#10323 - Courts Approach To Adr And Sanctions - BPC Alternative Dispute Resolution

COURT'S APPROACH TO ADR

PD pre-action conduct

• aim = enable settlement without proceedings / efficient management of proceedings if unavoidable

• proceedings = last resort; don't commence if settlement being actively explored

• court expects compliance may ask for explanation of: steps taken before issue of claim / failure of comply

• parties encouraged to

  • consider ADR

    • consider ADR before starting proceedings + court may require evidence of consideration

    • explore settlement at all times, even after issue of proceedings + during trial etc.

  • exchange info

    • exchange enough info to enable understanding of each other's position, informed decisions (unless circumstances make inappropriate e.g. limitation)

    • attempt to resolve without issuing proceedings (inc. ADR)

• C should send D detailed letter before claim, setting out suitable form of ADR + inviting D to agree

• D should send C detailed response, indicating whether D agrees to ADR proposals, if not why not + suggest alternative form of ADR / give reasons why ADR not appropriate

Pre-action protocols

• general requirements

  • early notification of claim to D

  • consider ADR + endeavour to agree which form to use + may need to produce evidence considered

  • detailed letter before claim containing info about the claim and remedies

  • give D reasonable time to investigate claim and respond

  • detailed response letter indicating whether claim disputed

  • early disclosure of relevant documents

  • joint experts

OO and active case management

• court, parties, lawyers must further OO of dealing with cases justly and at proportionate cost

• court must further OO by active case management, including

  • encouraging co-operation between parties

  • ID issues at early stage

  • encouraging + facilitating ADR if court considers appropriate

  • helping parties settle in whole or part

• court can direct parties to consider ADR at case management conference or pre-trial review via an Ungley Order

  • consider ADR by certain date

  • if party thinks unsuitable

    • not less than 28 days before trial file witness statement (WP save as to costs) giving reasons

    • + justify at trial

    • if trial judge thinks ADR wrongly refused costs sanctions

DQs and ADR

• procedure

1. D files defence

2. court officer provisionally allocates track

3. court officer serves notice of proposed allocation on each party

4. parties must file DQ by date in notice of proposed allocation

• DQ

  • legal rep must confirm has explained need to try ADR, options, possible costs sanctions

  • parties must answer:

    • do you want to attempt to settle given rules require you to attempt ADR?

      • if Y, do you want a 1 month stay?

      • if N, state why ADR inappropriate

        • if court thinks reasons inadequate can direct parties to consider ADR and grant stay of own motion (BUT cannot compel parties to undertake ADR)

Stay for ADR / settlement

• stay can be granted at track allocation or any stage

  • by order of court

  • on application by one or both parties

  • by court of own motion

• usual = 1 month

• if stayed at track allocation, case not allocated until end of stay

• any party may apply for stay to be lifted (PD 26A para 3.3)

• court may extend stay (r26.4(3))

• if settlement reached, C must tell court + will probably lodge settlement order

• if no settlement by end of stay C must apply to get stay lifted + for directions for litigation

Judicial encouragement of ADR

• R(Cowl) v Plymouth CC 2002 - JR can be refused if parties fail to consider ADR + an extra-judicial complaints procedure is in place which is capable of resolving issues

• (un)willingness to consider ADR if appropriate affects costs

• BUT not alternative to litigation

• judge should strike balance of encouraging parties of suitable cases to mediate, but not being too forceful or pushing unsuitable cases into mediation

• voluntary mediation achieves higher settlement rates than compulsory

Approach of courts to contractual ADR clauses

• = clause by which parties agree to resolve dispute primarily by ADR

• may specify method / several methods which need to be exhausted in turn

• if method adjudicative, may specify that parties to be bound by decision

• if parties agree on particular method court may

  1. stay proceedings brought in breach + require parties to use method

  2. only if cannot be recovered via breach of contract action award damages for costs reasonably incurred re: proceedings brought in breach of clause not recoverable in proceedings themselves

• requirements for clause to be binding

  • Holloway v Chancery Mead

1. process must be certain, so no agreement needed at any stage to proceed

2. admin process for selecting + paying party to resolve dispute must be defined

3. detail of process certain

• what court takes into account in deciding whether to stay (if clause clear)

  • compliance with pre-action protocol

  • suitability for agreed ADR process

  • costs compared to litigation

  • OO

Can the court compel parties to use ADR?

• current position (Halsey v Milton Keynes)

  • CANNOT compel parties to: use ADR / if use, reach settlement

    • infringes art 6 (right to fair trial)

    • mediation more effective if voluntary

  • BUT court can (and will) robustly encourage party to use ADR by way of court order

  • unreasonable refusal may result in costs sanction

• art 6 point

  • doubted by commentators: stay only delays right of access / other EU countries have compulsory mediation / EU Mediation Directive implies

  • textbook: ordering parties to undertake non-adjudicative process NOT breach of art 6, provided parties can still issue / continue proceedings if fail to settle

SANCTIONS FOR REFUSING TO ENGAGE IN ADR

• court can penalise party who unreasonably refuses to:

1. comply with court order requiring ADR attempt

2. accept offer to settle before issue

3. accept invitation by other side to use ADR during litigation / after judgment

• orders court can make

  1. pay some / all of other side's costs (even if win)

  2. indemnity costs (case must fall outside norm + must be unreasonable conduct to a high degree)

  3. higher interest on damage

  4. deprive party of interest on damages

Court's general powers to make costs orders

• general rule = costs follow event (loser pays winner) BUT can make different order

• costs must be reasonably incurred and proportionate to claim + amount in dispute

• in deciding court have regard to all circumstances including:

  1. conduct of parties

     1. before + during proceedings

     2. extent of compliance with pre-action protocols etc.

     3. whether actions reasonable

     4. whether successful C exaggerated claim

  2. whether party has succeeded in part, even if not wholly successful

  3. admissible offer to settle (except part 36)

Court's treatment of privileged material when imposing sanctions

• court CANNOT order disclosure of WP communications to determine unreasonableness

• party should mark 'WP save as to costs' court can look after liability and remedies decided in order to decide costs

• otherwise, court can only refer to WP material if all parties waive privilege

Failure to comply with pre-action protocol

• significant non-compliance DOES attract adverse costs order BUT if adverse costs order made on interim application, no need to make further at trial

Unreasonable refusal to consider ADR - Halsey v Milton Keynes

• costs follow event rule only departed from if winning party unreasonably refuses ADR

• losing party bears burden of proving unreasonableness

• in deciding if unreasonable, court should consider all circumstances including:

  • nature of dispute

    • ADR unsuitable if: need to resolve point of law; need precedent; fraud / disreputable conduct requiring trial; injunctive relive; SO / FI

  • merits of case

    • if have very strong case, particularly Ds who repeatedly face unfounded claims = reasonable

  • extent to which other settlement methods attempted

    • unreasonable refusal of settlement offers may indicate unreasonableness generally BUT not decisive

    • rejection of settlement attempts is NOT good reason to refuse ADR, as does not involve engagement on central issues

  • whether costs of ADR would be disproportionately high

  • whether delay caused by ADR would be prejudicial

    • if ADR proposed late + would delay trial = good reason

  • whether ADR had reasonable prospect of success (settlement)

    • burden on loser seeking to avoid costs to show winner unreasonably refused + would have had reasonable prospect of settlement

    • high risk reason to refuse - depends on court's opinion

  • whether ADR order made

  • whether further info / evidence required

    • reasonable to wait...