FLK1 Disputes Flashcards
What is alternative dispute resolution?
Litigation is considered the last resort and sanctions may be imposed on those clients who refuse to consider other options. Alternative dispute resolution (ADR) is a collective term which refers to any means of settling disputes outside of the traditional litigation process.
Negotiation, in which the parties and the lawyers discuss possible solutions whether in formal meetings or by correspondence, is a form of ADR which is used routinely throughout the litigation process.
In practice, the vast majority of claims are settled and negotiation is usually a key element in achieving this outcome.
Although there are a number of other different types of ADR the two most important are arbitration and mediation.
ADR, such as mediation, is a means of resolving disputes with the assistance of an independent third party who may help the parties to reach their own solution but who cannot impose a solution.
It is voluntary and confidential or ‘without prejudice’. This means that if it fails and court proceedings are taken, the court will not be made aware of the ADR until after the judge has dealt with the issues of liability and the award of damages. The parties choose the process and can withdraw at any time before a settlement is reached. If either party does not like the proposed solution, they do not have to accept it.
Arbitration is also voluntary, but only in the sense that the parties either voluntarily entered into an arbitration agreement or agreed to decide the matter in this way once a dispute arose. If the former, the effect is that one party may force the other to arbitrate against their will provided the original contractual agreement to arbitrate is valid.
In contrast, litigation is not voluntary (save that the claimant chooses to issue a claim in the
first place). Once the case is started, usually, neither party can withdraw without paying the
opponent’s costs. If the parties are unable to negotiate a settlement or otherwise resolve their
differences through ADR, the court will impose its own solution which may be enforced by the
party who obtains judgment.
When should ADR not be considered?
When a dispute arises, a solicitor should discuss with the client the availability of ADR. If the client is willing (or has already agreed) to participate in ADR, it should be used unless:
a) it is obviously inappropriate, for example because an injunction is required;
b) the other party is unlikely to co- operate in the process; or
c) the other party cannot be trusted to comply with an award.
Although actively promoted by the courts, there is no point in proceeding with ADR if it will inevitably fail. Nevertheless, a party who decides not to engage in ADR must be made aware that penalties may well be imposed for this failure, unless they can justify their stance to the court.
The litigation process is subject to rules, one of which specifically requires the parties to consider the use of alternative dispute procedures, if appropriate.
As a consequence, parties who choose to litigate may well receive judicial encouragement (and sometimes a degree of pressure) to attempt ADR although they cannot be ordered by a court to pursue this route.
The importance the court attaches to proposals for ADR is evidenced by the provisions of the Civil Procedure Rules 1998 which dictate how a case is litigated; and a failure to respond to a reasonable proposal to attempt settlement by ADR may have a significant impact on any subsequent order for costs.
What do the parties need to complete during the course of the court proceedings with regards to ADR?
During the course of the court proceedings the parties complete what is known as a directions questionnaire and, to ensure that clients are fully aware of the importance and implications of ADR, solicitors are required to confirm they have explained to their client:
(a) the need to try to settle;
(b) the options available; and
(c) the possibility of costs sanctions if they refuse to attempt to settle.
The message is clear – clients should always consider ADR and engage in the process unless there are convincing reasons not to do so; and even then, they should be prepared to justify their decision before a sceptical judge if necessary.
What is an essential feature of ADR?
The independence of the third party is an essential feature of ADR, as is the fact that (with the exception of arbitration) they cannot impose a solution.
Because of this, the parties are more likely to be open in their discussions and less likely to be aggressive towards each other.
As a consequence, the prospects of reaching a settlement are higher. A further advantage is that the independent third party will not only be trained to act as a neutral, but they also should have the appropriate industry or commercial knowledge required to understand the dispute.
This may allow them to come up with ideas the parties may not have thought of and which solve the problem without either side losing face.
What is the procedure for mediation?
In a typical mediation, the parties will agree an independent third person or body who will act as a ‘go- between’ known as a mediator.
The mediator will be sent written statements from both parties and, thereafter, will discuss the case with them on a ‘without prejudice’ basis.
Because any future judge in the proceedings will not be made aware of the discussions, the parties should feel free to engage in frank exchanges with both the mediator and each other.
These conversations will also assist the mediator in identifying the real areas of disagreement and the points that are most important to the respective parties, with the aim being to move the parties towards constructive solutions to the problem.
In many cases, the mediator and the parties will meet in the same building. This enables any issues to be dealt with quickly because, if necessary, the parties can meet face to face to resolve their differences. There are, however, other forms of mediation in which the dispute is dealt with by correspondence, telephone conversations or online with the use of technology.
What are the advantages of mediation?
Apart from the fact that an independent third party may find it easier to lead the parties to a settlement, mediation has other attractions.
- Cost and speed
Mediation can be significantly cheaper than both arbitration and litigation, primarily because the process is quicker.
A skilled neutral can often help the parties to resolve their dispute in a relatively short period of time.
Nevertheless, clients should not be given the impression that mediation comes at ‘bargain basement’ prices.
The parties have to pay the third party for their services and, in addition, lawyers will usually be instructed.
However, if the mediation is successful, there will be a significant reduction in the amount of time the lawyers would have spent in preparing and presenting the case and this, in itself, will save costs.
- Flexibility
Mediation is also very flexible, because the parties may choose the procedure to be followed.
There are no legal requirements and thus no need to comply with any statutes, rules of court or even case law.
- Privacy
Mediation takes place in private so that clients, customers and the public are unaware of the circumstances or the outcome of the dispute. This may be important where the party’s reputation is an issue or where there may be possible future claims from other litigants.
- Preserving a business relationship
Mediation is also ideal for cases where the parties to the dispute will need to continue to deal with each other. The fact they have chosen a non- confrontational method of solving their problem makes it much easier for them to continue their relationship, since the solution is theirs and has not been imposed upon them.
- Commercial reality
A third party unconnected with the dispute may be able to assist the parties to arrive at realistic and workable terms of settlement. This could include arrangements that a court could not order, such as discounts on future orders. In contrast, litigation with its final court judgment will be decisive but the process carries inherent risk and uncertainty.
- Ability to withdraw
If the client is unhappy with the progress, mediation allows them to withdraw at any time.
What are the disadvantages of mediation?
- Inappropriate for the matter
There are occasions where mediation is simply not appropriate, such as where the client needs a ruling on a point of law or if an injunction is required.
Matters involving allegations of fraud or other commercially disreputable conduct are also generally unsuitable for mediation.
However, although in most other cases the advantages of mediation will usually outweigh the disadvantages, these must also be considered.
- Disclosure
Because there are no formal procedures for disclosure of documents and evidence, there is a risk the parties may resolve the dispute without knowing all the facts.
This may lead to a decision that is subsequently found to be unjust. However, many business clients take the view that a quick decision, even if it is not completely accurate, is better than wasting time and money on a protracted dispute in order to get a (potentially) more correct outcome.
- Privacy
If the client requires public vindication – perhaps to ensure that any damage to their reputation is repaired – privacy is a disadvantage as they will lose the opportunity to demonstrate they were not at fault.
- Ability to withdraw
As a general principle, no one can be forced to engage in mediation against their wishes.
Furthermore, even if the parties have started to resolve a dispute by mediation, they may withdraw at any stage before a solution has been agreed despite objections from the other party. It will then
usually be necessary to resort to litigation.
As with privacy, the ability to withdraw is both an advantage and a disadvantage. A party who decides to walk away from the mediation process will be pleased they can do so, whereas the other party is likely to be unhappy at the time and money expended without a resolution.
Is a mediation outcome enforceable?
Even if an agreement is reached, it is not automatically binding as the client cannot enforce this like a court judgment.
However, if the parties do agree to terms suggested as a result of mediation, they have entered into a contract. If one of the parties does not carry out that contract, they may be sued for the breach.
How does arbitration arise?
The parties may be contractually bound to use arbitration and many business contracts contain a clause requiring the parties to submit to arbitration in the event of a dispute. It is common in certain industries such as construction and shipping, for example.
In the absence of such a clause, the parties may agree to arbitration once a dispute has arisen and may choose their own arbitrator with the relevant expertise.
What is the procedure for arbitration?
The dispute is referred to an independent arbitrator. The person, professional or trade body may be specified in the original contract; alternatively, the parties may choose their own arbitrator with the relevant experience. An arbitration process will be adopted but this will be less formal than the court procedure.
Once the third party has reached their decision, this is binding on both parties to the dispute.
What are the advantages of arbitration?
Many of the advantages of the parties agreeing to arbitration rather than litigation are similar to those of mediation. The main ones are:
(a) arbitration is likely to be quicker than going to court and may be cheaper although there will be costs implications in retaining the services of an arbitrator, who may be a highly qualified and experienced expert in their field;
(b) the procedures are less formal;
(c) the decision is made by an impartial third party with expertise in the matter;
(d) arbitration takes place in private thus retaining confidentiality – particularly important if the parties wish to preserve a business relationship or to ensure that customers or competitors are unaware of the dispute or the outcome;
(e) the solutions reached are often more practical than those a court has the power to order; and
(f) the decision is binding on the parties.
The binding nature of the outcome is the most important distinction with mediation.
What are the disadvantages of arbitration?
The main disadvantages are:
(a) the dispute may not receive the depth of investigation it would receive in the courts (depending upon the procedures adopted); and
(b) certain remedies such as injunctions are not available.
Furthermore, arbitration is unlikely to be a cheap alternative as the arbitration expert or panel will need to be paid and parties often want to be represented by lawyers, particularly if the amounts in dispute are significant.
One disadvantage mirrors an advantage: the decision is binding with very limited rights of appeal.
Is the outcome if arbitration enforceable?
Once a decision has been reached, the winning party to an arbitration can apply to the High Court under s 66 of the Arbitration Act 1996 for permission to enforce the arbitration award as if it were a court judgment.
What is the main advantage of litigation?
If the parties either cannot or will not engage in ADR, they will be left with no alternative but to proceed by way of litigation through the courts. Once they have done so, neither party can withdraw without paying the opponent’s costs. If the parties are unable to negotiate a settlement, the court will impose its own solution that may be enforced by the successful party.
Indeed, this is the main advantage of litigation as it breaks the deadlock between the parties, albeit at a cost.
Most civil disputes are between individuals and/ or companies and they may arise in many different contexts. The most common types are contractual disputes, perhaps involving the sale of unsatisfactory goods, and negligence claims in relation to, for example, road traffic accidents, injuries at work or inadequate professional advice.
What is the aim of the CPR?
Civil litigation is governed by the Civil Procedure Rules 1998 (CPR), which dictate the procedure that must be adopted when pursuing a claim through the courts.
The aim of the CPR is to provide a more ‘user- friendly’ system of resolving such disputes. This has become increasingly important due to the increase in litigants in person (those individuals who represent themselves) who are unlikely to have the degree of legal knowledge of a lawyer.
To ensure that the process proceeds at a reasonable pace, with the consequent reduction in cost, the courts have control over the conduct of the matter. This includes making appropriate directions, setting strict timetables and ensuring the parties comply with them, backed up by a system of sanctions that the court can impose.
Give an overview of the 5 stages of a civil claim
Stage 1: pre- commencement of proceedings
There are a number of steps to take before issuing proceedings and the starting point is the client – what are their objectives, both legal and commercial? Having established this, evidence must be gathered to confirm the viability of the claim and the prospects of success. Costs will be at the forefront of the client’s mind and should be addressed; and serious consideration must be given to ADR.
Pre- action protocols govern the steps the parties should take before commencing a court case. The parties must establish what issues are in dispute, share information that is available to them concerning these matters and endeavour to resolve the issues. Failure to follow a protocol step or its spirit, without good reason, will usually incur a sanction such as a reduction in the costs recovered by that party if litigation proves successful.
Immediately after collecting sufficient evidence to substantiate a realistic claim, the potential claimant should send to the proposed defendant a letter detailing the claim; and the defendant is expected to send a letter in response.
Only after these steps have been completed should litigation be started.
Stage 2: commencement of the claim
Proceedings are commenced by a claim form, which must be served on the defendant together with full details of the claim, called particulars. If the defendant wishes to contest the claim, they are required to file at the court and serve on the claimant a defence. At this point, the court will allocate the matter to a track, with higher value cases being given greater attention and resources.
Stage 3: interim matters
Once on a track, the court carefully manages a case to ensure the matter progresses towards the trial date. Directions are given to the parties listing all the steps they must take to prepare for trial and a strict timetable is imposed as to when each step must be taken. This will include the parties disclosing any relevant documents that are in their possession and that impact upon the case (whether they assist or not). Evidence the parties wish to rely on, such as witness statements and experts’ reports, must then be exchanged; and costs will also be scrutinised.
In addition, the parties may apply to the court for any specific orders that might be required, perhaps to compel an opponent who has neglected to take a required step in accordance with the timetable to do so.
Stage 4: trial
The judge will hear the evidence at the trial and make a decision as to the outcome, resolving all issues of liability and quantum (damages). As to costs, the judge will decide if any party should pay the other’s costs and, if so, how much.
Stage 5: post- trial
A party who is unhappy with the judgment may decide to appeal all or part of the trial judge’s decision.
If the damages and/ or costs are not paid as required, the party will have to apply to the court to enforce the judgment.
Most commonly, this involves instructing court officials to attend the debtor’s premises and to take their belongings to be sold at public auction. The proceeds are then paid to the appropriate party.
What needs to be considered before a civil claim can be brought?
(a) Can the claim be brought at all?
(b) Who are the parties?
(c) Does the defendant have the means to pay a judgment?
(d) What are the merits of the case?
(e) What steps must be taken before proceedings are issued?
In terms of limitation what needs to be considered before a civil claim can be brought?
Before issuing proceedings, the solicitor must ensure that the client is not precluded from making a claim at all.
The Limitation Act (LA) 1980 prescribes strict time limits with which the claimant must comply. If these are missed, unless there are exceptional circumstances, that is the end of the matter as the claim will be ‘statute barred’.
The rationale behind imposing these deadlines is to prevent a potential defendant remaining under constant threat of litigation for events that happened many years before; and to recognise that the passage of time results in evidence being lost and witness accounts becoming less reliable.
From the outset, a solicitor must ascertain when the limitation period began and when it will expire.
These dates should be diarised to remind the lawyer that time is marching on, particularly if the expiration of the relevant period is drawing near. It is vital that proceedings are issued before the limitation period expires, otherwise the solicitor is likely to face a claim in negligence.
What are the consequences if a party misses a limitation period?
If a party has missed the limitation period, the defendant will have a technical defence to the claim. This means that, if the court agrees the claim is statute barred, the claimant will not succeed in the litigation.
What are the limitation periods for contract or tort?
For claims founded on contract or tort, the basic rule is that the claimant has six years from the date of the cause of action to commence their proceedings and time runs from this point.
However, when calculating the date on which the limitation period expires, usually the day on which the cause of action accrues is excluded from the calculation as is apparent from the examples below.
In contract, the cause of action accrues as soon as the breach of contract occurs. This will be a question of fact to be determined by the court.
In tort, the cause of action accrues when the tort is committed. In negligence, this will be when damage occurs as a result of a breach of duty.
What is the limitation period for personal injury matters?
The limitation period for personal injury matters is three years. This runs from the date of the cause of action or the date of knowledge of the person injured, except for children where the time limit does not start to run until their 18th birthday.
What is the limitation period for latent damage?
Furthermore, in a claim based on negligence where the damage is latent (hidden) at the date when the cause of action accrued, s 14A of the LA 1980 provides that the limitation period expires either:
a) six years from the date of the cause of action; or
b) three years from the date of knowledge of the damage, whichever is later; but
c) no later than 15 years after the date of the negligent act or omission.
What needs to be remembered with limitation periods and contracts?
In a contract case, it is very important to check whether a different limitation period is specified in the contract.
This is because any such provision is usually shorter than the statutory limitation periods referred to above, and the claim should therefore be commenced within the contractually specified period.
Can a limitation period be extended?
The general rule is that actions commenced outside the limitation period where the defendant has raised the issue as a defence will not be allowed to proceed, although extensions may be available in exceptional circumstances.