The Civil Procedure Rules which lay down the processes and procedures governing civil actions in England and Wales have a lot to say about Alternative Dispute Resolution, or ADR. Section 1.1 of the CPR lays down their overriding objective which is to ‘deal with cases justly and at proportionate cost.’It goes on to state that factors to be considered, which are the need to avoid expense, the financial positions of the parties, and the need to deal with issues expeditiously. The parties to the dispute are placed under a general duty to assist the Court in delivering the overriding objective (CPR 1.3), and the Courts, in actively managing the cases before it, are directed to ‘…encourage the parties to use alternative dispute resolution (ADR) procedure if the court considers that appropriate…’ (CPR 1.4(2)(e)).
Initially, the way in which the Courts would interpret the direction and guidance contained in these two sections of the CPR was unclear, but three cases in particular stand out as indicating the approach which they are taking, and the behaviour that they are expecting from the disputing parties and their legal teams, and the part that mediation should play in the process.
The first case was Shirayama Shokusan Co v Danovo Ltd [2003]. In that case, it was held that the Courts have the authority to compel parties to enter into some form of alternative dispute resolution, even when one party is an unwilling participant. The Court’s decision notwithstanding, it is a rule seldom followed, probably in recognition of the fact that a participant in a mediation session or other form of ADR who has been forced to attend is unlikely to approach the process with a frame of mind conducive to finding a resolution to the dispute.
The second case was Halsey v Milton Keynes NHS Trust [2004], and this is generally regarded as the single most important case concerning whether or not parties to a dispute should attempt mediation. The Court recognised the potential benefits in terms of time and cost that mediation brings, but observed that it will not always be appropriate in every case. The issue before the court was about costs. Generally speaking, the loser in any trial is ordered to pay the winner’s costs unless there are sound reasons why that would be unjust. In Halsey, the court held that the loser might be excused from meeting the winner’s costs if he or she could show that the winner refused to attempt to mediate the issue, and that the refusal was unreasonable. Evidence that the refusal was reasonable might be found if any of a number of different circumstances applied:
- The nature of the dispute between the parties was unsuitable for ADR, recognising that not all disputes are suitable for mediation;
- A reasonably held belief by the eventual winner that his or her case was absolutely unassailable;
- Evidence that the eventual winner had attempted other means of resolving the dispute short of trial;
- Whether, in a low value action, the costs of mediation or other form of ADR would have been disproportionate;
- The offer to mediate was made at the very last moment and just before a trial, which would have caused unnecessary disruption;
- ADR had no realistic chance of success; and
- Where the court had not encouraged the use of ADR.
In 2013 the Court of Appeal extended the guidelines set out in Halsey v Milton Keynes. Upholding the finding of the High Court, the Court of Appeal in the case of PGF II SA v OMFS Co [2013] held that not responding at all to an offer of mediation or other form of alternative dispute resolution amounted to unreasonable conduct, and that such conduct could result in the winner of the eventual court case losing his or her general right to have its costs paid by the party that had lost. This was regardless of whether or not a refusal to mediate, had such a refusal been given, would have been reasonable or not.
The Court explained that parties should be open in their reasons for refusal so as to allow differences to be ironed out and the door to mediation to be opened.
It is clear from these three cases that the Courts take their responsibilities to encourage mediation very seriously, and will penalise parties who refuse to take part.
