In this second article, we will look at the reasons why it is important to consider and respond to a proposal to enter into alternative dispute resolution (“ADR”) as a method to resolve the dispute.
As we set out in our first article in this series (https://www.bandmlaw.co.uk/site/blog/bandm-blog/alternative-dispute-resolution-a-general-overview), ADR methods exist in different forms and can comprise different methods and techniques and not unimportantly, they can carry different costs and time implications for the parties involved in the dispute.
We also mentioned that, where a party refuses to enter into ADR when an ADR method was offered by the other party, the court may look unfavourably on this and impose an order on the refusing party to pay additional costs or not to award some or all of the costs incurred due to such refusal.
But can the courts compel a party to enter into ADR? And how much power does the court have concerning a party’s willingness to enter into ADR?
To answer these questions we need to look at the 2004 case of Halsey v Milton Keynes General NHS Trust  EWCA (Civ) 576 (“Halsey”).
A summary of the facts of the case are as follows:
Lilian Halsey brought a claim against the NHS Trust following the death of her husband, who had died after liquid food entered his lungs as a consequence of having been fed through a nasal drip. Negligence on the part of the hospital staff was disputed and an inquest was held, the results of which were inconclusive. The claimant’s solicitors asked for bereavement damages and proposed mediation to settle the matter. The NHS Trust denied liability and as such, decided that mediation was not suitable.
In 2003 the case went to trial and the Lilian Halsey’s claim was dismissed; the NHS Trust won. The claimant’s solicitors asked for costs to be awarded due to the defendant’s refusal to mediate, but this was denied by the judge.
On appeal, the appeal judges upheld the original decision as being correct and stated inter alia as reasons for dismissing the appeal that the claimant “had come nowhere near showing that the Trust acted unreasonably in refusing to agree to a mediation”.
Halsey was the first case the court had to decide on in which a party simply refuses an invitation to engage in ADR. What should the court’s response be in such situations? The factors taken into account by the appeal judges in dismissing the appeal were as follows:
- The NHS Trust believed it had a strong defence to the claim and had reasonable grounds for that belief notwithstanding that the matter was not unsuitable for mediation;
- Mediation was not suggested nor ordered by the court at any point;
- The NHS Trust believed the cost of mediation would be disproportionate with regard to the value of the claim;
- The judges believed that the claimant had not discharged its burden of proving that the NHS Trust’s refusal to enter into mediation was unreasonable; and
- The was reason to believe that the claimant’s solicitors offers of mediation were based on tactical motivations.
Thus, the court established the following guidelines in its decision in Halsey:
- The court should not compel parties to engage in ADR (as this may risk contravening Article 6 of the European Convention on Human Rights) but may encourage them to do so in suitable cases and the court’s encouragement may be robust;
- The court's power to have regard to the parties’ conduct when deciding whether to depart from the general rule that the losing party pays the winning party’s costs, includes the power to deprive the winning party of some or all costs on the grounds of its unreasonable refusal to engage in ADR; and
- For that purpose, the burden is on the unsuccessful party to show that its opponent’s refusal was unreasonable (that is, there is no presumption in favour of ADR).
The court also went on to identify a non-exclusive list of factors that would be relevant to determining whether a refusal to engage in mediation was unreasonable. These include the nature of the dispute, the merits of the case and whether if ADR was entered into if there was a reasonable prospect of success, the extent to which other settlement methods had been attempted and the costs impacts and/or impact of delay due to the ADR.
In answer to the questions posed at the start of this brief article, the court cannot compel parties to enter into ADR, as compelling a party to do so could mean to increase costs, delay and damage the perceived effectiveness of the ADR process. The refusing party must justify their decision to refuse ADR and the judge should explore the reasons for resistance to it even where it takes the view that a case is suitable for it.
These principles are therefore applied in determining whether an unreasonable refusal to attempt ADR can result in negative costs sanctions at the end of litigation, and as of 2015, this has been reflected in the Civil Procedure Rules:
“If proceedings are issued, the parties may be required by the court to provide evidence that ADR has been considered. A party's silence in response to an invitation to participate or a refusal to participate in ADR might be considered unreasonable by the court and could lead to the court ordering that party to pay additional court costs”.
The importance of ADR has been recognised by the European Commission which, in 2008 enacted the Mediation Directive (Directive 2008/52/EC on certain aspects of mediation in civil and commercial matters). It applies to all EU member states apart from Denmark, which opted out. ADR is important for the UK Government, as illustrated by the inclusion of measures in the CPR designed to encourage it. Also, in Lord Justice Jackson’s final report on civil litigation costs (Review of civil litigation costs – final report, December 2009 https://www.judiciary.uk/wp-content/uploads/JCO/Documents/Reports/jackson-final-report-140110.pdf), ADR took up a whole chapter.
Whilst Halsey is a landmark decision demonstrating the importance of ADR, case law continues to develop the Halsey principles and is extending them beyond the scope of this case. The message is clear: litigants who do not consider these principles do so at their own peril!