Mediate or face cost consequences – is this still the court’s approach?

Published 15 March 2018

Parties cannot be compelled to use an Alternative Dispute Resolution (ADR) procedure such as mediation to resolve their disputes. Yet, for around two decades now, a pro-ADR approach has become an integral part of our litigation culture in the UK, with pre-action protocols, the Civil Procedure Rules and the Jackson reforms all promoting the use of ADR whenever appropriate. Endorsing this culture, the courts have encouraged parties to use ADR, particularly mediation, and they have imposed costs sanctions where they consider parties have unreasonably refused to engage in the process.

In 2017, the Court of Appeal heard two appeals on the reasonableness of a party’s refusal to engage in mediation, with very contrasting outcomes. In Thakkar v Patel, the Court held that to remain silent in the face of an offer to mediate is, absent exceptional circumstances, unreasonable conduct that merits a costs sanction. In Gore v Naheed, the Court refused to penalise the claimant in costs for his failure to engage with the defendant’s proposal to mediate.

It remains to be seen whether Gore is a one-off departure from the long-running trend of cases which have penalised parties for failing to use mediation, or driven by a wider concern that not all cases are suitable for mediation, and its effectiveness may be undermined if parties are compelled to use it in all cases.

Thakker v Patel

At trial, the judge noted that there were real prospects that the parties would have settled this property dispute had it been referred to mediation. Both parties had initially expressed a willingness to mediate but the defendants had been slow to respond to the claimants’ suggestions for possible mediators and mediation dates, and the claimants then refused to continue with the process. Reflecting on this conduct, the judge ordered the defendants to pay 75% of the claimants’ costs of the claim and ordered the claimants to pay the defendants’ costs of the counterclaim.

The defendants appealed to the Court of Appeal on the basis that the costs award did not take into account that, allowing for interest, the claimants had failed to beat the defendants’ offer. Lord Justice Jackson did not interfere with the award (noting that the offer was outside CPR Part 36) but on the mediation issue he said:

“The message which this court sent out in PGF II was that to remain silent in the face of an offer to mediate is, absent exceptional circumstances, unreasonable conduct meriting a costs sanction, even in cases where mediation is unlikely to succeed. The message which the court sends out in this case is that in a case where bilateral negotiations fail but mediation is obviously appropriate, it behoves both parties to get on with it. If one party frustrates the process by delaying and dragging its feet for no good reason, that will merit a costs sanction. In the present case, the costs sanction was severe, but not so severe that this court should intervene.”

Gore v Naheed

This dispute between neighbouring landowners concerned the claimant’s right of way to use a shared driveway for vehicular access to his garage and the defendants’ right to obstruct the driveway to temporarily unload deliveries for their wine business.

The trial judge found in favour of the claimant. He awarded damages to the claimant, granted an injunction preventing the future obstruction of the driveway other than for unloading (20 minutes max) and ordered the defendants to pay the claimant’s costs.

The defendants appealed the decision, arguing that the claimant failed to engage with their invitations to mediate and therefore the judge was wrong not to have made some deduction or allowance in the claimant’s costs.

The Court of Appeal unanimously upheld the decision on costs. In the leading judgment, Patten LJ said:

“Speaking for myself, I have some difficulty in accepting that the desire of a party to have his rights determined by a court of law in preference to mediation can be said to be unreasonable conduct particularly when, as here, those rights are ultimately vindicated….A failure to engage, even if unreasonable, does not automatically result in a costs penalty. It is simply a factor to be taken into account by the judge when exercising his costs discretion.”

Patten LJ agreed with the trial judge that the case raised complex questions of law which made it unsuitable for mediation. The claimant’s solicitor also thought mediation had no reasonable prospect of success and would only add to costs. For these reasons, he held the lower court’s decision not to reduce the claimant’s costs because of his refusal to mediate was not wrong in principle.

Comment

It is difficult to reconcile these two Court of Appeal judgments. Thakker follows the harder line of authorities where the courts have robustly encouraged mediation and imposed costs sanctions on those who refuse to engage, drag their feet in the process or remain silent when invited to participate in mediation. Gore took a softer approach where a party can reasonably refuse mediation if the legal issues are complex or if he/she has doubts over whether a mediation would successfully resolve the dispute.

Interestingly, both cases were decided before the Civil Justice Council ADR Working Group published its interim report in October 2017 on its review of existing forms of encouragement for mediation within the civil justice system in England & Wales. The Working Group was critical of the suggestion that Gore was an unsuitable case for mediation noting:

“Gore was ultimately about whether a van could park to unload in a particular place…a type of dispute ideally suited to ADR. Mediators resolve ‘complex cases in which both parties feel strongly’ all the time.”

Cases which are genuinely unsuitable for mediation will be rare. Legally complex cases are often very well suited to mediation because the risks and costs associated with complicated litigation can be significantly higher. As a rule, if the court recommends the use of mediation, then the court considers the case is suitable for this process and the parties should heed this recommendation or run the risk of cost penalties.