Last edited 27 Jan 2016

Alternative Dispute Resolution legislation

Contents

[edit] Introduction

The Civil Procedure Rules (CPR) 1998, which apply only to litigation in England and Wales, contain several references to Alternative Dispute Resolution (ADR), including mediation. The courts are now more and more insisting that the parties attempt to settle their dispute by some means of ADR, generally by mediation, before the matter is brought to trial. Failure of a party to attempt some form of ADR may adversely affect its entitlement to costs, even if it succeeds in the action.

Some very important judgments on mediation have come out of the courts, especially the Court of Appeal, during the past few years. Perhaps the most important is Halsey v. Milton Keynes NHS Trust (May 2004). The Court made the following points:

  1. 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.
  2. The fundamental principle is that a departure from the general rule that costs follow the event 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.
  3. The fact that a party unreasonably believes that his case is watertight is no justification for refusing mediation. But the fact that a party reasonably believes he has a watertight case may well be a sufficient justification for a refusal to mediate.

Other important cases concerning cost sanctions arising out of a refusal to partake in ADR are as follows:

[edit] Burchell v. Bullard (2005) Court of Appeal.

This arose from a building dispute where a claim of £18,300 by the builder was met by a counterclaim of £100,000 by the house-owner. In the event the builder succeeded very substantially with his claim but the counterclaim succeeded only to the extent of £14,300. The costs of both parties amounted to over £185,000. Ward LJ said:

‘The defendants behaved unreasonably in believing, if they did, that their case was so watertight that they need not engage in attempts to settle … The stated reason for refusing mediation, that the matter was too complex for mediation, is plain nonsense.’

[edit] McMillan Williams v. Range (2004) Court of Appeal.

A solicitor who received advance salary in excess of her actual earnings had to repay the excess to her employers when she left the firm. The Court at first instance advised mediation, but both parties refused. The Court ordered both parties to bear their own costs.

[edit] Dunnett v. Railtrack (2002) Court of Appeal.

A successful party was denied its costs because it had earlier flatly refused to mediate. This case was a benchmark in the requirement to mediate and followed earlier cases warning of likely costs sanctions (see Cowl v. Plymouth City Council below).

[edit] Hurst v. Leeming (2002)

In appropriate cases, it is acceptable to refuse to mediate, but it is a high risk strategy. The critical factor in coming to a decision on the reasonableness to mediate is whether the mediation had any real prospect of success. A refusal will only be reasonable if, objectively, that prospect does not exist. This decision has, however, been modified by Halsey in that whilst Hurst placed the burden on the successful party who refused mediation to justify that refusal, Halsey places the burden on the unsuccessful party to show that mediation had a reasonable prospect of success.

[edit] SITA v. Watson Wyatt and Maxwell Batley (2002).

A successful party in litigation who refused mediation escaped costs sanctions because the invitation to mediate was made at short notice in an effort to ‘dragoon, browbeat and bully’ and in a way that was ‘disagreeable and off-putting’. The mediation proposal was a litigation tactic rather than genuinely designed to seek settlement.

[edit] Cable & Wireless v. IBM United Kingdom Ltd (2002).

A mediation clause in a contract was enforced by the court and the litigation stayed. The clause was not a mere agreement to negotiate and therefore unenforceable, but a real contractual commitment to find solutions which were mutually commercially acceptable at the time of the mediation. Mediation is described as ‘a firmly established, significant and growing facet of English procedure’.

[edit] Cowl v. Plymouth City Council (2001) Court of Appeal.

Lord Woolf said: ‘Without the need for the vast costs which must have been incurred in this case … the parties should have been able to come to a sensible conclusion as to how to dispose of the issues which divided them. If they could not do this without help, then an independent mediator should have been recruited to assist. That would have been a far cheaper course to adopt. Today, sufficient should be known about ADR to make the failure to adopt it, in particular where public money is involved, indefensible.’


In addition to the long line of cases concerning cost sanctions, there has been a recent important case concerning privilege in mediation proceedings:

[edit] Brown v. Rice and Patel and ADR Group (2007) Chancery Division

The question before the court was: Can a court hear evidence of without prejudice negotiations in a mediation in order to determine whether or not there was a concluded agreement to settle?

  1. What is the consequence of the provisions of the mediation agreement?
  2. That any agreement to settle reached in the mediation is not complete until reduced to writing and signed by, or on behalf of, the parties?
  3. If an offer, made at the mediation, is left open for acceptance on the following day, is any such acceptance within the mediation for the purposes of creating a concluded agreement to settle?

The judge had no difficulty in deciding that the court had to look at without prejudice material in order to decide whether or not there was a concluded agreement to settle. That was on the basis of the existing without prejudice rules, including the exception to it, and not any special category of mediation privilege.

He also decided that an agreement to settle, which was not reduced to writing and signed by, or on behalf of, the parties, could not be a binding agreement by reason of the term of the mediation agreement providing otherwise (and because the agreement was incomplete).

Finally, he said, albeit obiter, that an offer left open for acceptance after the mediation day and then accepted was ‘as much made in the mediation as if it were made at the hearing itself’.

[edit] Multiplex Constructions Ltd v. Cleveland Bridge UK Ltd and Cleveland Bridge Dorman Long Engineering Limited (2006)

The encouragement by the courts to parties to resolve their disputes by means of mediation or other forms of ADR is clearly illustrated by the words of Mr Justice Jackson in the case of Multiplex Constructions Ltd v. Cleveland Bridge UK Ltd and Cleveland Bridge Dorman Long Engineering Limited (2006) when, after a long series of cases concerning preliminary issues arising out of the construction of the new Wembley Stadium, he ended his judgment as follows:

‘Finally I wish to say something directly to the parties. It has been obvious to me that no settlement could be achieved whilst certain fundamental issues were unresolved. The present set of preliminary issues was drafted by counsel precisely in order to break that deadlock. Both parties have had a measure of success on the preliminary issues. Neither party has won an outright victory. With the assistance of this court’s decision on the 10 preliminary issues, it may now be possible for both parties to arrive at an overall settlement of their disputes, either through negotiation or else with the help of a mediator, who is unconnected with this court.

‘I commend this course to the parties, if only as a means of saving costs and management time. If, however, the parties would prefer the court to resolve all remaining issues, then so be it. This court encourages sensible commercial settlements, but nevertheless stands ready to determine every issue which the parties wish to litigate.’

[edit] Cumbria Waste Management Limited, Lakeland Waste Management Limited v. Baines Wilson (a Firm) (2008)

This case illustrates dealing with confidentiality in mediation.

In two separate mediations both Cumbria and Lakeland had settled disputes relating to the foot and mouth epidemic in 2001 with the Department for the Environment, Food and Rural Affairs (DEFRA). Both then sought to recover damages from their solicitors, Baines Wilson, who were not a party to the mediations for negligence in connection with the original agreements with DEFRA. Baines Wilson asked the court to order disclosure of the documents created in the mediations which they said related to the reasonableness of the mediation settlements. Disclosure was objected to by DEFRA who, while not a party to the litigation, nevertheless made submissions to the court.

The court refused to order disclosure, distinguishing the situation from that in the Court of Appeal decision in Muller v. Lindsay & Mortimer (1996). In passing, the court also expressed the view that mediators themselves may have privilege in their own documents that cannot in normal circumstances be waived by the parties.


The relevant extracts from the Civil Procedure Rules that refer to ADR are set out as follows:

[edit] CPR 1.1

(1) These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly.

[edit] CPR 1.4

(1) The court must further the overriding objective by actively managing cases.

(2) Active case management includes –

  • a) encouraging the parties to co-operate with each other in the conduct of the proceedings;
  • e) encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure;

[edit] CPR 26.4

(1) A party may, when filing the completed allocation questionnaire, make a written request for the proceedings to be stayed while the parties try to settle the case by alternative dispute resolution or other means.

(2) Where –

  • (a) all parties request a stay under paragraph (1); or
  • (b) the court, of its own initiative, considers that such a stay would be appropriate,

the court will direct that the proceedings, either in whole or in part, be stayed for one month, or for such specified period as it considers appropriate.

(3) The court may extend the stay until such date or for such specified period as it considers appropriate.

(4) Where the court stays the proceedings under this rule, the claimant must tell the court if a settlement is reached.

(5) If the claimant does not tell the court by the end of the period of the stay that a settlement has been reached, the court will give such directions as to the management of the case as it considers appropriate.

[edit] CPR 44.3

Court’s discretion and circumstances to be taken into account when exercising its discretion as to costs

(4) In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including –

  • (a) the conduct of all the parties;

(5) The conduct of the parties includes –

  • (a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed any relevant pre-action protocol;
  • (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
  • (c) the manner in which a party has pursued or defended his case or a particular allegation or issue;

[edit] CPR 44.5

Factors to be taken into account in deciding the amount of costs

(3) The court must also have regard to –

(a) the conduct of all the parties, including in particular –

  • (i) conduct before, as well as during, the proceedings; and
  • (ii) the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;’

The following provision of the Civil Procedure Rules – Practice Direction – Protocol is also relevant:

4.7 The parties should consider whether some form of alternative dispute resolution procedure would be more suitable than litigation, and if so, endeavour to agree which form to adopt. Both the Claimant and the Defendant may be required by the Court to provide evidence that alternative means of resolving their dispute were considered. The Courts take the view that litigation should be the last resort, and that claims should not be issued prematurely when a settlement is still actively being explored. Parties are warned that if the protocol is not followed then the court must have regard to such conduct when determining costs. It is not practicable here to address in detail how the parties might decide which method to adopt to resolve their particular dispute. However, summarised below are some of the options for resolving disputes without litigation:

  • Discussion and negotiation.
  • Early neutral evaluation by an independent third party (for example, a lawyer experienced in that field or an individual experienced in the subject matter of the claim).
  • Mediation – a form of facilitated negotiation assisted by an independent neutral party.’

On 22 April 2005 the following practice advice was issued jointly by the Law Society’s civil litigation committee and its alternative dispute resolution committee.

‘This practice advice relates to the giving of information on mediation and other dispute resolution (ADR) options to clients before, and during the process of resolving any disputes between the client and third parties. The principle of why this advice and information should be given is to be found in the dicta of Lord Justice Dyson in the case of Halsey v. Milton Keynes NHS Trust and Steel v. Joy [2004] EWCA 576:

“All members of the legal profession should now routinely consider with their clients whether their disputes are suitable for ADR.”

‘Solicitors should note that the court has a duty to encourage parties to co-operate with each other in the conduct of the proceedings – Civil Procedure Rules 1998 (CPR), rule 1.4(a) – and to likewise encourage parties to use mediation or some other alternative dispute resolution technique in appropriate cases – CPR rule 1.4(d). Where the parties cannot agree to use mediation or another ADR process, the obligation is on the party wishing to use mediation or another process to say why it is appropriate in the circumstances. Section 2 of the guidance summarises the factors to consider in ascertaining whether a case is suitable for ADR.

‘The term ADR means both mediation and any other alternative to formal litigation or arbitration that might be an appropriate alternative means of resolving the dispute in the particular circumstances of the case. This might include expert evaluation, early neutral evaluation or conciliation, as well as mediation.

‘This practice advice applies to advice and information at the appropriate time, which may be at the commencement of a dispute within the initial advice, or at any later stage of the dispute.

‘Practitioners should keep these options under review throughout the course of the matter. Solicitors should:

  • in appropriate cases, and at appropriate times, explain to clients whether there are ADR techniques that might be used other than litigation, arbitration or other formal processes, what those alternative processes involve, and whether they are suitable in the circumstances; and
  • keep the suitability of mediation and other ADR techniques under review during the case and advise clients accordingly.

‘In assessing whether a case is suitable for mediation or some other form of ADR, the solicitor should have in mind:

  • the nature of the dispute;
  • the merits of the case;
  • the extent to which other settlement methods have been attempted;
  • whether the costs of the ADR process would be disproportionately high;
  • whether any delay in setting up and attending the ADR process would have been prejudicial to the client; and
  • whether the ADR process had a reasonable prospect of success.

Solicitors should be aware that failure to provide information and advice at the appropriate stage may have costs or other consequences.’

[edit] Consumer Rights Act 2015

On 1 October 2015 the Consumer Rights Act came into force. This included provisions allowing businesses that sell directly to consumers to use ADR to deal with disputes. The Act applies to consultants and trades people offering services direct to consumers. See Consumer Rights Act for more information.


This article was created by --The College of Estate Management 10:50, 12 December 2012 (UTC)

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[edit] External references

  • Tiered ADR, Chartered Institute of Arbitrators, "Catch All" Dispute Resolution Clause.
  • ‘Alternative Dispute Resolution – A Discussion Paper’, The Lord Chancellor’s Department.
  • Dignan, Sorsby and Hibbert (1996) ‘Neighbour Disputes – Comparing the cost-effectiveness of mediation and alternative approaches’, Centre for Criminological and Legal Research, University of Sheffield. ISBN: 1872998364.
  • The Central London County Court Pilot Mediation Scheme– Evaluation Report by Professor Hazel Genn.
  • The Institution of Civil Engineers’ Conciliation Procedure 1999 (1999) London: Thomas Telford Publishing.
  • Tait J N and Cottam G (1994) ‘The ICE Conciliation Procedure 1994’, Civil Engineering Surveyor, November.
  • The Centre for Effective Dispute Resolution.