Serious consequences for those refusing to mediate during detailed assessment

Two High Court decisions towards the end of 2015 have made it clear that parties refusing to mediate during the detailed assessment process will, in all likelihood, suffer sanctions on costs.

In the matter of Reid v Buckinghamshire Healthcare NHS Trust [2015] EWHC B21 (Costs) (28 October 2015), the Claimant made an offer for both parties to attend mediation on 24 July 2015. The Defendant failed to respond for six weeks and when they did respond they refused to mediate.

The outcome of the detailed assessment was that the Claimant beat their own part 36 offer, in accordance with CPR 36.17(4)(d)(ii) as a consequence they were awarded a 10% uplift on the costs awarded. In light of the Defendant's refusal to mediate the Claimant was also awarded indemnity costs from the date that the offer to mediate was deemed served; 27 July 2015.

Of the Defendant’s failure to mediate Master O'Hare stated:

'If the party unwilling to mediate is the losing party, the normal sanction is an order to pay the winner's costs on the indemnity basis, and that means that they will have to pay their opponent's costs even if those costs are not proportionate to what was at stake. This penalty is imposed because a court wants to show its disapproval of their conduct. I do disapprove of this defendant's conduct but on as from the date they are likely to have received the July offer to mediate.'

The more recent decision of Master Simons in Bristow v The Princess Alexander Hospital NHS Trust & Ors [2015] EWHC B22 (Costs) (04 November 2015), goes further still. The Claimant's bill of costs was reduced by, a not insignificant 43%, from £239,000.00 to £135,486.90 at detailed assessment. This was party because the Claimant had included costs that were not recoverable as they related to pursuing other potential Defendants; claims which were later discontinued.

Following the result, in accordance with CPR 36.17 (4)(b), the Claimant claimed their costs of the detailed assessment as they had beaten all offers made by the Defendants. The Claimant had also requested that the parties engage in mediation, however this was rejected by the Defendants; the Claimant therefore sought a sanction for the failure to agree to mediate.

The Defendants argued that they did not enter into mediation as the parties were too far apart, the Claimant’s offers were unreasonable and the offers put forward by the Defendants were much closer to the actual settlement than the Claimant's offers had been during the assessment process.

Due to the inaccuracies in the bill the Claimant was only entitled to 80% of their costs of the detailed assessment. When reaching a decision Master Simons stated:

‘In principle the defendants have not given any reasonable reason why they refused to engage in mediation and I am satisfied that there should be an appropriate sanction.’

'I am not satisfied that the sanction should be increased interest because eight per cent interest in this day and age is already a penal rate of interest and the defendant has to bear this very high rate of interest and they are being punished already by their actions because this case could have been settled by mediation.’

'Nevertheless I am satisfied there should still be a sanction and I think the correct sanction is that the claimant should receive their costs on an indemnity basis on their 80 per cent costs as a sanction for the defendant's failing to engage in mediation.'

Both cases highlight the need, in the very least, to seriously consider mediation as an option during the detailed assessment process. Moreover to be prepared to defend that decision should you choose, without good reason, to refuse.

It is clear therefore that the courts are pulling no punches in punishing those failing to attempt ADR. Often the reasons for refusing are the costs associated with mediation, particularly when it is considered that settlement cannot be reached; as was the case in Bristow. However with the courts willing to hand down significant costs sanctions, the question will be whether the costs of attempting mediation outweigh the potential costs of refusing.