Mediation and costs: some recent cases

by | 11 Sep 2024 | News

While the debate goes on as to whether, or when, mediation will become compulsory before going to trial, the case law lurches this way and that when it comes to reflecting in costs orders the court’s displeasure at failing to engage properly with ADR. Three recent cases illustrate the point.

Conway v Conway & Anor (Rev1) [2024] EW Misc 19 (CC) was a County Court case about access to a barn and an oral contract. HHJ Mithani KC (Hon) decided the case in favour of the defendant, but in paragraph 129 of his reserved judgment gave a warning shot across their bows:

“I will deal with any outstanding matters and the issue of costs when I hand judgment down. One matter that seriously concerns me is why the Defendants did not agree to mediation when it was put to them. The importance of mediation can never be over-emphasised: see, for example, the recent decision of the Court of Appeal in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416. The Defendants will have to advance compelling reasons why the offer of mediation was rejected out of hand by them.”

In a subsequent ex tempore judgment the judge rejected an ambitious submission that a 100% reduction to the successful defendants’ entitlement to costs was appropriate in the circumstances, but he did reduce their entitlement to recover costs by 25% on the basis that they had unreasonably refused to engage in ADR.

His decision came hot on the heels of a judgment given just a few weeks earlier in which the Court of Appeal, not for the first time, expressed its displeasure at a party’s negative approach to the question of mediation. Northamber plc v Genee World Ltd & Ors (Rev1) [2024] EWCA Civ 428 concerned appeals from an order made by HHJ Rawlings, sitting as a High Court Judge, following the trial of a claim relating to breach of an exclusivity agreement. After he had handed down his main judgment, the judge ordered the second defendant, Mr Singh, a director of the first defendant, to pay 70% of Northamber’s costs of its claim against him and ordered Northamber to pay 80% of its claim against a third defendant, IES. In the opening paragraph of his judgment in the Court of Appeal Arnold LJ noted,

“I granted permission for both appeals, but recommended mediation. It is unfortunate that the parties have not been able to settle their differences.”

Arnold LJ thought the judge below had dealt too leniently with a refusal on the part of Mr Singh and IES to engage in any way with the possibility of mediation:

“Mr Singh and IES were silent in the face of an offer to mediate. That was in itself unreasonable. To compound matters, they breached an order of the court requiring them to explain their failure to agree to mediation. If breaches of such orders are ignored by courts when deciding costs, parties will have no incentive to comply with them. That would undermine the purpose of making them, which is robustly to encourage parties to mediate.

[…]

The judge’s reasoning ignores these points.”

The judge turned next to what he described as the more difficult question of how Mr Singh’s and IES’s conduct should be reflected in relation to costs. He said:

“Although costs sanctions have been imposed in a number of cases for an unreasonable refusal to mediate or for silence in response to an offer of mediation, it does not automatically follow that a costs penalty should be imposed: see Gore v Naheed [2017] EWCA Civ 369, [2017] 3 Costs LR 509 at [49] (Patten LJ). Rather, it is a factor to be taken into account among the other circumstances of the case.”

While Northamber sought what may again be considered an ambitious order, namely that Mr Singh pay 100% of its costs, the judge thought that that could not “possibly be justified by Mr Singh’s failure to respond to Northamber’s offer to mediate.” But equally he was not convinced that no sanction was appropriate. He considered that the correct approach was to “impose a modest, but not insignificant” costs penalty against Mr Singh by increasing the claimant’s costs recovery by an additional 5% to 75%.

Invenia Technical Computing Corporation & Anor v Matthew Hudson [2024] EWHC 1302 (Ch) went the other way. ICC Judge Barber devoted a portion of her judgment to the impact on costs of a refusal to engage in ADR/mediation, but decided, in the circumstances of the case, that the refusal was reasonable.

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