ADR Update

It has been clear in recent years that the Courts are continually keen to reiterate the importance of Alternative Dispute Resolution and show no reluctance to make an example of any party that has unreasonably refused to engage in ADR. There have been a handful of cases heard this year where the Court have chosen to do just that.

BXB v Watch Tower and Bible Tract Society of Pennsylvannia and Trustees of the Barry Congregation of Jehovah’s Witness [2020] EWHC 656 (Admin)

This matter involved a Claimant who had been raped by a ministerial servant of the Barry Jehovah’s Witness Congregation and claimed damages for personal injury as a result. The Claimant submitted that the Defendants were vicariously liable of the acts of the ministerial servant and also for the inadequacy of the investigation undertaken at the time she reported the incident. The Claimant was successful at trial and was awarded £69,500 in damages. The Claimant had put forward a Part 36 offer in the sum of £25,000 in July 2019, meaning she had beaten her own Part 36 offer.

The Defendants accepted that they were liable for indemnity costs from 30 July 2019, being the date that the offer expired. However the Claimant submitted that she should be awarded costs on the indemnity basis for a further period due to the Defendant’s refusal to participate in ADR.

The Claimant relied on the direction made by Deputy Master Brown in the standard form on 20 April 2018:

“At all stages the parties must consider settling this litigation by any means of Alternative Dispute Resolution (including Mediation); any party not engaging in such means proposed by another must serve a witness statement giving reasons within 21 days of that proposal; such witness statement must not be shown to the trial judge until questions of costs arise.”

The Claimant noted that the only attempts to settle her claim was by way of a global offer which also included the claims of two other individuals who had also been assaulted. The Claimant’s solicitors confirmed they could not consider an offer on this basis as it would create a conflict of interest and invited the Defendant to make separate offers. The Defendants had proposed a Joint Settlement Meeting with the other two individuals and the Claimant’s solicitors queried whether the same could be arranged for the Claimant. The Defendants simply responded to confirm that it had no authority to negotiate settlement of the Claimant’s claim at a JSM. Subsequent to this, the Claimant made two Part 36 offers which were rejected without reason being provided. The Defendants made no further attempt to settle the claim and the Claimant submitted that the Defendants had breached the order of Deputy Master Brown.

The Defendant submitted that indemnity costs awards should be saved for matters where the paying party’s conduct is unreasonable to the highest degree and therefore the refusal of ADR was insufficient in this instance.

Chamberlain J considered the facts and noted that the direction of Deputy Master Brown set out a two-fold obligation on both parties; the parties should consider ADR at all stages and, if refusing ADR, the party should serve a witness statement outlining the reason for the refusal. This was not done and it was ordered that the Claimant would have her costs on the indemnity basis from 25 February 2019, being the date that the Defendant confirmed it had no instructions to attend a JSM.

DSN v Blackpool Football Club Limited [2020] EWCH 670 (QB)

This claim also involved a claim for damages for personal injury due to abuse. The Claimant had been a victim of abuse whilst on a football trip in New Zealand in 1987. He alleged that the Defendant was vicariously liable for the acts of his abuser and was successful at trial. The Claimant was awarded £19,746.37 in damages and sought indemnity costs on the basis that he had made a Part 36 offer to settle his whole claim in the sum of £10,000 on 2 December 2019. The Claimant also claimed indemnity costs for a broader period on the basis that the Defendant had repeatedly refused to engage in any sort of ADR or mediation.

The Defendant submitted that that it had reasonably refused mediation on the basis that it considered it had a strong defence. On this occasion, the Defendant did file a witness statement in compliance with the case management directions, which detailed the reasons for the refusal of ADR. However Mr Justice Griffiths found the explanation to be inadequate and noted that no defence, however strong, justifies a failure to engage in ADR at all. He ordered the Claimant’s costs on the indemnity basis from 1 December 2018, being one month after Master McCloud ordered the parties “at all stages” to “consider settling this litigation by any means of Alternative Dispute Resolution”.

Wales (t/a Selective Investment Services) v CBRE Managed Services Ltd & Anor [2020] EWHC 1050 (Comm)

This matter concerned a pensions dispute and loss suffered due to a breach of contact of the relevant pension agreement. The Claimant initially instructed Linder Myers LLP who sent a letter of claim on 27 July 2016. The Claimant later instructed Clarke Willmott LLP who sent a further letter of claim on 29 June 2015. Both letters of claim indicated that the Claimant would be willing to consider any proposal to settle this dispute by means of Alternative Dispute Resolution, including mediation. The Defendant was requested to respond providing details of which form of mediation it would be willing to consider. Aviva, the Second Defendant, initially showed a willingness to participate in mediation however CBRE was unwilling to attend on the basis that mediation would be premature. Following this, Aviva changed its stance.

Shortly prior to issue of proceedings, Aviva confirmed that it would be willing to consider ADR subject to CBRE’s agreement. However, this was not provided and it was necessary to issue proceedings. During the preparation and agreement of proposed directions, Clarke Willmott proposed a provision for a stay of proceedings to enable ADR to take place. However the provision for a stay was deleted on the basis that the CBRE considered the timetable already allowed sufficient time for ADR. The Claimant further proposed a mediation on several occasions throughout proceedings. Aviva confirmed they would be willing to enter ADR but submitted that it would not be constructive without the attendance of CBRE, who unfortunately declined the offer.

The Defendants were successful at trial and CBRE sought costs on the indemnity basis due to the Claimant’s conduct, namely failures in the presentation of his pleaded case, his allegations of dishonesty and bad faith, and his failure to accept CBRE's drop-hands offer. The Claimant sought an order that he should not liable for costs due to the Defendants’ failures to engaged in ADR.

His Honour Justice Haliwell considered the provisions of CPR r44.2 and noted that, unless there was good reason, the Claimant should be ordered to pay the Defendants’ costs. He considered the history of the CBRE’s conduct in the matter and noted a general refusal to engage in any form of ADR until 14 February 2019, when it put forward its drop-hands offer. CBRE were deprived of 50% of its costs incurred up until this date and 20% of it costs from 17 June 2019 due to a further refusal to mediate. Aviva were also deprived of 20% of their costs however this was due to the manner in which its case was pleaded at the outset, rather than any failures to engage in ADR.

Commentary

The Courts are clearly becoming increasingly keen to highlight the importance of ADR at all stages; and even if you consider your case to be strong, this will not be an excuse. This is clearly just as relevant if you are the unsuccessful party as, if you are able to show that the other party has unreasonably refused ADR, this may mean that you may escape liability for a proportion of their costs. Additionally, as the refusal to engage in ADR often results in an order for indemnity costs, this would mean that you will not be bound to your costs budget, nor will you be bound to any proportionality considerations, for any part of the claim to which the indemnity costs order applies.

Therefore, given that there are both potential benefits and punitive measures for offering or failing to engage in ADR, it is clearly an important tool which should be at the forefront of every litigator’s mind throughout the duration of proceedings.