The Cost of Refusal

Winning at trial does not of itself secure the recovery of costs. A party who refuses to mediate, or ignores an invitation to do so, may lose part or all of the costs it would otherwise recover. The courts have built that consequence over two decades, and since October 2024 it has been written into the rules.

The general rule and its exception

The unsuccessful party ordinarily pays the successful party’s costs. The court may depart from that rule where the winner unreasonably refused alternative dispute resolution. The Court of Appeal set out the test in Halsey.

Such departure is not justified unless it is shown (the burden being on the unsuccessful party) that the successful party acted unreasonably in refusing to agree to ADR.

Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, [13]

The court identified factors which may be relevant, including: the nature of the dispute, the merits, the extent to which other settlement methods had been attempted, whether the costs of ADR would be disproportionately high, whether delay in setting it up would be prejudicial, and whether ADR had a reasonable prospect of success ([16]).

A warning to the profession

A year later the Court of Appeal addressed practitioners directly.

The profession can no longer with impunity shrug aside reasonable requests to mediate.

Burchell v Bullard [2005] EWCA Civ 358, [43]

No sanction was imposed in that case. The refusal was judged by the practice before Dunnett, and the defendants had then lacked legal advice ([42]). The warning nevertheless marked the direction of travel.

Silence as refusal

In PGF II the Court of Appeal went further. A party that simply does not answer an invitation to mediate is in no better case than one that refuses.

Silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable.

PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288, [34]

The consequence was concrete. The defendant, whose Part 36 offer the claimant had accepted late, was deprived of the costs to which it would otherwise have been entitled for the relevant period ([2], [17]). The Court of Appeal upheld the order. It described the sanction as one that, “even if a little more vigorous than I would have preferred, nonetheless operates pour encourager les autres” ([56]).

Silence, and a court order ignored

The Court of Appeal returned to silence in 2024. In Northamber a case management order required any party declining a proposed form of ADR to serve a witness statement giving its reasons. The claimant offered to mediate. Neither defendant answered substantively, and neither served a statement.

Mr Singh and IES were silent in the face of an offer to mediate. That was in itself unreasonable. To compound matters, they breached an order of the court requiring them to explain their failure to agree to mediation.

Northamber plc v Genee World Ltd [2024] EWCA Civ 428; [2024] 1 WLR 4826, [104] (Arnold LJ)

The court explained why such breaches cannot be overlooked: ignoring them would undermine the purpose of the order, “which is robustly to encourage parties to mediate” ([104]). It also emphasised that a penalty does not follow automatically; the conduct is “a factor to be taken into account among the other circumstances of the case” ([106]). Weighing it, the court imposed “a modest, but not insignificant, costs penalty”, increasing the claimant’s recovery of its costs against Mr Singh from 70% to 75% ([107]).

From encouragement to order

For two decades it was widely assumed that the court could encourage mediation but not compel it. In 2023 the Court of Appeal held that assumption to be wrong. The relevant passage in Halsey “was not a necessary part of the reasoning” (Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, [20]), and the court “can lawfully stay existing proceedings for, or order, the parties to engage in a non-court-based dispute resolution process” ([58]).

The rules followed. The Civil Procedure (Amendment No. 3) Rules 2024 (SI 2024/839), in force from 1 October 2024, gave the court an express power to “order the parties to engage in alternative dispute resolution” (CPR 3.1(2)(o)). They also added to the conduct the court must consider on costs “whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution” (CPR 44.2(5)(e)).

The power in use

The High Court exercised the new power within weeks. In DKH Retail Ltd v City Football Group Ltd [2024] EWHC 3231 (Ch), the defendant resisted mediation on the ground that it had low prospects and that the dispute required adjudication. Miles J rejected both points ([40]) and made the order on 21 November 2024 ([43]). The parties notified the court on 13 January 2025 that they had settled ([44]).

The limits

The strongest objection is that parties are entitled to their day in court, and that confidence in a strong case should not be penalised. The law accommodates both points. An order to mediate must not impair “the very essence” of the right to a judicial hearing and must be proportionate (Churchill, [65]). The merits remain one of the Halsey factors. A refusal may be reasonable where mediation had no reasonable prospect of success (Halsey, [16]).

The most recent decision applies the amended rule directly. In MJS Projects (March) Ltd v RPS Consulting Services Ltd [2026] EWHC 884 (TCC), handed down in April 2026, the court considered CPR 44.2(5)(e) and declined to disturb the usual order. The defendant had asked to understand the claimant’s expert evidence before mediating, while pursuing other forms of ADR and making offers. The court held: “The Defendant’s reasoned rejection of one form of ADR, namely mediation, was not unreasonable” ([50]).

The protection, however, is for a reasoned refusal. It is not for silence, and it is not for a refusal that ignores the court’s own order.

Conclusion

The law has moved from exhortation to consequence. A party invited to mediate should answer, and should answer in writing. If it declines, it should give reasons capable of withstanding the Halsey factors. If the court orders mediation, it should comply. Each step is simple. The cost of omitting any of them may be borne at the end of the case, when it can no longer be avoided.

This article is general commentary on the law of England and Wales at the date of publication. It is not advice on any particular matter.