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The Courts and Mediation – a settled position?

The Courts and Mediation – a settled position?

Late last year, a Court of Appeal decision on alternative dispute resolution highlighted the significant role that mediation can play in successfully resolving disputes, write Sophie McCabe, Rachel Murray-Smith and Helen Arthur.

In Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, the Court of Appeal found that the court can order a stay to proceedings to allow parties to engage in alternative dispute resolution (ADR), as long as “it does not impair the 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 a reasonable cost”[1].

The court declined to set out any fixed principles as to when the discretion of ordering parties to engage in an alternative form of dispute resolution can and will be exercised by the courts, with the Master of the Rolls stating in his conclusion, “I decline to lay down fixed principles as to what will be relevant to determining the questions of a stay of proceedings or an order that the parties engage in a non-court-based dispute resolution process”.[2]  In understanding whether it is right to compel the parties, the court will consider the claimant’s right to proceed to a hearing and whether such an order would assist with the aim of settling the dispute, fairly and quickly and at reasonable costs.

The ability to compel parties to engage in ADR has somewhat overturned the previous decision in Halsey v Milton Keynes General NHS Trust[3]. In Halsey, it was considered that compelling parties to engage in ADR could constrain the parties’ ability to have the right of access to the court, with particular focus on Article 6 of the European Convention on Human Rights.

Civil Procedure Rules Committee (Committee) / Proposed Changes to Civil Procedure Rules

The decision in Churchill has prompted the Committee to consult on some proposed changes to the Civil Procedure Rules (CPR), which includes the following:

  • Changes to CPR 1.1 (the overriding objective) to include that dealing with a case justly and at proportionate cost includes the use and promotion of ADR.
  • Changes to CPR 1.4 (court’s duty to manage cases) and CPR 3.1 (the court’s general powers of management) are influenced by the decision that judges may order parties to participate in ADR rather than just encouraging the parties to engage in ADR.
  • Changes to CPR Parts 28 (Directions) and Part 29 (Case Management) to include that courts must consider where to order or encourage parties to participate in ADR or a different claims route.
  • Changes to CPR Part 44 (court’s discretion as to costs) to clarify where there is a failure to comply with an order for or unreasonable failure to engage in ADR then this will be considered by the courts when deciding costs.

The Committee is inviting views and comments on the above proposals before 28 May 2024. More information on the proposed changes and how to send responses can be found here:

ADR and the Technology & Construction Court

These new proposals will certainly encourage parties to place greater importance on ADR prior to and during formal litigation.

In respect of construction disputes, the Technology and Construction Cout (“TCC”) guide confirms that “the court will provide encouragement to the parties to use alternative dispute resolution and will, whenever appropriate, facilitate the use of such a procedure[4].

The TCC guide clarifies further that “If at any stage in the proceedings the court considers it appropriate, an ADR order in the terms of Appendix E may be made. If such an order is made at the first CMC, the court may go on to give directions for the conduct of the action up to trial (in the event that the ADR fails). Such directions may include provision for a review CMC”[5]. The TCC guide certainly includes an expectation that the parties give serious consideration to ADR throughout the litigation even amounting to the ability for the court to make an order – to some extent mirroring the position adopted in Churchill.

The benefits of mediation

Given the increasing importance placed on the parties to contemplate ADR, we set out some of the benefits of mediation (being a form of ADR) below.

  • Flexibility – The parties have the flexibility to decide who is to be appointed as mediator. This simple act of appointment already compels the parties to adopt a conciliatory approach between them. The mediator, once appointed, will usually set out some directions to allow the mediator to understand each party’s respective position. The mediation itself is entirely flexible in approach and can adapt to suit the parties’ needs on the day. Most mediations last one day, however for complex disputes, it can expand into additional days.
  • Confidentiality – mediation is a confidential process in between the parties. Whilst the parties may refer to the fact that a mediation has taken place, the substance of the mediation remains confidential and will be governed by the mediation agreement signed by the mediator and the participating parties. If the mediation is successful, then a settlement agreement is usually entered into setting out the agreed terms of the settlement. The settlement agreement itself will also be confidential as between the parties. Any discussions and documents identified within the mediation are also confidential and without prejudice, meaning that parties cannot rely on this information outside the mediation if it were to go further into formal litigation.
  • Commerciality – mediation is a forum in which parties are encouraged to engage in a commercial and pragmatic way to negotiate their own settlement. The parties are in charge of the process and so drive the outcome. A successful mediation may be a resolution which the courts cannot provide such as a PR statement or a letter of apology. It has the ability to remove the adversarial approach which can often result in the parties becoming entrenched in their own position  losing the ability to look at the issue in a holistic way.
  • Relationships – due to their nature, mediations can help maintain the relationship of the parties. Given that the parties have agreed to mediate shows a willingness to find a common ground between them. In formal litigation, the damage sustained to the relationship is often so great that it is irreparable. Not only do the parties risk losing publicly (and the costs involved with this), but they also risk losing what once was a valuable relationship, as well as the negative impact this may have on potential future relationships.
  • Cost-effective – if used at the appropriate time, mediation can be a cost-effective process for all parties, especially if formal proceedings have yet to begin.

Why should you consider mediation?

Around 70-75% of cases settle on the day of the mediation, and 15-20% of cases settle shortly after mediation takes place. It also has a high success rate, with around 90% of all cases settling at mediation.[6] These figures are compelling and should serve as a reminder to parties that, used in the right way and at the right time, mediation provides a positive forum to resolve disputes.

Read the complete article here.

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