Court of Appeal orders early neutral evaluation despite party objection

The Court of Appeal has held that the court has power to order an early neutral evaluation (ENE) by a judge even where one or more parties do not consent to that course. There was no reason to imply into the relevant rule giving the court power to order ENE any limitation based on the parties’ consent: Lomax v Lomax [2019] EWCA Civ 1467.

Early neutral evaluation (ENE) is a form of alternative dispute resolution in which a neutral third party (often a judge) provides the disputing parties with a non-binding assessment of the merits of the dispute. The aim of the process is to assist the parties’ bilateral settlement discussions by encouraging them to appraise their cases realistically and step away from deadlocked positions.

The use of ENE in the UK has been very limited to date and the decision has the potential to prompt an increase in its use.  Although it is unlikely to result in a large number of cases where judges order such a hearing over the parties’ objections, particularly in commercial disputes, the increased prominence of the process through the Court of Appeal’s strong endorsement of it could feasibly lead to it being more frequently suggested by judges and/or proposed by parties.

Perhaps more importantly, the decision is arguably of wider significance in the context of the ongoing debate as to the extent to which the court’s encouragement of ADR should extend into compulsion.  Since the Court of Appeal’s 2004 decision in Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002, the established position in the UK has been that, while the court may strongly encourage parties to engage in ADR (including imposing costs sanctions for unreasonable refusal to mediate), this power stops short of compelling unwilling parties to do so.   Amongst other reasons, it was held in Halsey that such compulsion would amount to an unacceptable obstruction of the parties right of access to the court, in breach of Article 6 of the European Convention on Human Rights.

However, as efforts to increase the use of ADR have failed to meet expectations, and with the increased focus on the efficient use of the courts’ resources, there have been increasingly prominent voices calling for a reconsideration of this position, at least for particular categories of disputes. These voices include that of Lord Justice Ward in Wright v Michael Wright Supplies Ltd & Anor [2013] EWCA Civ 234 (see our post here), in which Ward LJ (who was himself on the panel in Halsey) queried with hindsight the correctness of the “access to justice” objection.  Whilst the point did not need to be decided in Wright, Ward LJ suggested that a bold judge may in future wish to rule on this question, in order that the Court of Appeal might revisit this aspect of Halsey.

The Court of Appeal in the present case has not directly taken up that challenge.  It held that compelling ENE could be distinguished from the circumstances addressed by Halsey, and it therefore did not need to enter into the question raised in Wright as to what Halsey determined and the extent to which it remains good law. The court limited itself in this regard to a comment that “the court’s engagement with mediation has progressed significantly since Halsey was decided”.

The court’s decision here was clearly driven by its view of the value of ENE as a process, as demonstrated particularly by its successful use in the Family Division. However, the grounds on which the court was prepared to distinguish Halsey in order to compel ENE arguably suggest an openness to moving away from a wholesale prohibition on compelling ADR, and to open the door further to a full reconsideration of Halsey.

As we have previously commented, the extent to which such a development would be welcome would depend on the degree to which it took into account the vast differences in the types of cases dealt with across the civil litigation landscape.  What measures may be appropriate to encourage a greater use of ADR will depend on a range of factors which differ across the broad range of claim types, not least of which includes the litigants’ level of familiarity with litigation and ADR processes (“ADR reform: One size does not fit all“).

Background

The context for the decision was an application by a widow under the Inheritance (Provision for Family & Dependants) Act 1975.  The claimant sought an ENE hearing, which the defendant opposed on the basis that it considered mediation to be the preferable ADR option in the circumstances.  Although the trial judge considered that the case “cries … out for a robust judge-led process”, she concluded that the court did not have the power to order an ENE hearing in the absence of all parties’ consent to the process.

Decision

The court’s decision was given by Lord Justice Moylan, with Lord Justice McCombe and Lady Justice Rose agreeing.

The court approached the issue principally by reference to CPR 3.1(2)(m).  Rule 3.1 contains the court’s general case management powers and sets out a list of powers which are in addition to any other powers the court might have. The list includes, at paragraph 2(m), a catch-all provision specifying that the court may “take any other step or make any other order for the purpose of managing the case and furthering the overriding objective, including hearing an Early Neutral Evaluation with the aim of helping the parties settle the case”. The reference to ENE was added in October 2015 and was broadly understood to have been prompted by the decision in Seals and Seals v Williams [2015] EWHC 1829 in which Norris J concluded that the court had power to order an ENE despite there being no reference to such power in the rules.  In that case, the parties had consented to the ENE process.

The claimant argued that there was nothing in the wording of the provision or in principle to justify reading it as though it was dependant on the parties’ agreement.  It also noted that, up until recently, commentary in the White Book stated that the power to order an ENE “is not constrained by the need to secure party consent” (this was deleted and the current version does not address the question of party consent).

Unsurprisingly, the defendant relied heavily upon Halsey. It argued that that authority applied to all forms of ADR, was still good law, and therefore precluded the court from interpreting the rules in such a way as would allow the court to order any form of ADR over a party’s objection. It also noted that each of the Commercial Court Guide, the Technology and Construction Court Guide and the Chancery Guide includes statements to the effect that party consent is a prerequisite to the ordering of ENE.

The court concluded that there was no reason to imply into CPR 3.1(2)(m) any limitation on the court’s power to order an ENE hearing in the absence of the parties’ consent. In particular:

  • In relation to the Court Guides, the court confirmed that, whilst they can assist in particular where there is ambiguity, the effect of rules and directions cannot be suspended or disapplied by what may be said in such guides.  Similarly,  commentary in the White Book (or the deletion of such commentary) is not determinative as to the proper interpretation of the rules.
  • As to Halsey, the court stated:

“I do not consider that Halsey v Milton Keynes assists with the proper interpretation of subparagraph (m) because it was dealing with a very different situation. It was concerned with whether a court can oblige parties ‘to submit their disputes to mediation’. It does not, therefore, in my view assist with the interpretation of subparagraph (m), which is dealing with an ENE hearing as part of the court process.”

The court went on to note that, in any event, ENE does not prevent the parties from having their disputes determined by the court if they do not settle their dispute at or following an ENE hearing and concluded that the process therefore does not obstruct a party’s access to the court. Insofar as it includes an additional step in the process, the court did not consider this in any sense an “unacceptable constraint” of the type disapproved of in Halsey.

It is not clear on what basis the court considered this position distinguishable from mediation, following which the parties can similarly commence or continue court proceedings if no settlement was reached.

It is also not clear whether the court intended to suggest that the prohibition in Halsey was limited to mediation. Such a distinction would be difficult to justify given that the judgments in Halsey refer on several occasions to “ADR” generally when expressing the prohibition. The court in the present case does not appear to have taken issue with the defendant’s submission that ENE is a form of ADR (within the glossary definition in the White Book).

  • On the issue of ENE more generally, the court was clearly heavily influenced by its use in financial remedy cases in the Family Division since 1996 (in the form of Financial Dispute Resolution (FDR) appointments).  The court agreed with the trial judge’s observation that that process had been “outstandingly successful”.  Further, it observed that those benefits frequently extended to cases where the parties were resistant or even hostile to the suggestion of resolving the dispute by agreement and resistant to the listing of an FDR.  The court referred here with approval to the observations of Norris J in Bradley v Heslin [2014] EWHC 3267 (Ch) in the context of boundary disputes:

“I think it is no longer enough to leave the parties the opportunity to mediate and to warn of costs consequences if the opportunity is not taken. In boundary and neighbour disputes the opportunities are not being taken and the warnings are not being heeded, and those embroiled in them need saving from themselves.”

Given the trial judge’s clear view that ENE was appropriate in this case, the court directed that such a hearing take place.

Jan O'Neill
Jan O'Neill
Professional Support Lawyer, London
+44 20 7466 2202

 

 

Failure to engage with ADR proposals: UK Court of Appeal extends the Halsey principles

The Court of Appeal has delivered a judgment strongly reiterating its support for the role of ADR in civil litigation and extending the existing principles governing the question of when a litigant's failure to engage in ADR will justify a court imposing costs sanctions upon it (as established in Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002)

In particular, it has confirmed that a party's silence in the face of a serious invitation to mediate will, as a general rule, be considered to be of itself unreasonable and will warrant a costs sanction – even if there may have been reasonable grounds that would have justified the party expressly refusing the proposal.

In doing so, the Court has sent a clear message that it expects parties not only to participate in mediation where it is appropriate but also to engage constructively in discussion as to whether and when it will be appropriate in any particular case:  PGF II SA v OMFS Company Limited [2013] EWCA Civ 1288.

Click here to read more.

 

Jan O'NeillJan O’Neill

Professional support lawyer,
dispute resolution, London

Email
+44 20746 62202

UK High Court claim struck out as full redress was available under an ADR scheme

The UK High Court recently refused to allow a claim to proceed in relation to mis-selling of an insurance product on the basis that the claimants had already been offered full redress under a formal ADR scheme established in relation to such complaints.   The decision is a further example of the UK courts’ support for ADR and illustrates that the courts’ artillery in this regard is not limited to imposing costs sanctions at the conclusion of litigation (Christopher and Claire Binns v Firstplus Financial Group Plc [2013] EWHC 2436 (QB)).   Continue reading

English Court of Appeal suggests a rethink of the prohibition on court-ordered compulsory mediation

In a withering attack on what he terms “the emasculation of legal aid” and the inevitable increase in unrepresented litigants in the English courts, Lord Justice Ward in the Court of Appeal has suggested that it may be time to review the rule in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 prohibiting a court from ordering unwilling parties to refer their dispute to mediation. In this regard, the Court of Appeal addressed the power of the courts to order a stay for mediation to be attempted other than at the allocation stage under CPR 26.4(2)(b):  Wright v. Wright [2013] EWCA CIV 234 Court of Appeal 27 March 2013

Background

The case concerned a dispute between two unrepresented litigants, formerly successful business partners, who had fallen out and were pursuing litigation with a vengeance.  Despite being, in Ward LJ’s words, “intelligent and not unsuccessful businessmen”, the parties steadfastly refused to mediate despite the continued encouragement of the trial judge, which resulted in a disproportionately expensive trial and appeal process.  The appeal itself concerned an alleged procedural error by the trial judge in not acceding to a request by one party to adduce oral evidence, an error which Ward LJ considered may well have arisen, in part at least, as a result of the “chaos which litigants in person inevitably – and wholly understandably – manage to create” in such cases. 

Mediation

The rule against court-ordered mediation was set out by Dyson LJ and Ward LJ himself in Halsey in the following terms:

“It seems to us that to oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the court.”

Delivering his judgment in Wright, Ward LJ noted that in Halsey he had been persuaded by the argument that to order parties to mediate would fall foul of the right to a fair trial enshrined in Article 6 of the European Convention on Human Rights.  In Wright, Ward LJ suggests that he may have been wrong to decide this point as he did in Halsey and rhetorically questions whether forcing the parties to go through an additional step before gaining access to court would in fact be an “unacceptable obstruction”.  Whilst he declines to answer this question, since the point was not before the court in Wright, he suggests that a “bold judge” may wish to accede to an invitation to rule on this question, in order that the Court of Appeal may revisit this aspect of Halsey in the light of developments in mediation practice over the last decade. Ward LJ also suggests in Wright that CPR 26.4(2)(b) (which allows a court at the allocation stage to stay proceedings of its own initiative in order for the parties to attempt ADR), might permit the court at any time to direct a stay for mediation to be attempted with the warning of adverse cost consequences for unreasonably refusing to attempt ADR.

Comment

The recent reduction in legal aid funding may on its face have saved expenditure in one area, but this has, in Ward LJ’s view, simply increased the costs and expense of court proceedings, both at the trial and appellate stages.  Aside from the “inevitable chaos” of a case involving unrepresented litigants (Ward LJ refers to the requirement on judges to “micro-manage” such cases and praises Judge Anthony Thornton QC in this case for his “manful, patient, polite, careful and conscientious” efforts in this regard) he considers that Wright also highlights the impossibility of shifting litigants off the trial track and onto the parallel track of mediation, a situation which he describes as “depressing”. This is particularly so since he considers mediation to be a proper alternative to be “tried and exhausted” before finally resorting to trial, especially in cases such as this where mediation is an obvious way to move forward before parties “cripple themselves with debt”.

Ward LJ’s comments, whilst persuasive, are obiter and it therefore remains to be seen whether a suitable case and a “bold judge” emerge to tackle this issue head on, as he hopes.  If this aspect of Halsey is overruled, it will be interesting to see how this will affect both the take up of mediation and its success rate. It seems likely that legislation (either adapting CPR 26.4(2)(b) or a new provision entirely) would be desirable to put matters on a clear setting. In any event, forcing a party to mediate is one thing, forcing them to settle is a different matter entirely and is fraught with theoretical and practical difficulties even in cases which are overwhelmingly ripe for mediation.  It is well established that the success of mediation often rests in large part on the parties’ willingness to engage in the process, and as Ward LJ himself acknowledged, “you may be able to drag the horse (a mule offers a better metaphor) to water, but you cannot force the wretched animal to drink if it stubbornly resists.” The increase in court-annexed mediation pilots in England & Wales (for example in relation to small claims and certain appeals) should be monitored closely and their success analysed in this regard.

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English Court of Appeal reviews test for unreasonable refusal to mediate and provides guidance on approach to negotiation

In a judgment handed down in October 2012 but only recently made available, the English Court of Appeal has set out guidance on the factors to be taken into account when assessing a successful party’s refusal to mediate and general approach to settlement: Newman v Framewood Manor Management Co Ltd [2012] EWCA Civ 1727.

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ADR in the UK – article published

Julian Copeman, a Herbert Smith Freehills partner and accredited mediator with CEDR (the Centre for Effective Dispute Resolution), recently published an article in Solicitors Journal addressing whether litigating parties are required to attempt ADR in the UK. He charts developments from the Woolf reforms to Lord Justice Jackson’s proposals, and explores key judgments in relation to refusals to mediate and disclosure of mediation documents and information. Julian concludes that ADR is correctly a consensual process, whereby judicial encouragement rather than compulsion to undertake ADR is the preferred course.

Click here to download a copy of the article, which was first published by Solicitors Journal in Litigation Focus on 25 September 2012, and is reproduced with their kind permission  (www.solicitorsjournal.com).

Julian Copeman
Julian Copeman
Partner, dispute resolution, London
+44 207 466 2168

English High Court defends successful party’s refusal to mediate and declines to impose costs sanctions

In ADS Aerospace Limited v EMS Global Tracking Limited [2012] EWHC 2904 (TCC), Mr Justice Akenhead sitting in the Technology and Construction Court held that a successful party was not unreasonable to refuse mediation and should not be penalised in costs on that basis. The judge’s approach was similar to the Court of Appeal in Swain Mason v Mills & Reeve (a firm) [2012] EWCA Civ 498  (see post), and demonstrates that, applying the non-exhaustive Halsey factors, a refusal to mediate may, in some circumstances, be justified. Mr Justice Akenhead cited the lack of prospects of settling the matter at mediation and the proximity to trial as influencing factors. Continue reading

Court of Appeal defends successful party’s refusal to mediate

In a rare move, the Court of Appeal has stepped into the shoes of the trial judge and exercised the court’s discretion on costs, holding that a successful party was not unreasonable to refuse mediation and should not be penalised in costs on that basis: Swain Mason v Mills & Reeve (a firm) [2012] EWCA Civ 498

The decision illustrates that a refusal to mediate may, in some circumstances, be justified. It is however a high-risk strategy, as an unreasonable refusal to mediate can carry significant costs penalties. Parties should not take such a decision lightly. Continue reading

Refusal to mediate and effect on Part 36 costs

In PGF II SA v OMFS Company and another [2012] EWHC 83 (TCC), the High Court ordered that both parties should bear their own costs after expiry of the relevant (21 day) period for acceptance of a Part 36 offer, due to the defendant’s unreasonable refusal to mediate.  This displaced the claimant’s liability to pay the defendant’s costs and interest incurred during that period, after its acceptance of the defendant’s offer some nine months after it was made. Continue reading

ECJ issues its opinion in support of Italian mandatory mediation rules

The implementation of new domestic Italian legislation requires parties to engage in mediation as a pre-condition to accessing the Italian courts in many types of disputes. The new legislation coincided with the requirements outlined in the Mediation Directive and was aimed at reducing some of the backlog of over 5 million cases pending in Italy.On 18 March 2010, in the joined cases of Rosalba Alassini and Others (C-317/08 and C-320/08) the ECJ confirmed an opinion previously given by the Advocate General, that requiring a dispute to be subject to an out of court settlement procedure before being heard in court was not precluded by EU law. Continue reading