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

 

 

UK: Civil Justice Council report on ADR calls for review of Halsey guidelines but stops short of recommending mandatory mediation

Jan O’Neill
Professional Support Lawyer, London

 

The Civil Justice Council’s ADR working group has released its final report on ADR and Civil Justice, following consultation on its interim report released last year. The broad mandate of the review was “to maintain the search for the right relationship between civil justice and ADR” and to promote debate over possible reforms.

The report includes various recommendations aimed at improving the awareness of ADR (both in the general public and in the professions/judiciary) and the availability of ADR (both in terms of funding/logistics and regulation of the professionals involved).

However the recommendations likely to be of most interest to users of the civil justice system in the short term are those that relate to Court/Government encouragement of ADR.  In this regard:

  • The report does not support blanket compulsion of ADR in the sense of requiring proof of ADR activity as an administrative precondition to any particular step in the litigation.
  • It also rejects the introduction of mandatory Mediation Information and Advice Meetings (as used in the family courts) as a precondition to pursuing civil claims.

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Article published – ADR reform: one size does not fit all

On 6 March, the Civil Justice Council held a workshop to discuss the recommendations made in its interim report on ADR, which was subject to consultation late last year. The interim report addresses concerns regarding a perceived underuse of ADR within some sections of the civil justice system and suggests a variety of possible corrective measures. The proposals include a power for the court to determine whether costs sanctions should be imposed for unreasonable conduct relating to ADR (such as an unreasonable refusal to mediate) not only at the end of a case, as currently, but during the matter when the decisions regarding ADR are taken.

Jan O’Neill has published a post on Practical Law’s Dispute Resolution blog in which she questions how realistic the suggestion of “midstream” assessment of parties’ conduct relating to ADR would be in practice. She suggests that many of the concerns expressed in the report as to the underuse of ADR are not relevant to many larger, complex claims, and urges the working group to tailor any final recommendations to the specific courts or dispute types for which the evidence suggests they are needed and practicable.

Click here to read the post (or here for the Practical Law Dispute Resolution blog homepage).

 

 

CJEU holds that mandatory mediation is not inherently precluded by EU law

The Court of Justice of the European Union (CJEU) has concluded that national legislation imposing mandatory mediation as a pre-condition to litigation is not precluded by the EU ADR legislative framework, provided that the parties are not prevented from exercising their rights of access to the judicial system.  

However, to the extent that such a pre-condition required consumers to be assisted by a lawyer in the mediation process, or penalised them for withdrawing from the mediation without good grounds, it would be contrary to the Consumer ADR Directive (2013/11/EU):  Menini and another v Banco Popolare Società Cooperativa (Case C-75/16) (14 June 2017).  

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Court of Appeal sends further message on mediation: Don’t drag your heels in arranging it

A recent Court of Appeal decision is the latest instance of the court expressly sending a message to litigants confirming what it expects of them regarding mediation within the court process: Thakkar v Patel [2017] EWCA Civ 117.

Upholding a first instance decision which it described as "severe, but not so severe that this court should intervene", the court refused to overturn a costs sanction on a party who had agreed to mediate but then "dragged its heels" in the discussions over the arrangement of the mediation, to the point where the other party ultimately abandoned the process.

The Court of Appeal has in recent years made clear to litigants that it now expects them to be proactive and engage constructively with each other during proceedings to fully explore the potential for the dispute to be mediated – to the point where ignoring a mediation proposal will usually warrant a costs sanction even if the circumstances were such that an outright refusal to mediate would have been justified (PGF II SA v OMFS [2013] EWCA (Civ) 1288).

The present case confirms that, where mediation is appropriate, the constructive engagement expected by the court also requires that the parties cooperate and act proactively in the arrangement of the mediation: "It behoves both parties to get on with it. If one party frustrates the process by delaying and dragging its feet for no good reason, that will merit a costs sanction". 

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Advocate General Opinion on the Consumer ADR Directive and compulsory mediation

In a case referred to the Court of Justice of the European Union (CJEU) by the Italian courts, an Advocate General opinion has been issued which considers the scope of the Consumer ADR Directive, including whether it precludes national legislation from imposing mandatory mediation as a pre-condition to litigation:  Menini and another v Banco Popolare Società Cooperativa (Case C-75/16). 

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Hong Kong court imposes costs sanctions for unreasonable refusal to mediate

A recent Hong Kong judgment has added to the growing body of case law illustrating courts’ intolerance of litigants who refuse to engage with ADR.   The decision will be of interest to litigants not just in Hong Kong but in other jurisdictions (including England) where similar procedural rules allow a court to penalise a party whose refusal to mediate is held to have been unreasonable: Wu Yim Kwong Kingwind v Manhood Development (24/07/2015, DCCJ 3839/2012).

Of particular interest are the court’s findings that the successful defendant’s refusal to mediate could not be justified by:

  • the fact that the claim was for possession of real property, rather than a monetary claim.  The court refused to accept that this meant the claim was not susceptible to negotiation at all; or
  • the other party’s uncooperative attitude in the proceedings more generally and the fact that it had not instigated settlement negotiations itself.  Aside from the fact that bilateral settlement negotiations are not to be equated with more structured ADR procedures like mediation, the court noted that ‘one must not assume that the process of mediation would not bring about changes in attitudes’. This echoes the English High Court’s recent warning that litigants should not consider themselves justified in dismissing mediation as futile purely on the basis of the stance adopted by their opponent up to that point – ‘tactical positioning should not be too easily labelled as intransigence’.

Read our Hong Kong office’s briefing on the decision here.

UK: Further guidance on when refusal to mediate may attract costs sanctions

A recent High Court decision has provided a further example of a successful defendant being deprived of a portion of the costs it otherwise would have been awarded because it was found to have unreasonably refused to engage in ADR (applying the guiding principles laid out by the Court of Appeal in Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002):  Laporte & anor v Commissioner of Police of the Metropolis [2015] EWHC 371 (QB).

In particular, the judgment is interesting for its consideration of two arguments frequently relied on by parties seeking to justify a failure to engage in ADR: (i) the strength of the party’s case and (ii) the unlikelihood of a mediation being successful.  Notably, the court warns litigants against dismissing mediation as futile purely on the basis of the stance adopted by their opponent up to that point – ‘tactical positioning should not be too easily labelled as intransigence’.

In that regard, the decision can be seen as an example of the courts increasingly recognising the potential for mediation to be effective even where parties seem to be ‘miles apart’ prior to the process – either because of one party’s belief it has a ‘watertight’ case or otherwise.  It serves as a reminder that a party considering refusing to mediate (or to mediate at a particular time) on the grounds that a mediation would be unlikely to succeed should consider that decision very carefully  – and ensure that the reasons supporting that view are fully set out at the relevant time.

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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.

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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