P4 Ltd. v Unite Integrated Solutions Plc

A refusal to mediate may be unreasonable even where parties have exchanged settlement offers and one party considers its case strong. The court should assess the non-exclusive Halsey factors objectively, including the nature and merits of the dispute, the prospects and cost of mediation, delay, and other settlement attempts. Mediation may succeed where correspondence has failed, particularly where factual disputes, uncertain issues and disproportionate litigation costs exist. Unreasonable pre-action conduct may justify an unusual costs order, but does not necessarily displace a later Part 36 costs consequence. Indemnity costs require conduct taking the case outside the norm.

P4 claimed more than £70,000 from Unite for goods allegedly converted after P4 supplied emergency light fittings to Unite’s insolvent subcontractor. Judgment on liability awarded P4 approximately £387. The court then considered costs.

Unite had made a Part 36 Payment of £6,000, which P4 had not beaten. P4 argued that it would nevertheless be unjust to apply the ordinary Part 36 costs consequence because Unite had failed to disclose relevant payment information and had unreasonably refused mediation. Unite sought all its costs, including indemnity costs. The issues were whether Unite’s refusal to mediate was unreasonable, how its pre-action conduct affected costs, and whether indemnity assessment was justified.

1. Refusal to mediate. The court applied the non-exclusive factors identified by Dyson LJ in Halsey v Milton Keynes NHS Trust [2004] 1 WLR 3002. The dispute involved modest sums, uncertain factual and legal issues, and potentially disproportionate costs. It was well suited to mediation. Unite could not reasonably have regarded its case as watertight when mediation was proposed.
2. Written offers and correspondence were not an adequate substitute for mediation. Mediation could have enabled the parties to identify the significance of Unite’s payment to Tudor and narrow the factual dispute about unfixed fittings. The court considered that mediation had a good prospect of resolving the dispute, despite P4’s increasingly unrealistic offers.
3. Unite’s rejection of mediation, and its failure during the pre-action stage to provide relevant payment information, were unreasonable. Those matters deprived the parties of an opportunity to resolve the dispute at minimal cost.
4. Costs after the Part 36 Payment. Under Civil Procedure Rules 1998 Rule 36.20(2), it was not unjust for Unite to recover its costs from 5 July 2005, the date from which the payment could have been accepted without permission. P4’s costs conduct after that date was assessed in light of the payment, the information later disclosed, and P4’s unrealistic subsequent offers.
5. Costs before the payment. Justice required P4 to recover its costs up to 5 July 2005. The court did not make no order as to costs for that period, because that would insufficiently reflect Unite’s unreasonable refusal to mediate. Unite’s costs were assessed on the standard, rather than indemnity, basis. The litigation, although hard fought, did not take the case outside the norm. P4 was ordered to pay £45,000 on account of Unite’s costs.