A recent case involving a family property dispute shows what happens when a mediation fails and the parties go on to trial. The case concerned is Mate v Mate & Ors [2023] EWHC 806 (Ch) (05 April 2023) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2023/806.html
This was an interesting case for many reasons:
First, unfortunately the mediation failed and so the parties who were sisters and brothers went on to a trial. The judge awarded £652,000 but an offer had been made of £650,000, which the Claimant beat. The question was whether her brothers, to whom she had made the offer close to trial, and her sister should pay her costs. Was the offer a valid and timely offer.
Interestingly the judge found that the offer was valid as it had been made within 21 days of the trial, as the judge’s reading time at the beginning of the case did not count as the start of the trial.
The judge went through the principles which apply, when the Court looks at the issue of costs, saying that:
- It is common ground that the general rule (in CPR 44.2(2)) is that the unsuccessful party will be ordered to pay the costs of the successful party, but that the court may make a different order.
- As Gloster J emphasised in HLB Kidsons v Lloyds Underwriters [2008] 3 Costs LR 427 , “[t]he aim always is to ‘make an order that reflects the overall justice of the case’…“, a point also emphasised by Briggs J in Bank of Tokyo-Mitsubishi UFJ Ltd v Baskan Gida Sanayi Ve Pazarlama AS [2010] 5 Costs LR 657 at [4] by reference to the overriding objective: “Besides taking due account of the specific provisions of Part 44, the court must in framing an appropriate order for costs bear constantly in mind the need to comply with the overriding objective, that is to deal with cases justly“.
- The general rule set out in CPR 44.2(2) was described by Lord Woolf MR in AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507 (at 1522-1523) as a “starting point from which the court can readily depart“. However, whilst the court may depart from the general rule, “it remains appropriate to give ‘real weight’ to the overall success of the winning party” (per Gloster J in HLB Kidsons at [10]). In addition, I bear in mind that commercial litigation is complex and that, in almost every case, the winner is likely to have failed on some issues. There is no automatic rule requiring reduction of a successful party’s costs if he loses on one or more issues (see HLB Kidsons at [11]).
- In deciding whether to depart from the general rule, the court must have regard to all the circumstances of the case, including “(a) the conduct of all the parties; (b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and (c) any admissible offer to settle which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply” (CPR 44.2(4)). Insofar as relevant for the purposes of this judgment, conduct of the parties includes conduct before and during the proceedings, whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue, and the manner in which a party has pursued or defended its case or a particular allegation or issue (CPR 44.2(5)(a)-(c)).
- The various orders which the court may make are set out in CPR 44.2(6), and I note the terms of CPR 44.2(7) to the effect that before the court considers making an order for costs relating only to a distinct part of the proceedings (i.e. an issue-based order) it will consider whether it is practical to make an order for a proportion of another party’s costs or for costs from, or until, a certain date only. As was pointed out by Jackson J in Multiplex Constructions v Cleveland Bridge [2009] EWHC 1696 at [72 (iv)-(v)], the court will hesitate before making an issue-based order “because of the practical difficulties which this causes” (amongst other things the additional time and expense that may then be spent on assessment) and because of the steer provided in CPR 44.2(7) . In many cases “the judge can and should reflect the relative success of the parties on different issues by making a proportionate costs order“.
- Every case will, inevitably, turn on its own facts and I remind myself that there is only limited assistance to be gained from looking at the findings made in other cases on different facts.
The judge found that the Claimant should get 75% of her costs as there was one ground of her claim where she had not succeeded. He also ruled that to be valid a Part 36 offer does not need to be served on all of the Defendants. The Claimant had not served the offer in her sister who had admitted the claim but remained a party, albeit a reluctant one. The judge did not consider it would be unjust to make the brothers pay indemnity costs under CPR Part 36 plus an additional amount of over £57,000 because the trial could have been avoided, and interest in costs of 8% above base. An interim payment of costs of approximately £269,000 was ordered to be paid by the judge, on the basis of 50/65% of costs payable. So, it was likely that the final bill would be at least double this figure. If the brothers had accepted the offer made earlier they would have paid £370,000 costs plus VAT.
This case demonstrates that litigation can be a costly gamble. The Claimant was rewarded for making a reasonable offer as it turned out and the brothers were left with a hefty costs bill for failing to accept the proposed compromise.