Recent English High Court Judgment reminds litigants of the cost implications of unreasonably refusing to mediate

By Jeremy Sharman, Alexander Grigg

08-2020

In a recent judgment, the High Court has again reminded litigants that an unreasonable refusal to mediate by a successful party at trial can lead to that party facing adverse costs consequences. In Richard Wales (t/a Selective Investment Services) v (1) CBRE Managed Services LTD (2) Aviva Administration LTD (2020)[1], the first defendant, CBRE, repeatedly refused to accept the claimant's offer of mediation. Although the judge ultimately ruled against the claimant in the court hearing, CBRE suffered a significant reduction in its costs due to its unreasonable refusal to participate in ADR.

Background

The claimant in the case was an independent financial adviser who introduced insurance and pension business to his clients. He provided pension advice for many years to the first defendant, CBRE Managed Services Limited (“CBRE”), before introducing the pension business of CBRE to Friends Life Services Limited, now part of Aviva. CBRE subsequently moved to a new pension platform and dispensed with the claimant's services. The claimant brought claims against both CBRE and Aviva for breach of contract.

In 2015 both the claimant and Aviva indicated a willingness to refer the dispute to mediation, however CBRE did not respond. In early 2016, the claimant formally proposed that the parties hold a three party mediation to which CBRE responded explaining that they were not willing to participate. Aviva expressed unwillingness to participate without CBRE. 

In early 2019, CBRE offered to settle on the basis that the claimant withdrew the claim and each party would bear their own costs, however the claimant did not make any inquiries about the offer. Finally, in May 2019, the claimant again proposed mediation commencing in June. CBRE did not respond until the week of the proposed mediation in June when it made clear that it had chosen not to mediate on the grounds that, in its view, there was insufficient time to prepare for and attend the mediation in light of the tight deadlines imposed by the court.

Following the trial the claimant's claims against both defendants were dismissed and there then followed a separate hearing on who should pay the costs. 

Failure to agree to mediation>

The starting point in any claim is that the unsuccessful party should be ordered to pay the successful party’s   costs unless there is a good reason to the contrary. Accordingly, the defendants sought their costs from the claimant. Yet, the claimant argued, relying on Halsey v Milton Keynes General NHS Trust [2]and the judgment of Briggs LJ in PGF II SA v OMFS Company 1 Ltd[3] ,  that the usual rule should not be followed  as CBRE unreasonably refused to participate in ADR. The Judge agreed, and as a result CBRE was deprived of a substantial proportion of its costs. 

In the judgment, the judge made clear that if CBRE had accepted the proposals  to mediate, the material issues in the case would have been properly considered, and many of the smaller issues that 'devilled' the matter would have not had to be addressed in court. The failure by CBRE to engage in mediation meant the parties were denied the opportunity to fully canvass and engage with the underlying issues and helped perpetuate misunderstandings. In fact, there were reasonable prospects that early mediation could have even led to settlement of the claim before proceedings were commenced. 

When considering the extent to which CBRE’s costs should be disallowed, the judge did so by reference to  various time periods to reflect the types of settlement / ADR offered and subsequently rejected by the parties. For the period until CBRE's settlement offer in 2019 50% of CBRE's costs were disallowed to 'reflect the nature and significance of their failure to engage in mediation'. However, the settlement attempt by CBRE in 2019 was taken into account by the judge, and since the claimant did not engage with CBRE in relation to its offer, for the period between the offer and CBRE's second refusal to mediate, the claimant was ordered to pay the whole of CBRE's costs. From the second refusal to mediate in June 2019 onwards, CBRE was deprived of only 20% of its costs. The smaller reduction reflected, among other things, CBRE’s earlier attempt to settle the matter.

Relevance for litigants

The case acts as an important reminder that parties which unreasonably refuse to engage in alternative dispute resolution, including mediation, are likely to be penalised in costs. The advantages of mediation over the court process (including lower costs and the ability to provide a wider range of solutions than the court can order) are recognised by the courts. While there are various factors that a court will take into account when deciding whether a party’s refusal to mediate is unreasonable, it is likely that a failure to engage without proper justification in mediation will be considered unreasonable. The judge was critical of CBRE’s failure to take up the claimant’s invitations to mediate throughout the dispute (both before and after proceedings were commenced) and was not prepared to accept at face value the assertions by CBRE as to why it was unable to do so. The judge was also prepared to take a positive view of the likelihood of the mediation having a successful outcome.

 Yet, the judgment also recognises the importance of settlement offers and genuine attempts to resolve a dispute before it reaches trial whether or not mediation is proposed. Although CBRE did unreasonably refuse mediation, the fact that it made a  genuine attempt to settle the dispute prior to trial with its “drop hands” offer meant it was entitled to a full recovery of its costs (albeit for a limited period) and thereafter only suffered a relatively minor reduction of 20% notwithstanding its continued refusal to mediate.

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[1] [2020] EWHC 1050 (Comm)

[2]  [2004] 1 WLR 3002

[3]  [2013] EWCA Civ 1288