This happened in a recent case reported in the Law Society Gazette in which the Claimants were awarded only £2,000 damages and ordered to pay £500,000 interim costs. This was only interim costs and so the final bill could end up being higher.
The matter concerned a building dispute in which the Claimant claimed £3.7m in damages but was awarded only £2,000 at trial. This was very much a Pyrrhic victory. The Claimant was penalised with a costs bill of at least £500,000.
In Beattie Passive Norse Ltd & Anor v Canham Consulting Ltd Mr Justice Fraser made the costs order following a judgment which referred to Part 36 and a refusal to mediate.
The claimant had claimed damages for alleged professional negligence against structural engineers for design failings in respect of foundations for two blocks of housing
The court heard that the Defendant made two Part 36 offers, which were both rejected The first offer was to pay £50,000 plus costs. A second offer of £110,000 was made at a later date.
Following the judgment the defendant would normally have been entitled to its legal costs from the Part 36 offer acceptance date but the Defendant sought more, saying that the claim had resulted in a ‘derisory’ damages award.
When it came to costs the claimants argued that the Defendant’s refusal to engage in mediation during 2020 was unreasonable. This was rejected on the basis that the claimants were advancing and continuing to advance an untruthful case.
The judge concluded that it was ‘plainly unreasonable’ for the claimants not to have accepted the first Part 36 offer. He further ordered that they pay the defendant’s costs going back to a previous information request assessed on an indemnity basis.
In a case drawn to our attention in Gordon Exall’s Civil Litigation Brief, called Gregor Fisken Ltd v Carl [2021] EWCA Civ 792 the Court of Appeal made an observation about the failure to consider mediation. The judge commented:
“I have already observed that it would have been in the interests of both parties, if they were unable to resolve matters themselves, to have engaged the services of a skilled mediator at an early stage, and before this dispute escalated to court proceedings. When giving permission to appeal to this court I observed that:
The case does not fall within the [Court of Appeal] pilot scheme for mediation, but the parties are strongly encouraged to consider attempting to resolve their dispute by mediation.
“When we asked Mr Shepherd what steps had been taken in the light of this observation, his answer was succinct. He told us that the answer was “none” When we asked Mr Hooper the same question, he told us that in view of Mr Carl’s failure to respond to settlement offers in the past (including a Part 36 offer which had been beaten at the trial), it was not thought worthwhile to pursue this suggestion. This is highly unsatisfactory.
Strong encouragement from the court to consider mediation merits careful consideration and is not simply to be ignored or rejected out of hand.”
So the lesson from these two cases is that the Courts will not hesitate to penalise those who refuse to use ADR or mediation.