Why is it important to be reasonable in litigation? The days of ignoring sound judgment and resorting to aggressive tactics in Court are long gone. Not only are you at risk of incurring costs, but the Court may also order you to take settlement offers seriously and attend mediation. The key question is whether this will lead to a genuine change in approach or whether parties will merely pay lip service to negotiations.
Alternative dispute resolution (ADR) is a popular way of settling disputes out of Court. Until the decision in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, ADR was typically used voluntarily. Churchill, however, confirmed that a court could order parties to engage with ADR. The case also confirmed that cost penalties can be imposed on parties who do not engage with ADR.
Despite the strict requirements of the Civil Procedure Rules, the confines of legal principles found in both statute and case law, and individuals tending to want to resolve disputes as swiftly as possible, they still do not like being told what to do.
The arguments in favour of ADR are well rehearsed by the Court, in professional literature and our advice to our clients. ADR often reduces cost, speed, and allows for flexibility and privacy, all of which are beneficial to the Court and our clients in resolving disputes.
What is of interest in relation to ADR following Churchill is whether ADR’s benefits are sufficient to justify its compulsory enforcement in every matter before the Court. In our view, compulsory ADR remains ‘contentious’ in the world of contentious disputes.
For Compulsory ADR
- Litigating a dispute to trial is extremely costly. It also comes with cost risk for both the claimant and defendant as the Court typically orders the “loser” to pay the “winner’s” costs. ADR can be less costly and result in a dispute resolving in a matter of hours – saving the parties time, money and the stress that comes with seeing a claim through to trial. If done early, it may also avoid the parties becoming too entrenched.
- Most forms of ADR afford the parties autonomy and flexibility over what a settlement may look like. Do you want to bear your own costs, or have a proportion of your costs paid? Perhaps you would like an apology, or perhaps you want to make sure you keep certain items of sentimental value, for example. Many terms that are desirable to parties (e.g. an apology) are unlikely to be ordered by the Court. Should resolution of every issue not be reached, ADR can allow the parties to at least narrow the disputes in play and thereby reduce future legal fees associated with litigating a wider dispute with multiple issues.
- ADR can help free up Court resources. Every case that is resolved out of Court frees up court resources, allowing them to deal with unresolved disputes more quickly.
- ADR can allow for matters to be resolved privately, saving personal affairs from the tabloids.
- Often, a major hurdle of ADR is bringing the parties to the table. Despite the above benefits of ADR, parties can often be reluctant to engage in negotiations as they do not want to be seen as the first to concede or suggest their claim is weak by exploring resolution. Some may simply want a judge to tell them they were right, regardless of the cost they incur to hear that. If the Court orders ADR, it removes any sense of bruised pride in being the first to negotiate and eliminates any standoff. Once the parties are at the table and closer to resolution, the prospect of resolution may be more tempting.
Against Compulsory ADR
Despite the benefits outlined above, there are some drawbacks to the enforcement of ADR.
- There are many questions which remain to be resolved in relation to compulsory ADR. For example, what form of ADR will the Court consider most fitting for the dispute? A mediation, Early Neutral Evaluations by a Judge, or is an advisor-led round table a better suggestion? Do the parties engage in negotiations via correspondence, and if so, at what point will the Court consider this ADR to have been exhausted? How might a Court consider a matter where the parties choose instead to arbitrate (a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute) as the compulsory form of ADR, therefore ousting the Court entirely?
- Failed forms of ADR can incur wasted costs. Clients and their advisers spend a lot of time tactically considering when to engage in ADR and what constitutes a sensible settlement offer. If ADR is ordered too early, the parties may not have had sufficient time to outline their case and see the other side’s disclosure etc. ADR may therefore come too early to be meaningful.
- Linked to the above, parties must come to ADR in good faith. Good faith cannot be ordered, and parties may turn up to a mediation with no intention to settle, but purely as a tick-box exercise. How will the Court ascertain that ADR was approached properly and in good faith? There also needs to be confidence in the neutral party in circumstances such as a mediation, which cannot be enforced.
- There is also a public policy consideration. As a common law jurisdiction, we require legal principles to be considered before the Court to develop our legal system – Churchill being an example. In the absence of robust consideration of legal principles by the Court in favour of private ADR between parties, there is a risk that the English legal system will miss the consideration of critical points of law.
The value of ADR is undisputed and remains a helpful and beneficial tool, where appropriate. However, ADR is highly dependent on the specifics of each case; to be effective, it requires careful consideration regarding the timing and the form of ADR. We believe that ADR should be primarily guided by the parties’ legal advisors, at least until after disclosure has taken place. While the Court might be inclined to increase compulsory ADR orders, it should remain an exception that is based on the facts and circumstances of each case, rather than becoming the standard practice – at least for the time being.
