Decision that holiday claimants should have used the ABTA mediation scheme has been overturned

The High Court has ruled that claimants who litigate instead of using an available mediation scheme are not automatically acting unreasonably.

This decision follows the initial ruling in the matter of Briggs & 598 others -v- First Choice Holidays and Flights Limited which last year saw a significant ruling from Master James at the Senior Courts Costs Office. The decision of Master James considered a number of preliminary costs issues relevant to a group litigation action for damages for personal injury and loss of enjoyment of holidays.

The claim related to a group action brought by no less than 599 claimants who holidayed at a Turkish resort in the summer of 2009 which had been booked though the defendant tour operator. Of the 599 claimants, 447 suffered from illness, typically gastrointestinal and 152 sought damages for having to endure substandard accommodation and service.

The 599 claims were concluded in six tranches for approximately £1.7 million in total plus costs. The claimants’ solicitors sought to recover costs in the sum of approximately £4.5 million made up of £2 million in base profit costs and a further £2.5 million in additional liabilities. £1.8 million was paid on account of costs by the defendant.

Following settlement of the claims, the claimants’ solicitors proceeded to request an interim costs certificate in the sum of £881,000. Various issues were considered including the method under which the 152 non-injured claimants had pursued their claims. In reaching her decision, Master James held that the appropriate procedure which should have been used in pursuing these claims, should have been through the ABTA mediation scheme which covers non-personal injury claims of up to £25,000 per booking.

Master James held that it was ‘neither reasonable nor proportionate’ to incur costs of just under half a million pounds in respect of these 152 claimants’ claims by way of group litigation. Master James found that the ABTA mediation scheme would have covered the 152 claimants ‘perfectly adequately’ and as such she ordered that the maximum costs that the defendant should have to pay in relation to these claimants was what they would have paid to use the ABTA scheme, which was a maximum of £264 each.

This matter has now been heard by the High Court where the decision has been overturned by Justice Singh who was sitting with Mater Gordon-Saker. Upon considering the matter, Mr Justice Singh held that just because there was an option to use ADR did not mean that it was unreasonable to litigate. Mr Justice Singh further held that the costs judge was not entitled to go behind the costs order.

The Lawtel report on this matter has stated: ‘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 will no doubt be a disappointing decision for defendants who had welcomed Master James’ earlier decision, which sought to encourage the usage of mediation where it was available rather than incurring considerable costs of litigation for low value quality complaints claims. Whilst the recent decision focuses on some important points, i.e. that a costs order was already in place, it follows that where parties wish to suggest that the ABTA mediation scheme should be used, such suggestions need to be made at an early stage and certainly before the case settles and an order for costs is made.