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The Detail:
This was an appeal by a small builder, Mr
Nicholas Burchell against the costs orders that were made in
heavily contested litigation arising out of work done to the
property of Mr and Mrs Bullard.
Mr Burchell and the Bullards had fallen out:
Mr Burchell wanted a payment of £13,540.99. Mr and Mrs Bullard
complained about the work and had written setting out what they
said had to be done before any further payment would be made. Mr
Burchell instructed solicitors, who sensibly wrote to the
Bullards suggesting that, to avoid litigation, the dispute be
referred for alternative dispute resolution through "a qualified
construction mediator". The response from the Bullards’
chartered building surveyor was that "the matters complained of
are technically complex and as such mediation is not an
appropriate route to settle matters." That exchange of
correspondence took place well before the decision
in Halsey v
The Milton
Keynes General NHS Trust, in which the Court of
Appeal set out guidelines in relation to the consequences that
might follow an unreasonable refusal to mediate.
Proceedings began. Mr Burchell brought his
claim against Mr and Mrs Bullard for £18,318.45. They
counterclaimed £100,815.34 and further damages. Of that sum
£23,646.88 related to the roof which the Bullards alleged needed
to be "dismantled and reconstructed." In fact, the roof had been
built by a sub-contractor, Mr Teversham and Mr Burchell brought
a Part 20 claim against him. In due course, District Judge
Tennant, in the Bournemouth County Court,
entered judgment for Mr Burchell against the Bullards on the
claim for £18,327.04 but gave judgment for the Bullards against
the Mr Burchell on the counterclaim for £14,373.15. Allowing for
VAT and interest the result was that he ordered the Bullards to
pay Mr Burchell the difference between the two amounts, namely
£5,025.63. In the Court of Appeal, it emerged that the total
spent on costs by the parties to achieve a
judgment of £5,000 was about £185,000.
In looking at whether a
costs sanction against the Bullards was appropriate, Lord
Justice Ward said that a small building dispute is
par excellence the
kind of dispute which lends itself to ADR; that the merits of
the case favoured mediation; and that the Bullards behaved
unreasonably in believing, if they did, that their case was so
watertight that they need not engage in attempts to settle. He
added that the stated reason for refusing mediation because the
matter was too complex was “plain nonsense” and that the costs
of ADR would have been a drop in the ocean compared with the
fortune that had been spent on this litigation. Finally, he was
satisfied that the case was suitable for mediation and that the
Bullards could not rely on their own obstinacy to assert that
mediation had no reasonable prospect of success.
He concluded:
“It seems to me, therefore,
that the Halsey
factors are established in this case and that the court should
mark its disapproval of the [Bullards]' conduct by imposing some
costs sanction. Yet I draw back from doing so. This offer [to
mediate] was made in May 2001. The [Bullard]s rejected the offer
on the advice of their surveyor, not of their solicitor. The law
had not become as clear and developed as it now is following the
succession of judgments from this court of which
Halsey and
Dunnett v Railtrack plc
… are prime examples. To be fair to the [Bullards], one must
judge the reasonableness of their actions against the background
of practice a year earlier than
Dunnett. In the
light of the knowledge of the times and in the absence of legal
advice, I cannot condemn them as having been so unreasonable
that a costs sanction should follow many years later.
The profession must,
however, take no comfort from this conclusion.
Halsey has made
plain not only the high rate of a successful outcome being
achieved by mediation but also its established importance as a
track to a just result running parallel with that of the court
system. Both have a proper part to play in the administration of
justice. The court has given its stamp of approval to mediation
and it is now the legal profession which must become fully aware
of and acknowledge its value. The profession can no longer with
impunity shrug aside reasonable requests to mediate. The parties
cannot ignore a proper request to mediate simply because it was
made before the claim was issued. With court fees escalating it
may be folly to do so. I draw attention, moreover, to … the
Pre-action Protocol for Construction and Engineering Disputes -
which I doubt was at the forefront of the parties' minds - which
expressly requires the parties to consider … whether some form
of alternative dispute resolution procedure would be more
suitable than litigation. The [Bullards] have escaped the
imposition of a costs sanction in this case but defendants in a
like position in the future can expect little sympathy if they
blithely battle on regardless of the alternatives.”
Lord Justice Rix added:
“In
Halsey, this court
was particularly concerned with the problem of whether an
unreasonable refusal of mediation could prejudice a
successful party in
costs. The present case illustrates that the problem may arise
in many different situations, as here where the counterclaiming
defendants were (a) the overall losers in the litigation and (b)
exaggerated their counterclaim so as to receive only a small
percentage of it. In such circumstances, it seems to me to be in
principle easier than in the
Halsey situation to
give effect to an unreasonable refusal of mediation in costs.”
In Halsey
v Milton Keynes NHS Trust (2004), Lord Justice Dyson
had said
"All members of the
legal profession who conduct litigation should now routinely
consider with their clients whether their disputes are suitable
for ADR.” Add to that what has been said in
Burchell v Bullard
and it is clear that the policy of the courts is to encourage
mediation and to consider whether or not to apply cost sanctions
if there is an unreasonable refusal to mediate by either a
successful or unsuccessful party. |
