EWCA Civ 117
This was an appeal against a costs order. One of the principal issues was the consequences of failure to mediate. The claim in question was a dilapidations claim for £210k which was met by a counterclaim of just over £40k. In their allocation questionnaires, both parties requested a stay for ADR. In the CA, LJ Jackson noted that there seemed to have been a desire to settle on both sides. Both parties initially, at least, expressed a willingness to mediate. The claimants were proactive in making arrangements for a mediation and identifying possible mediators for consideration by the defendants. The trial Judge contrasted that with the approach of the defendants who were “slow to respond to letters and raised all sorts of difficulties.” Eventually, the claimants decided that no progress was possible and explained why in a letter as follows:
“Our clients have made all reasonable attempts to arrange a mediation but have been thwarted by your clients’ conduct. Since April 2012 countless weeks have been lost through having to chase for responses. When your client finally gave a clear window of availability we tried to fix a mediation within that period a variety of excuses have been given as to why that date could no longer go ahead.
Understandably, our clients no longer have any confidence that a mediation can be arranged given your clients’ conduct and do not feel that it is reasonable that they should continue to have to amend their travel plans and work commitments of both themselves, their surveyor, and the writer, when the likelihood is that further ‘circumstances’ will arise that will lead to the postponement of any future date.”
The ADR stay was lifted and the trial took place. The claimants were awarded £45k, the defendants, £17k, leaving a balance owing to the claimants of £28k.
This left the question of costs. The trial Judge described the defendants as having been “relatively unenthusiastic or lacking in preparedness to be flexible” but also noted that it was the claimants who had closed down the ADR. He concluded that there were real prospects of settlement if a mediation had taken place. After weighing up all the circumstances, the Judge ordered the defendants to pay 75% of the claimants’ costs of the claim. He ordered the claimants to pay the defendants’ costs of the counterclaim. The defendants appealed.
LJ Jackson agreed with the trial Judge that if there had been a mediation there would have been a real chance of achieving a settlement. The dispute was a commercial one, being purely about money. The offers that had already been made were close. The costs of the litigation were vastly greater than the sums in issue. Bilateral negotiations had been unsuccessful. The Judge at first instance had said that:
“Any mediator would have had both parties in the room with him. He would have let them have their say. He would then have pointed out (a) the small gap between their respective positions, and (b) the huge future costs of the litigation. In those circumstances I would be astonished if a skilled mediator failed to bring the parties to a sensible settlement.”
LJ Jackson referred to PGF II SA v OMFS Company (see Dispatch 162) where the CA held that silence in the face of an offer to mediate was, as a general rule, unreasonable conduct meriting a costs sanction. This was so, even if an outright refusal to mediate might have been justified. Here, the prospects of a successful mediation were good. The defendants did not refuse to mediate, “they dragged their feet and delayed until eventually the claimants lost confidence in the whole ADR process.” It was against that background that the trial Judge ordered the defendants to pay to the claimants 75% of the costs of the claim whilst recovering their costs of the counterclaim.
LJ Jackson said that this was a “tough order, but it was within the proper ambit of the trial Judge’s discretion”. Finally LJ Jackson made the following comment:
“The message which this court sent out in PGF II was that to remain silent in the face of an offer to mediate is, absent exceptional circumstances, unreasonable conduct meriting a costs sanction, even in cases where mediation is unlikely to succeed. The message which the court sends out in this case is that in a case where bilateral negotiations fail but mediation is obviously appropriate, it behoves both parties to get on with it. If one party frustrates the process by delaying and dragging its feet for no good reason, that will merit a costs sanction. In the present case, the costs sanction was severe, but not so severe that this court should intervene“.