The importance of Alternative Dispute Resolution

Alternative Dispute Resolution (ADR) is a fundamental aspect of the Civil Procedure Rules (CPR) which are the rules that govern the process of Civil Litigation. ADR is a way of settling a dispute other than having a judge decide the claim at trial after a lengthy dispute. ADR includes various methods of settling a dispute such as mediation, arbitration, part 36 offers, early neutral evaluation, without prejudice offers and an ombudsman.

CPR 1.1. contains the overriding objective which states that cases must be dealt with fairly and at a proportionate cost which would include the case being dealt with at a proportionate cost to the sum in dispute. If ADR is attempted early on in proceedings and is successful, it can save the parties the time and cost of a lengthy litigation dispute. Even at the end of a lengthy dispute that does result in a trial, the outcome of the trial cannot be promised. A claim going through the trial process has many stages that must be completed including but not limited to disclosure, exchanging witness statements, cost budgeting, expert instruction and trial preparation. All of this legal work will require payments on account throughout the process so even if a party is successful at trial and gains a cost award against the other party, expense will be incurred in the interim leading up to trial.

There is then also of course the chance that a party may not be successful at trial due to various reasons. The normal rule is that the successful party will be able to retrieve their costs from the unsuccessful party, although it is not possible to recover every penny a party has spent on litigation leading up to trial. However, a Judge can fray from this rule if they deem that the successful party has not been cooperative throughout the process and has unreasonably refused an offer of ADR. This means that if a party is successful in their claim but it is found that they unreasonably refused an invitation to enter into ADR, this may result in an adverse costs order. Mediation is a form of ADR in which parties are entered into a confidential meeting outside of the court process with a mediator who will communicate the offers of settlement between the parties.

Mediation has a high success rate of settling disputes so that the need for trial can be vacated. The case of Halsey -v- Milton Keynes General NHS Trust (2004) highlighted that there can be costs consequences for unreasonably refusing mediation where a Judge finds that mediation could have reasonably settled the dispute.

The Courts do not look favourably on parties who “want their day in Court” and strongly encourages parties to consider a reasonable alternative. The penalties for parties who don’t engage in ADR can include that the unreasonable party may be ordered to pay the other party’s costs on an indemnity basis. This could mean that the refusing party would have to pay the other party’s costs even if they are not proportionate to the amount in dispute. The Court often order a “stay” of proceedings which essentially pauses proceedings whilst the parties attempt ADR and often include on their orders that the refusing party may have to lodge a witness statement explaining their refusal to the Court.

It is well known within the profession that the Courts are extremely busy which causes significant delay in proceedings and countless adjourned trials, meaning that the relief that comes with a settled dispute is too often delayed for parties. The amendment No.3 to the Civil Procedure Rules comes into effect on 1st October 2024 which will include a stronger focus on Alternative Dispute Resolution which will take some pressure of the Courts.

For further advice and assistance please contact our Litigation and Dispute Resolution team on  01604 344562 / 01908 916096 or email info@franklins-sols.co.uk.