The High Court has ruled that a law firm should face some costs sanction for ignoring multiple requests to mediate a professional negligence claim. But the ruling exempted the firm from the harshest penalty, taking account of other elements of both parties' conduct.
International firm Charles Russell Speechlys was ordered earlier this year to pay nearly £1.5m in damages over advice given to the founders of a communications company.
In Richards & Anor v Speechly Bircham Llp & Anor (Consequential Matters) the court considered what costs to impose on the firm as well as potential appeals by both parties.
The claimants applied for costs on an indemnity basis, pointing out that four offers to mediate the case had been turned down. Three were made before the claim form was issued. The firm initially said a mediation would not be productive or cost-effective, then suggested there was no point engaging in mediation as the claim was ‘doomed to fail’.
The final refusal came with a reference to the potential expense of a mediation but did add an offer to discuss a Part 36 offer of £500,000 to settle.
Lawyers for the claimants accused the firm of a ‘high-handed approach which was no doubt intended to overawe the claimants and dissuade them from pursuing their claim’.
The defendants’ estimated cost of mediation was £105,000, while the claimants’ and defendants’ joint costs were around £1.6m.
The firm argued that its approach to mediation was not unreasonable and that, in any event, a refusal to mediate was only one facet of a party’s conduct. It was pointed out that both parties had failed to beat their own Part 36 offers, with the claimants at one point offering to settle for £4.25m.
His Honour Judge Russen QC, sitting as a High Court judge, said the firm’s approach to mediation was ‘unreasonable’, saying there had been ‘general passivity on the ADR process’ over a period of almost three years.
But the failure to engage constructively with mediation did not justify an order for costs on the indemnity basis. The judge added: ‘In circumstances where neither side made a cost-effective Part 36 offer, the defendants’ unreasonable conduct in relation to mediation is in my judgement sufficiently marked by an order that they pay the claimants’ costs down to and including trial on the standard basis.
‘That is an appropriate “sanction” for them not engaging in a process of ADR which might have curtailed those costs in a significantly lower sum at an earlier stage of the proceedings.’
Permission to appeal various parts of the original judgment was refused. The firm was ordered to pay £713,000 on account of the claimants’ costs. No costs order was made for the consequential matters hearing.