As any fule kno’ as Nigel Molesworth might have put it, costs generally follow the event, subject always to the discretion of the Court. One factor that the Court can take into account in the exercise of its discretion is whether it was reasonable or unreasonable not to mediate. In other words, in deciding not to mediate, a party takes a risk that the outcome will justify that decision.
In Parker Lloyd Capital Ltd v Edwardian Group Ltd (Lawtel October 2017), a successful defendant’s refusal to enter into mediation, because it had believed that the claimant’s case was hopeless and that the claimant had proposed mediation as a tactic designed to extract a nuisance payment, was held not to have been unreasonable.
So no adjustment was made to the defendant’s costs. The decision in that case was overwhelmingly in the defendant’s favour so that the costs argument relating to not mediating was straightforward and easy to determine.
Quite often though, litigation is far more of a close run thing and decisions far more nuanced. In that context, a variety of factors can impact on the costs decision quite independently of the reasonableness of the decision to mediate – such as issues won or lost, conduct of parties, assessment of witnesses, evidence given, procedural failings along the way etc.
In the instant case, the only straw the unsuccessful claimant could clutch at to reduce the costs payable was the defendant’s failure to mediate per se. In other cases, the factors mentioned above that might cause the Court to reduce the costs payable are, paradoxically, the same factors that can determine whether the refusal to mediate was reasonable. So though it remains the case that you can reasonably conclude you have a very strong case and thus refuse to mediate and be held to have acted reasonably even if you lose some issues, that may not always be so.
Absent a compulsion across civil litigation to mediate, the aim of making an unreasonable refusal to mediate a factor in awarding costs was designed to encourage parties to mediate. It involves the Court in making a value judgment on the conduct of the parties which is often easy enough once the Court has decided the outcome and formed views on the parties and their conduct and various other factors. By then, it can all seem so obvious
But most litigation that is not readily disposable by way of summary judgment or striking out or determinative preliminary issue is seldom clear cut which is all the more reason for compelling parties to mediate. After all, it is a simplistic view of mediation to suppose that in a case where one side thinks he is on to a winner and that he is going to have his arm twisted to make a nuisance payment, that that is all it can achieve.
The party who thinks he is on to a winner also has the opportunity to marry the shortcomings, as he sees it, in his opponent’s case to offers surrounding the disposal of the case now at considerably less cost to his opponent (and himself). Furthermore, if you take account of the broader advantages of mediation such as diffusing personal animosity, maintaining and enhancing commercial and personal relationships, avoiding washing dirty laundry in public and arriving at creative solutions outwith the jurisdiction of the Court, the notion that is was reasonable not to mediate simply because you think you have a strong case and do not want to make a nuisance payment becomes rather flimsy. But until parties are required to mediate in civil litigation, this is what we will get and mediation will continue to struggle to have the impact it should have in modern litigation.