The judgment of Lord Justice Dyson in the landmark appeals of Halsey v Milton Keynes NHS Trust (2004) and Steel v Joy and Halliday (2004) has something for everyone.
“The pro-mediation people are happy to read to the jolly bits, whereas the cynics in the City are trying to keep their litigation fee incomes up and reading the parts they like – and they think it’s great,” says one mediator, who clearly wishes the compulsive litigators were not quite so chipper.
The cases gave the Court of Appeal the opportunity to look at when it might order costs against a successful party who refused to mediate at the invitation of the unsuccessful party. It follows last year’s ruling in Dunnett v Railtrack (2002), where for the first time a successful litigant was deprived of costs. In the post-Dunnett world, all eyes were on the two-day appeal, and hefty submissions were made by the Law Society, the Civil Mediation Council, the ADR Group and the Centre for Effective Dispute Resolution (CEDR).
On the face of it, the ruling is a blow to the alternative dispute resolution (ADR) movement insofar as the court declined to penalise the refusing parties. That aside, the judgment talks up mediation in a way that will sit comfortably with most of the profession.
The Law Society appears to take credit for the ruling. “This judgment endorses the Law Society’s position on mediation,” says president Peter Williamson. He points to the “considerable confusion” as a result of a string of cases where successful litigants have faced cost sanctions for not using mediation and other cases where the sanction has not been used, arguing: “This is likely to greatly enhance the use of mediation, as parties will increasingly use it because they feel it is helpful, rather than feeling forced into it.”
The judges held that, while a successful party could be deprived of some, or all, costs for a refusal to take part in mediation, such an order was an exception to the rule that costs follow the event. They also held that the burden was on the unsuccessful party to show why there should be a departure from that general rule. The fundamental principle is that such a departure is not justified unless it was shown that the successful party acted unreasonably in refusing ADR. They also provided a non-exhaustive checklist of factors that courts should consider in determining that reasonableness.
“All members of the legal profession should now routinely consider with their clients whether their disputes are suitable for ADR,” ruled Dyson LJ.
“This is close to warning that not to do so could be negligent and a breach of professional duty,” reckons CEDR director Tony Allen.
But would the ruling make a difference to conduct before litigation, given that few cases reach trial? “I’m not convinced that it will, or that it would be wise to assume so,” says Allen. “The decisions give some comfort to a party who both reasonably and rightly decides in advance that they’re going to win, and who rejected mediation because it had no reasonable prospect of success.”
Clearly, the defendant insurers welcome the ruling. Graham Dickinson is head of personal injury at Barlow Lyde & Gilbert, which acted for Milton Keynes NHS Trust.
“I take the view that you have to bear in mind the common sense reality of disputes, and some of them need to be decided by a judge and can’t be suitable for mediation,” he says. “The financial realities are that in some cases mediation would be unrealistically expensive. I don’t think the ruling is the disincentive to mediation that some commentators have assumed, but an encouragement in properly controlled circumstances.”
Another reason for the refusal to mediate in Halsey was that, as the judge at first instance put it, the offer was “somewhat tactical” – the claimant was on ‘no win, no fee’, with a 100 per cent uplift and no insurance.
“We think that, if anything, this was an understatement,” Dyson LJ reflected. “The extraordinary letter written to the Secretary of State very early on was an attempt to extort a sum, plus costs, in settlement of a very small claim which, at best, was speculative.”
Where does the ruling fall down? Brick Court’s William Wood QC, a CEDR mediator, believes compulsive litigators will happily seize upon Halsey as providing them with more latitude to reject mediation in cases where previously they will have worried about the threat of a Dunnett costs order.
“Litigation solicitors don’t readily describe their client’s cases as borderline, certainly not at a case management conference,” says Wood.
The silk also takes issue with the obiter dictum remarks that were sympathetic to the Law Society line of argument, that court-ordered mediation could breach Article 6 of the European Convention on Human Rights (the right to a fair trial).
“In the US, the constitutional challenge to mediation orders was sorted out years ago. Nobody’s access to the court is being denied, or even significantly delayed. All you’re doing is sending someone along to discuss a settlement,” adds Wood.