UK: The Importance of Considering ADR

Last Updated: 30 May 2003

ADR is not mandatory in the UK, save where agreed by the parties in contract (although there have been orders made by individual judges in exceptional cases). That said, the use of ADR is now firmly enshrined in the English Civil Procedure Rules. The court has a positive obligation to encourage parties to use an ADR procedure if the court considers it appropriate and to facilitate the use of such a procedure. Failure to consider ADR can result in adverse costs consequences. Recent cases have highlighted the importance the court is attaching to ADR.

In April 2002, the Court of Appeal’s decision in Dunnett v Railtrack Plc [2002] 2 All ER 850 highlighted the necessity for lawyers and parties to consider Alternative Dispute Resolution (ADR), failing which a party may be penalised in costs. This decision was not wholly unexpected. In the earlier case of Cowl v Plymouth City Council [2002] 1 WLR 803, Lord Woolf, in his judgment in the Court of Appeal, stated in the context of a judicial review that: "both sides must by now be acutely conscious of the contribution alternative dispute resolution can make to resolving disputes in a manner which both meets the needs of the parties and the public and saves time, expense and stress."

In Dunnett, the claimant lost at first instance and applied for permission to appeal. Before granting permission to appeal, Lord Justice Schiemann advised her to explore the possibility of ADR. The claimant referred this suggestion to the defendant who was not willing to consider it. The claimant lost her appeal and the defendant asked the court for an order that the claimant pay its costs of the appeal. The Court of Appeal refused this request and made no order as to costs saying that the defendant should not have dismissed Schiemann LJ’s suggestion of ADR out of hand. Lord Justice Brooke (with whom Lord Justice Robert Walker and Lord Justice Sedley agreed) specifically stated that he hoped any publicity given to this part of his judgment would draw the attention of lawyers to their duties to further the overriding objective, which include encouraging parties to use ADR, and, if they turn down "out of hand" the chance of ADR when suggested by the court, they may have to face "uncomfortable costs consequences".

In Hurst v Leeming [2002] EWHC 1051 and EWCA Civ 1173, Mr Hurst brought a claim against his counsel, Mr Leeming QC, alleging negligence in respect of a previous unsuccessful piece of litigation in which he was represented by Mr Leeming. (Mr Hurst had already unsuccessfully brought actions against his former solicitors in respect of the same in both the Chancery Division and the Queen’s Bench Division).

This action was dismissed by Mr Justice Lightman who then had to deal with the issue of the costs of the action. In the ordinary case Mr Leeming would be entitled to his costs as the successful party, but Mr Hurst submitted that no such order should be made as both prior to and after the commencement of the proceedings, he had invited Mr Leeming to proceed to mediation and Mr Leeming had refused.

The Judge had to consider whether Mr Leeming was justified in refusing to proceed to mediation. Lightman J concluded after "anxious consideration" that "quite exceptionally" the defendant was justified in taking the view that mediation was not appropriate because, viewed objectively, it had no realistic prospect of success. Amongst the factors he took into account were the previous actions commenced by Mr Hurst against his solicitors, the fact that as a bankrupt he had nothing to lose in the proceedings, together with Mr Hurst’s underlying motivations. Mr Leeming was therefore awarded his costs. Mr Hurst sought permission to appeal which was refused.

Lightman J acknowledged that mediation is not compulsory in law. Nevertheless, referring to the decisions of the Court of Appeal in Dunnett and in Cowl, he said:

"..alternative dispute resolution is at the heart of today’s civil justice system, and any unjustified failure to give proper attention to the opportunities afforded by mediation, and in particular, in any case where mediation affords a realistic prospect of resolution of dispute, there must be anticipated as a real possibility that adverse consequences may be attracted." 

Although he accepted that a party may refuse to proceed to mediation with impunity if there is, objectively assessed, no real prospect of success (as was exceptionally the case in these proceedings), he described such a refusal as "a high risk course to take".

In refusing permission to appeal, Keene LJ described Lightman J’s conclusion that the rejection of mediation was justified as "unusual" but said that it was fully borne out by the evidence in the case.

The trend towards mediation as "a firmly established, significant and growing facet of English procedure" was confirmed by Colman J in Cable & Wireless Plc v IBM United Kingdom Ltd [2002] EWHC 2059. In that case, a dispute arose under an agreement entered into by the claimant and the defendant for the supply of information technology. An application was made to stay the proceedings pending the dispute being referred to ADR on the basis of an ADR clause in the agreement. The application for a stay raised the issue of the effect, if any, which the court should give to agreements to refer disputes to ADR. The relevant clause provided as follows: "The Parties shall attempt in good faith to resolve any dispute or claim arising out of or relating to this Agreement…promptly through negotiations…If the matter is not resolved through negotiation, the Parties shall attempt in good faith to resolve the dispute or claim through an ADR procedure as recommended to the Parties by the Centre for Dispute Resolution. However, an ADR procedure which is being followed shall not prevent any Party from issuing proceedings." Cable & Wireless submitted that the clause was unenforceable as it lacked certainty and imposed no more than an agreement to negotiate.

Colman J held that the ADR clause contained an enforceable obligation to participate in ADR procedures recommended by the Centre for Dispute Resolution (CEDR). He also held that the clause was more than an agreement to negotiate as it had identified a particular procedure, namely an ADR procedure as recommended by CEDR. The Judge also stated: "For the courts now to decline to enforce contractual references to ADR on the grounds of intrinsic uncertainty would be to fly in the face of public policy as expressed in the CPR and as reflected in the judgment of the Court of Appeal in Dunnett v Railtrack."

Finally, the Court of Appeal has applied Dunnett v Railtrack again in March 2003 in Leicester Circuits Ltd v Coates Brothers plc [2003] EWCA Civ 333 in which a successful party which had withdrawn at the "11th hour" from a mediation arranged pre-trial was denied some of its costs.

Comment

These cases highlight the increasing move by the courts to actively encourage parties to consider ADR. This is consistent with Lord Woolf’s desire for judges to take a more proactive role in deciding the best way of dealing with a particular case and recommending ADR to litigants where relevant. In a recent interview for a Southeast European Regional Conference on Dispute Resolution, Lord Woolf said that, although the Civil Procedure Rules had influenced people’s thinking in respect of ADR, he did not believe that they had gone nearly far enough. He said: "It’s my belief that any sensible system is run where the litigants feel that going to court is the last resort, not the first resort, and that is the culture I would like to encourage."

More developments in this area therefore seem likely.

Article by Christa Band

© Herbert Smith 2003

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

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