It is becoming increasingly common for the unsuccessful party in litigation to try to argue that it ought not to be paying the successful party’s costs on the basis of a failure to mediate. The case law on that issue is relatively settled (see the judgment of LJ Dyson in Halsey v Milton Keynes General NHS Trust).
What happens though if the unsuccessful party wants to try to demonstrate to the Court that although the successful party mediated, it did not do so in good faith and therefore the unsuccessful party ought not to pay the costs? The usual rule (Reed Executive plc v Reed Business Information Limited) is that the Court will not compel parties to disclose the detail of “without prejudice” negotiations. In other words, the Court will not allow the parties to lift the lid on what happened at the mediation in order to take a view on whether one party conducted itself reasonably or not. There are very sensible policy reasons for that decision, and it is submitted that it is quite right. Parties cannot be expected to mediate effectively if they know that their conduct at the mediation may later be scrutinised by the Court.
The only circumstances in which the Court will scrutinise the conduct of the mediation is where parties waive the privilege in their without prejudice negotiations. This is what happened in the attritional litigation between the Earl of Malmesbury and Strutt & Parker. In this case, the claimant land owners successfully proved negligence against Strutt & Parker in connection with car park leases at Bournemouth International Airport. After long and hard fought litigation in the courts, both parties said that the other had conducted without prejudice negotiations in an unreasonable manner. The Court concluded that neither side’s stance in negotiations was reasonable. Nonetheless, the Court found that the claimant’s position at the mediation was plainly unrealistic and unreasonable. A party who agreed to a mediation but then took an unreasonable position in the mediation was in the same position as a party who had unreasonably refused to mediate. That was something which the Court could and should take account of in the costs order. The Court duly trimmed (by between 20% and 30%) the costs that Strutt & Parker had to pay.
Gibson & Co
June 2008