The Court of Appeal recommended mediation to save costs, after refusing an appeal against a costs decision penalising a party who had refused to mediate.
In a recent case (TMO Renewables Limited v Timothy Yeo and Others https://www.bailii.org/ew/cases/EWCA/Civ/2022/1409.html) the Court had to consider who should pay the costs following a trial in which the Claimant had established liability but recovered nothing because there had been no loss suffered.
The Court made a split costs order, reducing the amount payable to the Defendant by 40% to take into account that the Defendants had acted dishonestly. The judge further reduced the Defendant’s costs by 30% on the basis of conduct.
The Defendant appealed to the Court of appeal arguing amongst other things that the judge hadn’t taken into account the offers made and correspondence pointing out the flaws in the Claimant’s case. The Defendant had offered over £500k to settle but not by way of a part 36 offer. Interestingly the Defendant refused to mediate, arguing that it would be a waste of time and cost. The Court of Appeal did not overturn the judge’s decision. The judge had not awarded the Claimant any costs, so had penalised them for their conduct. The main issue was the Defendants’ dishonesty in the underlying case, not in their evidence at trial.
The Court could have taken into account the Defendant’s refusal to mediate but this is not part of the official reasoning for the decision to penalise the Defendant. I feel that it must have influenced the Court of Appeal because of the points made about mediation at the end of the judgment:
The Court of Appeal (including Lady Asplin who sits as Chair of the Civil Justice Council ADR committee of which I am a member) said that:
- I cannot leave this case without observing that it is a great pity that the suggestion of a mediation was not taken up. Far from being a case for which mediation was not suitable, this was in my judgment just the kind of case where a skilled and independent mediator would have been able to help both parties to a realistic assessment of their prospects and to achieve a settlement. That would have benefited all parties. It would have avoided the trashing of the defendants’ reputations which has occurred despite their success in resisting the claim. It would have forced the claimant to focus on the flaws in its case on causation and quantum and to adopt a more realistic approach to what was clearly a grossly exaggerated claim. It would have avoided for all parties the stress and expense of heavy commercial litigation and a lengthy trial. Instead, because none of the parties was prepared to be reasonable, they marched on with colours flying to the disaster which the trial proved to be for them all.
- I agree that the appeal should be dismissed for all of the reasons which Lord Justice Males has set out. I also endorse his postscript in relation to mediation. It is particularly unfortunate that the defendants took the view that mediation would be “an expensive waste of time.” On the contrary, this case was ideally suited to mediation,especially in the light of the fact that reputations were at stake, the defendants contended that the claim was deeply flawed and the claimant was open to discussing the provision of additional information about its claim. Rather than being an expensive waste of time, it would have forced both sides to take a more realistic approach to the litigation. It would have been likely to have saved much of the very considerable amount of time and costs which were ultimately expended. In the end, the negative attitude towards an attempt at negotiated dispute resolution which was adopted, cost everyone dear. In future, both parties and their advisers should approach the possibility of mediation in a more positive light.
Conclusion
Ordinarily a Claimant who loses at trial would have to pay the other party’s costs. By offering to mediate they demonstrated a reasonable approach to the Court which contributed to the overall picture and the decision not to award all the successful Defendant’s costs, even though the Defendants had made an offer. If the Defendants had agreed to mediate rather than being so dismissive about it they would have had more ammunition to fire at the Claimant on the issue of unreasonable conduct, So as always we say – it’s worth mediating. Look at it as an insurance policy to protect you from an adverse costs order.