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SETTLEMENT AND THE USE OF ADR (i) Introduction

CHAPTER 43. CASE MANAGEMENT

6. SETTLEMENT AND THE USE OF ADR (i) Introduction

6.1 It is a fair assumption that attempts will have been made to settle any claim before issue. In such cases, the attempts will have failed. Nevertheless ADR techniques (particularly mediation) have an important role to play in many civil actions.

126 It is understood to be a programme of a similar nature but, due to budgetary cutbacks, the implementation of EW is much narrower than was originally envisaged by EFDM.

127 It is envisaged that this capability will be rolled out to all users overtime.

Chapter 43: Case management 6.2 The overwhelming majority of cases128 settle between issue and judgment. A

significant proportion of settlements are achieved through conventional negotiation.

Many are resolved using ADR techniques (including mediation). In the context of TCC litigation, approximately two thirds of settlements are achieved by conventional negotiation and approximately one third of settlements are achieved through mediation.129

(ii) ADR: What it is and the rules

6.3 ADR is a broad term for which there is no accepted definition. The White Book glossary explains it as a “collective description of methods of resolving disputes otherwise than through the normal trial process.” This can include:

(i) Non-binding processes without third party intervention. This means bilateral negotiation. It still appears to be the most commonly used process for resolving disputes, whether before or after solicitors have been instructed.

(ii) Non-binding ADR processes with third party intervention. This may mean mediation (in other guises where the third party plays a more active role it may be called conciliation); or stakeholder dialogue (used in environmental disputes where various stakeholder groups are consulted); or executive tribunals (used in commercial disputes: a representative for each party makes a presentation to a panel comprised of senior executives of each party and a mediator, the panel then retires to discuss the dispute); or early neutral evaluation; and

(iii) Binding ADR processes: expert determination (usually used in disputes of a technical nature); adjudication; arbitration; Med-Arb (hybrid process – if mediation fails, the mediator becomes an arbitrator who makes a binding decision).

Generally within the UK, ADR is more commonly understood to describe all dispute resolution methods other than litigation in court and arbitration.

6.4 Since its effective rebirth in America in the 1970s ADR has steadily grown in importance. This was recognised in England and Wales in the Heilbron/Hodge Report which preceded and informed the two Woolf Reports. Lord Woolf saw ADR as playing a crucial role (a) in achieving resolution of many disputes before the issue of proceedings and (b) in promoting settlement as early possible in the course of proceedings.

6.5 Procedural rules which encourage ADR. The CPR introduced a number of mechanisms to give effect to Lord Woolf’s aims. For instance, pre-action protocols were introduced to facilitate the settlement of disputes before the parties resorted to the courts. All protocols now stress that parties should consider whether “some form of alternative dispute resolution would be more suitable than litigation and, if so, endeavour to agree which form to adopt.”130

6.6 Once litigation has been commenced the court and the parties must abide by the overriding objective. Active case management includes encouraging the parties to use ADR, if appropriate, and facilitating the use of ADR (CPR rules 1.4(1)(e) and (f)

128 Leaving aside those cases that settle pre-issue.

129 See chapter 34, section 2.

130 Paragraph 4.7 of the PDPAC.

Chapter 43: Case management

and 3.1). The virtues of mediation in suitable cases are recognised in the various court guides.131

6.7 Active pursuit of ADR is further encouraged by CPR 26.4(1), which enables parties to make a written request with their AQ for a stay of proceedings while settlement via ADR is attempted. Alternatively, the court may make such an order of its own initiative. The costs rules provide an incentive to mediate: see CPR rule 44.5(3)(a)(ii). Parties who unreasonably refuse to mediate may be penalised in the court’s eventual costs order: Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002. ADR is further encouraged by a number of court-based mediation schemes, such as the one operated by the Court of Appeal.

6.8 One of the important benefits of ADR is the ability for a remedy to be agreed that is not within the court’s power. For instance, as a result of ADR one party may agree to give a public apology. Other perceived advantages include informality; speed of process; confidentiality; and the fact that the parties themselves are involved in shaping the outcome. Conversely, some criticise the fact that the solution may not reflect the parties’ rights and note that sometimes it desirable (in the public interest) for a ruling from the court.

6.9 Who pays? Unless agreed otherwise, each party will usually bear its own costs related to any form of ADR. However, it is becoming more common in larger cases for parties to agree that the costs of any failed ADR will become costs in the case.

6.10 Optimum time for ADR. There is much debate about when the parties should consider ADR. The pre-action protocols obviously encourage the parties to engage very early on in the process. Some of the Phase 1 submissions suggest that this is too early and that entering into an ADR process too soon may wreck the chances of a later attempt. The current rules give most prominence to the use of ADR at the allocation stage.

(iii) Government policy

6.11 The Government pledge. In 2001 the Government set out its pledge on the

“Settlement of government disputes through ADR”. Government departments undertook, amongst other measures, to consider and use ADR in all suitable cases where the other party accepts it and, where appropriate, to use an independent assessment to reach a possible settlement figure. Certain types of dispute are acknowledged as being unsuitable for ADR: e.g. cases involving intentional wrongdoing, abuse of power, public law, human rights, vexatious litigation, where a legal precedent is required to clarify the law or where it would be contrary to the public interest to settle.

6.12 The Government departments must measure their performance. The aim is that in leading by example they will encourage greater uptake. During the reporting period 2007/08, ADR was used in 374 cases with 271 leading to settlement, saving costs estimated at £26.3 million (although there is no indication as to how this estimate has been calculated).132 It is worth noting that statutory bodies such as the NHSLA are covered by the pledge scheme.

131 Chancery Guide (paragraphs 17.1 and 17.3); the Queen’s Bench Guide (paragraph 6.6); the Admiralty and Commercial Court Guide (paragraph D8.8) and the Technology and Construction Court Guide (paragraph 6.4).

132 “Annual Pledge Report 2007/08: Monitoring the effectiveness of the government’s commitment to using alternative dispute resolution, April 2009.”

Chapter 43: Case management 6.13 The court has considered whether any “great weight” should be given to this

pledge in determining adverse costs orders against a successful public body on the grounds that it refused to agree to ADR. In Halsey, overruling Royal Bank of Canada v Secretary of State for Defence,133 it was decided that the pledge does not create an additional burden: “If a case is suitable for ADR, then it is likely that a party refusing to agree to it will be acting unreasonably, whether or not it is a public body to which the ADR pledge applies.”134

(iv) Court backed schemes

6.14 Mediation. Over the years a number of court mediation schemes have been piloted. The first was in the Central London county court in 1996 and similar initiatives were subsequently established at Birmingham, Exeter, Guildford and South Wales. In March 2004 the Central London county court piloted an “Automatic Referral to Mediation Scheme” (“ARMS”), but following the decision in Halsey this scheme encountered difficulties. A number of schemes continue today. For example, the Mayor’s and City of London Court has a mediation scheme with a success rate of 60%, but only a very low take-up rate.135

6.15 Court of Appeal mediation scheme (“CAMS”). This scheme, for non-family work, is administered by CEDR Solve (“Centre for Effective Dispute Resolution”).

The parties are not obliged to take part in the scheme and are free to terminate the mediation by informing the Civil Appeals Office or CEDR at any time without giving any reason. CEDR is responsible for nominating mediators, preparing a mediation agreement and liaising with the parties over mediation arrangements. The court remains responsible for the composition of the panel (the mediators) and for any adjustment to the fees payable. The panel includes mediators from a varied range of disciplines including commercial, personal injury, insurance, shipping, employment, intellectual property, etc.

133 [2003] EWHC 1941 (Ch).

134 [2004] EWCA Civ 576 at paragraphs 34-35.

135 See the report by Professor Simon Roberts entitled “The Mayor’s and City of London Court Mediation Scheme: a review of the Scheme’s second year”, dated 31st August 2008.

Chapter 43: Case management

6.16 I understand (subject to confirmation) that the usage of CAMS is as follows:

Table 43.1: Use of CAMS 2003-2008

Case numbers

6.17 I understand (subject to confirmation) that the success rates are as follows:

Table 43.2: Success rates of CAMS, 2003-2006

Comparative settlement rates 2003-2006 Settlement rate 1 April 2003 to 31 July 2004 (15 months) 66%

1 August 2004 to 31 July 2005 (12 months) 47%

1 Aug 2005 to 31 July 2006 (12 months) 48%

1 Aug 2006 to 31 July 2007 (12 months) 57%

1 Aug 2007 to 31 July 2008 (12 months) 22%

6.18 Following the recommendations in Professor Genn's paper, “Court based initiatives for non family civil dispute”, a Lord/Lady Justice considering an application for permission to appeal is expressly required to consider whether the matter is suitable for mediation. The full Court may also propose mediation where there are outstanding issues and a possibility of further litigation.

6.19 It has been found that very few cases go to mediation without judicial encouragement. Little explanation has been proposed as to why the settlement rate has dropped so drastically in the past year. It has been suggested that it is not standard of the mediators but perhaps more “intransigent parties”.