Mediation, costs and whether to maintain privilege

Costs awards following litigation are always at the discretion of the court. Although the court cannot 'force' parties to mediate, parties are now strongly encouraged to at least consider the possibility of Alternative Dispute Resolution (ADR) from the earliest stages of a claim, including before issuing proceedings. As this case confirms, the court can, and will, penalise parties for failing to agree to mediate and for acting unreasonably at a mediation. Below are some suggested steps to take, or avoid, in relation to the issue of costs and mediation:

• Act reasonably. The courts will take account of unreasonable refusals to mediate when determining costs. The burden remains with the unsuccessful party in the proceedings to show why there should be a departure from the general rule that the successful party gets its costs. The court will take into account the Halsey factors and will, where appropriate, deprive a successful party of some or all of its costs.
• Seek a waiver of the without prejudice privilege if you are the party paying the costs and you truly believe the receiving party has acted unreasonably in any mediation. It will be difficult to persuade the opposition to agree particularly if they took a tactical stance at the mediation, never intending to settle but simply going through the motions of attending the mediation to avoid being penalised on costs for unreasonably refusing to do so.
• Don't agree a waiver if you are the receiving party and there is any possibility that the court could find your stance at the mediation unreasonable. The court will, of course, by the time it is determining costs, have the benefit of hindsight. A stance or view that might have seemed reasonable at the time of the mediation, may no longer seem so reasonable in the light of the judgment delivered.