Rule changes ramp up ADR push

On 1 October changes to the Civil Procedure Rules came into force which lend statutory muscle to the senior judiciary’s determined push towards alternative dispute resolution. The new rules embed into the CPR the Court of Appeal’s pro-ADR findings in the landmark ruling Churchill v Merthyr Tydfil Borough Council [2023] EWCA Civ 1416. So what changes have been made?

Most strikingly, the overriding objective of dealing with cases ‘justly and at proportionate cost’ has been expanded to include ‘promoting or using [ADR]’ as far as practicable. On the case management side, a court’s duty to actively manage cases now includes ‘ordering or encouraging the parties to use, and facilitating the use of, [ADR]’. And in relation to cost sanctions, the rules spell out that when the court is considering a party’s conduct, this can include ‘whether a party failed to comply with an order for [ADR], or unreasonably failed to engage in [ADR]’.

On this last point, the use of the term ‘unreasonably failed to engage’ has puzzled the profession, because the April consultation on the rule changes had phrased it as ‘unreasonable failure to participate’. What is the difference between ‘participating’ and ‘engaging’, and was the wording changed to make the requirement on parties stronger or weaker? As Nikki Edwards, partner at Howard Kennedy and president of the London Solicitors Litigation Association told the Law Society’s Commercial Litigation Conference earlier this month, there is no consensus among lawyers about what ‘engage’ means in this context. Some see it as a low bar that can be satisfied by simply giving some initial consideration to ADR. Others interpret it as requiring substantive engagement in the ADR process. This could be complicated by the fact that a judge will not necessarily know what happened at a confidential mediation, for example. For now, we can only guess what it means, and why it was changed from the original consultation wording. We will have to wait and see how judges apply and interpret the rules before we know what level of involvement in ADR will be needed to avoid a costs sanction.

One thing that is absolutely certain, however, is that ADR needs to be at the forefront of a litigator’s mind – and lawyers need to be fully clued up on all the different types available. Everyone knows how mediation and arbitration work, but do you really understand how early neutral evaluation works? Lawyers need to be prepared for judges at case management conferences starting to ask them whether they have considered using these sorts of processes; and if not, why not?

Conversations with clients will also need to change. Previously, a client might decide they were simply not interested in trying to settle a case, and while a lawyer would explain the potential costs consequences, it was ultimately the client’s prerogative to decide not to use ADR. But since Churchill, it is now spelt out in the procedural rules that clients need to understand that the decision may be out of their hands. A court might order them to try ADR, regardless of what they want; and even regardless of what has been agreed with the other side. If the ADR fails, they can then proceed with the litigation.

So if a court order to mediate looks likely, is it better to simply agree to a mediation, and get it done sooner? There is always the chance that the mediation may be successful – and if so, happy days. But even if that is not remotely likely, there can be strategic benefits for opting to mediate sooner rather than later, if you think a court will ultimately order it. For example, if you have a particularly impressive factual witness or expert, an early mediation allows you to show them off and let your opponents see what they are up against. It can also mean you get to see key documents much earlier; not to mention providing a rare chance to spend eight productive hours in the same room as your client.

Meanwhile, the timing of ADR proceedings can be a key litigation tactic. For example, a claimant might want to time any ADR so as to keep momentum going in a case; whereas it might serve a defendant’s interests to use it to string things out and cause the litigation to be stayed.

This month’s CPR changes set into formal rules the writing that was already on the wall from the senior judiciary in relation to the growing importance of ADR methods. But ultimately, how much difference they will make will depend on how judges in the lower courts apply and interpret the rules; and how willing they are to order parties to try ADR, or to penalise them where such methods are shunned. If these new rules fail to make much of an impact, we can expect more far-reaching rule changes in the future. The drive towards ADR is only going in one direction.

Rachel Rothwell is editor of Gazette sister magazine Litigation Funding, the essential guide to finance and costs.

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