Roundstone Nurseries Ltd v Stephenson Holdings Ltd  EWHC 1431 (TCC)
Here, Mr Justice Coulson had to review the relationship between the Pre-Action Protocol process , ADR and parallel court proceedings in the TCC. In doing so, he noted that these relationships often seem to give rise to di" culties including the length of time that the parties allow the process to take, which can signi! cantly increase the costs of the parties.
The dispute revolved around a concrete floor built in 2002 by Stephenson. That floor was found to be defective and Stephenson denied liability saying that the defects were matters of design for which another party, Bridge Greenhouses Ltd, alone were responsible. Round-stone commenced proceedings against Stephenson (and not Bridge) in April 2008. Due to potential limitation di" culties, there was no attempt to comply with the Pre-Action Protocol. As a result, the parties agreed that the proceedings should be stayed to allow that process to be completed. Eventually, it was agreed to mediate, but the mediation was cancelled at the last minute by Stephenson. Consequently judgment in default of defence was entered against Stephenson. That judgment was set aside. However, in the course of that application, Roundstone sought an order that Stephenson pay, on an indemnity basis, the costs thrown away by their late decision to withdraw from the mediation.
The protocol process was certainly protracted. Little happened during 2008. There was no letter of response, no pre-action meeting and, although Roundstone’s expert report was repeatedly promised it was not served until 19 December 2008. Some steps were taken in late February to arrange a mediation, which was fixed for 15 April 2009. During March 2009, Stephenson said that their expert report indicated that design was the cause of the problems. They also said that their contract was with Bridge and not Roundstone. Therefore it was important that Bridge attend the mediation. Bridge were approached, but said they needed further information including the Stephenson expert report. The expert report was not served until 7 April and mediation submissions were exchanged the next day. Prior to that, Bridge had said that it would not be attending the mediation. They did not have the necessary documents.
As a consequence, Stephenson said that it would not be possible to resolve the dispute. Unless Bridge attended, the mediation would be a pointless exercise. Bridge would not attend and so Stephenson withdrew from the mediation. As the Judge noted, the position on costs was not straight- forward. The costs of a stand-alone ADR process, do not usually form part of the costs of litigation. Typically parties agree that they will bear their own costs, which means that the costs cannot subsequently be recovered. However, the costs incurred during the Protocol process may, in principle, be recoverable as costs incidental to the litigation. Here, the Judge concluded that the mediation was, and was indeed treated by the parties as being, an integral part of the Protocol process. For example, Stephenson had said that their letter of response would be incorporated into their mediation submission.
Roundstone criticised the failure of Stephenson to provide a letter of response. However, the Judge said that this did not mean that they had failed to comply with the Protocol. Although they had not provided a letter of response, and the Judge thought there was something to be said for providing of such a letter in any event, they had said that they would detail their position in the mediation submission. As the boundaries between the Protocol process and the mediation had become blurred, that was not, here, an unreasonable stance to take. Further, the Judge noted the Construction Protocol is the only protocol which requires a without prejudice meeting. Often this meeting is held under the umbrella of a mediation. Finally, there was no agreement that the mediation costs would be borne by each party regardless of the outcome. Therefore the Judge held that the costs allegedly thrown away were in principle recoverable. Indeed they were actually recoverable as Stephenson were wrong to cancel the mediation because:
- The mediation was an agreed part of the Protocol process and Stephenson were therefore obliged to participate in it;
- Without the mediation, there was no way in which the requirement for a without prejudice meeting between the parties could be fulfilled;
- The mediation was arranged before there was any question of inviting Bridge, and should have gone ahead even without their involvement. Bridge were identi! ed by Stephenson as a possible party as early as June 2008; and
- Bridge did not participate in the mediation because of the late service of Stephenson’s expert’s report. This was a reasonable position for them to take.
That said, the Judge did not consider that these costs should be paid on an indemnity basis. He said that this “was a bona fide, but incorrect, decision, made perhaps without any real thought of the ultimate consequences.” However, both here and in the Kendrick case, the Judge declined to assess the costs thrown away immediately. The assessment of costs thrown away is a matter for agreement or, failing that, a costs judge. Further, any proper assessment of the costs thrown away could not be performed at least until end of the Protocol process. This is because it will not usually be clear until then what costs could be said to have been wasted, and what costs were not.