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Halsey v Milton Keynes General NHS Trust: Steel v Joy, Court of Appeal, 11 May 2004

17 May 2004
The issues

Costs – Alternative Dispute Resolution – Whether A Successful Party Who Had Refused To Agree To Alternative Dispute Resolution Should Be Deprived Of Its Costs

The facts

Two appeals were brought to the Court of Appeal raising a question of general importance: –
when should the Court impose a costs sanction against a successful litigant on the grounds that he had refused to take part in an Alternative Dispute Resolution.

Four intervening parties made submissions – The Law Society, The Civil Mediation Counsel, The ADR Group and The Centre for Effective Dispute Resolution.
In the case of Steel there was a second ground of appeal relating to causation. The Court of Appeal would proceed on the basis that there were many disputes which were suitable for mediation and that this approach was consistent with an underpinned by the Woolf reforms. It was also consistent with the fact that there were a number of Court based civil non-matrimonial mediation schemes in existence. The Government had announced an “ADR pledge” by which all Government Departments and agencies made a number of commitments including that “Alternative Dispute Resolution will be considered and used in all suitable cases where the other party accepts it”. The NHS LA on the strength of the pledge had launched an initiave requiring solicitors representing NHS bodies to offer mediation in appropriate cases and to provide clear reasons for the authority if a case was considered inappropriate.

The decision

In the case of Steel there was a second ground of appeal relating to causation. The Court of Appeal would proceed on the basis that there were many disputes which were suitable for mediation and that this approach was consistent with an underpinned by the Woolf reforms. It was also consistent with the fact that there were a number of Court based civil non-matrimonial mediation schemes in existence. The Government had announced an “ADR pledge” by which all Government Departments and agencies made a number of commitments including that “Alternative Dispute Resolution will be considered and used in all suitable cases where the other party accepts it”. The NHS LA on the strength of the pledge had launched an initiave requiring solicitors representing NHS bodies to offer mediation in appropriate cases and to provide clear reasons for the authority if a case was considered inappropriate.

An issue had arisen as to whether the Court had the power to order mediation. The Court took the view that it did not have jurisdiction to order unwilling parties to refer their disputes to mediation and that this would be contrary to Article 6 of the European Convention of Human Rights. But in any event if the Court was wrong on this point it was difficult to conceive the circumstances in which it would be appropriate to exercise such a power since the hallmark of ADR was its voluntariness.

The Courts role however should be to encourage not to compel. The form of encouragement might be robust. The general rule as to costs was that the Court would order the unsuccessful party to pay the costs of the successful party. A departure from this rule might follow on the grounds that the successful party had refused to agree to ADR. The burden however would be on the unsuccessful party to show why there should be a departure from the general rule. The issues to be considered in deciding whether a party had acted unreasonably in refusing ADR had to be determined by having regard to all the circumstances of a particular case. Those factors which might be relevant would include but were not limited to: –

a) The nature of the dispute.
b) The merits of the case.
c) The extent to which other settlement methods had been attempted.
d) Whether the cost of the ADR would be disproportionately high.
e) Whether any delay in setting up and attending the ADR would be prejudicial.
f) Whether the ADR had a reasonable prospect of success.

a)The Nature of the Dispute

Not every dispute was suitable for ADR. The most obvious kind would be whether the parties wished the Court to determine issues of law or construction which would be essential to the future trading relations of the parties or where the issues were generally important for those participating in a particular trade or market; or where there were issues involving allegations of fraud or commercially disreputable conduct. However, in the Court’s view most cases were not by their very nature unsuitable for ADR.

b) The Merits of the Case

The fact that a party unreasonably believes that his case is watertight is no justification for refusing mediation. The fact that a party reasonably believes that he has a watertight case may well be sufficient justification for a refusal to mediate.

c) Other Settlement Methods Have Been Attempted

If settlement offers have already been made but rejected, this is a relevant factor. It is not sufficient in itself and on analysis is in fact no more than an aspect of factor f) below.

d) The Costs Of Mediation

Mediation could sometimes be as expenses as a day in Court. The costs of an ultimately successful party being required to incur the costs of an abortive mediation was a relevant factor to be taken into account in deciding whether the unsuccessful party acted unreasonably in refusing to agree to ADR.

e) Delay

If mediation is suggested late in the day, acceptance may have the effect of delaying the trial of the action and was a factor relevant to the issue of reasonable conduct.

f) Whether The Mediation Has A Reasonable Prospect Of Success

This was a relevant but not a determinative factor. A might reasonably take the view that a mediation had no reasonable prospect of success because B was unlikely to accept a reasonable compromise. That would be a proper basis for concluding that a mediation would have no reasonable prospect of success and for that reason A’s refusal would be reasonable. If however A himself has been unreasonably obdurate the Court might well decide that a mediation would have no reasonable prospect of success but that would be no proper reason for concluding that the refusal to mediate was reasonable. A successful party could not rely on his own unreasonableness.

The Court should encourage mediation. A particularly valuable example was the standard form of order now widely used in clinical negligence cases devised by Master Ungley which required the parties to consider by a certain date whether the case was capable of resolution by ADR and obliging a party which considered a case unsuitable to file with the Court a witness statement prior to the Trial without prejudice save as to costs giving reasons upon which the party relied for saying that the case was unreasonable. The Court could see no reason why such an Order should not be routinely used at least in general personal injury litigation and perhaps in other litigation too.

Although public bodies now came within the Government’s pledge to consider ADR, this was no basis for the Court discriminating against successful public bodies when deciding whether a refusal to agree to ADR should result in a costs penalty. This gave no greater weight than already lay upon a party to act reasonably when considering ADR.

The Court emphasises that the parties were entitled in an ADR to adopt whatever position they wished and if as a result the dispute was not settled, that was not a matter for the Court. The integrity and confidentiality of the process was to be respected and the Court should not know and should therefore not investigate why the process did not result in agreement.

Both appeals dismissed.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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