UK: Mediation And Costs Sanction: Further Court Guidance

Last Updated: 19 February 2013
Article by Adam Knee

Introduction

Litigation can be a very expensive and time consuming process that can be a real drain on a party's resources. In some cases, the costs of fighting litigation and recovery of those costs can become as important to a party as winning the claim. Mediation is generally seen as a successful method of resolving disputes cheaply and quickly. The Courts are very keen to encourage parties to mediate disputes and often penalise those who refuse an offer of mediation. However, a failed mediation is expensive for both parties and can be a real distraction for the parties. In recent cases, the Court have reviewed the circumstances where a party may legitimately refuse to mediate.

Background

The general rule when determining who should pay the costs of litigation is that the losing party should pay the victorious party's costs. However, the Court retains a broad discretion to reduce the amount of costs a victorious party can recover from the losing party or, in some cases, make a costs award against the victorious party to penalise behaviour that is deemed unreasonable. One factor that the Court is likely to take into account is whether the parties attempted to settle their disputes through mediation. A mediation is a meeting between the parties where they are encouraged to discuss their dispute on a confidential basis with the assistance of an independent third party (the mediator) to see if a deal can be done to settle the case without the need to go to Court. The mediator's role is to assist in these settlement discussions, to test the strength of the parties' legal positions and to build common ground between the parties so that a settlement can be achieved. The use of mediation to try to resolve disputes has received strong judicial approval and there have been a number of cases where Judges have penalised parties that have refused to attend a mediation by not awarding them all of their costs of the litigation or even making a costs order against them.

Recent Updates

However, recent case law demonstrates that it should not be assumed that a refusal to mediate will automatically result in a costs sanction against the refusing party. In an article in May 2012, we reported on the Court of Appeal's decision in Swain Mason –v- Mills & Reeve (A Firm) (2012), which can be found here. In the Swain Mason case, the Court of Appeal recognised that there were circumstances when a party should not be penalised in costs for refusing an offer of mediation such as where the refusing party reasonably believed that it had a very strong case. The recent decision in ADS Aerospace Ltd v EMS Global Tracking Ltd (2012) is a further example where the Court is prepared to review the circumstances surrounding a refusal to mediate and consider whether the refusing party has acted unreasonably and should be penalised in costs as a result.

The Claimant (C) brought a claim for over $16 million in damages for alleged breach of an exclusive distribution agreement by the Defendant (D). At trial in July 2012, the Judge found in favour of D on all the key issues. As a result, D claimed its costs, which were approximately £877,000, of defending the proceedings.

Decision on Costs

In the subsequent hearing to determine what costs order should be made, the Judge considered the various efforts the parties had made to resolve the dispute other than through trial. The following events were of particular relevance:

  • D's solicitors had opened settlement negotiations on 2 March 2012. C's solicitors had declined to enter into any negotiations until witness statements had at least been exchanged and possibly expert evidence as well.  
  • D's solicitors made various efforts to enter into settlement negotiations with C's solicitors throughout April and also made a settlement offer of £50,000.
  • C's solicitors rejected that offer on 31 May 2012 and instead proposed a mediation for week commencing 11 June 2012.  
  • D's solicitors rejected this offer of mediation due to the trial commencing on 2 July 2012 and the fact that it was clear that C was not prepared to settle for substantially less than its $16,000,000 claim.
  • The parties made settlement offers in June 2012. C offered to settle for £4,246,000 whereas D was only prepared to offer £100,000.

D accepted that C was entitled to its costs of successfully defending the claim in accordance with the general rule but that these costs should be substantially reduced because of D's rejection of C's offer of mediation. However, the Court held that D had not acted unreasonably in rejecting mediation and should not be penalised in costs for the following reasons:

  • D had made repeated efforts to engage in settlement discussions as far back as 2 March 2012 and C had shown no interest in engaging in such discussions until 31 May 2012;
  • It was clear from the parties' settlement offers in June 2012 that C believed that it was entitled to substantial compensation. D did not accept this view and it was unlikely that a mediator would be able to change these views sufficiently to bring about a settlement.
  • D had remained open to the possibility of Without Prejudice negotiations throughout.
  • The offer of mediation had come only a few weeks before trial. To prepare for a mediation would have been a significant distraction when the parties needed to focus on preparing for the trial.
  • D was entitled to take the view that it had a strong case on the merits of the case and the Judgment had shown that this belief was reasonable.

The Court awarded D its costs to be assessed on the standard basis and further ordered C to make a substantial interim payment in respect of these costs.

Conclusion

The Court has a wide discretion in awarding costs and, as the ruling in ADS Aerospace shows, the Court is likely to take into account the parties' conduct throughout the whole process. Refusing an offer to mediate is still a big decision to make, but as recent cases show, this should not prevent a party to a dispute declining to mediate where it has consistently acted reasonably in the proceedings, and the offer to mediate is made late in the day with little prospects of success

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Gowling WLG
Goodman Derrick LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Gowling WLG
Goodman Derrick LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions