- Litigation Futures - https://www.litigationfutures.com -

Defendant penalised after “unreasonably” refusing to mediate costs dispute

Gordon-Saker: no reason for pessimism as to the outcome of any mediation

Gordon-Saker: no reason for pessimism as to the outcome of any mediation

Newspaper group Mirror Group Newspapers has been hit with indemnity costs after the Senior Costs Judge ruled that it had unreasonably failed to engage in efforts to use alternative dispute resolution instead of going to detailed assessment.

In the latest significant ruling to arise from this piece of phone-hacking litigation, Master Gordon-Saker found MGN’s conduct unreasonable “to a high degree”.

MGN was actually the party to first raise the possibility of finding an alternative method to assessing costs. The claimants’ solicitors were initially lukewarm about the idea, expressing “serious concerns that agreeing to mediation could well, in our view, achieve nothing for the claimants except delay and incur costs”.

However, their response continued: “For that reason, we are not prepared to stay the assessment process pending any such attempt at ADR. That said, we would of course be happy to engage in a considered and genuine ADR process if one could be had.”

They suggested using the former Senior Costs Judge, Peter Hurst, as a mediator, and said that if he was acceptable, “please let us know which type of ADR your client would agree to and if the latter (mediation), whether it would meet the entire costs of the process”.

The defendant did not respond to this or when it was repeated subsequently on three occasions.

Master Gordon-Saker said: “It seems to me that there has been a blanket refusal by the defendant to engage in any process of discussing alternative dispute resolution.”

He rejected explanations for the defendant’s solicitors’ behaviour, such as the request for the defendant to pay the costs of the process.

“It seems to me that request was not a reason simply to ignore the suggestion of ADR. It could have been dealt with, possibly suitably robustly, by a response that there was no reason why the defendant should pay for it, but that the defendant would nevertheless be willing to engage in the process. That was not done.”

The master ruled: “I have no hesitation in concluding that the defendant has behaved unreasonably in failing to engage in the process of discussing at least the possibility of alternative dispute resolution, and mediation in particular, and given that the common costs base costs have been agreed [at £2m], it seems to me that there was no reason for pessimism as to the outcome of any mediation.

“It seems to me, therefore, that the defendant’s conduct is unreasonable to a high degree and is such as to justify an award of costs on the indemnity basis. Accordingly, save insofar as the parties have agreed that the defendant should pay costs on the standard basis, it seems to me that the claimants are entitled to the costs of the assessment of the common costs bill and of the four individual claims on the indemnity basis.”

Simon Browne QC of Temple Garden Chambers, instructed by James Heath of Atkins Thomson and Philip Daval-Bowden of Masters Legal Costs Services, was counsel for the claimants. Jamie Carpenter of Hailsham Chambers, instructed by RPC, represented the defendant.

Matthew Smith, a costs barrister at Kings Chambers, commented: “Mediation is a process which has been looked upon increasingly favourably by judges, a development that has led to an increase in the demand for specialists in this area.

“This ruling is proof that judges will take action where they believe that it has been unreasonably dismissed as an option, and is likely to make parties think twice before dismissing mediation out of hand.

“They know that if they do, they may find themselves landed with substantial costs, so we can expect the option of mediation to be considered very seriously in light of this ruling.”

Kings Chambers has recently set up its own costs ADR service and members have also joined CADR, the specialist costs ADR offering.