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Can a party's silence as to an offer to mediate impact costs?

View profile for Jade Fairhurst
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Muslim woman who refused handshake at job interview awarded £3,420 in compensation

In the recent case of Northamber PLC V Genee World Ltd & Ors (Rev1) [2024] EWCA Civ 428, the Court of Appeal considered the conduct of parties in refusing to mediate. The court found that silence in the fact of an offer to mediate can have an impact on the costs award.

The appeal court was tasked with considering a number of issues following a judgment relating to breach of an exclusivity agreement. One of the defendant’s was allowed to appeal in part, and the court was asked to consider an appeal in relation to the costs order made.

At first instance, the district judge had made a case management order requiring the parties to engage in alternative dispute resolution, and if any party did not do so, it was required to serve a witness statement giving reasons why, which could only then be shown to the trial judge when the question of costs arose.

During the course of proceedings, the claimant wrote to the defendants as to mediation. The third defendant’s solicitor replied saying that instructions would be taken, but no further response was received. The second defendant failed to respond at all. Neither defendant served a witness statement in compliance with the case management order.

At trial, the judge awarded the claimant 70% of its costs but refused to consider any penalty against the defendants in costs for their failure to comply with the case management order. The judge’s reasoning was that there was no evidence that the claimant had attempted to chase the defendants for their reply to mediate.

The claimant argued on appeal that the trial judge had failed to take into consideration the fact that it had made the offer to mediate, and that there had been no substantive response from the defendants. Essentially, that the judge’s decision was an error of principle.

The Court of Appeal decided that the judge had indeed erred in their decision not to penalise the defendant in costs for failing to comply with the case management order. It was found that the defendants silence as to an offer to mediate was, in itself, unreasonable. More serious of an issue was that the defendants had breached the case management order and that, as per Arnold LJ: “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”.

Despite the decision, the Court of Appeal’s costs sanction was to increase the defendant’s costs liability to the claimant to only 75%, representative of an additional 5% of the claimant’s overall costs. The court rejected submissions from the claimant that it should recover 100% of its costs in light of the defendant’s conduct highlighting that it would only be appropriate to impose a “modest, but not insignificant” penalty on the defendants.

The decision makes it clear that once a party received a clear invitation to engage in alternative disputer resolution, the onus is on the part of the receiving party to respond, and not on the offeror to chase.

At Stephensons we have a dedicated team handling commercial and consumer disputes and we are able to offer alternative dispute resolution services. Contact our specialist team on 0161 696 6170.