Alternative dispute resolution and the court


Author: Christian Charles


The English courts have for many years actively encouraged litigants to explore alternative methods of resolving their disputes. This support for alternative dispute resolution (ADR) was at the heart of the Woolf reforms in the late 1990s and is now enshrined in the Civil Procedure Rules and the Pre-Action Protocols, as well as the various High Court guides.

The limits of judicial support for ADR

However, despite strong judicial support for ADR (and mediation in particular), the courts have stopped short of requiring parties to attempt ADR before bringing their claims to court. In Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, the Court of Appeal underlined that whilst parties who “unreasonably” refused to mediate ran the risk of costs sanctions, mediation was not mandatory and there may be circumstances in which a party has “reasonable” grounds for refusing to engage in mediation or another form of ADR.

The judgment in Halsey provides a non-exhaustive list of considerations to be borne in mind when deciding whether a party has acted unreasonably in refusing to engage in ADR.  These considerations include whether:

  • the dispute is “intrinsically unsuitable” for ADR;
  • the overall merits of the case indicate that one party is seeking to use ADR to force a settlement;
  • other settlement methods have been attempted;
  • the costs of mediation would be disproportionately high;
  • any delay in setting up the mediation would have a prejudicial effect; and
  • ADR has a reasonable prospect of success.

On the face of it, these considerations would appear to give parties considerable scope for refusing an invitation to engage in ADR. Certainly, in practice one encounters excuses of this kind on a fairly regular basis: “the parties are too far apart”; “there is no common ground”; “it is too early to contemplate mediation”; or “the issues are too complex”.

One can certainly find examples of the courts deciding that a party’s refusal to mediate was “reasonable”. In Halsey itself, the Court of Appeal held that the defendant NHS Trust did not act unreasonably by refusing to engage in mediation, on the basis that the prospects of a mediation succeeding were very low and the costs of a mediation involving all three parties to the litigation would have been disproportionately high.

However, on a closer inspection, most of these cases tend to be at the extreme end of the spectrum, for instance where one party’s case was demonstrably much stronger than the other’s (as in Halsey) or where ADR was proposed so late in the proceedings that it would have jeopardised the trial timetable (for example, ADS Aerospace Ltd v Global Tracking [2012] EWHC 2904 (TCC)).  It is also difficult to discern a common judicial logic which underpins these decisions, so for every case where the court has decided that a party has “reasonably” refused mediation, one can find similar cases where the court has decided the opposite.

In short, these cases do not offer much comfort to parties seeking to avoid mediation in the face of an invitation from the other side.

A tougher approach post-Jackson?

The latest reforms to civil litigation have now been implemented following the recommendations of Lord Justice Jackson in his report on civil litigation costs in late 2009. The report made two key recommendations in relation to ADR, as follows:

  • There should be a serious campaign (a) to ensure that all litigation lawyers and judges are properly informed about the benefits which ADR can bring and (b) to alert the public and small businesses to the benefits of ADR.
  • An authoritative handbook should be prepared, explaining clearly and concisely what ADR is and giving details of all reputable providers of mediation. This should be the standard handbook for use at all JSB seminars and CPD training sessions concerning mediation.

The ADR Handbook was published in 2013 and has quickly become a touchstone for the judiciary and practitioners when considering ADR.

A number of decisions in the last two years appear to show a hardening of the court’s support for ADR and its willingness to impose severe penalties on those who unreasonably decline an invitation to engage in ADR.

In PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288, the Court of Appeal upheld a first instance decision to deny the defendant a portion of its costs as a result of its unreasonable failure to even respond to the claimant’s invitation to mediate.  The Court of Appeal noted that the case:

sends out an important message to civil litigants, requiring them to engage with a serious invitation to participate in ADR, even if they have reasons which might justify a refusal… The court’s task in encouraging the more proportionate conduct of civil litigation is so important in current economic circumstances that it is appropriate to emphasise that message by a sanction which, even if a little more vigorous than I would have preferred, nonetheless operates pour encourager les autres.

The High Court imposed similar sanctions in Garritt-Critchley & Ors v Ronnan & Anor [2014] EWHC 1774 (Ch), ordering a party to pay indemnity costs as a result of its unreasonable refusal to mediate.  Notably, in reaching its decision the court dismissed all of the defendant’s reasons for refusing to mediate, which included that familiar excuse that “the parties were too far apart”.  The court observed that:

“Parties don’t know whether in truth they are too far apart unless they sit down and explore settlement. If they are irreconcilably too far apart, then the mediator will say as much within the first hour of mediation. That happens very rarely in my experience.”

More recently, in Reid v Buckinghamshire Healthcare NHS Trust [2015] EWHC B21 (Costs) the court sanctioned the claimant for its unreasonable delay and ultimate refusal of the defendant’s invitation to mediate.  The court ordered the defendant to pay the claimant’s costs on an indemnity basis from the date on which it was likely to have received the claimant’s invitation to mediate.

It is clear that judicial support for ADR and mediation has never been stronger. These recent cases show that the courts will not buy the usual excuses deployed by parties as justification for not engaging in ADR.  Indeed, many of these clichéd excuses have been firmly rejected by the courts.  The message is clear: no dispute is too complex or intractable for mediation.

Moving closer to compulsory ADR?

The Court of Appeal’s decision in Halsey remains the starting point for the courts when faced with litigants who have refused to engage in ADR, and the courts will therefore continue to assess each case on its own facts.  However, it is now increasingly difficult to think of cases where a refusal to mediate will be deemed “reasonable” in the eyes of the court.

The attitude of the court towards parties who refuse to mediate, and their willingness to impose severe costs sanctions, is clear. Parties and their legal advisers should therefore think long and hard before ignoring or declining an invitation to mediate: it may end up costing them dearly, regardless of the outcome of the litigation.

Christian Charles, Associate, Fladgate LLP (ccharles@fladgate.com)

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