Why the Shift in Alternative Dispute Resolution Matters

The courts of this country should not be the places where resolution of disputes begins. They should be the places where the disputes end after alternative methods of resolving disputes have been considered and tried. 

Although the above quote from Sandra Day O'Connor, the former Associate Justice of the Supreme Court reflects on the process in the USA, the principal also applies to the UK court system and in recent years there has been a noticeable shift in how the courts view and engage with Alternative Dispute Resolution (ADR).  This shift is driven by a desire to reduce the burden on courts, save costs, and provide more flexible, quicker solutions for disputing parties.  But what is the courts' stance on ADR, and how do they approach the allocation of costs in proceedings?
 

What changes have been made

Alternative Dispute Resolution (ADR) has always been a voluntary option for pre-court proceedings for parties wishing to resolve their matters outside of court in an amicable and non-confrontational way. This could involve mediation, negotiation, arbitration or a collaborative approach. ADR can be faster, less expensive, and allow parties to maintain greater control over the outcome of their dispute.

However, as reported by Trust Mediation services, from 1 October 2024 there has been a positive move toward the development of ADR due to the court’s authority to compel parties to engage in ADR, either before or during litigation.  Such a move is intended to reduce the emotional and financial stress of protracted litigation, especially when relationships (such as those between parents and spouses) need to be preserved.  .

The case that led to the ADR push

The Court of Appeal’s pro-ADR findings in the landmark decision in Churchill v Merthyr Tydfil Borough Council [2023] EWCA Civ 1416, considered whether a court can lawfully stay proceedings for the parties to engage in a non-court-based dispute resolution process, or whether it is possible to order the parties to engage in ADR. The court found in favour of utilising this power but to do so on the individual facts of each case presented.   

What level of involvement in ADR is needed to avoid costs sanctions?

The real financial benefit of ADR often comes from the costs saved by avoiding a lengthy and expensive trial.  This is why if one party refuses to engage in ADR, the court is now more likely to impose costs sanctions to serve as an overall deterrent.   

When the court is faced with balancing cost sanctions or not – the court must use their discretionary powers to consider a party’s conduct and whether the party unreasonably refused to participate in ADR. While the court has the power to award costs for a failure to engage in ADR, it is important to note that the court retains discretion in how this power is exercised. The court will typically assess whether the refusal to engage in ADR was reasonable, given the facts of the case. Factors that the court may consider include:

  • The nature of the dispute: Some disputes may be more suited to ADR than others. For example, disputes concerning the arrangements for children may benefit from arbitration or mediation, while some matters where there is parental conflict may require a full trial for resolution.
  • The timing of the refusal: If ADR was suggested early in the proceedings and the refusal was made without reasonable justification, the court is more likely to impose a costs penalty. However, if ADR was suggested later, after considerable litigation had already occurred, the refusal might be seen as less unreasonable.
  • The conduct of the parties: If one party has acted in a manner that makes ADR unlikely to succeed (such as being particularly hostile or unwilling to negotiate in good faith), the court may be less inclined to penalise them for refusing ADR.
  • The outcome of the case: If a party that refused ADR later wins the case, the court may still award costs against them, depending on how unreasonable their refusal was.

Costs sanctions can include issuing a costs order to cover the other parties’ costs in full or in part, even if they ultimately win the case, having their own costs reduced or denied, or facing a court order to cover the costs of the ADR itself.   Therefore, cost sanctions essentially punish the non-compliant party for their refusal to explore ADR options, even if they ultimately succeed in the case. 

The aim

The overriding aim and importance of this new power of the English court system can be seen as an attempt to reduce the burden on the judicial system, to streamline case management and to encourage and promote a more collaborative approach to dispute resolution.  Ultimately, the message is clear: refusing to engage in ADR without good reason can have serious financial consequences.  As ADR continues to gain traction, parties are increasingly expected to make a genuine effort to resolve disputes outside of court, and the consequences of failing to do so should not be underestimated. 

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Article by Amanda Myles-Lawrence
Trainee Solicitor, Family Law Department
 
 

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