On 1 October 2024, a historic change to the status of alternative dispute resolution in the civil justice system took effect. Amendments to the Civil Procedure Rules (CPR) came into force to promote the use of alternative dispute resolution (ADR), which may include mediation or other forms of ADR such as conciliation, expert determination or early neutral evaluation.

The amendments bring the rules in line with the Court of Appeal decision in James Churchill -v- Merthyr Tydfil County Borough Council [2023], which we reported on in detail in our earlier article - 'Do you have to mediate?'. This confirmed that the court has the power to stay proceedings and compel parties to engage in a non-court-based dispute resolution process.

The changes have been introduced following a consultation by the Civil Procedure Rule Committee earlier this year, which we described in our previous article - 'Mediation is the future'.

We outline below the key amendments to the CPR, and what this means for you.

What are the rule changes and how do they impact on the use of ADR?

As of 1 October 2024, a suite of amendments has been made to the 'overriding objective' and other Parts of the Civil Procedure Rules. These include

The ability to order parties to engage in ADR:

  • The 'overriding objective' of civil justice enabling the Court to "deal with cases justly and at proportionate cost" now includes "promoting or using alternative dispute resolution";
  • The Court's duty to further the overriding objective by actively managing cases has been expanded to include not just encouraging ADR, but "ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution";
  • The Court's general case management powers now also include the power to "order the parties to engage in alternative dispute resolution".

Court directions to include consideration of whether to order or encourage ADR:

  • When giving directions for fast-track, intermediate track and multi-track claims, the Courts must consider "whether to order or encourage the parties to engage in alternative dispute resolution".

Cost sanctions for failure to engage in ADR:

  • When deciding whether to make a costs order, the Courts must have regard to all the circumstances including the parties' conduct: this has now been expanded to encompass "whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution."

What do the changes mean in practice?

As well as hopefully alleviating the backlog of claims in the courts, it is hoped that the CPR changes outlined above will lead to a cultural shift in attitudes towards ADR. Much will depend on how the Courts now apply these amendments, since whether ADR is ordered remains at the discretion of the Courts. This reflects the Court of Appeal's comments in Churchill that it would be "undesirable to provide a checklist or a score sheet for judges to operate" and there are no set guidelines as to how and when the court's power to order ADR should be exercised.

This shift towards increased use of ADR and in particular mediation is also reflected in the implementation of new Practice Direction 51ZE – Small Claims Track Automatic Referral to Mediation Pilot Scheme in May 2024. This makes it clear that ADR, and mediation in particular, is now an integral part not only of the small claims process, but that considering the use of ADR should also be a key part of any dispute.

There are many reasons why parties to a dispute might decide to participate in ADR, including the possibility of saving time and money on legal and management costs, protecting ongoing business relationships or keeping disputes confidential – as well as hopefully securing a favourable early commercial resolution of the dispute. Equally, engaging in ADR can help to inform strategies for settlement and limit risk exposure where it transpires that a party's case is not as robust as initially anticipated.

It is also important to bear in mind the likely costs sanctions in the event of a failure to comply with an order for ADR, or a failure to engage in ADR when it has been proposed by the other party. This was emphasised by the Court of Appeal in the recent case of Northamber PLC v Genee World Ltd & Ors (Rev1) [2024], in which the Court of Appeal imposed a "modest, but not insignificant, costs penalty" on the defendant for its "unreasonable" silence in the face of an offer to mediate. Although substantial costs had already been incurred by the time the offer to mediate was made, thereafter substantial further costs were incurred which "could have been avoided by a successful meditation". We describe this case in our previous article - 'Court of Appeal judgment highlights key points to consider in claims for inducing a breach of contract'.

The message to litigants in receipt of offers to engage in ADR is clear – such offers should not be ignored or rejected without reasonable justification, even at a late stage in proceedings.

Gowling WLG and the University of Manchester are collaborating on a significant research project which will investigate and report on the timing of when mediations happen and its effect on costs. If you wish to find out more about the research or take part, please contact Michael O'Shea or David Turner