HEADLINE SUMMARY


Generally English courts will order that the loser pays the winner's costs.  However, a losing party may raise aspects of the overall conduct of the case by the winning party in order to argue that the winner's costs should be reduced, disallowed or shifted.

Two recent decisions have explored the impact that (i) a refusal to mediate and (ii) alleged failures to comply with pre-action rules, provide early disclosure or provide disclosure satisfactorily may have on a winning party's entitlement to costs.

(UN)REASONABLE REFUSAL TO MEDIATE

RICHARDS & ANOR V. SPEECHLY BIRCHAM LLP & ANOr [2022] EWHC 1512 related to a claim for professional negligence against a firm of solicitors.  The claimants (C) were successful and were awarded £1.454 million.  

On the question of costs, Cs sought an award on the indemnity basis.  Costs on the indemnity basis shift the burden onto the paying party to show that the costs incurred are unreasonable and introduce a presumption that the costs claimed are proportionate.

FACTUAL BACKGROUND

The grounds for Cs' submission were that the defendants (D) had unreasonably refused to mediate. Cs had asked on four occasions and Ds had variously responded saying too early, maybe after disclosure and then latterly that the claim was without merit.

KEY LEGAL ISSUES

The court looked at the case law on the issue and noted that there were a number of factors to be considered.  These include the nature of the dispute, merits, attempts at other settlement methods, the costs of ADR, the prospects of ADR being successful and the approach to ADR being only one facet of a party's conduct.  However, only the last was viewed as being of any assistance to them.

The court concluded that the refusal to mediate was unreasonable but was not sufficient to push it into the territory of an indemnity basis order.  The Judge observed that neither side had made an effective Part 36 offer but that the offers made by the Cs were higher than the eventual quantum awarded and they had resisted a significant part of the claim. 

COMMENTARY

ADR is currently high on the courts' priority list and whether and how to make it mandatory continues to be discussed by the senior judiciary and the Rules Committee.  A mandatory provision for mediation may be too prescriptive, but parties should beware of taking a hard line against it, where the respective costs of mediation are likely to be minimal in relation to the overall costs budget for the claim.  

Parties should not be forced to go through the motions of a mediation, particularly where offers may be more effectively be made in correspondence.  And mediations don't necessarily produce a positive outcome.  That is borne out by practice.  In a very high value claim arguing that the cost may not be commensurate with the likely benefit is unlikely to persuade a court that mediation was not worth attempting. Similarly, the suggestion that the other parties' motivations and/or unreasonable demands made a mediation impossible is unlikely to have much traction when a court is considering why a party refused to mediate.

Here, Ds were not ultimately punished for their approach to mediation, but on another day or with a different set of facts the outcome could have been different.  Whilst there may sometimes be merit in delaying ADR to allow for disclosure, or for a party to provide fuller particulars, as this case shows, the courts are alert to parties imposing strict preconditions to embarking on mediation.     

COMPLIANCE WITH PRE ACTION PROTOCOLS

SHEERAN & ORS  V. CHOKRI  & ORS  – The Encore

In April 2022 Ed Sheeran & others were successful in their claim for a declaration of non-infringement of copyright -  emerging the winner in the battle of Oh Why vs Oh I.  

The litigation had been hard fought with Cs cost budget topping £900,000.  Cs said that they were successful – which could not realistically be disputed – so were entitled to their costs.  Ds took the position that due to the Cs' conduct the appropriate order was no order as to costs.

The points variously taken by Ds were that Sheeran had not engaged with the pre-action protocol, not provided sufficient early disclosure of documents and/or details of their position on "independent creation" and had left an evidential void as to how Shape of You was created.

In considering Ds' submissions on costs the court looked at the approach of both parties.  Prior to the issue of proceedings, Ds had contacted the Performing Rights Society about the dispute. The PRS responded by suspending Sheeran's royalties for Shape of You.  The Judge noted that Ds were clearly aware at that point that proceedings were likely to follow and that such conduct could be seen as a premature act on their side.  He was also unwilling to penalise Cs for not undertaking searches similar in form to full disclosure in advance of proceedings even being issued.  

Further, it was clear from the conduct of the claim by Ds, and the approach to Mr Sheeran that the provision of documents and further details as to their creation hadn’t noticeably impacted Ds' litigation strategy.  They had continued to pursue the case aggressively up to and at trial.

The Judge therefore made an order in the Cs' favour, which included a payment on account of £900,000.

COMMENTARY

Conduct and delayed provision of key documents or information can be a reason for costs to be disallowed.  However, parties seeking to make such submissions will in practice need to show that once in possession of them they changed their approach to the claim.  Here, it was not apparent that the documents had a material impact.  Many of Ds' submissions on costs seemed to be rather a collateral attack on the liability findings in respect of witness evidence and copying.

While the Sheeran case related to music copyright, the principle applies across the board.  If a party doubles down once they have received disclosure or information, it is likely to be difficult to persuade a court that if the documents or information had been forthcoming earlier there would have been a different outcome.

Such arguments may have a greater influence at a detailed assessment hearing where the reasonableness and quantum of costs is being considered; but in most situations they are unlikely to unseat an initial order as to entitlement to costs.

Key contact

Rachel Cook

Rachel Cook

Managing Associate, Dispute Resolution
United Kingdom

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