Lynn v Borneos LLP t/a Borneo Linnels [2015] 3 Costs LR 439

                  [2015] 3 Costs LR 439

                  Costs of the action: reduction to the costs awarded in favour of the winner for unreasonably refusing to engage in mediation. Costs reduced by 40%.

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                  Case 25



                  Borneos LLP t/a Borneo Linnels

                  [2015] 3 Costs LR 439

                  High Court of Justice, Birmingham District Registry

                  30 January 2014


                  HHJ Cooke


                  In proceedings in which the defendants had been the successful party, the starting point was that they should be awarded their costs of the claim. However, two matters weighed in the balance against that. First, the defendants had only abandoned a number of bases on which breach of duty had been denied at a very late stage. Second, despite being urged to do so, the defendants had refused all invitations from the claimant to engage in mediation. That refusal had been unreasonable. Taking these factors in the round, a proportionate sanction to recognise them was to reduce the costs allowed to the defendants by 40% so that they would be entitled to 60% of their costs from the claimant.

                  (Only those paragraphs relating to costs are reproduced here.)

                  Cases Cited

                  None (in the paragraphs reproduced here).


                  HHJ COOKE: [...]

                  (Discussions as to costs follow)

                  93. In my view, the correct starting point in this case is that it is the defendant which is, effectively, the successful party. The claimant has nominally succeeded in recovering £1 in damages for breach of contract but it cannot be said that there would be any realistic justification for commencing an action or pursuing it to this stage to achieve that satisfaction. At all times, this was a claim for a very substantial amount of money which has, effectively, been lost. It is a matter of pure technicality that the claimant has won £1 rather than having its claim dismissed entirely. Therefore, I have no hesitation in saying that the starting point is that one would ordinarily expect the defendants to be awarded their costs of the claim.

                  94. There are two matters, effectively, which are put in the balance against that. One is that the defendants have changed their case and, in particular, they maintained a number of bases on which a breach of duty was denied until a very late stage in the claim – only being formally abandoned at the start of the trial. There is, on the face of it, no reason why those concessions could not have been made earlier and the fact that they were not, one is bound to infer, I think, means that the defendants were anxious to hang on to any point that might conceivably prove successful rather than to consider and make realistic concessions when they might have done. On the other hand, I do accept that the extent to which the fact those arguments were being maintained could realistically be said to have added to the costs of running the action is relatively limited.

                  95. The second is that the claimants have, throughout, urged the defendants to go to mediation. I have been shown correspondence going back to a date in 2012 in which that idea was floated. At every stage, there has either been no response to that or there has been a refusal. The defendants’ position, as Mr Bacon set out today, is that it regards this claim as having been a try-on. It explored the possibility of making allegations of fraud or discreditable conduct against the claimant which, ultimately, it did not pursue. As I made clear in my judgment, although there were hints of murky background, there was no allegation that the claimant’s business was conducted on a fraudulent or unlawful basis, save in the respect that he did not account for tax or prepare the corporate accounts properly. It may be, therefore, that the refusal to go to mediation was maintained, at least to some extent, in the belief or hope that those concerns about the background would mature into something which would have the effect of defeating the claim entirely. If so, that was disappointed.

                  96. There does not appear to have been any reasoned refusal to go to mediation, at least on any detailed basis, at any point. The defendants simply did not respond or made a fairly bland refusal to all the invitations to mediate. The effect of authority is now, in my view, that the court should regard a refusal or a failure to engage a mediation in those circumstances as unreasonable. It is something which is, in principle, unreasonable no matter what the strength of a party’s case is felt to be. There is an advantage, which is recognised in policy terms by the court, in encouraging the parties to explore the possibility of settlement at a mediation. The sanction for not doing so is something which is in the discretion of the court. It is not, in my view, a matter in which one can automatically say that the sanction should invariably or even presumptively be that a party should be denied the whole of the costs to which it would otherwise be entitled from a particular point in time. That, it seems to me, would go too far; it would, in effect, attribute magical properties to mediation and indicate that no costs would have been incurred if a mediation had been engaged in at the first point at which it was offered. That, I think, would be just as unreasonable and unrealistic as assuming that there is no point in going to mediation at any point until the parties’ positions, as they will be presented at trial, have been fully expounded and are available in the evidence. It is a matter which, in my view, ought to be recognised by a sanction of some sort. However, it is a sanction that, I think, ought to be proportionate, and proportionate to the degree to which the court can realistically infer that there was actually an opportunity to save costs.

                  97. In this case, I am bound to say that nothing I have seen suggests to me that there would have been any realistic hope that the matter would have settled at mediation. Not only was the defendants’ stance doggedly maintained to trial – ultimately successfully – but it seems equally clear from the correspondence that the claimant has doggedly maintained his position that he is entitled, on one of any of a number of bases several of which were only abandoned after he had given his oral evidence at trial, to damages which might have exceeded £1 million by a very substantial amount. I think, realistically, I must approach this on the footing that, whilst it cannot be said there was no value in going to mediation, I cannot assume that there was a high possibility that there would have been a settlement achieved at any recognisable point in time which would have saved a significant amount of costs in preparation for the trial. Taking all that in the round, it seems to me that a proportionate sanction to recognise both of those factors would be to reduce the costs allowed to the defendant by 40% and order that they be entitled to 60% of their costs.

                  Clifford Darton appeared for the claimant.

                  Frances Bacon appeared for the defendant.

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