Monday 28 January 2013 by Masood Ahmed
The general principle on costs in civil litigation is clear: the unsuccessful party will be ordered to pay the costs of the successful party, albeit that the court has discretion to order otherwise (Civil Procedure Rule 44.3 (2)).
The court may exercise its discretion where a party (whether claimant or defendant) refuses, without legitimate excuse, to engage in an alternative dispute resolution process (ADR). That refusal may be seen as evidence of unreasonable behaviour and a court may penalise that party in costs. However, it does not follow that such a party will automatically be considered to have acted unreasonably in refusing to engage in ADR. In assessing unreasonable behaviour in this context, the court will seek to apply the criteria set out in Halsey v Milton Keynes NHS Trust  EWCA Civ 576.
ADS Aerospace Ltd v EMS Global Tracking Ltd
The approach taken by the courts when assessing unreasonable behaviour is well illustrated by the recent case of ADS Aerospace Ltd v EMS Global Tracking Ltd  EWHC 2904 (TCC).
The claimant's $16m claim, which was for breach and repudiation of an agreement between the parties for the exclusive distribution of satellite tracking devices for aeroplanes or helicopters, was dismissed. The court was required to decide on the issue of costs.
The claimant maintained that there should be a substantial reduction in the defendant's costs entitlement (of at least 50%) to reflect the unwillingness of the defendant to enter into mediation to seek to resolve the issues between the
The parties provided the court with information about what was going on behind the scenes with regard to trying to settle the case. The defendant's solicitors had proposed that the parties engage in settlement discussions but the claimant wanted to wait until exchange of witness statements.
The defendant later offered to settle the claim on a without-prejudice basis but the claimant failed to provide a response and later, during a telephone discussion with the defendant, the claimant did not demonstrate any intention to settle the matter.
Later, the claimant rejected the settlement offer which had been made and suggested that the parties engage in mediation. The defendant wrote back and referred to the previous history and stated that: it did not feel that mediation would be worthwhile and that both parties were now aware of each other's case; the time and cost of mediation would be wasted; and that the claimant was not likely to accept less than $16m.
Despite this, the defendant indicated that it would consider any reasonable offer which the claimant may make on a without-prejudice basis. The claimant replied by stating that there was a reasonable prospect of settling the claim and that a skilled mediator would be capable of settling the matter. The defendant wrote back reiterating its previous position that a formal mediation was not necessary, especially given the fact that it was now three weeks before the commencement of the trial. The claimant then offered to settle the matter and repeated its invitation for the parties to engage in mediation. The defendant replied with a counter offer which was substantially less than the claimant's offer. Neither of the offers were accepted and the matter proceeded to trial.
The claimant accepted that prima facie the defendant is entitled to its costs, but said that the defendant acted unreasonably in refusing its request to attempt to settle the dispute in mediation. The defendant said that it acted reasonably in all the circumstances.
Akenhead J made reference to Halsey in which Dyson LJ (as he then was) held the following:
Applying the above criteria to the circumstances of the case before him, Akenhead J held that the claimant had failed to demonstrate that the defendant had acted unreasonably in refusing to engage in mediation on the following grounds:
Masood Ahmed, Birmingham City University