From childhood, society seeks to encourage us to play fair and follow the rules. Most recently, both the Cabinet Office as well as the Construction Leadership Council have sought to encourage contractual parties to espouse such principles and work collaboratively to resolve issues which have arisen in the wake of Covid-19.
Clearly this is useful guidance. Especially since, in many construction cases, it will commercially be in the contracting parties’ best interests to work together and share the impact of Covid-19 in relation to delays and costs.
Yet, notwithstanding the virtuousness of this goal, there will be situations where parties will be unable to resolve matters between themselves and will need to resort to formal dispute resolution. In doing so, parties will need to remember those childhood lessons, as illustrated by the recent decision in DSN v Blackpool Football Club Limited  EWHC 670 (QB).
The Claimant in DSN was successful in his claim, and was thus entitled to costs: it was the basis for payment of these costs that was in question. The Claimant was seeking the more advantageous indemnity basis due in part to the Defendant’s failure to engage in alternative dispute resolution (ADR).
Within the Court’s case management directions there was a specific requirement that the parties were to consider any means of ADR “at all stages” of the claim. Where a party chose not to engage in any proposed ADR, the directions required such party to serve a witness statement on the other outlining why the first party would not take part in ADR.
In response to the Claimant’s proposal to enter into settlement negotiations, the Defendant’s solicitor provided the required witness statement stipulating that its client would not engage in settlement discussions as the Defendant remained “confident in the strength of its defence”.
Unsurprisingly, Mr Justice Griffiths found the Defendant’s reason for not partaking in ADR “inadequate”, and stated that “no defence, however strong, by itself justifies a failure to engage in any kind of” ADR. Accordingly, the Defendant was ordered to pay indemnity costs commencing one month after the case management directions.
Importantly, the judge highlighted that ADR “allows solutions which are potentially limitless in their ingenuity and flexibility, and they do not necessarily require any admission of liability, or even a payment of money.”
While not a construction case, DSN, reiterates judicial expectation of the use of ADR. Irrespective of the strength of a party’s case, where an option to engage in ADR arises at any point throughout the litigation process, the Court will take notice of a party who refuses to participate.
Additionally, ADR might offer flexible and innovative methods of dealing with delay and cost disputes which will likely serve all parties far better than protracted and costly claims. One has to wonder if Mr Justice Griffiths read the Government’s recent guidance note before giving his judgment.
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