Are the cost rules regarding refusal to mediate about to be beefed up (Halsey revisited)

Are the cost rules regarding refusal to mediate about to be beefed up (Halsey revisited)

Introduction

The talk in the mediation community is that the Court of Appeal will shortly be invited to overturn its own pronouncement in the Halsey case, to the effect that compulsory mediation is incompatible with the right to a court hearing, set out in the European Convention on Human Rights (“ECHR”). However for the reasons set out below, this point is now largely of academic interest. The key question is whether the court will also take the opportunity to beef up the cost rules to make it easier for courts to penalise litigants who refuse to participate in mediation. If they do then litigators will need to reconsider how to position their clients when the question of whether to mediate is raised in litigation.

Context

In the case of Halsey v Milton Keynes General NHS Trust, Steel, Joy and Halliday [2004] 1 WLR 3002 (“Halsey”) the Court of Appeal reviewed and codified much of the current case law regarding how a refusal to participate in alternative dispute resolution should be reflected in cost orders, in particular whether a successful litigant should be deprived of some or all of their costs award if they refused to mediate.

However in the judgement of the Court of Appeal, statements were also made (probably obiter) regarding whether it was lawful to compel a party to mediate, having regard to s.6 of the European Convention on Human Rights (“ECHR”), which provides for a right “to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”. The court in Halsey concluded that “compulsion of ADR would be regarded as an unacceptable constraint on the right of access to the court and, therefore, a violation of article 6”.

That statement has been criticised, including (after some time) by at least one judge who sat on the case in the Court of Appeal. In essence the criticism is that the statement is wrong as a matter of law, as it overlooks the fact that even if a party is compelled to mediate, that party is not compelled to settle, and therefore has the right, if the case does not settle, to prosecute the case through the courts. A further objection to the statement is that it goes against the current direction of policy and procedure, which is at least to encourage the use of mediation in cases where it is appropriate (acknowledged to be most cases), and at most to make participation in mediation compulsory.

Policy background

Mediation has been a cornerstone of litigation management since the introduction of the Woolf reforms. The courts and parties are actively encouraged to use alternative dispute resolution procedures in suitable cases (most) and there are cost consequences for those who unreasonably refuse to play that game.

The UK government is starting down the path of making mediation compulsory (for my note on that subject please click here ). The consultation paper issued by the UK Ministry of Justice (“MoJ”) on 26th July 2022 proposes the introduction of compulsory mediation for small claims and makes it clear the plan is to extend compulsory mediation to most County Court cases and probably beyond to higher court cases. The policy is driven by a need to reduce the volume of court cases and to save money, as well as promoting a process (mediation) which offers many benefits to litigants.

In formulating this proposal the MoJ considered the relationship between the concept of compulsory mediation and s.6 ECHR. Based on a report produced by the Civil Justice Council’s (CJC) Judicial ADR Liaison Committee, which concluded that not only was compulsory mediation lawful but that its introduction should be encouraged, the UK MoJ view is that s.6 ECHR is no impediment to compulsory ADR.

It appears therefore that both the weight of legal opinion and policy is against the statement of the Court of Appeal made in Halsey in this respect.

What is happening?

The Court of Appeal is scheduled later this year to hear an appeal in the case of Churchill v Merthyr Tydfil County Borough Council (“Churchill”), and is, apparently, going to address the statement made in Halsey regarding the effect of s.6 ECHR on the concept of compulsory mediation (among other things). The case involves claims arising from the alleged failure of the Council to deal with issues relating to Japanese Knotweed. The Civil Mediation Council, the Chartered Institute of Arbitrators and the Centre for Effective Dispute Resolution have joined forces and have been granted the right to intervene in the case through written submissions. Their position is that the courts view as stated in Halsey is wrong, for the reasons set out above. The expectation is the Court of Appeal in Churchill will follow that line.

So what?

The question of whether compulsory mediation (with suitable safeguards) is incompatible with s.6 ECHR is now largely of academic interest; few legal experts and commentators believe that it is. And in practice no cases turn on the point, as mediation is not yet compulsory in the UK. On that basis, unless the Court of Appeal in Churchill surprises us, a decision to overturn Halsey on this point will simply confirm to the UK government that it is lawful for it to press ahead with its compulsory mediation plans (something it believes already).

The more interesting and more practical question for litigators is whether the Court of Appeal in Churchill will also take the opportunity to revise the principles set out in Halsey regarding the circumstances in which litigants can be penalised in costs for not participating in mediation. There are of course limits on the extent to which the Court of Appeal can overturn its own decisions. But it might find room to do so given that it could conclude that the obiter statement in Halsey may have coloured the pronouncements which followed regarding cost penalties.

In broad terms, pursuant to Halsey, a successful litigant who refuses to participate in mediation will not be penalised in costs unless the other party can show the refusal was unreasonable, having regard to whether (1) the case was suitable for mediation; (2) the court encouraged the use of mediation; (3) the successful litigant reasonably believed it would succeed at trial; (4) the mediation had little prospect of succeeding; (5) the cost of mediation would be disproportionately high; or (6) mediation would cause unreasonable delay.

For example, with a view to encouraging the use of mediation and with the move to compulsory mediation in mind, it might be thought appropriate to introduce a presumption of unreasonableness, to be rebutted only in specified circumstances. This could be reinforced by reversing the burden of proof, imposing an obligation on the refusing party to justify their position. Further the grounds for establishing reasonableness might be reviewed. For example the idea that a party can refuse to mediate on the grounds that a mediation is unlikely to succeed seems very odd; many disputes seem intractable, but are nevertheless resolved when the parties are assisted by a skilled mediator.

So that is the interesting question which lies at the heart of the Churchill appeal, namely will the court of Appeal look at the Halsey more broadly, and change the rules on cost penalties. If they do then litigators will need to reconsider how to position their clients when the question of whether to mediate is raised in litigation.

Mike Henley