Alternative dispute resolution takes centre stage

On 1 October 2024, the Civil Procedure Rules (CPRs) were updated to reflect the decision handed down by the Court of Appeal in the case of Churchill v Merthyr Tydfil, in which it was held that the courts can stay proceedings and order parties to engage in alternative dispute resolution (ADR). 

The updates to the Civil Procedure Rules include: 

• CPR 1.1(2)(f) and CPR 1.4.(2)(e) to incorporate the promotion and use of ADR into the overriding objective and the courts’ active case management duties;
• CPR 3.1(2)(o) to empower the courts to order parties to engage in ADR, as a part of its general case management powers;
• CPR 28.7, CPR 28.14 and CPR 29.2 (1A) to direct the courts to consider whether to order parties to engage in ADR, as a potential direction in regard to intermediate, fast-track or multi-track claims; and
• CPR 44.2(5) to permit the court to consider whether a party has ‘unreasonably failed’ to engage in ADR, when exercising its direction as to costs. 

The recent trend

The decision in Churchill and the amendments to the CPRs come as no surprise and are consistent with the general trend in English law over the past decade or so, which has seen the judiciary and legislative powers combine to place an ever-increasing obligation upon parties to engage with ADR.

In theory, therefore, practitioners should see a further increase in the use of ADR (the most common form of which is mediation), in light of the amendments to the CPRs, with parties potentially fearing court sanctions, in accordance with the court’s new case management powers, for a failure to use ADR. 

There is no fixed, statutory definition of ADR; however, in most cases, it will be considered to be mediation, although in some, expert determination or early neutral evaluation may be more appropriate. Negotiation also falls within the ambit of ADR; however, as to how the courts will evaluate this less structured, more informal means of ADR, when assessing whether parties have engaged in ADR, is unknown at this stage. 

The way forward

However, as ever, it remains to be seen as to whether the theory, which is well-reasoned and well-intentioned, will translate effectively in practice. 

As to how and when these powers will be exercised by the courts remain to be seen, as the amendments that have been made to the CPRs are intentionally non-prescriptive, so as to give the courts wide discretion to exercise their new case management powers as they see fit. For example, the courts could conceivably use their new powers to expressly order parties to engage in ADR, but in reality, it seems more likely that a court will stop short of expressly doing so, but instead order a stay of proceedings to allow parties to engage in ADR (which nonetheless could be seen as an implicit order by the court to engage in ADR). 

Such directions from the court look to be a particularly apt and useful tool in potentially dealing with lower value claims, involving parties who may otherwise not be aware of the existence and benefits of ADR, which can often be settled without the need for judicial intervention and without the parties incurring the significant legal costs of going to trial.

In any event, irrespective of the value of the claim and the level of sophistication of the parties involved, if the use of ADR can at least narrow the issues potentially before the court (if not settle them in their entirety), then this should be encouraged and empowering the courts to achieve this by giving them the statutory tools to do so is a positive step forward. 

Potential pitfalls

As such, on paper, the amendments to the CPRs seem entirely sensible; however, that is not say that they do not come without any potential pitfalls. Whilst the purpose of these amendments is to encourage parties to engage with ADR (and, therefore, provide much needed relief to the already over inundated courts), an entirely plausible side effect of the introduction of these new CPR provisions is that we will see parties artificially engaging in ADR, in order to avoid the prospect of a sanction as a result of the court’s new case management powers. It also remains to be seen as to what level of engagement will be sufficient for a court to determine a party to have ‘engaged’ in ADR, so as to avoid any potential costs sanctions under the new provision at CPR 44.2 (5) for potentially having ‘unreasonably failed’ to do so. 

Such an approach would be entirely contrary to the purpose of the amendments to the CPRs and would only serve to inflate costs, which may in turn result in parties becoming more entrenched in their position. Furthermore, the rising cost of many forms of ADR, such as mediation, may result in a negative cost–benefit output, particularly in the event that a court exercises its case management powers to order ADR to take place and that ADR fails to produce a positive result. 

The courts will also be keen to avoid parties using their obligations to engage in ADR for the ulterior purpose of undertaking fact-finding missions, to ultimately support their position in the litigation, as opposed to a genuine attempt to settle the dispute between the parties. The first court order made under these case management powers will, therefore, be eagerly awaited and will provide some insight into how and when these powers will be exercised. 

Conclusion

In the meantime, however, parties should tread carefully to avoid being seen to have failed to engage with ADR and potentially find themselves being sanctioned by the court for such a failure. Parties should, therefore, carefully consider their ADR strategy at the outset of any claim and ensure that all communications between the parties in respect of the same are clearly documented to avoid any imposition by the court of an unwelcome ADR process at a later date.