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Mediation and costs management – a hot topic

Mediation is a hot topic at the moment. One reason for this is because of Sir Alan Ward’s judgment in Wright v Michael Wright Supplies Ltd; another is the changes to the Civil Procedure Rules (CPR), which came into force at the beginning of April.

Wright v Michael Wright Supplies Ltd

It was in Halsey v Milton Keynes General that Dyson LJ said:

“It seems to us that to oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the court.”

This principle may soon be reviewed following Sir Alan Ward’s judgment in Wright v Michael Wright. Sir Alan heartily agreed with the aspiration that mediation is a proper alternative that should be tried and exhausted before finally resorting to a trial of the issues. He referred to the fact that the trial judge had:

“…attempted valiantly and persistently, time after time, to persuade [the two litigants in person involved] to put themselves in the hands of a skilled mediator, but they had refused.”

Sir Alan suggested that it is perhaps time to review the rule in Halsey and that, perhaps, some bold judge would accede to an invitation to rule on the questions he raised about Halsey (including whether what was said was obiter) so that the court could look again at Halsey in the light of the past ten years of developments in this field.

Why? Sir Alan said he was concerned that Wright v Michael Wright showed:

“…it is not possible to shift intransigent parties off the trial track onto the parallel track of mediation.”

Indeed, as will be examined in forthcoming blogs about mediation, the Court of Appeal’s support for and promotion of mediation shines through a number of its recent judgments.

Costs management and proportionality 

The new Civil Procedure Rules unquestionably promote, encourage and assist parties to resolve their dispute, other than by going all the way to trial. The theme is now one of proportionality in costs. Indeed the new “overriding objective” enables the courts to deal with cases “justly and at proportionate cost”.

For cases which fall within the test in CPR Part 3.12, this will be “enforced” by cost management. It also comes into play at the end of the dispute because there are new rules for assessing costs on a standard basis (as to the applicability of which, see CPR Rule 44.3(7)).

The link between proportionality and the value of the claim is reinforced by one exception to the costs management regime in CPR Part 3.12, namely, unless the court orders otherwise, where the case is in the Chancery Division, the Technology and Construction Court or the Mercantile Court, Section II (Cost Management) and Practice Direction 3E (Cost Management) do not apply:

“…to cases where at the date of the first case management conference the sums in dispute in the proceedings exceed £2,000,000, excluding interest and costs, except where the court so orders.”

Further, when assessing costs on the standard basis, the court will only allow costs which are proportionate to the matters in issue. Costs that are disproportionate in amount may be disallowed or reduced “even if they were reasonably or necessarily incurred” (CPR Part 44.3(2)(a)). By CPR Part 44.3(5), costs incurred are proportionate if they bear a reasonable relationship to five factors, one of which is the sums in issue in the proceedings.

CPR Rule 44.3(2)(a) cross refers to CPR Part 44.4. There, in line with what was considered in Burchell v Bullard and Rolf v De Guerin, one of the factors that the court will also have regard to when assessing costs is the conduct of the parties, including efforts made, if any, before and during the proceedings in order to try to resolve the dispute.

Cost management and the concept of proportionality both promote alternative dispute resolution (ADR) in the minds of the parties. Through cost management, parties will be aware of the steps to trial and the costs of taking those steps for all parties involved. This will inform the parties of what they will encounter on the road to trial and the risks that lie ahead. Budgets produced for cost management purposes – as they are documents setting out the cost of the various phases to trial – will themselves be a useful tool at any mediation.

Perceptions of mediation are changing

Another important factor is the changing perception of what it means to suggest mediation to the other parties to the dispute. As reported by the Irish Times on 1 April 2013, this was recently neatly put by Judge Kelly (who has presided over the Commercial Court in Ireland since 2004) as follows:

“Nowadays it’s not regarded as a sign of weakness that one side would suggest mediation – it’s regarded as good common sense.”

As for practical points about mediation, I have discussed the mediation of relatively low value claims previously. Over the next few months, I will be writing a series of blogs about particular points which arise in the mediation of particular types of dispute, starting with mediation of neighbour disputes.

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