The Consequences of Refusing to Mediate: Lessons from Assensus Ltd v Wirsol Energy Ltd
The recent case of Assensus Ltd v Wirsol Energy Ltd (Re Consequential Matters) [2025] EWHC 503 (KB) provides a significant examination of the consequences of refusing to mediate. While the court ultimately ruled in favor of the defendant, Wirsol Energy Ltd, it also had to consider whether Wirsol’s refusal to engage in mediation should result in any cost penalties. The decision reinforces key principles from previous cases while clarifying the limits of penalizing a successful party for refusing alternative dispute resolution (ADR).
The Legal Framework on Mediation and Costs
The courts have long recognized the importance of ADR, including mediation, as a means of resolving disputes efficiently and cost-effectively. In Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, the Court of Appeal established that an unreasonable refusal to mediate can justify a departure from the general rule that costs follow the event. However, the burden is on the losing party to demonstrate that the successful party acted unreasonably in refusing ADR. Factors considered include:
• The nature and complexity of the dispute
• The merits of the case
• Whether other settlement attempts were made
• The cost and potential delay of ADR
• The likelihood of ADR succeeding
This framework has been applied in subsequent cases, including PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288, where silence in response to an invitation to mediate was deemed unreasonable. However, in Gore v Naheed [2017] EWCA 369, the Court of Appeal acknowledged that insisting on court adjudication is not automatically unreasonable, particularly when the party’s rights are ultimately vindicated.
Key Findings in Assensus v Wirsol
In Assensus v Wirsol, the claimant argued that the defendant should be penalized in costs for its refusal to mediate. The court rejected this argument, concluding that Wirsol’s decision was not unreasonable for several reasons:
1. The Nature of the Dispute – The case was relatively straightforward, centering on whether Assensus was entitled to a contractual bonus. Given the starkly opposing positions, mediation was unlikely to bridge the gap.
2. Settlement Attempts – Although Wirsol declined mediation, it made a Part 36 settlement offer of £100,000. This was a significant sum in light of the ultimate finding that Assensus had no entitlement to a bonus. Assensus, however, maintained a much higher counteroffer, suggesting mediation would have been futile.
3. Prospects of Success in Mediation – The court emphasized that mediation must have a reasonable prospect of success to justify compelling a party to engage in it. Given Assensus’ prior rejection of a discretionary bonus of £257,000, there was little chance of it accepting a significantly lower settlement.
4. Proportionality – While the costs of mediation would not have been prohibitive, the likely lack of a successful resolution justified Wirsol’s decision to avoid unnecessary expenditure.
Ultimately, the court concluded that refusing to mediate in this case did not warrant a reduction in Wirsol’s costs recovery.
Implications for Future Litigation
This decision reinforces the principle that refusing mediation is not inherently unreasonable, particularly when:
• A party has made a reasonable settlement offer
• The dispute involves clear-cut legal rights
• Mediation has little realistic chance of success
However, it also serves as a reminder that courts will scrutinize refusals to mediate. Parties should carefully consider their position before declining ADR, ensuring they have solid justifications to avoid potential cost penalties.
For litigants, Assensus v Wirsol highlights the importance of a strategic approach to dispute resolution. While mediation remains a valuable tool, it is not a one-size-fits-all solution, and its necessity will always be judged in the context of the specific case.