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Swain Mason v Mills & Reeve

Posted on 23/04/2012 · Posted in Mediation

Refusal to mediate not necessarily derimental to party’s costs position

The Defendant, Mills & Reeve, helped Mr Swain to sell the significant shareholding he held in a company by way of management buyout. Shortly after completion Mr Swain died following heart surgery and his estate was subject to a very large inheritance tax charge. The tax charge would have been significantly lower if Mr Swain had still owned the shares rather than the proceeds of the share sale.

The Claimants, Mr Swain’s representatives, accused the Defendant of professional negligence. They claimed that Mr Swain had sent to the Defendant email correspondence which, if read thoroughly, would have revealed to the Defendant that Mr Swain was about to undergo a serious heart operation. They further claimed that in light of this information the Defendant should have advised Mr Swain to delay the share sale until after the operation.

At trial the Defendant successfully defended the action on the ground that they were not under any extra duties by virtue of the fact that Mr Swain had sent them the email correspondence.  However, the trial judge only awarded the Defendant 50% of its costs. This costs order was based, in part, on the fact that the Defendant had failed to properly engage in alternative dispute resolution.

The Court of Appeal did not agree with the trial judge on the costs point and ordered that the Claimants pay 60% of the Defendant’s costs. It was stated that even where mediation is suggested by the court and/or one of the parties, refusing to mediate would not necessarily been seen as unreasonable if the party reasonably believed that it had a strong case, as the Defendant did on the facts.

Link: Swain Mason v Mills & Reeve [2012] EWCA Civ 498

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