The recent County Court case of Conway v Conway & Anor [2024]1 (Conway) has highlighted the increased emphasis that courts are placing on parties' use of alternative dispute resolution (ADR) when considering cost orders, particularly the use of mediation.
Overview of the case
In Conway, HHJ Mithani KC penalised the successful defendants for unreasonably refusing to mediate during the course of the dispute, with the defendant's costs being reduced by 25% as a result.
This follows the decision of the Court of Appeal in Churchill v Merthyr Tydfil Borough Council [2023]2 (Churchill) where it was held that a court could order parties to engage in ADR or stay proceedings to enable them to engage in ADR.
The decision in Churchill was a significant one and prompted the Civil Procedure Rules Committee of England and Wales to issue a consultation to the legal community on the use of ADR. That consultation sought views on proposed changes to the Civil Procedure Rules relating to the court's powers concerning the use of ADR. In summary, the consultation proposed changes to include reference to the use of ADR to achieve the court's overriding objective, that the court must consider whether to order the use of ADR and that a party that fails to comply with such an order may face adverse cost consequences. We consider this consultation in more detail in our article: Mediation is the future.
The results of that consultation have not yet been published, however, it is clear that the courts will take the use of ADR into account when determining costs. In Conway, HHJ Mithani KC made the following statement:
"I will deal with any outstanding matters and the issue of costs when I hand judgement down. One matter that seriously concerns me is why the Defendants did not agree to mediation when it was put to them. The importance of mediation can never be over-emphasised: see, for example, the recent decision of the Court of Appeal in Churchill. The Defendants will have to advance compelling reasons why the offer of mediation was rejected out of hand by them."3
As mentioned above, HHJ Mithani KC subsequently reduced the successful defendants' costs by 25% for unreasonably refusing to engage in mediation. It has been reported that the claimant made three separate offers to mediate. The first at the pre-action stage, the second in October 2022, and the third after the first day of trial, accompanied by a without prejudice offer.
The first offer received no response. The second offer was rejected on the basis that the defendants saw the dispute as unsuitable for mediation, that mediation would delay any final determination and increase costs while noting that any decision would not be final and binding. The third offer was rejected with no counteroffer.
When making his order on costs, HHJ Mithani KC saw the defendants' decision to refuse the second offer as misconceived and that it was not possible for the defendants to say that mediation held no merit. Although not binding on other courts, this decision should be interpreted as a further sign from the courts that a failure to mediate (or consider any other form of ADR) may well have an adverse effect on a successful party when it considers costs.
Indeed, the importance of the use of ADR can also be seen in the Irish courts. In the case of Byrne v Arnold [2024],4 Kennedy J imposed a 5% penalty on the claimant's recoverable costs because of the failure of its solicitors to comply with the Irish Mediation Act 2017 by failing to advise the claimant of the advantages and benefits of mediation. Although statutory in this case, this again serves as a reminder of the significance the courts are placing on the use of ADR.
Key takeaways
Ultimately, the courts will continue to place increasing importance on parties' use of ADR to achieve a proportionate outcome to their disputes. That appears to be the direction of the courts moving forward and we await the outcome of the Civil Procedure Rules Committee's consultation in relation to a formal amendment to the CPR regarding the use of ADR.
Footnotes
1] EW Misc 19 (CC)
2] EWCA Civ 1416
3] Paragraph 129
4] IEHC 308
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