9 - Settlement and ADR

Question 1

What is the role of Part 36, CPR?

Answer 1

Part 36 is a self-contained procedural code. The court and the CPR, including Part 36, encourage the parties to settle.

Part 36 of the CPR:
- Describes a kind of offer that a party can make.
- Sets out consequences if an offer of that kind is made and accepted.
- Sets out different consequences if an offer of that kind is made and not accepted and the matter proceeds to trial (and those consequences depend on the outcome at trial).

The court generally has a wide discretion when awarding costs, and will consider the behaviour of both parties, including their efforts to settle the case (CPR 44.2). However, the advantage of Part 36 is that the financial incentives contained within it are more certain than the court’s general discretion and go beyond what the court can generally order.

Question 2

What is the rationale behind Part 36 CPR?

Answer 2

The central rationale behind Part 36 is that parties who make realistic proposals to settle actions should get some benefit if these are not accepted and it turns out, at trial, that they should have been accepted.

A party who is ‘dragged to trial’ having tried to be reasonable should be ‘compensated’, and an unreasonable party who insists on a trial should be subject to a penalty.

The ‘penalty’ stipulated in Part 36 generally takes the form of adjusting the costs, damages and/or interest.

Question 3

When can a Part 36 offer be made and by whom?

Answer 3

• Part 36 offers can be made at any stage of proceedings, including before proceedings are issued.
• A Part 36 offer can be made by either party.

Examples: The claimant can write to the defendant words to the effect: ‘I will accept £x from you to settle these proceedings’ and if the settlement offer conforms with certain other formalities (CPR 36.5) then it is a valid Part 36 offer.

In a similar vein, the defendant can write to the claimant words to the effect: ‘I will pay £y to you to settle these proceedings’ and if the settlement offer conforms with certain other formalities (CPR 36.5 and 36.6) then it is a valid Part 36 offer.

Question 4

How does Part 36 contrast with Calderbank offers?

Answer 4

Part 36 is quite specific that nothing within Part 36 prevents a party from making an offer in whatever way it chooses, including by making a Calderbank offer:

Calderbank offer: An offer, usually communicated in writing, and written ‘without prejudice save as to costs’, such that it cannot be referred to the judge until costs are considered after trial, but at that point can be relied upon. Such an offer does not need to comply with Part 36.

Although the specific consequences of Part 36 do not apply the court will have regard to a Calderbank offer when it exercises its discretion on costs (pursuant to CPR Part 44).

However, if a party wants to avail itself of the specific cost consequences and protection afforded by Part 36 it must make the offer in compliance with the rules set out in Part 36.

Question 5

What are the main CPR rules to support making, varying, withdrawaing, and accepting Part 36 offers?

Answer 5

The main CPR which support the content of this element are:

• CPR 36.5-36.7 (in relation to making offers)
• CPR 36.8-36.10 (in relation to clarifying, withdrawing or changing offers)
• CPR 36.11-36.15 (in relation to accepting offers)

Question 6

How do you make a valid Part 36 offer?

Answer 6

Within the rules the party making the offer is defined as the ‘offeror’ and the party receiving the offer is the ‘offeree’.

The rules (CPR 36.5) state that the Part 36 offer must:
- The offer must be in writing.
- It must clearly state that it is made pursuant to Part 36.
- It must specify a relevant period of at least 21 days within which the defendant will be liable for the claimant’s costs if the offer is accepted.
- It must indicate whether it relates to the whole or part of the claim.
- It must state if it takes into account any counterclaim.

Additional requirements for defendants’ offers only (CPR 36.6):
- With limited exceptions, a Part 36 offer by a defendant to pay a sum of money must be an offer to pay a single sum of money.
- If the offer includes a provision for payment later than 14 days after acceptance, it will only qualify as a Part 36 offer if the offeree accepts the offer under these terms.

These rules apply to Part 36 offers made by both claimants and defendants.

Question 7

What are the key requirements for ensuring a Part 36 offer is valid and complies with Part 36 timing rules?

Answer 7

To ensure a Part 36 offer is valid, the following requirements must be met:
- Relevant period: The offer must specify a period of at least 21 days within which the defendant would be liable for the claimant’s costs if the offer is accepted.
- A Part 36 offer can be made at any time, including before proceedings are issued (CPR 36.7(1)).
- Part 36 offers can be made by either the claimant or defendant, so the rules refer to the offeror.
- The offer must be in writing, which can include a letter that clearly states it is made pursuant to Part 36 or using the prescribed form N242A.

Following these requirements will ensure that the offer is a valid Part 36 offer.

Question 8

When is a Part 36 offer considered made?

Answer 8

When it is served on the offeree (CPR 36.7(2)).
- The rules of service (CPR 6) apply. A party need not wait until proceedings are issued to make a Part 36 offer as they can be made before proceedings have been commenced.
- Pre-issue Part 36 offers have the usual Part 36 consequences (including recoverable pre-action costs) upon acceptance after issue of proceedings or upon judgment being given.
- Where a Part 36 offer is both made and accepted before proceedings are commenced, the Part 36 consequences of acceptance (CPR 36.13 and 36.14) have no effect since the consequences are dependent upon there being extant proceedings.

Question 9

How can a Part 36 offer be clarified?

Answer 9

The offeree can seek clarification of the terms of the offer, for example a breakdown of the components of the offer, within 7 days of service (CPR 36.8 ).

Question 10

What are the main rules for withdrawing or changing a Part 36 offer once it has been accepted or after the trial has started?

Answer 10

The ability to withdraw or change a Part 36 offer depends on whether the offer has been accepted and if the trial has begun:
- If the offer has been accepted: It cannot be withdrawn or changed (CPR 36.9(1)).
- If the trial has already started: The court’s permission is required to withdraw or change the offer.

Question 11

What are the rules for withdrawing or changing a Part 36 offer depending on whether the relevant period has expired?

Answer 11

The rules on withdrawing or changing a Part 36 offer vary based on the status of the relevant period:

If the relevant period has expired:
- The offer can be withdrawn or its terms changed without needing court permission.
- The offer can also be withdrawn automatically if it includes a time limit (CPR 36.9(4)).
- With time limited offers, the time limit must be after the expiry of the relevant period. It cannot be less than the relevant period.

If the relevant period has not expired:
- Any notice of withdrawal or change takes effect only at the end of the relevant period, unless the offeree accepts during this period.

If accepted within the relevant period, after a notice of withdrawal, the offeror can either:
- Allow the acceptance, or
- Apply to the court to withdraw or change the offer, within 7 days of acceptance or before the first day of trial.
- The court may allow withdrawal or change if circumstances have changed since the offer and if it serves the interests of justice.

Question 12

What are the consequences of making a Part 36 offer?

Answer 12

If a part 36 offer has been made and it is not withdrawn, two things can happen:

• It is accepted – you then need to know the consequences of the acceptance;
• It is not accepted – you then need to know whether the court will impose a ‘penalty’ after trial because the offeree did not accept the offer, and if so, what that penalty will / might be.

Question 13

How can a party accept a Part 36 offer?

Answer 13

• Serve written notice of acceptance on the offeror (CPR 36.11(1)).
• If the case is issued the acceptance also needs to be filed at court.
• There is no prescribed form for this - a letter will be sufficient.

Important: An offer remains open for acceptance unless it has been withdrawn (CPR 36.11(2)). This remains the case even after the relevant period has expired, unless offer is expressed to be withdrawn automatically at the end of the relevant period.

Question 14

What is the consequence of accepting a Part 36 offer on the continuation of the claim?

Answer 14

Accepting a Part 36 offer has specific consequences, depending on the terms of the offer and the timing of acceptance:

Stay of Proceedings: Acceptance of a Part 36 offer stays the claim, so it will not proceed to trial (CPR 36.14(1)).

Question 15

What are the consequences regarding the settlement sum when a Part 36 offer is accepted, both for offers involving a single sum of money and those without?

Answer 15

For Offers Involving a Single Sum of Money:
- Payment Deadline: If the Part 36 offer includes an offer to pay or accept a single sum of money, the defendant has 14 days from acceptance to pay the agreed settlement amount unless otherwise specified in writing (CPR 36.14(6)).
- Judgment on Non-Payment: If the defendant fails to pay within this period, the claimant may enter judgment against the defendant for the settlement sum (CPR 36.14(7)).

For Offers Not Involving a Single Sum:
- Enforcement of Terms: If the Part 36 offer does not involve a single sum of money, and a party fails to comply with the agreed terms, the aggrieved party can apply to the court to enforce the terms of the offer without starting separate court proceedings (CPR 36.14(8)).

Question 16

What are the cost consequences of accepting a Part 36 offer within the relevant period?

Answer 16

If a Part 36 offer is accepted before the expiry of the relevant period:
- The claimant is entitled to costs of the proceedings up to the date the notice of acceptance was served on the offeror (CPR 36.13(1)).
- Rationale: Since the claimant receives a sum in settlement and has effectively ‘won’ the claim, they should be entitled to costs of the proceedings. This rule applies regardless of which party (claimant or defendant) made the offer.

Question 17

What are the cost consequences of accepting a Part 36 offer after the relevant period?

Answer 17

If a Part 36 offer is accepted after the relevant period has expired (CPR 36.13(4)):

The court will determine liability for costs unless the parties agree otherwise.

Generally, the court must, unless it finds it unjust, order that:
- The claimant be awarded costs up to the date the relevant period expired.
- The offeree (which could be the claimant or the defendant) pays the offeror’s costs from the expiry of the relevant period to the date of acceptance.

Rationale: The claimant has ‘won’ its claim by receiving payment; therefore, the claimant should receive costs up to the expiry of the relevant period. However, the offeree bears costs from the end of the relevant period to the date of acceptance as a penalty for delaying acceptance.

Question 18

What are the cost consequences of accepting a Part 36 offer made less than 21 days before trial?

Answer 18

If a Part 36 offer is made less than** 21 days before trial and accepted:**
- If the parties do not agree on liability for costs, the court must determine who is liable (CPR 36.13(4)).

This rule applies due to the special circumstances arising from an offer made so close to the trial date.

Question 19

What is the consequence of accepting a Part 36 offer related to only part of a claim?

Answer 19

If Claimant Abandons the Remainder of the Claim: The claimant is only entitled to costs for the part of the claim contained in the offer unless the court orders otherwise (CPR 36.13(2)).

If Claimant Retains the Remainder of the Claim: The court determines liability for costs unless the parties reach an agreement (CPR 36.13(4)).

Question 20

Provide a summary of making, varying, withdrawing, and accepting Part 36 offers.

Answer 20

• Part 36 offers must be marked as such, be in writing, state whether they apply to the whole / part of claim / any counterclaim and state a period of at least 21 days when the defendant will be liable for the claimant’s costs if accepted.
• A Part 36 offer cannot be withdrawn after it is accepted, and there are limits on withdrawing it within the relevant period.
• After the end of the relevant period, a Part 36 can be withdrawn.
• If a Part 36 offer is accepted, the claim is stayed and the settlement sum must usually be paid within 14 days.
• If the Part 36 offer was accepted within the relevant period, the claimant is entitled to its costs up to the date notice of acceptance was served on the offeror.
• If the Part 36 offer was accepted after the relevant period, then the court will determine costs (unless the parties agree) but unless unjust the court must award the claimant its costs up to the expiry of the relevant period and the offeror its costs from that point onwards.

Question 21

Which CPR rules support the consequences of unaccepted Part 36 offers at trial?

Answer 21

The main CPR which support the content of this element are:

• CPR 36.17 and 36.24 (in relation to the cost consequences set out in CPR 36)
• CPR 44.2 (in relation to the court’s approach to costs when CPR 36 does not govern the situation)

Question 22

How does the court address unaccepted offers at trial, at an overview?

Answer 22

Rationale of Part 36: The principle of Part 36 aims to reward parties who make realistic settlement offers and to penalise parties who unreasonably refuse such offers and later go to trial.

The objective is to:
- Compensate a party who was reasonable in trying to settle, avoiding unnecessary trial costs.
- Penalise an unreasonable party who insists on a trial despite a fair settlement offer.

Court’s Role in Unaccepted Part 36 Offers: If a Part 36 offer is not accepted and the claim proceeds to trial, the court must determine whether a penalty should be imposed, focusing on whether the offer should reasonably have been accepted.

Approach Based on Offeror: The court’s approach to imposing penalties depends on whether the unaccepted Part 36 offer was made by the claimant or the defendant, which influences the consequences and application of any penalty.

Question 23

What are the two issues considered when a Defendant’s offer is not accepted by the Claimant and vice versa?

Answer 23

• Trigger: does the failure to accept the defendant’s offer trigger any consequences?
• Consequences: if so, what are those consequences?

Question 24

What triggers the consequences of a claimant failing to accept a defendant’s Part 36 offer?

Answer 24

Trigger Requirement: Under CPR 36.17(1)(a), consequences are triggered when a claimant fails to secure a judgment that is “more advantageous” than the defendant’s Part 36 offer.

Definition of ‘More Advantageous’: This means the claimant’s trial outcome must exceed the defendant’s Part 36 offer in monetary terms, even by a small amount. If the outcome is not better in monetary terms, the offer should have been accepted, which then triggers penalties.

Calculation of Advantage: The comparison in monetary terms is made as of the date of judgment. Since Part 36 offers include interest up to the end of the relevant period (CPR 36.5(4)), interest after that date is disregarded in assessing whether the claimant achieved a better outcome.

Question 25

What are the consequences imposed on the claimant for failing to accept a defendant’s Part 36 offer when it should have been accepted?

Answer 25

Penalties on the Claimant: If the claimant fails to obtain a more advantageous judgment, the court must, unless it considers it unjust to do so, impose the following penalties:
- Costs from Expiry of the Relevant Period: The claimant is ordered to pay the defendant’s costs from the date the relevant period expired.
- Interest on Costs: Additionally, the claimant must pay interest on these costs (CPR 36.17(3)).
- The claimant is also responsible for their own costs from this period onward.

Costs Prior to the Relevant Period Expiry: Part 36 does not govern costs for the period before the relevant period expired. Therefore, the standard costs rules (CPR 44) apply:
- If the claimant received some award, the court usually orders the defendant to pay the claimant’s costs for this period.
- If the defendant “won” at trial, the claimant typically covers the defendant’s costs for this period.
- The court retains discretion in applying these standard costs rules.

Question 26

How do the consequences of a defendant’s Part 36 offer differ depending on the trial outcome?

Answer 26

Failure to Meet Trigger: If the claimant’s judgment is more advantageous than the defendant’s offer, the offer has no effect under Part 36, and no penalties apply.

Example Scenarios:
Example 1: Defendant’s offer is £2 million; judgment for claimant is £1 million.
- Trigger Met: The claimant failed to achieve a judgment more advantageous than the defendant’s offer, so penalties apply.
- Consequences: Defendant is awarded costs and interest from the end of the relevant period. Likely also that the defendant will pay claimant’s costs up to the end of the relevant period, subject to court discretion.

Example 2: Defendant’s offer is £2 million; judgment for defendant (claimant = £0).
- Trigger Met: The claimant failed to secure a more advantageous judgment, so penalties apply.
- Consequences: Defendant receives costs and interest from the end of the relevant period and may also be awarded costs for the period prior to the relevant period’s expiry.

Example 3: Defendant’s offer is £2 million; judgment for claimant is £3 million.
- Trigger Not Met: The claimant achieved a judgment more advantageous than the defendant’s offer.
- Consequences: No penalties under Part 36, and the claimant may receive costs for the whole claim (subject to court discretion under CPR 44.2).

Question 27

What triggers the consequences for a defendant failing to accept a claimant’s Part 36 offer?

Answer 27

Trigger Requirement: Under CPR 36.17(1)(b), the consequences are triggered if the judgment against the defendant is “at least as advantageous” to the claimant as the proposals in the claimant’s Part 36 offer.

Meeting the Trigger: If the claimant achieves the same or a better outcome at trial than the Part 36 offer, the failure to accept the offer triggers consequences. This penalises the defendant for not accepting an offer that would have yielded an equivalent or better result.

Comparison in Money Terms: The judgment’s value is assessed at the date of judgment, using the same interest approach as for a defendant’s Part 36 offer.

Question 28

What are the consequences imposed on the defendant for failing to accept a claimant’s Part 36 offer when it should have been accepted?

Answer 28

Penalties on the Defendant: If the claimant’s judgment is at least as advantageous as the Part 36 offer, the court must, unless it considers it unjust to do so, order:
- Interest on the Award: Up to 10% above the base rate for part or all of the period from the end of the relevant period.
- Indemnity Basis for Costs: Costs from the end of the relevant period are assessed on the indemnity basis (as opposed to the usual standard basis), which can significantly increase the awarded costs.
- Interest on Indemnity Costs: Interest on these costs up to 10% above the base rate.
- Additional Amount: Based on a percentage of the award—10% for amounts up to £500,000 and 5% on amounts above £500,000, capped at £75,000 (CPR 36.17(4)).

Non-Monetary Claims: If there is no monetary claim (e.g., possession of property), the penalty in the form of an additional amount is based on total costs awarded instead of damages.

Question 29

How do the consequences of a claimant’s Part 36 offer vary depending on the trial outcome, and what factors influence the court’s discretion in applying them?

Answer 29

Example 1: Claimant’s offer is £3.5 million; judgment for claimant is £4 million.
- Trigger Met: The claimant’s judgment is more advantageous than the offer, so penalties apply.
- Consequences: Claimant receives indemnity costs, interest on costs and damages (up to 10% above base rate), and an additional amount of £75,000.

Example 2: Claimant’s offer is £3.5 million; judgment for claimant is £2 million.
- Trigger Not Met: The claimant’s judgment is less advantageous than the offer, so no penalties apply.
- Consequences: The claimant may receive costs under CPR 44.2 (subject to court discretion) as the claimant won.

Example 3: Claimant’s offer is £3.5 million; judgment for defendant (claimant = £0).
- Trigger Not Met: The claimant did worse than the offer, so no Part 36 consequences apply.
- Consequences: The defendant may receive costs under CPR 44.2 (subject to court discretion) as the defendant won.

Question 30

Under what circumstances might the court find it unjust to impose Part 36 consequences, and what factors influence this decision?

Answer 30

‘Unless Unjust to Do So’ Provision: When Part 36 consequences are triggered, penalties are imposed unless the court considers it unjust.

Factors Considered by the Court:
- Terms of the Part 36 Offer: The specific details and fairness of the offer itself.
- Timing of the Offer: The stage in the proceedings at which the offer was made.
- Information Availability: The information accessible to each party at the time of the offer.
- Conduct of the Parties: Particularly in relation to providing or withholding information essential to making or assessing the offer.
- Genuine Settlement Attempt: Whether the offer was a sincere effort to resolve the dispute.

Limited Discretion: The court’s discretion under CPR 36.17(5) is narrower than its general discretion under CPR 44, specifically focusing on these factors.

This is sometimes called a split costs order.

Question 31

What is a “split costs order” in the context of a defendant’s Part 36 offer?

Answer 31

A “split costs order” occurs when a defendant makes a Part 36 offer, and the claimant fails to obtain a more favourable judgment. This results in distinct costs orders for different periods of the case:

• Period 1: From Defendant’s Part 36 Offer to the End of the Relevant Period
  The court will likely order the defendant to pay the claimant’s costs for this period under the normal costs rules (CPR 44), rather than the Part 36 rules.
• Period 2: From the End of the Relevant Period to Judgment
  If the claimant fails to beat the defendant’s offer, the court, unless it would be unjust, will order the claimant to pay the defendant’s costs and interest on those costs, in accordance with CPR 36.17.

This structure, where costs are split between these two distinct periods, is sometimes referred to as a “split costs order.”

Question 32

What are the special rules for Part 36 consequences when an offer is not accepted?

Answer 32

No Part 36 Consequences if Offer Made Within 21 Days of Trial:
- Even if the ‘trigger’ is satisfied, there will be no Part 36 consequences unless the court shortens the relevant period.
- This is because the relevant 21-day period hadn’t expired, giving the offeree no fair chance to accept.

Part 36 Consequences Do Not Apply If:
- The Part 36 offer was withdrawn; or
- The Part 36 offer was modified to be less advantageous, and the offeree beat the modified terms.

For Full Part 36 Costs Protection:
- Make the offer more than 21 days before trial—the earlier, the better for potential benefits.
- Keep the offer open (do not withdraw it).

Question 33

What happens if both the claimant’s and defendant’s Part 36 offers are open and effective at the same time when the matter goes to trial?

Answer 33

Each Part 36 offer is considered separately based on the trial outcome, with Part 36 consequences applying only if one of the offers meets the required outcome threshold:

Example 1: Judgment Award of £4 million
- Claimant’s Offer: £3.5 million.
- Defendant’s Offer: £2 million.
- Outcome: The claimant has won more than their own offer of £3.5 million, so the claimant’s offer takes effect, and Part 36 applies (CPR 36.17(4)). The defendant’s offer has no effect since the award is greater than the defendant’s offer.

Example 2: Judgment Award of £3 million
- Outcome: Neither offer has any effect:
- Claimant’s offer of £3.5 million has no effect as the claimant has not won as much as their offer.
- Defendant’s offer of £2 million has no effect because the claimant has not won the same or less than the defendant’s offer.
- Costs: Likely to be awarded under normal principles (CPR 44.2).

Example 3: Judgment Award of £1 million
- Outcome: The claimant has won the same or less than the defendant’s offer of £2 million, so the defendant’s offer takes effect, and Part 36 applies (CPR 36.17(3)). The claimant’s offer has no effect as the award is less than the claimant’s offer of £3.5 million.

Question 34

Provide a summary of the consequences of unaccepted Part 36 offers at trial.

Answer 34

• Claimants’ offers and defendants’ offers have different consequences.
• You first need to consider whether an unaccepted offer triggers any consequences – this depends on comparing the sum awarded at trial to the sum contained in the offer.

-If the claimant fails to beat a defendant’s offer, the penalty is the claimant being ordered to pay the defendant’s costs from the date the relevant period expired, and interest on those costs.

• If the claimant does the same or better than its own offer, the penalty is the defendant being ordered to pay enhanced interest, indemnity costs and interests on those costs from the date the relevant period expired, plus a lump sum.
• All these consequences are ‘unless the court considers it unjust’ to impose them.
• All these consequences need to be seen in the context of the ‘normal’ costs rules in CPR 44 which will apply where Part 36 is silent or where there are no Part 36 consequences at all.

Question 35

Why is it important to consider alternative dispute resolution (ADR) options when advising a client on a civil dispute?

Answer 35

When advising a client on a dispute, a solicitor must identify the most effective dispute resolution procedure by:
- Considering both the nature of the dispute and the client’s commercial interests.
- Recognising that court proceedings may not be the best route for the client’s interests, as ADR can offer suitable alternatives.
- Advising on available ADR options to potentially resolve the dispute more efficiently and in alignment with the client’s objectives.

This approach involves understanding the main types of ADR, assessing why ADR should be explored, determining which ADR method might suit the case, considering the timing for exploring ADR, and recognising how the court encourages ADR use.

Question 36

What is negotiation?

Answer 36

Negotiation is a communication process between parties that is intended to reach a compromise or agreement to the satisfaction of both parties.

Question 37

What is mediation?

Answer 37

Mediation is a confidential process used to help resolve disputes through an impartial third party, known as the mediator. Key points include:
- Process: The mediator facilitates discussions, often with each party (and their legal representatives) in separate rooms. They shuttle between rooms to deliver offers and encourage each party to consider settlement options.
- Mediator’s Role: The mediator has no binding authority, meaning they cannot impose a resolution.
- Outcome: If no agreement is reached, mediation remains confidential and cannot be disclosed to the court.

Question 38

What are the characteristics and benefits of arbitration as an ADR method?

Answer 38

Arbitration is a formal ADR process where an impartial adjudicator makes a binding decision. Key aspects include:

Binding Authority: The adjudicator’s decision is final, removing the dispute from court jurisdiction.

When to Use: Parties may agree to arbitration in a contract (pre-dispute) or decide to arbitrate after a dispute arises (post-dispute).

Advantages:
- Privacy and confidentiality.
- Easier enforcement in some jurisdictions.
- Choice of a specialist arbitrator with expertise relevant to the dispute.
- Flexibility in process, allowing parties to tailor arbitration to their needs.

Question 39

What is Med-arb and how does it function as a dispute resolution process?

Answer 39

Med-arb is a hybrid dispute resolution process combining mediation and arbitration.
- Process: Initially, the parties attempt to resolve the dispute through mediation with the help of a mediator.
- If Mediation Fails: If mediation does not lead to a satisfactory resolution, the matter progresses to arbitration, where a binding decision is made by the arbitrator.
- Binding Outcome: The arbitration phase ensures that, if mediation fails, the dispute will be resolved by a binding decision.
- Purpose: This process provides flexibility by attempting mediation first, but guarantees a final binding resolution through arbitration if necessary.

Question 40

What is early neutral evaluation (ENE) and how does it differ from expert appraisal?

Answer 40

Early neutral evaluation (ENE), expert appraisal, and expert evaluation involve an independent third party providing an impartial, non-binding assessment. Key points include:
- ENE Process: An independent party (typically a lawyer or an expert) is appointed to offer a non-binding assessment of the dispute. This evaluation can provide an impartial opinion to help guide settlement discussions.
- Payment: The parties must pay the independent evaluator for their time and costs.
- Difference from Expert Appraisal: ENE differs from expert appraisal in that, while both provide an opinion, ENE may also involve a detailed evaluation of the dispute. However, both remain non-binding assessments.

Question 41

What is expert determination and how does it differ from expert appraisal?

Answer 41

Expert determination is a form of ADR where an independent expert provides a binding decision. Key points include:
- Process: An independent expert, appointed by the parties, determines the outcome of the dispute.
- Binding Decision: Expert determination results in a binding decision, unlike expert appraisal, which only provides an opinion.
- Suitability: It is particularly suited for disputes requiring technical knowledge. However, it may not be appropriate where there are issues of credibility or when the parties wish to be fully heard.

Assessment Tip: Expert determination should not be confused with expert appraisal, as the latter is non-binding.

Question 42

What is conciliation and how does it differ from mediation and expert evaluation?

Answer 42

Conciliation is a process where an independent third party assists the parties in resolving a dispute. Key points include:
- Process: Conciliation is usually a facilitative process, similar to mediation, but it may occasionally involve some evaluation, akin to early neutral evaluation (ENE).
- Statutory/Regulatory Scheme: Conciliation often forms part of a statutory or regulatory framework, specifying the conciliator and process, unlike mediation, where these aspects are determined by the parties.
- Clarification: The exact nature of the conciliation process can vary, so it is crucial for the parties to understand what is involved before agreeing to it.

Question 43

Provide a summary of the different types of ADR.

Answer 43

ADR can be categorised based on the level of third-party intervention and whether the determination is binding.

ADR without third-party intervention:
- Negotiation: The parties resolve the dispute themselves without the help of a third party.

ADR with third-party intervention, no binding determination:
- Mediation: A neutral third party facilitates settlement discussions but cannot impose a binding decision.
- Early Neutral Evaluation (ENE) / Expert Appraisal / Expert Evaluation / Conciliation: Involves an impartial third party offering non-binding opinions or assistance in resolving the dispute.

ADR with third-party intervention, binding determination:
- Expert Determination: An independent expert makes a binding decision on the dispute.
- Arbitration: A neutral arbitrator makes a final, binding decision after hearing both sides

Question 44

What are the advantages of using ADR?

Answer 44

The advantages of ADR, depending on the case and the form used, include:

Court Expectations: The court expects parties to consider ADR and can impose sanctions for non-compliance.

Better Relationships: ADR can preserve or create better commercial and personal relationships by addressing emotional and business aspects, unlike court proceedings.

Cost-Effective: ADR can be less expensive than litigation if successful.

Saves Time: ADR often resolves disputes faster than litigation.

Privacy: ADR processes are private and confidential, unlike public court hearings.

Less Disruption: ADR, especially mediation, can be less disruptive to clients than court proceedings.

Outcomes Reflect Risks: Non-binding ADR can result in settlements reflecting the parties’ risk, which courts cannot do.

Greater Control: Parties have control over the ADR process, including choosing the third-party mediator or arbitrator.

More Involvement: ADR allows clients to be more involved and have a say in the outcome, unlike the more detached nature of litigation.

Question 45

How does ADR compare to court proceedings in terms of cost, time, and control?

Answer 45

Cost-Effective: ADR can be much less expensive than litigation, as it typically avoids the costs associated with court proceedings, including court fees, extensive preparation, and legal representation.

Saves Time: ADR processes, such as mediation or negotiation, can often result in a quicker resolution of the dispute compared to court proceedings, which can be prolonged due to scheduling, formalities, and procedural delays.

Greater Control: ADR offers parties more control over the process. This includes the ability to select their mediator or arbitrator and agree on the procedure. In court, the parties cannot control who the judge will be or how the case will proceed.

Question 46

How does ADR support privacy and confidentiality, and how does it affect relationships?

Answer 46

Privacy / Confidentiality: ADR processes are private and confidential, ensuring that the details of the dispute, as well as any settlement offers, remain confidential. In contrast, court proceedings are public, and documents filed at court may be accessible by the public.

Better Relationships: ADR provides the opportunity to preserve or create better relationships between the parties, whether business, personal, or reputational. ADR can address emotional dimensions or allow parties to agree on future trading relationships, unlike court proceedings which do not offer this flexibility.

Question 47

How does ADR result in less disruption to clients and provide more tailored outcomes?

Answer 47

Less Disruption: ADR processes like mediation can be far less disruptive to clients compared to court proceedings. Clients may not need to gather extensive documents, attend multiple meetings, or take part in lengthy court hearings. This saves time and resources.

Outcomes Reflect Risks: In non-binding ADR, such as mediation, the parties can agree on settlements that reflect the risks each side faces. For example, parties may settle for a sum that reflects the claimant’s chance of winning, something that courts cannot do. In litigation, the judge must deliver a judgment without considering the risks or uncertainty of the case outcome.

Question 48

How should a party choose the most appropriate form of ADR for a dispute?

Answer 48

The choice of ADR depends on the individual circumstances of the case. To determine the most suitable form of ADR, you should:
- Consider the advantages listed under “Why use ADR?” and assess which are most important for your client.
- Evaluate which form of ADR offers the most relevant benefits based on those factors.

Question 49

What form of ADR would be recommended for a commercial dispute involving reputational concerns, privacy, and a desire for quick resolution?

Answer 49

In a case where two commercial parties have a generally good and productive relationship but are in dispute over a contract, and where reputational concerns, privacy, and speed of resolution are important, mediation would likely be the best form of ADR.
- Preserving the Relationship: Mediation allows the parties to address all aspects of their working relationship, including sensitive issues like the meeting that senior management was involved in.
- Speed of Resolution: Mediation can be relatively quick compared to arbitration or court proceedings, which are generally slower.
- Privacy: Mediation is confidential, ensuring that the matter remains private, which is important when reputational issues are at stake.
- Range of Outcomes: Mediation offers the flexibility to explore a range of solutions, which may not be possible in arbitration or court.

While arbitration or court proceedings could be considered as a fallback option, these are not likely to meet the client’s need for speed, privacy, and preserving the relationship. Mediation is ideal for dealing with a non-technical issue where both parties are seeking a collaborative solution.

Question 50

Why might arbitration or expert determination not be suitable in the case of a dispute between two commercial parties?

Answer 50

Arbitration or expert determination may not be suitable for a dispute between two commercial parties for several reasons:
- Lack of Complexity: There is nothing technically or legally complex in the dispute, so processes like expert determination or expert appraisal, which require technical expertise, are unnecessary.
- Adversarial Nature: Arbitration and expert determination are adversarial processes that could damage the working relationship between the parties, rather than helping to preserve it. These processes focus on determining who is “right,” rather than facilitating a consensual solution.
- Slower Resolution: Both arbitration and court proceedings are typically slower processes, which may not meet the client’s need for a quick resolution.

Question 51

Which types of case are not suitable for ADR?

Answer 51

Very few. In practice, most concerns about the suitability of a case for ADR can be overcome if the ADR is appropriately chosen and timed.

Question 52

What is the role of a lawyer when determining the use of ADR for a client?

Answer 52

A legal representative acting in their client’s best interests will:

• Ensure their client is fully aware of the options for ADR.
• Help their client to pursue any ADR which it wishes to pursue.
• Act within the authority to settle granted by the client in any settlement discussions. It is generally prudent to involve the client directly in the final approval of any settlement agreement.

Question 53

Provide a summary of the reasons, types, and choice of ADR.

Answer 53

There are many types of ADR including:
- Negotiation
- Mediation
- Early neutral evaluation / expert appraisal / expert evaluation
- Expert determination
- Arbitration.

Some types of ADR provide for a third party to determine the dispute, some types provide for a third party to help the parties to reach an agreement, and some types do not involve a third party.

There are many advantages of ADR, including saving of time and money, privacy and confidentiality, greater empowerment and involvement of the parties, and a broader range of potential outcomes.

Legal representatives must consider and advise their clients in relation to ADR.

Question 54

When should a party engage in ADR?

Answer 54

A party should engage in ADR based on several factors, including:

Contractual Obligation: The parties may be required to use ADR as per the terms of their contract. For example, a commercial contract may require certain issues to be referred to expert appraisal before commencing proceedings.

Form of ADR: Some forms of ADR, like arbitration, can only be considered before court proceedings. Arbitration is typically pursued as an alternative to court proceedings, and must be undertaken before a lawsuit is filed.

Balancing Factors: More generally, the decision to engage in ADR depends on balancing various factors, which influence whether ADR should take place earlier or later in the dispute process.

Question 55

What are the factors suggesting that engaging in ADR earlier is better?

Answer 55

Engaging in ADR earlier can have several advantages:
- Cost Saving: The earlier ADR is pursued, the greater the potential for cost savings if it results in a successful resolution.
- Better Relationships: Even if ADR does not lead to a settlement, it can improve the relationship between the parties, allowing them to resolve issues without escalating the dispute.
- Useful Information: Early ADR can provide valuable information that can help the parties in future negotiations or litigation. For example, an opinion obtained during early neutral evaluation may inform a party’s approach to litigation.

Question 56

What are the factors suggesting that engaging in ADR later is better?

Answer 56

There are several reasons why waiting to engage in ADR might be beneficial:
- Better Understanding of the Case: The parties will have a clearer understanding of each other’s case by the time the statements of case are finalised, making ADR more informed and productive.
- Better Understanding of Evidence: The parties will better understand the evidence available to each side, although waiting until all information is available is usually not necessary. An exchange of information can often be agreed in advance or as part of the ADR process.
- Avoiding Unnecessary Costs: If ADR is attempted too early, the parties may incur costs without a genuine dispute. This could lead to unnecessary expenditure if the dispute might not have been pursued at all.

Question 57

How do the Civil Procedure Rules (CPR) influence the timing of ADR?

Answer 57

The CPR contain several provisions that impact when ADR should be considered during litigation:

Pre-Action Protocols: These require the parties to consider ADR before initiating formal proceedings.

Precedent H (Costs Budget): This guidance requires elements related to negotiations and advising on settlement to be included in the costs budget.

Directions Questionnaires: For Fast, Intermediate, and Multi-track cases, legal representatives must confirm that they have advised clients about settlement options, the need to try to settle, and potential cost sanctions. If a settlement is not likely, parties must explain why and can request a stay for settlement. A stay is common after Directions Questionnaires, but the court can order one at any stage of the proceedings.

Case Management Conferences: During these conferences, the court will enquire about steps taken to explore ADR. The court is obligated to encourage and facilitate ADR if it is appropriate, in line with CPR 1.4(2)(e).

Question 58

How does the court encourage engagement in ADR?

Answer 58

The starting point is that the court can:
- Provide information about ADR; and
- Encourage parties to consider ADR and engage in it.

However, the court cannot generally compel a party to engage in ADR.

Question 59

How does the court’s discretion in awarding costs affect ADR participation?

Answer 59

The court has the discretion to decide costs in a case, with the general rule being that the unsuccessful party pays the successful party’s costs.

However, the court also considers the conduct of the parties, both before and during proceedings, when determining costs (CPR 44.2(4) and CPR 44.2(5)). The court may encourage ADR by rewarding positive ADR behaviour and penalising negative behaviour, including the refusal to engage in ADR.

Question 60

What factors does the court consider when a party refuses to engage in ADR and the successful party seeks costs?

Answer 60

The court will consider several factors when deciding whether to penalise a party for refusing ADR, including:
- The nature of the dispute and how suitable it is for ADR.
- The merits of the case, with a refusal to engage in ADR potentially more justifiable if a party believes their case is strong.
- The extent to which other settlement methods have been attempted.
- The costs of ADR, and whether they would be disproportionately high, though free or fixed-fee mediations may be available for low-value claims.
- Whether any delay in setting up ADR would prejudice the case, particularly if it is close to trial.
- The prospect of success in ADR, with the court not requiring unreasonable behaviour to prove ADR could have succeeded.

Question 61

What are the consequences for a party failing to suggest ADR, and how does it differ from refusing an ADR invitation?

Answer 61

The court does not take the same approach when considering a party’s failure to suggest ADR.
- A party will not be penalised for failing to propose ADR, unless this failure constitutes a breach of a court order or a breach of the pre-action protocols or Practice Direction on Pre-action Conduct.
- However, if a party remains silent in the face of an offer to engage in ADR, this silence is likely to be considered unreasonable and may result in costs sanctions, unless the parties are already engaged in a form of ADR.

Question 62

What practical steps should a party take upon receiving an offer to engage in ADR?

Answer 62

Upon receiving an offer to engage in ADR, a party should take the following steps:
- Consider with legal advisors the merits of the offer and whether ADR is appropriate for the case at hand.
- Respond promptly, in writing, setting out the reasons for the decision, noting the relevant principles concerning ADR, and ensuring a clear position is communicated.
- If the party does not wish to engage in ADR, they should explain under what circumstances they might agree to it, ensuring that it is very rarely stated that ADR will never be appropriate.
- Ensure the response is ‘open’ or marked as ‘without prejudice save as to costs,’ to ensure the response can be used in cost assessments if necessary.
- Consider making a separate note of any reasons for refusing ADR that the party is unwilling to disclose at that time, in a form that can later be presented to the court if necessary.

Question 63

How can the court encourage ADR during a case management conference (CMC)?

Answer 63

At a CMC, the court has various powers to encourage the use of ADR, including:
- The court can order a stay to allow the parties to explore ADR.
- The court can direct the parties to consider ADR and require them to explain their reasoning for or against engaging in ADR.

The court can further reinforce this direction with a statement such as:

“At all stages the parties must consider settling this litigation by any means of Alternative Dispute Resolution (including Mediation); any party not engaging in any such means proposed by another must serve a witness statement giving reasons within 21 days of that proposal; such witness statement must not be shown to the trial judge until questions of costs arise.”

This requirement to produce a witness statement helps create a record of the situation, enabling the court to consider it when determining costs and to identify any obstacles preventing the adoption of ADR, so they can be addressed (29 PD 4.10(9)).

Question 64

Provide a summary of timing and judicial encouragement in ADR.

Answer 64

• Engaging in ADR early leads to greater costs savings in the event of success, and even if unsuccessful, can start court proceedings off on a better footing.
• Engaging in ADR late might mean the parties have a better understanding of all the issues, evidence and likely outcome at trial.
• In many cases, the former considerations outweigh the latter.
• Parties are required to consider ADR by the practice direction on pre-action conduct and the various pre-action protocols. It must be considered as part of the case management process.
• The court can penalise a party that unreasonably refuses to engage in ADR in costs. There are a number of factors that the court will consider before deciding to do this.
• The court can also stay claims in order that the parties can explore ADR, and can take other procedural steps.
• The court cannot compel a party to engage in ADR.

Question 65

What are the different ways in which a claim can end?

Answer 65

Claims can end in a variety of ways, including:
- Success on the substance: The claim is successful at trial or through an application for summary judgment.
- Settlement: The parties reach a settlement agreement.
- Judgment following striking out: A claim or defence is struck out, often for failing to comply with court rules.
- Admission: One party admits the claim, leading to a conclusion of the case.
- Discontinuance: The claim is discontinued, which is relatively uncommon.

Question 66

What is the nature of discontinuance in claims?

Answer 66

• Only the claimant can discontinue a claim and can do so at any time, choosing not to pursue the claim against the defendant any further (CPR 38.2(1)).
• The claimant can also choose to discontinue part of a claim, not necessarily the entire claim (CPR 38.2(1)).
• Discontinuance can apply to a claim against a single defendant or multiple defendants (CPR 38.2(3)).

Question 67

What are the consequences of discontinuance?

Answer 67

It ends the proceedings in relation to the claim or part of the claim that is discontinued (CPR 38.5(2)).

The claimant is liable to pay the defendant’s costs up to the point of discontinuance, unless the court orders otherwise. If the claim is only partially discontinued, the claimant is only liable for costs related to the part discontinued (CPR 38.6).

In exceptional circumstances, the claimant must seek court permission to discontinue proceedings, typically when the claimant has already received a remedy, such as an interim injunction or interim payment (CPR 38.2(2)).

Question 68

What is the procedure for discontinuance?

Answer 68

• File a notice of discontinuance at court (CPR 38.3(1)(a)) (This must make clear which part of the claim is discontinued (if only part)).
• Serve a copy on every party (CPR 38.3(1)(b))
• Discontinuance takes effect from the date of service (CPR 38.5(1))
• Upon discontinuance, a costs order is deemed to have been made in the defendant’s favour on the standard basis (CPR 38.6 and 44.9(1)(c)).

Question 69

Provide a summary for Discontinuance.

Answer 69

• A claimant can discontinue a claim
• This brings the claim to an end
• The claimant can discontinue all or part of a claim
• The claimant will normally be required to pay the opponent’s costs in relation to any claim discontinued
• Discontinuance is effected by filing and serving a notice of discontinuance