The Cost Implications Of Refusing To Mediate
Updated: Feb 8
"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. […] But when the parties are brought together on neutral soil with a skilled mediator to help them resolve their differences, it may well be that the mediator is able to achieve a result by which the parties shake hands at the end and feel that they have gone away having settled the dispute on terms with which they are happy to live. A mediator may be able to provide solution which are beyond the powers of the court to achieve" Dunnett v Railtrack plc (Practice Note)  1 WLR 2434.
The Civil Procedure Rules place great emphasis on the importance of parties engaging in mediation prior to embarking on litigation. A recent decision of the High Court in Wales (t/a Selective Investment Services v CBRE Managed Services Ltd and Aviva Administration Limited  EWHC 1050 (Comm), in which the successful parties were deprived of a substantial portion of their legal costs, serves as another stark reminder that judges, when determining a costs order, pay careful attention to the conduct of parties at the commencement of litigation.
Mr Wales was unsuccessful in his claim for damages for breach of contract against the defendants CBRE Managed Services Ltd (“CBRE”) and Aviva Administration Limited (“Aviva”). Mr Wales had been a longstanding pension’s adviser to CBRE. Their business relationship came to an end as a result of a change in legislation regarding pension schemes and Mr Wales’ pension advisory services were no longer required.
The costs hearing
It was Mr Wales’ submission at the subsequent costs hearing that CBRE should be deprived of all of its costs due to its repeated refusal to take part in mediation. The case ended up running for four days which meant that the costs incurred by all parties had amounted to many thousands of pounds.
Costs awards are always within the discretion of the presiding judge
In considering the applicable law the Honourable Mr Justice Halliwell took as his starting point the time-honoured general principle that the unsuccessful party will be ordered to pay the costs of the successful party. However, a secondary principle is that a judge may, in his or her discretion, decide to depart from this general principle and make a different order.
Conduct of the parties
Judge Halliwell focussed on the conduct CBRE at the very earliest stages of the litigation. In the claimant’s pre-action letter an offer was extended to CBRE to attempt to resolve the dispute via mediation. This invitation was ignored by CBRE. Aviva on the other hand indicated that it was willing to attend mediation. As a result of CBRE’s stance Mr Wales had no other option but to issue formal legal proceedings.
The factors which a court will consider in deciding whether a party has been unreasonable in refusing to mediate are:
· the nature of the dispute;
· the merits of the case;
· the extent to which other settlement methods have been attempted;
· whether the costs of the ADR would be disproportionately high;
· whether any delay in setting up and attending the ADR would have been prejudicial;
· whether the ADR had a reasonable prospect of success.
The judge noted further that at subsequent key stages in the litigation the offer to mediate was again extended and explicitly declined by CBRE. The court found that this refusals were unreasonable and justified CBRE being deprived of a substantial portion of its costs.
Circumstances when refusal was not unreasonable
Aviva, the second defendant, had indicated that it was amendable to mediation. However, due to CBRE’s refusal to consider this option, it declined later invitations to mediate. The court found that this was not unreasonable because, in light of the specific facts of the case regarding the contractual relationships between the parties, little could have been achieved without the participation of CBRE. There was thus no reasonable prospect of mediation being able to resolve the dispute between Mr Wales and Aviva.
The importance of mediation
In his judgment the Honourable Mr Justice Halliwell considered recent authorities where the benefits of mediation were considered. While a court cannot compel parties to mediate it can show its displeasure at a refusal to do so when considering an appropriate costs order. The legal basis of Mr Wales’ claim was bad in law but what the court did not doubt was the sincerity of his belief that he had been treated unfairly and dishonestly by CBRE, an organisation with which he had had a long and seemingly successful business relationship. The court further noted that there were issues regarding misunderstanding of fact which took days to untangle in adversarial court proceedings but which could have been easily cleared up by the intervention of a skilled mediator. It seems that, in Mr Justice Halliwell’s opinion, this was definitely a case where mediation could have provided the “solution which are beyond the powers of the court to achieve”.
The Court of Appeal set out in Halsey v Milton Keynes General NHS Trust  1 WLR 3002 what it considered the benefits of mediation:
“Mediation provides litigants with a wider range of solutions than those that are available in litigation: for example, an apology; an explanation; the continuation of an existing professional or business relationship perhaps on new terms; and an agreement by one party to do something without any existing obligation to do so”
Parties and their legal advisors would be well served in taking these words to heart when considering how best to resolve difficult disputes.
This article is provided for general information only and is not intended to be nor should it be relied upon as legal advice in relation to any particular matter. If you require specific legal advice on any issue relating to mediation, you can book a free 15 minute consultation with Avinder Laroya, a CMC accredited Mediator by clicking here