The ever-increasing discretion in costs and importance of ADR
Practitioners are well aware of the wide discretion of the Courts in respect of costs and of the ability of judges to take into account the parties’ conduct when making a costs order. This is set out in CPR Part 44.2(4)(a) and more particularly specified in 44.2(5), where it explicitly identifies at (a) “conduct before as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction- Pre-Action Conduct or any relevant pre-action protocol”. However, it was not clear whether conduct after the conclusion of litigation, such as after discontinuance, can be considered under CPR 44.2. A literal reading of the rule, which does not explicitly reference post-litigation conduct, might suggest that it falls outside its scope. Nevertheless, it is worth noting that the conduct before or during proceedings, as well as in costs assessment proceedings may also be considered under CPR 44.11.
This issue of conduct was recently considered by Master McLoud in, what was interestingly her very last judgment concerning the high-profile case of Elphicke v Times Media Limited [2024] EWHC 2595 (KB), where a former Member of Parliament pursued a claim against a national newspaper for defamation. In a very thorough and detailed judgment, the Court held that conduct after discontinuance can be considered in deciding whether to depart from the presumption that if a claimant discontinues proceedings the defendant should recover their costs, pursuant to CPR 38.6 (see para.103, 104 & 111).
The Court rejected the defendant’s argument that CPR 44.2 only applied during the currency of a claim and not after discontinuance (para.105, 112 & 113); noting that CPR 44.11 does not exclude consideration of conduct after discontinuance pursuant to CPR 44.2 (para.114).
The Court proceeded to consider the defendant’s admitted pre-action conduct of failing to preserve all evidence and its post discontinuance conduct of wrongful collateral use of witness statements, by disclosing and referring to matters in its newspaper and in tweets. As a result, Master McCloud varied the default costs order such that the Claimant was ordered to pay only 80% of the defendant’s costs, whilst indicating that any variation for other disputed misconduct was a matter for the costs judge under CPR 44.11 (para.129 & 130).
In respect of ADR, it is important to note that the Court accepted the defendant’s position, in rejecting an offer of ADR, that it would be of no value until after witness statements had been exchanged. With reference Halsey v Milton Keynes General NHS Trust (see below) it was held that the defendant had not refused ADR and that the Claimant had discontinued before it could be arranged (para.85). Accordingly, reasonable and clearly explained refusal of ADR until a later date is permissible without costs sanctions.
It is also worth noting that this was a case where the Court made an order for mandatory pre-detailed assessment ADR, due to “the prospect of long, expensive Detailed Assessment proceedings with counsel and costs lawyers occupying perhaps several days, at a cost comparable with that of many trials” (para.134) and Master McCloud strongly encouraged such ADR stating “It is my judgment essential that courts do what they can in the present congested court system to bring forward that settlement process so that assessments of costs are not needlessly listed whether in our County Courts (busy as they are) or in the Senior Courts Office” (para.136).
As to the consequences of failing to engage in ADR, practitioners need look no further than the recent Court of Appeal decision in Northamber PLC v Genee World Ltd & other [2024] EWCA Civ 428. As one of the grounds of appeal this considered the costs consequences of the defendants’ failure to respond to an offer of mediation. At first instance the judge noted that there was no evidence that the claimant ever chased the defendants for a reply and on that basis declined to adjust the costs order, for payment of 70% of the costs of the claim. The Court held that the judge was in error, referring to the principle set out 20 years ago in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 that an unreasonable refusal to participate in ADR constitutes unreasonable conduct, to which the court may properly apply a costs sanction. The Court decided to impose a modest, but not insignificant, costs penalty by increasing the Claimant’s costs recovery by an additional 5% to 75%.
These two recent cases demonstrate that the Court considers the conduct of parties at all stages—before, during, and after litigation. Additionally, they highlight the growing emphasis on ADR in both substantive and costs proceedings.
