Abstract of machinery with blue tint.

It's good to talk

16 July 2020. Published by Andy McGregor, Head of Civil Fraud and Adam Forster, Senior Associate

A successful party has been declined some of its costs on the basis of an 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 and, notwithstanding its successful defence of the claim, the High Court penalised CBRE for refusing to engage in alternative dispute resolution. Mr Wales' solicitors had indicated a willingness to participate in a mediation on several occasions, including in two letters of claim.

When Mr 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 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", and to settle on the basis that Mr Wales withdrew his claim and each party would bear its own costs.  Mr Wales did not accept the offer.  Just prior to trial, Mr Wales again proposed holding a mediation. CBRE contended there was then insufficient time to prepare and the trial went ahead in July 2019. 

The Court's decision on costs

In the view of the Judge, CBRE’s actions were unreasonable(1). The 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: “There 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.

There was nothing in the nature of the dispute which 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 CPR 44.2, the Court disallowed 50% of CBRE’s costs from 11 November 2016 (when CBRE’s solicitors confirmed that it would not take part in ADR) and 14 February 2019, and 20% of its costs from 17 June 2019.

Comment

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 even to give serious consideration to the obligation to engage in ADR. 

We first saw the Courts taking a stand against parties who failed to engage in ADR back in 2004 with the seminal Court of Appeal decision in Halsey v Milton Keynes General NHS Trust(3), which established the position that Courts strongly encourage parties to engage in ADR (including imposing costs sanctions for unreasonable refusals to mediate), albeit this encouragement stops short of compelling unwilling parties to do so.  

The judges in these recent cases echo the sentiment in Halsey and stressed that the mere fact that a defendant believes they have a strong defence is not a sustainable basis for refusing to participate in some form of ADR.

(1) [2020] EWHC 1050 (Comm)

(2) DSN v Blackpool Football Club Ltd (Rev 1) [2020] EWHC 670 (QB); and BXB v Watch Tower and Bible Tract Society of Pennsylvannia & Ors [2020] EWHC 656 (Admin).

(3) [2004] 1 WLR 3002