Parties judged to have unreasonably dismissed mediation as an option for out of court settlement risk being hit with indemnity costs, according to Matthew Smith, a costs barrister at Kings Chambers.
Smith has made the warning after Mirror Group Newspapers was forced to pay indemnity costs to claimants last week when Senior Costs Judge, Master Gordon-Saker, ruled that it had unreasonably failed to discuss the possibility of mediation.
The case of Various Claimants vs Mirror Group Newspapers is the latest high-profile case where indemnity costs have been awarded on this basis.
“In his judgment Master Gordon-Saker has reiterated the importance of Alternative Dispute Resolution and the possible consequences for litigants who fail appropriately to try to resolve their disputes outside the courtroom,” said Smith.
“The claimants were entitled to their costs. They successfully argued that those costs should be allowed on the indemnity basis because the defendant, Mirror Group Newspapers, had failed to respond to a suggestion of mediation.”
Indemnity costs were awarded despite the defendant having offered, and the claimant having accepted, over £2 million in settlement of the base costs in the common costs bill and costs on the standard basis for that part of the assessment.
“Mediation is a process which has been looked upon increasingly favourably by judges, a development that has led to an increase in the demand for specialists in this area,” added Smith.
“This ruling is proof that judges will take action where they believe that it has been unreasonably dismissed as an option, and is likely to make parties think twice before dismissing mediation out of hand.
“They know that if they do, they may find themselves landed with substantial costs, so we can expect the option of mediation to be considered very seriously in light of this ruling.”