Successful defendant penalised in costs for ADR failure

Halliwell: Mediation would have had reasonable prospect of success

The High Court has penalised a successful party for refusing to engage in alternative dispute resolution (ADR), saying it had brought the litigation on itself as a result.

The decision by His Honour Judge Halliwell, sitting as a High Court judge, follows two rulings we reported last month where unsuccessful defendants were ordered to pay indemnity costs for similar failures.

The dispute in Wales (t/a Selective Investment Services) v CBRE Managed Services Ltd & Anor [2020] EWHC 1050 (Comm) originated from CBRE’s decision to move its employees to a new pensions platform and, in so doing, to dispense with the claimant’s services.

He initially served a letter of claim on CBRE on 29 June 2016, and indicated his willingness to engage in ADR. CBRE refused and Mr Wales eventually issued proceedings in July 2018. The claim was dismissed in January.

HHJ Halliwell found that CBRE unreasonably refused to engage in ADR until it made an offer in February 2019 to compromise the proceedings, albeit on a subject-to-contract basis only.

He said: “At that stage, it was incumbent on Mr Wales to respond and he is culpable for a failure to make inquiries about the offer or otherwise engage with CBRE’s solicitors during this period.

“However, once Clarke Willmott [for Mr Wales] proposed mediation in the week commencing 17 June 2019, CBRE again declined to participate in or do anything to advance a mediation prior to trial the following month.”

CBRE’s actions were unreasonable, he continued, with the refusal to engage in mediation prior to the issue of proceedings compounded its failure to provide a detailed response to the issue of ADR raised in the letter of claim, which was in breach of the pre-action protocol.

“More particularly, at this stage it meant that the parties were denied the opportunity to fully canvass and engage with the underlying issues…

“Had CBRE been willing to engage in mediation, there would in all likelihood have been a tripartite mediation in which all the material issues were properly considered and addressed.”

The judge rejected CBRE’s reasons for refusing to participate in the proposed June 2019 mediation, which it said was because the parties had insufficient time to prepare.

“There is nothing to suggest that the solicitors instructed by Mr Wales or [fellow defendant] 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 not have had time to prepare for trial.

CBRE “appears to have lost sight of the wider observations” about the advantages of mediation made by the Court of Appeal in Halsey, HHJ Halliwell said. There was, he said, nothing in the nature of the dispute to render it unsuitable for mediation.

Further, while “the conceptual basis for Mr Wales’s claim was unsound”, Mr Wales nursed a genuine sense of grievance and, to the extent that CBRE encouraged this by failing to engage properly with the pre-action correspondence, “it brought the litigation on itself”.

HHJ Halliwell added: “Given the nature and longevity of the historic relationship between the parties and the nature of the issues in the litigation, I am satisfied that at each stage a mediation would have had a reasonable prospect of success.”

As a result, he 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.

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