As if the point needed proving – why defendants should consider ADR in every dispute9 May 2020
Along with the Civil Procedure Rules came a new attitude to litigation, one that was less confrontational and more geared to finding a resolution to disputes without the wasted time and expense of full-blown litigation before the courts. The general rule is that the loser in litigation can expect to be ordered to pay the winner’s costs but the court can have regard to a number of factors including the conduct of the parties and, in appropriate cases, can alter the application of this general rule.
This new attitude was early shown in Halsey v Milton Keynes General NHS Trust  EWCA Civ 576 where the Court of Appeal decided that a refusal to engage in ADR when offered could result in adverse costs consequences. One of the factors it considered were the merits of the case: after all, if a party thought it had a cast-iron case, why should it bother to mediate? Mediation might, it could be argued, simply be a means for an underserving claimant to extract unmeritied cash from a hapless defendant. Needless to say, this factor has been considered more than once, not least in Northrop Grumman v BAE Systems  EWHC 3148 (TCC) where the court thought that a reasonable belief of BAE that it had a strong case was not an absolute justification for refusing to engage in ADR – it provided “some but limited justification for not mediating” according to Ramsey J.
Cases have considered this many times since, but some recent decisions show a fairly consistent attitude on the part of the courts.
BXB v Watch Tower and Bible Tract Society of Pennsylvania
In BXB v Watch Tower and Bible Tract Society of Pennsylvania  EWHC 656 (Admin) the claimant succeeded in her claim for damages for a historic rape. She claimed that the defendants should pay all her costs on an indemnity basis as a result of their unreasonable conduct, including failing to engage in ADR. Despite the seriousness of the allegations, the defendants pointed to the exaggerated claims made by the claimant (who initially claimed more than £500,000 but who in fact was only awarded £69,500).
Despite an order requiring the parties to consider ADR at all stages, the defendants declined an offer by the claimant to engage in a joint settlement meeting and failed to serve a witness statement explaining that refusal in breach of the directions given by the court. The judge characterised this behaviour alone as “unreasonable”. However, although the judge found that the defendants might well reasonably have thought that they had relatively strong arguments, this did not “necessarily mean that there was nothing to discuss”. The judge thought that a joint settlement meeting was a chance for the defendant to put across its thoughts about the strength of its case and possibly gave the parties a chance to agree quantum subject to liability. The inflated claim put forward by the claimant did not justify a failure to engage at all with the process of a joint settlement meeting.
The judge concluded that the claimant was entitled to her costs on the indemnity basis.
DSN v Blackpool FC
DSN v Blackpool FC  EWHC 670 (QB) also sadly concerned a case of sexual assault, this time committed on a boy during a youth trip to New Zealand by a person for whom the defendant was found at trial to be vicariously liable.
In this case, the defendants failed to respond to a Part 36 offer. The court gave directions ordering each party to consider ADR at all stages, and on either party refusing to accept an offer of ADR it should serve a witness statement explaining its refusal. The claimant made a further Part 36 offer and again the defendants did not respond. The claimant’s solicitors emailed an offer of settlement negotiations, but the defendant’s solicitors responded with a witness statement as required by the court’s directions, stating that it had considered all the evidence and felt that it had a strong defence and that ADR could not serve any purpose. The claimant’s third Part 36 offer received a response, but the defendants refused the offer based on what they thought was a strong defence.
The judge observed,
“No defence, however strong, by itself justifies a failure to engage in any kind of alternative dispute resolution. Experience has shown that disputes may often be resolved in a way satisfactory to all parties, including parties who find themselves able to resolve claims against them which they consider not to be well founded.” (para 28)
The judge also enumerated the range of possible positive results that flow from ADR. In this case, the claimant was not seeking extravagant damages (and indeed his Part 36 offers were each successively lower). The claimant asserted that he was not primarily motivated by money but wanted some admission by the defendants of what had happened. The judge pointed to the possibility that a settlement could include an admission or a statement falling short of accepting legal liability.
In short, the defendant lost at trial – and while this alone would not justify an award of indemnity costs, the judge characterised the behaviour of the defendants as unreasonable and ordered them to pay indemnity costs as from a period one month after the court’s directions requiring consideration of ADR.
Wales v CBRE
The original case is of interest as it involves a recent consideration of the principle of good faith and it can be found here while the costs decision can be found here. Briefly, Wales worked as an IFA handling CBRE’s pension arrangements with Aviva. Following pension law reforms, CBRE migrated to a different pensions provider and in the process stopped instructing Wales. Wales alleged that CBRE was in breach of a duty of good faith (among other allegations) but lost his case entirely against both CBRE and Aviva.
With regard to the proceedings prior to trial, the claimant’s solicitors had more than once indicated a willingness to refer the case to ADR including mediation. Even before issue of proceedings, CBRE was adopting a position that it would not mediate, which continued prior to close of pleadings and thereafter. CBRE did provide a witness statement explaining its refusal to mediate, principally based on the lack of time available to it but also referring to the unsettled factual issues pending exchange of witness statements. After exchange of witness statements, no party took any further steps to refer the matter to mediation.
The judge referred to the well established authorities in this area and found that CBRE’s behaviour had been unreasonable. Not only had it failed to respond to the initial letter of claim in the detail required, but had failed to engage in any form of ADR or to provide a satisfactory explanation for its failure to do so. Looking at the factors given by the Court of Appeal in Halsey, the judge’s reasoning included the following factors:
- the case was not inherently suitable for mediation
- while the conceptual basis of Wales’ claim was unsound, he had a genuine sense of grievance and CBRE had done nothing to resolve it
- it could not be inferred that the mediation had no reasonable prospect of success and, indeed, at each stage of the proceedings would have had a reasonable prospect of success
- the costs of mediation would not have been disproportionately high
However, the judge took some account of CBRE’s subject to contract “drop hands” offer and ordered Wales to pay CBRE’s costs from this date until CBRE’s later refusal to mediate, after which he disallowed 20% of CBRE’s costs.
It must be frustrating for a defendant in modern litigation before the English Courts: you get advice that you have a cast-iron defence and are then told that you have to spend a day with your persecutor while going through the motions of a mediation. This itself potentially wastes yet further time and money. Of course, the possibility of summary judgment may well dispose of a frivolous claim but there is a vast array of other defences which may not be strong enough for summary disposal but which leave the defendant in little realistic doubt that he is going to succeed at the end of the day.
Of course, BXB and DSN were difficult cases involving allegations of really serious sexual assault but, as the court observed in DSN, the claimant’s motives, as shown by his ever decreasing Part 36 offers, were definitely not financial. Mediators in these circumstances are used to securing settlements where the victim receives some sort of acknowledgement or explanation falling short of any acceptance of legal liability. Many mediators working the field of clinical negligence are also used to this as a feature in mediations. Both cases show that having a strong, rational belief in one’s prospects at trial, whether based on evidential factors or legal arguments, is not going to mean that you can refuse an offer or ADR with impunity when it comes to the costs decision.
Turning to Wales, a case based squarely in the commercial arena, the judgment again shows that a defendant with a strong, rational belief in the strength of its case, amply justified by the judgment it ultimately secured, nonetheless suffered some penalty when it came to getting its costs. Even in the commercial arena, feelings can run high. The judge obviously had some sympathy with Wales who did not receive an adequate explanation following his letters of claim, and where a mediation had a good chance of airing all the issues and securing a resolution.
In short – use ADR. Don’t refuse it, in fact – be proactive in offering it. Realistically, following these and other cases, it is hard to conceive of a case where a defendant would be justified in refusing mediation. Possibly, where the claimant is simply a vexatious litigant which is behaving unreasonably itself but even there, in the cold light of the costs hearing after trial, a judge might well conclude that a mediation (or other ADR) would have early on exposed the claimant’s weaknesses and secured a satisfactory resolution. What DSN shows (and it is not the first case to point this out by a long way) is that a resolution at a mediation is not necessarily about winners and losers in the sense of legal liability.
So mediate – and above all, keep an open mind throughout the process.