Parties involved in modern litigation are increasingly encouraged to settle their disputes before the matter reaches trial. There is a range of options to try and help parties avoid Court, which are known collectively as "Alternative Dispute Resolution" or "ADR".

The goal of ADR is to achieve a mutually satisfactory settlement that will save both parties the time and costs of litigation. The private and flexible nature of many of the options can also encourage the parties to speak more freely. This can assist in salvaging business relationships and reputations, making such methods far more appealing from a commercial perspective.

It will not always be automatically appropriate to use ADR. There may be cases where the parties are too unequal, or where there is a real urgency that does not allow time to try ADR. Some ADR decisions will be binding, with no recourse to appeal an unsatisfactory outcome, and of course both parties must be genuinely willing and must take the process seriously. But it will always be worth considering whether ADR could assist in reaching a settlement or narrowing the issues in dispute.

ADR is a wide topic and the different options can be confusing. We therefore set out below an introduction to the forms of ADR that prove most useful for property disputes.

Mediation

This is an increasingly popular method for attempting to resolve disputes. Parties are often actively encouraged by the Court to try mediation before the matter reaches trial. The process includes the following stages:

  • Agreement to mediate
  • Joint appointment of mediator
  • Pre-mediation discussions to set the parameters and prepare the paperwork
  • Preparation for the mediation
  • Initial meeting with both parties and mediator, where each party makes submissions
  • Private meetings where the mediator goes back and forth between the parties
  • Conclusion/settlement

For a mediation, the opposing parties jointly instruct an independent third person to orchestrate negotiations. The mediator will be a qualified individual with expertise in the disputed area. His/her role is to identify the areas in dispute, explore the options for resolution, and attempt to reach agreement through discussions with each party. By going back and forth between the parties and talking to them, the mediator will try to flush out what each side hopes to achieve. The ultimate goal is to carve a pathway to compromise.

The process is voluntary, so both sides must agree to it. However, the Courts have shown in recent cases that the costs consequences for a party who refuses to mediate will be severe (read article, "Severe Costs Consequences for Failure to Mediate: When Silence is Not Golden"). Any request to mediate must therefore be taken very seriously.

Mediation is private, which can encourage parties to speak more freely without the worry that anything they say will end up being irrevocably entrenched or disclosed to the Court. However, the outcome is non-binding, so it requires good faith and genuine efforts to be made on both sides if it is to be effective.

In terms of costs, whilst mediation will be cheaper than a long trial, it can nonetheless be an expensive process. The parties will split the mediator's fees, but a lengthy mediation attended by experts and legal representatives can still incur significant fees. It is therefore important to bear the issues and sums in dispute in mind, to ensure that the costs are proportionate.

Mediation will inevitably continue to increase in popularity as the Courts are keen to see parties using it where appropriate.

Arbitration

Arbitration is a more formal process. Of all the ADR routes, arbitration most closely resembles Court proceedings. The arbitrator acts in a judicial role and makes an award to finalise the dispute. The stages of arbitration are as follows:

  • Agreement to arbitrate
  • Mutual selection of arbitrator or appointment by governing body if no agreement
  • Preparation for the arbitration
  • Submission of case
  • Award by arbitrator
  • Enforcement of award

The parties can choose to use arbitration, or they may be required to do so under a disputes clause in the contract. Unlike a Court, where proceedings are usually public, arbitration is a private forum where an independent arbitrator is appointed by the parties. If the parties cannot agree, the contract will usually provide for a governing body to appoint an arbitrator, for example the RICS. The arbitrator will be an individual with expertise in the disputed subject.

The parties will submit documents and submissions to the arbitrator, who will make directions for the progress of the arbitration. This can include verbal submissions or the arbitrator can simply make an award based on paper submissions. The duty of the arbitrator is to focus upon the law and the facts of the situation. Unlike mediation, the arbitrator is not permitted to meet with either party in private.

Once made, the award will be binding on both parties. There are usually limited options for appealing any decisions, unlike a Court judgment. It is a relatively inflexible method that allows little room for back-tracking.

Consequently, arbitration can be advantageous to a party that is seeking a definitive determination that can be enforced. Arbitration also has the advantage of being private, so the arguments will not be made public. The disadvantage is that there is limited opportunity for trying again if the award or the arbitrator is not to a party's liking.

An arbitrator also has the power to make a costs award, ie to order party to pay or contribute to his/her own fees and the other party's costs.

There is a general misconception that arbitration is quicker and cheaper than Court proceedings. This can be the case, but it is by no means guaranteed to be. Whilst the arbitrator has flexibility over the directions, so for example the disclosure exercise can be significantly curtailed compared to Court requirements, it will still be necessary to spend a great deal of time on arguments and submissions. The timing and costs of arbitration can therefore be equivalent or greater than Court proceedings, depending on the case. 

Expert Determination

This is an informal process where the parties choose to seek an expert determination to resolve an issue. They will jointly appoint an impartial and independent expert.

The expert will be agreed by the parties or will be appointed by a nominee. Expert determinations are usually used for technical points rather than legal points and so the expert will be required to have specialist knowledge. Consequently this form of ADR is particularly useful in specialist situations.

Unlike an arbitrator, who is bound to look at the evidence and arguments submitted by the parties, an expert is free to use his/her own professional knowledge and experience. Similarly, there is no statute to govern how the process goes or the conduct of the parties, who must settle their own contract with the expert. There is no obligation on the expert to act fairly or impartially; rather there is a simple duty to act with professional competence.

The advantage to an expert determination is that it can be a quick, informal and relatively cheap way of resolving a technical point. It is also private and does not involve a Court judgment. However, the caveat to bear in mind is that the award will be binding and it is not usually possible to appeal it. A party who is unhappy with the decision will most likely have to live with it. The process is therefore only as good as the expert.

The parties will have to pay the expert an agreed fee. Unless it is agreed at the outset that the expert has the power to determine costs, and both parties agree to this, the expert will not have any authority to make an award on costs.

Informal Negotiations

As a further alternative, sometimes the best way of resolving a dispute is to simply hold Without Prejudice negotiations with the other side. These can take place in face-to-face meetings or through an exchange of written correspondence. One of the greatest advantages of pursuing this course of action is that such negotiations can take place alongside other, more formal methods of ADR. These can then be discontinued if a settlement is agreed through informal discussions.

Informal negotiations are also significantly cheaper than other methods of ADR since there is no need to prepare formal submissions or to attend long hearings. Furthermore given the private nature of Without Prejudice discussions, relationships stand a far greater chance of being preserved.

Of course negotiations rely heavily on the parties' willingness to cooperate. If the dispute is of a particularly acrimonious nature, or if the relationship between the parties has broken down, it may be better to entrust any resolution attempts to an impartial third party.

Our tips

ADR can be very useful for bringing a matter to a conclusion, or for narrowing the issues in dispute. It can save time and costs and it can help to preserve a commercial relationship. However, it is essential to choose the correct format and to use it at the right stage in a dispute to maximise the benefits. Advice should therefore be sought on ADR at the outset and as a matter progresses.