It used to be the case that an unsuccessful party would be ordered to pay the successful party’s costs, unless they had not beaten an offer made by the other party. Now, the position is uncertain as conduct before and during the litigation and attempts to settle are taken into account, and in particular whether the parties have agreed to mediate. To quote a well-known defendant after acquittal in a criminal trial, “at least on a racecourse, when you back a winner, the bookmakers pay you.”
Claimants often bring claims which on the face of it look likely to be defeated at trial and in those situations, what can be done? Obviously, if the defence case is strong enough, then you can make an application for summary judgment or to strike out the claim or defence. There may be cases where it will not be possible to succeed on a summary judgment application because the case is too complicated for the summary procedure, or there is some other good reason to proceed to trial. There may be a litigant in person involved, or a point of construction, that needs deciding. Nonetheless, there may be a case where a party faces an unfounded claim or unmeritorious defence and wishes to contest it rather than buy it off.
The recent line of cases, following on from Halsey, such as PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288, Garritt-Critchley v Ronnan [2014] EWHC 1774 (Ch) and most recently Northrop Grumman Mission Systems Europe Ltd v BAE Systems (Al Diriyah C4I) Ltd (No 2) [2014] EWHC, suggest that however watertight you believe your case to be, there is no excuse to refuse mediation, because mediation can cut through such cases and can be successful. This is in line with the Chancery Modernisation Review of Briggs LJ, which promoted the idea of mediating to narrow the issues.
In the most recent case, BAE believed that it had a very strong case. Therefore when an offer was made to mediate, BAE refused and BAE succeeded at trial. However Ramsey J then went on to consider whether BAE had justifiably refused to mediate and as to whether they ought to be penalised by not recovering a proportion of their costs.
Ramsey J, who has been responsible for implementing the Jackson reforms, referred to the Jackson ADR Handbook (which I was proud to have been involved in publishing as a member of the editorial board) and which has since been distributed to every Civil Judge in England & Wales. Ramsey J also considered that the costs of mediation in this case (£40,000) were not disproportionate to the value of the dispute (£3M). Ramsey J extolled the virtues of mediation even in an unmeritorious case, saying that:
“This was a classic case where I consider that a mediator could have brought the parties together. In assessing the prospects of success I do not consider that the court can merely look at the position taken by the parties. It is clear that if BAE did not want to pay anything and if NGM would not settle without payment then there would not be a settlement. However this is the position in many successful mediations. It ignores the ability of the mediator to find middle ground by analysing with each party its expressed position and making it reflect on that and the other parties’ position. It allows the mediator to bring the necessary skills of evaluation and facilitation to find solutions which have not been considered. These may include such things as bringing other commercial arrangements or disputes into the discussion or, in this case, resolving the consequences of termination or finding future opportunities for the software or licences.
… In this case for the reasons set out above, I consider that this is a dispute between parties where a mediated settlement would have been likely. There were therefore reasonable prospects of success.”
Ramsey J did find that BAE had been unreasonable in refusing to mediate, but did not impose any sanction as luckily they had made an offer which Northrop had failed to beat. Even if a case looks like a “slam dunk” there is still a risk of a costs penalty if mediation is refused. One would think that in a fraud case, it would not be appropriate, but then it is necessary to establish fraud. In those cases, a party can attend the mediation and seek to persuade the claimant to give up and walk away, knowing that the costs of the mediation need not be “in the case” and therefore it is not a cost free option for the other party. Otherwise, making a settlement offer (possibly to reflect the mediation costs) may provide some protection. This means that a claim, however unmeritorious, does have a value.