VOLUNTARINESS OF MEDIATION AND COST SANCTIONS FORPARTIES REFUSAL TO CONSIDER MEDIATION: AN OXYMORON?

ByMansur Salanke

ABSTRACT:

The voluntariness of participants in mediation is oneof mediation’s four fundamental characteristics.1 Therequirement that parties to a civil dispute considerand, more significantly, engage in a settlementprocess has never been as important as it is in thecurrent climate of austerity.2 The huge financialburdens on the courts to manage civil cases and theneed to introduce much needed reforms to the issue ofcosts in civil litigation has further reinforced thecentral role which alternative dispute resolutionprocesses play in the English civil justice system.3

Levi and Zuckerman noted that the inability toprovide access to justice at proportionate cost meansthat the Government and the Judiciary have developedpolicies designed to put pressure on litigants torefer their dispute to mediation.4 One such policy iscost sanctions for parties’ unreasonable refusal toconsider mediation.5

1 Lisa Parkinson, Family Mediation: Appropriate Dispute Resolution in a New Family Justice System (2nd edn, Jordan 2011)2 Masood Ahmed, ‘Implied Compulsory Mediation’ C.J.Q 2012, 31(2) 151-1753 ibid4 ibid5 Hurst v. Leeming, [2002] EWHC 1051 (Ch.D.)

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This paper seeks to review the concept of costsanctions for refusal to consider mediation withparticular reference to part 36 of the CPR,6 which isa voluntary procedure which contains a structured andhighly prescriptive set of rules dealing with formaloffers to settle proceedings which have specificconsequences in relation to costs. The paper wouldalso assert that mediation is likely to lose it isvoluntary nature if and where disproportionate costsanctions for refusal to participate in mediation orthe fear of cost sanctions generally results incoercion to settle. The paper also reviews thelegitimacy of imposing cost sanctions and the ironythat punitive sanctions have to be imposed in orderto coerce a party to participate in a voluntaryprocess.

The paper has made an attempt to give a clearpicture of the orthodox position of whatvoluntariness in mediation is/was, then historicaldevelopment of the cost sanction regime up to thecurrent state of costs sanctions and how it isgradually but with brutal force eroding the basicphilosophy of mediation which is ‘voluntariness’. Thepaper concluded that, the regime of cost sanctionscontinues to enjoy justification by the government,academics and the judiciary, but sound as thesejustifications may be, is flawed because underneathit there is an indirect pressure that is verydifficult to identify, because it is mostly buried inthe settlement. And it undermined the voluntariness

6 Civil Procedure Rules 2007 part 36

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of mediation processes which subsequently produces anunfair outcome. Due to the abundance of sources onthe subject matter Doctrinal Research approach wasdeemed sufficient for the purpose of this paper.

PART ONE: INTRODUCTION

1.1 Mediation And Voluntariness

In his thorough and comprehensive review of costs incivil litigation, Jackson L.J. noted the benefits ofmediation as a valuable and effective alternativedispute resolution process in resolving civildisputes:7

The most important form of ADR is mediation.The reason for the emphasis upon mediation istwofold. First, properly conducted mediationenables many but certainly not all civildisputes to be resolved at less cost andgreater satisfaction to the parties thanlitigation. Secondly, many disputing partiesare not aware of the full benefits to begained from mediation and may, therefore,dismiss this option too readily.8

Some of the greatest benefits of mediation weresuccinctly expressed by Masood9 were he wrote that:

‘The very nature of mediation presents it asan attractive consensual ADR process as

7 Masood Ahmed, ‘Implied Compulsory Mediation’ C.J.Q 2012, 31(2) 151-1758 Jackson L.J., Review of Civil Litigation Costs Final Report, January 14, 2010, Ch.36, p.3559 Ibid (n7)

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opposed to the adversarial and lengthy processof litigation. It is entirely voluntary andinvolves a neutral third party who activelyassists the parties to the dispute to broker asettlement. Mediation is a flexible yet formalprocess. It strikes a balance between allowingthe parties to retain effective control overwhen the mediation is to take place, thestructure the mediation will adopt and who themediator will be, while at the same time, itcreates a formal setting within which theparties are able to present their argumentsand seek a solution tailored to their dispute.In order to assist the mediation process, theparties concede some control to the neutralthird party in order to facilitate anatmosphere of co-operation and settlement. Theprocess is confidential and the parties mayleave during the mediation process. Settlementthrough mediation generally saves the partiesa great deal of cost and time which otherwisewould be incurred if the matter continued totrial.’10

However, Masood’s article challenges the notion thatmediation is not compulsory within the English civiljustice system and argues that despite the expressrejection of the concept of court compelledmediation, judicial attitudes, government policy,recent empirical research, and the structure of theCivil Procedure Rules indicate that the powers of the

10 Masood Ahmed, ‘Implied Compulsory Mediation’ C.J.Q 2012, 31(2) 151-175

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courts and judicial attitudes towards alternativedispute resolution processes (in particularmediation) have the inevitable consequence ofcompelling parties to engage in alternative disputeresolution processes.11 This compulsion, Masoodfurther observed, is largely driven by existing courtpowers which allow it to punish a party in costs forfailing to participate in settlement processes.12

1.2 THE ORTHODOX POSITION OF MEDIATION

The orthodox position in English civil justice is toadvocate the voluntary nature of mediation and toreject the formal introduction of compulsorymediation.13

The voluntariness of participants in mediation is oneof mediation’s four fundamental characteristics.14 TheFamily Mediators Code of Practice provides that:

Participation in mediation is always voluntary.Any participant or mediator is free to withdrawat any time. If a mediator believes that anyparticipant is unable or unwilling toparticipate freely and fully in the process,the mediator may raise the issue with theparticipants and may suspend or terminate themediation. The mediator may suggest that theparticipants obtain other professional servicesas are appropriate.15

11 ibid12 ibid 13 ibid14 Lisa Parkinson, Family Mediation: Appropriate Dispute Resolution in a New Family (2nd edn, Jordan 2011)15 Family Mediators Code of Practice sec 4.1

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The recommendation of the European Legal Instrumenton family mediation also re-emphasizes the need forthe voluntariness of mediation in settling familydisputes.16

Parkinson17 noted that ‘voluntariness can be asafeguard against pressurization or coercion orinappropriate referrals. For it to be effective,voluntariness needs to be an explicit tenet ofmediation practice at the outset and throughout theprocess.’18

The most important point made so far is thatmediation is voluntary. However, so many events suchas government policies, legislation and judicialpronouncements in the last ten years, particularlyduring the regime of the new part 36, appear to be inconflict with this orthodox position.

PART TWO: The Evolution of Cost Sanctions

2.1 The Statutory Evolution of Cost Sanctions

The inability to provide access to justice atproportionate cost means that, the Government and thejudiciary have developed policies designed to putpressure on litigants to refer their disputes tomediation.19 The Government public policy on the newcivil justice regime can be summed up in two16European Legal Instrument: Family Mediation, Recommendation No. R(98) 1 1998 princ. ii17Lisa Parkinson, Family Mediation: Appropriate Dispute Resolution in a New Family (2nd edn, Jordan 2011)18ibid19Masood Ahmed, ‘Implied Compulsory Mediation’ C.J.Q 2012, 31(2) 151-175 Citing I. Levy and A. Zuckerman, “Report on the state of Civil Justice in England” (2011) 1 I.J.P.L. 71.

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competing narratives: ‘that there is not enoughaccess to justice and that there is too muchlitigation.’20 The emergence of jurisprudenceconcerning the role mediation played in litigationbecame clearer after the enactment of the CivilProcedure Rules.21

It all started with Lord Woolf’s final report‘Access to Justice,’22 which he referred to as ‘thenew landscape’ of civil litigation. The new civilprocedure rules introduced a new and effective courtrule regime which required courts to actively managecases in furthering the overriding objectives of thenew system. The overriding objective is definedexplicitly in Part 123 as:

1.1 (1) These Rules are a new proceduralcode with the overriding objective ofenabling the court to deal with casesjustly.(2) Dealing with a case justly includes, so faras is practicable-(a) ensuring that the parties are on an equalfooting;(b) saving expense;(c) dealing with the case in ways which areproportionate-(i) to the amount of money involved;(ii) to the importance of the case;

20Hazel Genn, Judging Civil Justice(Cambridge UK 2010) p7821Civil Procedure Rules 199822Lord Woolf, Final Report to the Lord Chancellor on the Civil Justice System in England and Wales (HMSO, July 1996).23Ibid (n21) r1

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(iii) to the complexity of the issues; and(iv) to the financial position of each party;(d) ensuring that it is dealt with expeditiouslyand fairly; and(e) allotting to it an appropriate share ofthe court's resources, while taking intoaccount the need to allot resources toother cases.24

It could be observed from the above that, theoverriding objectives, according to Woods,25 ‘inkeeping with the way it has been named, is truly"overriding"; it informs and lends colour, meaningand context to all of the procedural machinery of theCPR. Part 1 imposes positive duties on both the courtand the parties to conduct themselves so as tofurther the overriding objective. One way theoverriding objective is made concrete and operationalis by requiring the court to engage in active casemanagement.’26 ‘Active case management’ includes butnot limited to: encouraging the parties to use analternative dispute resolution procedure if the courtconsiders that appropriate and facilitating the useof such procedure and helping the parties to settlethe whole or part of the case as provided in theCPR.27

Rule 328 list some of the court’s management powers.Woods noted that several of these powers have been

24Civil Procedure Rules 1998 r125Thomas S. Woods ‘Cost Sanctions for Unreasonable Refusal to Mediate: Coming to a Court House Near You?’ 31 Advoc. Q. 393 200626ibid27Civil Procedure Rules 1998 r1.4 e-f28ibid pt. 3

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invoked specifically to encourage ADR.29 For example,the court has power to stay the whole or part of anyproceedings or judgement either generally or until aspecified date or event.30 This general power isaccompanied by more specific powers under Rule 26.31

(a) the power that a party has under Rule26.4(1) to "make a written request for theproceedings to be stayed while the partiestry to settle the case by alternativedispute resolution or other means" or;(b) the power of the court under Rule26.4(2)(b) to direct "where it would beappropriate" that proceedings, either inwhole or in part, "be stayed for one month,or such specified period as it considersappropriate".32

Also Rule 3.1(4) provides that "where the court givesdirections it may take into account whether or not aparty has complied with any relevant pre-actionprotocol".33 Woods observed that ‘While a number ofspecific pre-action protocols have been developed forvarious kinds of claims, the general practicedirection concerning protocols neverthelessstipulates that its general provisions - all aimed atavoiding litigation if possible and making

29Thomas S. Woods ‘Cost Sanctions for Unreasonable Refusal to Mediate: Coming to a Court House Near You?’ 31 Advoc. Q. 393 200630ibid (n27) r3.1(2)(f)31ibid (n29)32ibid (n27) r26a-b33Civil Procedure Rules 1998 r3.1(4)

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unavoidable litigation open and efficient - havewidespread and general application.’34

In cases not covered by any approved protocol, thecourt will expect the parties, in accordance with theoverriding objective and the matters referred to inCPR 1 .l(2)(a), (b) and (c), to act reasonably inexchanging information and documents relevant to theclaim and generally in trying to avoid the necessityfor the start of proceedings.35

The examples of provisions aimed at discouraginglitigation and encouraging settlement are toonumerous in the CPR. Wood wrote that: ‘The policythread concerning the active encouragement of ADRthat runs through all of these rules, protocols andpractice directions can be traced directly to theprovisions of the CPR that govern costs. While thegeneral rule that costs "follow the event" ispreserved, the wide-ranging discretion that the courthas to depart from that general rule is guided in theCPR by a specific reference to the "conduct of theparties" that brings into consideration the stancethat the parties adopt concerning ADR.’36

An example of this rules in the CPR is: Rules 44.3(4)(5)37 which provides that:

(4) In deciding what order (if any) tomake about costs, the court must have

34Ibid (n29)35Practice Directions – Protocols s 4.136 Thomas S. Woods ‘Cost Sanctions for Unreasonable Refusal to Mediate: Coming to a Court House Near You?’ 31 Advoc. Q. 393 200637 Civil Procedure Rules 1998 r44.3(4)(5)

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regard to all the circumstances, including-

(a) the conduct of the parties...(5) the conduct of the parties includes -(a) conduct before, as well as during theproceedings and in particular the extent towhich the parties followed any relevant preaction protocol...

Also s. 2.3(1) and 2.3(2) of the general practicedirection governing pre-action protocols makes itclear that failure to comply with the requirementsset out in such protocols can have seriousconsequences.38 A non-complying party faces, interalia, the risk of having to "pay the costs of theproceedings, or part of those costs, of the otherparty or parties", possibly on an indemnity basis.39

It could be established from the examples above, asrightly pointed out by Woods, that ‘the CPR have beenstructured to provide clear encouragement to partiesto try to resolve their disputes by alternative meansbefore litigation begins and (if a resolution is notfound) to continue in those efforts while litigationproceeds.’40 Moreover, Woods further observed ‘thecourt is given a substantial role and powers, throughcase management and otherwise, to apply pressure tothe parties to have them at least seriously consider,if not make, good faith efforts to reach consensusthrough mediation or some other form of ADR. And38 ibid (n36)39Ibid (n36)40 ibid

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last, should the parties not live up to their ownobligations in this regard, or should they failunreasonably to explore ADR as a means of achievingsettlement without litigating their disputes totrial, the CPR have equipped the court withsubstantial powers to penalize that intransigence,most obviously by making orders as to costs thatreflect the court's disfavour.’41

What follows since the introduction of theseinnovations is the Court’s somewhat pragmatic butaggressive approach in the application of theprovisions, whereby courts have sometimes entertainedarguments that parties' conduct, in refusingunreasonably to mediate, warrants some form ofsanction, generally in the form of an unfavourablecosts order.42

2.2 THE JUDICIAL EVOLUTION OF THE COST SANCTIONS

Not too long after the implementation of hisrecommendations and the introduction of the CPR LordWoolf C.J seized the opportunity offered in Cowl & Othersv Plymouth City Council43 as a platform from which he madesome earlier pronouncements, in the context of anactual case, about the importance of exploringsettlement options. According to Woods, Cowl is oftencited as an early judicial expression and approbationof the policy thrust reflected in Lord Woolf's Reportand in the CPR, particularly on the issue of ADR.44

41 ibid42 Thomas S. Woods ‘Cost Sanctions for Unreasonable Refusal to Mediate: Coming to a Court House Near You?’ 31 Advoc. Q. 393 200643 Cowl and Ors. v. Plymouth City Council, [2001] EWCA Civ. 1935 (C.A.)44ibid (n42)

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The Court of Appeal in its judgement in Cowl, trustedthat, the parties will now draw a line under what hashappened in the past and focus instead on what shouldhappen in the future.45 Lord Woolf further has this tosay:

“This case will have served some purpose ifit makes it clear that the lawyers actingon both sides of a dispute of this sort areunder a heavy obligation to resort tolitigation only if it is reallyunavoidable. If they cannot resolve thewhole of the dispute by the use of thecomplaints procedure they should resolvethe dispute so far as is practicablewithout involving litigation. At least inthis way some of the expense and delay willbe avoided. We hope that the highly skilledand caring practitioners who practise inthis area will learn from what we regard asthe very unfortunate history of thiscase.”46

But it was in Dunnett v Railtrack plc47 that the courtdirectly confronted the prospect of penalizing aparty in costs for unreasonable refusal to mediate.In that case Railtrack, which had succeeded indefending an appeal brought by Dunnett, sought itscosts. When granting Dunnett leave to appeal, thejudge had advised her to consider the possibility of

45 Cowl and Ors. v. Plymouth City Council, [2001] EWCA Civ. 1935 (C.A.), 2646Cowl and Ors. v. Plymouth City Council, [2001] EWCA Civ. 1935 (C.A.), 27 47Dunnett v. Railtrack plc, [2002] EWCA Civ. 303, [2002] 1 W.L.R. 2434 (C.A.),

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alternative dispute resolution. Dunnett hadapproached Railtrack concerning the judge'ssuggestion but Railtrack had rejected it. Railtrackhad offered to settle the action prior to the appealbeing heard.48

The Court makes making no order as to costs and heldthat if a party rejected alternative disputeresolution out of hand when it had been suggested bythe court, they would suffer the consequences whencosts came to be decided. It is important toemphasise that parties themselves had a duty tofurther the overriding objective of the CivilProcedure Rules 1998. Such a duty includedconsideration of whether alternative disputeresolution was a possible remedy. In the instantcase, Railtrack plc had refused to even contemplatealternative dispute resolution at a stage prior tothe costs of the appeal beginning to flow, it was notappropriate to take into account the fact that offershad been made to compromise the action.49 Brooke L Jin his judgement said that:

“Having regard to their duties under CPR1.3, parties and their lawyers might haveto face uncomfortable costs consequences ifthey turned down out of hand the chance ofADR when suggested by the court. Skilledmediators were now able to achieve results

48Dunnett v. Railtrack plc, [2002] EWCA Civ 303; [2002] 1 W.L.R. 2434; [2002] 2 All E.R. 850; [2002] C.P. Rep. 35; [2002] C.P.L.R. 309; (2002) 99(16) L.S.G. 37; Times, April 3, 2002; Official Transcript; CA (Civ Div.)49Dunnett v. Railtrack plc, [2002] EWCA Civ 303; [2002] 1 W.L.R. 2434; [2002] 2 AllE.R. 850; [2002] C.P. Rep. 35; [2002] C.P.L.R. 309; (2002) 99(16) L.S.G. 37; Times, April 3, 2002; Official Transcript; CA (Civ Div.)

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satisfactory to both parties in many caseswhich were quite beyond the power oflawyers and courts to achieve. When theparties were brought together on neutralsoil with a skilled mediator to help themresolve their differences, it could verywell be that the mediator was able toachieve a result by which the parties shookhands and felt that they had gone awayhaving settled the dispute on terms withwhich they were happy to live. In theinstant case, the defendant appeared tohave misunderstood the purpose of ADR.Given its refusal to contemplate ADR at astage before the costs of the appealstarted to flow, it was not appropriate totake into account the offers that had beenmade.”50

Hurst v Leeming51 ‘is the case in which the court firstsought to articulate a test that defines anddelineates those occasions on which a costs sanctionshould be applied to penalize a litigant forunreasonable refusal to mediate.’52 Hurst and Leemingboth applied for summary judgment of Hurst's claimagainst Leeming, a barrister, for professionalnegligence. Hurst, formerly a partner in a firm ofsolicitors, contended that Leeming had been negligentin handling proceedings brought by Hurst against the

50Dunnett v. Railtrack plc, [2002] EWCA Civ 303; (Brooke LJ)51Hurst v. Leeming, [2002] EWHC 1051 (Ch. D.)52Thomas S. Woods ‘Cost Sanctions for Unreasonable Refusal to Mediate: Coming to a Court House Near You?’ 31 Advoc. Q. 393 2006

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firm. At the hearing of the summary judgmentapplication, Hurst conceded that his claim waswithout merit but he contended that Leeming was notentitled to recover his costs in the usual mannerbecause Leeming had refused Hurst's suggestion toproceed to mediation.53

Lightman J.,54 in refusing the application, held thatin the exceptional circumstances of the case it wasinappropriate to penalise Leeming in costs followinghis refusal of a pre-trial offer of mediation in viewof Hurst's attitude, character and status as an un-discharged bankrupt.55 Further, and mostsignificantly, Leeming had been justified in refusingmediation as Hurst's claim clearly had no realprospect of success. His Lordship reiterated that:

‘A party who refuses to proceed tomediation without good and sufficientreasons may be penalized for that refusaland, most particularly in respect of costs.Mediation is not in law compulsory, and theprotocol spells that out loud and clear.But alternative dispute resolution is atthe heart of today's civil justice system,and any unjustified failure to give properattention to the opportunities afforded bymediation, and in particular any case wheremediation affords a realistic prospect ofresolution of dispute, there must be

53Hurst v. Leeming, [2002] EWHC 1051 (Ch. D.)54Hurst v. Leeming, [2002] EWHC 1051 (Ch. D.) (Lightman J.) 55ibid

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anticipated as a real possibility thatadverse consequences may be attracted.’56

It is worth noting that the decision of the court inthat case was held at the earlier stages of evolutionof the emergence of court sanctions. In Cases thatfollows after the judgement in Hurst, saw theemergence of courts pragmatic approaches to the issueof refusal to mediate.

In Halsey v. Milton Keynes General NHS Trust57 judgement, Woodsasserted that ‘the judgment is the most definitiveand detailed treatment of the court's jurisdiction todeprive a party of its costs for unreasonable refusalto mediate yet to be handed down in the UnitedKingdom.58 Because according to him the case includesa thorough analysis and review of the law as it haddeveloped to that point. The case also refined andrestated the test articulated in Hurst v Leeming. 59

The Court of Appeal seized the opportunity that hadbeen presented by the Halsey case to establish a newgeneral direction on the subject of costs sanctionsfor unreasonable refusal to mediate. In the words ofDyson L.J:

“These two appeals raise a question of somegeneral importance: when should the courtimpose a costs sanction against asuccessful litigant on the grounds that he

56 ibid 57 Halsey v. Milton Keynes General NHS Trust,[2004] EWCA Civ. 576.58 Thomas S. Woods ‘Cost Sanctions for Unreasonable Refusal to Mediate: Coming to a Court House Near You?’ 31 Advoc. Q. 393 200659 Hurst v. Leeming, [2002] EWHC 1051 (Ch.D.)

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has refused to take part in an alternativedispute resolution? There seems to be someuncertainty as to the approach that shouldbe adopted in answering this question: ithas been the subject of consideration bycourts on a number of occasions. A measureof its significance is that we havereceived detailed and helpful submissionsfrom no fewer than four interveners, namelythe Law Society, the Civil MediationCouncil, the ADR Group and the Centre forEffective Dispute Resolution.”60

In Halsey, the claimant issued proceedings against thedefendant NHS Trust in relation to the death of herhusband arising out of the defendant's allegedlynegligent treatment of him. The judge dismissed theclaim and proceeded to heard argument on the questionof costs. The claimant submitted that there should beno order for costs and relied on the refusal of thedefendant to agree to mediation. The judge decidedthat the successful defendant should not be deprivedof any of its costs. The claimant not satisfied withthe decision appealed against that decision.61

Dyson L.J., reaffirmed the principle of voluntarinessby acknowledging that "to oblige truly unwillingparties to refer their disputes to mediation would beto oppose an unacceptable obstruction on their right

60Halsey v. Milton Keynes General NHS Trust,[2004] EWCA Civ. 576. (Dyson L.J)61Halsey v. Milton Keynes General NHS Trust,[2004] EWCA Civ. 576.

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of access to the court."62 He further invokes s. 6 ofthe European Convention on Human Rights in support.63

In delivering it is reserved judgment, the court saidthat the appeals64 raised some questions ofsignificant importance: When should the court imposea costs sanction against a successful litigant on theground that he had refused to take part in analternative dispute resolution?65

In deciding whether to deprive a successful party ofsome or all of his costs on the ground that herefused to agree to alternative dispute resolution,it had to be borne in mind that such an order was anexception to the general rule that costs shouldfollow the event.66

The burden was on the unsuccessful party to show whythere should be a departure from the general rule.67

The fundamental principle was that such departure wasnot justified unless it was shown that the successfulparty acted unreasonably in refusing to agree toalternative dispute resolution.68

Mediation and other alternative dispute resolutionprocesses were not appropriate for every case and sothere should not be a presumption in favour ofmediation.69

62 ibid (n60)63 ibid64Halsey v. Milton Keynes General NHS Trust and Steel v. Joy andHalliday,[2004] EWCA Civ. 576.65Ibid (n60)66 ibid67 Halsey v. Milton Keynes General NHS Trust,[2004] EWCA Civ. 576.68 ibid (Dyson L.J)69 ibid

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The question whether a party acted unreasonably inrefusing alternative dispute resolution had to bedetermined having regard to all the circumstances ofthe particular case.70

The court further to state that factors whichmay be relevant to the question whether a party hasunreasonably refused ADR will include (but are notlimited to) the following:

(a) the nature of the dispute; (b) themerits of the case; (c) the extent to whichother settlement methods have beenattempted; (d) whether the costs of the ADRwould be disproportionately high; (e)whether any delay in setting up andattending the ADR would have beenprejudicial; and (f) whether the ADR had areasonable prospect of success.71

The court then proceeded into a pedanticconsideration of these factors in turn and emphasisedthat in many cases no single factor will be decisive.The court also warned that the factors should not beregarded as an exhaustive checklist. Wood rightlyobserved that:

‘While Halsey stands foursquare behind thepolicy of encouraging ADR, the test fordetermining whether a party that refuses toengage in ADR should be deprived of costshas been relaxed by Halsey in the sense that

70 ibid (n68)71 ibid

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it affords more scope for a determinationthat a party's refusal can be reasonable.To put it somewhat differently, the zeal toattach adverse costs consequences to aparty's refusal to mediate reflected inearlier judgments like Dunnett,72 Hurst73 andCable & Wireless74 is replaced by a more closelyreasoned and moderate approach in Halsey.’75

However, Dyson L.J., was alive to the risk that theunreasonable refusal to mediate jurisprudence couldbe exploited so as to enable parties with cases ofdoubtful merit to extort unwilling defendants to makeimprovident settlements based on those defendants'concern that if they pressed ahead to seekvindication of their legal positions in the courts,and succeeded, they may nevertheless be penalized incosts.76 He also admitted that some disputes areinherently more complex than others, and cautionedthat the task of recognizing unreasonableness can bedifficult. His Lordship expressed his concern in thisway:77

“The burden should not be on the refusing partyto satisfy the court that mediation had noreasonable prospect of success. As we havealready stated, the fundamental question iswhether it has been shown by the unsuccessful

72Dunnett v. Railtrack plc, [2002] EWCA Civ 303;73Hurst v. Leeming, [2002] EWHC 1051 (Ch.D.)74Cable & Wireless plc v. IBM United Kingdom Ltd., [2002] EWHC Comm 2059,75Thomas S. Woods ‘Cost Sanctions for Unreasonable Refusal to Mediate: Coming to a Court House Near You?’ 31 Advoc. Q. 393 200676ibid77Halsey v. Milton Keynes General NHS Trust, [2004] EWCA Civ. 576. [28] (Dyson L.J)

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party that the successful party unreasonablyrefused to agree to mediation. The questionwhether there was a reasonable prospect that amediation would have been successful is but oneof a number of potentially relevant factors whichmay need to be considered in determining theanswer to that fundamental question. Since theburden of proving an unreasonable refusal is onthe unsuccessful party, we see no reason why theburden of proof should lie on the successfulparty to show that mediation did not have anyreasonable prospect of success. In most cases itwould not be possible for the successful party toprove that a mediation had no reasonable prospectof success. In our judgment, it would not beright to stigmatise as unreasonable a refusal bythe successful party to agree to a mediationunless he showed that a mediation had noreasonable prospect of success. That would be totip the scales too heavily against the right of asuccessful party to refuse a mediation and insiston an adjudication of the dispute by the court.It seems to us that a fairer balance is struck ifthe burden is placed on the unsuccessful party toshow that there was a reasonable prospect thatmediation would have been successful. This is notan unduly onerous burden to discharge: he doesnot have to prove that a mediation would in facthave succeeded. It is significantly easier forthe unsuccessful party to prove that there was areasonable prospect that a mediation would have

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succeeded than for the successful party to provethe contrary.”78

It could be observed that the Halsey judgement to areasonable extent attempted to identify thatcompulsion into mediation may in some cases notproduce the desired result and may lead to an unfairoutcome. This refined judgement may be considered asa victory to opponent of compulsion in mediation.

2.3 CRITICISM AGAINST THE HALSEY JUDGEMENT:

The main criticisms of the Halsey judgement are thatthe court was wrong in asserting that compellingparties to mediation violates art.6 of the ECHR.79 Thecourt also confused mediation process with anarbitration process. On ‘the requirement that theparty seeking the imposition of costs sanctions toprove that the other has been unreasonable and thejudgment that a court cannot compel parties tomediate their dispute,’80 Lightman J., said is an“unfortunate and (I would suggest) clearly wrong andunreasonable.”81

On the art, 6 challenge, Masood wrote that, ‘LightmanJ. argued that, the court appeared to have beenunfamiliar with the mediation process and to haveconfused an order for mediation with an order forarbitration or some other order which places apermanent stay on proceedings. An order for mediation

78 Halsey v. Milton Keynes General NHS Trust,[2004] EWCA Civ. 576. [28] (Dyson L.J)79 European Convention on Human Rights 1950 art.680 Masood Ahmed, ‘Implied Compulsory Mediation’ C.J.Q 2012, 31(2) 151-17581 Lightman J., ‘Mediation: An Approximation to Justice’, S.J. Berwin, June28, 2007

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did not interfere with the right to a trial: at mostit merely imposes a short delay to afford anopportunity for settlement and indeed the order formediation may not even do that, for the order formediation may require or allow the parties to proceedwith preparation for trial.’82 According to Masood,Lightman J. went on to state that the Court of Appealappears to have been unaware that the practice ofordering parties to proceed to mediation regardlessof their wishes was prevalent elsewhere throughoutthe Commonwealth, the United States and otherjurisdictions.83

Agreeing with Lightman J’s position on ECHR, SirAnthony Clarke84 said that ‘a number of Europeanstates such as Belgium and Greece, both signatoriesto the Human Rights Convention, have introducedcompulsory ADR schemes without, as far as I am aware,any successful Art.6 challenges.’85 Further, the EUMediation Directive, now implemented by the majorityof EU states including the United Kingdom, hasintroduced mediation in respect of civil andcommercial cross-border disputes.86

Dundas87 viewed the assertion that compelling partiesto mediation violates art.6 of the ECHR as whollyillogical.88 He argued that if a judge can stay82 Masood Ahmed, ‘Implied Compulsory Mediation’ C.J.Q 2012, 31(2) 151-17583 ibid84 Sir Anthony Clarke, ‘The Future Of Civil Mediation’ (2008) 74 Arbitration485 ibid86 Ibid (n82)87 Hew R. Dundas, ‘Court Compelled Mediation and the European Convention on Human Rights article 6’ May (2010) 76 Arbitration 288 ibid

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proceedings for X days, as he can offer any number ofreasons, what is the difficulty in stayingproceedings for mediation and ordering it? Why shoulda short delay for an intermediate step constitute an‘unacceptable obstruction’ to the right of access tothe court?89 He further buttressed his point by citingthe submission of A.G Kokott90

“….I suggest to the Court that it should answerthe four references for a preliminary rulingfrom the Giudice di Pace di Ischia as follows:  Article 34 of Directive 2002/22/EC… requiresthat procedures for out-of-court disputeresolution must be transparent, simple andinexpensive. The principle of effective judicialprotection does not preclude such procedures forout-of-court dispute resolution from beingmandatory, provided they pursue legitimateobjectives in the general interest and are notdisproportionate with regard to the objectivepursued.”

Dundas concludes his argument with the followingwords: ‘At least we have finally laid the art.6 mythto rest; may it rest in peace.’91

Recently an opportunity presented itself for DysonLJ., he countered his critics. Dyson said, ‘whilstsix years on I agree with the EU legislator and thejudiciary on the art.6 point, I am still less89 ibid90West Tankers [2005] EWHC 454 (Comm) High Court; [2007] UKHL 4 House of Lords; Case C-185/07 ECJ. (A.G. Juliane Kokott)91 Hew R. Dundas, ‘Court Compelled Mediation and the European Convention on Human Rights article 6’ May (2010) 76 Arbitration 2

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convinced that compulsory mediation is more effectivethan when it is voluntary. I remain of the view Iadvanced in Halsey that, if the court were to compelparties to enter into mediation to which theyobjected, that would achieve nothing except to add tothe cost to be borne by the parties. It would alsopossibly postpone the time when the court determinedthe dispute and damaged the perceived effectivenessof the ADR process.’92 He also maintained that he is‘still of the view that the Halsey decision was on thewhole correct and that the guidance in relation tocosts was sound.’93

On the criticism on cost sanctions for unreasonablerefusal, Dyson, re-asserted his position and saidthat:

“In my view this is an appropriate midwaypoint between those who advance a sanction-based solution and those who favour incentives.It acts as a future threat of financial penaltyon a party who unreasonably refuses to mediate.In the Halsey case we confirmed that a courtmay make an adverse cost order if a party hasunreasonably refused mediation and then we setout the guidelines as to the circumstances inwhich refusal would be considered to beunreasonable.”94

92Lord Dyson, ‘A Word on Halsey v Milton Keynes’ A Talk Given at the CIArb’sThird Mediation Symposium in October 2010 (2011) 77 Arbitration, Issue 3 93ibid94 Lord Dyson, ‘A Word on Halsey v Milton Keynes’ A Talk Given at the CIArb’s Third Mediation Symposium in October 2010 (2011) 77 Arbitration, Issue 3

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On the issue of compelling unwilling parties tomediate, Dyson L J. still maintained his earlierposition in Halsey and said that, “I am still of theview today that I expressed in May 2004 that trulyunwilling parties should never be compelled tomediate. Cajole them, yes. Encourage them, yes. Butcompel them, no in my view.”95 However, on thequestion of whether ordering parties to mediateinfringes on their art. 6 rights, Dyson LJ.96 saidthat:

“I rather regret, (and I wasn’t alone, my twocolleagues were with me) that I was tempted bythe Law Society to embark upon something whichit was unnecessary to embark upon, and venturesome views upon art.6. What I said in Halsey wasthat to oblige truly unwilling parties to refertheir disputes to mediation would be to imposean unacceptable obstruction to their right ofaccess to the court in breach of art.6. I thinkthose words need some modification not leastbecause the European Court of Justice enteredinto this territory in March this year in thecase of Rosalba Alassini.97”

Shipman98 is also of the opinion that there appears tobe little potential for conflict with either art.5(1)(b) or art.6(1) in relation to the use ofimprisonment for contempt or of the striking-out95 ibid 96 ibid 97Alassini v Telecom Italia SpA (Joined Cases C-317–320/08) [2010] 3 C.M.L.R. 17 ECJ.98 Shirley Shipman, ‘Compulsory mediation: the elephant in the room’ C.J.Q. 2011, 30(2), 163-191

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procedure for an individual's refusal to comply witha compulsory mediation order.99

Whatever the art.6 position may be, the real questionis not whether a power exists to order mediation, itis rather whether the court should exercise thatpower.100 Dyson LJ. maintained his view in Halsey thatthe court should not exercise that power if it issatisfied that the parties are truly unwilling toembark upon a mediation.101 Similar view has beenendorsed by the Jackson102 review on costs.

‘It is clear … that mediation should never becompulsory although courts should in appropriatecases encourage mediation by pointing out itsbenefits, by directing parties to meet and ordiscuss mediation and by using the Master Ungleyform of order in the field of clinicalnegligence.’103

Dyson LJ104 also commented briefly on some of theissues on this part of Halsey that have come to lightfollowing the decision. Firstly, the situation wherea party agrees to mediate but then proceeded tobehaves unreasonably during the mediation was notdiscussed in Halsey. Dyson LJ. pointed out that, thesituation has received the attention of the High

99 ibid 100Lord Dyson, ‘A Word on Halsey v Milton Keynes’ A Talk Given at the CIArb’s Third Mediation Symposium in October 2010 (2011) 77 Arbitration, Issue 3101ibid102 Rt. Honourable Lord Justice Jackson, Review of Civil Litigation Costs: Final Report (London: TSO, 2010).103 ibid. Ch. 36 104 Ibid (n101)

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Court in the case of Carleton v Strutt & Parker (APartnership).105 In that case Jack J. held that thesituation where the party takes an unreasonableposition during mediation is not dissimilar to anunreasonable refusal to mediate.106

Dyson LJ. cautioned that allegations ofunreasonableness in conduct of mediation or indeed inany traditional interparty negotiation are easy tomake but they may be highly contentious, andsuggested that the courts should be very slow indeedto embark on a detailed exercise of fact finding tofind out the rights and the wrongs in suchcircumstances.107

PART THREE: OFFERS TO SETTLE

3.1 PART 36 CPR OFFERS TO SETTLE

A Part 36108 offer is more or less a formal offer tosettle an action or part of an action by a party tothe other party. Unlike all other ADR relatedprovisions in the CPR which are mostly invoked by thecourts, part 36 is an independent, party’s initiationprocedure. Part 36 provides ‘a statutory procedurefor settlement which is complete in its own right andby itself. It is a code that sets out a system formaking and accepting offers of settlement in a

105 Carleton v Strutt & Parker (A Partnership) [2008] EWHC 616 (QB).106 ibid107 Lord Dyson, ‘A Word on Halsey v Milton Keynes’ A Talk Given at the CIArb’s Third Mediation Symposium in October 2010 (2011) 77 Arbitration, Issue 3108 Civil Procedure Rules 2007 pt. 36

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prescribed form which encourages the resolution oflitigation on reasonable terms.’109

Offers to settle were introduced in many common lawjurisdictions with the purpose of encouraging earlysettlements, thus speeding up the resolution ofdisputes and reducing the crippling legal costs oflitigation110

Although an offer can be in any form, Part 36 affordssignificant costs, interest and tactical advantagesif used correctly.111 Arguably, part 36 offer tosettle may be considered as one of the most brilliantinnovations introduced by the Civil Procedure Rules.In 2007, part 36 offers replaced payments into courtas the sole mechanism under the CPR for making offersto settle.112 According to Jackson, in his Report onCosts, he highlighted Pt. 36 as a fundamental elementto promote settlement, reduce costs, and one of themost successful changes brought forward by the WoolfReforms.113

109Naomi O’Higgins and Elizabeth B.‘Part 36 of the Civil Procedure Rules 1998 (England and Wales)’ Step Journal Dec 2011 <http://www.stepjournal_archive/2011/tqr_volume_9_issue_4/part_36_of_the_civil_procedure.aspx> accessed 2nd Dec 2011 110Pablo Corte’s, ‘A comparative review of offers to settle - would an emerging settlement culture pave the way for their adoption in continental Europe?’ C.J.Q. 2013, 32(1), 42-67111 Naomi O’Higgins and Elizabeth B.‘Part 36 of the Civil Procedure Rules 1998 (England and Wales)’ Step Journal Dec 2011 <http://www.stepjournal_archive/2011/tqr_volume_9_issue_4/part_36_of_the_civil_procedure.aspx> accessed 2nd Dec 2011112 Erich Suter ‘Building Towards Compulsory Mediation’ 77 Arbitration 3 (2011)113 Jackson L.J., Review of Civil Litigation Costs Final Report, January 14,2010

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Part 36.10 of the Civil Procedure Rules provideswhich dealt with costs consequences, provides that:114

(1) Subject to paragraph (2) and paragraph (4)(a), where a Part 36 offer is accepted within therelevant period the claimant will be entitled tothe costs of the proceedings up to the date onwhich notice of acceptance was served on theofferor.(2) Where –(a) a defendant’s Part 36 offer relates to part onlyof the claim; and(b) at the time of serving notice of acceptancewithin the relevant period the claimant abandonsthe balance of the claim, the claimant will beentitled to the costs of the proceedings up to thedate of serving notice of acceptance unless thecourt orders otherwise.

(3) Costs under paragraphs (1) and (2) of thisrule will be assessed on the standard basis if theamount of costs is not agreed.(Rule 44.4(2) explains the standard basis forassessment of costs)(Rule 44.12 contains provisions about when a costsorder is deemed to have been made and applying foran order under section 194(3) of the LegalServices Act 2007.)(4) Where –(a) a Part 36 offer that was made less than 21days before the start of trial is accepted; or

114 Civil Procedure Rules 2007 pt. 36.10

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(b) a Part 36 offer is accepted after expiry ofthe relevant period, if the parties do not agreethe liability for costs, the court will make anorder as to costs.(5) Where paragraph (4)(b) applies, unless the courtorders otherwise –(a) the claimant will be entitled to the costs ofthe proceedings up to the date on which therelevant period expired; and(b) the offeree will be liable for the offeror’scosts for the period from the date of expiry ofthe relevant period to the date of acceptance.(6) The claimant’s costs include any costsincurred in dealing with the defendant’scounterclaim if the Part 36 offer states that ittakes into account the counterclaim.115

As can be observed from above, the costs consequencesof part 36 offers are a bit complex and varydepending on the timing of the offer and of itsacceptance or rejection. It is both a carrot andstick,116 as it rewards an offeror who makes asensible offer which is rejected, while penalisingthe offeree for rejecting that sensible offer.117 Part36, in the words of Lord Justice Moore-Bick, couldhave a ‘far reaching consequences if the case goes to

115 Civil Procedure Rules 2007 pt. 36.10116Naomi O’Higgins and Elizabeth B.‘Part 36 of the Civil Procedure Rules 1998 (England and Wales)’ Step Journal Dec 2011 <http://www.stepjournal_archive/2011/tqr_volume_9_issue_4/part_36_of_the_civil_procedure.aspx> accessed 2nd Dec 2011117ibid

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trial and the other party fails to obtain a judgmentwhich is more advantageous to him than the offer.’118

Offers to settle are considered formal economicsettlement proposals; these are frequently made byone of the parties after a legal action has startedwith the purpose of reaching an agreement, resultingin the stay of the claim.119 ‘These offers have anadditional incentive; if the offeree refuses toaccept the offer to settle, and the case continuesall the way to a judgment which ends up being lessfavourable than the previous offer; in such an eventthe offeree will have to pay the legal costs of theofferor from the moment the offer was made.’120 As tonon-monetary claims, the trial judge must compare theterms of the offer with the judgment and decidewhether the claimant has achieved a more favourableresult than what was stipulated in the offer.121

In the case of Rolf v De Guerin,122 According to Rix LJ,123

“This is an appeal solely about costs. It is also asad case about lost opportunities for mediation. Itdemonstrates, in a particular class of dispute, howwasteful and destructive litigation can be.” Rolf wasan appeal case about so many mediation issuesincluding but limited to the cost consequences of apart 36 offers and defendants refusal to mediate.118 Gibbon v Manchester CC: LG Blower Specialist Bricklayer Ltd v Reeves [2010] EWCA Civ 726,[2010] All ER (D) 218, [2010] 1 WLR 2081. (Moore-Bick LJ.)119Pablo Corte’s, ‘A comparative review of offers to settle - would an emerging settlement culture pave the way for their adoption in continental Europe?’ C.J.Q. 2013, 32(1), 42-67120 ibid121 ibid122 Rolf v De Guerin [2011] EWCA Civ 78; [2011] C.P. Rep. 24 CA.123 Rolf v De Guerin [2011] EWCA Civ 78; [2011] C.P. Rep. 24 CA. (Rix LJ.)

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More importantly for the purposes of this chapter,the dilemma a party is likely to find himself in,when faced with a part 36 offer.

In Rolf, the facts, as succinctly summarized byMasood,124 as follows:

The claimant entered into an agreement with thedefendant for the construction of an extension tothe claimant's house. The day-to-day control of thebuilding works was left in the hands of theclaimant's husband. As a result of the claimant'sfailure to make payments to the defendant and, asthe trial judge found, the claimant's husband'saggressive and interfering role in the matter, thedefendant ceased work and treated the contract asrepudiated. The claimant issued proceedings againstthe defendant. However, both before and afterissuing proceedings, the claimant made variousinvitations to the defendant to enter settlementdiscussions and, later, mediation which thedefendant rejected. On appeal, when asked by thecourt why he had been unwilling to mediate, thedefendant stated that if he had participated inmediation then he would have had to accept “hisguilt” and that he would not have been able todemonstrate to a mediator what the claimant'shusband was like, as this could only be done attrial. In any event, he wanted his “day incourt”.125

124 Masood Ahmed, ‘Implied Compulsory Mediation’ C.J.Q 2012, 31(2) 151-175125 Rolf v De Guerin [2011] EWCA Civ 78; [2011] C.P. Rep. 24 CA.

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Rix L.J.126 held that the defendant's refusal tomediate was unreasonable behaviour for the purposesof CPR 44(5),127 also the court was entitled toexercise its discretion and make on order as tocosts. Rix L.J. held:

‘As for wanting his day in court, that ofcourse is a reason why the courts have beenunwilling to compel parties to mediate ratherthan litigate: but it does not seem to me to bean adequate response to a proper judicialconcern that parties should respond reasonablyto offers to mediate or settle and that theirconduct in this respect can be taken intoaccount in awarding costs.’128

Rix L.J. was also of the opinion that the case wassuitable for mediation:

‘It is possible of course that settlementdiscussions, or even mediation, would not haveproduced a solution; or would have produced onesatisfactory enough to the parties to haveenabled them to reach agreement but which MrGuerin might now, with his hindsight of thejudge's judgment, have been able to say did himless than justice. Nevertheless, in myjudgment, the facts of this case disclose thatnegotiation and/or mediation would have hadreasonable prospects of success. The spurnedoffers to enter into settlement negotiations or

126 ibid 127 Civil Procedure Rules 2007 pt. 44(5)128 Ibid (n125)

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mediation were unreasonable and ought to bearmaterially on the outcome of the court'sdiscretion, particularly in this class ofcase.’129

Rolf raises a number of interesting points. AlthoughRix L.J. acknowledged that the courts have beenunwilling to compel parties to mediate, his Lordshipreinforced the trend that parties will be expected toconsider and engage in mediation, and a refusal to doso will be considered as unreasonable behaviour whichwill justify the making of an adverse costs orderagainst the defaulting party.130 Any reason forrefusing mediation must be strong and grounded in thefacts and law for it to withstand judicial scrutiny,any reason which is slightly weak, for example thedefendant's argument that a judge would be in abetter position to see the claimant's unreasonablebehaviour and its relevance to the issue ofrepudiation will be dismissed by the courts and willamount to legitimate “circumstances” in making anadverse costs order. 131

The decision appeared to take the approach which hasdeveloped through the jurisprudence in the area ofmediation, and which supports the notion of mandatedmediation. As Masood132 observed, the judgmentconfirms, that although mediation may not alwaysproduce a solution or a satisfactory solution for the

129 Rolf v De Guerin [2011] EWCA Civ 78; [2011] C.P. Rep. 24 CA.130 Masood Ahmed, ‘Implied Compulsory Mediation’ C.J.Q 2012, 31(2) 151-175131 ibid132 ibid

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parties, the court will expect parties to engage inmediation as a matter of course.

On the issue of Part 36 offer to settle, it was onthe provisions of the amended Pt. 36 rules that thecosts decision at the first instance floundered inRolf. The judge at first instance appears to havetreated the costs consequences of Mrs Rolf’s Pt. 36offer as those which would apply if the offer hadbeen made by the defendant. That is, since she hadfailed to beat the offer the defendant should beentitled to costs.133 The Court of Appeal had nohesitation in overturning the judge’s decision oncosts.134 Rix LJ. noted that:

“There is nothing about the procedure whichstates that an offeror is to be prejudiced asto costs because he has expressed hiswillingness to accept less than his openposition. That would make the procedure a mostdangerous one to use.”135

In looking at what costs should have been awarded RixL.J. noted that the judge appeared, apart from thePt. 36 offer, to have decided that there should be noaward of costs.136 ‘Mrs Rolf had succeeded on thecontract partner issue, rather than Greyfox, was hercontract partner in respect of the building work. Shehad also been the winner in the sense of beingawarded £2,500. By contrast, however, she had lost on133Erich Suter, ‘ Building Towards Compulsory Mediation’ (2011) 77 Arbitration, Issue 3134 ibid 135 Rolf v De Guerin [2011] EWCA Civ 78; [2011] C.P. Rep. 24 CA.136 Ibid (n133)

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the repudiation point, and the size of the award wasfairly small having regard to her claim, which hadvaried between £44,000 and £92,000.’137

In Carver v BAA Plc.138 the claimant beat marginally thedefendant’s Pt. 36 offer, which was £51 below thecourt decision, and yet the Court of Appeal orderedthe claimant to pay defendant’s costs.139 According tothe court the construction of the new provision musttake into account, not only hard numbers,140 but a“more wide-review of all the facts and circumstancesof the case in deciding whether the judgment, whichis the fruit of the litigation, was worth thefight.”141 Example a situation where the the offer tosettle were nominally higher than the amount awardedin the judgment, then the court would not havehesitated in granting legal costs in favour of theofferor.142

However, the result would be different if thecircumstances have changed since the moment the offerwas made. In Jones v Associated Newspapers Ltd143 the claimantobtained £1 more than his Pt. 36 offer, but the courtheld that he was not entitled to the costs benefitsin Pt. 36 because, according to the court, thecircumstances of the case were different (and less

137 ibid 138 Carver v BAA Plc [2008] EWCA Civ 412; [2009] 1 W.L.R. 113 [30]–[31].139 Pablo Corte’s, ‘A comparative review of offers to settle - would an emerging settlement culture pave the way for their adoption in continental Europe?’ C.J.Q. 2013, 32(1), 42-67140 ibid141 Carver v BAA Plc [2008] EWCA Civ 412; [2009] 1 W.L.R. 113 [30]–[31].142 Civil Procedure Rules 2007 pt. 36.10143 Jones v Associated Newspapers Ltd [2007] EWHC 1489 (QB); [2008] 1 All E.R. 240 [16].

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advantageous to the claimant) at the precise momentthe Pt. 36 offer was made.144

In LG Blower145 the Court of Appeal decided to narrowthe ratio decidendi in Carver by refusing to weigh theemotional burden of litigation with the additionalamount recovered (£661).146 Pablo wrote that‘although, this interpretation of Pt. 36 encouragedcourts to be unsympathetic to those who refused anoffer for technical or other trivial reasons—encouraging settlements and greater proportionalityof costs —it introduced a higher degree ofuncertainty by empowering courts with greaterdiscretion in the allocation of costs.147

Offers to settle, gained teeth after they werecodified in Pt. 36 of the CPR 1998.148 They have nowtransformed into a more powerful weapon of litigationin relation to costs after the 2007 amendments.Zuckerman rightly observed that, the original purposeof Pt. 36 offers is to make litigation costsforeseeable for the parties.149 With the emergence ofso many decisions around the provisions of part 36offers,150 it could be argued that such original

144 Ibid (139)145 LG Blower v Reeves [2010] EWCA Civ 726; [2010] 1 W.L.R. 2081.146 Ibid (n144)147 ibid148 Pablo Corte’s, ‘A comparative review of offers to settle - would an emerging settlement culture pave the way for their adoption in continental Europe?’ C.J.Q. 2013, 32(1), 42-67149 ibid150 Carver v BAA [2008] EWCA Civ 1109; C v D [2011] ECWA Civ 646; Ford v GKR Construction Limited [2001] 1 WLR 1397; Gibbon v Manchester City Council [2010] ECWA Civ726; Howell and others v Lees-Millais and others [2011] ECWA Civ 786; Rolf v De Guerin [2011] EWCA Civ 78; Carillion JM Ltd v PHI Group Ltd [2012] EWCA Civ 588; Thewlis v Groupama Insurance Co. Ltd [2012] B. L. R. 259 (QBD (TCC))

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purpose is today some-how defeated. According toJackson L J., in Fox v Foundation Piling Ltd.151 “A largenumber of authorities have accumulated around theprovisions of part 36 and their interrelationshipwith rule 44.3. This is not a welcome development,since Part 36 is intended to provide a clear andsimple framework within which parties can settlelitigation.”

These uncertainties which can best be described fromthe words of Moore-Bick L.J. in Gibbon v Manchester CityCouncil152 that “Certainty is as much to be commended inprocedural as in substantive law, especially,perhaps, in a procedural code which must beunderstood and followed by ordinary citizens who wishto conduct their own litigation” is now illusive inPart 36 offers. Particularly it raises the majorconcern of coercion within the settlement process inthe form of fear of cost consequences. Therebyuprooting voluntariness in it is entirety. This isbecause it is now ‘debatable whether settlementsoccur because there is simply an offer or due to thefear of having to pay the costs of the otherparty.’153

Evidently, Part 36 offer equipped parties in a civildispute with a powerful weaponries which onceinvoked, would apply pressure on the opponent tosettle in order to avoid cost consequences. It couldalso be argued that, this pragmatic approaches by the

151 Fox v Foundation Piling Ltd. [2011] EWCA Civ. 790 (Jackson L J.)152Gibbon v Manchester City Council [2010] ECWA Civ 726 153Ibid (148)

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courts on the application of costs sanctions has thepotential of a party finding himself facingexaggerated claims that are not made in good faithbut are brought by fraudsters, relying on the factthat they can explore the part 36 offer to avoid costeven where they subsequently fail to win their case.Conversely, it can be argued that this additionalpressure aims to avoid disproportional results thatmay not be justified by a nominal difference.154 Pablosuggested that his goal may have been in the mind ofthe court in Carver when Ward L.J. stated:

“This was a small claim in which the defendantsadmitted liability within months of the accident. Tohave incurred about £80,000 in costs to contest aclaim under £5,000 fills one with despair.”155

Many practitioners who since Carver had found it moredifficult to advise their clients on whether toaccept an offer to settle, as it was not enough toachieve a judgment which is economically moreadvantageous, but it had to be in the eyes of thecourt sufficiently more advantageous than the offerto settle.156 When there is inequality of economicpower between the parties, the risk of having to paythe costs may be too burdensome for a less affluentofferee, who may be left with too little choice, butto accept the offer.157

154 ibid155 Carver v BAA [2008] EWCA Civ 412; [2009] 1 W.L.R. 113 [30].156Pablo Corte’s, ‘A comparative review of offers to settle - would an emerging settlement culture pave the way for their adoption in continental Europe?’ C.J.Q. 2013, 32(1), 42-67157 O. Fiss, ‘Against Settlement’ (1984) 93 Yale L. J. 1076.

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It could be understood from all of the above that thefear of cost consequences and the pragmaticapproaches of the court could have a serious negativeeffect on the perceived voluntariness of mediation.Unlike arbitration where the parties always agreed tosubmit any future dispute to arbitration through thesigning of the contract containing the arbitrationclause, parties to mediation are more like accidentalmediation participants, either through court referralor party initiated offer to settle.

While discussing effect of excessive cost sanctions,Quek, wrote that ‘disproportionate sanctions forfailure to participate in mediation may also resultin coercion and undermine the nature of mediation asa voluntary process. It is indeed ironic if punitivesanctions have to be imposed in order to compel aparty to participate in a voluntary process.’158 Shefurther observed that a strict regime of sanctionsmay cause the parties to enter the mediation processwith an acute consciousness and fear of courtsanctions, resulting in less than candid andautonomous participation in the mediation process.159

PART FOUR: LEGITIMACY OF COST SANCTIONS

4.1 The central aim of Lord Woolf report was toachieve a shift away from an adversarial approach tolitigation which had the undesired effect of causingdelays, increasing costs and causing a drain on the158Dorcas Quek, ‘Mandatory Mediation: An Oxymoron? Examining the Feasibilityof Implementing a Court-Mandated Mediation Program’ (2010) 11 CJOCR 479 159ibid

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courts resources and to move towards a regime whichrecognised ADR processes as an important feature ofthe CPR.160 Ultimately the policy rationaleunderpinning the proposals is to achieve the desiredconsequence of reducing public funding of the courts.This policy rationale is also recognised as afundamental basis upon which ADR processes and, inparticular, mediation is promoted.161

Then the system of administration of justice hasreceived criticisms for being a costly service ofresolving disputes since the nineteenth century.162 Inprinciple, parties to litigation must be prepared tocover their own costs, yet it is important to bear inmind that, as a general rule, the courts shouldnormally order the unsuccessful party to pay thesuccessful party‘s costs.163 This situation is knownas the indemnity principle or the rule that costsfollow the event.164

The expression costs sanctions, refers to the court’srefusal to award some or all of the costs in favourof a successful litigant even though prima facie itis entitled to costs, since it has won the case.165

Costs sanctions exist as an exception to the generalrule as to costs because in the past, parties tolitigation have often been able to ignore the rules

160 Masood Ahmed, ‘Implied Compulsory Mediation’ C.J.Q 2012, 31(2) 151-175161 ibid162 Julio C’esar Betancourt, ‘The Legitimacy of the Imposition of Costs Sanctions Against Parties Who Are Reluctant to Mediate’ CIArb’s Mediation Symposium 2010 L. 71.163 ibid164 ibid165 ibid

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of the court with relative impunity.166 This departurefrom the general rule on costs takes place inexceptional circumstances,167 such as the refusal toattempt ADR which implicitly includes the refusal tomediate.168 More importantly for the purpose of thischapter rejection of part 36 offers to settle.169

The introduction of costs sanctions within the CPR,irrespective of whether there is a specific breach ofany of its rules, Betancourt wrote, was regarded asan essential tool for the fulfilment of the newregime, and it is maintained that members of thejudiciary saw sanctions as a key element.170 However,he observed that, the imposition of sanctions withouthaving a duty to obey does not seem to be appropriatefrom a purely theoretical and juridical perspective.

Betancourt further observed that ‘‘…the imposition ofcosts sanctions against parties who are reluctant tomediate results from a pragmatic approach based uponthe perceived effectiveness of mediation. As there isno evidence to suggest that there is a social demandfor compulsory mediation, let alone a collectivepetition against the use of litigation, suchpragmatism can only be seen as an inappropriatemanner of both persuading the parties to participatein mediation proceedings and dissuading them fromresolving their conflicts out-of-court. As a result,166 ibid167 ibid168 Dunnett v. Railtrack plc, [2002] EWCA Civ 303;169 Carver v BAA [2008] EWCA Civ 412; [2009] 1 W.L.R. 113170 Julio C’esar Betancourt, ‘The Legitimacy of the Imposition of Costs Sanctions Against Parties Who Are Reluctant to Mediate’ CIArb’s Mediation Symposium 2010 L. 71

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it can be concluded that the imposition of costssanctions on parties who are not willing to mediateis a paradigmatic example of the illegitimateexercise of the judicial function, which undoubtedlycalls for a prompt judicial reassessment concerningthe imposition of such sanctions.’171

The question may be asked, how can a party faced withan exaggerated claim and who is determine toestablish a right challenge an offer to settle underpart 36? Although Clarke assumed that ‘that a cast-iron case is a very rare bird indeed; so that for themost part only a madman does not want to settle.’172

The question may be asked then is assuming theparty’s case is among a few potential cast-iron casesand the party is a sane man? Evidently such a partymay succumb to the pressure to settle for fear ofcost sanctions. This is because participation aloneis not enough unless the court is satisfied that theparty participated in good faith. Good faith here issynonymous with the party not taking an unreasonablebehaviour during the mediation.173

Another question that may be asked is that what is acast-iron case? Brunston-Tully174 posits that at leasta case with a 70% chance of success “is clearly not acast-iron case but it is a fairly good bet. Yet alitigant with such a case is a ‘madman’ not to wantto settle it? Such language in my view, deflects from

171 ibid172 Anthony Clarke, ‘The Future of Civil Mediation’ (2008) 74 Arbitration 4173 Carleton v Strutt & Parker (A Partnership) [2008] EWHC 616 (QB). (Jack J.)174 Mathew Brunston-Tully, ‘There is an A in ADR but does anyone know what it means anymore?’ C.J.Q 2009, 28(2), 218-237

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the real issue.” He further posited that, theseconflicting normative and procedural messages had ledto predictions that the habit of settlement has beenconverted into a rule in favour of settlement where,individuals are no longer constituted as bearers ofrights but as components of a problem, whenlitigation is deviant rather than differentbehaviour.175

Proponents of ‘cost sanctions’ as an effective meansof encouraging parties to engage in mediation, are ofthe opinion that, an adverse costs order ‘is anappropriate midway point between those who advance asanction-based solution and those who favourincentives. It acts as a future threat of financialpenalty on a party who unreasonably refuses tomediate.’176

The irony here is that the regime of costs sanctionsis not only contemplating eroding ‘voluntariness’alone, the fact that the court need to enquire intowhether a party’s participation in mediation was ingood faith or not, has the potentials of erodinganother cardinal philosophy of mediation which is‘confidentiality’. Critics of mandatory mediation areof the opinion that there cannot possibly be a neatdemarcation or even a semantic difference betweencoercion into and within mediation.177 Parties’perceptions of the reduction in confidentiality could

175 ibid176 Halsey v. Milton Keynes General NHS Trust,[2004] EWCA Civ. 576. Dyson L.J177Dorcas Quek, ‘Mandatory Mediation: An Oxymoron? Examining the Feasibilityof Implementing a Court-Mandated Mediation Program’ (2010) 11 CJOCR 479

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discourage them from participating freely andopenly.178 Quek, further asserted that‘confidentiality of mediation is jeopardized once thecourt begins to make complex evaluations concerningwhat transpired during the mediation process. Thecourts’ attempts to enforce participation standardsmay entail requiring mediators to testify about theproceedings.’179 Evidently, this complex evaluationbecomes necessary as long as the need to enquire intowhat constitute ‘unreasonable behaviour’ in themediation process.

The purists definition of mediation is that of avoluntary, consensual process in which the partiesare assisted to reach settlement.180 The ‘justice’ ofmediation is in the voluntariness.181 Mediationderives it is ‘justice’ from the ability of theparties to mediate on an equal footing, aided or notby the mediator, not from the fact of settlement.182

It could then be argued that the threat of ‘costsanctions’ have practical and ethical implicationshere. This because in a dispute were one of theparties’ is financially weaker, ‘the ‘powerimbalance’ would be heavily weighted in favour of aparty who is able to pay privately for courtproceedings, with legal representation, thus

178 Dorcas Quek, ‘Mandatory Mediation: An Oxymoron? Examining the Feasibility of Implementing a Court-Mandated Mediation Program’ (2010) 11 CJOCR 479 179 ibid180 Hazel Genn, Judging Civil Justice(Cambridge UK 2010) p106181 Mathew Brunston-Tully, ‘There is an A in ADR but does anyone know what it means anymore?’ C.J.Q 2009, 28(2), 218-237182 ibid

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increasing pressure to settle in mediation on anotherparty who is unable to afford to go to court.’183

The threat of cost sanctions could also be said tohave ‘the most direct impact on the poorest insociety.’184 This is because those who can afford totake the potential costs consequences will be able toignore judicial pronouncements.185 For example a poorlitigant with a genuine claim against a big andbuoyant corporation will feel compelled and coercedinto accepting an offer to settle under part 36 notbecause he is satisfied with the offer, not becausehe genuinely want to settle, not because he feltfairly treated and most importantly not because hehas a weaker claim but because of the fear of notobtaining a judgement that is ‘more advantageous’than the earlier offer.

This situation was best described in Abel’s analysisthat ‘the modern trend towards in-formalism, based inefficiency arguments, represents a ‘downgrading’ ofthe problem of the poor and a relegation of theirdisputes to second-class forms of justice.’186 Thissituations only leaves one with no other option thanto contemplate that ‘the imposition of costssanctions on parties who are not willing to mediateis a paradigmatic example of the illegitimateexercise of the judicial function, which undoubtedly183Lisa Parkinson, ‘Appropriate Dispute Resolution in a New Family Justice System’ (2nd edn.Jordan 2011) p72184Ibid (181)185ibid186ibid

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calls for a prompt judicial reassessment concerningthe imposition of such sanctions.’187

The essence of the civil justice reforms embarkedupon some ten years ago was to amongst other thing toprovide easy and affordable access to justice. Manyof the reforms to civil justice that have beenimplemented over the past few years argue thatdiverting legal disputes away from the courts andinto mediation is, in fact, a strategy that willincrease access to justice.188 But it is this papersargument that the regime of punitive costs sanctions‘has the most direct ‘negative’ impact on the poorestin the society.’189 The most adversely affected bypunitive costs sanctions for refusal to considermediation or offers to settle are those who cannot beable to either afford the punitive costs, orlitigation. Such parties’ felt coerce to settlewithin the mediation process which inevitablyundermine voluntariness.

PART FIVE: CONCLUSION

It is this paradox which currently exists in Englishcivil justice: on the one hand, the courts' officialapproach to mediation is that it should not be madecompulsory but, on the other hand, judicial andextra-judicial statements, the structure of the civil187Julio C’esar Betancourt, ‘The Legitimacy of the Imposition of Costs Sanctions Against Parties Who Are Reluctant to Mediate’ CIArb’s Mediation Symposium 2010 L. 71188 Hazel Genn, Judging Civil Justice(Cambridge UK 2010) p114189 Mathew Brunston-Tully, ‘There is an A in ADR but does anyone know what it means anymore?’ C.J.Q 2009, 28(2), 218-237

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procedure rules190 are all indicative of the fact thatthe new regime of ‘cost sanctions’ is beingextensively used to put pressure on litigants tosettle their dispute.

This pressure is inevitably but with brutal forceeroding the remaining iota of ‘voluntariness’ left bythe concept of implied mandatory mediation. It isthis papers assertion that for as long as the issueof proportionality of this cost sanctions is notreviewed, ‘the ‘haves’ will still come out ahead’191

and continue to enjoy the benefits associated withmediation while the ‘have not’s will continue to bepressurized into settlements that may or may not bean unfair outcome. Evidently, the cost sanctionsregime pressures, ‘especially from judges, hasalready gone too far,’192 to the extent that ‘theoutcome of mediation is not about just settlement, it isjust about settlement.’193

It is therefore suggested that a delicate balanceshould be struck between the need to punish a partyin costs for rejecting an offer to settle under part36 CPR or unreasonable refusal to participate inmediation, ‘and the equally crucial necessity ofensuring that sanctions are not draconian to the

190Masood Ahmed, ‘Implied Compulsory Mediation’ C.J.Q 2012, 31(2) 151-175191M, Glanter ‘Why the ‘Haves’ Come Out Ahead: Speculations on the Limits ofLegal Change’ (1974) 9 Law and Society Review 95192Penny Derbyshire, Derbyshire on the English Legal System (10th edn, Sweet & Maxwell2011 London) 294193Penny Derbyshire, Derbyshire on the English Legal System (10th edn, Sweet & Maxwell 2011 London) 294 Citing Hazel Genn. Judging Civil Justice The Hamlyn Lectures 2008(Cambridge UK 2010)

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extent that they overshadow the informal andvoluntary nature of mediation.’194

It is indeed ironic that, part 36 of the CPA which isactually intended to provide a clear and simpleframework within which parties can settle is nowcompounded satellite litigation on the issues ofcosts and procedures.195

‘The Government has already announced that from2013 an amended Pt. 36 will increase claimants’recovery to an additional 10 per cent on thevalue of the claim, except for claims that arenot for damages, which calculation will likely bebased on costs. Moreover, the government statedthat a new test of proportionality would beemployed to ensure that costs are proportional tothe value, importance and complexity of thecases.196 The challenge the government now faceswill be to draft clear legislation that ensures aconsistent approach by the courts whileminimising the risks for satellite litigation.’197

194Dorcas Quek , ‘Mandatory Mediation: An Oxymoron? Examining the Feasibility of Implementing a Court-Mandated Mediation Program’ (2010) 11 CJOCR 497 195 C v D [2011] ECWA Civ 646196Pablo Corte’s, ‘A comparative review of offers to settle - would an emerging settlement culture pave the way for their adoption in continental Europe?’ C.J.Q. 2013, 32(1), 42-67 Citing Ministry of Justice, “Reforming Civil Litigation Funding and Costs in England and Wales—Implementation of Lord Justice Jackson’s Recommendations” The Government’s Response (March 2011), paras 12, 30 and 149.197Pablo Corte’s, ‘A comparative review of offers to settle - would an emerging settlement culture pave the way for their adoption in continental Europe?’ C.J.Q. 2013, 32(1), 42-67. Citing J. Sorabji, ‘Solomon and Oliver and the Interaction between CPR 36 and CPR 44 and 45’ (2012) 31 C.J.Q. 135.

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Whichever approach the courts may take, they should beguided by the fact that so far the English LegalSystem accepted the forcing of the cow to the river,the system also accepted encouraging, cajoling,guiding and threatening the cow with costs sanctionsto drink from the river. But excessively punishing thecow in cost sanctions has the tendency of ‘avoidingconfrontation with the problems: hindering access tojustice.’198 Because to suggest that the threat of costsanctions can ‘provide a panacea for the ills of thecivil justice system and the problems of costlylitigation is unrealistic.199

198Mathew Brunston-Tully, ‘There is an A in ADR but does anyone know what itmeans anymore?’ C.J.Q 2009, 28(2), 218-237199ibid Citing H. Genn, ‘Solving Civil Justice Problems: What Might be Best?’ SCS Seminar on Civil Justice, January 2005

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BIBLIOGRAPHY:Legislation:Civil Procedure Rules 2007 part 36Civil Procedure Rules 1998 r1.4 e-fEuropean Convention on Human Rights 1950Practice Directions – Protocols s 4.1Family Mediators Code of Practice sec 4.1European Legal Instrument: Family Mediation 1998

CASES:Alassini v Telecom Italia [2010] 3 C.M.L.R. 17 ECJ.C v D [2011] ECWA Civ 646Cable & Wireless plc v. IBM United Kingdom Ltd. [2002] EWHC Comm2059Carillion JM Ltd v PHI Group Ltd [2012] EWCA Civ 588Carleton v Strutt & Parker (A Partnership) [2008] EWHC 616 (QB).Carver v BAA Plc [2008] EWCA Civ 412; [2009] 1 W.L.R. 113 Cowl and Ors. v. Plymouth City Council, [2001] EWCA Civ. 1935(C.A.),Dunnett v. Railtrack plc, [2002] EWCA Civ 303 Ford v GKR Construction Limited [2001] 1 WLR 1397; Fox v Foundation Piling Ltd. [2011] EWCA Civ. 790Gibbon v Manchester City Council [2010] ECWA Civ 726Halsey v. Milton Keynes General NHS Trust,[2004] EWCA Civ. 576.Howell and others v Lees-Millais and others [2011] ECWA Civ 786Hurst v. Leeming, [2002] EWHC 1051 (Ch.D.) Jones v Associated Newspapers Ltd [2007] EWHC 1489 (QB);[2008] 1 All E.R. 240

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LG Blower v Reeves [2010] EWCA Civ 726; [2010] 1 W.L.R.2081.Rolf v De Guerin [2011] EWCA Civ 78; [2011]Steel v. Joy and Halliday, [2004] EWCA Civ. 576.Thewlis v Groupama Insurance Co. Ltd [2012] B. L. R. 259 (QBD(TCC))West Tankers [2005] EWHC 454 (Comm) HC; [2007] UKHL 4HL; Case C-185/07 ECJ.

OTHER SOURCES:Ahmed, Masood. ‘Implied Compulsory Mediation’ C.J.Q2012, 31(2) 151-175Betancourt, Julio C’esar ‘The Legitimacy of theImposition of Costs Sanctions Against Parties Who AreReluctant to Mediate’ CIArb’s Mediation Symposium2010 L. 71Brunston-Tully, Mathew. ‘There is an A in ADR butdoes anyone know what it means anymore?’ C.J.Q 2009,28(2), 218-237Clarke, Sir Anthony. ‘The Future Of Civil Mediation’(2008) 74 Arbitration 4Corte’s, Pablo. ‘A comparative review of offers tosettle - would an emerging settlement culture pavethe way for their adoption in continental Europe?’C.J.Q. 2013, 32(1), 42-67Derbyshire, Penny. Derbyshire on the English Legal System(10th edn, Sweet & Maxwell 2011 London) 294Dundas, Hew R. ‘Court Compelled Mediation and theEuropean Convention on Human Rights article 6’ May(2010) 76 Arbitration 2Dyson L.J., ‘A Word on Halsey v Milton Keynes’ A TalkGiven at the CIArb’s Third Mediation Symposium inOctober 2010 (2011) 77 Arbitration, Issue 3Fiss, O. ‘Against Settlement’ (1984) 93 Yale L. J.1076

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Glanter, M. ‘Why the ‘Haves’ Come Out Ahead:Speculations on the Limits of Legal Change’ (1974) 9Law and Society Review 95Genn, Hazel. Judging Civil Justice (Cambridge UK 2010) p78Jackson L.J., Review of Civil Litigation Costs FinalReport, January 14, 2010Levy, I. and A. Zuckerman, “Report on the state ofCivil Justice in England” (2011) 1 I.J.P.L. 71.Lightman J., ‘Mediation: An Approximation toJustice’, S.J. Berwin, June 28, 2007O’Higgins, Naomi and Elizabeth B. ‘Part 36 of theCivil Procedure Rules 1998 (England and Wales)’ StepJournal Dec 2011<http://www.stepjournal_archive/2011/tqr_volume_9_issue_4/part_36_of_the_civil_procedure.aspx> accessed2nd Dec 2011Parkinson, Lisa. Family Mediation: Appropriate DisputeResolution in a New Family Justice System (2nd edn, Jordan 2011)Quek, Dorcas. ‘Mandatory Mediation: An Oxymoron?Examining the Feasibility of Implementing a Court-Mandated Mediation Program’ (2010) 11 CJOCR 479 Shipman, Shirley ‘Compulsory mediation: the elephantin the room’ C.J.Q. 2011, 30(2), 163-191Suter, Erich. ‘Building Towards Compulsory Mediation’77 Arbitration 3 (2011)Woods, Thomas S ‘Cost Sanctions for UnreasonableRefusal to Mediate: Coming to a Court House NearYou?’ 31 Advoc. Q. 393 2006Woolf, L.J., ‘Final Report to the Lord Chancellor onthe Civil Justice System in England and Wales’ (HMSO,July 1996).

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