The cost of alternative dispute resolution

In recent years, there has been a noticeable trend of the courts encouraging parties to resolve disputes by alternative means to avoid the need for a court hearing. This has become known as alternative dispute resolution (“ADR”). More recent discussions have involved making ADR compulsory, effectively taking the ‘A’ out of ADR.

However, the recent case of Assensus Limited v Wirsol Energy Limited [2025] seemingly bucks that trend.

Background

In brief, the Claimant company, Assensus, alleged it was entitled to a bonus of £2.5million from the Defendant company, Wirsol. However, Wirsol argued that there was no entitlement to the bonus, contractual or otherwise. Ultimately, the court agreed with Wirsol.

How are costs calculated?

The standard position in relation to legal costs is that the unsuccessful party (in this case Assensus) pays the legal costs incurred by the successful party (Wirsol). The proportion of legal costs to be paid is usually decided by the judge, however it is unusual for 100% of a party’s legal costs to be recovered.

In deciding the proportion of legal costs to be awarded, a court may penalise a party that has refused to engage in ADR. In the Assensus case, Assensus sought to argue that Wirsol was only entitled to 70% of its legal costs due to its prior refusal to participate in mediation, which is a common form of ADR.

What did the court consider?

As the unsuccessful party in this instance, Assensus was liable to pay Wirsol’s legal costs. In an attempt to reduce the amount of costs payable, Assensus drew the court’s attention to Wirsol’s refusal to mediate. Whilst Wirsol had in fact refused to engage in mediation, Wirsol had made a Part 36 offer in November 2022 of £100,000, which provided an element of costs protection. To understand what a Part 36 offer is, please read our dedicated page.

Assensus had previously refused to accept a reduced bonus of £257,000. Further, in October 2022, Assensus had made its own Part 36 offer of £1,041,589 (excluding costs). In addition, Assensus later made a further verbal offer in discussions of £725,000.

The court considered that a successful mediation would have been “improbable” given the gulf between the Part 36 offers of £100,000 (Wirsol) and £1,041,589 (Assensus), the already rejected offer of £257,000 and the subsequent offer of £725,000.

What was the outcome?

The court therefore concluded that the proportion of legal costs that Wirsol should receive, as the successful party, should not be reduced as a result of its failure to engage in ADR. The basis of the court’s decision was that Wirsol’s previous Part 36 offer of £100,000 was reasonable, as was its decision to stand by this offer.

Discussion

The decision in Assensus is an important one, as it reminds litigants that a refusal to engage in ADR does not automatically result in costs sanctions. Rather, an order made by the court to reduce the successful party’s costs is an exception to the general rule that costs follow the event. Although parties remain under an obligation to consider and attempt to engage in ADR where appropriate, this is balanced against the reasonableness of a party’s refusal to do so. JMW works with its clients to advise on and implement ADR where appropriate to do so.