UK: Impact Of ADR In Practice

Alternative Dispute Resolution (ADR) is likely to become one of the significant imprints of the Woolf reforms.

One of the perceived inadequacies of the litigation process, that the Woolf report identified, was its inflexibility in dealing cheaply with the "real" issues and concerns of the parties. It was therefore conceived that ADR had an important role to play in resolving disputes, apart from Court proceedings.

Under the Civil Procedure Rules (CPR) one of the Courts new case management duties is to "encourage the parties to use an alternative dispute resolution procedure if the Courts consider that appropriate, and facilitating the use of such procedure".

What are these alternative dispute procedures that we are encouraged to use?

The term has a broad meaning. It can mean, simply, the parties negotiating a resolution through their solicitors. More usually, it involves some independent third party as a mediator or adjudicator. The methods of this type of resolution are various. The "mediator" can act purely as a facilitator to settlement, or, the parties can appoint someone to act as an "adjudicator" to determine the dispute in an informal way, or, particular issues in the dispute - so as to assist the parties in assessing the strengths or weaknesses of their case (without actually deciding the issues in the case, in a determinative fashion).

Organisations such as "CEDR" offer sophisticated facilities for such settlement meetings.

These methods of resolving disputes must be distinguished from a formal arbitration with which many lawyers and surveyors are already familiar.

Formal arbitration, as a process, is seen as equally hidebound with procedural technicalities, and, as expensive as litigation. Woolf thus does not particularly favour the formal arbitration process.

CPR has not, therefore, seriously encouraged the expansion of formal arbitration, (perhaps to the disappointment of many in the legal and surveying professions), but has encouraged the informal settlement, particularly by mediation.

The Court cannot direct that a particular procedure be used to resolve the dispute - it can only encourage and facilitate - principally by putting a stay on proceedings for a short period (1 month) for ADR to be attempted.

CPR provides that a party, when completing its Allocation Questionnaire (at the beginning of the case), may make a written request for a stay for the purposes of mediation. Even if no such request is made at this stage, however, the Court can at any stage order a stay for these purposes. This does not force the parties to resolve the matter by alternative means, but it does put pressure upon them. At every Case Management Conference in the early stages of a case the Court is likely to consider ADR, and, in order to be able to answer the Judge's questions, the input of parties' surveyors may often required. Why is the dispute not capable of settlement by ADR?

• An Information Body

The second thing that the Court can do, is to act as a source of information about professional and commercial bodies who provide ADR services.

The CPR says that the parties are under a "duty to consider seriously the possibility of (these) ADR procedures". How does this tend to work in practice?

Whilst the Court can make an Order for ADR, even if one party is opposed (see King Street Limited v. Balnago Corporation Limited August 3rd 1999 (unreported)), as indicated above, it cannot actually force the parties to mediate or adjudicate their disputes in a particular way.

So far, however, ADR continues to have a fairly limited role; particularly where (as in most Landlord & Tenant cases) there are significant questions of pure law.

• For example: X claims possession of an office building from T company. X claims T company is a tenant at will because, as landlord X has never "recognised" them as tenants by accepting rent. Furthermore their entry into occupation was during a time when a lease was being negotiated with them. T company claim they are tenants, fully protected by the 1954 Act Part II, they have paid money which was accepted as rent and are entitled to a periodic tenancy.

The above everyday problem involves a myriad of legal issues - with the parties' poles apart in terms of what they wish to achieve. The strength of their respective positions depends on a very careful understanding of legal authority and an intimate examination of the factual matrix surrounding their entry into occupation and the basis on which monies were (allegedly) paid and accepted.

ADR has little to offer the parties in such dispute: their positions are likely to be entrenched before the litigation begins. The consequences of either party being right are clear, and, the positions irreconcilable.

The position might be different, however, where, in, for example, a dilapidations claim the parties are agreed that the extent of disrepair does not, on any basis exceed diminution in value, and the dispute is therefore simply one between building surveyors (a rare scenario). Their disagreement is as to certain significant items in the schedule of dilapidations. Providing there are no legal questions of interpretation of the lease covenants, one can see quite easily how ADR can work quickly, and, efficiently, for the parties (even if it deprives the lawyers of some fees).

It is likely to become visible in property disputes only where extensive building practice (or possibly valuation practice) questions arise. The general experience for property litigators appears to be that in the last 18 months, the procedures have not been used significantly more than before.

Perhaps more useful is the provision in the Commercial Court for "Early Neutral Evaluation" of the strength of one's case - not a procedure used elsewhere, and so, not particularly relevant at the moment to property litigators.

This is a facility for a without prejudice, non-binding, early neutral evaluation by a commercial Judge of a dispute, or, of particular issues within the dispute. It is for the Judge to decide if it is appropriate, as a forum, for assisting resolution, and, if he gives the evaluation, he then has to drop out of further conduct of the case - unless the parties agree otherwise.

This seems to be a useful procedure which will no doubt be expanded. One can see how it might apply in the above example.

Generally it would be true to say that litigation has seen a downturn since the introduction of Woolf. ADR must therefore be having some impact; perhaps less in the area of property litigation. Some of this downturn, in the last 18 months, has certainly been due to a reluctance amongst litigation solicitors to become the first to test the new reforms. Lawyers, being both conservative and cautious, wanted someone else to dip their toes in the reformed waters of litigation before they did.

The second reason why litigation has seen a downturn is because there is much more "front loading" of costs than there was in the past.

In the past, proceedings could be issued without any clear idea of when they would come to trial, or, what the real strength of one's case was. The key to the Woolf reforms is that one has to grasp, early, the strength of the case that one is advancing (whether as claimant or defendant) and, to be able to prove to your opponents fairly openly at an early stage that the claim (or defence) has merit. (This is enshrined in various "pre-action protocols") This front loading process tends of course to put some parties off (or perhaps to show that they had no case in the first place!).

The third point to make, however, is that a lot of the supposed decline in litigation masks the fact that a stable economy is not good news generally for litigators (and property litigators in particular); neither is the abolition of legal aid, which, has a significant "knock on" effect on all litigation.

Overall, it is probably still too early to say, therefore, how litigation will be affected in the long term by the Woolf reforms. It seems unlikely, however, that it will cause any significant decline (in itself) in the extent of litigation, at least in the long term