DAMAGES, COSTS AND MEDIATION: COURT OF APPEAL CONSIDERS THE BOUNDARIES

May 24, 2017 · by · in Appeals, Damages, Interest, Mediation, Mediation & ADR

In  the judgment today Gore -v- Naheed [2017] EWCA 369 the Court of Appeal considered the issue of damages being awarded (when they had not been claimed) and where costs should lie when a party – reasonably – declined to mediate.

“Speaking for myself, I have some difficulty in accepting that the desire of a party to have his rights determined by a court of law in preference to mediation can be said to be unreasonable conduct particularly when, as here, those rights are ultimately vindicated. But, as Briggs LJ makes clear in his judgment, a failure to engage, even if unreasonable, does not automatically result in a costs penalty. It is simply a factor to be taken into account by the judge when exercising his costs discretion.”

THE CASE

The defendants appealed against a decision awarded damages against them and granting an injunction in relation to a right of way over neighbouring properties. The appeal against the injunction was not successful.

THE ISSUE OF DAMAGES AND COSTS FOLLOWING A REFUSAL TO MEDIATE

The Court of Appeal did, however, overturn the judge’s award of £2,500 damages. Not least the claimant had not made any claim for damages.

THE JUDGMENT ON DAMAGES AND COSTS

Lord Justice Patten considered these issues:-

  1. “In these circumstances and given that no claim for general damages was either pleaded or advanced at the trial, I think that the award of £2,500 cannot stand. I would therefore allow the defendants’ appeal in respect of this part of the judge’s order.
  2. The judge made a separate order that the claimant should have his costs of the claim on the standard basis after considering written submissions. It is clear that Mr Gore was the overall winner so as to bring into operation the general rule that he should have his costs. But the defendants submitted and now submit on this appeal that the judge should have made some allowance in their favour for the fact that Mr Gore refused to or failed to engage with their proposal that the dispute should be referred to mediation.
  3. Mr McNae referred us to the decision of this Court in PGF II SA v OMFS Company 1 Ltd in which Briggs LJ emphasised the need, as he saw it, for the courts to encourage parties to embark on ADR in appropriate cases and said that silence in the face of an invitation to participate in ADR should, as a general rule, be treated as unreasonable regardless of whether a refusal to mediate might in the circumstances have been justified. Speaking for myself, I have some difficulty in accepting that the desire of a party to have his rights determined by a court of law in preference to mediation can be said to be unreasonable conduct particularly when, as here, those rights are ultimately vindicated. But, as Briggs LJ makes clear in his judgment, a failure to engage, even if unreasonable, does not automatically result in a costs penalty. It is simply a factor to be taken into account by the judge when exercising his costs discretion.
  4. In this case the judge did take it into account but concluded that it was not unreasonable for Mr Gore to have declined to mediate. His solicitor considered that mediation had no realistic prospect of succeeding and would only add to the costs. The judge said that he considered that the case raised quite complex questions of law which made it unsuitable for mediation. His refusal to make an allowance on these grounds cannot in my view be said to be wrong in principle.
  5. The other aspect of the costs appeal concerns the judge’s order that the defendants should pay interest under what was CPR 36.17(4) on the costs Mr Gore has paid to his solicitors. Mr McNae says that this power was only exercisable when the claimant has obtained a result at least as advantageous as the terms of his Part 36 offer but that in this case there was no such offer. The written submissions which were provided to the judge by Mr Webb for the claimant make it clear that interest on costs was in fact sought under s.74 of the County Courts Act 1984 which does not depend on a Part 36 offer having been made. It seems to me that the judge was exercising the jurisdiction contained in what was then CPR 44.2(6)(g) and that the reference in paragraph 9 of his order to CPR 36.17(4) is simply an error. I would therefore dismiss this ground of appeal.
  6. In summary, therefore, I would allow the defendants’ appeal against the judge’s award of general damages but otherwise dismiss these appeal”

Mediation

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