Patel & Anr v Barlows & Ors (No. 2)

[2020] EWHC 2795 (Ch)  

The Claimants were successful but the Second Defendant argued that they were not entitled to costs because of an alleged failure to engage in mediation. HHJ Mithani QC agreed that there was “no question” that parties should consider the resolution of a case by an appropriate ADR procedure and that the unreasonable failure on the part of a party to do so may be visited by a sanction in costs. However, the Judge also said that the failure to do so will not always result in such a sanction (see Northrop Grumman Mission Systems Europe Ltd v BAE Systems, Dispatch Issue 172).

Here, the Judge said that the claim against the Second Defendants was very strong and other settlement methods had been attempted which did not work; the costs of the mediation would have been high, and:

“the plain fact is that it is difficult to see how the ADR would have succeeded”.

Further, the Judge noted that the Claimants did not reject the offer of mediation outright. The Second Defendants had made an offer of £40k, which was rejected. Then they suggested mediation. The Claimants said:

“My client is not against Mediation per se. However, in an attempt to keep costs down, we are working with Counsel to see if we can put forward a possible offer. I will of course keep you updated as to how we get on but should this not be possible, I would be happy for you to suggest 3 mediators from whom we can select one.”

The Second Defendants were prepared to “pause” the mediation, and the Claimants served a Part 36 Offer of £315k.  This was formally declined, and the Claimants asked whether the Second Defendants wished to make a counter-offer. The Second Defendants said that: 

“the parties are simply too far apart to engage in sensible discussions” and the Part 36 Offer was “beyond reason”.

 “. . . and further that any settlement would include the Trustees retaining a significant percentage of sums held on account. Moving forward, perhaps you could take instructions and provide an indication as to whether a without prejudice telephone conference would be a productive use of time and resources in all of the circumstances.”

In those circumstances, the Judge thought it difficult to see what else could have been achieved by mediation and there was no basis upon which the Claimants could be criticised for refusing to mediate when without prejudice communication had been attempted and proved wholly unsuccessful. Either party could have improved on the offer which they had made. Neither did so.

The costs’ argument accordingly failed. 

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