Two cases of significance have been ruled. One in the High Court. One in the Court of Appeal in November 2023, the consequences of which are that: Mediation is compulsory, if the Court orders ~ And ~ Failure by one party to engage in mediation because you are sure of success at trial, is not an excuse.
Alternative Dispute Resolution
Alternative Dispute Resolution (ADR) is now an ‘obligation’, and not just ‘encouraged’ by the Courts of England and Wales, irrespective of the strength of your case as an individual or a company.
This means that, however strong your case may be, there is always reason to engage in ADR. There is always a risk that you may not win everything you seek at trial. Of course you may lose, however good you think is the strength of your case. You will incur more costs going to trial, than you will, seeking to settle earlier.
When the Civil Procedure Rules came into force in 1999, (CPR), a new culture was introduced to encourage the parties in litigation, to resolve their disputes outside of the judicial system, by mediation or arbitration, without resorting to litigation…generically referred to as ADR.
Ironically, the procedure for bringing a case, was set in the first instance to actually discourage bringing a case before the courts.
Instead of a hasty and ambiguous 7-day letter threatening to pay up or be sued, pre-action protocols were introduced to encourage a healthy exchange of information. The intention being to narrow issues between the parties and encourage ‘alternatives’ to bringing a case before a Judge in a court of law.
Pre-action Conduct And Protocols Encouraged
Over the years, a number of different pre-action protocols (currently under 20 in effect), have been introduced to address specific issues. (i.e., professional negligence, personal injury, housing disrepair, media and communications claims, etc…). Even if one of those pre-action protocols does not quite fit an individual, or company’s particular circumstances, there is a general practice direction for pre-action conduct and protocols.
If a proposed claimant does not follow the pre-action protocols, there can be costs consequences if a claim were brought, which could otherwise not have been brought, had the facts been set out following the pre-action protocols. Similarly, if a proposed defendant fails to engage or comply with the pre-action protocol, adverse costs consequences may be applied against them.
Applying The “Cards On The Table” Approach
The rules were in place to discourage litigation and seek to find a solution through alternative means, by adopting a ‘cards on the table approach’.
Indeed, in all pre-action protocols there is provision to engage in ADR, rather than to litigate in court.
CPR Part 1.1 sets out the ‘overriding objective’ of the rules:
(1) These Rules are a procedural code with the overriding objective of enabling the court to deal with cases justly and at proportionate cost.
(2) Dealing with a case justly and at proportionate cost includes, so far as is practicable –
(a) ensuring that the parties are on an equal footing and can participate fully in proceedings, and that parties and witnesses can give their best evidence;
(b) saving expense;
(c) dealing with the case in ways which are proportionate –
(i) to the amount of money involved;
(ii) to the importance of the case;
(iii) to the complexity of the issues; and
(iv) to the financial position of each party;
(d) ensuring that it is dealt with expeditiously and fairly;
(e) allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases; and
(f) enforcing compliance with rules, practice directions and orders.
There are few cases in which one could say that it would be proportionate to proceed to court, rather than to try and settle a case earlier in court proceedings.
There are a variety of alternatives to a court battle namely mediation (where a third party seeks to facilitate agreement between the parties), and arbitration, (where the parties agree to be bound by the decision of an appointed person), and without prejudice negotiations between the parties (usually negotiations between the parties directly or through lawyers).
ADR Is An Obligation Not A Choice
It is now a duty to engage dispute resolution in all civil legal matters and is no longer simply encouraged or at the discretion of the parties to litigation, following legal advice.
CPR Part 1.4(2) provides the court with management powers, which include, amongst other things:
(e) encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure.
(f) helping the parties to settle the whole or part of the case.
CPR Part 44.4(3) requires the court to have regard to the efforts made before and during the proceedings to try and resolve the dispute when determining the issue of costs.
What started off as an ‘encouragement’ by the courts for the parties to explore alternative dispute resolution, has now become a positive duty upon all parties to do so.
Dispute Resolution In Case Law
There have been a number of cases over the years, where one party refused to mediate because they say there was no point: The parties were diametrically opposed, and there could never be a meeting of minds. The following cases, whilst not an exhaustive list, show an evolution of the principles:
Dunnett v Railtrack [2002] EWCA Civ 302: The Court of Appeal decided that where one party unreasonably refused to mediate: they ‘flatly refused’ to consider mediation, although Railtrack won, they were penalised by the court in not being able to recover their legal costs against the losing party because they refused to mediate. Had they done so, they would have saved all parties and the court in time and costs.
In Halsey v Milton Keynes NHS Trust [2004] EWCA Civ 576, a number of factors were set out in which the court should take into consideration whether a case was suitable for mediation, or not. In this case, Lord Justice Dyson said that it would be an: ‘unacceptable constraint on the right of access to the court and therefore a violation of article 6’ if an unwilling party was compelled to engage in ADR. In the Halsey case, an unwilling party, could not be forced to engage in ADR.
In a case decided on 24th November 2023, the culture of dispute resolution, was further extended in Stoney-Anderson v Abbas & Ors [2023] EWHC 2964 (Ch). This was an inheritance claim in which the parties were agreeable to mediate, and then the claimant withdrew, citing clear liability. This in turn led to protracted litigation and a significant increase in legal costs and court time.
In James Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 In the most recent Court of Appeal decision decided on 29th November 2023, the Court of Appeal held that a Court could lawfully stay proceedings for, or order, the parties to engage in ADR, so long as it was not “disproportionately onerous” and did not prevent their ability to have access to the Courts. The Court of Appeal left a decision to order the parties to engage in ADR at their discretion.
The culture of the Courts, and most certainly Central London County Court is that in very few cases will it not be the case that ADR is ordered for the Parties to seek to engage.
Changing Times – ADR Is The First Step
The main take home from this Stoney-Anderson judgment is that silence, or refusal to mediate can have adverse costs consequences against the party who does not engage. This is an example of the Court showing its displeasure. The Learned Judge stated, amongst other things:
‘…it is commonplace that both sides are told by their lawyers that they will win. But they cannot both be right. Indeed, sometimes, both sides are wrong. The combination of litigation risk and irrecoverable costs almost always makes it worthwhile considering mediation and other ADR. On the material before me, the claimant did not give enough thought to this. In accordance with the case law, I consider it appropriate to mark the court’s disapproval of the claimant’s failure to take up the mediation/ADR suggestions of the first and second defendants’.
Whereas the court’s view was to encourage the parties to engage in ADR, the culture developed is very much an obligation and a positive obligation to do so. However much you think you are right, and your case is cast-iron, there is always a possibility that a court will not agree with you. A court may prefer the presentation and evidence of the defendant, and you may lose, however much your lawyer tells you how good your case is.
Your perception that you are entirely right, might not be a view shared by a Judge, especially where you have insufficient evidence to support your claim, or your defence, as the case may be.
It is however, a more palatable argument to refer to the overriding objective, and to conclude that in very few cases is it ever proportionate, or a lesser risk of costs and court time to proceed to court, rather than to engage in ADR.
To ADR OR NOT TO ADR – This Is The Guidance
The court’s view now is that irrespective of the strength of your case, you have a duty to engage in ADR. This necessitates a compromise to the full value of your claim in exchange for the risk of potentially losing, or not winning everything, a saving in costs and savings in court time and delay in the hearing of your matter. You are expected to seek to compromise and hedge your bets against such risks.
It should be noted that it is now usual practice, in a Costs and Case Management hearing for there to be a direction that where a party proposes ADR, if the other side refuses or simply remains silent, they must within 21 days of such a request, write to the court with a statement setting out why they have chosen not to engage in ADR. I would argue that this is the Court expressing strongly that refusal to engage in ADR is not an option.
However, in the Court of Appeal James Churchill case, the Court can order a stay of proceeding to allow for ADR, or such further order as it thinks fit, to make clear that they expect the Parties to mediate and resolve matters without continuing a court battle at significant costs, and always an element of risk of success, and the prospect of paying adverse costs to the winning party.
So ADR is a material and central part of litigation now, and not just part of the legal process, if so ordered by the Court, or else a party refuses to engage.
Professor Rosen is a solicitor-advocate in practice and principal of David Rosen & Co. He specialises in counter-fraud and counter-corruption in both criminal and civil jurisdictions of English Law, as well as divorce and finance. David holds memberships with the Association of Certified Fraud Examiners, the Royal United Services Institute, and the Society of Legal Scholars amongst others. He is a full academic Professor of Professional Practice at Brunel University Law School where he lectures one day each week.