Would a refusal to mediate be reasonable in context of coronavirus?
The court has recently provided some interesting guidance in relation to an unreasonable refusal to mediate in the case of BXB v Watch Tower and Bible Tract Society of Pennsylvania and the Trustees of the Barry Congregation of Jehovah’s Witnesses (2020).
The case was a personal injury action brought by a member of the Church against the Trustees of the Church. In April 2018 directions were given at a case management conference, which included a provision requiring the parties to engage in alternative forms of dispute resolution (ADR), and imposing obligations upon any party that refused to engage in ADR to then file a witness statement with the court explaining why they had not so engaged.
Almost a year later in February 2019 the Claimant’s solicitors suggested a settlement meeting, but this was declined by the Defendant.
In July 2019 the Claimant made a Part 36 offer which the Defendant subsequently failed to beat when the case came to trial in early 2020. As a result, the usual cost consequences of Part 36 applied. The Defendant accepted that it would be liable to pay the Claimant’s costs on an indemnity basis from 21 days after the offer was made, and subject to the other penalties usually associated with Part 36 offers.
The principal issue for the court to determine was whether or not the indemnity costs should be extended to a date prior to the Part 36 offer, given the Defendant’s refusal to engage in ADR.
The Court determined that the refusal to engage in ADR was unreasonable, and therefore extended the indemnity costs order to cover a broader period running from February 2019 (when it could be said that the Defendant’s refusal to engage in ADR had been unreasonable). Therefore, the Defendant ended up paying a greater proportion of the Claimant’s costs on a full indemnity basis and subject to a punitive interest rate.
The Court imposed an enhanced interest rate of 4% on costs and damages. The Court indicated that it might have imposed a greater punitive interest rate, save for the fact that the Defendant’s only unreasonable conduct was in its refusal to engage in ADR at the earlier stage. In all other aspects it had behaved reasonably, and that to some extent mitigated its position with regards to the scope of indemnity cost order.
We live in extraordinary times, with coronavirus impacting every aspect of our working and personal lives. However, this case provides some interesting insight as to what the court may do in the event that a party refuses to mediate on the basis of coronavirus. This is because a lot of mediation houses are offering to provide mediations remotely, by telephone conference or via video calling facilities such as Facetime, Skype or by Zoom. A number of these mediations have proceeded effectively and have led to successful outcomes.
Given the effectiveness of virtual mediation, and the fact that it is very much available currently, it is likely that a court will determine that a refusal to mediate solely on the basis of coronavirus would be deemed as unreasonable conduct, and therefore would expose the refusing party to a potential indemnity cost order for a substantial part or even the whole of the proceedings.
Therefore, it remains sensible to consider engaging in early ADR notwithstanding external events that are beyond your control, as the facilities are on offer to provide an effective service to parties who want to try and resolve their disputes. Courts are still likely to take a dim view on those who do not engage unless the excuse is a very strong one.