High Court compels use of ADR prior to detailed assessment of costs

In Elphicke v Times Media Ltd [2024] EWHC 2595 (KB) the High Court ordered that, prior to any detailed assessment proceedings to determine the costs due to the defendant, the parties must engage in alternative dispute resolution (ADR) to try to agree the costs.

In making the order, the Master drew on the Court of Appeal’s decision in Churchill and the recent changes to the Civil Procedure Rules (CPR) which confirm the power of the courts to order ADR. This decision is a further example of the courts promoting the use of ADR during litigation to ensure that court and parties resources are used appropriately. The Master commented that she expects such an order to become the norm when a judge directs detailed assessment unless costs are agreed.

Power to order ADR

In October last year, the Court of Appeal in Churchill v Merthyr Tydfil Borough Council [2023] EWCA Civ 1416 decided that a court has both the power to order the parties to engage in mediation or another form of ADR, and the ability to stay proceedings while they do so, providing that the order does not impair a party’s right to a fair trial (per Article 6 of the European Convention on Human Rights) and is proportionate to the legitimate aim of settling a dispute fairly, quickly and at reasonable cost. See further details of the Churchill decision here.

In October this year, amendments were made to the CPR to give effect to the Churchill decision and confirm the power of the English courts to compel parties to engage in out-of-court ADR (see further detail here).

Neither Churchill nor the amendments to the CPR are prescriptive on when and how the courts’ power to order ADR should be exercised. In Churchill, the Court of Appeal avoided setting limits on the courts’ discretion. Rather, the Court of Appeal noted various factors that could be relevant to the exercise of the discretion (for example, the sophistication of the parties, the cost of ADR and the prospect of it resolving the dispute), but it is for each court to consider the specific circumstances of the case when deciding whether an order for ADR is appropriate.

Background

Following the discontinuance of a high-profile defamation claim by the claimant, a former MP, the Court was asked to consider several applications relating to the award and assessment of costs, including whether the Court should disapply the default costs rule that a party who discontinues a claim pays the other side’s legal costs. This article focuses on the ADR aspect of the judgment.

Decision

The Master ordered that the claimant must pay 80% of the defendant’s costs on the standard basis, to be assessed if not agreed. The Master observed that the parties were facing the prospect of long, expensive detailed assessment proceedings with counsel and costs lawyers which would likely take several days, and incur costs comparable with those for many trials. This was not a good use of resources in a busy court system.

Of her own motion, the Master therefore ordered that the parties must engage in alternative dispute resolution as to the costs claimed by the defendant, stating that:

“the parties must engage in alternative dispute resolution as to the costs claimed by the Defendant. Good reason will need to be shown if the form of that dispute resolution is at any less engaged a level than mediation via Costs Lawyers given that the Bill here [said to be roughly £500,000] more than justifies Costs Lawyer input. The time for commencing detailed assessment is to be extended until conclusion of any such mediation, or the point at which either party indicates it is not prepared to proceed and wishes to go to assessment.”

The Master warned that any party which decided not to engage in ADR as ordered, or decided to ‘call it off’, must be in a position to justify that non-engagement to the Costs Judge and be alert to the risk of sanctions for unreasonable or improper behaviour (under CPR 44.11).

She commented that, “In all cases where the claim is at an end, such as here, but significant costs are incurred and must be determined, in my judgment it would be remiss of a judge not to make use of the principles in cases such as Churchill and direct that, before a fresh set of proceedings is in effect commenced so as to lead to detailed assessment there must be proper dispute resolution [ADR].”

Key takeaways

This is a further example of the courts’ support for the use of ADR as a way of ensuring that disputes are dealt with fairly, quickly and at proportionate cost.

The Master commented that she fully expects an order for ADR to become the norm when a judge directs detailed assessment unless costs are agreed. For the reasons discussed in the judgment, it seems likely that other judges will follow this example, particularly in larger, more complex cases where the costs in dispute are significant and detailed assessment would take considerable time and incur further significant cost. Parties should bear this in mind when considering their approach to costs assessment.