As mediators we are often told that litigation is about finding who is to blame for a situation. Who will win and who will lose? So who is to blame for the costs incurred in pursuing or defending litigation? And how, as mediator do you pick through the bones of this highly emotive topic and help the parties find a solution?

How do You Find a Solution?

In my experience, the vexed question of costs often presses even more buttons that the issues in dispute. As a mediator and also as a solicitor I’m often told that we spend too much of our professional lives discussing costs (here I go again).

Settling Fast

However, I have conducted many mediations where the participants settle all the practical and legal issues by mid-afternoon, but by leaving the costs until last they turn out to be the biggest stumbling block and can take longer to resolve than the other issues!

To the participants (and to me as the mediator) this does not seem right. Furthermore this can’t be what Mr Justice Jackson would have envisaged 18 months into his reforms

Unrealistic View: Cost of Mediation

It seems to me that the participants, and often their legal advisors, have an unrealistic view of the likely cost of mediation that should be recovered in a mediation.

As each side views their case as a ‘winner’, so they think all their costs should be paid by the other side.

In the ‘blame game’ I frequently hear ‘it’s the other side’s fault that made me spend so much in costs bringing or defending the claim – so why should I pay the cost of mediation?’ or ‘why should I agree a costs inclusive figure which will mean diluting the costs recoverable?’

The harsh reality of a negotiated settlement is not as simple. With business disputes, as with life in general, it is not just about winning and losing.

Budgeting for Cost of Mediation

Jackson’s scheme for cost budgeting, management and capping was intended to control the levels of costs recoverable by a winner.

This aim was to help soften the blow to the ‘paying’ party by requiring participants to prepare a costs budget to be agreed between them and approved by the court in the early stages of a case.

This sounds laudable. However in a mediation I conducted recently I found that the costs’ budgets themselves were being used as part of the argument. One side sought a higher settlement figure, where the budget costs were seen as part of the mediation settlement pot, whilst the other approach was to plead impecuniosity and justify reducing the settlement pot. That cannot be right.

Taking Responsibility in a Dispute

In my view, the earlier the parties to a dispute can focus on the likely impact of costs the more they will take responsibility for their role insettlement. It’s not appropriate to look around for others to blame (and this sometimes includes the mediator).

If the Jackson changes can help us continue to move away from the ‘blame culture’ then this will be a real achievement. It will take more time and a continuing change of culture and mind set which as we have seen will not happen overnight.

Reducing Cost of Mediation

I see a trend for cost reduction continuing to be led by the courts. This will lead to the impact of costs as part of a settlement being reduced, which in turn will lead to quicker settlements.

I see the increasing role taken by courts in encouraging and persuading participants to mediate earlier rather than later in the litigation as being crucial to this trend developing.
So in the case of my mediation last week the participants’ minds were focussed to try and settle before the first case management conference.

Consequently, the costs to bring the case to trial were in the region of £20,000 rather than £120,000 per party.

Common commercial sense says that must be better for all concerned.

Since the Jackson reforms in April 2013, one of the watchwords in litigation has been ‘proportionality’ What does that mean? It has been said to mean that the total of both parties’ costs (or costs budgets) are not to exceed the value of the sum in dispute.

See for example Willis v MRJ Rundell & Associates Limited [2013] EWHC 2923 where the total of both parties costs budgets was about £1.6m in relation to a maximum claim of £1.1m. In this case, Coulson J said ”it will cost significantly more to fight this case than the claimant will ever recover.

On that basis alone it seems to me that the costs in the costs budgets are both disproportionate and unreasonable”