Implications of declining to engage in ADR
In the present climate, there is pronounced pressure on parties to engage in alternative dispute resolution (ADR). We consider whether the courts have gone too far in promoting the cause.
An ADR direction is a normal feature of case management orders. Even in the absence of such a direction, winning parties have been at risk of sanctions for unreasonably failing to mediate and recent case law indicate a hardening approach towards parties who decline ADR. There are numerous cases where a party has been penalised for refusing to participate in ADR, even when successful at trial.
In Ghaith v Indesit UK Limited  Lord Justice Longmore criticised the defendant for failing to participate in mediation in a claim worth £60,000. The Court of Appeal further boosted the importance of ADR in PGF SA v OMFS Co  (a case described as “ground breaking” by Lord Justice Jackson), where Lord Justice Briggs construed silence in the face of an ADR invitation as unreasonable and should be visited by costs sanction.
It is as dangerous as it is expensive to run weak arguments. The court can and will impose costs penalties on parties who unreasonably refuse to mediate (CPR 44.5). In Reid v Buckinghamshire Healthcare NHS Trust , the defendant found themselves with an indemnity costs order for failure to accept an offer to mediate. In Lynn v Borneos LLP , the defendant's costs were reduced by 40% due to its refusal to mediate, notwithstanding their success at trial. A similar result ensued in Rana v Tears of Sutton Bridge .
In Laporte v The Commissioner of Police of the Metropolis , the court found the defendant had failed without adequate justification to engage fully and adequately in ADR, which had a reasonable chance of success. Consequently, the court imposed a costs sanction, depriving them one third of their costs, notwithstanding the fact that they were successful on every substantive issue.
More recently in Manna v Central Manchester NHS Trust , the judge was appalled at the misconceived case conducted by the defendant which resulted in a lengthy trial and unnecessary anguish for the claimant’s family. An indemnity costs order against the defendant ensued.
When can a party refuse to engage in ADR? What about cases where judgment has been obtained in favour of a party who does not see the benefit of engaging in ADR, but where the losing party is seeking to appeal the judgment?
In such a scenario, we anticipate that even if the appeal is dismissed, the Court of Appeal may be critical if the winning party does not at least show a willingness to engage in ADR and impose a costs penalty. Accordingly, we consider it is reasonable for the winning party to say in advance that it is prepared to participate in ADR; provided a resolution is not conditional upon there being an offer to pay damages or costs. It can advance in support to the point that it has a costs order in its favour and confirm its willingness to discuss a reasonable settlement of those costs via the process of ADR (allowing a discount for risk etc). However, such an approach may cause the other side to decline to go forward with ADR.
Claimants do not relish the prospect of a trial and defendants minimise their exposure by conducting the claim as swiftly as possible. It goes without saying however that although the aim is to settle, it is not to settle at any cost. There is no duty to compromise, despite what some judges appear to think.
Read related items in Healthcare Brief - March 2017