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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Fogarty -v- St Martin's Cottage Ltd [2016] JRC 073 (30 March 2016) URL: http://www.bailii.org/je/cases/UR/2016/2016_073.html Cite as: [2016] JRC 73, [2016] JRC 073 |
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Property - continuing dispute between neighbours and costs relating thereto.
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Before : |
W. J. Bailhache, Esq., Bailiff, sitting alone |
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Between |
Caitriona Mary Fogarty |
Plaintiff |
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And |
St Martin's Cottage Limited |
Defendant |
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Advocate JD. J. Benest for the Plaintiff.
Advocate C. Hall for the Defendant.
judgment
the bailiff:
1. On 10th April, 2015, the Court gave judgment in relation to the property dispute between the plaintiff and the defendant. This is reported at Fogarty-v-St Martin's Cottage Ltd [2015] JRC 068. The present judgment is to be read in conjunction with the material set out in the judgment on the dispute.
2. At trial the Court was faced with an order of justice from the plaintiff which claimed that the defendant's property encroached upon her own and that she was entitled to have the encroachments removed. Accordingly the prayer requested the Court to order the defendant to remove all such encroachments within such timescale as the Court might order; to pay damages for the wrongful encroachment until removal; to pay costs on a standard basis, and such further or other relief as is appropriate. It is to be noted that the plaintiff did not claim damages other than on the limited basis that the damages should relate to the existence of the wrongful encroachment until removal. When it came to trial, the plaintiff relied heavily on Felard Investments Limited v Trustees of the Church of Our Lady, Queen of the Universe (No.2) [1979] JJ 19, in particular for the submission that the Court had no jurisdiction to grant damages instead of an order for the physical removal of the encroachment. As is clear from the Court's judgment in April 2015, to have made such an order would in effect have subjected the defendant as the owner of the Treetops property, to a significant financial penalty.
3. At the time of trial, the Court was also faced by a re-amended answer of the defendant which raised a number of different legal issues - it was said that the boundary contract entered into in 2008 should be vitiated for erreur, lésion, déception d'outre moitié and dol. Alternatively it was said that the defendant had a right of support in voisinage for those parts of the wall which did not encroach; that the plaintiff by her conduct had intentionally led the defendant's predecessor in title to assume that the passing of the boundary contract would not affect the wall and openings and/or the location of such wall and openings and that any apparent encroachment would be resolved amicably by agreement, or by an award of realistic damages; that the doctrine of destination de père de famille applied so as to enable the encroachments to remain, and finally that in any event the plaintiff's remedy sounded in damages and not in an order for the removal of the encroachments, which would be disproportionate. Accordingly the defendant claimed in its prayer that the boundary contract should be declared void ab initio and the plaintiff ordered to enter into a new contrat de bornement which set out the correct boundary; that the plaintiff was estopped from removing the encroachments and should be ordered to grant reasonable access to the defendant for the purposes of maintenance; and that any wall and openings could remain but the plaintiff be awarded an appropriate award of damages in compensation. The defendant continued in its prayer that these various orders should be registered in the Public Registry and that the plaintiff should bear the defendant's costs.
4. Following delivery of the Court's judgment in April 2015 the issue of damages and costs was left over. Damages have now been resolved, and the defendant has agreed to pay the plaintiff the sum of £43,000 to the plaintiff by way of damages. This is £3,000 more than the monetary offer which the defendant made to the plaintiff prior to trial, although I note that that offer was conditional upon the plaintiff agreeing other matters including a right to maintain the encroachment as it now stands, and a right of access over the plaintiff's property for that purpose. The argument before me today solely concerned the issue of costs. Both parties appear to have considered that there should be no distinction between the costs incurred up to the end of the trial and the costs incurred in agreeing damages, and accordingly, the Court should apply a broad brush and make an order in respect of all those costs. That obviously would not include the costs of the costs hearing, which would be capable of being dealt with separately.
5. I also note in passing that the costs of the action are agreed to include the costs of an unsuccessful mediation which took place in 2012/2013. That was expressly agreed in paragraph 2.2 of the mediation agreement itself which sets out that if the mediation did not result in a settlement, and in the absence of any other agreement regarding costs, the costs of and associated with the mediation should be treated as costs in the cause of the litigation.
6. Both parties filed detailed skeleton arguments in relation to the costs hearing, and both parties also lodged a lever arch file of documents in support of their respective claims. Before the hearing, an indication was given to the parties through the Bailiff's Private Secretary that, subject to any representations of the parties, I wanted to be addressed on these five questions:-
(i) Who won?
(ii) To the extent that the person who lost raised or had to deal with issues raised by the other party unsuccessfully, what impact did that have on (a) the basis of assessment of the costs or (b) the entitlement to a costs order at all?
(iii) What impact, if any, do the fraud claims have on the entitlement to an order for costs, or upon the basis of assessment of those costs, or the persons against whom an order should be made?
(iv) What, if anything, flows from the without prejudice offers prior to trial?
(v) What, if anything, flows from the unsuccessful mediation? What are the rules to determine whether the Court should hear evidence on such a point in order to make a finding in this respect, and if so, from whom?
7. The parties before me did not really contend there was material which needed to be advanced outside this set of questions, and indeed they were broadly agreed on the legal principles which applied in relation to an award of costs, although they were not agreed on the principles which applied to the impact of an unsuccessful mediation. The agreed principles can be summarised as follows:-
(i) The Court's overriding objective is to do justice between the parties.
(ii) A good starting point is the general rule that costs follow the event.
(iii) Too much emphasis ought not to be placed in determining which party won where the complexity or other circumstances of the case do not lend themselves to that analysis.
(iv) The Court's discretion is a wide one and ought not to be considered as fettered, save that the discretion must be exercised judicially.
(v) It is open to the Court to have regard to any and all considerations that may have a bearing on the overriding objective to do justice between the parties. The Court's task is to take an overview of the case as a whole.
(vi) It is implicit in this that even though a party would otherwise be regarded as having been successful, justice may require that costs should not automatically follow the event.
(vii) A party may be deprived of its costs where he raises issues on which he fails even though he has succeeded overall.
(viii) A party may be ordered to pay the unsuccessful party's costs if he raises issues or makes allegations improperly or unreasonably.
8. I now turn to the questions which were put to the parties for consideration.
9. The admonition that the Court should not place too much emphasis on determining the winning party where the complexity or other circumstances of the case do not lend themselves to that analysis appears to me to be absolutely in point in this case. Both the plaintiff and the defendant claim that they "won" the litigation. Advocate Benest asserted that the plaintiff's real property rights had been vindicated. It was true that the encroachments could remain, but that was a temporary indulgence. The Court had not granted any right of access and had not granted any right that the encroachments themselves could remain as a matter of property law. It amounted to a temporary stay on the natural demolition that would happen in due course. Furthermore, the monetary payment which the defendant had agreed to make exceeded anything which had been offered prior to trial in Calderbank correspondence. Accordingly the defendant had lost and the plaintiff had won.
10. The defendant took the view that the defendant had won and the plaintiff had lost. Advocate Hall contended that this litigation was, in the mind of the plaintiff, all about obtaining an order for the removal of the encroachments in accordance with Felard Investments Limited (supra). The plaintiff however had not obtained such an order, and the amount which the defendant had agreed to pay in damages, a point on which a commercial view had been taken, was very close to the amount which had been offered prior to trial. Because the plaintiff's desire to have the encroachments removed had been the basis of the whole action and a bar to any settlement, and because she had been unsuccessful, the plaintiff should have to pay for the cost of the whole proceedings. However, Advocate Hall placed great reliance on the proposition that the overriding principle is to do justice between the parties. That is the starting point, and the fact was, in her submission, that the plaintiff had acted unreasonably and was not entitled in those circumstances to an order for costs.
11. I agree that this is one of those cases where it is difficult to say who has won the litigation. The fact is that both the plaintiff and the defendant have included within their pleadings prayers for relief which the Court has not granted. It seems to me that the defendant is right to say that the primary motivation for the bringing of the proceedings in the first place was the obtaining of an order that the encroachments be removed, and in that, the plaintiff has not been successful. On the other hand, the defendant has certainly not been successful in obtaining any of the orders in its prayers for relief which it sought in its re-amended answer.
12. I approach the issue of who won by concluding that, on balance, the plaintiff was probably more successful than the defendant. I agree that she was successful in establishing the basis of her claim, namely that by reason of the boundary contract, there were encroachments on her property from the defendant's property, albeit that the relief which she obtained as a result of that success was different from that which (a) she envisaged and (b) she wanted. In reaching my view as to the appropriate order for costs, I have proceeded on the basis that the plaintiff was more successful than the defendant but that this case does not provide a clear example of winners and losers.
13. The defendant would have been in a good position to argue questions of costs had an answer been filed along these lines:-
(i) As a result of the boundary contract there were a number of encroachments as a matter of law.
(ii) Having regard to all the facts, it would be disproportionate for the Court to order the removal of the encroachments.
(iii) The Court should not follow Felard Investments, and should award damages in lieu.
14. Had the defendant adopted that stance, it is hard to see how it would not have been successful in claiming the costs of the action.
15. However, the defendant did not take that tack. Instead, a whole range of novel arguments were put forward all of which seemed to the Court to carry no basis in law, and in some cases no basis in fact either. Taking a step back, it seems to me that a good deal of the cost of these proceedings must have been incurred in researching and dealing with the defendant's claims which failed. In saying that, I accept that some of the evidence which the defendant adduced might have been relevant to the decision on whether to give damages in lieu of making an order for removal of the encroachments.
16. Leaving aside the question of the claims to fraud, to which I will come in a moment, I do not think that these other defences show the defendant to have conducted the defence unreasonably so as to be liable for an indemnity costs order against it, even though the flaws in the arguments were raised in correspondence by the plaintiff's lawyers in April 2014. The fact that they were raised does go to support the view that the defendant was on notice before these costs were substantially incurred that there were serious difficulties with the defences in question, and therefore supports the view that raising these defences, as it turns out wrongly, is to be held against the defendant. I do not accept that this falls in the same category as the costs incurred in Flynn v Reid [2012] (2) JLR 226 where the Court of Appeal was not critical of the plaintiff for raising novel points of law. As is clear from the Court's judgment in the instant case, I consider that the points of law raised here were very speculative indeed.
17. As the defendant was seeking an order for costs in its favour, the fact of it raising a number of issues unsuccessfully does in my judgment have an impact, not on the basis of assessment of costs, but on where the liability for costs should fall. Taking a step back, and subject to the overall equity point so far reserved in this judgment, I think the answer to this question also suggests that the plaintiff has had the better of the substantive argument, but to the extent that the defendant did have success (the damages jurisdiction) the issues raised unsuccessfully militate against an award of costs in its favour.
18. Both in his skeleton argument and in oral argument before me, Advocate Benest contended that the defendant had been wholly wrong to plead an allegation of fraud and that as a result a proportion of the costs to which the plaintiff was entitled should be paid on an indemnity basis. In his skeleton, Advocate Benest contended that the order for indemnity costs should be made against Advocates Hall and Falle personally. In argument, that position changed and it was contended that the order should be made against the defendant, with an invitation to the advocates to show cause why the costs order should not also be made against them personally.
19. By contrast, Advocate Hall contended that the fraud defence, as with the others, was raised legitimately. She asserted that the defendant understood both from Mrs Dodds, the predecessor in title and from her lawyer, Mrs Canavan that they believed the plaintiff had deliberately kept quiet about the encroachment and the witnesses were adamant that they did not believe the encroachments would have to be removed. In the skeleton argument and in oral argument before me, Advocate Hall contended that the defendant was not so much pleading fraud but rather a dishonest silence - réticence dolosif, and that Advocate Benest was simply exaggerating the significance of dol to enable him to argue costs. The assertions, she thought, should be placed in the context of the whole claim.
20. Advocate Benest reminded me of the dicta of this Court in Makarenko v CIS Emerging Growth Limited [2001] JLR 348 where Birt, DB, having referred to the fact that in his judgment the order of justice did not come near to the required standard of particularity for an allegation of fraud given that general assertions were made with no supporting allegations of fact, continued at paragraph 5:-
21. Advocate Benest also relied upon the decision of the Royal Court in Perczynski (née La Rocque) v Perczynski and others [2005] JLR Note 24 for the submission that where an allegation of fraud is not supported by evidence and fully particularised, a costs order may be made against the advocate responsible. Finally he referred to Rule 18 of the Law Society of Jersey's Code of Conduct which provides that:-
22. The reference in the Jersey Law Reports at note 24 to Perczynski is in these terms:-
23. Although the word 'exceptionally' appears in that note, there is nothing in the judgment of the Court, reported at [2005] JRC 084 which suggests that the general rule is that such an order will be made against the Advocate. It is clear on the House of Lords decision in Medcalf v Mardell that the Court considered that if the full background could not be established, it would be wrong to make an order for costs personally against the lawyer. No doubt there are other authorities to which I have not been referred in this connection. In the absence of privilege being waived, it seems to me that the usual approach however would be to make an order for costs against the defendant and, taking up the comments of the then Deputy Bailiff in Perczynski, it will then be a matter for the lawyer to determine how best the liability for costs is dealt with. As Birt DB said on that occasion, it is very often the case that orders for costs are made against clients where the true fault lies with the lawyer, and no doubt in those cases, an accommodation is arrived at between the lawyer and the client. That is however a matter for them and it is no concern of the Court unless the client raises the matter with the Court. Where in its judgment, the Court makes it plain that the conduct of the claim or defence as the case may be has been inappropriate, that may well inspire the lawyer to tackle with the client how best the allocation of liability should be settled.
24. In his oral submissions to us, Advocate Benest abandoned the claim for an order against Advocate Falle, and he added that he thought it would be right to make an order for indemnity costs against the defendant albeit no doubt Advocate Hall would have to justify her position in relation to the pleading of fraud if the Court made that clear in its judgment.
25. The defendant's pleading in this connection was as follows. By paragraph 8.2(b), the defendant asserted that the Court should annul the boundary contract on various grounds which included lésion, déception d'outre moitié and/or dol. The pleading went on in this way:-
"The Defendant avers that the Plaintiff was deceitful in that she failed to make her intentions clear. The Plaintiff never believed that any part of Treetops encroached onto Clairmont ...
The Plaintiff deliberately led Mrs Dodds to believe that the purpose of the boundary contract was to resolve the ownership of the trees only. The Plaintiff ... deliberately left the boundary contract silent in relation to the encroachments in order to obtain an unfair advantage over Mrs Dodds, knowing that once the boundary contract was actually signed, she would demand the removal of the encroachment at great expense and inconvenience to Mrs Dodds and the Defendant ..."
26. I have reviewed the notes which I made of the hearing on 10th November, 2014. At approximately 2:40pm., the plaintiff was sworn, and taken through, briefly, her affidavit which was identified as her evidence in chief. The very next question of which I have a note was the question "Were you deceitful?" to which the plaintiff answered "It's completely untrue", and there were then further questions expanding on the allegation. I mention that because when Advocate Benest submits that the plaintiff was extremely concerned at having to meet an allegation of dishonesty. I accept that submission unreservedly. Advocate Hall contends that the fact that the plaintiff is an advocate and an officer of the Court is irrelevant in this context, and, without deciding it, I have proceeded on the basis that that is objectively correct. Nonetheless, in so far as the effect of the pleading on the plaintiff is concerned, it is fair, so it seems to me, to conclude that as an advocate she might be concerned for her ongoing reputation with the Court if the Court were to find that she had been deceitful or dishonest. As I said in argument to Advocate Hall, this goes to emphasise how serious it is to make an allegation of fraud in a pleading, and why it is that the Court insists that practitioners take special care to ensure that there is an evidential basis for the assertion before it is pleaded.
27. I record that, though I do not have the advantage of a transcript of cross-examination, I do not have a note of any question from Advocate Falle to the plaintiff which in terms puts the assertion of deceit to her.
28. In its judgment, the Court rejected the defences of dol and erreur as a matter of law, but went on to deal with the issues on the facts as well and said this:-
29. At paragraph 56 of its judgment the Court also said this:-
30. In argument, Advocate Hall asserted that there was a basis for the pleading of fraud, which is to be found in the witness statement of Mrs Canavan where, at paragraph 24, Mrs Canavan expressed the view that the plaintiff had in her opinion effectively misled her client into entering the boundary contract by remaining silent on her intentions. In my view this goes nowhere near the necessary standard for pleading fraud. It is a statement by a witness of her opinion, which is not evidence of fraud in itself. That position is made worse by the fact that it is clear from the rest of Mrs Canavan's statement that she was aware herself from a note prepared by her conveyancer when he attended on site that one could not draw an imaginary line between the two boundary stones without possibly creating an encroachment. Advocate Hall added that Mrs Dodds had not realised the plaintiff would seek to have the encroachments removed. This was prima facie evidence of fraud on the part of the plaintiff - was she right to remain silent in circumstances when she was aware that Mrs Dodds had not appreciated that the encroachments might be the subject of an order for their removal?
31. Advocate Hall went on to suggest that dol was not the same as fraud, although she did not expand on the precise differences. She contended that a réticence dolosif was not as serious as fraud. There were degrees of dishonesty.
32. In my judgment the allegation of fraud should never have been made. It was always perfectly plain that the plaintiff had not negotiated directly with Mrs Dodds at any time in relation to the boundary contract. All those negotiations had taken place through lawyers. It was not any part of the duty of Advocate Dorey, then acting for the plaintiff, to negotiate the boundary contract by putting to the other party all the possibilities which might flow from the contract which was negotiated. Those possibilities were obvious, as indeed is reflected by the note to Mrs Canavan from her conveyancer. The nature of a réticence dolosif is that the Court penalises a party where it considers there was an obligation to speak, and the party remained silent. That was not the position here. The fact that the plaintiff was asked to confirm that the encroachments could remain as established and refused is the clearest possible evidence that Mrs Dodds and those advising her should have been on the alert as to the possibilities which might follow from the boundary contract - those possibilities included of course the payment of damages to secure the encroachments remaining in place, but another possibility would have been the Court's order for the removal of the encroachment.
33. As we indicated at paragraph 56 of our judgment, the Court has found that the plaintiff acted unreasonably and was unyielding in her approach. It would have been possible to plead unreasonableness and/or obduracy as part of the defence, such characteristics going in equity to whether or not an order should be made for the removal of the encroachments or instead some award of damages. That course was not followed, and instead, allegations of deceit were made against the plaintiff when they ought not have been made. In my view, the wrongful pleading of fraud does have an impact on the basis of assessment of costs, in principle, and leads the Court to consider the award of costs on an indemnity basis in whole or in part. Applying that to the instant case, where this was only one of many defences being advanced, I have considered whether the result of the wrongful pleading of fraud should be reflected in an award of indemnity costs against the defendant in part.
34. I will come to the mediation question shortly, but Advocate Hall contended that the defendant made all the running in connection with settlement offers prior to the hearing. She also submitted that the damages which were agreed were in a figure very close to the offer which had been made prior to trial, and that a commercial decision had been taken by the defendant. On analysis, it does not seem to me the Court can go into this question in any great detail. I do not have the material before me to form a view as to whether £43,000 does or does not reflect a good settlement of damages on the part of either the plaintiff or the defendant. I have to assume, as they have agreed it, that it reflects the appropriate award. It is in a higher sum, albeit not by much, than a Calderbank offer which had been made previously and one cannot be sure what the position would have been if the higher offer had been made before trial.
35. However, it is to be noted that the terms on which the Calderbank offer were made were different. The email dated 11th September, 2014, which contains this offer has as a condition that an appropriate consent order would have to be agreed reflecting that there were no further issues in relation to the boundary or the wall, to include allowing the encroachment to remain and/or drafting a new boundary line, ensuring that the defendant had a right of access over the plaintiff's property in order to maintain those encroachments. The outcome of the hearing in November 2014 was that the encroachments could remain, in the sense that the Court did not make an order that they be removed, but they have not been expressly permitted, and there is no right of access to maintain them.
36. Advocate Heywood, on behalf of the plaintiff, made a counter-settlement offer in September. Advocate Hall criticised this as being unclear, and I understand the reasons for that criticism. In my view, none of the offers made prior to trial are relevant to the costs order which I now ought to make in the sense that they would afford a reason for not making the costs order which would otherwise be appropriate.
37. This matter arises because in her skeleton argument, Advocate Hall contends that the Court ought to take into account that the plaintiff did not approach the mediation of the case in good faith, in that she had no intention of achieving a negotiated outcome that did not involve strict enforcement of the principle in Felard Investments, and everything that she wanted as a result. Ms Hall contends that the plaintiff failed to consider any offers in settlement and made no real attempt in the mediation or otherwise at investigating whether a compromise could be found. She accepted that mediation is normally confidential, but there was an implied term that all parties enter into the mediation in good faith. Accordingly the mediation was a waste of time because it was engaged in by the plaintiff solely to shield herself in respect of an adverse costs order and with no real appetite for compromise. She relied on Earl of Malmesbury v Strutt [2008] EWHC 424, a Queen's Bench decision at first instance of Mr Justice Jack in connection with the costs of an action by the claimant landowners against the defendant surveyors alleging negligence in connection with leases of land used by Bournemouth International Airport as a car park. In the course of his judgment, at paragraph 72, Jack J said this:-
38. Advocate Benest objected to my looking at any of the material regarding the mediation which was put before me by Advocate Hall. He said I should not look at any of the steps taken in the course of the mediation. As he put it, he would climb onto his highest horse for the purposes of that objection. The mediation was entirely without prejudice. There was a specific contractual duty of confidentiality. Matters arising under the mediation are sacrosanct. In relation to Malmesbury, he pointed out that we do not know from the report put before us how the Court had the information which it had in relation to the progress of the mediation in that case. As to the remarks made by Jack J at paragraph 72, cited above, Advocate Benest submitted he was wrong to conclude as he did.
39. Advocate Benest agreed that there was clear authority to the effect that an unreasonable refusal to attempt mediation could be held against a party when the Court came to consider applications for costs in relation to litigation. He also agreed that logically it was difficult to see any difference in principle between a party who unreasonably refused to go to mediation, and a party who agreed to go to mediation but actually had no intention whatsoever of seeking a mediated settlement. His approach, however, was that the Court could only look at open material and correspondence to decide on a party's good faith in going to mediation. If the correspondence was not open, the Court would have to accept that the parties did go to mediation in good faith. It could only look at the material it was as a matter of law permitted to look at. He contended that it was completely inappropriate to have a mini-trial of the intentions of the parties in going to mediation and he pointed out that the Court had no evidence before it on the present application as to what had happened in the mediation, simply a number of submissions made by Advocate Hall whether in her skeleton argument or orally.
40. Advocate Hall submitted that while she made no allegations at all against Advocate Benest personally, the mediation contract had to be entered in good faith. There was a public policy in ensuring that the Court supported efforts at mediation and the Court should lean against any outcome which might allow a party to pretend to engage in attempts at mediating a settlement but in fact not do so. Ideally, in her submission, the parties should waive privilege to enable an enquiry to take place as to the conduct of the mediation. She agreed that one could not automatically rely upon what is said at a mediation hearing, and that position protected the contractual confidentiality, but of course contracts, or any provision in them, could be attacked on any of the usual bases, and the absence of good faith was such a basis.
41. She submitted that the plaintiff's approach to mediation was a separate issue from the content of the mediation. Thus on a costs application, it was open to her to argue that the plaintiff had no real intention to mediate, and that argument could be run without breaching the confidentiality provisions.
42. I agree with that last submission, provided that the Court is not invited to look at the content of the mediation in order to reach a conclusion as to a party's intentions when agreeing to go to mediation. It is well known that in mediations, issues are raised on occasion which have nothing to do with the pleaded case between the litigants, and indeed sometimes resolving the non-pleaded issues is key to finding a mediated settlement of what is in dispute before the Court. In a sense that of itself supports the view that the Court should not look at the process of mediation in deciding costs issues which do arise out of the pleaded case before the Court - how could an unreasonable approach to a particular non-pleaded issue assist the Court in deciding whether to make a costs order or not in relation to a pleaded issue? Nonetheless, I accept that if there is open material which shows that a party's approach to mediation was a sham, and in effect amounted to an unreasonable refusal to engage in the mediation process, that is a matter which, subject to the usual rules, a court could take into account in deciding whether or not to make a costs order in favour of the party acting unreasonably.
43. Advocate Hall helpfully provided me with a decision of the English Court of Appeal in Reed Executive PLC and another v Reed Business Information Limited and others [2004] 1 WLR 3026. In that case, the Court of Appeal was considering, on an application for costs, whether it should order disclosure of without prejudice letters or conversations against the wishes of one of the parties to the action, and whether it could draw adverse inferences from the refusal of a party to allow such disclosure even though that might prevent the Court determining in relation to the allocation of costs whether one party or another was unreasonable in refusing alternative dispute resolution. The Court held that it had no jurisdiction to order disclosure of the 'without prejudice' negotiations for the purposes of deciding the question of costs; that even if there were such jurisdiction disclosure ought as a matter of discretion to be refused; and that since, on the open materials, the defendants had not acted unreasonably in refusing alternative dispute resolution, the possibility of dispute resolution was not a relevant factor to be taken into account for the court's decision on costs.
44. The judgment of the Court of Appeal makes it plain that the rule of longstanding, set out in Walker v Wilsher (1889) 23 QBD 335 remained the law - evidence of the detail of 'without prejudice' negotiations could not be given on the question of costs unless both sides agreed. Its application could be avoided by the simple expedient of using the Calderbank formula of negotiating 'without prejudice save as to costs'. In the context of the instant case, that clearly is not the position in relation to the mediation, because the mediation agreement expressly requires that all matters arising out of it remain confidential.
45. In Halsey's case [supra] the Recorder dismissed a claim under the Fatal Accidents Act against the second defendant and awarded the second defendant his costs despite the fact that he had refused to mediate. There was an appeal on both costs and liability. The English Court of Appeal held, in dismissing the appeals on costs, that to oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the Court, and that in deciding whether to deprive a successful party of some of all or his costs on the grounds that he refused to agree to alternative dispute resolution, it had to be borne in mind that such an order was an exception to the general rule under the Civil Procedure Rules and the burden was on the unsuccessful party to show why the general rule should be departed from. Such a departure was not justified unless it could be shown that the successful litigant acted unreasonably having regard to all the circumstances of the case. Alternative dispute resolution would be considered and might be appropriate in suitable cases, but it remained the case that a refusal to agree to mediation had to be unreasonable before it was taken into account. In that context, the Court of Appeal observed that the stronger the Court's encouragement to enter mediation, the more weight would be subsequently given to the mediation factor when deciding whether the refusal was unreasonable.
46. I refer briefly to two decisions in this Court in relation to the impact of mediation on costs. The first is Bespoke Investments Limited v Lincoln Nominees Limited and others [2005] JLR Note 29, [2005] JRC 098. Sir Philip Bailhache, Bailiff, referred to his comments when introducing the amendment of the Royal Court Rules which provided for a Royal Court power to refer cases for mediation, when he said:-
47. Having referred to Hurst v Leeming [2003] 1 Lloyds Rep 379 and to Halsey [supra], the Court went on to hold in the Bespoke case that the fundamental principle in determining whether or not to penalise a party in costs for refusing to engage in mediation is whether the successful party acted unreasonably in so doing. Sir Philip Bailhache, B, continued at paragraph 9 of his judgment in that case:-
48. The other local case in which reference to mediation arises is that of Manley v Bell [2007] JLR Note 20 where again the Royal Court indicated that the use of mediation to settle disputes is strongly to be encouraged and if a party unreasonably refuses to engage in mediation a costs sanction is likely to be applied.
49. I respectfully agree with the Royal Court's comments in the Bespoke case other than the conclusion that the characters of the litigants may be relevant, on which I express no view at present, and I adopt the sentiments expressed in Reed and in Halsey. In particular, it would in my judgment be inconsistent with the Article 6 Convention right to require a party to go to alternative dispute resolution. Citizens have a right to come to the Royal Court to have their disputes resolved; but this is in no sense to undermine alternative dispute resolution or to underplay its advantages. Both the courts and practitioners are well aware that there are some cases which are ideally suited to mediation; cases where parties can address issues which may not be of direct impact in the context of their litigation, but which nonetheless, if resolved, might lead to the litigation itself becoming easier of settlement. This is classic mediation territory. On the other hand, there are cases which do not so naturally lend themselves to mediation. In my view, the present case is one where mediation was probably always unlikely to be successful. That is not to say it should not have been attempted. Any course of mediation which might have put two neighbours back on track in understanding each other's point of view and avoiding the damaging litigation which we have experienced here would have been desirable. Yet the reality is that with a decision as clear as that of the Royal Court in the Felard Investments case, and a history underlying the plaintiff's approach to the boundary between her property and that of the defendant, it is to me entirely unsurprising that the mediation failed. Indeed, I would not have held the plaintiff to have acted unreasonably if she had refused to go to mediation because in my judgment it probably stood a relatively small chance of being successful and undoubtedly caused the parties additional expense. If the question whether the mediation had a reasonable prospect of success would have been relevant to the reasonableness of the plaintiff to refuse the defendant's invitation to agree to it, as I think it would, then equally it is relevant to whether the successful party acted unreasonably in refusing to consider a possible outcome from the mediation which might have led to settlement.
50. I do not think that there is anything in the open material which has been put before me to suggest that the plaintiff acted in bad faith in handling the mediation process. I also take into account that the effect of the efforts to mediate was to stay the plaintiff's claim in the interim. Indeed, the trial was adjourned, and the plaintiff was put back in the efforts which she was making to secure orders for the removal of the encroachments. It is counter-intuitive to suggest that she entered the mediation process in bad faith because it was not in her interest to do so. It would have been far more in her interests to get on with the case in court on the basis that the Court's determination of whether Felard Investments remained good law was fundamental to the overall outcome. Had the plaintiff taken that approach, I would not have considered that to be unreasonable.
51. Advocate Benest submitted that Jack J's conclusion at paragraph 72 of his judgment in the Malmesbury case was simply wrong. As a matter of general principle, I agree with Jack J that a party who agrees to mediation but then causes the mediation to fail by reason of his unreasonable position is in reality in the same position as a party who unreasonably refuses to mediate in the first place, and therefore in principle that might be taken into account. However, I agree with Advocate Benest that that is no reason to interfere with the confidentiality of mediation proceedings, and in particular with the contractual commitment to confidentiality of the particular mediation agreement which was signed by the parties or on behalf in this case. I find that there is no basis from the open material (or indeed on any of the evidence before me whether or not admissible) for concluding that the plaintiff entered the mediation proceedings in bad faith and I reject Advocate Hall's submissions in that respect. I have to say that I think it is unfortunate that the costs argument has led to a further allegation of bad faith on the part of the plaintiff.
52. In my judgment it would be very undesirable to have a protracted taxation process in which the parties and then the taxing officer had to identify as best they could respectively whether time spent and costs incurred related to an issue which was wrongly raised and lost, or ought never to have been raised at all. There is much authority in favour of adopting a broad brush approach to issues of costs in circumstances such as these, and I propose to do so in this case.
53. Subject to the question of overall equity, bearing in mind that the defendant succeeded in relation to the main objective of the plaintiff where she sought to obtain an order for the removal of the encroachments, but failed on everything else, including the defendant's own prayers for relief, I would have concluded on an issue basis alone that the defendant should pay 60% of the plaintiff's costs.
54. In relation to a proportion of the plaintiff's costs, I would want to reflect that the basis of assessment should be largely on the standard basis, but in relation to the allegations of fraud, wrongfully pleaded, the assessment should be on an indemnity basis.
55. I now have to return however to the issue which Advocate Hall raised with me that, transcending all these arguments, namely that the award of costs should be determined in such a way as is fair to the parties - as reflects the overall equity of the position. In this respect, the contention is that I should have some regard to the fact that the plaintiff has in part caused the problem which has exercised the Court and the defendant, because she agreed upon, arguably insisted upon, a boundary contract containing a boundary line which she knew would have the problems which were presented to the Court. It is not a question of bad faith or fraud, or réticence dolosif which is here being canvassed. It is simply a recognition that by deliberately leaving over the question of whether the encroachments could remain, the plaintiff must have had in mind that argument over those encroachments might have to take place in the future, and that she herself therefore bears some responsibility for the costs which have been incurred.
56. After careful consideration, I have resolved that this is not an argument which I am willing to accept. That is so for these reasons:-
(i) As I indicated earlier, it would have been open to the defendant to defend the plaintiff's claim on a limited basis which would have narrowed the costs exposure, and indeed resulted in the defendant having a good case to put to the Court for an award of costs in its favour.
(ii) To penalise the plaintiff in costs because she did not deal with the question of encroachments at the time of the boundary contract would be to penalise her for making a contract which was to her advantage. There is no question that it was to her advantage, as is reflected by the award of damages and the agreed settlement which has been made. Other than in cases of déception d'outre moitié, which has been found not to exist here, or in cases where, on whatever legal basis, the volonté which is at the heart of the intentions of the contracting parties is called into question, the Court does not enquire into the merits of a particular contract from the perspective of either party. That is implicit in the doctrine embodied in the maxim la convention fait la loi des parties.
(iii) The counterpart to the previous point is that Mrs Dodds did not have to make the contract. She chose to do so, no doubt because she considered it was necessary in order for her to secure a sale of Treetops. That choice should not be held against the plaintiff.
(iv) As an extension of the last point, the defendant did not have to buy Treetops. The Company took advice from its lawyer in making that purchase, and either was fully advised as to the particular problems (we note Mrs Harrison's evidence that it was not so advised, but the Company's lawyer is not a party and we cannot make any findings in that respect) and decided to proceed nonetheless, taking the risk involved in an uncertain boundary, or it did not have that advice, in which case it has a claim no doubt against it lawyers. Either way, that is not a matter to be held against the plaintiff.
(v) Although I do not rule out the possibility that an award of costs might be refused where the case of the unsuccessful party had a moral rather than legal merit, the "who won" question prompts the statement that an award of costs is intended to benefit the party whose case had legal merit. That seems to me to follow from the fact that the costs are incurred in relation to an action in court where legal merits are primarily what is under consideration. This case ultimately was about the legal merits of the contentions of opposing lawyers as the law of property. What is fair and equitable, in relation to costs, must be focused upon not just the conduct of the parties but also the conduct of the litigation.
57. Taking all these matters into account, and applying the broad brush to which I have referred, I order the defendant to pay 40% of the plaintiff's costs on the standard basis and 20% of the plaintiff's costs on an indemnity basis. If the total is not agreed, that will work on taxation in the following way. The plaintiff will produce two bills, one on the standard basis and one on the indemnity basis. Once taxed by the Greffier, the plaintiff will be entitled to 40% of the taxation total of the former, and 20% of the taxation total of the latter.
