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The Halsey Case 2004
Can the court compel unwilling parties to mediate?
On the 11th May 2004 the Court of Appeal published its decision in the cases of Halsey and Steel. This is the most recent, and therefore the most important, case law on the subject of ADR.
Further information can be found below on:
The decision
Guidance on ADR
Compulsion
Costs
The facts of the case
Comment
The decision
The judgement in the these cases establishes two important principles:
- Compulsion to use ADR would be regarded as an unacceptable constraint on the right of access to the court and, therefore, a violation of article 6 of the European Convention on Human Rights
- Cost penalties can be imposed by the courts on parties that have unreasonably refused to consider some form of ADR. But since the general rule is that the losing party should pay the winning party's costs, it is up to the losing party to show that the winning party was unreasonable in refusing to mediate, or to consider some other form of ADR
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Guidance on ADR
The first part of the judgement establishes "guidance" on the way in which courts should approach ADR, which is clearly intended to be independent of the facts of the two cases involved. The guidance covers the two important principles stated above, compulsion and costs.
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Compulsion
The guidance begins by offering general encouragement of the use of ADR, which is generally understood to mean "some form of mediation by a third party". The guidance states that:
- courts do have a duty to encourage the parties to use ADR where it is considered appropriate
- courts should proceed on the basis that there are many disputes which are suitable for mediation, an approach which is underpinned by the Woolf reforms. Mediation has a number of advantages over the court process, including the fact that it is generally cheaper, and has a wider range of solutions than litigation
- "all members of the legal profession who conduct litigation should now routinely consider with their clients whether disputes are suitable for ADR"
- mediation and ADR processes have disadvantages as well as advantages, and are not suitable for every case, so there should not therefore be a presumption in favour of mediation
The guidance makes a distinction between the duty of the court to encourage parties to use mediation, and the power to force parties to use mediation against their will. Lord Justice Dyson said:
"It seems to us that to oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the court." He quoted article 6 of the European Convention on Human Rights in support of this, and distinguished between a voluntary agreement to waive access to a court (such as an arbitration clause) and compulsion by the court itself.
Volume 1 of the White Book (2003) is quoted:
"The Hallmark of ADR procedures, and perhaps the key to their effectiveness in individual cases, is that they are processes voluntarily entered into by the parties in dispute with outcomes, if the parties so wish, which are non-binding. Consequently the court cannot direct that such methods be used but may merely encourage and facilitate."
The guidance suggests that to compel parties to attempt mediation risks simply adding to the total costs, delaying the date of the hearing, and bringing ADR into disrepute. Judges may well wish to explore with the parties the reason for an initial refusal to mediate, but "it would be wrong for the court to compel them to embrace it".
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Costs
The Civil Procedure Rules (CPR 44.3(2)) set out the general rule that the unsuccessful party should pay the costs of the successful party. Rule 44.3(5) allows costs to be varied by the court, taking into account the behaviour of the parties both before and during the proceedings, including their attempts to resolve the dispute, and whether or not they have followed any pre-action protocol. However, the judges make it clear in this guidance that deciding to deprive a successful party of costs on the grounds that they have refused ADR should be an exception to the general rule that costs follow the event, and the burden should be on the unsuccessful party to show that the successful party acted unreasonably in refusing to agree to ADR.
The factors taken into account when deciding whether a refusal to mediate is unreasonable should include:
a. The nature of the dispute
b. The merits of the case
c. The extent to which other settlement methods have been attempted
d. Whether the costs of the ADR would be disproportionately high
e. Whether any delay in setting up and attending the ADR would have been prejudicial
f. Whether the ADR had a reasonable prospect of success
a. The nature of the dispute
There may be cases where it is important for a court to resolve a point of law, where a binding precedent would be useful, or where an injunction is needed.
b. The merits of the case
The fact that a party unreasonably believes his case to be watertight is no justification for refusing mediation, but a reasonable belief that a case is watertight may well be sufficient justification. Courts should be alert to claimants with a weak case inviting mediation as a tactical ploy, using the threat of cost penalties to try to force a settlement.
c. Other settlement methods have been attempted
Attempts to settle and offers to mediate are just one factor for courts to consider when deciding whether a refusal to mediate is reasonable.
d. The cost of mediation would be disproportionately high
This is a particular factor when the sum in dispute is comparatively small. A mediation may be at least as expensive as a day in court, and the parties will also have to bear the cost of legal advice in preparing the case, and representation before the mediator. Generally speaking, the cost of the mediation will be borne equally by the parties regardless of the outcome, though it is possible that the cost of mediation may be the subject of a costs order after the hearing. As it is not possible to predict the outcome of mediation, it may be that the cost of an abortive mediation would simply be added to the costs of the court process, and this is a relevant factor in deciding whether a refusal to mediate was reasonable.
e. Delay
Accepting a late offer of mediation may have the effect of delaying the hearing. This is another relevant factor when deciding whether refusal to mediate is reasonable or not.
f. Whether the mediation had a reasonable prospect of success
The judges in these cases decided that the requirement is not that the unsuccessful party has to prove that the mediation would in fact have succeeded, just that there was a reasonable prospect of success. If the successful party refuses to mediate despite the court's encouragement, that is a further factor to take into account. The stronger the encouragement of the court, the easier it would be for the unsuccessful party to demonstrate that the other party's refusal was unreasonable.
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The facts of Halsey v Milton Keynes General NHS Trust In this case a claim was brought against the NHS Trust by Lilian Halsey, after her husband Bert, aged 83, died at Milton Keynes General Hospital. Bert Halsey was being fed through a nasal drip, and died as a result of liquid food entering his lungs. There was a dispute about whether or not the negligence of the hospital staff had caused his death, and an inquest was held. The results of the inquest were inconclusive, as two medical experts disagreed about responsibility. The claimant's solicitors asked for bereavement damages, and offered to refer the matter to mediation to resolve the matter; however, the Trust claimed that they did not accept any liability, and therefore mediation was inappropriate. When the trial took place in June 2003, the claim was dismissed, and the Trust therefore won the case. However, the claimant's solicitor asked for costs to be awarded on the grounds that the defendants had refused to mediate, quoting the decision in Dunnet v Railtrack to back the claim. The original trial judge refused to award costs against the successful defendant, and the case was taken to appeal.
The appeal judges concluded that the original judgement was correct, on the grounds that the claimant "had come nowhere near showing that the Trust acted unreasonably in refusing to agree to a mediation". The factors taken into account in dismissing the appeal were as follows:
- Although the subject matter was not intrinsically unsuitable for mediation, the Trust believed it had a strong defence to the claim, and had reasonable grounds for that belief
- The court had not suggested or ordered mediation at any stage
- There were grounds for belief that the offers of mediation from the claimant's solicitors were "somewhat tactical"
- The Trust's view that the costs of mediation would be disproportionately high compared with the value of the claim and the cost of a trial was a relevant factor
- The judges believed that the claimant had not discharged the burden of proving that mediation had a reasonable prospect of success
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Comment
The general guidelines established in this judgement, independent of the facts of the two cases involved, seem to strike a blow for common sense in making decisions about whether mediation is appropriate or not.
The case of Halsey had been talked about and discussed for some months before the judgement was issued on May 11th. One of the reasons for this unusual degree of anticipation about a forthcoming judicial decision was the fact that the Appeal Court judges had requested opinions from the Civil Mediation Council, the ADR Group and the Centre for Effective Dispute Resolution about the value of mediation. The Law Society had also submitted an opinion. The judgement makes it clear that the Appeal Court judges did not accept the Civil Mediation Council's argument that there should be a general presumption in favour of mediation (the Civil Mediation Council is a recently formed umbrella organisation for providers of civil and commercial mediation). Instead, they accepted the submission of the Law Society that the question of whether mediation was unreasonably refused should depend on a number of factors, which should be evaluated by the court in each case.
This judgement, and the general guidance about ADR which it contains, provides quite a radical departure from the direction in which recent court judgements about ADR had been moving.
Compulsion
With regard to compulsion, the most recent cases seem to authorize courts to compel a party to mediate, even when they are unwilling to do so. In Shirayama Shokusan Company ltd and others v. Danovo Ltd the court ordered mediation to take place, despite the unwillingness of the claimant. However, the court did decide that continuing to delay a hearing in order to require the attendance at mediation of a person who was not a named party to the proceedings would infringe article 6 of the European Convention on Human Rights, and have the effect of denying the parties the right to a fair trial. The Halsey judgement reverses the trend towards compulsion, and makes it clear that courts cannot force unwilling parties to mediate.
Costs
In the case of Dunnett v Railtrack the winning party, Railtrack, was required to pay the costs of the case, despite being successful at appeal, as a result of refusing an offer to mediate from Ms Dunnett. Following this decision, an offer to mediate has subsequently been used by potentially weaker parties as a tactic to try to persuade the stronger party to settle, on the grounds that they risked an adverse costs penalty for refusing ADR. In the case of Halsey, the judges commented that the mediation offers from the claimant's solicitor were "somewhat tactical". This judgement puts the burden on the unsuccessful party to demonstrate that the successful party's refusal to mediate was unreasonable.
What is reasonable?
In the case of Hurst v Leeming, a number of reasons were given by the defendant, who won the case, for refusing to mediate. Many of them were dismissed by the judge: the fact that heavy costs had already been incurred was not a justification for refusing mediation, nor was the fact that a party believes they have a watertight case. The critical factor was whether, objectively viewed, mediation had any realistic prospect of success. In the guidance given as part of this judgement, however, the factors for the court to take into account when judging whether or not a refusal is reasonable are much wider, and give the court far more discretion in deciding on the reasonableness issue. The judgement also makes it clear that the burden should be on the unsuccessful party to prove that the refusal to mediate is unreasonable, rather than, as in Hurst v Leeming, on the successful party to prove that it was reasonable.
The government's ADR pledge
The court also considered whether public bodies should be particularly penalised when refusing to mediate. This is in the light of the previous Lord Chancellor's pledge, in March 2001, that government departments would use ADR to resolve disputes wherever appropriate. In a recent case the MOD was penalised for refusing mediation in a dispute about a lease, which they believed needed judicial resolution because it involved clarifying a point of law. The court stated at the time that that was not a justifiable reason for refusing to mediate. However, the judges in this case have made it clear that the need to resolve a point of law is one of the factors to take into account when deciding whether or not a party is reasonable in refusing mediation. They also decided that the pledge is just one more factor to consider when deciding whether a refusal to mediate is reasonable, and that it should not place any greater burden on public bodies than on individuals.
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