Seven short case summaries that clearly demonstrate there is senior judicial support for mediation and that those who decline to do so may find that there are significant cost penalties.

Introduction

Although it cannot be said that mediation has wholehearted judicial approval, the cases cited below suggest  a very reasonable level of support amongst senior judges. The overriding message emanating from these cases is that disputing parties should endeavour to mediate wherever possible, do so meaningfully and if not, be prepared to be penalised in costs.

This article is not meant to be the last word on the very complex subject of court costs on which disputing parties’ lawyers should advise. Rather, it  highlights some recent court decisions and identifies some of the costs related pitfalls that might beset successful litigants.  One anticipates that civil mediators will take careful note of these case either when communicating with prospective mediatees or during the course of individual mediations. One also trusts that lawyers and other advisers will take them on board and give the appropriate advice, preferably early on in court proceedings or even before they start.

Putting matters simply, in civil cases although any award is ultimately at the discretion of the court,  the starting point is the loser pays  the victor’s costs. In most cases these will be awarded either on the more usual  “standard basis” or exceptionally  on an “indemnity basis”. However, it should also be noted that  in both personal injury and what are known as fast track cases, successful parties will generally only be awarded  much less generous fixed costs.

“Standard basis” means that only  costs which are proportionate to the matters in issue in a particular case,  and were reasonably incurred. In practise this means that although  a  “successful” party might expect recover the majority of his/her costs it is by no means certain that this will happen. The concept of proportionality was implemented in the 1990s.

The net effect of “the Proportionality Rule”  which was implemented via what are referred to as the Jackson Costs Reforms in the 1990s is  that although in most instances a successful party will  be expected to pay the full amount of his/her lawyer’s final bill he/she will be unable to  recover any element of that bill which the court in its discretion considers to be disproportionate.

“Indemnity basis” effectively means all the costs that lawyers have incurred on behalf of a particular client. Such costs will only be awarded in exceptional cases although one wonders what view a court might take in a case where a losing party has behaved in a cavalier or unconscionable fashion or even where he/she has gone to mediation but has only done so very late in the day.

It is clear then that in practice in most if not all instances at best a successful parties will not recover all of the costs his/her lawyers have expended. At worst he/she may be very heavily penalised. In an era when court fees have been raised to what many would consider to be an unacceptably high level, some will undoubtedly conclude that civil litigation is completely uneconomic. Effective competitively priced mediation is there to fill the gap.

1. Savoye and Savoye Ltd v Spicers Ltd [2015] EWHC 33 and the costs related “Proportionality Rule”

In Savoye the  High Court was asked to review a successful party’s legal costs claim of more than £200,000. With reference to the Proportionality Rule  (see above) the judge decided to halve this costs claim because it considered that the amount of time spent on the matter by the victor’s lawyers was disproportionate. Some experienced observers feel that in reality the Jackson s  reforms  militate against mediation. However, it is distinctly possible that in many cases, not least those which are particularly complex or where there are a lot of factual issues to resolve, a successful litigant should be  advised in advance that because of the applicability of this rule he/she might only enjoy a pyrrhic victory and that mediation is a viable and very cost effective option.

2. Halsey -v- Milton Keynes  General NHS Trust and others [2004] EWCA Civ 576

In this landmark case the Court of Appeal concluded that it had no power to compel parties to a particular case to use some form of ADR and that there was a principle of voluntariness that should not be interfered with.

However it was made clear that in principle the court might need to encourage  mediation and that it could do so robustly. This case also makes it abundantly clear that when deciding whether to depart from the general rule that the unsuccessful party should pay the successful party’s costs the court has the power to deprive the successful party of some or all of his/her costs on the ground of unreasonable refusal to agree to ADR.  [my emphasis]

3. Bradley and another -v- Heslin [2014] EWHC 3267 (Ch)

In this case a High Court judge was asked to adjudicate on a neighbour dispute, which was essentially as he put it, “a case about a pair of gates in Formby”. Ostensibly ignoring authoritative guidance given in a 2012 Court of Appeal case, Oliver -v- Symons, where the value of early mediation, particularly in neighbour disputes was highlighted, the parties in Bradley were ostensibly not prepared to consider mediation. In his judgement the judge commented as follows:-

” I think it is no longer enough to leave the parties the opportunity to mediate and to warn of costs consequences if the opportunity is not taken. In boundary and neighbour disputes the opportunities are not being taken and the warnings are not being heeded, and those embroiled in them need saving from themselves. The Court cannot oblige truly unwilling parties to submit their disputes to mediation: but I do not see why, in the notorious case of boundary and neighbour disputes, directing the parties to take (over a short defined period) all reasonable steps to resolve the dispute by mediation before preparing for a trial should be regarded as an unacceptable obstruction on the right of access to justice.” [my emphasis]

Reiterating his views, the judge went on to suggest that the parties allow a two-month stay, and gave a direction that whatever their views  they take  “all reasonable steps” to mediate.

4. Malmesbury and others -v- Strutt and Parker [2008] EWHC 424 (QB)

This case involved a dispute arising out of a land leasing arrangement. The parties agreed to go to mediation. However the claimant put forward a very large settlement figure at mediation and refused to budge. When addressing the issue of costs the trial judge said that he considered the claimant’s position at the mediation was “plainly unrealistic and unreasonable” and continued – “For a party who agrees to mediation but then causes the mediation to fail by …. his unreasonable position is in reality in the same position as a party who unreasonably refuses to mediate. In my view it is something which the court can and should take into account in the costs order…”
The judge concluded that he was allowed to take this issue into consideration when making a decision on costs.

There is no explanation in the case report as to how the judge came to know of the positions adopted at what was to all intents and purposes a confidential process. However, Malmesbury confirms that litigants who do not mediate or who do not behave reasonably when doing so may find that even if they are ultimately successful  they may  be penalised in costs.

Query whether in future County and High Court  judges might take the view that in exceptional cases a meaningless mediation is not a mediation at all and feel able to lift the veil of confidentiality that mediatees would otherwise enjoy? One trusts not but the possibility does exist.

5. Laporte and Christian -v- Commissioner of Police of the Metropolis [2015] EWHC 371 (QB)

In this case, the claimants lost. However they sought to argue that because the defendant had refused to engage in ADR, there should be no order for costs. The defendant argued that he should be paid indemnity costs.

The judge stated that when costs are considered the starting point should be that the loser pays the winner’s costs. However, with the benefit of considering the minutiae of the case he concluded that in the present instance there was no reason not to engage in ADR. The judge noted that the defendant had ultimately been successful. However he concluded that the defendant had failed to justify  declining to engage in ADR and that this should be reflected in the costs order. Accordingly the judge decided that the claimants should pay the defendant only two thirds of his costs.

6. PGF II SA OMFS Company 1 Limited Case No: A2/2012/0373 & 0465 (Court of Appeal) (on appeal from the High Court).

The High Court judge who tried this case agreed with the claimants’ contention that because the defendant had unreasonably refused to mediate, he should be deprived of the costs that he otherwise would have been entitled to recover. The judge concluded that the defendant’s silence amounted to a refusal to mediate and that this refusal had been unreasonable. However, he declined to go one step further and order that the defendant pay the claimant the costs that accrued as result. Both parties appealed.

In giving the Court of Appeal’s judgement, and with the reference to Halsey (see above) Lord Justice Briggs noted that for the first time this appeal raised a matter of principle i.e. “what should be the response of the court to a party which, when invited by its opponent to take part in a process of ADR simply declines to respond to the invitation.”[my emphasis]

Although the Court of Appeal ultimately declined to interfere with the  High Court’s cost rulings and concluded that he had been entitled to exercise his discretion in the manner that he did, Briggs LJ emphasised that:-

“this case sends out a message to civil litigants, requiring them to engage with a serious invitation to participate in ADR, even if they have reasons which might justify a refusal… The court’s role in encouraging the more proportionate conduct of civil litigation is so important in current economic circumstances that it is appropriate to emphasise that message by sanction which, even if a little more vigorous …nonetheless operates pour encourager les autres.” [i.e. operates as a deterrent to others][my emphasis]

7. Garritt-Critchley and others -v- Ronnan and Solarpower PV Limited [2014] EWHC 1774 (Ch)

This case involved a dispute about an issue of shares valued in excess of £200,000. Before court proceedings were issued the claimants’ solicitors wrote to the defendants’ solicitors suggesting mediation in the following terms : —

“…. our clients are willing to enter into an appropriate form of ADR, such as mediation at the appropriate time. We therefore hope that the issue of proceedings will not be necessary.”

Subsequently, court proceedings were issued and in due course directions for  trial were given. At this point the judge giving the directions recorded:-

“…the court considers that the overriding objective would be served by the parties seeking to resolve the claim by mediation, the parties will no less than 21 days before trial file in a sealed envelope a statement  which explains why a party refused to attend mediation.”

Negotiations between the parties ensued. In  what was subsequently referred to in the court’s judgment as a final attempt at negotiation and notwithstanding some misgivings, the claimant’s solicitors wrote to the defendants’ solicitors as follows:-

“However, if your clients are prepared to negotiate constructively… then we may be able to progress matters.”

The case was not resolved by negotiation.  Following a four-day trial but before the judge could deliver his decision, the defendants decided to accept an offer to pay the claimants £10,000 and effectively, all of their costs on a standard basis. However, the claimants sought payment of their costs on an indemnity basis. It was subsequently noted by the trial judge that by this stage the claimants’ costs amounted to £161,000!

Making it clear that he was not was not impressed with the defendants’  view that they had a strong case, the judge stated that the fact that a party believes he has a watertight case is no justification for refusing mediation. In similar vein he was not impressed with the defendants’ contention that there was considerable dislike and lack of trust between the parties. He pointed out that this was very often the case and declined to accept it as a reason for a refusal to mediate. In similar vein the judge was dismissive of the defendant’s view that a mediation would only serve to increase the case costs.

The net result was that although the claimants did not recover all of their costs, they did recover a sum that ostensibly  was substantially in excess of the  £10,000 settlement figure.   Given that this case underlines the maxim that there is no such thing as a “cast iron” case, overly optimistic litigants may do well to consider mediation it when it is suggested.

I am grateful to James Shepherd of Doughty Street Chambers and our associate Anthony Wooding of Kerseys Solicitors for the help and assistance they have provided.