grounds, inter alia, that the plaintiff had a willingness to settle, which was spurned by the defendant until it was too late.  The court described the defendant’s reasons for declining mediation settlement negotiations as “not seeming to hold water.”  The court said:

“as for wanting his day in court, that of course is a reason why the courts have been unwilling to compel parties to mediate rather than litigate, but it does not seem to me to be an adequate response to a proper judicial concern that parties should respond reasonably to offers to mediate or settle and that their conduct in this respect can be taken into account in awarding costs.”

 

Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002

Here the court gave detailed consideration to the circumstances in which it might be said that a party had acted unreasonably in refusing alternative dispute resolution and listed some factors which it may take into account, these are: –

the nature of the case,

its merits

the extent to which other settlement methods had been attempted,

its cost and delay (timing of the offer to mediate), and

whether it had reasonable prospects of success.

In Halsey the court said that an unusual order (refusing costs to a winner) on the ground of a refusal to mediate always had to be justified, with the burden on the party seeking such an order to show that the refusal was unreasonable.  The court held:

1.    that to oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the court

2.    that in deciding whether to deprive a successful party of some or all of his costs on the grounds that he refused to agree to alternative dispute resolution, it had to be borne in mind that such an order was an exception to the general rule and that the burden was on the unsuccessful party to show why the general rule should be departed from

3.    that such departure was not justified unless it was shown that successful litigant acted unreasonably having regard to all of the circumstances of the case

4.    that there was no reason for the court to be particularly disposed to make an adverse costs order were the successful litigant was a public body

On the facts in Halsey the court held that in neither case before it had the refusal to agree to mediation been unreasonable.  Factors which the court considered relevant to take into consideration in determining the reasonableness or otherwise were the likelihood or otherwise that the mediation would have been successful, the expense of the mediation relative to the costs of the trial, and the timing of the offer of mediation, which in Halsey came comparatively late in the litigation after substantial costs has already been incurred.

The court added that where a successful party refuses to agree to alternative dispute resolution despite the court’s encouragement, that is a factor which the court will take into account when deciding whether his refusal was unreasonable, and the stronger the encouragement, the easier it will be for the unsuccessful party to discharge the burden of showing that the successful party’s refusal was unreasonable.  Halsey was not a case where the court had made any order encouraging the use of ADR and therefore was not a case where a party refused to even consider ADR despite a court order that it should do so.

In Halsey the court said “We recognise that mediation has a number of advantages over the court process. It is usually less expensive than litigation which goes all the way to judgment, although it should not be overlooked that most cases are settled by negotiation in the ordinary way. Mediation provides litigants with a wider range of solutions than those available in litigation, for example, an apology, an explanation, the continuation of existing professional or business relationship perhaps on new terms, and an agreement by one party to something without existing legal obligation to do so.”

Having said that the court said that it is one thing to encourage parties to agree to mediation, but another to order them to do so.  The court said that if it were to

“Compel parties to enter into mediation to which they objected, that would achieve nothing except to add to their costs to be borne by the parties, possibly postpone the time when the court determines the dispute and damage the perceived effectiveness of the ADR process.”

The court went on to say that all members of the legal profession who conduct litigation should now routinely consider with their clients whether their disputes are suitable for ADR, but reiterated that the court`s role was to encourage, not compel.

In Rolf the court said “the nature of the case, a small building dispute between a homeowner and a small builder, is well recognised as one in which trial should be regarded as a solution of last resort, and one which is likely to give a non-satisfactory outcome to the parties at disproportionate cost, to which should be added the cost of disproportionate anxiety.”  The court said that considerations on the grounds as set out above strongly militated in a case of that nature in favour of attempts at settlement, even mediation.  It went on to say the facts of this case disclosed that negotiation and/or mediation would have had reasonable prospects of success. The spurned offers to enter into settlement negotiations or mediation were unreasonable and ought to bear materially on the outcome of the court’s discretion, particularly in this class of case.

In making no order for costs the court added that it “would not have been adverse to an order somewhat, but not very much, in favour of the plaintiff.”

 

Burchell v Bullard EWCA Civ 358  (2005)

In this case the court observed that “Halsey has made plain not only the high rate of a successful outcome being achieved by mediation but also its established importance as a track to a just result, running parallel to that of the court system. Both have a proper part to play in the administration of justice…The parties cannot ignore a proper request to mediate simply because it was made before the claim was issued.”

Irish Law Reform Commission

In its Report on Alternative Dispute Resolution: Mediation and Conciliation, dated November 2010 the Law Reform Commission set out its view: –

“The Commission recognises voluntariness as a fundamental principle of mediation and conciliation. It agrees with the view that voluntary action in mediation [and conciliation] is part of the “magic of mediation” that leads to better results: higher satisfaction with process and outcomes, higher rates of settlement, and greater adherence to settlement terms. Furthermore, voluntary participation in mediation and conciliation is intrinsically linked to other fundamental principles of these processes such as autonomy and party self-determination. Indeed, mediation rhetoric, focusing on empowerment and recognition, is grounded in voluntariness. The Commission recommends that mediation and conciliation are voluntary processes and participation in these processes cannot be compelled. Any party to mediation or conciliation, including the mediator or conciliator, may leave the process at any time and without explanation.”

The Commission specifically recommended that participation in mediation and conciliation be voluntary, and any party involved in a mediation or conciliation, and the mediator or conciliator, may withdraw from the process at any time and without explanation.”