If a solicitor ever tells you that you have 100% chance of success he does not know what he’s talking about, as there are always the risks of litigation.
Mediation is the most viable ADR solution used to settle litigation cases, avoiding the risks of litigation. It is now enshrined in the litigation process, it appears in every protocol, it is the first question on the allocation questionnaire and usually the first direction of the case management conference.
However, what if my prospects of success are say 70/30 and my client is prepared to take the risk of the trial? The reality is that current case law states that if you choose to ignore mediation, your client will still probably face the risk of an adverse case costs order even if the case is successful.
The costs position first started to develop with the well known case of Halsey v Milton Keynes General NHS Trust  EWCA Civ 576, which introduced a merits-based approach. The court, in considering whether a refusal to mediate should give rise to costs sanctions, identified certain considerations (the Halsey Guidelines) to determine whether or not a party has acted unreasonably in refusing to mediate. Relevant factors include the merits of the case, the extent to which ADR was attempted and whether ADR would have had a reasonable prospect of success.
The position moved on in the case of PGF II SA v OMFS Co 1 Ltd  EWCA Civ 1288 where the Court of Appeal held that to remain silent to an offer of mediation was, as a general rule, unreasonable conduct meriting a costs sanction. This seemingly applied even in cases where mediation was unlikely to be successful, which clearly undermined the Halsey merits principle.
Keeping with that theme Northrup Grumman v BAE Systems  EWHC 3148 (TCC) again highlighted the court’s attitude that mediation should be used, even in cases where it may not be appropriate. Here, the Defendant believed that it was right to refuse mediation as it reasonably believed the claim had no prospects of success, and it would never have paid out money to settle the case. As such the Defendant saw no reason to engage in mediation. Ramsey J did not agree this was sufficient to avoid a costs sanction stating that:
'[T]he authors of the Jackson ADR Handbook properly, in my view, draw attention at paragraph 11.13 to the fact that this seems to ignore the positive effect that mediation can have in resolving disputes even if the claims have no merit. As they state, a mediator can bring a new independent perspective to the parties if using evaluative techniques and not every mediation ends in payment to a claimant… [On] the merits of the case, I consider that BAE’s reasonable view that it had a strong case is a factor which provides some but limited justification for not mediating.'(emphasis added).
The next significant case didn’t concern a failure to mediate but rather a sluggish approach to responding to an offer of mediation – could that be justification for a costs order? Yes. Thakkar v Patel  EWCA Civ 117 was an appeal against a costs order. The defendants were very slow to respond to the offer of mediation, to the extent that the Claimant wrote to the defendant setting out the history of attempts and concluded that it had lost all confidence in arranging a mediation between the parties.
In considering the appeal, Jackson LJ agreed with the Judge at first instance’s finding that there was a real chance that the case could have been settled by mediation, and that by “delaying and dragging its feet for no good reason” the costs order given was merited.
Only 4 months after the decision in Thakkar the Court of Appeal made a partial U-turn with the decision in Gore v Naheed  EWCA Civ 369. The Claimant had declined an offer of mediation on the basis that the Defendants had no real prospect of success and that mediation would have only added further costs. The Defendants appealed the costs order on the basis of that some allowance should be made for the Claimant’s refusal to mediate, as per the ruling in PGF.
Briggs LJ, did make clear that a failure to engage in mediation, even if unreasonable, does not automatically result in a costs sanction – it is simply a factor to be taken into account by the judge when he exercises his costs discretion.
Patton LJ agreed with the Judge that it was not unreasonable for the Claimant to have rejected mediation, and agreed that the complex nature of the case made it unsuitable for mediation. He concluded that the judge’s “refusal to make an allowance on these grounds cannot in my view be said to be wrong in principle”.
Gore obviously raises some contradictions. It clearly goes against the decisions in PGF and Thakkar that mediation should always be seriously considered, despite the merits of the case. Additionally, the issue of complexity of a case being a barrier to mediation has previously been dismissed in other Court of Appeal cases – see Burchell v Bullard  EWCA Civ 358.
There are some older cases which might provide assistance such as Hurst v Leeming where it has been held to be reasonable to refuse mediation. On that occasion it was held that the professional reputation of the barrister was a good reason for allowing the matter to proceed to trial.
The Gore case has thrown doubt on what had been the clear thrust of the Court that you must mediate or face the potential of the cost sanction. My own view is that to rely on the Gore case you will have to have strong grounds, which you will need to have set out very clearly in correspondence, preferably at an early-stage. The Court will still remain very pro-mediation.
Perhaps the moral of this story is that you will never know which way the Court will turn so it is safer to mediate.
Having said that, I feel there will be very few cases where mediation will not be advantageous in that you will be able:
- To test the reality of the merits of the case through the mediator
- To take the strength of the merits of your case into your negotiating stance to dictate the terms of settlement
- To avoid the risks of litigation and an adverse costs order
- To settle at a much earlier stage
Victoria Greenwood is the managing director at NWMS, and in her spare time is a litigator and partner at Gunnercooke LLP in Manchester.
She can be contacted on firstname.lastname@example.org or 01663 719442