REUTERS | David Bebber

Alternative Dispute Resolution versus having your day in court: another round to ADR

“See you in court” was an oft-used expression prior to the implementation of the Woolf Reforms which involved the replacement of the Rules of the Supreme Court by the Civil Procedure Rules (CPR) with effect from 26 April 1999. With the introduction of the CPR, the intention was that there would be no more “firing off a writ and seeing what happens”. On the contrary, prospective litigants were to make every effort to settle their differences via pre-action protocols with the intention of avoiding court altogether.

Falling under the umbrella of “making every effort” also came the concept of Alternative Dispute Resolution (ADR), the most well-known aspect of which was mediation, although the rules themselves did not provide any compulsion on warring parties to submit their differences to that process. Whilst CPR 1.4(e) placed a duty on the court to manage cases actively by encouraging the parties to use ADR and facilitating the use of such procedures, that fell short of making ADR mandatory.

Matters have, however, moved on over the past two decades. Although ADR has no formal definition, the glossary to the CPR has described it as a:

“Collective description of methods of resolving disputes otherwise than through the normal trial process.”

Those methods have and continue to include arbitration and early neutral evaluation (ENE), as well as mediation. In respect of the latter pair, two recent cases have emphasised how the courts (with one exception) have continued their advance into ADR as a means of settling disputes without calling upon the judiciary to do so at a fully contested trial. In Halsey v Milton Keynes General NHS Trust, five years after the implementation of the CPR, Dyson LJ had this to say about ADR:

“Parties sometimes need to be encouraged by the court to embark upon an ADR. The need for such encouragement should diminish in time if the virtue of ADR in suitable cases is demonstrated even more convincing than it has been thus far. The value and importance of ADR have been established within a remarkably short time. All members of the legal profession who conduct litigation should now routinely consider with their clients whether their disputes are suitable for ADR. But we reiterate that the court’s role is to encourage, not to compel. The form of encouragement may be robust.”

Matters moved on further when, a decade later, Briggs LJ said this in PGF II SA v OMFS:

“In my judgment, the time has come for this court firmly to endorse the advice given in chapter 11.56 of the ADR Handbook, that silence in the face of an invitation to participate in ADR is, as a general rule, of itself, unreasonable, regardless whether an outright refusal or refusal to engage in the type ADR requested, or to do so at the time requested, might have been justified by the identification of reasonable grounds”.

It followed from these two decisions that parties who declined to engage in ADR (and in mediation in particular) did so at their peril as to costs, but there was then a hiccup in Gore v Naheed and Ahmed, when Patten LJ (with whom Lewison and Underhill LJJ agreed) appeared to revert back to the “see you in court” days. At [48] and [49], he said this:

“The Judge made a separate order that the claimant should have his costs of the claim on the standard basis after considering written submissions. It is clear that Mr Gore was the overall winner, so as to bring into operation the general rule that he should have his costs. But the defendants submitted and now submit on this appeal that the judge should have made some allowance in their favour for the fact that Mr Gore refused to or failed to engage with their proposal that the dispute should be referred to mediation…”.

“Speaking for myself, I have some difficulty in accepting that the desire of a party to have his rights determined by a court of law in preference to mediation can be said to be unreasonable conduct particularly when, as here, those rights are ultimately vindicated…”.

The two recent decisions referred to above, however, suggest that Gore is somewhat out on a limb so far as the court’s modern attitude to ADR is concerned, and both are much more supportive of the Halsey and PGF approaches favoured by the Court of Appeal in those cases.

The first decision concerns mediation. In Burgess v Penny, the task facing Catherine Newman QC (sitting as a Deputy High Court Judge) was to decide what costs order to make in what she described as “Highly contentious litigation” involving the estate of the parties’ late mother. Such was the degree of that contention that it had left two sisters no longer speaking to their brother. In reaching her decision, the judge made clear that she had in mind CPR 44.2(4), namely the conduct of the parties and whether the defendants had been unreasonable in their complete refusal to mediate. In her view they had. At [15] and [16] she said this:

“But mediation should not be about one side getting what they want. That is a misconception of the purpose of mediation. Mediation should be about attempting to reach a solution which both parties can live with as a better alternative to litigation….”

“Refusal to mediate because one party cannot obtain something which even complete success in the litigation cannot guarantee (the admission the defendants wanted) was in this case unreasonable. Granting the defendants any part of their costs out of the estate would be an encouragement to obduracy”.

It followed that the price that the defendants were to pay for their unreasonableness was that payment of their costs would come out of their inheritances, rather than out of their late mother’s estate before distribution. A firm slap on the “having your day in court” wrist.

The second case involves ENE. When the CPR first came into force, the court’s powers of case management in CPR 3.1(2)(m) (as well as those in CPR 3.1(a) to (l)) simply provided for the court to take “any other step or make any other order for the purpose of managing the case and furthering the overriding objective”. With effect from 1 October 2015, the rule was amended with the addition of the words:

“…including hearing an Early Neutral Evaluation with the aim of helping the parties settle the case.”

The purpose of ENE is for a neutral third party to provide an assessment of some or all of the issues in dispute between the parties, especially where they may involve points of principle. In the context of CPR 3.1(2)(m), that evaluation is provided by a judge. In Seals and Seals v Williams, Norris J summarised the benefits of ENE as follows:

“The advantage over mediation is that the judge will evaluate the parties’ cases in a direct way and may well provide an authoritative (albeit provisional) view of the legal issues at the heart of this case and an experienced evaluation of the strength of the evidence available to deploy in addressing these legal issues. The process is particularly useful where the parties have very differing views of the prospects of success and perhaps an inadequate understanding of the risks of litigation itself.”

Until now it has not been settled law whether the court could impose ENE on the parties without their consent. In Lomax v Lomax, decided on 20 May 2019, Parker J held that it could not. She held, “on the finest of fine balances”, that she could not order an ENE essentially because the CPR were not clear that they are intended to provide for a non-consensual evaluation, attracted though she was by that proposition and the temptation to impose it.

That now has all changed, the Court of Appeal having set aside Parker J’s decision in a refreshingly short ex tempore judgment given by Moylan LJ on 6 August 2019. Contrary to the finding reached in the court below, he noted that the rules did not contain an express requirement for the parties to consent before an ENE can be ordered. It followed that the court needed to decide whether such a limitation was implied. In Moylan LJ’s view, it was not. The words “encouraging” and “facilitating” in CPR 1.4(2)(e) did not lead to the implication that consent was required. To the contrary, no reason existed to imply into CPR 3.1(2)(m) any limitation on the court’s power to order an ENE hearing to the effect that the agreement or consent of the parties was required. Accordingly, the appeal was allowed.

The upshot? More power to the court’s elbow in directing ADR, however intractable the dispute may appear to be. In terms of resolving preliminary issues, the court can decide of its own volition to evaluate these via an ENE by allocating a judge for that purpose. As to mediation, if the CPR still fall short of compelling the parties to mediate, the perils in costs penalties likely to befall those who ignore such entreaties ought to be sufficient to bring them into line. If you win hands down, an unreasonable refusal to mediate will impact upon your costs recovery: as was the case in Burgess v Perry, your victory will be pyrrhic if the case ends up costing more than the recovery. The message is clear: mediate or evaluate, do not litigate except when all else has failed.

One thought on “Alternative Dispute Resolution versus having your day in court: another round to ADR

  1. A very good article. I had not picked up on the developments in ENE at all before this. I am grateful to Mr Campbell for taking his time to write this. It will possibly prove helpful in some current matters.

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