Recent changes to the Civil Procedure Rules have sought to promote the use of alternative dispute resolution (ADR). The Rules now empower courts in England and Wales to order parties to engage in ADR under certain circumstances.
In November 2023, in James Churchill v Merthyr Tydfil County Borough Council, the Court of Appeal held that courts have the power to order parties to engage in alternative dispute resolution (ADR).
Following this decision, the Civil Procedure Rule Committee consulted on changing the Civil Procedure Rules (CPR or "the Rules") to codify and clarify the court's powers to order the use of ADR. The resulting amendments came into force on 1 October 2024, marking a significant change in court procedure.
Overview of changes to the CPR
CPR 1 provides that the "overriding objective" of the Rules is to enable the court "to deal with cases justly and at proportionate cost". This is unchanged.
A major change has been made to Rule 1.1(2)(f), which now provides that dealing with cases justly and at proportionate cost includes "promoting or using alternative dispute resolution". This is important as CPR 1 helps guide judicial discretion and will now direct courts to consider promotion of ADR as a core objective.
The court's duty to actively manage cases under CPR 1.4(2)(e) now includes "ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution". Similar amendments have been made to CPR 3, CPR 28, and CPR 29, which all further enable the court to encourage or order the use of ADR.
CPR 44 provides rules on the court's discretion as to costs and sets out which factors, such as the parties' conduct, must be considered when assessing costs. Crucially, CPR 44.2(5)(e) has been amended to state that relevant conduct to consider when deciding on costs includes:
"whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution."
So, unreasonably failing to engage in ADR now comes with the risk of increased costs imposed by the court.
When can a court order the use of ADR?
In the Churchill case, it was held that a court can order the use of ADR as long as doing so:
"does not impair the very essence of the claimant's right to proceed to a judicial hearing, and is proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost."
This is fairly broad, and neither the updated CPR nor the rest of the Churchill judgement state precisely when a court can order the use of ADR.
It was noted in Churchill that courts will have to consider the individual circumstances of each case when deciding whether to order the use of ADR, but relevant factors include:
- the nature of the process contemplated;
- whether the parties were legally advised or represented;
- the urgency of the case and the reasonableness of the delay caused by ADR;
- whether there is a significant imbalance in the parties' resource or bargaining power; and
- whether there is a realistic prospect of the case being settled through ADR.
Key takeaways
It may be difficult to predict when an order to use ADR may be made until further case law on the updated CPR emerges. However, parties should be wary of 'unreasonably' refusing to engage in ADR due to the potential for cost sanctions under CPR 44.
The key point to note is that ADR ought to be considered thoroughly and undertaken where practicable. If this is not done by parties in litigation before and during a dispute, the court may now order the use of ADR where it is proportionate to do so.
The factors from Churchill listed above may provide guidance as to what could constitute a 'reasonable' failure to engage in ADR, such as where the case is particularly urgent or where there are no prospects of settling through ADR.
Parties should also note that there is no specification under the CPR about which forms of ADR ought to be considered and/ or used. This suggests that parties are free to decide whether mediation, arbitration, or other forms of ADR are most suitable for their particular dispute.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
