High Court judges order indemnity costs over ADR failures

Blackpool FC: Conduct was out of the norm

The courts are getting harder on parties who fail to follow directions to try alternative dispute resolution (ADR), with judges imposing indemnity costs in two cases in recent weeks.

They stressed that just because defendants may think they have strong defences, this was not a good reason not to engage in ADR.

DSN v Blackpool Football Club Ltd (Rev 1) [2020] EWHC 670 (QB) concerned a successful historic sexual abuse claim for which the defendant was found vicariously liable last month.

The claimant beat his part 36 offer of December 2019 and argued that he should have indemnity costs for a longer period because of the defendant’s failure to engage in settlement discussions.

In October 2018, Master McCloud had issued directions, including that “at all stages the parties must consider settling this litigation” by any means of ADR. Any party that did not engage with a proposal by the other had to serve a witness statement giving reasons.

In October 2019, the claimant sought to start ADR but the defendant flatly refused, its solicitor’s witness statement saying this was because it believed it had a strong defence and “no purpose would be served by any form of ADR”.

The defendant also failed to respond to the claimant’s first two part 36 offers.

Mr Justice Griffiths found the defendant’s reasons “inadequate”. He said: “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.

“Settlement allows solutions which are potentially limitless in their ingenuity and flexibility, and they do not necessarily require any admission of liability, or even a payment of money. Even if they do involve payment of money, the amount may compare favourably (if the settlement is timely) with the irrecoverable costs, in money terms alone, of an action that has been successfully fought.”

The judge noted that the claimant was not primarily motivated by money – as confirmed by the low figure (£10,000) of his final part 36 offer. Rather, he “expected the club to want to engage and to understand what had happened”. But it did not engage at all.

Even if the defendant had been correct that it had a strong defence, “its responses to the claimant’s settlement overtures and the statement made in compliance with [the order] would still, in my judgment, have fallen short of an acceptable level of engagement with the possibility of settlement or ADR.”

This was conduct that took the case “out of the norm” and the judge ordered the defendant to pay costs on the indemnity basis from 1 December 2018, a month after Master McCloud’s order, and over eight months after the claimant’s first part 36 offer.

BXB v Watch Tower and Bible Tract Society of Pennsylvannia & Ors [2020] EWHC 656 (Admin) was also a successful vicarious liability claim following the claimant’s rape in 1990. The claimant beat her part 36 offer made in July 2019; the trial was in January.

In April 2018, Deputy Master Brown issued the same direction as Master McCloud.

The claimant submitted that the defendants did not try to explore settlement other than to suggest a ‘global offer’ to settle the claimant’s case and those of two children who had been sexually assaulted by the same man and were represented by the same solicitors.

The claimant’s solicitors explained that a global offer would cause them a conflict of interest and invited the defendants to make separate offers. In response, the defendants offered a joint settlement meeting (JSM) in relation to the two other cases only.

The solicitors asked for a JSM in relation to the claimant’s case too, but this was rejected. Though they did not provide a statement as required by the deputy master’s order, before Mr Justice Chamberlain the defendants argued that this was because the claimant’s case was significantly different, as she was an adult.

Chamberlain J found that the defendants acted unreasonably by not only being silent in the face of an invitation to participate in ADR, but also by breaching the order to explain such a refusal.

Though he accepted that this case was very different from the other two, the judge said “this did not, however, necessarily mean that there was nothing to discuss”.

He explained: “One important purpose of a joint settlement meeting is to convey a defendant’s view about the strength of its case.

“In any event, the possibility of agreeing quantum subject to liability provides a good reason to engage in discussions even in a case where the defendant is confident about its case on liability. In this case, that would have shortened the trial and avoided some of the intrusive questioning which in the event was necessary.”

The judge noted that the claimant’s first part 36 offer showed she was willing to settle for less than she was ultimately awarded. “There is every reason to think that, had the defendants engaged with the proposal at an earlier stage, that willingness would have become known.”

Chamberlain J ordered that the defendants pay indemnity costs from 25 February 2019, the date when they refused to attend a JSM.

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