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ADS Aerospace Ltd v EMS Global Tracking Ltd, High Court, 24 October 2012

13 November 2012
The issues

Mediation – ADR – costs – whether refusal to mediate should be penalised in costs

The facts

The claimant brought an action for over £16million for breach and repudiation of an agreement between it and the defendant for an exclusive distribution of satellite tracking devices for aeroplanes or helicopters. The claim was dismissed at trial. In respect of costs, the claimant argued that the defendant’s costs should be reduced by at least 15% to reflect its unwillingness to enter into mediation.

The decision

The starting point was that the unsuccessful party would be ordered to pay the costs of the successful party, although the court had a discretion to order otherwise. The leading authority remained Halsey v Milton Keynes NHS Trust, in which the Court of Appeal, whilst recognising the important role of mediation in litigation, stated that mediation was not appropriate for every case. The Court of Appeal said that when considering whether or not a party had acted reasonably in refusing ADR it was necessary to have regard to all the circumstances of the particular case. The relevant factors might include the nature of the dispute, the merits of the case, the extent to which other settlement methods had been attempted, whether the costs of ADR would be disproportionately high, whether any delay in setting up an attending ADR would have been prejudicial, and whether ADR had a reasonable prospect of success. These factors, the Court of Appeal emphasised, should not be regarded as an exhaustive checklist.

In this case, the court noted that there had been no willingness on the part of the claimant to engage in without prejudice discussions, notwithstanding at least four attempts on the part of the defendant to initiate them. The defendant continued to show willingness to engage in without prejudice conversations. There was no reason why that approach should not have been tried, at least on a ‘nothing ventured, nothing gained’ basis. The claimant had made an offer to settle in the sum of over £4million. The defendant had responded with an offer of £100,000. It was clear that the claimant, for good or bad reasons, had a strong view that it was entitled to substantial compensation. The claimant gave every indication that it was simply not interested in a nuisance payment, even through the good offices of a mediator.

The mediation suggestion had come just before a double bank holiday and with less than 20 working days before the trial. Without prejudice discussions would have been quicker, cheaper and less intrusive into trial preparation than a mediation. A mediation would also have cost substantially more than without prejudice discussions. This was not immaterial in the light of the claimant’s impecuniosity, which had been highlighted by a security for costs order.

Finally, the defendant had not acted unreasonably in believing that it had a very strong case on liability, causation and quantum. The order would be an order for costs in favour of the defendant without deduction.

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