Let's take a closer look

Whatever you think of mediation, if one party to a dispute suggests it, that suggestion has to be taken seriously. If the idea is rejected out of hand, things might go badly wrong when it comes to costs. While we know that this is a risk, there is a debate about how serious that risk is. The defendant is in a quandary. It might seem as if mediation would be a complete waste of time and money, but to refuse could be expensive. This encourages claimants to make the suggestion, perhaps hoping that the defendant will agree to settle in order to get rid of the nuisance.

We now have guidance from the Court of Appeal on when it is appropriate to deprive the successful party of costs because it rejected mediation. This is contained in Halsey vs Milton Keynes General NHS Trust and Steel vs Joy & Halliday. In fact it is two cases consolidated into one because of the common theme. It has nothing to do with construction, but the judgment was given by Sir John Dyson who knows a thing or two about construction disputes, and is sure to be followed in construction cases.

Sir John set out six rules that the court should follow. They have already been considered by Tony Bingham in his article (page 51). It is interesting to see how the tests were applied.

The first case was the more straightforward. Mr Halsey had died while being treated in hospital. His widow alleged negligence on the part of the doctors. She was unsuccessful, and the NHS trust asked for costs. The claimant referred to letters written to the trust suggesting mediation. All these had been refused because the trust thought it had a strong defence and saw no reason to contemplate settlement. Mrs Halsey said the trust had been unreasonable and ought not to be permitted to recover its costs after the first mediation offer. The first instance judge disagreed and made the usual order.

Applying his six tests, Sir John found that the clamant had failed to show the trust had acted unreasonably. The court had not encouraged mediation. The trust had reasonably thought that it had a strong case. The costs of the mediation would have been disproportionately high. The court considered that the claimant's offer to mediate was "somewhat tactical" as no fewer than five letters had been written asking the trust to mediate, plus a letter to the secretary of state, referring to the legal costs that the NHS would incur if mediation was not accepted. And to cap it all there had been little chance that the mediation would have been successful.

The trust thought that it had a strong defence and saw no reason to contemplate settlement

Steel vs Joy and Halliday concerned two road accidents. The claimant was injured twice, once in 1996 and again in 1999. Both defendants admitted liability and the issue before the court was whether the second defendant had caused the claimant to suffer any more damage.

During the litigation the first defendant wrote to the second defendant suggesting mediation. The second defendant refused on the basis that mediation was not appropriate as the dispute was a question of law that the court had to decide. The second defendant was later successful as to causation and asked for costs. The first defendant argued that the failure to mediate displaced the usual cost order, but the judge at first instance disagreed and so did the Court of Appeal.

Again applying his tests, Sir John found that the first defendant had not shown that mediation would have succeeded. Significant money (some £200,000) turned on the court's decision. The court noted that the judge at first instance dealt with the matter in only two hours. In comparison, mediation would have been relatively expensive, and as mediation was suggested fairly late on most of the costs had already been incurred.