High Court rules that the refusal to mediate was not unreasonable conduct

A High Court judge in England has reaffirmed that a party’s refusal to mediate does not, of itself, justify a costs penalty. Where a party can show it did not shut down Alternative Dispute Resolution (ADR) altogether, and had sensible reasons for declining mediation at that stage, the court is likely to make the usual order that costs follow the event.

In MJS Projects (March) Limited v RPS Consulting Services Limited, the claimant invited the court to depart from the normal rule on costs following the dismissal of its claim, arguing that the defendant had unreasonably failed to mediate. The defendant said it had not refused ADR, only mediation on the terms and timing proposed, and that the usual costs order should apply.

The Judge held that the appropriate order was the usual one: the claimant should pay the defendant’s costs. The refusal to mediate did not warrant a departure from that starting point.

Applying the principles in Halsey v Milton Keynes General NHS Trust, the judge stressed that mediation is neither the only nor the default form of ADR. She accepted that the defendant did not agree to repeated proposals for mediation without first understanding the expert evidence. In that context, declining mediation at that stage was not unreasonable—particularly where the defendant continued to propose other ADR options and made settlement offers.

The judge also noted that mediation in this dispute could have cost up to £50,000—a significant additional expense. That was a relevant factor when assessing whether it was reasonable for the defendant to decline mediation while still engaging with ADR more generally.

It was also recognised that the defendant did engage in ADR by way of advancing a series of settlement offers.

In deciding that the usual costs order should be made, the judge pointed to the dismissal of the claim and the court’s broad rejection of the claimant’s expert evidence. That outcome supported the defendant’s assessment of the merits and reinforced the conclusion that its approach to ADR was commercially and procedurally justified.

Key takeaways: In Northern Ireland, parties and practitioners are expected to comply with the court-issued Practice Direction for Commercial Actions, which stipulates that “any unreasonable refusal to consider ADR may result in the imposition of a costs sanction by the judge”. This decision of the English court (which although not binding upon the Northern Ireland Courts, can be persuasive) may be considered by Judges in this jurisdiction in deciding whether a party’s refusal to mediate may be treated as reasonable giving regard to the conduct of the parties (for example, if expert evidence hasn’t been clarified), alternative ADR attempts (such as settlement offers) and proportionality (including the potential cost of mediation).

*This information is for guidance purposes only and does not constitute, nor should be regarded as, a substitute for taking legal advice that is tailored to your circumstances.

If you would like any further information or advice, please get in touch with a member of our Litigation and Dispute Resolution team.