Avoiding Alternative Dispute Resolution – an own goal? What is a winning strategy?

The Civil Procedure Rules (CPR) govern the litigation process. The CPR does not oblige parties to engage in ADR; however, it recommends that litigation be a last resort and encourages the parties to keep ADR under review throughout the litigation process. However, a recent court case shows that a blanket refusal to engage in ADR where a party considers they have a strong claim or defence is not justifiable and may even result in costs sanctions being ordered.

An own goal?

In DSN v Blackpool Football Club Limited [2020] EWHC 670 (QB), the defendant considered that it had a strong defence to a claim so did not engage in any form of ADR. The Honourable Mr Justice Griffiths, the Judge in this case, stated that the defendant’s “reasons given for refusing to engage in [ADR] were inadequate” and that “no defence, however strong, by itself justifies a failure to engage in any kind of alternative dispute resolution”.

The claimant had approached the defendant on four separate occasions, and either made a financial offer to settle or tried to engage the defendant in some form of ADR. The defendant ignored or rejected the Claimant’s offers and refused to enter into ADR.

In DSN v Blackpool Football Club, the Judge decided that the defendant’s blanket refusal to consider ADR took the case out of the norm and ordered that the defendant pay the claimant’s costs on an indemnity basis; increasing the level of the claimant’s legal costs they would have been required to pay as a result of losing the case.

This case shows the importance of considering the appropriateness and potential advantages of ADR, rather than blindly continuing with litigation due to confidence in your case or defence. However, there is a risk of parties ‘going through the motions’ of ADR without any real intention to settle. Clearly, this would result in unnecessary costs being incurred, would not be the intention of the Courts or in keeping with the spirit of the CPR. Therefore, parties should carefully consider whether there is a realistic prospect of settling the dispute via ADR and which form would be most advantageous. Such considerations will be very fact-specific, and therefore we would strongly advise seeking legal advice when considering litigation or ADR.

Winning strategies – what are your options for ADR?

Many people are aware of ADR as a concept, but what are your options?

Some of the more common and relevant options for commercial and property disputes include:

Without prejudice negotiations  

• This involves both parties discussing matters to reach an agreement on the issues in dispute without the involvement of a third party, and are usually undertaken on a ‘Without Prejudice’ or ‘Without Prejudice Save as to Costs’ basis. ‘Without Prejudice’ means that the correspondence cannot be disclosed in court proceedings, giving parties the confidence to make concessions or discuss pragmatic solutions without the fear that they will be used against them by the other side.  
• Negotiations can be on-going throughout a claim or picked up at any time in the process. This may be undertaken via letters, emails, telephone calls or even at face-to-face meetings.

Mediation

• This involves an independent mediator meeting with the parties separately to gain an understanding of the matter. The mediator encourages the parties to find common ground and facilitate an agreement.
• As meditation involves a third party, it can be expensive; however, parties usually share the costs.
• Mediation can be useful as it encourages the parties to reach an agreement together on the day. To be successful, it usually requires some concessions or movement on both sides. The involvement of a third party may also bring some clarity to the matter, breaking a deadlock and encouraging settlement.

Private neutral evaluation

• An independent third party reviews the merits of both parties’ case. It provides an opinion on the key issues the parties will face if they pursue the claim at Court (i.e. any weaknesses or evidential problems with a party’s case). The parties can then choose how to settle the case, e.g. in line with the evaluation or by negotiating.
• This may be beneficial where the parties cannot agree on a basis to settle but are cautious about pursuing the claim at Court due to the time and cost implications. This process is being increasingly used for lower value (less than £25,000) commercial claims.
• There is a risk that the party whose case is considered to be stronger will become more entrenched in their position and not wish to settle.

Expert determination

• An expert is appointed by the parties to review the matters and make a final, binding decision. Unlike the above options, the decision is taken out of the parties’ hands.
• This may be useful where the matters in dispute are particularly technical, and the parties are concerned that, even with expert reports, a Court Judge may not afford the appropriate weight to the expert evidence when making a decision.
• This process is also likely to be cheaper and quicker than traditional litigation. However, parties should carefully consider the qualifications and experience of a proposed expert to ensure they can fully understand and determine the issues.
• Where the parties disagree with a decision made by an expert, the avenues of appeal are extremely limited, and so parties should consider carefully whether expert determination is appropriate for their claim.  

Arbitration

• During arbitration, an independent arbitrator reviews the matter at a hearing and makes an award.  This award is final and binding on the parties in the same way as a Court Judgment would be.
• Arbitration proceedings are confidential, so where private or commercially sensitive matters are being discussed, this may be preferred over court proceedings that are a matter of public record.
• Arbitration is also governed by less stringent rules compared to litigation, so it tends to be a quicker process. However, the flexibility in procedures may lead to uncertainty, which can increase the time and costs involved.

The information provided above is a summary of the possible routes for alternative dispute resolution in a claim. Which route is the most appropriate in a particular case will be dependent on the facts and type of dispute, and therefore we would recommend seeking legal advice when considering which to use.

If you would like to discuss the options listed and how they might apply to your claim or a future claim you may have, please get in touch with Niamh Millross.

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