The Court of Appeal, in its February 2011 judgment in the case of Rolf –v- De Guerin has taken the opportunity to reiterate that the conduct of parties during litigation, and in particular a refusal to mediate or attempt other forms of alternative dispute resolution, will have a significant impact on the costs award at the end of a case. The well known 2002 case of Dunnett –v- Railtrack Plc established that a party who refused to mediate, even if successful in litigation, may not be awarded costs. This was clarified somewhat in 2004 in Halsey –v- Milton Keynes NHS Trust which set out the factors which a Court should take into consideration in deciding whether or not a party had unreasonably refused to mitigate. The non-exhaustive list of considerations included whether a case was intrinsically unsuitable for mediation (very few cases would fall into this category), the merits of the case and in particular did a party reasonably believe it had a water-tight case, other attempts to settle, whether costs of mediating would be disproportionate, whether it would case delay to the trial and the prospects of success of the mediation.

Bearing these factors in mind, in Rolf –v- De Guerin, one party’s refusal to mediate had a significant impact on the costs recovery following trial. In this dispute which concerned the building of a garage and loft, the householder obtained a judgment for a mere £2,500 against a claim which, at its highest, was put at £92,515. Although the householder, a Mrs Rolf, had thus succeeded in her claim, she in fact recovered a very small proportion of the amount claimed and had failed on a number of her main allegations. Based on these and other factors, in this case costs did not “follow the event” as is common – the trial judge awarded costs to the unsuccessful defendant.

Mrs Rolf appealed to the Court of Appeal. In her favour, she was able to show that she had expressed a genuine willingness to settle and had been prepared to attempt mediation at various stages. The building contractor had rebuffed all these overtures until 6 days before trial which, in the circumstances of this case, was found by the Court of Appeal as having been too late.

The Court of Appeal held that the builder’s reasons for refusing mediation did not hold water. His reasons were that by mediating he would have had to accept liability, he felt a key witness for Mrs Rolf had to be seen by a judge at trial and in any event, he wanted his day in Court.

The Court of Appeal held that the spurned offers to enter into settlement negotiations or mediation were unreasonable and found that they “ought to bear materially on the outcome of the Court’s discretion”. In substitution for the order made by the judge at first instance, the Court of Appeal made “no order as to costs”.