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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UK commercial mediation market grows 20% – CEDR mediation audit results published

Jan O’Neill
Professional Support Lawyer, London

 

The Centre for Effective Dispute Resolution (CEDR) has released the results of its Mediation Audit 2018, based on a survey of practising mediators in the UK. (The results of parallel surveys of lawyer attitudes to mediation, and of US practitioners’ views, are to be published separately).

The audit is the eighth biennial survey CEDR has conducted in the last 16 years (in conjunction with the Civil Mediation Council).  The 2018 audit received 336 responses from UK mediators.

While it is important to bear in mind the empirical limitations of such reviews based on survey responses from a sample of market participants, the audit does indicate a number of interesting trends in civil and commercial mediation in the UK.  CEDR’s key findings from the responses include: Continue reading

ADR in employment disputes

The Herbert Smith Freehills employment team has published a briefing examining the role of ADR within employment disputes, including considering the findings outlined in the recently released Global Pound Conference Report in the context of employment disputes in the key jurisdictions of Australia, France, Germany, Spain and the UK.

The briefing discusses the availability – and pros and cons – of various ADR methods for employment issues in those jurisdictions.  As we have previously reported, one of our London partners, Peter Frost, has co-chaired (with Paul Goulding QC of Blackstone Chambers) various reports on this issue by the Employment Lawyers Association’s Arbitration and ADR Group, and the article also reflects on those findings.

Click here to read the briefing.

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).

 

 

Global Pound Conference series – new online voting system now open

The Global Pound Conference (GPC) series concluded on 6 July, with the final conference held at the Guildhall in London. This landmark project (of which Herbert Smith Freehills is the lead sponsor)  has seen more than 3,000 corporate and disputes professionals come together in conferences spanning 29 cities across the globe throughout 2016-17, with many more following and discussing the series online and at other events.

Through interactive electronic voting at the individual conferences on a set of core questions, the series has gathered data aimed at improving systems for the resolution of commercial disputes in the 21st century – spanning court processes, arbitration and ADR.   We believe this is a unique set of data that has never been collected before.  Amongst other things, it will provide a unique insight into what organisations are currently doing to avoid conflict and save money through innovative uses of the key dispute resolution processes.

However, given that many people were unable to attend a local GPC event, GPC has now opened an online voting system, to allow a wider audience to provide input on the core questions.  If you were unable to vote and would like to do so, please click here to vote now.   The online voting system will be open until 31 July 2017  and should take no more than 15 minutes to complete.

We encourage you to add your voices about how to shape the future of commercial dispute resolution and improve access to justice in the 21st century.

 

High Court decision potentially extends exceptions to without prejudice protection

In a recent decision, the High Court has found that documents relating to negotiations regarding recoverable litigation costs had to be disclosed to a third party (the claimant in the present action) who had an interest in the outcome of the negotiations: EMW Law LLP v Halborg [2017] EWHC 1014.

The documents could normally have been withheld on the basis of the without prejudice ("WP") rule, which (in general) prevents negotiations genuinely aimed at settlement from being admitted in evidence in proceedings. However, the judge found that exceptions to the WP rule applied in this case, essentially on the basis that justice clearly demanded that an exception be made as there was a live issue as to whether the negotiations had led to a concluded settlement and that issue could not be determined without access to the documents.

The decision may be seen to expand existing exceptions to the WP rule. Although there is a recognised exception where documents are relevant to whether a concluded agreement has been reached, in previous cases it had been one of the parties to the litigation who alleged that an agreement had been reached. Here that question was put in issue by a stranger to the negotiations. The judge was also prepared to craft a new exception by analogy to the (much-criticised) exception established in Muller v Linsley & Mortimer [1996] 1 PNLR 74, where the WP communications were relevant to whether a party had reasonably mitigated his loss in negotiating a compromise of separate proceedings.

Although the issues in this case did not arise in the context of a mediation or other formal ADR process, they could potentially apply equally in that context. However, it is worth bearing in mind that, particularly in such formal ADR contexts, it is in practice very rare for the WP status of the discussions to subsequently be challenged and even more so for the challenge to be successful.  The courts' approach to the exceptions to WP could be expected to continue to be one of applying the exceptions narrowly and preventing erosions of the protection, to avoid undermining the policy of encouraging settlement discussions.

Click here to read more on the decision on our 'Litigation Notes' blog.

 

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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What do users of dispute resolution processes need and expect? Efficiency is key

With the first eight Global Pound Conference (GPC) events complete and more than 650 delegates sharing their views so far, some interesting data has started to emerge, particularly regarding the views expressed by those participating in the GPC as 'Users' of dispute resolution processes – in-house counsel and business executives whose organisations find themselves embroiled in commercial disputes.

One of the key themes to emerge from the Users at GPC events so far is that their highest priority when selecting which dispute resolution process to use (eg courts, arbitration, mediation or other ADR) is efficiency. They rate efficiency higher than they do the advice given by their advisors, which is revealing.  It reflects the extent to which commercial conflicts are a distraction from the day to day activity of Users, namely commerce.

Continue reading on our ADR Hub here.

 

Costs judge finds information from mediation is admissible when considering costs consequences of settlement

A costs judge has held that information about a party's costs provided for the purposes of a mediation could be used as evidence when considering the cost consequences of a subsequent settlement: Savings Advice Limited v EDF Energy Customers Ltd [2017] EWHC B1 (Costs) 

Documents produced for the purposes of mediation are generally covered by without prejudice privilege and, subject to limited exceptions, cannot subsequently be used as evidence. In the present case the costs information was provided in emails headed "without prejudice save as to costs", so it is perhaps not surprising that the costs judge concluded it could be used as evidence in subsequent cost proceedings.

However, other aspects of the reasoning for the decision are more surprising and arguably not supported by existing authorities regarding the without prejudice rule. In particular, the costs judge held that the costs information was not in any event covered by the privilege because it was a statement of pure fact rather than an admission or concession. Such distinction has been rejected in previous cases on the basis that requiring parties to a negotiation to constantly analyse whether they are making admissions or factual statements would undermine the privilege's purpose of enabling parties to speak freely in settlement negotiations (see for example the decision of the House of Lords in Ofulue v Bossert [2009] UKHL16, considered here).

While the decision will not necessarily be followed in future cases,  it serves as a reminder that parties should be aware of the limitations of without prejudice privilege and the circumstances in which information provided during mediation may be used in subsequent litigation. As a practice point, parties should ensure that they are clear as to what is intended when they provide or receive information  'without prejudice save as to costs' in the context of a mediation.

Gary Horlock (associate) and Jan O'Neill (professional support lawyer) in our dispute resolution team consider the decision further below.

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