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14 July 2020
A successful party was recently declined some of its costs on the basis of its unreasonable refusal to engage in mediation (Wales (t/a Selective Investment Services) v CBRE Managed Services Ltd & Aviva).
Mr Wales, an independent financial adviser, brought a claim for unpaid commission against CBRE and Aviva in relation to his services for CBRE's group pension scheme.
The claim was dismissed but, notwithstanding its successful defence of the claim, the High Court penalised CBRE for refusing to engage in alternative dispute resolution (ADR). Wales's solicitors had indicated a willingness to participate in mediation on several occasions, including in two letters of claim.
When Wales formally proposed that the parties hold a tripartite mediation, CBRE refused to participate at that stage and carried on resisting. In November 2018 CBRE's solicitor filed a witness statement to confirm that CBRE considered that it was "premature" to "consider arranging a mediation" pending the conclusion of pleadings.
In February 2019 CBRE made an offer, which was stated to be "without prejudice save as to costs" and "subject to contract and an agreed form of Tomlin order", to settle on the basis that Wales withdrew his claim and each party bore their own costs. Wales did not accept the offer. Prior to trial, Wales again proposed mediation. CBRE contended that there was insufficient time to prepare and the trial went ahead in July 2019.
In the judge's view, CBRE's actions were unreasonable.(1) Its refusal to engage in mediation prior to the commencement of proceedings was compounded by its failure to provide a detailed response to the suggestion of ADR in the letters of claim. That constituted a breach of the pre-action protocol.
The judge was also critical of CBRE's refusal to participate in the mediation proposed shortly before trial, stating that "[t]here is nothing to suggest that the solicitors instructed by Mr Wales or Aviva considered that they had insufficient time to do so, indeed they evinced a willingness to proceed with such a mediation". There was also no evidence to support the suggestion that they would have had insufficient time to prepare for the forthcoming procedural steps.
Nothing about the nature of the dispute made it unsuitable for mediation. In particular, the judge noted that in view of the parties' longstanding commercial relationship, mediation would have had a reasonable prospect of success.
Accordingly, exercising its discretion under Civil Procedure Rule 44.2, the court disallowed 50% of CBRE's costs from 11 November 2016 (when CBRE's solicitors had confirmed that it would not take part in ADR) to 14 February 2019 and 20% of its costs from 17 June 2019.
The court's approach is consistent with two other recent cases(2) in which the courts awarded indemnity costs against litigants that had failed to follow directions or give serious consideration to the obligation to engage in ADR.
The courts first took a stand against parties that failed to engage in ADR in 2004 with the seminal Court of Appeal decision in Halsey v Milton Keynes General NHS Trust,(3) which established the position that the courts strongly encourage parties to engage in ADR (including imposing costs sanctions for unreasonable refusals to mediate) – although this encouragement stops short of compelling unwilling parties to do so.
The judges in these recent cases echoed the sentiment in Halsey and stressed that the mere fact that a defendant believes that they have a strong defence is not a sustainable basis for refusing to participate in some form of ADR.
For further information on this topic please contact Andy McGregor or Adam Forster at RPC by telephone (+44 20 3060 6000) or email (email@example.com or firstname.lastname@example.org). The RPC website can be accessed at www.rpc.co.uk.
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