| Date | 26 May 2004 |
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| Judgment | Halsey v Milton Keynes General NHS Trust, CA 11 May 2004 |
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| The Issue | The grounds upon which a court will deprive a successful party of some or all of its costs on the basis that it refused to agree to ADR. |
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| Implication |
The burden lies on the unsuccessful party to show that the successful party has acted unreasonably in refusing to agree to ADR if it is to secure an order that deprives the successful party of the costs of legal proceedings. |
printThe Court of Appeal has recently examined the circumstances in which a successful party in litigation will be penalised in the recovery of its costs where it has refused to participate in alternative dispute resolution (ADR) procedures during the period leading up to the trial. Before the Civil Procedure Rules came into force ADR had been encouraged by the courts in various ways. The Civil Procedure Rules built on this, Rule 1.4(2)(e) requires the court "to encourage the parties to use an alternative dispute resolution procedure if the court considers that appropriate, and facilitating the use of such procedure". ADR is defined as a collective description for methods of resolving disputes otherwise than through the normal trial process. In practice however, references to ADR are usually understood as being references to some form of mediation by a third party. In Halsey v Milton Keynes General NHS Trust the claimant failed in a negligence action against the hospital and facing a very large costs order, asked the court that there should be no order as to costs on the basis that the Trust had refused to agree to mediation. At the outset of the proceedings Halsey had written to The Secretary of State for Health asking for mediation of the claim and on no less than five further occasions had requested that the Trust consider mediation. Throughout, the Trust had held firmly to its stance that there had been no negligence and that mediation was inappropriate. The judge held that Halsey's approach had been somewhat tactical and commented that the Civil Procedure Rules were not designed to make parties which have a good defence settle claims which they do not wish to settle. He concluded that the Trust should not be deprived of any of its costs on the ground that it had refused to accept the claimant's invitations to mediate. In agreeing with that view, the Court of Appeal made clear the guidance that should be taken into account when considering whether a court should impose a costs sanction against a successful litigant on the grounds that it had refused to take part in ADR. Lord Justice Dyson noted firstly that the court did not have power to order parties to submit their disputes to mediation against their will. It was one thing to encourage the parties to agree to mediation, even to encourage them in the strongest terms, but quite another to order them to do so. To oblige the parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the court and would achieve nothing. Moreover, it was to be recognised that ADR processes do not offer a panacea and can have disadvantages as well advantages. Mediation was not appropriate for every case, for example where the parties might wish the court to determine issues of law which might be essential to the future trading relations of the parties. Lord Justice Dyson reviewed other issues which the court ought properly to take into account. He noted that the merits of the case are to be regarded as a significant factor. The fact that a party reasonably believes that it has a strong case is relevant to the question of whether it has acted reasonably in refusing ADR. If the position were otherwise, there would be considerable scope for a claimant to use the threat of costs sanctions to extract a settlement from the defendant, even where the claim was without merit. The court noted that large organisations, especially public bodies, are vulnerable to pressure from claimants who, having weak cases, invite mediation as a tactical ploy. They calculate that such a defendant may make nuisance value offer to buy off the cost of a mediation and the risk of being penalised in costs for refusing a mediation, even if ultimately successful. Another factor to be taken into account is whether other settlement methods have been attempted. This may show that one party is making efforts to settle and that the other party has unrealistic views of the merits of the case. The costs of mediation have also to be taken into account, particularly where these would be disproportionately high. Equally where the mediation was suggested late and acceptance of it may have the effect of delaying the trial. Finally, a crucial factor to be taken into account would be whether the mediation had a reasonable prospect of success. Lord Justice Dyson commented that the burden should not be on the refusing party to satisfy the court that mediation had no reasonable prospect of success. The fundamental question was whether the unsuccessful party had shown that the successful party had unreasonably refused to mediate. That burden would be more easily discharged where the court had made a particularly strong order encouraging the parties to use ADR.
CJ-0421
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