Indemnity Costs For Failure To Mediate?

• Published date: 27 July 2022
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Debevoise & Plimpton
• Author: Mr Christopher Boyne and Doreena Hunt

INTRODUCTION

In Paul Richards and Keith Purves v Speechly Bircham and Charles Russell Speechlys LLP [2022] EWHC 1512 (Comm) the court considered the consequential matters arising from the trial of those proceedings in which the claimants were successful in their claim for negligence. The consequential matters included, inter alia, costs and the basis on which they were to be awarded. Specifically, the court considered whether a refusal to engage in mediation should result in costs being awarded on the indemnity basis.

BACKGROUND

In support of their application for indemnity costs, the claimants pointed to four offers to mediate contained in "without prejudice save as to costs" correspondence. Three of those offers had been made prior to issue of the Claim Form and the fourth was made following service of the Defence and in advance of a case management conference.

The defendants resisted the application on the basis that (i) their approach to mediation was not unreasonable, relying on Northrop Grumman Mission Systems Europe Ltd v BAE Systems (Al Diriyah C4l) Ltd [2014] EWHC 3148 (TCC); and (ii) that in any event, an unreasonable refusal to mediate was only one facet of a party's conduct to be taken into account when determining costs, relying on Gore v Naheed [2017] EWCA Civ 369.

The defendants' response to the first offer to mediate was that they did not consider it would be productive or cost effective at that stage, and that they would keep the merits of some form of alternative dispute resolution ("ADR") under review.

The defendants' response to the subsequent three offers to mediate was that there was no point in engaging in mediation as the claim was doomed to fail, as well as pointing, in the final refusal, to the expense of mediation given the uncertainty of its outcome.

Both parties made Part 36 offers which they failed to beat.

JUDGMENT

The Reasonableness of Refusing to Mediate

In their submissions as to the reasonableness of their refusal to mediate, the defendants pointed to (i) their having made a Part 36 offer, (ii) the fact that they had budgeted for mediation in their costs budget which indicated that they were open to mediation, (iii) without prejudice discussions had taken place between Leading Counsel in an attempt to settle and (iv) in their initial refusal to mediate, they had said that any mediation should follow disclosure, which, at the time of the fourth and final offer to mediate, had not taken place.

Having considered...