Refusing to Mediate – Is It Unreasonable?

By Alex Haddad

Legal Director

Mediation is a structured settlement negotiation between two parties involved a dispute which is facilitated by an independent third party. Mediation can take place before or after court proceedings have been issued and, if successful, the process can avoid much of the cost and uncertainty of litigation.  In recent years, there have been a number of cases about whether an unreasonable refusal to mediate should result in the imposition of costs sanctions.

In Richards & Another -v- Speechly Bircham LLP, the Commercial Court had to consider whether the unsuccessful defendant’s refusal to mediate was unreasonable and whether the defendant should be ordered to pay a higher proportion of the claimant’s costs as a result.

The claimant made four offers to mediate, including three before the claim had been issued. The defendant did not consider that mediation would be cost-effective at such an early stage in the proceedings but said that it would consider participating once the claim had advanced to the stage where the parties had disclosed copies of documents that they relied upon. After disclosure had taken place, the defendant continued to refuse to mediate on the basis that the claim lacked merit and would almost certainly fail. The claim succeeded at trial and the claimant sought his costs on an enhanced or indemnity basis because of what was said to be the defendant’s unreasonable refusal to mediate.

The judge did not accept that the defendant’s approach was reasonable.  A mediation could have take place before disclosure had taken place and defendant’s single settlement offer just 3 months before the trial suggested that it had no serious intention of trying to settle the dispute.

Although the defendant could have done more to try to settle, it was not ordered to pay the claimant’s costs on an enhanced basis. The defendant had succeeded in resisting a significant part of the claim and as a result of the outcome of trial the defendant was ordered to pay less than either of the claimant’s two settlement offers.

Whilst refusal to mediate is a factor that gives rise to an argument that there should be costs sanctions, this refusal has to be seen in the context of the case and the outcome at trial. Participating in mediation does not place any obligation on either party to make or accept an offer and, if they were concerned about costs sanctions, could be advised to participate in mediation.

For more information and to find out how we can help you, please contact us on 0345 646 0406 or fill in our online enquiry form and a member of our Team will be in touch.