Refusal To Mediate Was Not Unreasonable And Did Not Warrant Costs Sanction

It was important to consider the full background of discussions between the parties in considering reasonableness. 

The Technology and Construction Court (TCC) has held that neither a successful defendant's refusal to mediate nor a last-minute change in its expert's evidence warranted a departure from the usual order that it should be paid its costs of the litigation: MJS Projects (March) Ltd v RPS Consulting Services Ltd [2026] EWHC 884 (TCC).

The defendant's refusal to mediate was not unreasonable in circumstances where the claimant had failed to engage with a number of issues that the defendant had raised and where the defendant needed to understand the claimant's expert evidence in order to proceed with mediation. The defendant had also proposed other forms of ADR and made settlement offers throughout.

The court's endorsement of ADR is long standing and enshrined in the CPR. It is also well-established that a court can penalise a party in costs for unreasonably failing to engage in ADR. However, the court recognises that ADR is not always appropriate. There is also no presumption in favour of mediation as the preferred method of ADR. As demonstrated in this case, a refusal to mediate therefore does not automatically result in a costs penalty. 

Background

The claimant brought a claim for professional negligence arising out of the design and construction of a container park. The claim failed, primarily because the court had no confidence in the claimant's expert or his evidence.

The claimant submitted that there should be no order as to costs for two reasons. Firstly, the defendant had unreasonably failed to mediate. Secondly, there had been a last-minute change in the defendant's expert's evidence in respect of a particular element of the design at issue, and this had a decisive impact on the outcome of the case.

The defendant sought indemnity costs in respect of the expert phase on the basis of the court's criticism both of the claimant's expert and of the claimant's lawyers for failing to identify inadequacies in the expert's evidence.

Decision

The court held that the usual order for costs was appropriate in this case, and that the claimant should therefore pay the defendant's costs.

Refusal to mediate

The court accepted that the defendant had not agreed to the claimant's various proposals for mediation but also accepted that to look at that fact alone was to oversimplify the background.

The court had a broad discretion as to costs. The general rule was that the unsuccessful party would pay the costs of the successful party, but the court could make a different order having regard to all the circumstances, including the conduct of the parties. Relevant conduct included whether a party had unreasonably failed to engage in ADR. The Court of Appeal in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 identified a non-exhaustive list of factors relevant to whether a party has unreasonably failed to engage with ADR, namely: (a) the nature of the dispute; (b) the merits of the case; (c) the extent to which other settlement methods had been attempted; (d) whether the costs of ADR would be disproportionately high; (e) whether any delay in setting up and attending ADR would have been prejudicial; and (f) whether the ADR had a reasonable prospect of success. A failure to engage in ADR, even if unreasonable, would not automatically result in a costs penalty. It was just one factor to take into account. 

Mediation was not the only, nor the preferred, method for parties engaging in ADR. It was not unreasonable for the defendant to have declined to take part in mediation before proceedings were issued. The defendant had raised a number of workmanship issues with which the claimant had failed to engage. The claimant had also failed to provide its expert report on a without prejudice basis. It was not unreasonable for the defendant not to agree to mediate without having some understanding of the expert evidence. Other forms of ADR had also been proposed by the defendant. The defendant had also made various settlement offers.

The potential cost of mediation was not insignificant when the claimant had failed to provide information that had been reasonably requested. Once the expert evidence was available, the claimant's offer to mediate was only weeks before the trial (albeit the trial date might perhaps have been kept) and on potentially disadvantageous terms for the defendant. 

Although the court accepted that the merits of the claim were not all one way, the defendant had not refused to engage in ADR altogether. It had made various offers to settle, including a final "without prejudice save as to costs" (or Calderbank) offer shortly before trial. In light of the dismissal of the claim and the almost wholesale rejection of the claimant's expert evidence, the defendant's assessment of the strength of its case was justified, and its offer was generous.

The legal issues were also clear and largely agreed. The case would always depend on the court's assessment of the expert evidence. Even if the mediation had taken place, the court did not accept it would have had reasonable prospects of success. The claimant had not engaged with the defendant's workmanship allegations nor provided its expert evidence at an early stage. The defendant's reasonable wish to understand the case it was meeting was not simply going to disappear. Offers were being made in both directions in the run-up to trial, and the parties remained a vast distance apart. 

Taking all of these factors into account, the court did not accept that there was unreasonable conduct on the part of the defendant, still less conduct so unreasonable as to warrant a costs sanction.

Late change of expert evidence

The court rejected the claimant's argument that a late change of evidence by the defendant's expert supported the submission that no order as to costs was appropriate. Although the defendant's expert was in error regarding one point of design, this issue was never part of the claimant's case and did not appear to have had a material bearing on the outcome. The additional calculations produced by the defendant's expert shortly before trial were intended to enable him to consider the evidence of the claimant's expert. This was simply an example of the final sense-check the court would expect from an expert, particularly when the expert evidence had been finalised very late before trial. In this regard, the court accepted the defendant's submission that this was simply part of the usual cut and thrust of a professional negligence trial.

Indemnity costs

When considering whether to award indemnity costs, the question to be asked was whether there was something in the conduct of the action or the circumstances of the case which took the case out of the norm in a way which justified such an order. The court was just persuaded that the answer to this question was no, and costs should be assessed on the standard basis throughout. 

The claimant had lost because the court had no confidence in the claimant's expert. In particular, the expert did not properly understand his duties to the court, had not properly considered the applicable legal test, did not deal with the workmanship issues raised, relied on outdated materials and carried out additional tests and analysis immediately before the trial without telling anyone he had done so and without providing the results. However, the claimant's solicitors had set out the correct test in the expert's instructions, and the expert had stated it in his written report. The threshold for indemnity costs was high and there was insufficient material in the expert's reports to indicate to the claimant's legal team that their expert would give evidence in the way he did.

The claimant's tactical decision not to deal expressly with the workmanship issues on the basis that it needed only to show that a defective design was a cause of the damage was unsuccessful. With hindsight, it may have been better to instruct the expert expressly to address these issues. However, this decision did not take the claimant's lawyers' conduct out of the norm. The short expert timetable, which meant that the joint expert report became available only around three months before trial with individual and supplementary reports following thereafter, was also relevant. 

In the circumstances of the case, the conduct of the claimant's lawyers was not such that the action was conducted outside the norm so as to justify an order for indemnity costs. 

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