Why Refusal to Mediate is a Risky Business

Mr Justice Griffiths’ recent decision in DSN v Blackpool Football Club Limited [2020] EWHC 670 (QB) serves as a timely reminder to litigating parties that a refusal to mediate will carry consequences for the refusing party.

The Claimant brought proceedings against the football club (for vicarious liability) in respect of abuse he suffered at the club during his childhood.  The Claimant was successful in his claim, but on conclusion of the proceedings, the parties remained at odds as to the basis upon which the Claimant’s costs should be awarded.

The landmark case of case of Halsey v Milton Keynes General NHS Trust [2004] EWCA (Civ) 576 established that where there has been an unreasonable refusal to mediate, the Court will have the power to impose cost sanctions upon the refusing party, including an exceptional discretion to reverse the costs burden entirely.

In the DSN case, it was the Claimant’s position that he should be awarded costs on an indemnity basis because the Defendant had consistently refused to engage in mediation and had rejected a series of Part 36 offers.  However, the Defendant’s stance was simply that its ‘…confidence in the strength of its own defence’ was sufficient to justify its refusal, and accordingly there was no good reason to depart from the awarding of costs on the standard basis.  Mr Justice Griffiths disagreed.

In his Judgment he was highly critical of the Defendant’s position, and noted that ‘no defence, however strong, by itself justifies a failure to engage in any kind of alternative dispute resolution.’  His justification for levying such criticism was primarily a practical one.  He highlighted that the parameters of mediation (and other forms of Alternative Dispute Resolution, or “ADR”) were invariably wider than that within which the Court system operated, and which consequently served as a mechanism for greater remedial innovation, as well as alleviating the financial and emotional burden of a contested trial.  In particular, he commented that ‘settlement allows solutions which are potentially limitless in their ingenuity and flexibility, and they do not necessarily require any admission of liability, or even a payment of money.’

Whilst irrelevant in the context of awarding indemnity costs, the Defendant’s defence was not, in fact, particularly strong, but the Defendant’s misbelief in the strength of its position had significantly frustrated the litigation process.  Consequently, Mr Justice Griffiths ordered that the Defendant pay the Claimant’s costs on an indemnity basis from one month after the date of the Master’s Case Management Order – a substantial period.

Although parties cannot currently be compelled to revert their dispute to mediation/ADR, any ‘refusal’ to mediate must be reasonable, and objectively determined (see Kelly v Kelly [2020] 3 WLUK 94 for contrast).   In the absence of ‘reasonableness’ parties run a risk of significant penalisation.  Moreover, the benefits of mediation as a whole should not be over-looked.  The mediation/ADR process can successfully provide a more ‘holistic’ approach to a resolution, including the provision of confidentiality and non-disparagement terms aimed at reputational protection – the value of which cannot be under-estimated given the rise in the utilisation of online platforms for the promotion of opinion (good or bad).

If you would like more information or specialist advice, contact our Litigation team.