The recent decision in Garritt-Critchley v Ronnan is a stark reminder of the risks involved in refusing to engage in alternative dispute resolution (“ADR”). In this case the defendant repeatedly rebutted the claimant’s offers of mediation, resulting in a punitive costs order being made against them. Parties should bear this in mind when a dispute arises and give due consideration to the various methods of ADR so as to avoid being penalised on costs.
Alternative dispute resolution
Where the court considers it appropriate, parties are encouraged to use ADR as a method of resolving their disputes. A particularly effective and popular method of ADR is mediation. This is a flexible, voluntary and confidential method of ADR in which a neutral mediator assists the conflicting parties to work towards a settlement.
Mediation is significantly less formal than traditional court proceedings and the confidential, ‘without prejudice’ nature allows parties to express their views without the worry that, should the mediation be unsuccessful, these views will later be used as evidence at trial. This promotes and encourages open and honest dialogue which very often results in a settlement. A further advantage of mediation is that it allows the parties to deal with a variety of issues, not all of which might form part of the pleaded case.
As shown in Garritt-Critchley v Ronnan, engagement in the mediation process can be a statement of a party’s commitment to keeping costs to a minimum; an attitude which courts look on favourably when considering the amount of costs to be paid by each party.
Garritt-Critchley v Ronnan
In this case, one of the parties chose to continue with litigation rather than engage in mediation. This is not an unusual stance to be taken however, it does carry risk. Here, the parties were in a dispute over the existence of a building contract. In pre-action correspondence the claimant had proposed “an appropriate form of ADR, such as mediation” as a way of settling the dispute and avoiding proceedings. This offer was repeated on more than one occasion during the litigation but the defendant continually refused to participate, stating that the parties were “too far apart” to justify mediation. The defendant also stated that their refusal to mediate was “reasonable”, as they were so confident in the strength of their defence.
The matter proceeded to a four day trial, but before judgment was handed down the defendant accepted the claimant’s Part 36 Offer of £10,000 plus costs. The claimant then asked for indemnity costs, claiming that the defendant’s refusal to mediate was unreasonable.
The Judge found in favour of the claimant, and criticised the defendant for dismissing ADR throughout the litigation. In particular, the court made the following points:
- The fact that a party believes he has a watertight case is no justification for refusing mediation.
- Even where the parties’ positions appear to be ‘binary’, i.e. with no middle ground, mediation may still be a useful way of addressing central issues.
- Distrust between the parties is not a reasonable excuse for failing to mediate.
- Even where the costs of mediation appear disproportionate to the value of the claim, it is still likely to be less expensive than a trial.
Given that the claimant’s costs were £161,000, this must have been a difficult pill for the defendant to swallow when accepting a Part 36 offer for £10,000.
Many parties are unaware, or sceptical, of the alternative forms of dispute resolution that are available. This case acts as a reminder of just how helpful ADR can be as a way of settling litigation before incurring the costs involved in a trial. Even where parties seem irreconcilable in their opinion ADR should be seriously considered, with 70% of cases referred to mediation being settled on the day.
Further, this case highlights how refusal to consider forms of ADR during the litigation process can be a costly mistake to make, and just how unfavourably the court looks on a party who has done so. Of course, it is not compulsory for parties to engage in mediation, but it must be considered carefully. If ADR is refused, the party refusing should be prepared to justify its decision to the court and face the costs consequences of doing so.
If you are considering bringing a claim or have ongoing cases, ADR should be carefully considered, no matter how strong you believe a claim to be.