Dunnett v Railtrack plc (Practice Note)

When exercising its discretion as to costs, the court must consider all the circumstances, including the conduct of the parties. A categorical refusal to engage in alternative dispute resolution, particularly after the court has encouraged it, may justify depriving a successful party of its costs. Parties have a duty to help further the overriding objective and, when encouraged by the court, to consider ADR seriously. ADR is not confined to monetary settlements. Mediation may achieve outcomes beyond the powers of courts and lawyers.

The claimant, who had been acting in person, appealed from a judgment of Cardiff County Court. The substantive appeal was dismissed. The respondent then sought its costs.

Before the appeal, the court had encouraged the claimant to explore alternative dispute resolution. The claimant was willing to consider it, but the respondent refused to do so. The central issue was whether that refusal should affect the ordinary costs order, having regard to the parties’ offers and conduct.

Lord Justice Brooke gave the judgment of the court. Lord Justices Robert Walker and Sedley agreed.

1. Costs discretion. The ordinary order would have required the unsuccessful claimant to pay the respondent’s costs. The discretion under Civil Procedure Rules Part 44 applies in the Court of Appeal as well as at first instance. The court must consider all the circumstances, including the conduct of all parties.
2. Duties concerning ADR. The parties’ duty under rule 1.3 to help further the overriding objective includes taking seriously the possibility of ADR when the court encourages its use. Rule 1.4 places an active case-management duty on the court, including encouraging and facilitating ADR where appropriate.
3. Application. The claimant had been advised to explore ADR, and the respondent refused even to contemplate it. The respondent’s assumption that mediation necessarily required an additional payment misunderstood the purpose of ADR. A skilled mediator may achieve monetary or non-monetary solutions beyond the powers of a court. Although there was no evidence that ADR had been suggested before trial, the Court of Appeal had expressly encouraged it before the costs of the appeal began to accrue.
4. Order. In those circumstances, the court declined to take the later offers into account and made no order as to the costs of the appeal. The judgment warned that parties who reject court-encouraged ADR out of hand may face significant costs consequences.

1. Court of Appeal (Civil Division): after the substantive appeal had been dismissed, the court ordered no order as to costs: [2002] EWCA Civ 303.
2. Cardiff County Court: appeal from a judgment of His Honour Judge Graham Jones. The lower decision’s citation and substantive order are not stated in the judgment.