Chapter 3: Pre-action considerations and Alternative Dispute Resolution

Question 1

1 Pre-action conduct

Answer 1

In addition to the specific pre-action protocols, there is also a ‘Practice Direction – Pre-Action
Conduct and Protocols’ (the ‘Practice Direction’) which covers all cases (whether or not a specific
pre-action protocol also applies). The aim of this is to set a standard of behaviour for parties to
follow in all cases. Essentially the court expects the parties to follow a reasonable procedure
suitable to their circumstances. This means, for example, the parties should act reasonably in
exchanging documents and information and should try to avoid the necessity of commencing
court proceedings. If a specific pre-action protocol applies to the case then, in the event of a
conflict with the provisions of the Practice Direction, the provisions of the specific protocol will
take priority

Question 1

1 Pre-action conduct

Answer 1

Litigation should be a last resort. The parties may wish to explore alternative dispute resolution (ADR) or seek to resolve their dispute informally. But regardless of any such efforts, the court rules set out certain procedures that the court expects the parties to follow before issuing proceedings
unless there are exceptional reasons not to do so. Those procedures are set out in various pre-action protocols, each of which applies to a certain
type of dispute.

Question 2

1.1 Aims of the Pre-Action Protocols

Answer 2

The pre-action protocols are designed to force the parties to have a more ‘cards on the table’
approach to resolving the dispute. The emphasis is on encouraging the parties to focus on
resolving the dispute without involving the courts. The pre-action protocols are designed to
achieve this by enabling the parties to obtain information they reasonably need to settle the
matter at the earliest possible opportunity and, if settlement is not achievable, to lay the
foundations for expeditious conduct of proceedings. For example, the pre-action contact might
result in the parties being able to limit the issues in dispute at a very early stage.

Question 3

1.1 Aims of the Pre-Action Protocols

Answer 3

It flows from this that if a defendant intends to admit liability, it should do so early, and clearly. If the defendant intends to dispute liability, it should do so clearly, and with reasons. One of the expectations of the parties pre-action is that they consider whether negotiation or another form of ADR might allow them to avoid proceedings (paragraph 8, Practice Direction).
Silence in response to an opponent’s suggestion of ADR can itself be deemed unreasonable conduct. In a similar vein, the parties are expected to take stock of their positions before issuing proceedings, not simply press ahead in a ‘mechanical’ manner (paragraph 12, Practice Direction).

Question 4

1.2 Consequences of non-compliance

Answer 4

The court will decide whether non-compliance with a pre-action protocol (or the Practice Direction on Pre-Action Conduct) will merit adverse consequences. The most likely consequences will relate to costs and interest – increasing the amount of costs / interest to be paid / decreasing the amount to be received.

Question 5

1.2 Consequences of non-compliance

Answer 5

The Practice Direction also states that the court may stay the proceedings
until the relevant steps (which have not been complied with) are taken. When deciding whether to impose a sanction for non-compliance, the court will consider the overall effect of the noncompliance on the other party and it is unlikely that sanctions will be imposed for minor infringements. The court can ask for an explanation of non-compliance.

Question 6

Example: Consequences of non-compliance

Answer 6

The Practice Direction also states that the court may stay the proceedings
until the relevant steps (which have not been complied with) are taken. When deciding whether to
impose a sanction for non-compliance, the court will consider the overall effect of the noncompliance on the other party and it is unlikely that sanctions will be imposed for minor
infringements. The court can ask for an explanation of non-compliance.

Question 7

1.2.1 Is non-compliance ever justified?

Answer 7

There are limited circumstances in which it may be acceptable not to comply with pre-action requirements. Examples include:
(a) Where a limitation period is about to expire, in which case it may be necessary to issue proceedings (the crucial act that must be completed before the limitation date) before there
is time to comply with the pre-action requirements. In those circumstances, the parties must comply to the extent possible, and ordinarily will need to apply for a stay of proceedings
after issue in order that the pre-action procedure can be followed.

Question 8

1.2.1 Is non-compliance ever justified?

Answer 8

(b) Where there is another reason for urgent proceedings or for the element of surprise. For example, a party can apply to court for a search order, which allows an ‘unannounced’ visit
to the opponent’s premises to search for documents. It is obtained when there is fear that the opponent will destroy documents rather than honour an obligation to provide them to the
claimant / court. In such a case, it would defeat the purpose of the search order if a party was required to write to the other side about it before applying to court.

Question 9

1.3 The application of protocols and the Practice Direction

Answer 9

In this section, we will consider in more detail:
(a) Pre-action Protocol for Personal Injury Claims – an example of one of the pre-action protocols.
(b) The Practice Direction

Question 10

Pre-action Protocol for Personal Injury Claims applies to…

Answer 10

(a) personal injury claims…
(b) which do not fall within another preaction protocol…
(c) and which are likely to be allocated to the fast-track (a value of up to £25,000 - the ‘spirit’ of the protocol should also be followed in higher value claims).

Question 11

The Practice Direction applies to…

Answer 11

(a) all cases…
(b) but where a specific protocol applies, the provisions of that specific protocol override any conflicting provisions of the Practice Direction.

Question 12

Example: Pre-action Protocol for Personal Injury Claims - process and timetable

Answer 12

(a) Claimant should write Letter of Notification to potential defendant giving brief details, to enable defendant to notify its insurer.
(b) Parties consider any rehabilitation needs (ie any ongoing medical and care needs) and how to address them.
(c) Claimant should write to defendant to give full details of the claim (Letter of Claim).
(d) Defendant to acknowledge Letter of Claim within 21 days.

Question 13

Example: Pre-action Protocol for Personal Injury Claims - process and timetable

Answer 13

(e) Defendant to investigate and send full Letter of Response within 3 months of letter acknowledging claim. If the defendant denies liability or quantum (or both) then…
(f) The parties should disclose key documents, engage in appropriate negotiations and make proposals for settlement. Claimant should send schedule of losses giving details of losses.
(g) Joint selection of quantum expert (ie medical expert), or claimant discloses report and defendant sends written questions.

Question 14

Example: The Practice Direction - process and timetable

Answer 14

(a) Claimant should write to potential defendant to give details of the claim (Letter of Claim).
(b) Within a reasonable period (depends on complexity of claim), defendant should send a
response letter. Response letter must either…
(c) …accept the claim or reject the claim (in whole or in part) - giving reasons.
(d) The parties should disclose key documents, engage in appropriate negotiations and make proposals for settlement

Question 15

Not always precise

Answer 15

As can be seen, the Practice Direction is not always precise, because it needs to cater for a wide variety of disputes. For example, a reasonable response is required within a reasonable period, which could be between 14 days and 3 months. The main point is that the parties are supposed to behave reasonably, observing the spirit of the practice direction (the same can be said in relation to compliance with the specific pre-action protocols).

Question 16

1.4 Summary

Answer 16

• There are many pre-action protocols applying to different types of dispute, as well as a
  practice direction on pre-action conduct, which set out the court’s expectations as to steps to
  be taken before issuing proceedings. The aim of this is that proceedings can be avoided where
  possible, or if not avoided, will be conducted more efficiently.
• If a party fails to comply with the pre-action requirements, the court can impose sanctions in
  relation to costs or interest, or stay a claim

Question 17

1.4 Summary

Answer 17

• The precise requirements of the protocols vary, but they (and the practice direction) generally
  require a letter of claim setting out the claim and attaching key documents, a letter of response within a specified period, the parties trying to engage in ADR where possible, and a
  ‘stocktake’ before the issue of proceedings

Question 18

2 Limitation
2.1 The Limitation Act 1980

Answer 18

If proceedings are not commenced within the relevant limitation period, the claimant will be barred from recovering damages and on this basis, the defendant will have a full defence.
The most important legislation in this area is the Limitation Act 1980, which has been amended several times. Section references in this section are references to sections of this Act unless otherwise stated. The diagram shows a broad map to guide you through an analysis of limitation. It aims to set out a logical order in which you might approach limitation, but it does not illustrate all the links
between the areas.

Question 19

2.2 Personal injury claims and Fatal accidents
2.2.1 Personal injury claims (s 11)

Answer 19

When a party makes claim that includes a claim for personal injuries, the claimant must bring the
claim within 3 years of the latest of:
(a) the date when the cause of action accrued; or
(b) the date of knowledge of the person injured.
The date of knowledge is defined in s.14.

Question 20

2.2.2 Fatal accidents (s 12)

Answer 20

Imagine that an employee dies at work due to the negligent failure of his employer to provide a safe place to work. The Fatal Accidents Act 1976 provides that, in certain circumstances, people who were depending on that employee (perhaps the employee’s children) can claim
compensation from the employer

Question 21

The time limits on a claim under the Fatal Accidents Act 1976 are that:

Answer 21

(a) The claim cannot be brought if the person injured (the employee in our example) could no longer bring a claim. In most cases, you will need to apply the personal injury rules on the
previous page to ascertain this, from the injured person’s perspective.
(b) The claim cannot be brought after 3 years from the later of:
(i) Date of death;
(ii) The date of knowledge of the dependent

Question 22

2.2.3 Date of knowledge (s 14)

Answer 22

Date of knowledge means knowing:
(a) That the injury was significant;
(b) That it was attributable (at least in part) to the alleged wrongdoing;
(c) The identity of the defendant; and
(d) If it is alleged that the wrongdoing was by someone other than the defendant, the identity of that person and the additional facts supporting bringing the claim against the defendant

Question 23

2.2.3 Date of knowledge (s 14)

Answer 23

When you are looking at this provision in the context of claims under the Fatal Accidents Act 1976 (s 12) then you are looking at this from the perspective of the dependent (ie you are interrogating the dependent’s knowledge), but the injury referred to is obviously the fatal injury to the deceased.
Note that it is knowledge of the facts which permits the limitation period to start running. The claimant may or may not realise that, given those facts, they have a claim in negligence. This is not relevant to this test. Dates of knowledge include knowledge which the claimant might reasonably have been expected to acquire from an expert / facts observable / ascertainable by them.

Question 24

2.3 Extensions of time (s 33)

Answer 24

The court can extend time in relation to personal injury claims or claims under the Fatal Accidents
Act if that would be equitable, balancing the prejudice to the claimant caused by the limitation
period with any prejudice to the defendant which allowing the claim would cause.
The court will look at:
* the conduct of the parties;
* the reasons for the delay; and
* the effect of such a late claim on the evidence.

Question 25

2.4 Contribution (s 10)

Answer 25

There are some circumstances in which a person liable for damage, can claim a contribution from
another person.

Question 26

Exercise: Contribution

Answer 26

The claimant buys a television which malfunctions and causes a fire. Assume that the claimant has a claim in breach of contract against the shop that sold the television. Assume that the claimant also has a claim in negligence against the manufacturer of the product. Both parties are
liable for the same damage and if the claimant claims against the retailer, then then retailer may be entitled to claim a ‘contribution’ towards that liability from the manufacturer under s 1 of the Civil Liability (Contribution) Act 1978

Question 27

In those circumstances, the limitation date is two years from the date on which the right to recover the contribution arose. This is calculated as:

Answer 27

(a) The date when the judgment was given imposing liability on the first party (the retailer, in our
example);
(b) In cases where the first party agreed to make the payment (rather than having a judgment
imposed on them), the date on which the amount to be paid was first agreed.

Question 28

2.5 Latent damage (s14A and s14B)

Answer 28

Note that this provision does not apply to personal injury claims – the rules in relation to personal injury and fatal accidents claims (see above) take precedence. Sometimes, an act of negligence causes damage that the claimant might be unaware of for a
long period of time. Imagine, for example, that a house is constructed negligently such that, from the outset, parts of the foundations are subject to rot in a way that starts immediately, but which the claimant might not be aware of (because the foundations are hidden) until 10 years later. The
cause of action accrues at the time the house is built because the rot (the damage) starts immediately, and so applying the ‘usual’ 6 year rule (explained later), limitation would expire
before the claimant is even aware of a problem

Question 29

This would be an unfair result, which the following rules seek to avoid.
In negligence claims (other than claims for personal injury), the limitation period is extended to the
later of:

Answer 29

(a) Six years from when the cause of action accrued; or
(b) Three years from when he had the requisite:
(i) knowledge; and
(ii) right to bring a claim. (s14A)
But this is subject to a long-stop limitation date of 15 years from the date of the latest negligent act / omission which caused all or part of the damage (s14B).

Question 30

Date of knowledge

Answer 30

is defined essentially the same as in the personal injury cases (set out above), but rather than needing to know that ‘the injury was significant’, the claimant needs to know ‘the
material facts about the damage in respect of which damages are claimed’ (so know that the foundations are damaged)(s14A(6))

Question 31

2.5 Latent damage (s14A and s14B)

Answer 31

Again, it is knowledge of the facts which permits the limitation period to start running. The
claimant may or may not realise that, given those facts, they have a claim in negligence. This is
not relevant to this test.
Dates of knowledge include knowledge which the claimant might reasonably have been expected
to acquire from an expert / facts observable / ascertainable by them.

Question 32

2.6 Judgments (s 24)

Answer 32

An action to enforce a judgment cannot be brought after six years from when the judgment became enforceable, nor can interest be recovered after that period.

Question 33

2.7 Tort and contract claims (outside categories already considered) (s2
and s5)

Answer 33

The general rule is that, for an action in tort, the limitation period expires six years after the date on which the cause of the action accrued (s 2). Likewise, for an action in contract, the limitation period expires six years after the date on which the cause of action accrued (s 5).

Question 34

2.8 Disability (s 28)

Answer 34

If the claimant is under a disability at the time that the cause of action accrued, the limitationmperiod starts to run from when the disability ends, and is:
(a) 2 years in relation to contribution claims;
(b) 3 years in relation to personal injury or fatal accident claims; and
(c) 6 years in most other cases.
A person is under a disability whilst they are a minor (under the age of 18) or lacks mental capacity to conduct the proceedings (within the meaning of the Mental Capacity Act 2005) (s38).

Question 35

2.9 Fraud / concealment / mistake (s 32)

Answer 35

Where a claim is:
(a) based on fraud, or;
(b) any fact relevant to the cause of action has been deliberately concealed by the defendant;
or
(c) the action is for relief from the consequences of a mistake; then
limitation does not start to run until the claimant discovered the fraud, concealment or mistake (or
could with reasonable diligence have discovered it).

Question 36

2.10 Summary

Answer 36

• Limitation periods are extremely important: if a claim is not commenced within the limitation
  period, the defendant will have a full defence.
• There are special rules for personal injury claims, fatal accidents claims, claims for negligence involving latent damages, and judgment claims.
• In relation to other claims for breach of contract or tort, the limitation period is 6 years from when the cause of action accrued.

Question 37

2.10 Summary

Answer 37

The court has a power to extend time in relation to personal injury claims and fatal accidents
claims.
* The Time will also be automatically extended where the claimant is ‘under a disability’
(meaning lacking capacity to conduct the proceedings or being under the age of 18) at the
time the cause of action accrued. Limitation starts to run from when the disability ends and
the limitation periods are modified slightly.
* Time is also extended in cases of fraud, concealment or mistake.

Question 38

3 Alternative Dispute Resolution (ADR): reasons, types
and choice

Answer 38

When advising a client on a dispute, it is important to identify the most effective dispute resolution
procedure, taking into account the nature of the dispute and your client’s commercial interests. A solicitor acting to resolve civil disputes cannot best pursue their clients’ interests if they think only in terms of court proceedings. They must advise in relation to the alternative dispute resolution (ADR) options available.

Question 39

3 Alternative Dispute Resolution (ADR): reasons, types
and choice

Answer 39

This section outlines very briefly the main forms of ADR, before turning to why it is important to explore ADR, which ADR might be appropriate for a particular case, when to explore ADR, and how the court encourages use of ADR.

Question 40

3.1 Types of ADR

Answer 40

There are several forms of ADR. These include:

Question 41

3.1.1 Negotiation

Answer 41

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

Question 42

3.1.2 Mediation

Answer 42

Mediation is a confidential process intended to facilitate the resolution of disputes through the medium of an impartial third party – the mediator. Generally, each party (usually with legal
representatives) will be present in the same location but in different rooms. The mediator will move between the rooms delivering settlement offers and guiding each party to reflect on those offers and the alternatives to reaching an agreement. The mediator has no authority to make any decision which is binding on the parties. In the event that the mediation does not end in an
agreed resolution, the content of the mediation will remain confidential and will not be made known to the court.

Question 43

3.1.3 Arbitration

Answer 43

Arbitration is a process by which a dispute is resolved by an impartial adjudicator whose decision
the parties to the dispute have agreed will be final and binding. By agreeing to arbitrate disputes parties are agreeing to oust the jurisdiction of the court to hear the matter, and to give the
jurisdiction to a different impartial party (the adjudicator) instead

Question 44

Typically, the question of whether to arbitrate or not arises at two key stages:

Answer 44

(a) When negotiating a contract the parties may decide to include an arbitration clause in their
agreement to cover disputes that arise in the future; or
(b) When a dispute has arisen, the parties can choose to deal with it by way of arbitration (ie even where there is no arbitration agreement in their underlying contract).

Question 45

3.1.3 Arbitration

Answer 45

It can be a long and formal process which is governed by rules and statute.
Advantages of choosing to arbitrate include privacy, easier enforcement in certain jurisdictions,
the ability to choose a specialist to determine the dispute and the additional flexibility of
arbitration which can be adapted to suit the needs of the parties and the dispute.

Question 46

3.1.4 Med-arb

Answer 46

Med-arb (mediation/arbitration) is a process whereby parties agree that, initially, they will try to resolve any dispute by mediation. In the event that this does not result in satisfactory resolution of the matter, the matter will move on to an arbitration pursuant to which a binding determination
will be made.

Question 47

3.1.5 Early neutral evaluation / expert appraisal / expert evaluation

Answer 47

These terms all refer to process where an independent party is appointed by the parties. The independent party will provide a non-binding assessment of the matter(s) referred to it. The
parties will have to pay them for their time and costs. The assessment provides an impartial ‘opinion’ which might usefully influence the parties in future settlement discussions. The
independent party could be a lawyer, but alternatively could be an expert in a relevant matter – such as a medical or engineering expert

Question 48

Assessment focus point

Answer 48

At first glance expert appraisal and expert determination appear similar but they are different in important regards.
Expert appraisal: expert appraisal does not deliver a binding decision – just an opinion. Expert determination: the expert does give a binding decision.

Question 49

3.1.7 Conciliation

Answer 49

Conciliation involves an independent neutral third party in helping parties to resolve their dispute. The process is usually facilitative, like a mediation, but may occasionally involve more of an evaluation, like ENE. The term has no clear meaning, so the parties should ensure they understand what is involved in any particular conciliation before embarking on it. The details you have been provided in relation to other forms of ADR (like mediation and ENE) will apply by analogy depending on the precise nature of the conciliation involved.

Question 50

Conciliation as part of the statutory regime

Answer 50

Conciliation often forms part of a statutory scheme or other regulatory scheme, and that scheme
might provide who the conciliator should be, and the process involved. This is unlike mediation,
where these are matters purely for the parties.

Question 51

3.2 Why use ADR?

Answer 51

The following are all potential advantages of ADR, but whether they apply in any particular case
will depend on the facts of that case and the particular form of ADR being considered. Each is explained on the following pages.

Question 52

3.2.1 The court expects the parties to explore ADR

Answer 52

The court expects the parties to act reasonably in relation to considering and engaging in ADR, and can impose sanctions if they do not.

Question 53

3.2.2 Preserves or creates a better relationship between the parties

Answer 53

In many forms of ADR, factors such as business relationships, reputational issues or personal
emotions can be taken into account as necessary. This means that the process can assist the
parties in maintaining a commercial and/or personal relationship. Parties can explore emotional
dimensions, or agree a future trading relationship. Court proceedings do not offer such
opportunities.

Question 54

3.2.3 Less expensive and/or saves time

Answer 54

An appropriate form of ADR, if successful, can lead to a resolution at less cost than litigation. An appropriate form of ADR can also lead to a conclusion more quickly than litigation.

Question 55

3.2.4 Greater privacy / confidentiality

Answer 55

Litigation involves filing documents at court which might be accessible by the public, and hearings (including the trial) will generally be public. All the forms of ADR already identified are essentially private and confidential.

Question 56

3.2.5 Less disruption to clients

Answer 56

Forms of ADR such as mediation can be much less disruptive to clients – they might not need to search for documents, engage in as many internal meetings or attend court the way they might in the case of court proceedings.

Question 57

3.2.6 Outcomes that reflect risks

Answer 57

In non-binding forms of ADR the parties can agree a settlement that reflects the risks to each side.
For example, in a financial claim, the parties might agree that the claimant has a 60% chance of winning, and if the claimant wins, they will recover £100,000. In such circumstances, both parties might be attracted by a settlement by which the defendant pays £60,000 to the claimant – less
than the full sum to reflect the possibility that the claimant loses and recovers nothing. In court proceedings, the judge cannot decide the claim in such a way. The judge must decide each issue and then give a judgment accordingly, and cannot discount the judgment sum to take
into account the uncertainty that it is the right judgment.

Question 58

3.2.7 Greater control over the process

Answer 58

In many forms of ADR, the parties have greater control over the process.
One aspect of control is the ability to choose any third party involved (eg an arbitrator or
mediator). Parties cannot control the court process in the same way nor choose the judge.

Question 59

3.2.8 Greater involvement of the parties themselves

Answer 59

Clients often prefer mediation (for example) to litigation as there is a greater opportunity to get
involved in the process and have their say. Litigation can feel like an alienating and detached
process for many clients.

Question 60

3.3 Which form of ADR should a party choose?

Answer 60

Unsurprisingly, this all depends on the individual circumstances.
When you know the details of a case, you could look back over the material under the ‘why use ADR’ heading in this section to consider which of those advantages are most important for your client. When you have done that, you can consider which form of ADR offers most by way of
those advantages.

Question 61

3.4 Which types of case are not suitable for ADR?

Answer 61

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 62

3.5 Role of lawyers

Answer 62

A legal representative acting in their client’s best interests will:
(a) Ensure their client is fully aware of the options for ADR.
(b) Help their client to pursue any ADR which it wishes to pursue.
(c) 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 63

3.6 Summary

Answer 63

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

Question 64

3.6 Summary

Answer 64

• 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 65

Alternative Dispute Resolution (ADR): timing and judicial
encouragement
4.1 Timing

Answer 65

When should a party engage in ADR?
Firstly, a contract between the parties may already have specified how and when ADR should be used. For example, a commercial contract might provide that before the parties commence proceedings in relation to the subject matter of the contract, they first need to refer certain issues
for expert appraisal.

Question 66

4.1 Timing

Answer 66

Secondly, some forms of ADR can only be considered at particular times. For example, arbitration
is an alternative to court proceedings, and therefore will almost always be pursued before any court proceedings have been commenced.
More generally, a decision on timing involves balancing various factors:

Question 67

As well as these general considerations, the CPR also contain various provisions which have
implications for when ADR should at least be considered.

Answer 67

(a) The various pre-action protocols and the practice direction on pre-action conduct require the
parties to consider ADR;
(b) The guidance accompanying Precedent H (costs budget) requires the inclusion of some
elements relating to negotiations and advising on settlement.

Question 68

As well as these general considerations, the CPR also contain various provisions which have
implications for when ADR should at least be considered.

Answer 68

(c) Directions Questionnaires (DQs) (Fast / Multi-track) require legal representatives to confirm
that they have explained to clients the need to try to settle, the settlement options and
possible cost sanctions. It also includes the option to request a stay for settlement. Parties
must state expressly why a settlement might not be achieved at this early stage in the
proceedings, if they do not require a stay of the proceedings. Whilst a stay following DQs is common, the court has the power to stay the proceedings at any stage.

Question 69

As well as these general considerations, the CPR also contain various provisions which have
implications for when ADR should at least be considered.

Answer 69

(d) At a case management conference, the court is likely to want to know what steps the parties
have taken to explore alternative dispute resolution. The court can give directions that are
aimed at encouraging ADR (as explained elsewhere in this section). The court is required to
manage cases including by encouraging and facilitating ADR if appropriate (CPR 1.4(2)(e)).

Question 70

4.2 How does the court encourage the parties to engage in ADR?

Answer 70

The starting point is that the court can:
(a) Provide information about ADR; and
(b) Encourage parties to consider ADR and engage in it. However, the court cannot generally compel a party to engage in ADR. We will consider the way that the court encourages ADR by looking firstly at the area of costs,
and secondly at other forms of encouragement.

Question 71

4.3 Costs

Answer 71

The usual costs order at the end of an English court case is that the unsuccessful party pays the
successful party’s costs. Costs are, however, always at the discretion of the court. One of the factors which the court will consider when making a costs order is the conduct of the parties (CPR 44.2 (4)), which includes conduct before, as well during, proceedings (including compliance with pre-action protocols) (CPR 44.2(5)).

Question 72

Rewarding positive ADR behavior and punishing poor in costs

Answer 72

Accordingly, the court can encourage the parties to engage in ADR by rewarding positive ADR behaviour and punishing poor behaviour in costs. Note that the court will rarely know (for example) exactly what happened at a mediation, as this will be ‘without prejudice’, but it will know
whether or not a party has agreed to mediate at all.

Question 73

Rewarding positive ADR behavior and punishing poor in costs

Answer 73

One issue that comes before the court is where the successful party in the litigation would normally be entitled to its costs but that party has refused to engage in ADR. If a party refuses to engage in ADR then when it comes to assessing costs the court will consider whether that refusal
was reasonable, and if not, the court might impose a costs penalty. The burden of proof will be on
the unsuccessful party to show the court why it should depart from the general rule on costs to
deprive the successful party of some or all of its costs on the grounds that it refused to agree to
ADR.

Question 74

The court will look at all the circumstances, including:

Answer 74

(a) The nature of the dispute – how suitable it is for ADR;
(b) The merits of the case – a refusal to engage in ADR may more justifiable if the party
justifiably believes it to be very strong.
(c) The extent to which other settlement methods have been attempted

Question 75

The court will look at all the circumstances, including:

Answer 75

(d) Whether the costs of ADR would be disproportionately high (but note that free or fixed-fee
mediations are potentially available in relation to low value claims which might make the costs proportionate even for such claims);
(e) Whether any delay in setting up and attending the ADR would have been prejudicial – particularly if it is very close to trial; and
(f) Whether ADR had a reasonable prospect of success – this by no means requires the alleging
unreasonable behaviour to show that it would have succeeded

Question 76

Should the party be penalised for not engaging with ADR

Answer 76

The points above are about whether a party should be penalised for refusing to engage in ADR
when invited to do so. The court does not take the same approach when considering what the
consequences should be for a party who has simply failed to suggest ADR. The court will not
refuse to award costs to a successful party simply because it did not positively suggest ADR.
Clearly where such a failure amounts to a breach of court order or of one of the pre-action
protocols / PD on Pre-action Conduct, then the situation is different.

Question 77

A note on silence

Answer 77

On the other hand, silence in the face of an offer to engage in ADR is likely to be considered unreasonable and to be sanctioned in costs (unless the parties are already engaged in a form of ADR).

Question 78

4.4 Practical advice

Answer 78

It flows from the above that upon receipt of an offer to engage in ADR, a party should:
(a) Consider with its legal advisors the merits of that offer;
(b) Respond promptly, in writing, setting out reasons for its decision, and noting the principles
above;

Question 79

4.4 Practical advice

Answer 79

(c) If it does not wish to engage in ADR, explain in what different circumstances it would agree to
ADR. It would very rarely be appropriate to indicate that ADR will at no stage be appropriate;
(d) Make that letter with ‘open’ or ‘without prejudice save as to costs’; and
(e) Consider making a separate note of any reasons for refusal that it is unwilling to express to
the opponent at that time, in a form which can be later shown to the court if necessary.

Question 80

4.5 Other forms of encouragement

Answer 80

We have mentioned above the various stages in proceedings when the court rules specifically require that consideration be given to ADR. At a CMC, the court has various powers that can be used to encourage ADR. For example:
(a) The court can order a stay in order that the parties can explore ADR;
(b) The court can direct the parties to consider ADR and require an explanation of the parties’ thinking in that regard.

Question 81

4.5 Other forms of encouragement

Answer 81

(c) The court can reinforce the direction mentioned immediately above, for example with the
following direction: ‘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’

Question 82

Requirement to produce a witness statement

Answer 82

The requirement to produce a witness statement creates a record of the situation so that the court
can consider this when it comes to costs and encourages the identification of any obstacles to the
adoption of ADR in order that they might then be overcome (29 PD 4.10(9)).

Question 83

4.6 Summary

Answer 83

• 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

Question 84

4.6 Summary

Answer 84

• 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.