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Colin Campbell

Consultant, Kain Knight

Quotation Marks
Sir Geoffrey Vos MR has gone further in suggesting that it is time that the ‘A’ is taken out of ADR

Alternative dispute resolution in civil costs: will mandatory mediation be the way forward?

Alternative dispute resolution in civil costs: will mandatory mediation be the way forward?


Colin Campbell, retired costs judge, assesses the benefits and drawbacks of the different approaches 

Judgment has been given. The client has won. The costs of the action are in the bag. From now on, it will merely be a matter for the successful client to run laughing all the way to the bank.

Or will it? Before the bubbles in the champagne glasses lose their effervescence, serious thought should be given to the next stage. How will those costs be recovered? After all, the opponent, who has fought a hard but fair case, is not going to open the cheque book and ask, “How much do you want?” In reality, one battle may be over, successfully at that, but the war is far from being won. The quantification of the costs of the action can become a war in itself, with the expense of actually running the case often dwarfing the amount originally in dispute. It is in these circumstances that parties should explore how to settle the costs of action before they embark upon another potentially expensive and lengthy journey through the costs court. Curiously though, few do so.

The conventional way

Let us first look at the conventional way in which the costs of a case are quantified where the loser had been ordered, either by a judge or by agreement, to pay the winning party’s costs. The process is the ‘detailed assessment’ and the procedure is to be found in the Civil Procedure Rules (CPR) 44-47.

Not later than three months after the date of the order giving the entitlement to the costs, the winner must serve a bill on the loser in the form set out in Practice Direction paragraph 5 to CPR 47. Within 21 days of service of the bill, the loser must serve ‘points of dispute’ (POD) challenging any items which it does not wish to pay for, otherwise the winner can enter judgment via a default costs certificate for the full amount. Optionally, the winner can serve a reply to the PODs and if the parties’ differences cannot be resolved, proceedings for detailed assessment under CPR 47.14 must be commenced within three months thereafter, upon payment of a court fee up to £6,640 depending on the size of the bill.

Thereafter, the court takes over. The court assigns a costs judge to hear the assessment, the court fixes a hearing date, the court directs where and when the supporting documents should be lodged and, in due course, another battle royal will be joined at which the parties and the judge grapple with the reasonableness of the winner’s legal representatives’ charges. It can cost a fortune and take ages, as the recent decision of the senior costs judge in Deutsche Bank AG v Sebastian Holdings Inc [2023] EWHC 9 (SCCO) has demonstrated. 

The action in Deutsche Bank took Cooke J 44 days to try and resolve the matter – see [2013] EWHC 3463 (Comm). He subsequently gave judgment for the bank for US$243,023,08, but 97 additional days of court time were required to sort out the costs, with the expense of doing so running into the millions. In these circumstances, it might be asked rhetorically, surely there must be an alternative way to quantify and agree the costs than by a detailed assessment process involving over twice the number of days to do so, than a High Court Judge needed to try the case?

Alternative dispute resolution

There is, and it has been around for years, yet parties still appear reluctant to use it, despite judicial exhortations at the highest level that they should do so. The process is alternative dispute resolution (ADR), which the glossary to the CPR describes as: ‘[…] a collective description of methods of resolving disputes otherwise than through the normal trial process.’

The best-known form of ADR is mediation, a concise description of which was given by Catherine Newman QC in Burgess v Penny [2019] Costs LR 1453: “Mediation should not be about one side getting what they want. That is a misconception of the purpose of mediation. Mediation should be about attempting to reach a solution which both parties can live with as a better alternative to litigation […].”

However, ADR has other useful tricks up its sleeve. They include early neutral evaluation, which can be by a judge using the court’s general powers of management under CPR 3.1(2)(m), or an expert determination by a nominated expert on a particular issue which has divided the parties.

It is mediation, however, that is the focus of this article and in the context of sorting out the costs of the action, other than by a day (or days or weeks) in court before the costs judge. There is nothing new in this. In other disputes, it has long been the case that ADR should be used to resolve differences. Briggs LJ said so a decade ago in PGF II SA v OMFS Company 1 Limited [2013] 6 Costs LR 973: “34. In my judgment, the time has now come for this court firmly to endorse the advice given in Chapter 11.56 of the ADR Handbook, that silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable, regardless whether an outright refusal, or a refusal to engage in the type of ADR requested, or to do so at the time requested, might have been justified by the identification of reasonable grounds.”

Jackson LJ followed his warning in Thakkar v Patel [2017] 2 Costs LR 233 in the following terms: “31. The message which this court sent out in PGF II was that to remain silent in the face of an offer to mediate is, absent exceptional circumstances, unreasonable conduct meriting a costs sanction, even in cases where mediation is unlikely to succeed. The message which the court sends out in this case is that where bilateral negotiations fail, but mediation is obviously appropriate, it behoves both parties to get on with it. If one party frustrates the process by delaying and dragging its feet for no good reason, that will merit a costs sanction.”

Sir Geoffrey Vos MR has gone further in suggesting that it is time that the ‘A’ is taken out of ADR. In his speech at Hull University on 21 March 2021, he added: “There is nothing alternative about either mediation, early neutral evaluation, or judge led resolution.”

More recently, in its June 2021 report on compulsory ADR, the Civil Justice Council concluded that parties could lawfully be compelled to participate in ADR and that a court order to do so will not infringe the European Convention on Human Rights.

The differences

Against this background, what does a costs mediation offer as an alternative to detailed assessment and how does it differ? First and foremost, mediation is consensual. It cannot be imposed, at least not yet, so unless all parties agree, the process is simply a non-starter.

Where, however, agreement is reached to mediate, the starting point is to choose a mediator and to sign a mediation agreement. Specialist ADR firms provide such services. Parties often agree to pay their own costs of the mediation if it succeeds, with the costs being ‘in the detailed assessment’ if there is no settlement and the matter proceeds to court. That way, both sides have a fighting chance of recovering the costs, depending on how good a day they have before the costs judge, who will have regard to the effectiveness of any earlier ‘Calderbank’ or CPR Part 36 offers when deciding where liability for those costs should lie.

When the mediation formalities have been agreed, the contrast with ‘having one’s day in court’ could scarcely be more marked. Consider the following:

  • The parties select the mediator whereas the court appoints the judge;
  • The parties choose when, where and for how long the mediation will take place, whereas the court fixes the hearing which may be months ahead on dates inconvenient to the parties and those advising them;
  • The parties choose how much they wish to spend with the mediator’s fee being agreed in advance and shared, whereas the costs of detailed assessment can be open ended;
  • The parties decide what materials they wish to deploy before the mediator (usually the less the better), whereas the court has set rules to lodge all documents in support of the bill using a complicated electronic platform;
  • The parties’ discussions in the mediation are wholly confidential and cannot be used later against either side, whereas all that is said and done in court is in public and tape recorded;
  • The parties choose whether they wish to settle as no terms can be imposed on them by the mediator, whereas the court decides issues and makes decisions which are binding (subject to appeal), whether the parties like them or not;
  • The parties disclose to the mediator the terms of any offers to settle so that the gap which must be bridged in order to settle the costs is known, whereas the judge must be kept in ignorance of any Calderbank or offers under CPR Part 36 until after the assessment has ended;
  • The parties at mediation are at no risk of receiving an adverse costs order depending on the outcome of the assessment because they are in control of their own destiny at all times, whereas the court can make different costs orders depending upon the parties’ conduct and the effectiveness of any settlement offers made; and
  • The parties at mediation where agreement is reached achieve finality whereas the court’s decisions are susceptible to appeal, with more costs and more delay.

The best moment for a costs mediation to take place is after the bill and PODs have been served, but before the court fee for commencing detailed assessment has been incurred. With the fee being up to £6,640, it is clearly sensible to defer any detailed assessment proceedings until after the mediation. Settlement on the day means no more fees and no assessment costs going forward. It also results in the receiving party having accelerated receipt of the money, and for the party paying, there will be a stop to interest running at eight per cent on unpaid costs.  

What happens on mediation day? In advance it is helpful for the parties to exchange position statements, so that the mediator knows why no agreement has been reached so far, the nature of the stumbling blocks and how much it will take to bridge the gap. These are not pleadings and the parties should not deploy detailed legal arguments on every point as if they were skeleton arguments for use by the trial judge.

Representation can be by counsel, solicitors or costs lawyers. It is also essential that the mediation is attended by a party authorised to settle. That is often the claimant, if receiving costs, and a representative of the defendant, if paying, with authority to sign the cheque. Both also need a willingness to compromise, so that a solution can be reached which both sides can live with. It is no good and an abuse if one- or other-party attends with no intention of settling, simply to be able to tell the costs judge, “We gave mediation a try but it did not work.”

The court will rumble that behaviour, as Jack J did in Malmesbury v Strutt & Parker [2008] 5 Costs LR 736, when he said: “72. […] a party who agrees to mediation but then causes the mediation to fail by his reason of unreasonable position in the mediation is in reality in the same position as a party who unreasonably refuses to mediate.”

The mediation will usually begin with a plenary session (‘facilitative mediation’) at which the mediator explores the common ground and identifies the ‘big ticket’ items which have prevented settlement so far. These may include matters such as hourly expense rates, the use of leading counsel and proportionality. When the parties get stuck, they can go into a private session, which involves retiring into private rooms (created remotely if using a remote platform) in which they can have confidential discussions with the mediator. Shuttle diplomacy will follow, with the mediator acting as an honest broker, conveying offers until a settlement is reached. It is then the responsibility of the parties to draft any settlement agreement, the mediator does not have a hand in that.

If, however, the facilitative mediation fails, that is the end, unless, by agreement, the parties ask the mediator (involving a further document expressing their wish to do so) to provide a non-binding view about the case, and/or a fair figure for settlement (‘evaluative mediation’). It is then ‘take it or leave it.’ The mediator cannot compel the parties to accept the figure suggested, but having reached that stage, it would be unwise if they were unwilling to do so, given that the mediator will have been chosen because of his or her experience in costs disputes and whose view will merit very serious consideration. Were the mediator to be sitting instead in the costs judge’s chair, would the outcome be significantly different? Probably not, would be the answer.


It is also important to understand what a costs mediation is, and is not. In no sense can either party expect to ‘win’ at a mediation. If a spectacular victory is the prize sought, the ambitious party must go to court, but doing that brings the chance not only of winning, but also of losing, and heavily at that.

Critics will point to the additional expense if the mediation does not work on the day, but if that happens, the parties should continue to talk. Settlements often occur a week or two later. Given too that the only issue is quantum, liability (who is paying) already having been decided, it is difficult to think of a procedure more suited to the resolution of disputes than those involving costs, a fortiori because the parties remain in control at all times. Clients should give that serious thought before mediation is made mandatory by the government and they have no choice.

Colin Campbell is a consultant at Kain Knight Costs Lawyers and a mediator at Costs Alternative Dispute Resolution