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High Court overturns costs judge ruling that holiday claimants should have used ABTA mediation scheme

Holiday: mere presence of ADR scheme does not mean you have to use it, says court
Claimants who litigate instead of using an available ADR scheme are not automatically acting unreasonably, the High Court has ruled.

Mr Justice Singh overturned a costs judge’s decision that it was neither reasonable nor proportionate for a group of claimants to spend £456,000 in base costs alone on litigating holiday claims that could have been dealt with far more cheaply by the mediation scheme run by the Association of British Travel Agents (ABTA).

Master James had ruled on several preliminary issues following a group action brought by 599 claimants who had stayed at a resort in Turkey in the summer of 2009.

They settled their cases for £1.7m, and their solicitors, Irwin Mitchell, claimed base costs of just under £2m, with a further £2.5m in additional liabilities. At issue in particular were the 152 claimants who were not ill but had to endure substandard accommodation and service, and caring for family members and companions who had fallen ill.

The ABTA scheme provided compensation of up to £5,000 per person or £25,000 per booking, a cap that Master James said would have covered the 152 claimants “perfectly adequately”.

She ordered that the maximum costs the defendant First Choice Holidays should have to pay in relation to these claimants was what they would have paid to use the ABTA scheme – a maximum of £264 each.

But according to a report today on Lawtel of Briggs & 598 Ors v First Choice Holidays & Flights Ltd, Mr Justice Singh held that the position had not yet been reached where the mere presence of ADR meant that it was not reasonable to litigate.

The report said: “The parties had reached the stage of proceedings where a detailed assessment of costs was to occur; they were not at a stage where decisions were to be made as to whether to make costs orders at all.

“There were already costs orders in place for the claimants, and the effect of the costs judgment was to negate the earlier orders. The cost judge’s conclusion that it was inherently unreasonable for the appellants to enter into a CFA rather than a voluntary mediation scheme went too far. The costs judge had erred.”

This is a disappointing decision for mediators but we think it is confined to its own facts. If the Claimants had been offered ABTA and refused the defendants would have been on strong ground to argue unreasonablenss. It appears that in this case the Claimants simply didn’t avail themselves of an ADR scheme that exists. Moreover, they could still have mediated the dispute once proceedings had been issued. It doesn’t overrule the authorities on refusal to mediate or ignoring an offer to mediate and is only a High Court decision.  In any event, we await an appeal.