2020-02-17
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Can the Court require you to use alternative dispute resolution?

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Posted by Susan Hopcraft on 04 October 2019

Susan Hopcraft - Professional Negligence Lawyer
Susan Hopcraft Partner

Alternative dispute resolution (ADR) is a very important way of trying to achieve settlement of disputes.  Parties in dispute can step away from the red mist of preparing for trial to try to reach a sensible commercial compromise.

Increasingly the courts have encouraged parties in commercial disputes to submit to ADR as an alternative to using the court process, hoping to reserve precious court resources for the cases that really matter or cannot be dealt with elsewhere.

It has been thought that alternative dispute resolution can only take place if all parties to the dispute agree to it.  After all, what is the point of trying to settle if one party resolutely does not want to?   However, the courts have just given a decision that might change that by compelling ADR.  In some cases it might just be sensible.

What is alternative dispute resolution?

The parties might agree to negotiate amongst themselves with legal advisers.  These discussions, held ‘without prejudice’ to the legal case, can often narrow the issues towards settlement.

Opposing sides might agree to mediate, particularly where the issues are more tricky or if there are more than two parties.  Mediation is where an independent facilitator uses shuttle diplomacy to explore the possibilities of a deal.  It is an arduous and an often expensive day, but it can be money well spent.

They might agree to Early Neutral Evaluation. This is where a neutral expert agrees to read the papers and evaluate where the case is likely to come out.  Often a judge or senior lawyer is asked to do the evaluation.  The early neutral evaluation decision can be binding or not, depending on what is agreed in advance between the parties.

The Court Rules have, since October 2015, allowed the Court “to take any other step or make any other order for the purpose of managing the case and furthering the overriding objective, including hearing an early neutral evaluation with the aim of helping the parties settle the case”.  (CPR 3.1(2)(m))

This means the judge in the case itself can give preliminary views on the legal issues or strength of evidence as part of the normal case management process.  This type of early neutral evaluation will not be binding, but it can nonetheless bring the parties to compromise.

Is alternative dispute resolution mandatory?

The courts encourage all forms of alternative dispute resolution and have come very close to requiring parties to mediate, given the consequences if they don’t.  If a litigant refuses unreasonably to submit to alternative dispute resolution they might find they are barred from recovering the cost of continuing even if they subsequently win their case.  Or worse, they might have to pay the other side’s costs from that point on, again even if they win the case.

In Lomax v Lomax (2019) the appeal court has ordered the parties to use ENE, even when one side did not want to and said they preferred to mediate.  The court considered whether it was entitled to compel that party to early neutral evaluation.  Reflecting the Court’s consistent approach of increasingly pushing parties to alternative dispute resolution, they decided that they could order ENE even when one side did not want it.  They decided this was consistent with the need to save expense and allot to cases an appropriate share of the court's resources.

The appeal judges were influenced by a 2014 case in which the judge commented: "I think it is no longer enough to leave the parties the opportunity to mediate and to warn of costs consequences if the opportunity is not taken. In boundary and neighbour disputes the opportunities are not being taken and the warnings are not being heeded, and those embroiled in them need saving from themselves." (Norris J, in Bradley v Heslin [2014] EWHC 3267 (Ch))

Outcome

Early neutral evaluation is perhaps a somewhat more constructive type of alternative dispute resolution.  It does not necessarily compel anyone to accept the outcome and that is possibly why compulsory early neutral evaluation is easier to accept than compulsory mediation.  You can’t find yourself stuck in a room, at significant cost, compelled to try to settle when you have no intention of doing so.  But you might see something in an early neutral evaluation decision that makes you pause for thought. 

Meanwhile compulsory mediation is still probably a step too far but it may nonetheless be closer on the horizon than we thought.

About the author

Susan is a disputes and professional negligence lawyer, mainly in the financial services sector.

Susan Hopcraft

Susan is a disputes and professional negligence lawyer, mainly in the financial services sector.

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