SQE 1 - Dispute Resolution (Different options)

What is alternative dispute resolution (ADR)?

An umbrella term that covers methods of resolution of disputes in ways other than those involved outside the civil court process.

What does the Civil Procedure Rules 1998 make clear about the order of ADR and litigation?

The act makes it clear that despite the ADR process being voluntary, litigation should be a last resort and that an offer to engage in forms of ADR by one party should not be unreasonably refused by the other.

What can the courts do if parties have unreasonably refused ADR?

In cases where the court considers that a party has unreasonably refused ADR or that the party has been silent in the face of invitqation to participate.

The court is entitled to:

- impose sanctions or penalties

Are ADR forms confidential?

Yes, all forms of ADR are confidential and 'without prejudice', which means that parties cannot disclose any information used as part of the ADR process if a resolution is not reached, and the matter is subsequently referred back to court for determination.

Can parties disclose information used as part of ADR in a subsequently court proceeding on the matter?

No

What are the two main forms of ADR?

- Mediation

- Arbitration

What is litigation?

The formal process by which disputes are resolved through the courts. At the conclusion of the process, a trial will be held and a judge will make a determination on the claim which is binding on the parties.

What is mediation?

A form of ADR that involves the agreed instruction of an independent third party (mediator) to facilitate discussion between disputing parties with the aim of reaching an agreed settlement.

What is arbitration?

A form of ADR that involves the appointment of an arbitrator, or panel of arbitrators, by the disputing parties. The decision made by the arbitrator(s) at the conclusion of the procedure is binding to the parties, and they are not entitled to seek a judgment on the matter from the court.

What are three main topics the SQE will focus on surrounding disputes?

1. In what circumstances is it reasonable to refuse ADR?

2. If it is determined that ADR has been refused unreasonably, what sanctions are available for the court to impose?

3. Which type of dispute resolution mechanism is most suitable to a particular dispute?

In which circumstances is it reasonable to refuse ADR?

The merits factor holds that if a party can show that they had a reasonable belief in the merits of their case, their refusal to engage with ADR will not be deemed as being unreasonable.

- Halsey v Milton Keynes

Halsey v Milton Keynes General NHS Trust (2004)

- Circumstances when it is reasonable to refuse ADR

The court set out a list of criteria to determine whether refusal to consider ADR is justified:

1. The nature of the dispute

2. The merits of the case

3. The extent to which other settlement methods have been attempted

4. Whether the cost of the ADR would be disproportionately high

5. Whether any delay in setting up and attending the ADR would have been prejudicial

6. Whether the ADR had a reasonable prospect of success.

If you can argue one or more of these circumstances, then the court will be unlikely to impose sanctions.

Is it ever considered reasonable for a party to refuse responding with an ADR invitation?

No, will automatically be deemed as unreasonable by the courts.

Even if a party refuses to engage in ADR, they must at least engage with the proposal.

If this conduct arises, the court will likely find this conduct unreasonable and impose a sanction or penalty against the refusing party.

Who is the burden of proof on when the courts believe a party has unreasonably refused ADR?

The burden is on the other party to show that the refusal is unreasonable with the court rejecting any presumption in favour of ADR.

what sanctions are available to the courts if a party has been found to unreasonably refuse ADR?

Penalties and sanctions available are: adverse costs order:

- depriving a party of being awarded their costs even if they are successful in litigation

- ordering the party to pay some or all of the losing side's costs as well as their own, even if the party is successful in litigation

- ordering a higher rate of interest to be paid on damages awarded by the court

- depriving a party of interest on damages awarded by the court

What is an adverse costs order?

A court order that requires a party to proceedings to pay some or all of the other party's costs associated with the legal action.

Annie has issued proceedings agianst Joshua for breach of contract. During the course of litigation proceedings, the court orders on two occasions that the matter be stayed (paused) for a 28-day period for the parties to explore ADR. During the 28-day period, Annie writes to Joshua on several occasions to ask that he engages in mediation. Joshua writes back refusing, on the basis that there is no realistic possibility of succeeding's; however, he offers no reason why.

The matter proceeds to court and Joshua is successful in defending all of the claim. Joshua requests the court to order that Annie pays all of his legal costs. However, when questioned by the judge about his refusal to mediate, he simply says, "I didn't see why I should".

What order is the court likely to make?

The court is likely to order Joshua pays Annie's legal costs of the action as well as being responsible for his own, despite him being successful in defending the claim. Where the court has specifically directed that the matter be stayed to allow the parties to attempt mediation and there is clear evidence that a party has refused with no grounds, the court has discretion to impose a costs sanction on that party.

What is a way a party can make an objection against ADR which the courts are likely to deem as reasonable?

Objections raised to ADR at the time the discussions are taking place are much more likely to be accepted for justifiably refusing ADR.

In contrast, parties who raise objections having just refused or ignored an invitation at the time are much more likely to be found to have acted unreasonably, and have sanctions imposed.

What are the different types of dispute resolution?

1.ADR

- Mediation

- Arbitration

2. Litigation

How does the mediation process work?

SPLIT INTO MULTIPLE

1.Once parties have consented to mediate in principle, they will nominate and agree on the appointment of an independent mediator.

2.Following this, parties will send written position statements to the mediator, which set out a background to the case, the points in dispute and any proposals they may have for settlement. - mediator uses this document to prepare for face-to-face meetinf.

3. A date/place for mediation will be agreed between the parties and mediator. On the say, each party will generally occupy a separate room, and the mediator will shuttle between them. The emdiator must isolate the areas of genuine legal and practical disagreement between parties and direct the parties towards a personalised settlement which satisfies both of them.

Any documents/representations made or relied upon any parties are 'without prejudice' - they are confidential and are not be used in the context of any subsqent court proceedingd

What are the advantages of mediation?

-Flexible

-Cost-effective

- Speedy

- Confidential

- Preserves relationships

- Settlement terms can b more creative

- Increases the likelihood of a later negotiated settlement, even if unsuccessful

- Parties can return to court if a settlement is not reached

- Commercial reality

- Ability to withdraw

What is meant by flexible?

- Mediation Advantage

As there is no set process/no legal requirements, parties can choose the procedure to be followed.

It can be set to suit the individual circumstances of the case. (e.g. keeping parties entirely separate if the relationship has disintegrated to that extent).

Mediation also allows issues to be 'unbundled' - broken into smaller issues that are easier to resolve.

What is meant by speedy?

- Mediation Advantage

Mediations can be arranged reasonably quickly and can result in swifter resolution of the dispute compared with litigation.

Should solicitors give clients the impression that mediation is 'bargain basement' prices?

RE-DO

No, despite mediation being cheaper than alternative dispute methods. The parties have to pay the third party for their services and, in addition, lawyers will usually be instructed. However, if the mediation is successful, there will be a significant reduction in the amount of time the lawyers would have spent in preparing and presenting the case and this, in itself, will save costs

What is meant by cost-effective?

- Mediation Advantage

Mediation can be arranged reasonably quicker and result in swifter resolution of dispute compared with litigation.

What is meant by confidential/privacy?

- Mediation Advantage

Mediation is a private process, and therefore is useful for commercial entities who may find their reputation damaged at trial or wish to protect trade secrets/confidential information from competitors.

What is meant by preserves relationship?

- Mediation Advantage

As mediated settlement requires an agreement from both parties, it is more likely to preserve commercial or personal relationships than adversarial trial followed by a win/lose court determination.

Particularly useful when the parties continue to deal with each other.

What is meant by settlement terms can be more creative?

- Mediation Advantage

The court is only able to award a remedy that has been claimed and is legally within their discretion. In contrast, mediation allows parties to be creative in terms of settlement (eg apologising or agreeing to continue reading with each other on renewed terms).

What is meant by 'increases the likelihood of a later negotiated settlement'?

- Mediation Advantage

Even if an agreement is not reached, it helps the parties to understand each other's position to the point that settlement could take place via negotiations between the party solicitors' after the mediation.

What is meant by 'parties can return to court if a settlement is not reached'?

- Mediation Advantage

If it is clear that an agreed settlement will not be reached, parties can be safe in knowing that they can still commence or continue proceedings through the court.

What is meant by commercial reality?

- Mediation Advantage

A third party unconnected with the dispute may be able to assist the parties to arrive at realistic and workable terms of settlement. This could include arrangements that a court could not order, such as discounts on future orders. In contrast, litigation with its final court judgment will be decisive but the process carries inherent risk and uncertainty.

SUMMARISE

What is meant by ability to withdraw?

- Mediation Advantage

If a party is unhappy with the progress, mediation allows them to withdraw at any time in the process.

What are the disadvantages of mediation?

- Enforceability of verbal agreements

- All parties must agree to a proposed resolution

- Can increase costs if parties are unwilling to cooperate

- Parties are not required to disclose documentation

- Ability to withdraw

- No 'day in court'

What is meant by enforceability of verbal agreements?

- Mediation Disadvantage

Unless there is a written agreement/contract between the parties, then the agreement is not enforceable through the courts.

What is meant by 'all parties must agree to a proposed resolution'?

- Mediation Disadvantage

If one party has already shown rigid unwillingness to negotiate, mediation could prove to be a futile exercise.

What is meant by 'can increase costs if parties are unwilling to cooperate'?

- Mediation Disadvantage

If one or both parties are unwilling to even consider settlement, then mediation is likely to fail and just increase the costs to the parties overall.

What is meant by 'Parties are not required to disclose documentation'?

- Mediation Disadvantage

There is no formal rules in mediation, therefore parties can deliberately withhold information if they think it will be damaging to their case. The risk, therefore, is that parties settle without having the full facts, and this can hinder settlement in dispute where trust between the parties has completely disintegrated or there is a history of dishonesty between them.

What is meant by ability to withdraw?

- Mediation Disadvantage

Parties can withdraw from mediation at any time, risking the exercise being expensive and causing unnecessary delay to court proceedings without a resolution being reached.

What is meant by no 'day in court'?

- Mediation Disadvantage

A party who is seeking vindication or validation of their conduct or looking for the conduct of the opposing party to be penalised will not find this through mediation.

How does the arbitration process work?

It involves an appointed arbitrator, or a panel of three arbitrators, hearing both sides of dispute before coming to a decision that is binding on the parties.

This is a more formal form of ADR than mediation.

What are the two ways arbitration may arise?

1. Due to a business agreement containing a clause that requires the parties to arbitrate in the event of a dispute. (Common in industries like construction and shipping)

2. The parties may agree in writing to arbitrate once a dispute has arisen

What do parties agree to when they agree to arbitrate?

In either of those situations where arbitration arises, the parties contractually agree to:

1. engage in arbitration

2. be bound by the arbitrator's decision at the conclusion of the proceedings

Who will be the arbitrator?

The arbitrator(s) will typically be selected because they have been specifically identified in the original contract between the parties or by subsequent written agreement.

Arbitrators can be a person, professional or trade body.

Which statute governs arbitration proceedings?

Arbitration is governed by the Arbitration Act 1996. HOWEVER, this only applies when the arbitration agreement is in writing.

Does the Arbitration Act apply to arbitration not in writing?

No, the act only applies if the arbitration agreement is in writing.

What are the key similarities and differences between arbitration and the court process?

Similarities

- Arbitrator decided on the relevant procedural and evidential matters

- requires disclosure of key documents

- witnesses can be examined and cross-examined

Differences

- Arbitration is quicker because it doesn't need to comply with the formal requirements and timetables laid out in the CPR.

Can parties withdraw from the arbitration process if they are not happy with the outcome?

NO. The Parties are not entitled to refer the matter to court if they are not happy with the outcome.

The decision taken by the arbitrator is legally binding parties, in the same way a court judgment would be.

- BIG DISTINCTION FROM MEDIATION

What are the advantages of arbitration?

- Expertise of the arbitrator

- Speed

- Flexible

- Confidential

- Preserves relationships

- Binding decision

- Enforcement

What is meant by ' Expertise of the arbitrator'?

Arbitration Advantage

Often the appointed arbitrator will have significant professional expertise in the area that is the subject of the dispute. This sometimes means that they can be more pragmatic than a judge, who may have only minimal experience by comparison.

What is meant by Speed?

Arbitration Advantage

Arbitration can be arranged more swiftly than parties could expect a full trial to take place, and the parties can put a time limit on the length of the overall process.

What is meant by Flexible?

Arbitration Advantage

The procedure that is laid down by the arbitrator can be tailored to suit the dispute. The solution that is reached by the arbitrator is often more practical and pragmatic than any order which the parties could receive from the court.

What is meant by Confidential?

Arbitration Advantage

Proceedings and awards are confidential, unlike court judgments. This is particularly attractive in commercial actions where the parties don't want their clients/customers or competitors to be aware that a dispute has arisen.

What is meant by Preserves relationships?

Arbitration Advantage

Similar to mediation, arbitration is more likely to preserve commercial or personal relationship since it is entirely confidential.

Neither party needs to lose face publicly, and it is more likely that a pragmatic solution will be reached and imposed by the arbitrator which takes account of the parties' need or desire to maintain a working relationship.

What is meant by Binding decision?

Arbitration Advantage

The parties contractually agree that they will both abide by the arbitrator's decisions prior to the arbitration hearing. This means that an outcome is certain, unlike with mediation.

What is meant by Enforcement?

Arbitration Advantage

Once a decision has been reached, under s66 Arbitration Act, a party can apply to the High Court to enforce a final arbitral award in the same way as a party is to free to return to the court to enforce a judgment .

What are the disadvantages of arbitration?

- Powers are more limited

- Cost advantage over litigation is potentially small

- Limited scope to challenge a decision

- Disclosure and remedies available

What is 'Powers are more limited'?

Arbitration Disadvantage

The powers that the arbitrator has to deal with obstructive or awkward parties are significantly less than those of the court. Therefore, the process requires a degree of good faith between the parties.

What is 'Cost advantage over litigation is potentially small'?

Arbitration Disadvantage

The arbitrator (or panel of arbitrators), legal representatives of both sides and any experts involved will all need to be paid, much in the same way as court proceedings. This therefore erodes any potential financial advantage over litigation

What is 'Limited scope to challenge a decision''?

Arbitration Disadvantage

s68 Arbitration Act provides that a challenge to a decision will only be successful where the applicant can prove that there is a serious irregularity in the proceedings, the tribunal or award which caused substantial injustice to the applicant.

The application must be made within 28 days of the award being made.

Criteria to make a challenge is narrow.

A serious irregularity can include where the arbitrator has erred on the particular point of law.

SPLIT INTO MULTIPLE CARDS

What is 'Disclosure and remedies available'?

Arbitration Disadvantage

Depending on the process, rules relating to disclosure of key documents are not as prescriptive in arbitration, leaving open the possibility that information could be withheld. The legal remedies available to the arbitrator are also slightly more limited than those of the court (eg the arbitrator could not make an order imposing an injunction on one of the parties).

Can parties use the advantages/disadvantages of ADR methods as a justification for not engaging in it?

No, the courts are more concerned with the criteria set out in Halsey v Milton Keynes General NHS Trust (2004).

John consults you regarding a dispute that has arisen between him and his neighbour, Barry, over the location of a boundary fence.

John informs you that he previously got on well with Barry, that he does not wish to move house in the future and that he would prefer a swift settlement. Which type of ADR would best suit John's situation?

Mediation would be John's best option. It allows him the opportunity to reach a negotiated settlement with Barry that both of them worked towards and leaves him with the best chance of preserving a reasonable relationship with Barry once the dispute is over.

What is Litigation and how does the CPR describe it?

Litigation is referred to in the CPR as the 'last resort' for parties who have been unable to resolve their disputes via ADR. It is the process through which parties ask the court to impose a solution on them after having presented their case through documents and oral representations to a judge.

At what point in a dispute should litigation be considered?

Last resort, when litigation is the only means of resolving the dispute in the absence of agreement. (e.g. parties are unable to come to an agreement themselves)

Why is it important to carefully consider entering into litigation?

Once proceedings are issued and defended, withdrawing without an agreement will likely result in the withdrawing party being ordered to pay the other party's costs.

Which statute governs the litigation process?

The litigation process is governed by a set of rules, the Civil Procedure Rules 1998 (CPR).

What is the Civil Procedure Rules 1997 (CPR)?

The CPR are the set of rules that govern how a civil court claim is conducted. There are 89 rules in total, each of which is accompanied by a Practice Direction that explains how the rule is to operate. It is essential that the CPR are complied with by litigating parties or their representatives. Failure to comply with a rule could result in a sanction, or penalty, being imposed by the court on the offending party

What are the advantages of litigation?

- Strict rules that govern the behaviour of parties

- Disclosure

- Outcome may be easier to predict if there are similar previously decided cases

- Binding decision

- Appeal

- Enforcement

What is 'Strict rules that govern the behaviour of parties'?

- Litigation advantage

The CPR provide a rigid framework of rules that the court expects parties to comply with. If one party does not conduct themselves within the confines of these rules, the court can impose sanctions. These rules also contain guidance on pre-action conduct (ie how parties behave before a claim is issued) to ensure that litigation is only used where there is no other alternative.

What is 'Disclosures'?

- Litigation advantage

Parties are required to put all of their cards on the table and produce all available evidence that relates to the claim (including what could adversely impact the party's claim) at as early a stage as possible.

Failure to disclose a key piece of evidence by the deadline for disclosure will result in that piece being excluded unless the court specifically gives permission for it to be used.

What is 'Outcome may be easier to predict if there are similar previously decided cases'?

- Litigation advantage

Due to the rules surrounding precedent, a lower court is bound to follow the ruling of a higher court in the event that a decision on a point of law has been taken previously.

What is 'Binding decision'?

- Litigation advantage

Once the trial has concluded, the judge or judges will make a decision, enshrined into an order, that is binding to the parties.

What is 'Appeal'?

- Litigation advantage

The parties have the right to apply for leave (permission) to appeal a decision that has been taken.

What is 'Enforcement'?

- Litigation advantage

If the losing party fails to comply with the court order, the successful party can apply to the court to enforce the terms of that order.

What are the disadvantages of litigation?

- Time-consuming

- Complex to conduct without legal representation

- Costly

- Adversial

What is 'Time-consuming'?

- Litigation Disadvantage

Litigation is a time-consuming for various reasons:

1. In order to be thorough and ensure the proper administration of justice, the courts set a full timetable to follow, which is designed to allow for exploration of all the legal and evidential issues between the parties.

2. The court is almost constantly dealing with a huge backlog of cases, and listing takes place on a first come, first served basis. Parties could therefore be waiting months before a future trial date is set.

What is 'Complex to conduct'?

- Litigation Disadvantage

Despite the helpful Practice Direction, the CPR was drafted by lawyers for lawyers, and can be complex for a layperson to follow if they do not have the benefit of legal advice or legal representation.

What is 'Costly'?

- Litigation Disadvantage

Litigation is expensive. Due to its complexity, parties will typlically instruct legal representation; and given the volume of work that is required to prepare a matter for trial, legal fees are often very high indeed. Other fees are also potentially payable, such as expert fees, barrister fees or court fees.

What is 'Adversarial'?

- Litigation Disadvantage

Litigation naturally is adversarial.

There will be a winner and a loser, and typically there is very little chance of preservation of the relationship between parties after litigation has concluded.

If a client desires the advantages of litigation, should they still consider ADR?

Yes, they are still required to consider ADR. Simply stating to the court that litigation fits better with the aims of a client will not be sufficient reason to not engage in ADR before issuing proceedings.

What are the five stages of the litigation process?

1. Pre-court involvement

2. Commencing and defending formal proceedings

3. Case management by the court

4. Trial

5. Post-trial

What is pre-court involvement?

- Litigation process

The CPR contains a number of pre-action protocols and a Practice Direction on Pre-Action Conduct, which guides parties on the steps to take prior to issuing proceedings

What is commencing and defending formal proceedings?

- Litigation process

The claimant will commence proceedings by filing a claim form with the court. Claim form include particulars of the claim (a document that sets out the facts. the legal basis on which the claim is made and the remedy sought).

If the defendant wishes to defend the action, they will file a defence with the court and serve it on the claimant.

What is Case management by the court?

- Litigation process

Once the claim and defence has been filed, the court will allocate the matter to a track, with higher value cases being given greater attention and resources.

Once on track, the court manages the case and will also issue directions to the parties on how they are to conduct the case/prepare for the trial and set deadlines to meet for each stage.

Stages include dates by which disclosure must take place, by which witness statements must be exchanged and, if the parties have the court's permission to rely on expert evidence, when that evidence must be filed with the court.

In addition, the parties may apply to the court for any specific orders that might be required,

perhaps to compel an opponent who has neglected to take a required step in accordance

with the timetable to do so.

What are the different claims tracks, with their values?

1. Small claims track: Value up to £10,000

2. Fast track: Value over £10,000 and up to £25,000

3. Multitrack: Value over £25,000

What is trial?

- Litigation process

The judge will hear all of the evidence and make a order that sets out who is liable to whom (liability) and for how much (quantum).

Once the judge has made their decision on liability and quantum, they will then make an order on who will pay the legal costs of the matter, and in what percentage.

What is post-trial?

- Litigation Process

This stage only applies if one party disagrees with the decision, and they choose to appeal a judgment (all of it or part of it) OR if one party fails to pay some or all of the judgment debt or associated legal costs, and therefore needs to enforce the judgment.

How could a party enforce payment for legal costs or judgment debt?

Typically, this involves instructing court officials to attend the debtor's premises and to take their belongings to be sold at public auction. The proceeds are then paid to the appropriate party.

Litigation key term: claimant

A person who makes a claim

- Claimant can be individuals, organisations or companies.

Litigation key term: defendant

A person against whom a claim is made

Can there be more than one claimant and defendant?

Yes, there can be multiple claimants and defendants in a case.

Litigation key term: proceedings

An action taken through the court to settle a dispute.

Litigation key term: direction

Instructions given to parties by the court on how they are to prepare or conduct a case (not to be confused with a Practice Direction).

Litigation key term: disclosure

The process by which a party makes documents and evidence available to the other party as part of the 'cards on the table' approach encouraged by the CPR.

Litigation key term: expert

A person who has been instructed to give or prepare expert evidence for the purpose of proceedings

Litigation key term: case management

The process by which the court actively manages the timetable and requirements of a particular claim/case.

Litigation key term: costs

Reference to costs typically means the costs that are associated with the litigation incurred by the parties. This can include court fees, expert fees and solicitor/barrister fees.

Litigation key term: leave

'Leave', in the context of civil litigation, is another word for 'permission'. For example, a judge will give 'leave to appeal', which means permission for a party to appeal a decision that has gone against them.

Litigation key term: listed

The process by which the court arranges the date for a hearing or trial.

Litigation key term: file

Where a party sends a formal document to court for placement on the court file, they are said to 'file' that document with the court.