ICC Judge Barber’s judgment in Invenia Technical Computing Corporation & Anor v Matthew Hudson [2024] EWHC 1302 (Ch) deals with costs issues arising out of a number of related applications including a successful one by Invenia to restrain the presentation of a winding up petition based on five statutory demands served by the respondent, Mr Hudson, two applications for relief from sanction in relation to the late filing and service of his evidence in response to the injunction application and a strike out application. ICC Judge Barber ordered that:
- Mr Hudson should pay the applicants’ costs of and occasioned by his relief from sanctions applications, an adjournment application, and an application for an extension of time on the standard basis; and
- subject to (1), he should pay the applicants’ costs of and occasioned by the injunction application and the strike out application on the indemnity basis;
in each case subject to detailed assessment if not agreed.
Mr Hudson argued that his liability in costs should be reduced on the basis that the applicants had unreasonably refused to participate in mediation, but his arguments failed to persuade the judge. She drew extensively on Halsey v Milton Keynes NHS Trust [2004] EWCA 576, taking as her starting point Dyson LJ’s statement:
“’In deciding whether to deprive a successful party of some or all of his costs on the grounds that he has refused to agree to ADR, it must be borne in mind that such an order is an exception to the general rule that costs should follow the event. In our view, the burden is on the unsuccessful party to show why there should be a departure from the general rule. The fundamental principle is that such departure is not justified unless it is shown (the burden being on the unsuccessful party) that the successful party acted unreasonably in refusing to agree to ADR.”
She noted that Dyson LJ had confirmed that whether a party had acted unreasonably in refusing ADR had to be determined having regard to all the circumstances of the particular case, but noted six factors of possible relevance to that question:
- the nature of the dispute;
- the merits of the case;
- the extent to which other settlement methods had been attempted;
- whether the costs of ADR would be disproportionately high;
- whether any delay in setting up and attending the ADR would have been prejudicial; and
- whether ADR had a reasonable prospect of success.
Applying those principles to the circumstances of the case before her, ICC Judge Barber gave a number of reasons for rejecting Mr Hudson’s submissions:
- Having regard to the correspondence and the evidence as a whole, it was clear that at all material times the applicants reasonably believed that they had a strong case (see Halsey at [18]). “This,” she said, “was a clear-cut case for injunctive relief, on an application with a threshold test akin to that applied in applications for summary judgment: see Halsey at [19]. The Strike Out Application was plainly hopeless and was ultimately dismissed marked totally without merit.”
- Other settlement methods had already been attempted; the applicants had already given Mr Hudson the opportunity to withdraw the statutory demands he had served and to offer a permanent undertaking not to present a petition. That opportunity had been rejected, suggesting that Mr Hudson had unrealistic views of the merits of his case (see Halsey at [20]).
- The mediation offer was put forward in November 2023 at a time when the parties already had a final half-day hearing listed in December (see Halsey at [22]). The suggestion that ADR could have saved time and costs was fanciful.
- The proposed mediation had no real prospects of success. Again the judge referred to Mr Hudson’s “entirely unrealistic views about the merits of his case.” He compounded matters by making repeated serious unsubstantiated allegations of wrong-doing against the applicants and their lawyers, despite being asked on numerous occasions to desist.
- In reality, mediation would simply have added another layer of expense for no good purpose.
- It would also have put in jeopardy the December listing, thus delaying final disposal of the proceedings (see Halsey at [16] and [22]).
- Mr Hudson relied on the fact that the applicants had agreed to ADR with another creditor who had served a statutory demand, but the terms agreed with that creditor were different, and the scope of the dispute between the parties in that case was much narrower than that in this case.
- In the present case, a number of the sums claimed in the statutory demands had connections with issues raised in complex litigation being conducted between the applicants and Mr Hudson in the King’s Bench Division involving contested allegations of breach of fiduciary duty, commercially disreputable conduct and misappropriation of property (see Halsey at [17]).
Although ICC Judge Barber decided the costs/mediation issue largely on the basis of Halsey, she mentioned other authorities to which she had been referred: Dunnett v Railtrack [2002] All ER 850, Hurst v Leeming [2003] 1 Lloyds’ Rep 379, Royal Bank of Canada v Secretary of State for Defence [2003] EWHC 1841 (Ch) and Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416. She did not address them for reasons of brevity but confirmed that she had considered them and taken their guidance into account.
It should be emphasised that this decision does not mean that mediation or other forms of ADR are necessarily unsuited to insolvency proceedings. Many insolvency claims are as susceptible of mediation as other commercial or financial claims (notably those brought by office-holders). It does, however, illustrate why mediation/ADR might not be appropriate in winding up proceedings where the process is summary, and in particular in a case where the would-be creditor adopts what Hoffmann J once described as the “high risk strategy” of presenting a petition on a disputed debt (Re a Company (No 0012209 of 1991) [1992] 2 All ER 797; [1992] 1 WLR 351). This was just such a case, where the merits plainly favoured the company, making it entirely reasonable for it to decline to mediate.