Mediation as an effective dispute resolution method for civil disputes is well established. Therefore it was not surprising that Lord Justice Jackson reinforced the important role of mediation in chapter 36 of his Review of Civil Litigation Costs Final Report: ‘The most important form of ADR… is mediation. The reason for the emphasis upon mediation is twofold. First, properly conducted mediation enables many (but certainly not all) civil disputes to be resolved at less cost and greater satisfaction to the parties than litigation. Second, many disputing parties are not aware of the full benefits to be gained from mediation and may, therefore, dismiss this option too readily.’

The Court of Appeal in Rolf v De Guerin [2011] EWCA Civ 78 considered various issues including the defendant’s refusal to mediate. The claimant entered into an agreement with the defendant for the construction of an extension to the claimant’s house. The day-to-day control of the building works was left in the hands of the claimant’s husband. The claimant’s failure to make payments to the defendant and, as the trial judge found, the claimant’s husband’s aggressive and interfering role, led to the defendant ceasing work and treating the contract as repudiated. The claimant issued ­proceedings against the defendant. Before and after issuing proceedings the claimant made various invitations to the defendant to enter settlement ­discussions and, later, mediation which the defendant rejected.

The defendant won at trial. However, the claimant appealed on a number of grounds including the costs order which the trial judge had made in favour of the defendant. The claimant argued, inter alia, that the defendant’s refusal to take part in mediation amounted to unreasonable behaviour for the purposes of Civil Procedure Rule 44 and therefore the defendant should not be awarded his costs.

On appeal, when asked by the court why he had been unwilling to mediate, the defendant stated that if he had participated in mediation he would have had to accept ‘his guilt’ and that he would not have been able to demonstrate to a mediator what the claimant’s husband was like, which could only be done at trial. In any event, he wanted his ‘day in court’.

Rix LJ did not hesitate in dismissing these reasons and found that the defendant’s refusal to mediate was unreasonable behaviour for the purposes of CPR 44(5) and, as a consequence, the court was entitled to exercise its discretion and make no order as to costs. Rix LJ held: ‘As for wanting his day in court, that of course is a reason why the courts have been unwilling to compel parties to mediate rather than litigate: but it does not seem to me to be an adequate response to a proper judicial concern that parties should respond reasonably to offers to mediate or settle and that their conduct in this respect can be taken into account in awarding costs.’

Rix LJ drew heavily upon the judgments given in Dunnett v Railtrack Ltd [2002] 1 WLR 2434, Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002 and related cases in arguing that a party’s refusal to engage in mediation would be a relevant factor when assessing costs. Rix LJ also observed that particular cases, such as small building disputes, should use the courts only as a last resort and would, therefore, benefit from mediation: ‘In particular, as I will develop below, the nature of the case, namely a small building dispute between a householder and a small builder, is well recognised as one in which trial should be regarded as a solution of last resort, and one which is likely to give an unsatisfactory outcome to the parties at disproportionate cost, to which should be added the cost of disproportionate anxiety.’

Despite acknowledging that mediation may not have produced a solution in this matter, Rix LJ was of the opinion that it was suitable for mediation nonetheless: ‘It is possible of course that settlement discussions, or even mediation, would not have produced a solution; or would have produced one satisfactory enough to the parties to have enabled them to reach agreement but which Mr Guerin might now, with his hindsight of the judge’s judgment, have been able to say did him less than justice. Nevertheless, in my judgment, the facts of this case disclose that negotiation and/or mediation would have had reasonable prospects of success. The spurned offers to enter into settlement negotiations or mediation were unreasonable and ought to bear materially on the outcome of the court’s discretion, particularly in this class of case.’

Rolf illustrates two significant points. The first and most obvious is that the courts will expect litigants to seriously consider and engage in mediation or other forms of alternative dispute resolution. The second point is that the courts now consider small building disputes as suitable for settlement rather than continuing to trial. Thus, a party (especially one who is party to a small construction dispute) who succeeds in his claim or defence but who has failed to engage in mediation without a legitimate excuse will be found to have behaved unreasonably by a court and is, as a consequence, likely to have an adverse costs order made against him.

Masood Ahmed, Birmingham City University