Costs penalty following a refusal to mediate is not necessarily an automatic sanction

It had been thought that if a party refused ADR in the form of mediation that there would be a costs penalty against that party even if they were successful in the case. In a recent case this principle has been slightly undermined. In Gore v Naheed & Anor [2017] EWCA Civ Lord Justice Patten, giving judgment held (at paragraph 49):

“… Speaking for myself, I have some difficulty in accepting that the desire of a party to have his rights determined by a court of law in preference to mediation can be said to be unreasonable conduct particularly when, as here, those rights are ultimately vindicated. But, as Briggs LJ makes clear in his judgment [in PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288], a failure to engage, even if unreasonable, does not automatically result in a costs penalty. It is simply a factor to be taken into account by the judge when exercising his costs discretion.

Patten LJ in referring to the facts of the case said at paragraph 50:

“In this case the judge did take it into account but concluded that it was not unreasonable for Mr Gore to have declined to mediate. His solicitor considered that mediation had no realistic prospect of succeeding and would only add to the costs. The judge said that he considered that the case raised quite complex questions of law which made it unsuitable for mediation. His refusal to make an allowance on these grounds cannot in my view be said to be wrong in principle.”

It seems that if this case is followed that the previous position that parties must take part in mediation or possibly be penalised in costs might be qualified. It remains to be seen but it may well be that such a sanction may not be automatic if parties to litigation do not wish to take part in mediation/ADR and they have good reason for not doing so – as in the Gore case.