In January we wrote about the Churchill v Merthyr Tydfil Borough Council case in which the Court of Appeal decided that it is lawful, with certain provisos, for the court to order that parties engage in Alternative Dispute Resolution or stay proceedings to allow it to happen. Such orders are not an obstruction to a party’s right to a fair trial.
Now, following a short consultation in the spring of this year, the decision is to be codified through amendments to the Civil Procedure Rules which will come into force on 1 October 2024.
Under CPR Part 1, one express new option for furthering the Overriding Objective through active case management is the court “ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution”. Furthermore, the court will have to consider ordering or encouraging ADR when giving directions, and, notably, when making costs orders under CPR 44 (where failure to comply with any order to engage in ADR or to engage in such ADR sensibly- will be a factor to weigh into the balance).
The message could not be clearer: litigating parties can be forced to the table by court order, and may risk costs penalties if they refuse, or if they unreasonably fail to engage once at the table. No one can be forced to settle, but they cannot escape an obligation to take the ADR process seriously.
Erso welcomes the CPR changes and the positive attitude to ADR which they reflect. My blog in January described how ADR (principally mediation) is often successful in facilitating settlement, even for initially reluctant parties. It also explained why funders are, as a rule, aligned with funded parties on finding opportunities for early settlement rather than continuing to fund a case all the way to a risky trial.
I commented in that piece about the difficulty lawyers can have in advising clients that, no matter the strength of their case, (or indeed the strength of feeling about their case) they should take seriously opportunities which may lead them to settle out of court. The updated CPR rules will doubtless assist.
Where a case is funded, those discussions between lawyers and clients usually include questions about the impact the funder’s presence might have on the ADR settlement process. In short, how much control can and will a funder exert over settlement decisions?
The answer will have been set out in black and white in the Litigation Funding Agreement itself, which should be revisited whenever there is a consideration of offers or settlement. The funder is not permitted to have control over the case, including settlement. If, like Erso, the funder is a member of the Association of Litigation Funders, there will be further comfort that the LFA terms comply with its Code of Conduct. Whilst the terms of the LFA may require a funded party to inform or consult with the funder when offers or settlements are being considered, decisions should rest with the funded party.
The LFA may include an obligation that the funded party should follow the reasonable advice of its lawyer on settlement decisions, and, following these CPR amendments, we may also start to see clauses expressly requiring funded parties to follow ADR orders made by the court.
Of course, by the time a material opportunity to offer or consider settlement or ADR comes along in proceedings, the lawyers, client, and funder will often have been working together for some time already, and will (hopefully) have developed a healthy rapport. The funded party should therefore have some confidence that the funder will in fact add value to discussions about settlement, rather than attempt to steer the decisions.
Sarah Breckenridge, Investment Manager
sb@ersocap.com
Sarah is an Investment Manager at Erso Capital and an English-qualified solicitor-advocate. Sarah has a unique combination of practice at a senior level as a corporate/commercial litigator and as a director-level dispute knowledge lawyer. Before joining Erso, she led the team of dispute knowledge lawyers at the global law firm Bryan Cave Leighton Paisner LLP. A significant part of her role involved forging the firm’s policy and practice around litigation funding, insurance and alternative fee arrangements. She knows how lawyers approach questions of funding and costs with their clients and understands the impact of funding on the process and outcomes of disputes.