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Does an initial refusal to mediate have an effect on costs?

Home / Knowledge base / Does an initial refusal to mediate have an effect on costs?

Posted by Jennifer Rhind on 15 October 2015

Jenny Rhind - Commercial Litigation Lawyer
Jennifer Rhind Solicitor

What is mediation?

Mediation is a form of alternative dispute resolution which is encouraged by the Courts as a way to assist parties in resolving their dispute. Mediation involves an independent third party, known as a Mediator, whose role is to assist the parties in working towards reaching a resolution of the issues. A Mediator will not listen to the arguments and make a decision on the dispute they will merely try to facilitate a settlement that is agreeable to both parties.

Mediation is a confidential process and is carried out on a without prejudice basis. This means that if the parties cannot reach an agreement and the dispute continues, nothing that was discussed at the mediation can be used during the remainder of the proceedings or at Court.

Mediation is a completely voluntary process and parties should only agree to participate if they have a genuine intention to see if a resolution can be reached. The cost of mediation is usually borne by the parties equally.

Benefits of mediation

Whilst mediation should not be used as an opportunity to rehearse the trial, it can be beneficial to the parties to hear the other side’s arguments as even if it does not settle, it may narrow the issues.

Litigation can be an extremely stressful, lengthy and expensive process. Whilst there will be a cost for parties to enter into mediation, if the matter settles at mediation, it will be a cheaper and less stressful process rather then going to a final hearing.

A Court does not have the jurisdiction to make certain awards. For example, in a defamation matter, the Court cannot order an unsuccessful party to make an apology. However, at mediation, it is possible for the parties to agree to any terms that they wish to include agreeing things that could not be awarded by the Court.

Mediation allows the parties to participate in the resolution of their matter. If the matter proceeds to a final hearing, the decision will be taken out of their hands and placed into the hands of an individual Judge and there is a risk that a Judge will make an order that neither party likes.

Refusing to mediate

Mediation is a voluntary process and is not something the Court can order. Despite this, a party should think very carefully before refusing to engage in the mediation process. An unreasonable refusal to mediate can result in the party refusing to mediate being penalised on costs, even if they are ultimately successful.

However, what is the position on costs if a party initially refuses to mediate but then later changes their mind?

This issue was considered in the recent case of Murray and another v Bernard [2015] EWHC 2395 (Ch). The Claimants initially refused to mediate and Master Teverson made it clear to the Claimants that refusing to mediate was a potentially high risk approach to take. Within a relatively short period of time after, the Claimants changed their mind and agreed to mediate. At this time, the Defendant decided that he was not ready to mediate.

At the end of the matter, Mr Justice Mann had to decide whether the Claimants should be entitled to their costs. The Defendant argued they should not because of their refusal to mediate. Mr Justice Mann considered the facts of the matter and held that the Claimants could not be penalised for initially refusing to mediate in this case as they subsequently changed their mind. Mr Justice Mann ordered that the Defendant was subject to the usual cost order and should pay the Claimants’ costs.

Conclusion

The Courts have an extremely wide discretion under CPR Part 44 in relation to costs orders. Whilst in this instance the Judge did not make an adverse costs order against the Claimants for initially refusing to mediate, each case will be considered on its own facts and there is no guarantee that the same decision will be reached in subsequent cases.  Parties should therefore be extremely wary of refusing to mediate, whether initially or at all.

About the author

Jennifer is a solicitor in the commercial litigation department.

Jennifer Rhind

Jennifer is a solicitor in the commercial litigation department.

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