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Mediation update: court fees, proportionality and unreasonable refusal

With recent stark increases in court fees, new guidance from the TCC on proportionality and another case on unreasonable refusal to participate in ADR, is it time for parties to revisit the question of why they should mediate?

Rise in court fees

Since 9 March 2015, court fees – the fee paid when a claim is issued – have increased considerably. Whereas it used to cost £1,515 to start a claim between £200,000 and £250,000, it now costs £10,000. For claims between £10,000 and £200,000 the court fee is now 5% of the value of the claim.

As a result, if limitation is not a problem, parties may wish to try to resolve their dispute without ever starting proceedings. Depending on the value of the claim, not issuing avoids the upfront outlay of the court fee and leaves the price of the fee, which could be as much as £10,000, in the settlement pot.

Mediating pre-issue

It is not unusual to mediate pre-issue. Indeed, section 7 of the TCC Guide says:

“ADR may be appropriate before the proceedings have begun or at any subsequent stage. However the later ADR takes place, the more the costs which will have been incurred, often unnecessarily.”

In two neighbour cases, the Court of Appeal has also encouraged early mediation:

  • In Bradford v James, Mummery LJ said parties should attempt mediation at the beginning of the dispute:

“…and certainly well before things turn nasty and become expensive. By the time neighbours get to court it is often too late for court-based ADR and mediation schemes to have much impact. Litigation hardens attitudes. Costs become an additional aggravating issue.”

“It depresses me that solicitors cannot at the very first interview persuade their clients to put their faith in the hands of an experienced mediator, a dispassionate third party, to guide them to a fair and sensible compromise of an unseemly battle which will otherwise blight their lives for months and months to come.”

Mediating early may mean costs are still relatively low and therefore not, as Mummery LJ said, an additional aggravating factor. Parties may also still be on relatively good terms – or still even working together on the same project – which may make settling easier and mean relationships can still be saved.

Practical considerations when considering mediating early include:

  • Do the parties understand the scope of their dispute and precisely what they are settling? For example in a defective building case, what exactly is being compromised? Drafting out (for internal purposes) potential settlement agreements is likely to answer these questions.
  • Are the parties prepared to resolve the case on the basis of the information available pre-issue? Before answering this, parties should consider Briggs LJ’s words in PGF II SA v OMFS Company 1 Ltd about taking a pragmatic approach when considering a request to participate in ADR. For example, in relation to disclosure, Briggs LJ said:

“ADR may be proposed before the other party has the requisite information, a difficulty capable of being addressed either by limited voluntary disclosure, or by ADR at a later date than that proposed.”

Proportionality and costs budgeting

Parties will have in mind that, pursuant to CPR 44.3(2):

  • Where the amount of costs is to be assessed on the standard basis, the court will only allow costs which are proportionate to the matters in issue; and
  • Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred.

In terms of what proportionate means, Akenhead J gave guidance in Savoye and Savoye Ltd v Spicers Ltd.

Further guidance has now been given in CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd. There, at the date of the costs management hearing, the claimant had spent (approximately) £4.2 million, and had another £5 million or so to spend.

Coulson J held, by reference to CPR 44.3(5) and Savoye and Savoye v Spicers, that the claimant’s costs (incurred and estimated) were disproportionate to the complexity and value of the claim (which was approximately £18 million).

The court examined the claimant’s costs budget figures and set out, for each stage, upper limit figures in terms of what was reasonable. This gave a total of £4.28 million (for incurred and estimated costs). Coulson J then put those figures into a cost management order (CMO) and said:

“…the assessed costs/costs budget for the claimant will be a total of £4.28 million, made up of the figures which I consider to be recoverable on assessment in respect of the costs said to have been incurred, and the approved budget figures in respect of the estimated costs. …the estimated costs fall to be reduced, £ for £, to the extent that the amounts actually recovered on assessment in respect of costs incurred are higher than the figures which I have indicated.”

Unreasonable refusal to participate in ADR

There is now a plethora of judgments on unreasonable refusal to participate in ADR (see, for example, my previous blogs on PGF, Northrop v BAE Systems, the revised TCC Guide and unreasonable refusal to mediate).

The latest decision is Laporte v The Commissioner of Police of the Metropolis, where the claimants lost their claim for:

  • Damages against the defendant for assault and battery, false imprisonment and malicious prosecution.
  • A declaration of violation of their rights under Articles 10 and 11 of the European Convention on Human Rights.

However, they asked the court to make no order as to costs because (among other things), they said, the defendant had unreasonably refused to engage in ADR.

Turner J reminded parties about what Briggs LJ said in PGF about what can happen after a failure to engage in ADR, including disallowing the whole, or only a modest part of, the otherwise successful party’s costs and, for serious and flagrant failures to engage with ADR, ordering the otherwise successful party to pay all or part of the unsuccessful party’s costs.

In terms of money, the court refused to make no order for costs. However, after taking into account all of the factors listed in Halsey and all other relevant matters referred to in the judgment, it only awarded the defendant “two thirds of his costs against the claimants to be assessed on the standard basis” because of his failure to fully and adequately engage in the ADR process.

In terms of how the court approached the Halsey factors, two points are of particular interest.

  • First, the defendant argued that the nature of the dispute made the case unsuitable for ADR because the claimants were seeking to litigate a point of legal principle concerning the scope of police powers and alleging that a police inspector had fabricated his account of the scenario giving rise to those powers. Turner J rejected this argument, holding that it was:

“unrealistic to suggest that a settlement by way of ADR would have been inappropriate for this type of dispute.”

  • Second, the defendant argued that mediation would not have had a reasonable prospect of success, as its legal representative:

“came incrementally to the view that the claimants would only accept a financial offer and that the defendant was unlikely to make one and so ADR was not appropriate.”

The court also rejected this. It found there was a reasonable chance that ADR would have been successful in whole or in part and the defendant was unjustified in coming to a contrary conclusion. The court noted (among other things) that at no time had the defendant excluded the possibility of making a money offer, that at no time had the claimants insisted that the making of a money offer would be a formal precondition of engaging in ADR and that:

“It is always likely that those representing any given party to a dispute will seek to lower the expectations of the other side in preparation for ADR. Simply because one side makes a prediction of what it might take to reach a settlement does not entitle the other side to treat such a prediction, without more, as a formal pre-condition. Tactical positioning should not too readily be labelled as intransigence.”

Although Northrop v BAE was not mentioned in the decision, Turner J’s words are in line with Ramsey J’s approach in Northrop to the question of the prospects of success of mediation.

As I wrote about previously, in Northrop the court said it could not “merely look at the position taken by the parties” (which in that case was BAE not wanting to pay anything and Northrop not settling without payment) because that:

“ignores the ability of the mediator to find middle ground by analysing with each party its expressed position and making it reflect on that and the other parties’ position.”

Conclusion

Mediation remains a hot topic. Indeed, in Paice v Harding Coulson J concluded his decision to refuse enforcement of an adjudicator’s decision by saying this:

“It seems to me that a mediation would resolve these relatively straightforward quantity-surveying disputes between the parties. They are much better off going down that route than waiting for an appeal hearing in the Court of Appeal, which will not be finally determinative of the disputes between them, and will instead relate to whether or not an adjudication should have been injuncted something like a year after that adjudication actually took place.”

Keating Chambers Elizabeth Repper

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