In a previous article we have looked at refusal to mediate and here, again, the question of costs sanctions following a refusal to mediate has come before the court in the case of ADS Aerospace Limited v EMS Global Tracking Limited .
In this case, the court refused to impose costs sanctions and found that the claimant failed to satisfy the burden to show that the defendant’s refusal to mediate was unreasonable.
The underlying dispute was a $16million claim for the breach and repudiation of a distribution agreement. The claim was dismissed and the defendant sought its costs. The claimant did not dispute that, in principle, the defendant was entitled to its costs but argued that these should be substantially reduced to reflect the defendant’s unwillingness to mediate. The costs in issue were said to be around £877,000.
The following chronology was described in the judgment:
- 2 March 2012
The defendant’s solicitors contacted the claimant’s solicitors to try and initiate settlement discussions but the claimant’s solicitors indicated they wanted to wait for witness statements and possibly expert reports before having discussions.
- 10 April 2012
The defendant’s solicitors wrote to the claimant’s solicitors offering £50,000 in settlement including costs, interest and VAT. There was no acknowledgement or response.
- 13 April 2012
During a telephone conversation the claimant’s solicitors displayed no inclination to discuss a settlement.
- 15 May 2012
The defendant’s solicitors reiterated their client’s willingness to settle.
- 31 May 2012
The claimant’s solicitors wrote referring to the £50,000 offer as a 'nuisance' payment and suggested mediation.
- 1 June 2012
The defendant’s solicitors wrote saying they did not think 'mediation is likely to be a worthwhile or successful investment of time and cost' but that they would consider any offers made and would welcome a without prejudice discussion.
- 6 June 2012
The claimant repeated the suggestion of mediation and said that cost was not a concern, given that the defendant’s estimated costs were £1million.
- 7 June 2012
The claimant offered £4,246,000 inclusive of costs and interest and reiterated the offer of mediation.
- 11 June 2012
The defendant increased its offer to £100,000.
- Neither offer was accepted and the case proceeded to trial.
The judge reviewed the procedural history and concluded that the claimant had not satisfied him that the defendant had acted unreasonably in refusing to mediate. In particular he highlighted the following:
- The claimant had shown no willingness to engage in a without prejudice discussion until 31 May whereas the defendant had made at least four attempts to discuss matters prior to that time. The claimant appeared to have little or no good reason why without prejudice discussions were not attempted
- The claimant had a strong view it was entitled to substantial damages and had given the impression it was not interested in a nuisance offer
- The lateness of the suggestion of mediation was a material factor
- The defendant did not act unreasonably in believing it had a very strong case on liability, causation and quantum
As a result the claimant’s submissions failed and it was ordered to pay the defendant’s costs to be assessed on the standard basis.
The decision does not really come as a surprise in light of the decision in Swain Mason v Mills & Reeve but it serves as a useful reminder of the factors that the court will take into account when deciding if there has been an unreasonable refusal to mediate. It remains vital to address the question of mediation early on but it is not necessary to agree to mediate in all cases provided the court is satisfied that the refusal was reasonable.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.