Litigation versus Alternative Dispute Resolution “ADR”

Can a litigant be mandated to follow ADR against their wishes?

In 2021 James Churchill began legal proceedings with his local council, due to Japanese knotweed getting onto his land. The council applied for a “stay”, until he had followed their complaints procedure, meaning his claim would be indefinitely suspended if he did not comply. Mr Churchill objected, demanding to fight on with his claim. How was this resolved?

Compelling someone to engage in ADR

The first judge refused to impose a “stay”, as it risked denying Mr Churchill his day in court and thus breaching his right to a fair trial.

Due to the importance of the above questions there was an appeal in which the Law Society was allowed to participate. The court said it could stay proceedings in order for parties to engage in ADR. However parties could not demand ADR, against the other party’s wishes. Ordering a stay for ADR was a power – and only be used if was not disproportionately onerous or would foreclose the parties effective access to the court.

What if the parties are ordered to follow ADR, but still cannot agree? After Churchill they are permitted to continue to trial, having attempted the ADR first.

Consequences of declining ADR

Imagine a claimant has been requesting ADR all along but loses comprehensively at trial. The winning defendant will feel vindicated in their decision to refuse ADR and deserving of recovering all their costs. However, the court may not see things that way. It might disapprove of the many hours of legal time used up – and consider that going to trial has cost everyone lot more money than if they had settled earlier.

This is what happened in the recent case of Conway. Here the court imposed a 25% reduction in the costs awarded to the winning party. Since costs can sometimes exceed the value of a claim, a 25% reduction could be nasty sting in the tail. Therefore, even the most confident of parties should consider very carefully before declining ADR and consider legal advice at that point.

Litigation

Take the example of a contract dispute between two SMEs worth under £100k. Going all the way to trial will involve lawyers and many hours of work and tens of thousands of fees. Then there are court fees and a barrister’s fee for the trial etc.

It is often overlooked that winning parties do not recover all their costs. In cases under £100,000 there are fixed costs rules, so the amount recovered is even less. Further, no party can be entirely sure of winning, or that the other party will have the means to pay, so there is always the chance that this huge investment of time, effort and costs could be lost altogether.

The time to get to court is also not widely appreciated. Recent statistics give 80 weeks as the average time for a case of this size to get from issuing proceedings to trial. In contrast a mediation can be set up in 2-3 weeks.

Litigation requirements take up significant management time and energy over a long period; it is not just about attending court.

ADR

ADR could consist of parties or their lawyers simply talking “without prejudice”, or holding a joint settlement meeting (JSM), organised by the lawyers. JSMs follow a typical pattern but are not a formal process.

Mediation is more formal and involves a trained independent mediator. It is widely used and has a high success rate.

In our example SME dispute, what would a Mediation look like?

When? – Any time, but especially where parties know that the next stage of the dispute is going to be expensive, such as paying the court issue fee or for a barrister to be involved, or time-consuming such as preparing witness statements and attending trial.

What and how? – The usual process is lawyers exchanging lists of qualified mediators, selecting the mediator and agreeing on a core set of documents for them to read. The lawyers and key representatives of the parties go before the mediator and can make an opening statement. The mediator goes between the parties, meeting them in private to probe the strengths and weaknesses, until offers and counter-offers begin to be made.

The majority of Mediations settle on the day or soon after. There is no winner and no loser. The mediator does not make a judgment. The idea is that however reluctantly, the parties simply decide to short-circuit the time consuming and expensive process of going to court. Parties might even agree terms for a new business relationship between them, something a judge could never order.

How much? – Mediators fees are typically £1,250-£1,925 plus VAT per party. A barrister may not always be needed. Mediation can be remote, saving travel time and venue costs. Then comes the important part – if both parties really focus hard on early ADR, lawyers time is significantly reduced compared with preparing for a court hearing. That is a significant cost saving of potentially tens of thousands for both parties. Court and barrister’s fees are also saved and so is management time, which can now be used more productively.

Getting costs back? – mediators cannot order costs. Parties have to negotiate what they can. They often agree to bear their own costs. This may sound unattractive to a party reasonably expecting to win at trial. However, they will need to consider their chances carefully and crucially how the costs shortfall will affect the costs they recover at trial, against those actually incurred.

The economics and merits of all litigation cases are different. Even so, the time and costs savings of ADR mean it will – nearly – always be better than going to court.

To consider if you have a dispute which could be settled by mediation or other ADR, or if someone has declined ADR and you wish to discuss your position, please contact Andrew Clarke, Associate Solicitor a.clarke@gullands.com