The Dekagram: 23rd September 2024

Think my claim’s hopeless? So what? – ADR becomes the rule, not the exception

From 1 October 2024, a raft of changes to the Civil Procedure Rules (CPR) will usher in a new era of mandatory Alternative Dispute Resolution (ADR) in civil litigation. The 171st PD Update introduces amendments to the Overriding Objective, the Court’s case management powers and costs rules, designed to place greater emphasis on the obligation to engage with ADR at an early stage. CPR rule 29.2(1A) for instance provides that when giving directions, the court will no longer merely ‘encourage’ or ‘require parties to consider’ ADR but may ‘order’ them ‘to participate in’ it.

Key Impacts of the 171st PD Update

The key provisions of the 171st PD Update include:

1. Mandatory ADR Consideration: Parties must now demonstrate that they have considered ADR seriously before proceeding to trial. Failure to do so can result in sanctions, such as adverse cost orders.
2. ADR Suitability Statements: Litigants are required to submit ADR Suitability Statements, explaining their efforts to pursue ADR or justifying why ADR was not appropriate.
3. Stronger Enforcement: Courts now have more robust powers to penalize parties who unreasonably refuse ADR, echoing principles set out in previous cases like Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, but with clearer, enforceable guidelines.

Road to compulsory ADR

These new rules formalise proposals made by the Court of Appeal (CoA) in Churchill v. Merthyr Tydfil [2023] EWCA Civ 1416 and later adopted by the Civil Procedure Rules Committee. In that case, the CoA held that courts can lawfully stay proceedings for, or order parties to engage in, ADR (with some provisos – see paragraph 74(ii) of the judgment). They are however part of a wider shift towards compulsory ADR reflected in various initiatives in recent months. For instance:

• The Civil Mediation Council is currently setting up a new board to advise and develop standards for mediation, trainers and organisations within its remit.

• The Damages Claims and Online Civil Money Claims services, as well as facilitating more efficient claims processing, now requires parties to opt out of rather than into mediation, with mandatory mediation the norm.

• The Small Claims Track Automatic Referral to Mediation Pilot Scheme under Practice Direction 51ZE is a two-year pilot which provides free (but compulsory) mediation in most small claims money disputes valued at £10,000 filed after 22 May 2024. The service aims to arrange a telephone mediation session (with no requirement to settle) within 28 days of referral.

The judiciary continues to promote the message that parties who refuse to engage unreasonably risk costs or other sanctions. In Northamber PLC v. Genee World Limited and others [2024] EWCA Civ 428. The CoA penalised a defendant for failing to accept the claimant’s mediation offer even though it was made late on and never pursued.

In that case, there had been a case management direction that the parties must consider settling the litigation by ADR and to serve a witness statement with reasons if they refused to engage. Eight months before trial, the claimant offered mediation to the defendants, reminding them of the direction and the consequences of refusal. D3 acknowledged receipt but did not follow up; D2 did not reply. Neither served the required witness statement.

The first instance judge declined to sanction either defendant on the basis that: (i) the claimant had not chased a reply, (ii) the offer came late (after most of the costs to trial had been incurred) and (iii) the offer was “half-hearted”. The claimant appealed, arguing that the judge should have given a costs sanction. They argued that (i) unreasonable refusal constitutes a form of unreasonable litigation conduct which could be sanctioned on, per Halsey, (ii) silence following a mediation offer is generally itself unreasonable per PGF II SA v. OMFS 1 Ltd [2013] EWCA Civ 1288; and (iii) the direction explicitly required reasons which were not given.

The CoA agreed, explaining that while the refusal to engage or respond did not automatically trigger a costs sanction, D2’s failure to respond justified an additional 5% costs liability. The CoA went on to say that neither the lateness of the offer nor the failure to pursue it should count against the claimant.

Comment

Many litigators will welcome greater use of early neutral evaluation and more robust Court rules to impose ADR, even on reluctant parties. But whether the mere imposition of mediation will lead to the fairer, cheaper and speedier resolution of claims remains to be seen. There is inevitably a risk of encouraging opportunistic claims and in some cases settlement is simply unrealistic and ADR will only add a new layer of time and expense: the success of the new regime will doubtless depend on the skill of the judiciary in identifying when and when not to deploy these new powers.

About the Author

Called in 2010, Tom Collins is ranked in the Legal 500 as a specialist in Travel Law. He has considerable experience across a wide range of travel and private international law disputes and has advised claimants and defendants in multi-party actions.