REFUSING TO ENGAGE IN COSTS MEDIATION – RESULTED IN SANCTIONS
In the recent case of Reid v Buckinghamshire Healthcare NHS Trust [2015] EWHC B21, a refusal to engage in Mediation in the costs claimed in Detailed Assessment proceedings resulted in sanctions.
This is the first case in the SCCO where sanctions have been imposed on the unsuccessful paying party for refusing to engage in mediation. Halsey v Milton Keynes NHS Trust [2004] has been a notable case on sanctions being imposed upon the successful party refusing to engage in mediation however Reid highlights, in costs matters, that the unsuccessful party is also exposed to these consequences.
In Reid v Buckinghamshire Healthcare NHS Trust, Master O’Hare ordered the defendant to pay costs on the indemnity basis from the date it failed to respond to an offer to mediate.
Master O’Hare’s transcript on the consequences for failing to reasonably respond to an invitation of mediation:
“In respect of the defendant’s failure to mediate, I think the only sanctions available for me to impose are to award costs on the indemnity basis and to award interest on those costs from a date earlier than today, today being the normal date. I am persuaded that the defendant’s refusal to mediate in this case was unreasonable. It took them six weeks to reply to the offer and they then replied in the negative. But nevertheless I do not think I should impose the indemnity basis penalty from a date earlier than the date the defendants are likely to have received the claimant’s offer, and that is why, in item (iii) I said interest should run from 27 July, that is, some three days after the offer was sent. I do not think I have any power to award a percentage penalty as I can in respect of a Part 36 offer. In my view I do not have power to alter the rate of interest payable and I do not think it proportionate to add interest penalties on top of an award on the indemnity basis from a date earlier than today.”
Master O’Hare ended on with a brief note of caution about sanctions imposed on parties who unreasonably refuse to mediate:
“Case law on this topic is largely about penalties imposed on parties who are in other respects the successful party. In Halsey v Milton Keynes NHS Trust [2004] EWCA Civ 576 and in other cases, penalties imposed upon winners. They do not involve the imposition of further penalties upon losers. One can see that throughout the judgment in Halsey. I will read out a sentence from paragraph 28:
‘As we have already stated, the fundamental question is whether it has been shown by the unsuccessful party that the successful party unreasonably refused to agree to mediation.’
There are many other such references to this being a penalty against winning parties, for example, see paragraphs 13 and 34.
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. I do disapprove of this defendant’s conduct but only as from the date they are likely to have received the July offer to mediate.”
This case of Reid v Buckinghamshire Healthcare NHS Trust highlights the importance that solicitors engaging in litigation recognise the support from the judiciary on mediation and the clear directions as to the consequences where there has been an unreasonable refusal to mediate.