warning red square stamp

Commercial Litigators have been bombarded over the last year or so with scary cases on costs. The litigation landscape is changing.  The requirement for both sides to the dispute to prepare detailed costs budgets with a view to providing the Court and their own clients with accurate estimates of what the litigation is actually going to cost at an early stage in the proceedings is proving to be a very powerful catalyst for settling disputes before too great a proportion of the estimated costs are incurred. The other old chestnut which has been back in the news is mediation and adverse costs orders made against those who refuse to mediate. This is a gentle reminder to our readers within the property industry that these costs cases also apply to property disputes.

So, why mediate?

The most recent case on mediation is particularly noteworthy because it sets out, in very clear terms, why mediation should be given serious consideration by the parties to any type of dispute and that, in the vast majority of cases, there should be no good reason for refusing mediation.

Alternative dispute resolution (ADR) has been with us for some time now, and many of us have had bad experiences of parties agreeing to mediate only to go through the motions with a view to racking up costs and with no intention of negotiating a settlement.  Some of us have had bad experience with mediators.  Whatever the particular reason for refusal, both my own clients and their opponents have refused to mediate for a variety of reasons.

The true cost of failing to mediate

A recent case* gives clear guidance that these refusals are almost always unreasonable and may lead to the Court making adverse costs orders against the party refusing to mediate.

To be fair to the Judge in the most recent case, this is the position adopted by a leading decision that has been with us since 2004. This concluded that most cases are not by their very nature unsuitable for ADR. Ignore the double negative.  This is the Court of Appeal telling us that most cases are suitable for mediation.

This case involved a dispute concerning a question of fact.  The Trial Judge concluded that it was “classically a case where both parties needed to engage in a risk analysis as to whether their side of the coin would be accepted or not”.  Accordingly, the party that had refused to mediate had, by definition, been unreasonable in adopting a position of ‘extreme confidence’.  He accepted that the parties disliked and distrusted each other but he concluded that this was commonplace in litigation cases and was not a good reason for refusing to mediate. Neither did he think that the costs of mediation would be a good reason for refusing to mediate in the vast majority of cases. The costs budget exercises are demonstrating that litigation is a very expensive business and the costs of mediation are relatively modest by comparison.

The Trial Judge ordered the defendant to pay the Claimant’s costs on an indemnity basis. The settlement sum paid by the defendant in respect of the claim agreed was £10,000.00. The sum paid by the defendant in respect of the Claimant’s costs was £161,000.00.

You have been warned! 

This post was edited by Iain Davies. For more information, email blogs@gateleyuk.com.

*Garritt-Critchley & Others v Romman & Another [2014] EWHC 1774 (Ch).

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.