The best alternative
8 April 2002
4 November 2013
29 July 2014
28 July 2014
15 July 2014
English Commercial Court enforces obligation to resolve disputes by friendly discussion prior to arbitration
8 July 2014
There is nothing new in the debate (which was starting to meander somewhat) over the extent to which the courts should intervene in the manner in which parties resolve their disputes by means other than litigation.
Everyone is entitled to their day in court, say the traditionalists, and for the courts to deny that is paternalistic and inappropriate for proper judicial function. Not so, say the modernists - litigation should be discouraged at all costs. Literally. The Civil Procedure Rules (CPR) are the banner under which the growing ranks of modernists rally. And the overriding objective? Active case management and all that.
Recently, however, this debate suddenly escalated and things are getting serious. People are playing for real money. The courts have raised the stakes and the modernists seem to hold most of the cards.
In December last year, Lord Woolf, sitting in the Court of Appeal, sent a warning shot spinning into the traditionalists' camp. In Frank Cowl & ors
Plymouth City Council (2001), a sad dispute about the closure of two old people's homes, he criticised participants in disputes between public authorities and members of the public for not paying "sufficient attention to the paramount importance of avoiding litigation whenever this is possible". "This case" he continued, "will have served some purpose if it makes it clear that the lawyers acting on both sides of a dispute of this sort are under a heavy obligation to resort to litigation only if it is really unavoidable."
In February this year, Railtrack received a nasty shock, again from the Court of Appeal. In Susan Dunnett
Railtrack (2002), a horse owner sued Railtrack for allegedly not providing adequate safeguards to prevent her horses wandering onto a railway line, which one of them did, with fatal consequences. Dunnett lost, but with permission she appealed, only to lose again. Did the costs of appeal follow the event? Decidedly not. Railtrack and its legal advisers, confident of their chances of success in the Court of Appeal (justifiably, as it turned out), flatly and without any consideration turned down Dunnett's suggestion (instigated by the judge at first instance) of alternative dispute resolution (ADR) to "get shot of this case as soon as possible". No order for costs on the appeal was made. Lord Justice Brooke commented: "It is hoped that any publicity [of the judgment] will draw the attention of lawyers to their duties to further the overriding objective and to the possibility that, if they turn down out of hand the chance of alternative dispute resolution when suggested by the court, as happened on this occasion, they may have to face uncomfortable costs consequences."
It is a mistake to treat these cases as saying something that people did not already know or suspect was coming. Legal opinions and comment abounded when the CPR came into force in 1999 about the theoretical risks of not complying with the overriding objective (which is at the heart of both of these cases). Shortly afterwards, in Paul Thomas Construction
Damian Hyland & anor (2001) (judgment given on 8 March 2000, with CPR underway), the claimant's "exceedingly heavy-handed" approach in failing even to consider ADR before commencing proceedings was rewarded with an order for indemnity costs against it.
The significance of these judgments, particularly the latter two, is perhaps their provenance - they come from high table, and everybody must sit up and listen. It is unfashionable to disagree with the underlying thoughts behind them; it is probably pointless anyway, since like it or not they are here to stay. Indeed, it is likely that no one, save the most cynical, really disagrees that jaw-jaw is better than war-war and that litigation should, in a largely rational society, be a weapon of last resort. The traditionalists have lost.
But the modernists must be merciful victors. What may be slightly worrying is that it seems that all a court has to do is suggest that the parties try ADR for the parties to risk the possibly disproportionate anger of the judge and a dreadful costs order at a future date if they dare to disobey. It is not always possible, for example, in complex litigation (which, it may be said, none of the foregoing cases were concerned with) for a judge to see the complete picture as to why the parties cannot settle, or to know the true extent and rationale of without prejudice communications. In those circumstances, it is not necessarily right or fair for the court to intervene mid-case or at the first case management conference stage. (It is significant that none of the cases previously mentioned involved the court giving an indication about ADR before the case was determined; each court spoke with the benefit of hindsight.)
The cynical party, on a losing wicket, can cry Woolf very easily by suggesting settlement and criticising their opponent for not playing along. Anyone who has tried it will also know that a full-blown mediation does not come cheap and that it is only cost-effective if it works. Money and time will be wasted, not saved, trying to settle a case when the time and people are not right. No doubt the courts will exercise care before they speak out to urge parties in the middle of a case to try to settle it. No doubt, too, they will be slow to anger when the parties choose not to take up that suggestion in all but the most blatant cases of arrogance or abuse.
There is a feeling of unease that the relationship between the courts and ADR may slowly be moving from a love affair into a (perhaps forced) marriage. Flexibility, manifested partly in freedom of choice and commercial spontaneity, is the vital organ of good, meaningful ADR. Remove it and you risk wounding or even killing the body it sustains. Our courts have - rightly - stayed away from formalistic, mandatory ADR. But they must not inadvertently reach the same place, albeit by a different route.
Dominic Spenser Underhill, an accredited and practising mediator, is a partner in the international arbitration and dispute resolution group at Mayer Brown Rowe & Maw