Barny over a Barn
In June, an English court tackled the refusal by the (ultimately successful) defendants not to engage in mediation, with painful results for those defendants. (Conway v Conway & Anor [2024] EWCA Misc 19)
Exhibit A 👉🏼
The case arose out of a dispute between the parties over an agreement about the transfer of a property (a barn) from one party to the other. Specifically there was a question as to whether the party transferring the barn (the claimant) was to have an option to buy it back at some point in the future. An oral agreement was made in this regard but relations broke down when the parties tried to formalise matters through their solicitors.
Timeline
The initial discussions between the parties about the transfer of the barn between happened in 2019, and the oral agreement was made (allegedly) in March 2020. The money was paid in October 2021. Legal proceedings kicked off in 2022, but the matter wasn't heard until Spring 2024.
Olive Branches
The first offer of mediation was made by the claimants even before proceedings were issued in 2022, another one was made later that year. The defendants rejected the offer, claiming that the dispute was unsuitable for mediation and that mediating would delay getting a judgement. After a strong "judicial encouragement to settle" was made and the trial adjourned, the claimants again offered mediation which, again, the defendants rejected.
The Decision
The defendants won their case, but even in giving judgement on the substantive issue the judge said:
"[o]ne 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... The Defendants will have to advance compelling reasons why the offer of mediation was rejected out of hand."
When it came to decide on the awarding of costs, the judge decided to reduce the costs the defendants could claim by 25% for the following reasons:
- The defendants had rejected all offers of mediation out of hand. The first refusal was "misconceived" and the subsequent refusals were considered to be unreasonable.
- The defendants had put forward that they were almost certainly likely to win and therefore the mediation offer had no merits, but the judge completely rejected this argument. He found that even if the parties were very much in dispute, this did not mean that a settlement could not be achieved through mediation.
- Taking into account the Court of Appeal decision in Churchill v Merthyr Tydfil BC, and the imperative to attempt mediation where possible, the court felt it was justified in reducing the defendants costs by 25% for failing to do so.
Overconfidence can get expensive
Even though this judgement is from a lower English court, and therefore not binding, it shows clearly how embedded the obligation to mediate is becoming in the UK, even in the absence of legislative obligations such as those that exist in Ireland. The Churchill case has obviously contributed significantly to this, but it is interesting how broadly that decision appears to be being interpreted.
What is particularly unusual about this decision is that the judge had no hesitation in penalising the successful party for refusing to mediate, departing from the long established principle that the successful party is entitled to their costs (subject to some exceptions).
Even if, therefore, a litigant thinks they have a cast iron case and that proves to be correct, refusing an invitation to mediate can end up with a reduced costs order, leaving a pretty bitter taste in the litigants mouth – the overall costs of course being higher on account of the case having been fully litigated, as in this case.
The judge had stated that the defendants would have to advance "compelling reasons" for their refusal to mediate. Clearly, their belief, however justified, in their likelihood of winning, and their concern that mediation would delay matters, did not tick this box for the judge.
This decision should add another point to a legal advisors list of reasons as to why they should advise their clients to at least try to mediate, and to do so at the earliest possible opportunity.
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