Cost News

Avi Dolties

Northamber PLC v Genee World Ltd & Ors (Rev1) [2024] EWCA Civ 428

The Claimant was a distributor of information technology equipment. The First Defendant was an importer of AV displays manufactured in China. The Second Defendant, was the sole director of the First Defendant. The Third Defendant supplied technology and IT equipment.  The Claimant entered into a ‘Exclusivity Agreement’  with the First Defendant in that the Claimant  would become the 100% exclusive source for all their products in the UK.

Claims were brought against the First and Second Defendant for breach of the Exclusivity Agreement and against the Second and Third Defendant  for inducing breach of contract and unlawful means conspiracy.

The Trial of the claim took place over nine days in October 2022. Judgment was entered against the First Defendant for breach of the Exclusivity Agreement in the sum of £1,419,046.62.  The judge however dismissed the Claimant’s claim against for inducing breach of contract. He also dismissed the Claimant’s claims for unlawful means conspiracy.

In view of the same, the judge ordered the Second Defendant  to pay 70% of the Claimant’s costs of its claim and ordered the Claimant to pay 80% of its claim against the Third Defendant.

The judgement  was appealed.

One of the grounds relevant to costs surrounded concerns over the Second and Third Defendant to respond to an offer of mediation made on behalf of the Claimant.

On 5 October 2021 DJ Rouine made a case management order, paragraph 7 of which provided as follows:

    “At all stages the parties must consider settling this litigation by means of alternative dispute resolution. Any party not engaging in any such means proposed by another must serve a witness statement giving reasons within 21 days of that proposal; such witness statement must not be shown to the trial judge until questions of costs arise.”

 On 16 February 2022 the Claimant reminded the Second and Third Defendant of this order and relayed that the Claimant’s incurred costs were about £450,000.00 and its budgeted costs were £300,000.00. The Claimant proceeded to invite the Defendants to a mediation.

On 4 April 2022, the Third Defendant responded that they were taking instructions, but there was no further response. The Second Defendant did not respond at all. Neither party served a witness statement as required by the order.

In his judgment on costs, the Trial judge rejected the Claimant’s contention that the Defendant’s failure to mediate and to comply with the order should result in an adjustment of the costs orders.

On appeal the Court referenced Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, [2004] 1 WLR 3002 that an unreasonable refusal to participate in alternative dispute resolution constitutes a form of unreasonable litigation conduct to which the court may properly respond by applying a costs sanction. The Court of Appeal held the Trial judge fell into error in view of the Defendants’ silence in the face of an offer to mediate. The Appeal Court went on to say

To compound matters, they breached an order of the court requiring them to explain their failure to agree to mediation. If breaches of such orders are ignored by courts when deciding costs, parties will have no incentive to comply with them. That would undermine the purpose of making them, which is robustly to encourage parties to mediate’.

The Court of appeal applied a costs penalty by increasing the Claimant’s costs recovery by an additional 5% to 75%.

Commentary – A reminder of the consequences of failure to comply with Order and the failure to engage in mediation. Whilst, the 5% appears modest, in view of the levels of costs, such an uplift in ‘money’ terms was likely to be significant.