Royal Bank of Canada v Secretary of State for Defence

[2003] EWHC 1841 (Chancery Division)

Should a defendant be awarded all costs despite refusal to mediate?

Facts

The claimant landlord sought a declaration as to the legality of break notices served by the defendant tenant (a government department). In March 2001 the Lord Chancellor had circulated what amounted to a formal pledge to seek to settle any dispute involving any government department by means of ADR, if the opponent agreed. The claimant landlord had made numerous offers to mediate the claim which had been refused by the defendant tenant. The defendant tenant had won on the main issue, but had not been wholly successful on all of the issues.

Issues

Whether the defendant tenant should be awarded all its costs of the action, despite its failure to mediate

Decision

The judge placed great weight on the Lord Chancellor’s pledge on behalf of government departments to engage in mediation in all cases where there was consent of the other side, and this defendant’s failure to agree to mediation was sufficient to lead the judge to make no order for costs, despite the defendant having been largely successful in the claim.

Comment

This is yet another example of a substantially winning party, on the merits, having to pay its own costs.

Some parties and their legal advisers are however becoming more sophisticated in their refusals to mediate. They tend to characterise it as a deferral of a decision pending the provision of information, which is often asked for in great detail, whilst some may open up a debate in correspondence as to another form of ADR and, perhaps, rely on what they perceive as the inflexibility of the opposing party or legal adviser so as to create an impasse (with the likely effect that there will be no adverse costs implications). 

However, such parties must beware that courts have a certain expertise in seeing through such tactical manoeuvres. There is no doubt that the unsophisticated party, who on being offered mediation simply says ‘no way see you in court,’ is at high risk of receiving a costs decision adverse to his interests.