The defendant costs specialists

Refusing offers of ADR

By on Dec 8, 2015 | 4 comments

An unreasonable refusal to engage in ADR can lead to adverse costs consequences even to a party who is ultimately successful.  This same principle applies to costs disputes.

What amounts to unreasonable refusal will be fact sensitive, but anecdotal evidence suggests that some costs judges in the Senior Courts Costs Office are ordering parties to pay the costs of assessment where they have refused an offer of ADR from the other side.

Certainly one well known personal injury law firm appears to be using this for tactical reasons.  Mickey Mouse offers are made together offers of mediation, JSM, etc, no doubt in the hope that if the other side declines to engage (on the basis the offers made are not even a sensible starting place for negotiations) they will have lined up an argument as to the costs of detailed assessment.

The problem paying parties face is the fact that this combines with the default starting position that they will be ordered to pay the costs of assessment unless the court orders otherwise.  Mediation, JSMs, etc can add another expensive layer of costs to the assessment process with no guarantee of success.  Although making a sensible offer at an early stage should always be the appropriate approach, even this is no guarantee a court will conclude it was reasonable not to engage in ADR.

ADR can certainly assist in helping parties to reach agreement in higher value disputes but paying parties will want to ensure this is at proportionate cost.

If offered ADR, I will often agree to this but on the basis that each side bears their own costs of the process.  This flushes out the time wasters as it means that it will focus the minds of both sides on trying to reach a sensible agreement, otherwise any costs incurred will have been entirely wasted with no chance of recovering the same.  Given the whole purpose of ADR is that it is outside the formal litigation process, it is unlikely that placing this condition on engaging in ADR will be criticised by the courts in due course.

    4 Comments

  1. Writing as an accredited mediator for a moment, I can say that 95% of all mediation agreements I have seen actually include terms insisting that the costs of mediation are not caught within the litigation costs and each side bears their own mediation costs.

    As a result it takes an conscious effort to agree to remove those terms and make the costs recoverable inter-parte. Certainly the basic agreement I use has those terms, and in most non-CFA work I am convinced that having a financial investment in the mediation helps to get the parties in the right mindset for the meeting.

    Funnily enough, it is often parties using CFAs that want the costs recoverable as the early “no win no fee” sales pitch goes right out of the window when informing a client what they will have to find several thousand quid for a mediator, solicitor and counsel to attend a mediation, irrespective of win / lose. Many clients just don’t have the ability to pay. Many clients refuse to accept that 1 type of meeting is “free” but another is not.

    Now speaking as a costs solicitor, I have not yet seen a single example of advice to a reluctant lay claimant informing them that if they refuse to consider ADR they might not recover their costs… and yet the definition of “win” in the CFA would have been met as damages would be paid.

    How long will it be before a firm tries to bill their own client in those circumstances?

    Paul

    8th December 2015

  2. Those particular tactics are deplorable BUT insisting on each party in a costs dispute bearing their own costs of ADR (other than the mediator’s fee) carries its own risks – RPs could argue that ADR denies them recompense that they could otherwise receive from the PP through the adversarial process.
    Speaking in a purely personal capacity I am an advocate of ADR in costs disputes and of consensus generally. Any other thoughts on how this might be achieved?

    Sue Nash

    8th December 2015

  3. My own personal view, is that the majority of organisations trying to jump onto the ADR/Mediation bandwagon (and lets be honest, that’s what it is to some in order to replace DA work), are inextricably linked to either claimant or defendant leanings or costs firms. Its rather difficult to pick someone on that basis

    There is of course a very viable alternative option which is not in place presently

    Anonymous

    8th December 2015

  4. Simon – agreed it has to be at proportionate cost. However in the case reported so far, C even beat it’s own Part 36 offer as well as offering ADR.

    Even you have to agree there is nothing more C could do to reasonably try and settle the case?

    http://www.lawgazette.co.uk/news/costs-judgment-a-declaration-of-war-against-adr-refuseniks/5052702.article

    ADR is perfect for £150k+ Bills of Costs. It’s quick, proportionate and often resolves the case there and then, if not, normally a few weeks later. Liability is never an issue (there is a binding authority for costs), just haggling over a commercial settlement. ADR is the future.

    Anon

    11th December 2015

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