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Refuse mediation? Be prepared to pay
June 15, 2014
Liz Davies illustrates how refusing to mediate is frowned upon by judges and can lead to an indemnity costs order.
Yet again, party punished for refusing mediation. In Garritt-Critchley & others v Ronnan, Solarpower PV Ltd [2014] EWHC 1774 (Ch), HHJ Waksman QC ordered indemnity costs against the Defendants because of the Defendant’s refusal to mediate. The Claimants had offered mediation in their letter before claim and during the proceedings. Directions for trial had included an observation by the Court that the overriding objective would be served by the parties seeking to resolve the claim by mediation, and so parties were ordered to file witness statements in sealed invelopes before trial explaining why a party refused to attend mediation. In the run-up to trial the parties were initially a long way apart: the Claimants seeking £170,000 plus costs whilst the Defendants’ position was that the Claimants should discontinue and pay most of their costs. However shortly before trial, the Claimants made a Part 36 offer of £10,000 plus costs and indicated in correspondence that constructive negotiation might still be possible. The trial took place, over four days, but the Defendants then accepted the Part 36 offer before judgment. The Defendants acknowledged they were required to pay the Claimants’ costs, but on the standard, not the indemnity basis.
HHJ Waksman QC considered and rejected the Defendants’ reasons for not engaging in mediation. The Defendants had argued that there was no natural middle ground; the Judge oberved that was usually the case when liability was disputed and to consider that mediation was not worth it because the sides were opposed on a binary issue was misconceived. The Judge took the view that the case had been eminently suitable for ADR as the Claimants had appreciated in their first letter. The Defendants’ stance, when refusing ADR, that they were “confident that no agreement [would] ever be reached” was said to be unrealistic and if correct it was surprising that no application for summary judgment had been made. The Judge quoted Lightman J in Hurst v Leeming: “the fact that a party believes that he has a watertight case…is no justification for refusing mediation”.
The Judge noted that there was considerable dislike and mistrust between the parties, and that unfortunately this was very often the case in litigation, but that the Claimants had been prepared to mediate. And in any event, it was precisely where there may be distrust or emotion that a skilled mediator could be useful. There had been previous litigation between the parties, which had caused the rift to widen even further, but again those were matters which a mediator could consider and deal with. Indeed in the earlier litigation, the Judge had suggested that mediation might be a fruitful way forward and could save costs. There had been no other settlement attempts made. It was right that the parties seemed a long way apart in terms of the value of the claim, but parties do not know whether in truth they are too far apart unless they sit down and explore settlement. The Defendants had been concerned about the costs of one day’s mediation but those costs would have been far less than the cost of a trial. When a claim is in lower figures, there is even more reason to mediate, and once the Part 36 offer of £10,000 had been made, the difference between the parties was very slight indeed with the Claimants’ costs significantly lower than after the four day trial. The Defendants had not just failed to seize the opportunity to negotiate at a late stage, although that refusal in itself had cost everyone a vast amount of money, they had continually failed to engage with the process from the word go and had effectively closed off ADR at any time, not by ignoring the suggestions of ADR but by refusing. The Defendants were ordered to pay the Claimants’ costs, assessed on an indemnity basis.
