By Paul Sandford, Director, ASM Plus
In a very recent blog, I considered the importance of the recently decided High Court judgment in the case of DSN – v- Blackpool Football Club (the Blackpool case) (2) in which Mr Justice Griffiths strongly criticised an ultimately unsuccessful defendant who declined both to discuss settlement and/or go to mediation. In consequence he awarded the successful claimant not only a significant sum in compensation but also substantially higher costs than might otherwise have been the case.
In the Ohpen case that was also decided in early 2020 by a different High Court judge, Mrs Justice O’Farrell, (O’Farrell J) the dispute in question related to an alleged breach of a high value commercial contract that amongst other things specified that in the event of dispute, the parties should go to mediation.
The primary facts of the Ohpen case and the findings and rulings made by the court
In 2016 Invesco, an investment company that trades in stocks, shares and bonds, entered in to a contract with Invesco. The contract specified that in return for the payment of a multimillion-pound sum Invesco would construct an online platform to enable Ohpen’s retail customers to buy and sell investments that it offered them. The contract was signed on 1st July 2016 with a stipulated platform launch date of 1st March 2017.
Amongst other terms, this contract included one particular provision, “clause 11” which prescribed a mediation procedure to be followed prior to the commencement of any court proceedings.
By the end of February 2017, the platform was not ready and further delays ensued with each “side” blaming the other. By late 2018 the platform was still not ready. Invesco issued a notice of termination essentially alleging that there had been a fundamental breach of contract. Invesco issued court proceedings in the High Court claiming £4.7 million for wrongful termination of contract. Invesco counterclaimed seeking £5.7 million. One particular issue that arose was whether the aforementioned clause 11 was valid and binding.
At the beginning of a judgement that followed what appears to have been an initial lengthy court hearing, O’Farrell J identified that the principal issue for her to resolve was whether the court proceedings started by Ohpen had been issued in breach of a contractually agreed tiered dispute resolution procedure and, if so, whether the court proceedings should be put on hold, pending referral of the dispute to mediation. One legal team was headed by a Queens Counsel, i.e. a very senior barrister who by virtue of being very senior and highly experienced, might conceivably have stipulated a very substantial fee.
Counsel representing Invesco contended that clause 11 of the Agreement was a valid and binding applicable alternative dispute resolution clause. He also contended that in breach of that provision Invesco had wrongly commenced the court proceedings and that the Court should exercise its discretion to stay the proceedings (i.e. put them on hold) in order to give effect to the mediation process that had been agreed by the parties.
Counsel representing Ohpen contended that this proposition was wrong and that because clause 11 was part of a contract that had been terminated, it was not binding and accordingly the court proceedings should go ahead.
In the course of considering these contentions and delivering her quite lengthy judgment, O’Farrell J took into account the guidance given in a number of previously decided and relatively recent cases that had addressed similar issues.
In so doing she particularly noted that in a 2002 case (3), another High Court judge, Mr. Justice Colman, had determined that a contractual agreement to refer a dispute to ADR (Alternative Dispute Resolution) could be enforceable by a stay of court proceedings. He continued stating that for a court to decline to do so would be to “fly in the face of public policy” as expressed in the all-important Civil Procedural Rules (the CPR), the rules which prescribe the manner in which civil cases are conducted.
O’Farrell J also noted that her 2002 predecessor had referred to an authoritative and binding decision of the Court of Appeal and also to the rules of Equity that have been established over many centuries.
Having unequivocally established that there was an authoritative underlying basis for her to determine that it would be lawful for her to stay the court proceedings O’Farrell J went on to scrutinise clause 11. In so doing she was mindful to ascertain whether it had been properly drafted and having done so she concluded that it was meaningful and that it had sufficient certainty. She also laid down the following clear, flexible and wide-ranging principles (4) which specify what has to be established before a provision such as clause 11 will be upheld by a court as valid.
“i) The agreement must create an enforceable obligation requiring the parties to engage in alternative dispute resolution.
- ii) The obligation must be expressed clearly as a condition precedent to court proceedings or arbitration.
iii) The dispute resolution process to be followed does not have to be formal but must be sufficiently clear and certain by reference to objective criteria, including machinery to appoint a mediator or determine any other necessary step in the procedure without the requirement for any further agreement by the parties.
- iv) The court has a discretion to stay proceedings commenced in breach of an enforceable dispute resolution agreement. In exercising its discretion, the Court will have regard to the public policy interest in upholding the parties’ commercial agreement and furthering the overriding objective in assisting the parties to resolve their disputes.”
Having identified these principles and considered the facts of the case before her, Farrell J not only reiterated that there was a clear legal basis for her to stay the court proceedings, but also that the all-important clause 11 satisfied all four of these requirements. In so doing she expressed herself in very clear, neutral terms and there was no express disapproval of either party. However, it is quite apparent from her judgment that a clear and certain agreement to mediate should not generally be ignored by the courts.
The costs issues considered by the court subsequent to its primary findings and rulings.
Because Invesco had succeeded, it followed that it was entitled to be paid its costs which were awarded on the quite usual “standard basis”. In the light of there being disagreement about precisely how much O should be paid, a second hearing was convened. (5)
The court rules clearly state that the basis of assessment of costs of litigation is that “the court will only allow costs which are proportionate ie. to the matters in issue and resolve any doubt which it may have as to whether or not costs were reasonably incurred or reasonable and proportionate.” (6)(7)
In practice this means that where costs are awarded, usually against an unsuccessful party that other than in cases where it has been determined that a losing party has behaved particularly badly, a successful party will only recover a proportion of the sums of money expended on its behalf by its legal team. In the present case, Ohpen had presented a claim for costs in which a figure in excess of £46,000 was specified. O’Farrell J concluded that Ohpen should pay Invesco pay a sum that was a little in excess of £28,000. This determination was quite in keeping with court practice and effectively meant that even though it had succeeded and that the court had clearly rejected the contentions made by Ohpen, Invesco had a costs shortfall in excess of £15,000 which it could not recover.
There is no indication as to the extent of Ohpen’s costs but it would not be unreasonable to infer that approximately £46,000 had also been expended on its behalf. That being the case, one might also reasonably infer that the combined costs of Ohpen and Invesco were in the region of £100,000, this in addition to very substantial claimed joint losses.
The important principles that were so clearly laid down by O’Farrell J must not be underestimated. Particularly when considered in tandem with the Blackpool case, the judgment in Ohpen makes it abundantly clear that mediation is not some form of “optional extra” that parties to disputes and/or to court cases can resort to if they feel like it. Equally it is made abundantly clear that properly drafted contractual agreements to mediate will be upheld by the courts.
In Ohpen O’Farrell J made it abundantly clear that there was ample legal authority such as would permit a court to stay proceedings pending the outcome of mediation. In particular, the guidelines that she specified on the issue of what constitutes an agreement to mediate are admirably clear and like the rest of her judgment, free of obscure legalese. This guidance also demonstrates that wording such as “agreement to mediate” can be very flexibly and broadly interpreted and as with the Blackpool case, her judgment sets out of a sequence of authoritative broad principles that should be applied in all types of disputes, not just high value commercial cases. Accordingly, it is clear that as happened in the Blackpool dispute, parties who decline to mediate and their lawyers may at the very least find themselves short of excuses and the subject of judicial criticism.
However, following O’Farrell J’s judgment Ohpen’s claim and Invesco’s counterclaim were no nearer to being resolved that they had been previously. Even though the judge specified a very narrow time frame for the mediation to take place, it seems to me that in reality, there was a notable element of both parties having to “start again” four or so years after the contract in question had been signed and three or so years after it had been terminated!
An objective, non-legal observer who was less concerned with legal niceties might reflect that in reality little or nothing had been achieved. Such an observer might also opine that delays that were perhaps in part precipitated by the ostensible “reluctance” of one party to go to mediation could serve only to fuel even more discord and disharmony. Would it not have been simpler to have mediated in the first place.
I also have a slight concern that O’Farrell J’s judgment may prompt future prospective litigants who may perhaps be disinclined to mediate and their lawyers to focus on construing terms such as “agreement to mediate” rather than actually mediating, even though they run the risk of incurring significant costs penalties. One therefore trusts that lawyers will take the Ohpen guidance on board and they and their clients will see this judgment as an opportunity to resolve issues in the timely and cost-effective manner that mediation offers.
- Ohpen Operations UK Limited & Invesco Fund Managers Limited.  EWHC 2246 (TCC) (Ohpen) (the substantive judgment)
- DSN -v- Blackpool Football Club  EWHC 670 QB (Blackpool) (my blog which considers this case can be seen at: https://bit.ly/3glrOvc)
- Cable & Wireless Plc v IBM United Kingdom Ltd  EWHC 2059
- Paragraph 32 of O’Farrell J’S substantive judgment
- Ohpen Operations UK Limited & Invesco Fund Managers Limited.  EWHC 2504 (TCC) (a second judgment that dealt with costs issues)
- CPR 44.2(1).
- My highlighting
Principal Director of ASM PLUS, civil/commercial, workplace, employment, family and educational mediator and trainer with a judicial/legal background. He has knowledge and expertise in dispute resolution in a wide range of areas and disciplines and mediates online.