Declining ADR may lead to (modest) costs consequences

The importance of engaging in ADR prior to and during proceedings has been re-emphasised in the recent case of Northamber Plc v Genee World Ltd and others [2024] EWCA Civ 428.

The District Judge hearing the matter at first instance made a case management order requiring the parties to engage with ADR. If any party did not do so, that party was required to serve a witness statement giving their reasons, which could only be shown to the trial judge on the issue of costs.

The claimant wrote to the three defendants indicating its willingness to engage with mediation. The third defendant’s solicitors responded, advising instructions would be taken; no further response was then forthcoming. The second defendant failed to respond. Neither party served a witness statement as required by the case management order.

Following the trial, the judge refused to make a costs order penalising the defendants for their failure to comply with the case management order, as there was no evidence that the claimant had chased the defendants following the initial request for mediation. The claimant appealed the decision, arguing the judge’s decision amounted to an error of principle.

The Court of Appeal granted the claimant’s appeal, agreeing that the judge had fallen into error, finding the defendants’ silence in response to the offer unreasonable and that they had breached the case management order by failing to explain why they did not agree to mediation.

As Arnold LJ explained: “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 ignored these points. The fact that the litigation had been under way for some time and the parties had incurred substantial costs was relevant to the exercise of the court’s discretion as to how to respond to the defendants’ conduct.

It was also noted that substantial time had been taken up by the litigation, which culminated in a nine-day trial. Substantial costs had been incurred. This could have been avoided if mediation had proceeded and been successful. Arnold LJ noted that it was not for the claimant to chase for a response to its invitation to mediate: “the ball was in the Defendants’ court.”

This notwithstanding, the Court of Appeal did not fully accept the Claimant's case that the Defendants should be ordered to pay 100% of the Claimant's costs, finding that the conduct in respect of mediation was just one factor to be taken into account. The case nonetheless underscores that parties’ failure to engage in ADR – and particularly their omission to respond to reasonable mediation efforts – will be considered unreasonable conduct for costs purposes.

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