Government’s ADR pledge
Royal Bank of Canada -v- Secretary of State for Defence  – Where the Defendant had rejected the Claimant’s proposal to mediate a claim for costs, the Defendant had not abided by a formal pledge given on behalf of all government departments to settle by alternative dispute resolution wherever possible and was not, therefore, entitled to costs.
Costs of the action
Nat West Bank v Feeney (unreported) No.9 of 2007 (14.05.07) Eady J – The Costs Judge held that, as a matter of general principle, costs incurred in a mediation would form part of the costs of the action just as any reasonable costs of negotiation would (see Costs Practice Direction para 4.6(8)). However, the mediation agreement provided for the parties to bear their own costs of mediation and if they wished to agree otherwise, the standard terms of agreement would need to be amended accordingly. No such amendment was made. Therefore the costs of mediation were not recoverable.
TCC and mediation
Roundstone Nurseries Ltd v Stephenson Holdings Ltd  EWHC 1431 (TCC) – Coulson J – 10 June 2009 – The costs of mediation during the pre-action protocol stage are recoverable as ‘costs of or incidental to the litigation’ since the TCC Order at the start of each requires the parties to consider ADR and therefore a mediation during the protocol period is anticipated.
Rejecting mediation, generally
Dunnet -v- Railtrack 2002 EWCA Civ 303 – The costs of a successful appeal were refused in their entirety where the party seeking them had unreasonably declined an offer of ADR.
Alan Valentine -v- (1) Kevin Allen (2) Simon Nash (3) Alison Nash  EWCA Civ 915 – The Appellant’s offer of mediation was refused by the Respondents but this did not detract from the usual order that the unsuccessful Appellant should pay the successful Respondents’ costs in resisting the appeal because it was clear that the Respondents had otherwise made real efforts to settle the matter.
Halsey -v- Milton Keynes General NHS Trust : Steel -v- (1) Joy and (2) Halliday  EWCA (Civ) 576 [CA civ div – 11.05.04 – Dyson LJ] – The successful party had believed their case was watertight and had refused a proposal to mediate. The court found that the refusal to mediate was not unreasonable in the particular circumstances of this case and clear guidelines for dealing with applications of this nature were set down by L J Dyson. The court may displace normal costs rules to order a winning party to pay costs if it acted unreasonably in refusing to mediate. However; (i) the burden of showing the refusal was unreasonable was placed on the unsuccessful party (reversing previous case law); (ii) the unsuccessful party must also show that the mediation had a reasonable chance of success; (iii) there should be no presumption in favour of mediation; (iv) However, litigants should routinely consider with clients whether disputes are suitable for ADR; (v) the court’s role was to encourage mediation – not to compel it.
Northrop Grumman Mission Systems Europe Ltd (“NGM“) v BAE Systems (Al Diriyah C4I) Ltd (No2)  EWHC 3148 (TCC) – Ramsey J – The dispute concerned BAE’s termination of a licence agreement and BAE was the successful party. When making a costs order, Ramsey J decided not to take into account (i) the defendant’s unreasonable refusal to mediate and (ii) the claimant’s failure to beat a reasonable offer so as to modify what would otherwise be the general rule that the successful party should have its costs.
NGM had argued that BAE’s costs should be cut by half due to its unreasonable refusal to mediate. The judge ruled that it was a case where the nature of the dispute was susceptible to mediation and where mediation had reasonable prospects of success.
Ramsey J accepted that BAE had reasonably considered that it had a strong case, noting that in the key ‘refusal to mediate’ case of Halsey, the Court of Appeal accepted that a party which reasonably believes it has a watertight case may well have sufficient justification for refusing to mediate. However, he also pointed to the Jackson ADR Handbook, which “properly, in my view, drew attention… to the fact that this seems to ignore the positive effect that mediation can have in resolving disputes even if the claims have no merit”. Ramsey J went on: “Was it unreasonable for BAE to reject NGM’s offer to mediate? I have come to the conclusion that it was. Whilst BAE’s view of the claim provided some justification for not mediating, I consider that the other factors show that it was unreasonable for BAE not to mediate the dispute.”
However, he also had to take into account the settlement offer that BAE had made and NGM did not better. Although the refusal to mediate means that the parties had lost the opportunity of resolving the case without there being a hearing, the failure to accept the offer had equally meant that the parties had lost such an opportunity. “Overall, in the case, I have come to the conclusion that the fair and just outcome should be that neither party’s conduct should be taken into account to modify what would otherwise be the general rule on costs. ”
Parker Lloyd Capital Ltd v Edwardian Group Ltd  EWHC 2421 (QB) – A successful defendant had refused to enter into mediation because it had believed that (i) the claimant’s case was hopeless and (ii) the claimant had proposed mediation as a tactic designed to extract a nuisance payment. The court held that the defendant had not been unreasonable in refusing mediation and, therefore, no adjustment to the defendant’s costs was necessary.