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Alternative Dispute Resolution Notes

BPTC Law Notes > Alternative Dispute Resolution Notes

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SGS1 - Introduction to ADR Learning Outcomes??

What is the range of ADR?
How to select which ADR procedure to use?
When to consider ADR?
Sanctions for failure to consider ADR?

What is ADR??ADR means alternative dispute resolution. It is resolving disputes out of court. There is a scale of flexibility from absolute autonomy to quasi-litigation.There are two main types of ADR: adjudicative and non-adjudicative. Both may use a TP to structure the debate, but the crux depends upon WHO decides the dispute: the parties (non-adjudicative), or a third party (adjudicative)?

Adjudicative ADR

Non-Adjudicative ADR

DEF: Neutral TP decides the dispute??

Adjudication Expert Determination Arbitration Early Neutral Evaluation

DEF: Parties seek a compromise inter se.?Negotiation Mediation Conciliation

AUTONOMY<-------------------------------------------------------------------------------->FORMALITY NEGOTIATION LITIGATION


What are the advantages and Disadvantages of ADR?
Advantages of ADR

Disadvantages of ADRAvoids "Litigation Risk"If adjudicative ADR, there may be a quasi-litigation risk.More flexible than litigation...Parties with strong legal claim don't need to settle in litigation. They may have to in nonadjudicative ADR.Simpler than litigation (less demanding, no strict evidential rules)May waste time agreeing procedure, evidential rules etc.Suits convenience of parties in place and time of hearing.Certainty of Judge - ADR may lead to difficulties in agreeing arbitrator, and location of hearing.Private and not public hearingsConfidentiality of Parties, and private hearings may be ordered in Court.ADR jurisdiction is unlimited, whereas litigation is limited to actions raised in Statements of Case.Some determinations may only be done by a Judge (eg: public law rights, rights under Wills, injunctions, approval of settlements relating to Protected Parties/children) thus making litigation inevitable.ADR is less confrontational, thus is more adept at maintaining long term relationships.ADR is difficult if multiple parties. No procedure for joining third parties.Can be less expensive.Fees to Mediator/Arbitrator may be more expensive than litigation in simple disputes.Arbitration Awards are final, as are consent orders. So just as binding as litigation.If non-adjudicative, ADR might not reach determination, so could be an expensive, time-

?consuming diversion. Not necessarily final if mediator/arbitrator makes error of law or jurisdiction, as recourse to courts.

International Enforcement of Awards due to New York Convention 1958 (Arbitration) and Mediation Directive 2008/52 (Mediation)

Differences in types of Outcome: ADR???Change in other party's behaviour; Putting right a mistake; Promise that OP will not do something; Repair or replacement of item; Apology; Explanation; Compensation


Prohibitory Injunction (to stop tortious conduct) Specific Performance of obligation; Rectification of document or rescission of contract; Return of property (land or goods) Compensation Declaration about rights of parties;

Pre-Action Protocol?

Pre-Action Protocols require parties to consider the use of ADR. The parties must explain their failure to use ADR in the Statements of CaseThe OO requires the court to actively manage cases. o

Active Case Management includes considering use of ADR;


Parties may apply to court for proceedings to be stayed and referred to ADR, or other means. The court can also do this of its own initiative if appropriate.


In determining costs, the court may look at ADR compliance.Para8.1, 4.4(3) - Parties are warned that the court may require evidence of ADR.ALL pre-action protocols refer to ADR. But it is expressly recognised that no party can or should be forced to mediate!For PI claims, see para2.16-2.19 PI Protocol.It is expressly recognised that not party can, or should, be forced to mediate or enter into any form of ADR!HMCTS Small Claims Mediation Service - Automatic referral for all small claims below PS10,000.There is also a CoA mediation service by CEDR (Centre for Effective Dispute Resolution) When permission to appeal is sought, the single Lord Justice considers whether case ripe for mediation. If so, Head of Civil Appeals refers to CEDR. CEDR writes to the parties to arrange mediation hearing. Offered choice of 3 mediators. Prticipation is voluntary, and CEDR will only act if all parties agree. Parties remain Free to terminate at any time by giving notice to CEDR or CAO without reasons. All PI and contract appeals upto PS100k for which permission to appeal is given will be expected to mediate disputes unless presiding judge says otherwise.

Costs Consequences of Failure to Consider/Use ADRThis is backed up by costs sanctions if parties unreasonably refuse to use ADR.Reasonableness depends upon (Halsey v MK NHS): o

Nature of the case (where injunctive relief is required, not suitable!);


Merits of case (e.g.: If one party has a very strong case);


Extent to which other ADR methods have been attempted;


Whether ADR costs would be disproportionately large;


Whether any delay in arranging ADR would be prejudicial;


Whether ADR had a reasonable prospect of success;


Whether court has made an ADR order;


Is it the right time to seek ADR? Premature attempts at ADR may waste costs.

oFailing to respond to an invitation is unreasonable PGF II SA v OMFS Co.

What are the costs consequences?

Costs payable are at the discretion of the court per s51 SCA 1981 and r44.2 CPR. The "general rule" is that an unsuccessful litigant will pay the whole of the winner's costs - r44.2(2) CPR. The judge must give reasons for departing...


In exercising its discretion, the court must have regard to all the circumstances and in particular under r44.2(4)-(5) CPR ?

Conduct before/during proceedings;Compliance with Pre-Action Protocol;Whether it was reasonable to raise the allegations, and pursue it;The manner of pursuing/defending the claim ("unreasonable conduct")Whether the successful party exaggerated the value of their claim; (Overvaluing a claim is not exaggeration without an element of blameworthiness - Morton v Portal Ltd)Any admissible offer to settle;Whether a party was only partly successful;


A 10-15% reduction for refusal to consider negotiating (Straker v Tudor Rose)


Successful appellant deprived of costs on ground it unreasonably withdrew from mediation shortly before trial in Leicester Circuits v Coates.


The burden is on the losing party to disallow winner's costs for unreasonably refusing to use ADR per Halsey v Milton Keynes NHS. Whether it is reasonable see above in r44.2.


r44.2(6) costs orders can be (With preference to A and C):Proportion of other's costs;

oStated amount of other's costs;Costs from or until a certain date only;Costs incurred before proceedings;Costs relating only to a distinct part of proceedings;Interest on costs from or until a date;

Technical Points:
? The Standard Basis
? Whether costs are reasonably, and proportionately incurred, resolving disputes in favour of payer.
? The Indemnity Basis
? Whether costs are unreasonably and disproportionately incurred, resolving disputes in favour of winner. This is punitive costs against the payer. (NB: You'll never get 100% costs...!)

Costs Orders?

Dunnett costs orders - A party can win on the judgment, but get 0% costs if it doesn't comply with ADR. The Halsey get-outs: a. Burden on the losing party.
? Counsel who has lost the case has to convince judge that mediation would be worth while, and the other side would have engaged in ADR - tough ask. b. Nature of the case: Test-case? Fraud? Injunctive relief?
c. A party's reasonable belief that he has a strong case. (No need to mediate)
? (BUT. In Hurst v Leeming ([2003] 1 Lloyds 379) Lightman J had said "The fact that a party believes that he has a watertight case no justification for refusing mediation. That is the frame of mind of so many litigants.") d. Previous failed attempts to settle. (No need to mediate) e. Mediation would be disproportionate costly (No need to mediate) f. Mediation suggested late (No need to mediate) g. Would mediation have had a reasonable prospect of success (remember, burden on losing party). h. Successful party has disregarded judicial encouragement to mediate " thinking person can but be disturbed by the imposition of the twin hurdles to mediation which the decision in Halsey creates to achieving the approximation to justice which the


institution of the mediation process may afford." Lightman J., SJ Berwin lecture 28th. June 2007. Very very rarely are these kinds of costs orders being made...!

What if client refuses ADR despite your advice??

Get "Letter of Best Practice" signed by the client saying ADR was recommened in accordance with the Pre-Action Protocol, and this was refused by Client. Then following Client's instructions. In furtherance of Overriding Objective, Court must encourage parties to use ADR where appropriate (r1.4(2)(e) CPR);Para8.1, 4.4(3) - Parties are warned that the court may require evidence of ADR.ALL pre-action protocols refer to ADR. But it is expressly recognised that no party can or should be forced to mediate!Client must consider use of ADR at all times, before and during trial. So unreasonable refusal at any time may be used against them.

What are the consequences for failure to consider/use ADR?

1. Adverse Costs Orders; (Only merits determine damages; unaffected by ADR compliance) a. In PGF II SA v OMFS Co the court held that if there were reasonable prospects of mediation being successful, and would have been able to reach settlement, ought to lead to adverse costs order. The parties should put reasons for refusal to undergo mediation in writing at the time... The court should be wary of retrospective arguments why it did not mediate, especially why it can be demonstated why mediation did not have a reasonable prospect of success.

2. Stay of Proceedings if ADR is appropriate ("pause")

3. The court may: a. Verbally encouraging parties to consider ADR at any stage;

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