Changes to CPR to reflect courts’ power to compel ADR

The latest amendments to the Civil Procedure Rules (CPR) confirm the power of the English courts to compel parties to engage in out-of-court alternative dispute resolution (ADR). As previously explained, the changes which came into force on 1 October 2024 underline the courts’ support for the use of mediation and other forms of ADR to resolve disputes.

Background to the amendments - the decision in Churchill

The amendments to the CPR are intended to give effect to last year’s landmark Court of Appeal decision in Churchill v Merthyr Tydfil Borough Council [2023] EWCA Civ 1416. That decision marked a significant departure from the longstanding position that it would be inappropriate for the courts to require parties to engage in ADR; the courts could only encourage ADR. In Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, Dyson LJ stated that “to oblige truly unwilling parties to refer their disputes to mediation would be to impose unacceptable obstruction on their right of access to the court.”

The Court of Appeal in Churchill held that Dyson LJ’s statements were not binding; they were not a necessary part of the reasoning that led to the decision in that case. The Court of Appeal decided that a court has both the power to order the parties to engage in mediation or another form of ADR, and the ability to stay proceedings while they do so, providing that the order does not impair a party’s right to a fair trial (per Article 6 of the European Convention on Human Rights) and is proportionate to the legitimate aim of settling a dispute fairly, quickly and at reasonable cost. See further details of the Churchill decision here.

The amendments to the CPR

To assess the impact of Churchill, the Civil Procedure Rule Committee established a multi-jurisdictional working group chaired by Lady Justice Asplin. After a period of consultation earlier this year, changes to the CPR were introduced and can be summarised as follows.

Overriding objective – the guiding principle of the CPR, for the courts to deal with cases justly and at proportionate cost, now expressly includes “promoting or using alternative dispute resolution” (CPR 1.1(f)). Furtherance of the overriding objective by actively managing cases now includes “ordering or encouraging the parties to use, and facilitating the use of, [ADR]” rather than simply encouraging ADR (CPR 1.4(e)).

Courts’ case management powers – the broad list of the courts’ general powers of case management has been expanded to include the power to, “order the parties to engage in alternative dispute resolution” (CPR 3.1(o)). When giving directions, the court should consider, “whether to order or encourage the parties to engage in alternative dispute resolution” (CPR 28.7/28.14/29.2/PD29.4.10(9)).

Costs sanctions – when exercising its discretion as to costs, the conduct of the parties that a court may consider now expressly includes, “whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution” (CPR 44.2(5)).

When and how will the court exercise its discretion to compel ADR?

Neither Churchill nor the amendments to the CPR are prescriptive on when and how the courts’ power to order ADR should be exercised. In Churchill, the Court of Appeal avoided setting limits on the courts’ discretion. Rather, the Court of Appeal noted a number of factors that could be relevant to the exercise of the discretion (for example, the sophistication of the parties, the cost of ADR and the prospect of it resolving the dispute), but it is for each court to consider the specific circumstances of the case when deciding whether an order for ADR is appropriate.

The CPR amendments reflect this flexible approach which seems appropriate considering the broad spectrum of disputes to which the CPR apply. In complex, high value commercial cases for example, it may be inappropriate for the court to intervene where sophisticated parties with the benefit of legal advice agree that ADR is not the right course of action at a particular point.

However, even the most sophisticated parties to litigation ought to give ongoing consideration to the use of ADR and may be required to explain to the court why they believe it would not be appropriate. There are many benefits to attempting to resolve a dispute via ADR – it can avoid lengthy, costly litigation through the court system while also giving parties freedom to explore more creative, tailored resolutions that better serve the interests of all involved. This is particularly beneficial in those commercial cases where the ongoing relationship is important to the parties.

Risk of cost sanctions

The power to compel ADR is in addition to the courts’ existing power to impose costs sanctions on a party if they unreasonably refuse to engage in ADR, as established by the Court of Appeal in Halsey. Whether a party has acted unreasonably in refusing ADR depends on all the circumstances of the case. In Halsey, Dyson LJ identified a number of factors which may be relevant, including, the merits of the case, whether the costs of ADR would be disproportionately high, the extent to which other settlement methods have been attempted and whether ADR had a reasonable prospect of success. A recent example of costs sanctions being imposed is Northamber PLC v Genee World Ltd & Others (Rev1) [2024] EWCA Civ 428. Costs sanctions were applied following the defendants’ failure to respond to an offer to mediate and their breach of a court order that required them to explain this failure. The Court of Appeal considered that the conduct of the defendants was unreasonable and held that the appropriate penalty was to increase the claimant’s cost recovery by 5% to 75%.

Key takeaways

The latest changes to the CPR are further evidence of the courts’ support for the increased use of ADR to resolve disputes. This can be seen in other areas, for example, in May 2024, engagement in mediation was made compulsory in many small claims cases worth less than £10,000. As a result, parties to such money claims must now take part in a free one-hour mediation appointment funded by the government.

Yet while there are many advantages to ADR and embedding it within the CPR recognises the role it can play in facilitating resolution outside the rigidity of the court system, ADR is not a guarantee of resolution. Its success or failure may ultimately depend on the extent to which the parties properly engage in the process. At its worst, it can be used as an expensive stalling tactic by parties with no interest in reaching a compromise. It remains to be seen whether courts compelling parties to engage in ADR when they have chosen not to do so results in quicker resolution or simply leads to more protracted disputes - and if so whether the threatened costs sanctions will have any real effect.

With thanks to Hollie Gallen for her assistance in preparing this post.