An unreasonable refusal to engage in ADR can lead to adverse costs consequences even to a party who is ultimately successful. This same principle applies to costs disputes.
What amounts to unreasonable refusal will be fact sensitive, but anecdotal evidence suggests that some costs judges in the Senior Courts Costs Office are ordering parties to pay the costs of assessment where they have refused an offer of ADR from the other side.
Certainly one well known personal injury law firm appears to be using this for tactical reasons. Mickey Mouse offers are made together offers of mediation, JSM, etc, no doubt in the hope that if the other side declines to engage (on the basis the offers made are not even a sensible starting place for negotiations) they will have lined up an argument as to the costs of detailed assessment.
The problem paying parties face is the fact that this combines with the default starting position that they will be ordered to pay the costs of assessment unless the court orders otherwise. Mediation, JSMs, etc can add another expensive layer of costs to the assessment process with no guarantee of success. Although making a sensible offer at an early stage should always be the appropriate approach, even this is no guarantee a court will conclude it was reasonable not to engage in ADR.
ADR can certainly assist in helping parties to reach agreement in higher value disputes but paying parties will want to ensure this is at proportionate cost.
If offered ADR, I will often agree to this but on the basis that each side bears their own costs of the process. This flushes out the time wasters as it means that it will focus the minds of both sides on trying to reach a sensible agreement, otherwise any costs incurred will have been entirely wasted with no chance of recovering the same. Given the whole purpose of ADR is that it is outside the formal litigation process, it is unlikely that placing this condition on engaging in ADR will be criticised by the courts in due course.