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In recent years there has been increased encouragement from the courts for parties to engage in Alternative Dispute Resolution (“ADR”) before issuing a claim, with the intention of reaching some form of settlement.
If a party refuses to engage in ADR when it is proposed by the other side, and they fail to provide sufficient reasons for their refusal, then they could find themselves being penalised on costs if the matter proceeds to trial.
Regrettably, for the successful defendants in the recent case of Conway v Conway & Anor, their outright refusal to engage in mediation has resulted in the Judge reducing the amount of costs awarded to them.
In his written judgment, His Honour Judge Mithani KC wrote that it seriously concerned him why the defendants did not agree to mediation when this was put to them, and that the onus was on the defendants to put forward “compelling reasons” why the offer was rejected out of hand.
Prior to proceedings being issued in 2022, it is understood that the claimant’s solicitor proposed pre-action mediation, but the defendants failed to respond.
A second offer to mediate was then made later that same year. Whilst the defendants did respond this time, it was simply to state that they considered the dispute unsuitable for mediation and that it would only serve to delay the final determination and increase costs.
The defendants also claimed that an agreement reached in mediation would not be final and binding.
However, it is standard practice that any agreement reached at mediation at mediation is recorded in a written settlement agreement, to be drafted and signed before anyone leaves the meditation. The agreement is then legally binding on all parties who have signed the document, in the same way that a county court judgment would be binding on them.
A final offer to mediate was made by the claimant’s solicitors after the first day of the trial (which lasted a total of 8 days). They also made a “without prejudice” offer of settlement. However, both were rejected, and labelled as ‘absurd’ by the defendants.
The judge found the decision to turn down the second offer to mediate in 2022 to be misconceived. The judge added that it was not possible for the defendants to say with any certainty that they would win at trial and therefore, mediation had no merits whatsoever.
As a result of the above, the judge applied a 25% reduction to the costs the defendants could recover, because they had unreasonably refused to engage in ADR.
Whilst the claimant tried to argue that there should be a 100% reduction, this was refused as it was considered to be too draconian.
This case is the perfect example of how seriously the court’s take ADR, and that they are willing to impose significant penalties on parties for unjustifiable refusals to engage in ADR.
If you have a dispute and want to explore mediation, contact our specialist Dispute Resolution team on 0121 355 0011 for a free, no obligation conversation to see how we may be able to assist you.
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