ANOTHER CASE OF INDEMNITY COSTS BECAUSE OF A REFUSAL TO MEDIATE

The decision on Master Simons in Bristow  -v- The Princess Alexander Hospital NHS Trust [2015] EWHC B22 (Costs) contains examples of two mistakes that can be made on assessment of costs. The most telling is the defendant’s failure to respond properly to offers to mediate.

KEY POINTS

  • The inclusion of items in a bill of costs that should never have been there led to the claimant’s costs of assessment being reduced to 80% of the costs.
  • The defendant’s unreasonable refusal to mediate meant that those costs would be assessed on an indemnity basis.

PRACTICE POINTS

  • It is clearly prudent for a receiving party to check the bill of costs properly before signing the certificate to ensure that the bill is claiming appropriate items.
  • This case is another example of the dangers of failing to agree to mediate without a good reason for doing so.

THE CASE

  • The claimant claimed £239,000 in costs. On a detailed assessment this was reduced to £135,486.90.
  • The claimant claimed the costs of the assessment on the grounds that all offers made by the defendant had been beaten and the defendant had failed to respond to an offer to mediate on costs.
  • The bill of costs had included items which should never have been included (they related to claims against other defendants when the settlement was only against one defendant.
  • The claimant argued that costs of the assessment. The defendant that there should be no order for costs.

THE ISSUES

The Master held that there were two issues at stake:

  1. Parties should not include claims for items to which a receiving party is not entitled.
  2. Parties should be encouraged to enter into mediation and if one party fails to enter into a mediation and that failure is unreasonable then there ought to be a sanction.
THE APPROPRIATE RESPONSE TO THE ISSUE OF THE CLAIMANT SEEKING ITEMS WHICH SHOULD NOT HAVE BEEN CLAIMED
  1. Dealing with the first principle, this claim was originally against five defendants but ultimately the settlement was only against one defendant. The bill specifically makes clear in the narrative that claims in respect of items against the second and the fifth defendants should not be included in the bill. They were included. This should not have happened. To start off with detailed assessment, the notice of commencement does include and the solicitors certified that this is a reasonable bill and that this is an accurate bill and these are the only costs to which the receiving party is entitled. At the time the original bill was served the bill was not accurate. There were included significant amounts which should not have been included in the bill because they related to costs that were incurred specifically in respect of the claims against the general practitioners, which claims were eventually discontinued and formed no part of the settlement. This is wrong and in my judgment is the principle that I have to take into account when dealing with the costs of the detailed assessment….
  1. ….Dealing with the first principle, that in 47.20 I have to have regard to all the circumstances including the conduct of all the parties, the amounts (if any) by which the bill of costs has been reduced and whether it was reasonable for a party to claim the costs of a particular item or to dispute that item. It is clear, as I have already indicated, that a fact that I have to take into account is whether it was reasonable for a party to claim the costs of a particular item which was clearly unreasonable, it should not have been done, the claimants were reasonably speedy in accepting the points of reply by making concessions and reducing some of the matters that were claimed in the bill that should not have been claimed. But it is a point of principle here that bills should not include items. There was a certificate in the bill and that certificate is wrong and it is appropriate there should be a sanction.
  2. Furthermore, I take into account that the bill was reduced by approximately 43 per cent. That is unusual in detailed assessments. One usually accepts a reduction in bills of perhaps 33 and a third. A 33-and-a-third reduction is something that is on the high side so a reduction of 43 per cent from the original bill is a factor that I have to take into account.
  3. In all those circumstances, whilst I think that the claimant is entitled to their costs of the detailed assessment, because of the principle that I have enunciated in my judgment they should only be entitled to 80 per cent of their costs.

THE SANCTION FOR THE DEFENDANT’S REFUSAL TO MEDIATE

  1. We now come to the question of mediation and, as I have indicated, in principle the defendants have not given any reasonable reason why they refused to engage in mediation and I am satisfied that there should be an appropriate sanction. I find it very difficult to decide what the sanction should be because, as I indicated in argument with Mr Blackwell, the beneficiary of any sanctions will be the solicitors who have not suffered any particular loss because they are being compensated for the delay by interest at eight per cent, and of course they are receiving profits on the further work that may have been done, so they do not really lose out as a result of the failure to mediate. However, there is a point of principle involved and in my judgment there should be a sanction. I am not satisfied that the sanction should be increased interest because eight per cent interest in this day and age is already a penal rate of interest and the defendant has to bear this very high rate of interest and they are being punished already by their actions because this case could have been settled by mediation.
  2. Nevertheless I am satisfied there should still be a sanction and I think that the correct sanction is that the claimant should receive their costs on an indemnity basis on their 80 per cent costs as a sanction for the defendant’s failing to engage in mediation.

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