Successive decisions of the High Court and Court of Appeal have reinforced the need for litigating parties to proactively consider and engage with invitations to explore settlement of their disputes through ADR (see PGF II SA v OMFS Co 1 Ltd  EWCA Civ 1288 and Thakkar v Patel  EWCA Civ 117). The ADR duty on litigating parties was also discussed at length in Lord Justice Briggs’ (as he then was) Civil Courts Structure Review (Interim and Final Reports) and more recently by the Civil Justice Council ADR Working Party in its ADR Interim Report.
The most recent addition to the growing and evolving ADR jurisprudence is the decision of Mr Justice Arnold in Shakir Ali & another v Channel 5 Broadcast Ltd  EWHC 840 (Ch). As well as dealing with issues regarding Part 36 offers and costs budgets, Arnold J also considered the unsuccessful defendant’s argument that the claimants should be penalised in costs for having wrongly refused to engage in ADR. This note only considers the ADR point.
The claimants succeeded on their claim against the defendant for misuse of private information and were awarded damages of £10,000 each. The court was then required to resolve the issue of the costs of the proceedings.
During pre-action correspondence, the defendant indicated that, although it intended to robustly defend the matter, it was prepared to engage with ADR to resolve the issues in dispute. The claimants, who were,inter alia, seeking injunctive relief and a public apology from the defendant, replied by stating that ADR was not appropriate at this stage but that their clients would keep it under review ‘once the substantive issues of law and regulation have been addressed’.
The claimants proceeded to issue their claims and then replied to the defendant’s earlier letter by repeating that ADR was not, at this point, appropriate but remained prepared to engage with ADR at an appropriate time and invited proposals for ADR. The defendant did not make proposals for ADR and the usual procedural steps were taken with various Part 36 offers being made.
After the exchange of witness statements, the defendant wrote to the claimants proposing mediation and explaining that, in its view, mediation would provide the claimants with the opportunity to explain why they felt they were entitled to an apology and that it would ‘consider seriously any reasonable solution on this issue’. The claimants replied by agreeing to mediation and agreeing that the issue of the defendant’s apology could be further explored at the mediation. The mediation took place but did not settle the matter. Before trial, the claimants’ costs budgets were approved, which included cost relating to the mediation.
Decision on ADR and costs
On the issue of costs and mediation, the defendant contended that there should be no order as to costs, alternatively that the claimants should only recover 50% or 75% of their costs because the claimants wrongly refused to engage in ADR. In support of this contention, the defendant relied upon PGF II SA v OMFS Co 1 Ltd and Thakkar v Patel. It will be recalled that Briggs LJ in PGF extended the principles established in Halsey v Milton Keynes General NHS Trust  EWCA Civ 576 on assessing unreasonable conduct for the purposes of costs sanctions and held that, as a general principle, silence in the face of an invitation to ADR would amount to unreasonable conduct. His lordship went on to justify the ‘modest extension’ to the Halsey principles when he said: ‘This case sends out an important message to civil litigants requiring them to engage with a serious invitation to participate in ADR, even if they have reasons which might justify a refusal, or the undertaking of some other form of ADR, or ADR at some other time in the litigation. To allow the present appeal would, as it seems to me, blunt that message. The court’s task in encouraging the more proportionate conduct of civil litigation is so important in current economic circumstances that it is appropriate to emphasise that message by a sanction which, even if a little more vigorous than I would have preferred, nonetheless operates pour encourager les autres.’
Did the claimants behaviour in Ali fall within the scope of the PGF principles and therefore justify a costs sanction? Arnold J held that the claimants’ conduct throughout the litigation demonstrated that they did not refuse to engage in ADR and, as a consequence, there was no justification for depriving them of any part of their costs. The judge noted that while it was true to say that the claimants did not ‘embrace’ the defendant’s initial suggestion of ADR, the claimants did respond by stating that they would keep the issue under review.
Further, Arnold J held that the claimants’ response to the defendant’s second suggestion of ADR (which on its face was confined to the question of an injunction) was to state that they were fully prepared to engage in ADR at a suitable time and to invite proposals. The defendant, however, did not propose mediation (or any other form of ADR) until much later, and when the defendant did propose mediation, the claimants, Arnold J noted, ‘promptly agreed’.
An initial refusal by a litigating party to engage with ADR will not automatically mean that costs penalties will follow. The courts will carefully analyse each party’s behaviour on the ADR issue throughout the litigation process. As Ali demonstrates, the party receiving the ADR invitation should remain open to the possibility of engaging with ADR at a later stage of the litigation even though it may not be appropriate at the time the invitation is made. The claimants in Ali were correctly found by Arnold J to have kept the issue of ADR under review, actively engaged with the defendant on the issue and made clear that they were willing to refer their dispute to mediation. This engagement in an ongoing ‘ADR dialogue’ ultimately protected the claimants from potentially being penalised in costs.
Masood Ahmed is associate professor at the University of Leicester and a member of the Civil Procedure Rule Committee (@ahmedCivJustice)