A compelling alternative - Courts can compel parties to engage in ADR
“If breaches of such orders are ignored by courts when deciding costs, parties will have no incentive to comply with them. That would undermine the purpose of making them, which is robustly to encourage parties to mediate.”
Northamber Plc v Genee World Ltd and others1
The benefits of ADR have long been recognised. It is an efficient mechanism for resolving disputes quickly, privately and usually far more cheaply than taking a case to trial. The Practice Direction relating to Pre-Action Conduct, together with the various specialist Pre-action Protocols which govern party conduct at a pre-action stage, require parties to consider ADR before commencing court proceedings and now the CPR has followed suit. New changes to the CPR mean that the court, since 1 October 2024, can now order parties to engage in ADR where it is proportionate and does not undermine the parties’ right to a judicial hearing.
The court’s position on ADR
The cases of Halsey v Milton Keynes General NHS Trust2 and PGF II SA v OMFS 1 Ltd3 both clearly set out the court’s view that a refusal to engage in ADR, or silence in the face of a proposal of ADR, is ultimately unreasonable conduct.
The case of Halsey is a landmark Court of Appeal judgment on ADR. While the courts held that they were able to (strongly) encourage parties to take part in ADR, with the right to impose costs penalties for unreasonable refusal, the court held that this needed to be balanced against Article 6 of the European Convention on Human Rights which entitles parties, including businesses, to the right to a fair trial. However, some 20+ years later, the courts position on parties engaging in ADR has changed.
CPR changes
The recent CPR changes are based on a government consultation on compulsory mediation which considered the effectiveness of ADR in offering a cheaper and quicker alternative to court litigation. ADR offers a set of processes and techniques that can help to resolve disputes without the need to go to court. Mediation and arbitration are perhaps the most commonly used types of ADR. However, ADR can also extend to internal complaints procedures, ombudsmen and exploring settlement of claims via pre-action correspondence.
Recent case law
The government consultation has been further bolstered by case law on this topic. In James Churchill v Merthyr Tydfil County Borough, the Court of Appeal underscored the importance of ADR even once proceedings are underway. The courts now have the power to stay proceedings and compel parties to engage in ADR.
The 2024 Northamber Plc case, quoted above, reinforces the principles behind unreasonable refusal to engage in ADR and that a party’s silence in the face of an invitation to engage in ADR will be considered as unreasonable conduct for the purposes of costs. In this case, a case management order required the parties to engage in ADR, failing which they were required to serve a witness statement giving reasons. The claimant wrote to the defendants to invite them to engage in mediation. The defendants failed to substantively respond and failed to serve any witness statement with reasons as to why they had not engaged in ADR. The Judge held that conduct to be unreasonable. The litigation had continued for a further eight months, including a nine-day trial, and the parties incurred substantial costs which could have been avoided by a successful mediation.
The court reinforced that the question of whether a party has acted unreasonably in refusing ADR must be determined having regard to all the circumstances of the particular case. Factors that may be relevant to that question will include (but are not limited to) the following:
- the nature of the dispute
- the merits of the case
- other attempts at settlement
- the costs of mediation
- delays
- the prospect of success
- judicial encouragement
Commercial parties will usually be open to exploring commercial resolutions of disputes via ADR techniques. However, there can be occasions when an opponent refuses to engage in such a dialogue. Knowing about the shift in the court’s attitude regarding ADR may be helpful in persuading a reluctant opponent to join you at the negotiating table.
How we can help?
Our team are experts in ADR. We have extensive experience of advising clients as to different mechanisms for ADR to suit the business, sector, and dispute dynamics. We will explore commercial options for resolving disputes with you at the appropriate stage and on terms which meet your priorities and commercial objectives, including via mediation.
1 Northamber Plc v Genee World Ltd and others [2024] EWCA Civ 428 2 Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 3 PGF II SA v OMFS 1 Ltd [2013] EWHC Civ 1288
If you would like to discuss anything in this article further, please contact:
Paul Jonson
Emma Haymes
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