A character cannot refuse a challenge if his model cannot be placed so that he is not in base contact with an enemy model – he can't evade his opponent and so must fight for his life. This most commonly happens if a lone character is the subject of a challenge, if his unit is small and engaged on all fronts, so that every model in the unit is in base contact with an enemy, or if he is fighting from a Shrine which must remain in the front rank of the unit.
Source: Warhammer Armies Project: Unofficial 9th Edition (v2.2)
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