No excuses acceptable for refusing to mediate? A checklist from the Court of Appeal…

Alternative Dispute Resolution is now a key player in the world of dispute resolution. Even successful parties have found themselves on the end of an adverse costs order because of their refusal to consider settling their dispute by a method other than a full trial.

In an eagerly-awaited judgment handed down yesterday, the Court of Appeal has set out some factors the court will take into consideration when deciding whether or not a disputing party has acted unreasonably in refusing to take part in a mediation or other form of ADR. It has also given its views on whether or not the court should compel parties to take part in mediation.

Such is the perceived significance of this decision that the court received submissions from the Law Society, the Civil Mediation Council, the ADR Group and the Centre for Effective Dispute Resolution.

In the cases of Halsey v Milton Keynes General NHS Trust & Steel v Joy & Halliday [2004] EWCA (Civ) 576 the court was first asked to consider whether or not courts should compel parties to take part in mediation (the most widely-used type of ADR). Their Lordships found that the court's role should be to encourage rather than compel. If opposition to ADR is expressed, the court should explore the basis for that resistance. An order from the court to mediate where the parties have not already agreed to resolve all their disputes by mediation (for an example, in a mediation clause in a contract) could fall foul of Article 6 of the European Convention on Human Rights which gives citizens the right to a fair trial. The judgment mentions the "ADR Orders" made by the Admiralty and Commercial Court and comments that they "stop short" of ordering the parties to mediate; they do however compel parties to take a number of steps towards ADR.

The Court of Appeal also set out a series of factors the court will take into account when making an award of costs, specifically where a party has refused to mediate:

• The nature of the dispute – a minority of cases are unsuitable for mediation; for example those where a question of law or construction needs to be resolved.
• The merits of the case – if a party reasonably believes that (s)he has a watertight case that belief may be sufficient justification for a refusal to mediate.
• Other settlement methods have been attempted – if one party has made offers to settle that have been rejected that may show the party's willingness to settle and his/her opponent's unrealistic views about the merits of the case.
• The costs of the mediation would be disproportionately high – this may be the case where the amount in dispute is low and trial is likely to be very short and therefore potentially less expensive than a mediation.
• Delay – this may be a factor where mediation is suggested close to the trial date and simply serves to delay the trial.
• Whether the mediation had a reasonable prospect of success – this is the factor given most attention by the court. It concluded that the burden must fall on the unsuccessful party to show that the successful party unreasonably refused to agree to mediation. Lightman J's test in Hurst v Leeming [2001] EWHC 1051 of an objective assessment of whether or not the mediation would have had a reasonable prospect of success was rejected. The court also commented that where the court has encouraged the parties to attempt mediation, the stronger the encouragement, the easier it will be for the unsuccessful party to discharge the burden of showing that the successful party acted unreasonably in refusing to mediate.

The decision will come as a relief to those who were against "compulsory" ADR orders on the basis that they made a voluntary process involuntary! However, the judgment also makes it clear that the court will fall down heavily on parties who do not show willingness to attempt ADR unless they can show a good reason for their intransigence.

If you want to know more about mediation and its development in Europe click here to read our CMS Guide to ADR. This will open a PDF in a new window.