Costs Follow the Event | No Reduction for Refusal to Mediate When Positions Were Polarised

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Background

Assensus Limited (‘Assensus’) initiated proceedings against Wirsol Energy Limited (‘Wirsol’) over an alleged entitlement to a performance-related bonus of approximately £2.5 million. Assensus’ claim was based on a contractual agreement which it argued entitled it to the bonus for its work on certain projects, including the Cleve Hill project. The trial involved detailed examination of factual and expert evidence relating to the existence and scope of the alleged contractual entitlement. In the judgment handed down on 26 February 2025, the court dismissed all claims brought by Assensus.

Following the main judgment, various consequential matters were remitted to Mr Justice Constable for determination, including costs, interest on costs, interim payment of costs, the Claimant’s application for permission to appeal, and stay of execution pending appeal. These matters were determined based on written submissions from both parties.

Costs Issues Before the Court

The primary costs issue revolved around the general rule that costs follow the event, as per CPR r.44.2. Assensus, the unsuccessful party, accepted its liability for costs but contended that Wirsol should only receive 70% of its costs due to its refusal to mediate. Key authority cited includes Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, which establishes that depriving a successful party of costs due to refusal to mediate requires the unsuccessful party to prove that such refusal was unreasonable. Further reliance was placed on Gore v Naheed [2017] EWCA 369 and PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288 which elaborate on whether refusal to mediate can be considered unreasonable.

The Parties’ Positions

Claimant’s Position: Assensus argued that Wirsol’s rejection of mediation invitations, both pre-litigation and during proceedings, was unreasonable. Assensus referenced authorities such as OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195 to support the contention that parties must engage constructively in settlement processes. Assensus also raised issues related to contentious amendments in pleadings, arguing these should affect cost liability.

Defendant’s Position: Wirsol maintained that, as the successful party, it should receive its full costs. It contended that its refusal to mediate was reasonable given the polarised positions and unlikelihood of resolving the dispute via ADR. Wirsol cited Gore v Naheed to argue that choosing court adjudication over mediation is not inherently unreasonable. Furthermore, Wirsol highlighted its Part 36 Offer of £100,000 as evidence of genuine settlement attempts, countering the claim that no efforts were made to resolve the matter amicably.

The Court’s Decision

Reduction in Costs: The court reaffirmed the general principle that costs follow the event. After evaluating the specifics of the case and authorities cited, the court found Wirsol’s refusal to mediate was justified. The positions of both parties were highly disparate, and mediation was unlikely to bridge the gap. Additionally, the court recognised Wirsol’s Part 36 Offer as a valid attempt at settlement, further diminishing the justification for a costs reduction based on refusal to mediate.

Interest on Costs: The court ordered interest on costs as per Wirsol’s request, granting 2% above the Bank of England base rate from the date costs were paid until one month after the delivery of a detailed bill of costs to Assensus, followed by the Judgments Act rate of 8%. However, due to a considerable proportion of costs falling outside the approved budget, the court allowed two months for the assessment of the detailed bill before the higher interest rate applied.

Interim Payment of Costs: The court assessed an interim payment based on realistic calculations. Considering both budgeted and non-budgeted phases of incurred costs, the court allowed 90% recovery for budgeted phases up to £256,369.39 and 60% for non-budgeted phases leading to £151,543.90. Consequently, the total interim payment ordered was £407,913.39.

Permission to Appeal and Stay of Execution: The application for permission to appeal was thoroughly examined. The grounds including errors in fact and law, claims of quantum meruit, unjust enrichment, and issues regarding Invoice 176 were all reviewed. The court found none had a realistic prospect of success. The request for a stay of execution pending appeal was also denied, as insufficient evidence was provided to demonstrate that such an order would stifle the appeal.

 

Costs Management | “Unrealistic And Unreasonable” Costs Budget Leads To Adverse Costs Award

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Background

These proceedings concern a complex construction dispute involving multiple defendants related to alleged defects in student accommodation constructed using modular building techniques. The claimants, GS Woodland Court GP 1 and GP 2 Limited, acting as general partners for GS Woodland Court Limited Partnership, brought proceedings against seven defendants involving significant allegations concerning fire safety attenuation and construction defects.

The construction was managed on a construction-management basis, with seven defendants spanning different aspects of the project: the construction manager, architect, cladding contractor, modular unit supplier, developer, fire-stopping works contractor, and installer. The claim involved allegations that numerous fire safety defects had not been properly implemented in the modular accommodation.

A half-day Costs Management hearing was convened to assess and manage the litigation costs, during which an unusual application was made by several defendants for their costs of the Costs Management hearing itself. The total claim against the defendants was approximately £11 million, with potential remediation costs estimated at £30 million.

Costs Issues Before the Court

The primary costs issues before the court included:

1. Assessment of the reasonableness and proportionality of the claimants’ costs budget
2. Evaluation of the claimed hourly rates against guideline rates
3. Consideration of the defendants’ application for costs of the Costs Management hearing
4. Determining an appropriate approach to costs management in multi-defendant construction litigation

The Parties’ Positions

The claimants (represented by Ms Packman KC) argued that the complexity of a multi-defendant case justified their approach. They initially sought a costs budget of £8.74 million, which was subsequently reduced to approximately £7.4 million.

The defendants (particularly represented by Ms Stephens KC) contended that the claimants’ costs were disproportionate and unreasonable. They highlighted significant discrepancies between the claimed rates and the Guideline Rates, with the claimants’ solicitors charging substantially higher rates without meaningful justification.

The Court’s Decision

Mr Justice Constable made several critical observations:

1. Rates: The claimed rates significantly exceeded Guideline Rates, with Jones Day charging rates substantially higher than recommended. The court indicated a potential downward adjustment of approximately £1.4 million solely based on rate reductions.

2. Proportionality: While acknowledging the case’s complexity, the judge suggested the claimants’ costs were potentially disproportionate, particularly when compared with the defendants’ aggregate costs.

3. Costs Management Hearing: Applying recent authorities (Nicholas Worcester v Dr Philip Hopley and Jenkins v Thurrock Council), the court determined that the claimants’ unrealistic initial budget warranted potential cost consequences.

4. Final Outcome: The court approved a reduced budget of £4.212 million for estimated costs and granted the defendants’ application for costs of the Costs Management hearing, with D2, D3, and D4/D5 recovering their reasonable attendance costs from the claimants.

Danish Judgment Registration Order Upheld but Rendered Worthless on Appeal

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Background

The case of Olsen v. Finansiel Stabilitet A/S involved an appeal to the High Court of Justice, King’s Bench Division, concerning the registration of a Danish judgment for enforcement in England and Wales. The appellants, Birgitte Wagner Olsen and Karsten Olsen, challenged an order registering the Danish judgment and a supplemental order for costs assessed at £12,500. The appeal was heard on 10 and 11 December 2024, with Mr Justice Kerr delivering the judgment on 28 January 2025.

Costs Issues Before the Court

The primary costs issues before the court were threefold: first, whether the costs order made below should be altered; second, the costs of the appeal; and third, the form of the court’s order on the appeal. The parties disagreed on the impact of the Judgments Regulation on the recoverability of costs related to the registration of the Danish judgment, given that the registration order’s effect had expired.

The Parties’ Positions

The appellants argued that the costs order should be set aside because the limitation period had expired, rendering the judgment debt unenforceable. In contrast, the respondent contended that the costs order should remain intact, as the Danish judgment was validly registered and the costs of registration remained recoverable despite the expiry of the limitation period. Both parties claimed to be the successful party in the appeal and sought costs against the other.

The Court’s Decision

Mr Justice Kerr decided that the respondent’s submission on the costs order was preferable, maintaining that the costs of registering the Danish judgment were recoverable. However, he concluded that the appellants were, in substance, the successful parties in the appeal, as they secured an order rendering the registration worthless to the respondent. The court made no order for costs of the appeal, citing the appellants’ misconduct, including presenting a non-existent authority and filing unnecessarily prolix documents. The Master’s order for £12,500 in costs below was upheld.

No Order As To Costs Despite Successful Application | Novelty And Conduct Considered

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In Titan Wealth Holdings Limited & Ors v Okunola, the High Court dismissed an application for a protective injunction sought by the Claimants to prevent the Defendant from sending abusive communications to their lawyers. The court found that while the Claimants’ lawyers might have a credible harassment claim, there was no jurisdictional basis for the Claimants to seek an injunction on their behalf. The judge held that the application did not fit within established exceptions to the cause of action rule and that the Claimants’ lawyers would need to make their own application if they wished to restrain the Defendant’s communications. Despite dismissing the application, the court made no order as to costs, considering the Defendant’s conduct and the novel nature of the application. Permission to appeal was granted due to the lack of authority on this issue.

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Costs Of Late Amendment Which Did Not Substantially Alter The Case

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In Magee and Others v Crocker and Others, the High Court addressed costs arguments following a judgment on a disputed share transfer and shareholders’ agreement, with particular focus on the impact of a late amendment to plead novation. The court considered whether to apply the general rule from Beoco Ltd v Alfa Laval Co. Ltd regarding costs up to the date of a late amendment. Departing from this principle, the court found that the amendment did not substantially alter the case and would not have changed the defendant’s approach if pleaded earlier. The judge noted that even if the novation case had been pleaded initially, the claim would still have been vigorously resisted, and the defendant was not deprived of the opportunity to make a Part 36 offer or compromise the proceedings. While the claimants were ordered to pay the costs of the amendment application, they were awarded 90% of their overall costs, subject to a 10% reduction to reflect partial success on some arguments and issues with evidence.

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Costs Penalty Applied For Silence In The Face Of An Invitation To Mediate | Court Of Appeal Decision

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In Northamber plc v Genee World Limited and others [2024] EWCA Civ 428 the Court of Appeal considered an appeal concerning inducing breach of contract, directors’ liability, and costs sanctions for unreasonably refusing ADR. The case involved breaches of an exclusivity agreement between two companies, and the potential liability of a director and a third party for inducing those breaches. The Court found the third party (IES) liable for inducement, as its conduct amounted to active participation, and held the director (Mr Singh) personally liable for causing the company  to breach an injunction, which was a serious breach of his duties. On the issue of costs, the Court held that the judge at first instance had erred in not imposing any costs sanction on Mr Singh and IES for their unreasonable failure to engage in mediation. The Court emphasised that silence in the face of an offer to mediate is itself unreasonable (PGF II SA v OMFS), and that breaches of court orders to consider ADR should not be ignored when deciding costs. The Court imposed a “modest, but not insignificant, costs penalty by increasing Northamber’s costs recovery by an additional 5% to 75%.”

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