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Ignore ADR at your peril

Ignore ADR at your peril

November 12, 2014
Ignore ADR at your peril

The Court of Appeal in England and Wales last month sent another message that if you ignore a genuine offer to participate in alternative forms of dispute resolution (“ADR”), before coming to court, you may be punished.

A dispute arose between an owner of a commercial/office building and a company who took assignments of office leases. A settlement was reached the day before trial. However, the issue of costs remained. The judge deprived one party of its costs for a certain period of the litigation as it was successfully argued that they had unreasonably refused to participate in ADR. This issue was appealed to the Court of Appeal.

The Court of Appeal considered what the court’s response should be when one party “simply declines to respond to [an invitation to take part in ADR] in any way”. In this case, the court stated that “a serious and carefully formulated written invitation” to mediate had been made and was “met with complete silence”. A further offer to mediate was made, and despite “promising a full response”, no further “reply or comment” was made.

The Court of Appeal firmly endorsed ‘the advice…that silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable”. It does not appear to matter that the refusal “might have been justified by the identification of reasonable grounds”. A successful party may, if certain criteria are met, lose their right to payment of some or all of their expenses.

The parameters for participation in ADR now appear to have been extended. South of the border, the courts will, most likely, continue to expect parties to engage in ADR.

Fear not: the courts do not appear to expect every party to every dispute to participate in ADR. A party may have reasonable grounds for refusing to do so. Such a ground may be because protective orders are needed. But parties should proceed cautiously, in order to lessen the risk of the loss of an award of expenses; or of the making of an award of expenses against them.

In Scotland, the courts have not yet taken the views of the courts south of the border about ADR. There may be philosophical reasons for this. It can be questioned whether parties should be forced to adopt ADR processes, rather than vindicating their rights through the court. However, the recent reviews of the Scottish court system under the Scottish Government, encourages ADR. The Gill Review stated “the court should ensure that litigants and potential litigants are fully informed about the dispute resolution options available to them”. The review further comments that mediation and other forms of ADR provide mechanisms that are beneficial to parties achieving a “negotiated settlement”. So the trend is likely to follow the English and Welsh model.

Therefore, the message must be that before, or during litigation, you should be willing to engage in ADR.

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