Refusing mediation: reasonable grounds and the costs consequences

In Halsey v Milton Keynes General NHS Trust (2004), the Court of Appeal held that a successful party may be deprived of some or all of its costs if it unreasonably refused ADR. In Churchill v Merthyr Tydfil County Borough Council (2023), the Court of Appeal confirmed that the court can order parties to engage in non-court dispute resolution, provided it does not impair the essence of the right to a judicial hearing and is proportionate.

From 1 October 2024, the Civil Procedure Rules were amended to reflect Churchill. Promoting or using ADR now forms part of the overriding objective, and the court’s consideration of conduct when deciding costs includes whether a party failed to comply with an order for, or unreasonably failed to engage in, ADR.

Halsey identified relevant factors: the nature of the dispute, the merits of the case, whether other settlement methods have been tried, whether the costs of ADR would be disproportionately high, whether any delay would be prejudicial and whether ADR had a reasonable prospect of success. These remain useful guides.

A party with a strong case may still be expected to mediate. Reasonable grounds are more likely to be accepted where the refusal is explained promptly, with reasons, and where an alternative such as a without prejudice meeting or Part 36 offer is proposed. Silence in the face of an invitation to mediate has itself been treated as unreasonable.

Sanctions vary. The court may reduce the winning party’s costs, order costs on a different basis, award a lower rate of interest or, in serious cases, order the winner to pay some of the loser’s costs. The court looks at all the circumstances, and outcomes are fact-specific.

Unreasonable refusal can also be relevant in detailed assessment proceedings, which increasingly involve offers to mediate. A refusal to engage in a costs mediation may influence the costs of the assessment.

Respond to every invitation to ADR in writing, with reasons. If the timing is wrong, say when ADR might become appropriate. Keep the response proportionate and constructive. If you invite mediation, propose practical terms, such as possible mediators and dates.

Our Costs Lawyers often attend costs mediations and settlement meetings, and we advise on how ADR conduct may affect the costs outcome.