Can you afford to avoid Alternative Dispute Resolution?

May 29th 2020

two people negotiating legal contract

One old colleague of mine (who I won’t name) would keep a pad of yellow sticky post-it notes by her desk to scribble down reminders of rules that, presumably, she had forgotten often enough to require permanent neon fixtures to her computer monitor:-

refer to companies as “it”, not “they”

Dear Sirs / Yours faithfully

The Judgment on costs following the trial of Richard Wales and (1) CBRE and (2) AVIVA, will act as a timely reminder to all litigators and their clients of the risk of unreasonably refusing to agree to Alternative Dispute Resolution (or ‘ADR’) such as mediating and offers of settlement. 

Mr Wales was not successful at trial against CBRE and AVIVA and yet, CBRE were awarded just half of its costs between November 2016 (still in pre-action) and February 2019, and a 20% reduction on its costs between June 2019 and the Trial. But on what basis did His Honour Judge Halliwell depart from the general principle in the Civil Procedure Rules 44.2(2), i.e. the loser pays the winner’s costs?

In November 2016, Mr Wales’ legal representative proposed a 3-party mediation to attempt to resolve the dispute which had already been in pre-action for over 18 months with AVIVA and with CBRE since June. CBRE’s legal representative responded with the following costly words:

“We are instructed that our client will not participate in the proposed mediation.”

With the benefit of hindsight, perhaps this was unwise.

In June 2019, one month before trial, CBRE’s legal representative again refused mediation on the basis that there was insufficient time to prepare for and attend a mediation as witness statements were due to be exchanged shortly.

CBRE’s saving grace? It had made a settlement offer (for each side to walk away from the claim; a ‘drop hands offer’) in February 2019 to which Mr Wales did not respond.

Mr Wales submitted that CBRE’s unreasonable refusal to agree to ADR warrants a departure from the general principle that the loser pays the winners costs (relying on Halsey v Milton Keynes General NHS Trust and the Judgment of Briggs LJ in PGF II SA v OMFS Company 1 Ltd). HHJ Halliwell agreed.

A couple of points to takeaway from Mr Wales and CBRE:

  1. During proceedings, and as per the standard directions, CBRE’s legal representative had filed a statement explaining why a proposal for ADR had been turned down; stating that it was premature to mediate prior to the conclusion of pleadings. Whilst this is perhaps a common argument for not mediating, HHJ Halliwell found this less convincing where it’s not then followed up with efforts to mediate once pleadings are settled.
  2. A simple drop hands offer letter was enough to save CBRE’s costs between the date it was made and the date it next refused to mediate.
  3. Blaming the short timescales available for mediation, and the need to draft witness statements, again was unconvincing. Especially where the witness statement produced was not lengthy.

In summary, now more than ever, litigators need to be constantly alive to the need to propose ADR to their clients when appropriate – which is likely to be more often than not. Clients will expect their advisor to be aware of the tactical advantage that can be gained by, not only proposing ADR early and often but also, responsibly and quickly dealing with any proposals for ADR which are made by the opposition. Clients will need to be thoroughly advised upon, and warned of, the cost-consequences of the failure to deal with this aspect of litigation effectively. The threat of losing out on 50% of costs at Trial should be persuasive.

If ever there were a rule worthy of a neon reminder on any litigator’s desk:-

consider ADR, advise on ADR

Finally, given the current COVID-19 pandemic, we may well start to see (if not already), the social distancing rules being used as an excuse to avoid mediating. I wouldn’t be surprised to see the Courts take a stern view on this. In circumstances where the Courts have been expected to adapt and overcome the challenges of conducting Trials and hearings remotely, they will also expect the legal industry too to equally adapt. Where telephone mediations and face-to-face teleconferencing solutions are commonplace, litigators will be treading on thin ice to refer solely to the virus without supporting reasons as to why ADR isn’t currently possible.