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Alternative Dispute Resolution– when can you refuse?

Posted on 16 October 2015

Alternative Dispute Resolution– when can you refuse?

Parties to litigation have for a long time been encouraged to collaborate and use Alternative Dispute Resolution ("ADR") to resolve their disputes rather than going to trial. A recent case has raised, once again, the duty on parties to mediate, highlighting that this duty continues throughout the litigation.

In Murray v Bernard [2015] the judge decided the claim in favour of the claimant. After making his decision the judge then considered who should pay the costs of the litigation. The usual rule of costs recovery is that the losing party pays the costs of the winning party, but the defendant argued that the claimant should pay the costs because the claimant had initially refused to attend a mediation.

Whilst the claimant had initially refused the defendant's suggestion of mediation, the claimant had later changed his mind and agreed to mediate. However, by this point the defendant said he was not ready to mediate because he wanted to review all the evidence first, which the claimant said was unnecessary. The defendant did not agree and mediation did not take place.

The judge was not persuaded by the defendant's arguments and he ordered that the defendant pay the costs of the claimant. The judge said this "is not a game in which the claimant will have one and one opportunity only to mediate for the purpose of the costs rule".  He took into account the change of position by the claimant, and found that the defendant was the reason that the mediation did not take place.

This decision is unsurprising and fair. It demonstrates the need for parties need to bear in mind the suitability of ADR throughout the litigation. Parties are free to change their minds and the court will take into account their changing position when considering who should pay the costs. 

Taking into account the rising cost of litigation and the ever increasing pressure on the court system, it's not surprising that judges are continuing to encourage the use of ADR, before and during litigation.  Proposing ADR has become a tactical play in litigation – one side will dare the other to refuse it, and this refusal would likely result in a cost penalty. However, whilst each case will be considered on its own facts, there are some factors that may suggest mediation is not appropriate, for example:

  • If the issue in dispute is a question of law or construction of a document
  • Where an injunction is sought
  • If one party reasonably believes they has a strong case
  • Where the cost of mediation is disproportionate to the sums at stake

A party should think carefully before refusing mediation as they will need to provide a reasoned explanation that will stand up to scrutiny by a judge. The decision not to mediate needs to be actively reviewed throughout the litigation and if there is a change of position then it needs to be communicated promptly and clearly, setting out why the position has changed. Failure to do so can result in being severely penalised on costs, whether or not the party succeeds in the underlying litigation.

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