The new legal term approaches: there is a backlog of cases and restricted capacity for the Courts to deal with the client demand for justice. This could have been the introduction to an article reviewing the new legal year for many a year – certainly since “austerity” led to cuts in budgets of unprotected Government Departments such as the Ministry of Justice. MGAs therefore face longer (and inevitably more expensive) cycle times on litigated cases with the associated uncertainty and reserving implications.
Covid has further disrupted and catalysed change – certainly in the field of mediation which has, because of its inherent flexibility, quickly adapted and provided an online service to clients looking for resolution.
Mediation is a process that has been encouraged by the Courts and it is instructive as clients and lawyers return from a rather different summer to consider a number of cases determined since the rather more normal summer of 2019.
- Ohpen Ops v Invesco(18/7/19): a party cannot avoid a contractually agreed ADR process (in fact a CEDR mediation clause). This may perhaps be a narrow point but parties should give careful consideration to contractual documents before litigating and consider at the outset of a business relationship whether to include a similar dispute resolution clause in the contract.
- Lomax v Lomax (6/8/19):in a significant judgment the Court of Appeal determined that it was within the powers of the Court to order a form of Alternative Dispute Resolution. In this instance it was an Early Neutral Evaluation rather than a mediation but it is a short step to other forms of ADR. See below the observation of Vos J in the Preface to the 2020 White Book
- BXB v Watchtower(11/3/20): a vicarious liability case where an “in-house” legal team represented the defendant who lost. An indemnity costs order was made covering a period of more than a year prior to the judgment reflecting the Defendant’s unreasonable refusal to attend a Joint Settlement Meeting.
- DSN v Blackpool (20/3/20): an abuse case where the Claimant made a “good” Part 36 offer on 2/12/19. The defendant relied on the “strong defence” argument to counter the contention that it had unreasonably resisted the ADR options and negotiations suggested by the claimant. The Judge determined that the defendant’s conduct had been unreasonable and made an order that the Defendant pay indemnity costs from 1/12/18 a full year before the effective Part 36 offer. To give an idea of the costs involved an interim costs order of £200,000 was also made.
- Wales v CBRE & Aviva (30/4/20): the Claimant lost but the judge had a close look at CBRE “conduct” and disallowed 50% of CBRE’s recoverable costs on grounds of unreasonable failure to mediate to 14th Feb 2019 and disallowed 20% of its costs after 17/6/19.
We are also approaching the second anniversary of the Civil Justice Council’s Report on ADR and Civil Justice published in November 2018. A reading of that report and its recommendations might have given the defendants in DSN v Blackpool an appreciation that the “strong defence” argument was unlikely to be sympathetically received.
The report also recommended that a Judicial ADR Liaison Committee should be set up. This recommendation was adopted and the Committee has met twice this year. It is in this context that the comments of Vos J in the Preface to the new White Book reflect the likelihood of further change and encouragement of ADR and of mediation by the Judiciary during the legal year 2020/21:
“There is an increasing emphasis on ADR generally, whether through the introduction of the presumption in favour of mediation in CPR PD51R, or in the Online Civil Money Claims Pilot. Jet 2 and Lomax suggest that during 2020 there may well be significant developments in the CPR’s approach to settlement.”
There are therefore options for MGAs involved in litigation to foreshorten the process. Mediation is supported as an alternative to litigation by the Judiciary as the cases above illustrate. The process is successful in the vast majority of cases (about 80% of mediated cases settle) curtailing cost and offering broader and more creative solutions to parties.
MGAs should therefore be aware not only of the options available to them and the levers that can be used to exercise those options but also of the costs that can arise where there is a failure to engage.