In the recent case of Invenia Technical Computing Corp v Hudson (also known as Re Invenia Labs Ltd) [2024] EWHC 1302 (Ch) ICC Judge Barber considered when the Court might deny a successful party their costs if they unreasonably refuse to participate in mediation.
Under the heading, 'The impact of a refusal to engage in ADR', ICC Judge Barber in Invenia summarised the position as follows, from paragraphs 9 to 16:
'The court may deny a successful party their costs if they unreasonably refuse to participate in mediation: Halsey v Milton Keynes NHS Trust [2004] EWCA 576. As confirmed by Dyson LJ at [13] in Halsey, however:
‘In deciding whether to deprive a successful party of some or all of his costs on the grounds that he has refused to agree to ADR, it must be borne in mind that such an order is an exception to the general rule that costs should follow the event. In our view, the burden is on the unsuccessful party to show why there should be a departure from the general rule. The fundamental principle is that such departure is not justified unless it is shown (the burden being on the unsuccessful party) that the successful party acted unreasonably in refusing to agree to ADR.’
At [16], Dyson LJ went on to confirm that the question whether a party has acted unreasonably in refusing ADR must be determined having regard to all the circumstances of the particular case. Factors which may be relevant to the question whether a party has unreasonably refused ADR will include (but are not limited to):
(1) the nature of the dispute;
(2) the merits of the case;
(3) the extent to which other settlement methods have been attempted;
(4) whether the costs of the ADR would be disproportionately high;
(5) whether any delay in setting up and attending the ADR would have been prejudicial; and
(6) whether the ADR had a reasonable prospect of success.
The subject matter of some disputes renders them intrinsically unsuitable for ADR. These may include cases involving allegations of fraud or other commercially disreputable conduct against an individual or group: Halsey at [17].
The fact that a party reasonably believes that he has a strong case is relevant to the question whether he has acted unreasonably in refusing ADR. As observed by Dyson LJ in Halsey at [18]:
‘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 when the claim is without merit. Courts should be particularly astute to this danger.’
Some cases are clear-cut. A good example is where a party would have succeeded in an application for summary judgement pursuant to CPR 24.2. Other cases are more borderline. In truly borderline cases, the fact that a party refused to agree to ADR because he thought that he would win should be given little or no weight by the court when considering whether the refusal to agree to ADR was unreasonable: Halsey at [19].
Where the costs of mediation would be disproportionately high, it may be reasonable for a litigant to refuse to incur them. Similarly, where acceptance of mediation may have the effect of delaying the trial of the action, this is a factor which it may be relevant to take into account when deciding whether a refusal to agree to ADR was unreasonable: Halsey at [21]-[22].
The burden should not be on the refusing party to satisfy the court that mediation had no reasonable prospect of success. As put by Dyson LJ in Halsey at [28] (with emphasis added):
‘the fundamental question is whether it has been shown by the unsuccessful party that the successful party unreasonably refused to agree to mediation.’
Where a successful party refuses to agree to ADR despite the court’s encouragement, that is a factor which the court will take into account when deciding whether his refusal was unreasonable: Dyson LJ at [29].'
For brevity, ICC Judge Barber in Invenia did not address some other relevant authorities which she had been referred to, namely: (a) Dunnett v Railtrack [2002] ALL ER 850; (b) Hurst v Leeming [2003] 1 Lloyds’ Rep 379; (c) Royal Bank of Canada v Secretary of State for Defence [2003] EWHC 1841 (Ch); and (d) Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416.
SIMON HILL © 2024*
BARRISTER
33 BEDFORD ROW
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