Do you have to mediate?

The Ministry of Justice is currently considering whether, and in what types of case, to introduce mandatory mediation. In any event, it has long been the case that the civil courts can encourage the use of mediation by potentially imposing costs penalties where a party unreasonably refuses to mediate (the Court of Appeal decision which paved the way for such penalties having been handed down in 2004). There are various factors that a party can rely on to show that its refusal to mediate was not unreasonable in the circumstances.

Two recent decisions have considered whether some of those factors worked for the party seeking to avoid a costs penalty.

In Richards & Anor v Speechly Bircham, the judge refused to accept the defendant law firm's reasons for failing to accept an offer to mediate. As lawyers, the judge commented that they were "particularly well-placed to appreciate this encouragement [to use ADR] rather than disregard it".

The defendant had argued:

• That mediation should follow disclosure (that is, that it was premature): it was held that any concern that disclosure was needed to understand parts of the case could have been explored during the mediation process.
• That the mediation was unlikely to succeed: the judge said that the mediator could have sought to moderate the claimant's expectations.
• That the mediation would have been costly given that it was uncertain to achieve a settlement. That showed "undue scepticism". Also, it is necessary to compare the costs of mediation with the costs of going to trial (and not the budgeted costs against the eventual judgment sum).

All of these factors are commonly raised to defend an allegation that the refusal to mediate was unreasonable and so the judge's rejection of them might be seen as an indication that judges are now becoming less lenient with refusals to mediate.

However, the case was quickly followed by a more generous decision in Epoq Legal v DAS Legal Expenses Insurance Co Ltd. Here, the claim "resoundingly" failed, but the claimant sought to argue that the defendant's costs should be reduce to reflect its unreasonable failure to engage in mediation.

The judge found there had been "foot-dragging and making excuses to put off for the time being the mediation", but that was not tantamount to an unreasonable refusal to mediate.

This case therefore demonstrates that, provided a party stops short of an outright refusal, and responds to any requests to mediate, a costs penalty is unlikely to be imposed for a lack of enthusiasm about the mediation process. Accordingly, there appears to be little to force a party to get on with, or take part enthusiastically, in mediation and even if compulsory mediation is introduced, it would only force a party to turn up to the mediation. However, the hope is that, with a skilful meditator, once there, parties will at least explore settlement possibilities.