Failure to enter into mediation could be costly

News Article

One of the key recommendations in the Jackson Report, which has undertaken a wide scale review into the way that civil litigation is conducted, is that alternative dispute resolution (ADR) should be explored wherever possible in a bid to settle legal battles.

In his report, Lord Justice Jackson stated: “ADR, particularly mediation, has a vital role to play in reducing the costs of civil disputes, by fomenting the early settlement of cases. ADR is, however, under-used. Its potential benefits are not as widely known as they should be.”

Luke Morgan, a commercial mediation expert with Palmers, explained: “There are now warnings from a senior judge that a refusal to mediate costs disputes may soon face the same consequences as a refusal to mediate in the original dispute.

“There have already been two cases, both involving NHS Trusts, where the courts have taken a dim view of defendants failing to engage in ADR and have penalised them accordingly.”

In the first case, involving Buckinghamshire Healthcare NHS Trust, sanctions were imposed on the unsuccessful paying party for refusing to engage in mediation.

Costs judge O’Hare ordered the defendant to pay costs, saying: “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”.

In the second case, involving The Princess Alexander Hospital NHS Trust, the defendants argued that they did not enter into the mediation because the parties were so far apart. Costs judge Simons took the view that this was an unreasonable refusal to mediate and stated: “The parties should be encouraged to enter into mediation and if they fail to do so unreasonably then there should be a sanction”.

Luke added: “As both cases illustrate, a failure to enter into ADR can have serious financial consequences. The view of the courts is that a trial is a last resort and should only occur when all other routes to reach settlement have been exhausted.”

For more information about Palmers’ dispute resolution and mediation services, please contact us.