Settle or else! The court’s approach to mandatory ADR post-Churchill
As predicted in our previous article, ‘The Court’s Power to Order Compulsory ADR‘, following the landmark decision in Churchill Merthyr v Tydfil County Court Borough Council [2023], the Court’s approach towards mandatory ADR has been unprecedented as of recent.
In light of Churchill, the Civil Procedure Rule Committee (“CPRC”) launched its consultation inviting views on incorporating mandatory Alternative Dispute Resolution (“ADR”) into the Civil Procedure Rules (the “CPR”). Whilst we eagerly await the result of the CPRC’s consultation, there has been considerable development elsewhere in the meantime post-Churchill.
Small Claims
Recently, a new Practice Direction 51ZE came into force to supplement the CPR and introduce the Court’s new pilot scheme which is scheduled to run until May 2026.
The pilot scheme will see all small money claims issued on or after 22 May 2024 automatically referred to the Small Claims Mediation Service (“SCMS”); a service which has now been run successfully on an opt-in basis for a number of years.
Along with automatic referral to the SCMS, the CPR has been expanded to, most notably, permit the Court to also take into account any failure by a party to attend mediation provided by the SCMS (CPR 27.14). The Court’s powers to sanction non-attendance to mediation has also been widened (CPR 27.8(7)).
Northamber
In Northamber PLC v Genne World Ltd & Ors [2024], the Court of Appeal offered welcome observations on the Court’s recent approach to ADR and, in particular, the consequences for a party acting unreasonable in the face of an offer to mediate.
Here, it was previously ordered by the Court that at all stages the parties should consider engaging in ADR. Further, the order provided that “Any party not engaging in any such means proposed by another must serve a witness statement giving its reasons […]”
Despite the Court’s direction, the Defendant in Northamber failed to respond to the Claimant’s proposal for mediation or provide a witness statement explaining their refusal.
Consequently, the Defendant’s unreasonable conduct was reflected by a 5% reduction in the costs order in its favour, and the Court starkly recited that: –
“To compound matters, they [the Defendant] breached an order of the court requiring them to explain their failure to agree to mediation. If breaches of such orders are ignored by courts when deciding costs, parties will have no incentive to comply with them.”
Conway
More recently, in Conway v Conway & Anor (Rev 1) [2024] EW Misc 19, the Defendant’s costs were reduced by 25% as a consequence of rejecting mediation “out of hand”. This deduction is considerably a lot more than imposed in Northamber. It was observed in Conway that: –
“One matter that seriously concerns me is why the Defendants did not agree to mediation when it was put to them. The importance of mediation can never be over-emphasised: see, for example, the recent decision of the Court of Appeal in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Ci 1416. The Defendants will have to advance compelling reasons why the offer of mediation was rejected out of hand by them.”
Impact
Since Churchill, the amendments to the CPR and subsequent rulings signal the Court’s emphasis towards ADR and negotiated ‘out-of-Court’ resolutions to disputes.
Whilst this approach may be welcomed by some, it is important not to jump the gun, and keep in mind that the Court’s automatic referral of all small claims to the SCMS is presently only a 2-year pilot. Moreover, the pilot is currently limited to those newly issued small money claims, and it remains to be seen whether we will see the widening of automatic referral to higher value and other types of cases.
That being said, Northamber and Conway are clear examples of the Court’s approach to slowly integrating ADR into the CPR, and is not something to be ignored. Indeed, it is positive that the Court are not taking refusal to ADR lightly and instead are sanctioning such unreasonable conduct.
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