In a report released on 12 July 2021, the Civil Justice Council (“CJC”) concluded that “mandatory (alternative) dispute resolution is lawful and should be encouraged”. This marks a significant shift from the orthodoxy established by the Court of Appeal in Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002 (“Halsey”). In this article, Jack Barlow considers the CJC report, the decision in Halsey and other significant cases post-Halsey.

Lord Justice Dyson asserted in Halsey that the court has no jurisdiction to force unwilling parties to mediate as it would be contrary to their right to a fair trial under Article 6 of the European Convention on Human Rights (“Article 6”).

Alternative dispute resolution (“ADR”)

There is no one agreed definition of ADR. The authors of the CJC report consider ADR to be a collective term describing all dispute resolution methods where third parties assist exploring settlement with parties to a claim. This definition encompasses a large number of methods, which contrast significantly in terms of cost and time burden placed on the parties. These methods include (among others):

  • Mediations conducted by a neutral individual (who may be a commercial provider or a judge)
  • Evaluative appraisals, usually but not always, conducted by a judge in the form of early neutral evaluations (“ENE”)
  • Online processes, which can be as straightforward as blind bidding systems but may involve more sophisticated tools such as artificial intelligence to generate solutions

Significantly, the key feature binding the various ADR techniques together is that parties at all times retain the ability to refuse to settle and return to the court procedure if they wish to do so.

Civil Procedure Rules (“CPR”) framework

The CPR strongly encourage and support parties’ engagement in ADR to resolve their disputes. The principle is enshrined in the overriding objective to deal with cases justly and at proportionate costs, which includes, at CPR 1.4, a duty for the court to actively manage cases by:

“(e) encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure

“(f) helping the parties to settle the whole or part of the case.”

Specific case management tools are also available to the court in this regard. If a court considers a stay in proceedings for parties to attempt ADR is suitable, it can, pursuant to CPR 26.4(2A), “direct that the proceedings, either in whole or in part, be stayed for one month, or such other period as it considers appropriate”.

Nevertheless, following Lord Justice Dyson’s judgment in Halsey, the courts have struggled with the issue of how far they can go to encourage parties to engage in ADR in the civil justice system.

Halsey

Lord Justice Dyson’s judgment in Halsey rejected compulsory ADR (specifically compulsory mediation) on two grounds:

  1. Imposing mediation would be unlawful as it would infringe upon parties’ right to a fair trial under Article 6. “To oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right to access to the court,” he said. (This is the “legality ground”.)
  2. Even if the court had jurisdiction to order unwilling parties to refer their disputes to mediation, it would be undesirable as, said Lord Justice Dyson: “We find it difficult to conceive of circumstances in which it would be appropriate to exercise it.” Lord Justice Dyson specifically noted that ordering parties to engage in a mediation which they objected to would “achieve nothing except to add to the costs to be borne by the parties, possibly postpone the time when the court determines the dispute and damage the perceived effectiveness of the ADR process”. (This is the “desirability ground”.)

The judgment also developed the principle in Dunnett v Railtrack PLC [2002] 1 WLR 2434 of giving the court power, when dealing with costs, to penalise a party financially for unreasonably failing to mediate. The judgment established a non-exhaustive list of considerations (known as the “Halsey Principles”) to determine whether a refusal to mediate had been unreasonable.

Since Halsey, the costs risk associated with refusing to mediate has been the primary stick by which the courts have encouraged reluctant parties to engage in mediation and other forms of ADR. Mindful of these penalties, legal advisors have been careful to engage sensibly with any proposal to mediate and only justify refusal on terms permitted by the Halsey Principles, which include (among others):

  • delay, if mediation would push back trial dates
  • excessive cost, where the quantum of the claim is comparatively small and the costs of mediation disproportionately high, and
  • unlikelihood of success due to inappropriate timing.

 Significant cases post-Halsey

An important recent development is the Court of Appeal decision in Lomax v Lomax [2019] 1 WLR 6527 (“Lomax”), which considered Halsey in the context of an appeal concerning the court’s power to order ENE where one party did not consent. The decision considered the interpretation of CPR 3.1(2)(m), which makes express provision for the court to order ENE. Specifically, it may “take any other step or make any other order for the purpose of managing the case and furthering the overriding objective, including hearing an Early Neutral Evaluation with the aim of helping the parties settle the case”.

Lord Justice Moylan concluded that the court could order ENE against a party’s will as it did not constitute an “unacceptable constraint” of the parties’ right of access to the court. If the parties did not settle at or following the ENE hearing, the court could then determine the dispute. He distinguished Halsey on the basis that it only considered the power to compel parties to mediate.

This was followed by McParland v Whitehead [2020] Bus LR 699, in which Sir Geoffrey Vos, Master of the Rolls, raised the prospect that following the decision in Lomax, a court could make an order for compulsory mediation despite the decision in Halsey.

Recent cases have, therefore, reassessed the lawfulness of compulsory ADR. However, without a further decision from an appellate court/or intervention from the legislature on compulsory mediation, Halsey remains orthodoxy on the subject and dominates the wider discussion in relation to other forms of ADR.

 Findings of the CJC report

The report considered the legality and desirability grounds set out in Halsey.

Legality ground

The authors conclude that “any form of ADR which is not disproportionately onerous and does not foreclose the parties’ effective access to the court will be compatible with the parties Article 6 rights”. They note that the logic of the Lomax decision is capable of applying to other forms of ADR, as well as ENE.

Significantly, the authors suggest that the sanctions for non-compliance with an order or procedural rule requiring ADR should include striking out the claim/defence, which would be preceded by an “unless” order in appropriate cases. This would mark a significant shift from the Halsey approach of dealing with recalcitrant parties via costs penalties and is likely to be controversial if included in future reform.

Desirability ground

Contrary to Halsey, the authors note that introducing further “compulsory elements of ADR” would be an “extremely positive development”.

They suggest that a procedural rule requiring parties to attempt ADR at a certain stage or stages and/or permit the court to make an order to that effect would be both lawful and desirable, but acknowledge that “more work is necessary in order to determine the types of claim and the situations in which compulsory ADR would work”. They do, however, make the following predictions regarding the form of compulsory ADR:

  • If a suitable and effective form of ADR occasions no excess expense in terms of cost and time, making it compulsory is unlikely to be controversial
  • The instances of compulsory judge-led ADR processes should increase given the comparative lack of cost associated with the method
  • Compulsory mediation could be considered as long as the industry is sufficiently regulated and available in shorter formats 

Comment

The report reinforces the judiciary’s growing desire for parties to stop regarding ADR as an external to civil justice but as a key part of the dispute resolution process. While it provides clarification on the Article 6 question, more is required in the absence of detailed proposals to understand how compulsory ADR could work in practice.

ADR is undoubtedly an invaluable tool available to parties to drive settlement and thus reduce costs. The difficulty will be to establish a scheme that can accommodate the huge variety of disputes in the civil justice system. Would that scheme involve a procedural rule that requires parties to attempt ADR at a certain stage or stages and/or one that empowers the court to make a case management order to that effect? Some disputes are, by their nature, more appropriate to different forms of ADR. The appropriate timing of ADR also poses problems as the moment when parties have a sufficient grasp of the case to engage with ADR satisfactorily will differ widely. In more straightforward cases, it might be suitable for ADR before proceedings are issued, whereas in more document-heavy disputes, ADR might be more productive after disclosure.

Clearly, it will be difficult for a one size fits all approach to succeed. As the authors of the report recognise, in the course of determining any future reform, lawmakers will have to reflect on a number of fundamental questions, including:

  • Is the form of ADR proposed or required too burdensome or disproportionate in terms of cost or time?
  • Are particular specialist jurisdictions better suited to compulsion than general litigation?
  • At which stage or stages should ADR be required?
  • How to cope with perfunctory performance?