Mar 17, 2015

Courts and their Pro-dispute Resolution Stance

The case of Laporte v The Commissioner for the Police of the Metropolis [2015] EWHC 371 (QB), has reinforced the pro-alternate dispute resolution ("ADR") stance of courts.

ADR encompasses all dispute resolution processes that exist which act as a means to try and enable parties to reach agreement without the need to resort to litigation (court based).  Typical examples include mediation, conciliation, negotiation and arbitration (although this is becoming more akin and can be as expensive the going to court).

By virtue of the Civil Procedure Rules ("CPR") there is and obligation on parties to seriously consider and engage with ADR processes.  To what extent is governed largely by case law.  Failure to comply can lead to costs consequences for parties that fail to consider or dismiss ADR out of hand without good reason.

Civil Procedure Rule 44 sets out the general rules on costs. CPR 44.2(1) provides that decisions relating to costs are in the discretion of the court. CPR 44.2(2) establishes the general rule that costs will follow the event (the usual costs order). CPR 44.2(4) identifies the circumstances to which the court is to have regard when exercising its discretion in making decisions about costs:

'(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and

(c) any admissible offer to settle made by a party which is drawn to the court's attention and which is not an offer to which costs consequences under part 36 apply.'

The burden is on the losing party to persuade the court that an order other than the usual costs order should be made.

In the instant case of Laporte the claimants were unsuccessful in their claim for damages.  As to costs, the claimants asserted that there should be no order for costs because the defendant had refused to engage in ADR.  In response, the defendant sought an award of costs against the claimants and contended that they should be assessed on an indemnity basis.

At various points in the litigation process the claimants made offers to the defendant to engage in ADR. Initially the defendant indicated an unwillingness to engage in ADR and rejected the claimants' offer of ADR on the grounds that it was not, in the defendant's opinion, an appropriate use of resources for either party.

The judge in the case, Turner J, referred to the Court of Appeal's decisions in Halsey v Milton Keynes General NHS Trust.  This case sets out the factors that have to be considered when assessing whether a refusal to engage in ADR was 'unreasonable'. Whether a party has acted unreasonably in refusing ADR must be determined having regard to all the circumstances of the particular case. The factors which may be relevant to the question will include the following:

the nature of the dispute;
the merits of the case;
the extent to which other settlement methods have been attempted;
whether the costs of the ADR would be disproportionately high;
whether any delay in setting up and attending the ADR would have been prejudicial; and
whether the ADR had a reasonable prospect of success.

The Judge also referred to PGF II SA v OMFS Co 1 Ltd [2014] 1 WLR 1386 in which it was decided that silence when given the opportunity to participate in ADR will be, as a general rule, unreasonable.

Considering each of the above factors Turner J held:

Nature of the dispute – rejected the defendant's arguments that the case was unsuitable for ADR. The claimants could have succeeded in obtaining some level of damages even if they had lost on the law and even if, in addition, the actions of the police had been vindicated.
Merits of the case – the fact that the defendant has accepted that it was prepared to mediate to narrow the issues indicated that the defendant conceded that the merits of the defence were not perceived to be so strong in themselves to have justified a refusal to engage in ADR.
Other settlement methods – the defendant had made no other settlement offers before ADR was suggested.
Cost disproportionately high – the defendant conceded that the costs of mediation would not have been disproportionately high.
Delay – mediation in this case would not have delayed the trial.
Reasonable prospect of success – the central point relied on by the defendant.  It's view was that the claimants would only accept a financial offer and that the defendant was unlikely to make one so ADR was not appropriate. On the evidence before him, the judge was satisfied ADR did have a reasonable prospect of success.

The judge found in favour of the claimants and only awarded the defendant two-thirds of its costs against the claimants.

The judgment is another reminder of the important role of ADR and underlines judicial expectations that parties involved in litigation will try to reach a settlement. Further the parties must show that they have taken positive steps in engaging with ADR rather than simply agreeing to it without any intention of making it work.

in: Case Law, Civil Procedure, Legal News

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