Costs – Mediation & ADR
Lord Justice Jackson has recommended in his final report on civil litigation (2010) that all litigation lawyers and judges should be properly informed about the benefits of alternative dispute resolution. “(ADR, particularly mediation) has a vital role to play in reducing the costs of civil disputes, by fomenting the early settlement of cases. ADR is, however, under-used. Its potential benefits are not as widely known as they should be”. To this end he recommended that an authoritative mediation handbook be prepared.
The Jackson ADR Handbook is now provided to every judge and has been endorsed by the Courts providing a foundation for mediation law relating to case and costs management hearings.
DJ Lentham, a regional costs judge, has said that a refusal to mediate costs disputes may soon face the same consequences as a refusal to mediate in the substantive dispute. Master O’Hare and Master Simons confirmed this in December 2015 on two cases:
Reid –v- Buckinghamshire Healthcare NHS Trust  EWHC B21
Sanctions have been imposed on the unsuccessful paying party for refusing to engage in mediation. Master O’Hare ordered the defendant to pay costs on the indemnity basis from the date it failed to respond to an offer to mediate. “If the party unwilling to mediate is the losing party, the normal sanction is an order to pay the winner’s costs on the indemnity basis, and that means that they will have to pay their opponent’s costs even if those costs are not proportionate to what was at stake. This penalty is imposed because a court wants to show its disapproval of their conduct. I do disapprove of this defendant’s conduct but only as from the date they are likely to have received the July offer to mediate.”
Bristow -v- The Princess Alexander Hospital NHS Trust  EWHC B22
The Defendants argued that they did not enter into the mediation because the parties were so far apart. Master Simons was of the view that this was an unreasonable refusal to mediate and stated:
“The parties should be encouraged to enter into mediation and if one party fails to enter into a mediation and that failure is unreasonable then there should be a sanction”.
“It took three months for them [the Defendants] to reject and they gave no good reason other than the fact that the case had already been set down for a detailed assessment”.
“I think that the correct sanction is that the claimant should receive their costs on an indemnity basis on their 80 per cent costs as a sanction for the defendants’ failing to engage in mediation”.
The judgement recognised that this case could have reached a settlement through mediation.
As can be seen, failure to at least consider ADR can have serious costs consequences on both parties.
Courts have stated that a trial is a last resort and should only happen when all other avenues to reach settlement have been explored. How long before the Courts routinely order that the parties enter into an alternative resolution process before proceeding to assessment, provisional or detailed?
There are many questions that need answering before Mediation / ADR becomes the norm, particularly in respect of the costs of assessment, the consequences of part 36, and most importantly the appointment and role of the mediator himself.
Currently, the Assessment fee for a Bill of Costs of between £50,000 and £100,000 is £1,005.00; with the losing party, in most cases, paying the costs of assessment. Mediation has to be more timely (Detailed Assessment can take up to a year) , it must be cheaper and above all it must be legally binding with a straightforward route to enforcing any agreement.
Sterling Costs will endeavour to research the minutia of costs mediation and on completion will issue a further blog, watch this space!
Call us now on 01925 909360 to talk to one of our Costs Lawyers