accreditations & partnerships
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Court of Appeal decision. Parties had been encouraged to mediate by LJ Arnold when he gave permission to appeal. The Court overturned the trial judge's finding on costs. The parties had been told by the DJ to consider ADR and that any party not engagning in any such means proposed by another must serve a witness statement giving reasons. Northamber had proposed mediation. One party had responded saying they were taking instructions whilst the other had not responded at all. Neither had provided a witness statement as ordered by the Court.
The Court of Appeal found that silence in the face of an offer to mediate is, in itself unreasonable.
".....To compound matters, they breached an order of the court requiring them to explain their failure to agree to mediation. If breaches of such orders are ignored by courts when deciding costs, parties will have no incentive to comply with them. That would undermine the purpose of making them, which is robustly to encourage parties to mediate.
The judge's reasoning ignores these points. The facts that the litigation had been underway for a long time by 14 February 2022 and that substantial costs had already been incurred were certainly relevant to the exercise of the court's discretion as to how to respond to Mr Singh's and IES's conduct, but the litigation continued for more than eight months after that, including a nine-day trial, and substantial further costs were incurred which could have been avoided by a successful mediation. The judge seems to have considered that the onus lay on Northamber to chase Mr Singh and IES for a response, but I do not see why that should be so. They made a clear offer to mediate and reminded Mr Singh and IES of DJ Rouine's order. After that, the ball was in Mr Singh's and IES's court. That was particularly so in the case of IES given that its solicitors said that they were taking instructions, but did not reply substantively. Northamber was entitled to assume that a chasing letter would not have met with a positive response. Nor do I see why the offer to mediate should be castigated as "half-hearted", particularly in the absence of any reasons whatsoever from Mr Singh and IES explaining their refusal to mediate. Finally, although the judge stated that he was taking the breach of DJ Rouine's order into account, in reality he did the opposite.
The more difficult question is how Mr Singh's and IES's conduct should properly be reflected in costs. Although costs sanctions have been imposed in a number of cases for an unreasonable refusal to mediate or for silence in response to an offer of mediation, it does not automatically follow that a costs penalty should be imposed: see Gore v Naheed [2017] EWCA Civ 369, [2017] 3 Costs LR 509 at [49] (Patten LJ). Rather, it is a factor to be taken into account among the other circumstances of the case.
Given that the costs order in respect of Northamber's claim against IES must reconsidered anyway, I shall confine attention at this stage to the judge's order that Mr Singh pay 70% of Northamber's costs of the claim against him. He reached this decision taking into account the extent of Northamber's success, the extent to which costs had been incurred on issues where Northamber had succeeded and Mr Singh's conduct. Northamber contends that Mr Singh should be ordered to pay 100% of its costs. In my judgment this cannot possibly be justified by Mr Singh's failure to respond to Northamber's offer to mediate. Equally, however, I do not think that it would be right to impose no sanction at all for Mr Singh's conduct. I consider that the correct response would be to impose a modest, but not insignificant, costs penalty by increasing Northamber's costs recovery by an additional 5% to 75%.