Alternative Dispute Resolution

Complete Study Notes

Based on Sime, Blake & Browne | White Book (Civil Procedure) Vol. 1 & 2
England & Wales

Contents
Part 1 — What ADR Is and Why It Matters (Chapters 1 & 2)
Part 2 — Timing the Use of ADR (Chapter 3)
Part 3 — Privacy, Privilege and Confidentiality (Chapter 5)
Part 4 — Ethics and Professional Responsibilities (Chapter 6)
Part 5 — Court Powers, Stays and ADR Clauses (Chapter 9)
Part 6 — Costs and Cost Shifting in ADR (Chapter 10)
Part 7 — Sanctions for Refusing ADR (Chapter 11)
Part 8 — ADR and Active Case Management (White Book, Vol. 2, para. 14-1)
Part 9 — Pre-Action Conduct and Protocols (Practice Direction & PI Protocol)
Part 1 — What ADR Is and Why It Matters
Source: Sime, Blake & Browne — Chapters 1 & 2

What is ADR?
Alternative Dispute Resolution (ADR) is an umbrella term for any method of resolving a civil dispute
other than a full court trial. The word 'alternative' is increasingly questioned — many now prefer
'appropriate dispute resolution' — but the traditional term is retained in the rules and case law.

For ADR to apply, three conditions must be met:

• There must be a dispute between two or more parties.
• The dispute must involve civil legal rights or duties.
• The dispute must be something that could, if necessary, go to court.

The Two Broad Categories of ADR

Adjudicative ADR Non-adjudicative ADR

• An independent third party makes a binding • The parties agree the solution themselves
decision • Parties retain control of both the process
• Parties control the process but give up and the outcome
control of the outcome • Includes: negotiation, offer & acceptance,
• Includes: arbitration, adjudication, expert mediation, ENE
determination • Any settlement is a binding contract
• All conducted in private and on a between the parties
confidential basis

Why ADR Matters — Six Key Benefits

• Lower costs — particularly when settlement is reached early through non-adjudicative ADR.
• Speed — negotiation and mediation can begin almost immediately after a dispute arises.
• Confidentiality — ADR is private, protected by the without prejudice principle and confidentiality
clauses.
• Flexibility — parties agree the process and can tailor it entirely to their dispute.
• Wider outcomes — parties can agree any terms, not just remedies a court could order.
• Choice of decision-maker — parties can select an expert or someone both sides respect.

The Key CPR Rules

• CPR r 1.1 — the overriding objective: courts must deal with cases justly and at proportionate cost.
Since October 2024 this expressly includes 'promoting or using ADR'.
• CPR r 1.3 — parties and lawyers have a duty to help the court further the overriding objective.
• CPR r 3.1(1)(o) — from October 2024, the court can order parties to engage in ADR.
 • CPR r 44.2(5)(e) — from October 2024, failure to comply with an ADR order, or unreasonable
failure to engage with ADR, is a factor when the court decides costs.
• Pre-Action Protocols — parties must actively consider ADR before issuing proceedings.
• Directions questionnaires — lawyers must confirm they have explained ADR options and potential
cost sanctions to their client.

The ADR Options — Adjudicative

Arbitration
• Governed by the Arbitration Act 1996.
• An arbitrator (chosen by the parties) makes a binding award on the basis of the material
submitted.
• The parties agree the process rules — many providers offer standard rules and agreements.
• Private and confidential. Widely used in commercial cases; increasingly used in family cases.
• Can be expedited if the parties agree a quicker, simpler process.
Watch out
Arbitration is not automatically cheaper than court. If a full hearing is used, costs can be similar to
litigation.

Adjudication
• A neutral third party decides specific issues under an agreed process.
• Most common in construction and other specialist industries — often agreed in the original
contract.
• Simpler and more flexible than arbitration.
• Whether the decision is final and binding depends on what the parties agreed.

Expert Determination
• An expert makes a binding decision on issues that require specialist technical knowledge.
• The process and scope must be clearly agreed in writing before it begins.
• Courts will generally uphold the determination even if it contains a factual error — unless the
parties specifically agreed grounds for challenge.

Other adjudicative options

• Baseball arbitration — each party submits one proposal; the decision-maker picks the most
reasonable one. Quick but only suitable for limited-issue disputes.
• Mini trial — senior representatives from each side make summary submissions to an independent
adviser who issues a non-binding opinion.

The ADR Options — Non-Adjudicative

Negotiation
• The most common form of dispute resolution. Flexible, no set procedure.
• Clients keep full control of the outcome.
 • Can fail if parties are too entrenched or their expectations are unrealistic.

Offer and Acceptance

• The simplest ADR option — one party makes an offer, the other accepts.
• Should be done in writing to ensure certainty of terms.
• Settlement offers are protected by the without prejudice principle and cannot be shown to the
court in proceedings.
• Mark an offer 'without prejudice save as to costs' if you want the court to consider it when deciding
who pays costs.
• CPR Part 36 offers carry the strongest formal costs protection and should be considered
throughout the case.

Mediation
• A neutral mediator facilitates negotiation — they do not decide the outcome.
• Involves a mix of joint meetings (both sides together) and private caucus sessions (mediator
meets each side separately).
• Preparation is essential: parties typically produce a position statement and key documents in
advance.
• Settlement, if reached, is signed in writing at the end of the session.
• Small claims: typically a 1-hour telephone session. Commercial cases: up to a full day or more.
Success rates
The Small Claims Mediation Scheme resolves approximately 70% of cases referred to it. The Court of
Appeal mediation scheme resolves around 40%.

Early Neutral Evaluation (ENE)

• An independent expert or legally qualified person gives a written opinion on the dispute or specific
issues.
• Helps parties see their case realistically and often breaks deadlocks.
• Most effective when used early, before positions harden.
• Courts can order ENE without both parties' agreement (Lomax v Lomax [2019]).
• Available in the Technology and Construction Court, Commercial Court, and High Court.

Conciliation
• A neutral third party facilitates negotiation and may propose (but not impose) a solution.
• The term has no single agreed meaning — always clarify the scope before agreeing to it.
• ACAS is the best-known provider, primarily for employment disputes.

Hybrid options
• Med-arb — starts as mediation; if no settlement, the mediator imposes a binding decision.
• Arb-med — arbitration proceedings begin, but the arbitrator attempts mediation before giving a
decision.
• Tiered clauses — a contract requires: negotiate first, then mediate, then arbitrate.
Regulation and Standards
• Arbitration Act 1996 — the statutory framework governing arbitration in England and Wales.
• Civil Mediation Council — sets training standards for mediators (there is no statute specifically for
mediation).
• Chartered Institute of Arbitrators — provides accreditation and training for arbitrators.
• No single regulatory body covers all forms of ADR. Ultimate oversight rests with the courts on a
contractual basis.

Key Cases — Chapters 1 & 2

Dunnett v Railtrack [2002]: the first major case establishing that a party can face a costs penalty for
refusing ADR — even if they win at trial.

Halsey v Milton Keynes NHS Trust [2004]: all litigation lawyers must routinely consider ADR with their
clients. Also sets out the six factors the court considers when deciding if a refusal to use ADR was
unreasonable.

PGF II SA v OMFS [2013]: ignoring an ADR proposal without responding is treated as an outright
refusal and can attract a costs sanction.

Lomax v Lomax [2019]: a court can order Early Neutral Evaluation even without the consent of both
parties.

Churchill v Merthyr Tydfil CBC [2023]: courts can stay proceedings or order parties to engage in non-
court dispute resolution — provided the claimant's right to a judicial hearing is not removed.

R (Cowl) v Plymouth CC [2002]: when public money is involved, failure to use ADR is 'indefensible'.
Part 2 — Timing the Use of ADR
Source: Sime, Blake & Browne — Chapter 3

The Core Principle on Timing

There is no single right time to use ADR in every case. Timing must be assessed on the specific facts.
The court and practitioners have consistently identified a 'happy medium': the point when both sides
know enough about each other's position to negotiate meaningfully, but before the costs of litigation
have grown so large that they themselves become an obstacle to settlement.

The 'happy medium' — judicial guidance

'The trick in many cases was to identify the happy medium: the point when the detail of the claim and
the response were known to both sides, but before the costs that had been incurred in reaching that
stage were so great that a settlement was no longer possible.'

Early ADR — Advantages and Risks

Advantages of early ADR Risks of ADR too early

• Best opportunity to save time and costs • If issues are not yet clear, the process may
• Adjudicative ADR (e.g. arbitration) should be wasted
normally be selected before litigation steps • A failed ADR attempt can harden attitudes
begin on both sides
• ENE is most effective early, before • May be difficult to properly evaluate the
positions harden case at too early a stage
• Even if no settlement, ADR can help clarify • Risk of the process being used tactically
the issues rather than genuinely
• Prevents parties entrenching in adversarial
positions

ADR at Each Stage of Proceedings

Pre-action
• Parties must actively consider ADR before issuing proceedings — this is an obligation, not a
suggestion.
• Each party should make or respond to ADR proposals, or clearly record why ADR is not
appropriate at this stage.
• Failure to engage with ADR pre-action risks an adverse costs order.
• Revised Pre-Action Protocols are expected to require parties to produce a 'stocktake' report if the
case proceeds — setting out what attempts at settlement were made and what issues remain.

On issue of proceedings
• The ADR position must be reviewed before issuing.
 • The directions questionnaire (fast track and multi-track) asks what steps have been taken to
settle. Legal representatives must confirm ADR has been explained to the client, along with the
risk of costs sanctions.

Interim stage
• The court can stay proceedings, order ADR, order attendance, and give specific guidance with
costs warnings.
• There is a continuing duty on both parties to try to settle throughout the litigation.
• Disclosure can be shaped to facilitate ADR — e.g. key documents disclosed early to support
mediation before full disclosure takes place.
• A party may be required to file a witness statement explaining why ADR is not appropriate.

At or during trial
• This is the last opportunity for the parties to control the outcome — a judge decides if the case
reaches trial.
• Settlement at the door of court is common but represents a failure of earlier opportunity.
• Courts are slow to adjourn a trial for ADR to be attempted.
• A costs sanction may follow if a party is shown to have frustrated settlement attempts until close
to trial.

Appeals
• ADR is strongly encouraged after trial, particularly to avoid or settle an appeal.
• Approximately 40% of those granted permission to appeal succeed — meaning both sides have
something to gain from mediating.
• Refusing to mediate after judgment is likely to attract a costs penalty, particularly if the court has
recommended it.

Costs assessment
• Even the assessment of costs can be resolved through ADR — including arbitration, ENE, or
mediation.
• Refusing to mediate on a costs dispute can itself be unreasonable.

Practical Factors to Consider When Timing ADR

• Costs — compare the expected cost of litigation against the cost of an ADR process. Are costs
budgets signalling that costs are already disproportionate?
• Clarity of issues — pre-action correspondence usually identifies the main issues. Statements of
case add further precision. Issues do not need to be formally evidenced for non-adjudicative ADR.
• Evidence — non-adjudicative ADR does not require formal proof. A lawyer does not need to wait
for full disclosure before recommending mediation, provided the client is properly advised about
the available information.
• Strength of case — a genuinely strong case is relevant but does not automatically justify refusing
ADR. Courts take their own objective view.
• Antagonism — a high level of hostility between parties may delay ADR, but does not rule it out.
Dishonesty allegations may make mediation unreasonable, but antagonism alone is not enough.
 • Need for interim relief — if an urgent injunction is required, litigation proceeds first. ADR can
follow once the interim order has been obtained.

ADR Clauses in Contracts — Pre-selecting the Process

• A contract can specify what ADR process must be used, and when, before litigation may begin.
• Courts will enforce such a clause if it is sufficiently clear and binding.
• Effective for: arbitration, adjudication, expert determination, mediation clauses with defined
processes.
• Not effective for: vague expressions of intention to use ADR, or any attempt to compel full
participation in a non-adjudicative process.

Practical Record-Keeping
• Keep clear, dated records of all ADR proposals made and received — these may be critical in any
later argument about costs.
• Avoid a confusing sequence of cross-offers with no clear responses.
• Expressly withdraw any out-of-date offers to avoid confusion.
• Keep settlement communications clearly separate from ongoing litigation. They are protected by
privilege, but an ambiguous statement could be read as an admission.

Specific Types of Case

• Clinical negligence — early settlement is strongly encouraged. The Pre-Action Protocol for the
Resolution of Clinical Disputes has been revised to support earlier resolution.
• Low-value construction and small business disputes — mediation is particularly valuable (Jackson
LJ's Review of Costs).
• Money claims up to £10,000 — compulsory referral to a free 1-hour telephone mediation session
is in place as a pilot (from 22 May 2024) and is likely to be extended.
Part 3 — Privacy, Privilege and Confidentiality in ADR
Source: Sime, Blake & Browne — Chapter 5

Overview — Four Separate Layers of Protection

ADR processes benefit from overlapping but distinct protections. It is important to understand which
protection applies in any given situation, because they operate independently and have different
scopes.

1. Legal Professional Privilege

• Protects communications between a lawyer and client made for the purpose of giving or receiving
legal advice.
• This includes advice about ADR options and strategy.
• The privilege belongs to the client — only the client can waive it.
• Cannot be lost simply because something is discussed with a lawyer. Information does not
become privileged merely by being raised with a lawyer if it was already disclosable.

2. Litigation Privilege
• Protects communications with third parties (e.g. experts) where the dominant purpose is to assist
litigation that has started or is reasonably anticipated.
• It is not yet settled in law whether this extends to cases where ADR, rather than litigation, is
actually used.
• A letter proposing mediation does not itself attract litigation privilege.

3. The Without Prejudice Principle

• Protects any oral or written communication made in a genuine attempt to settle an existing
dispute.
• Applies automatically — it is not necessary to mark a communication 'without prejudice', though it
is best practice to do so.
• Applies whether or not proceedings have been issued, and whether or not a settlement is actually
reached.
• Belongs jointly to both parties — one party cannot waive it alone.
• A final settlement agreement is not itself without prejudice — the dispute has been resolved at
that point.
• Courts apply this protection broadly and will not pick through an ADR process to find isolated
admissible material.

4. Contractual Confidentiality Clauses

• A written clause in an ADR agreement that binds the parties and any signed third party (e.g. a
mediator).
• Standard in mediation and arbitration agreements. Enforceable by injunction or a claim for
damages.
 • All attendees at an ADR process should sign a confidentiality agreement — others present may
not be bound by the professional code or the ADR clause.

Without Prejudice — What It Covers and What It Does Not

What IS protected What is NOT protected

• All communications made within an ADR • Information disclosable for an independent
process (negotiation, mediation, etc.) reason
• The court will not investigate why a • Discussions before a dispute clearly exists
mediation failed between the parties
• Applies from pre-action correspondence • Open offers (not conditional on overall
through to trial settlement)
• Purely factual information e.g. the cost of
the mediation itself

'Without Prejudice Save as to Costs' — A Critical Practical Point

If you mark a communication 'without prejudice save as to costs', the court may consider it when
deciding who pays costs — but not before then. If a communication is marked simply 'without
prejudice', the court cannot look at it at all on the costs question.
Best practice: if you want your ADR proposal to be visible to the court when costs are argued, either
send it as an open letter or mark it 'without prejudice save as to costs'.
Reed Executive v Reed Business Information [2004]: the court has no jurisdiction to order disclosure
of without-prejudice communications simply to decide if a party was unreasonable in refusing ADR.
Mark correspondence correctly from the outset.

When Can a Court Look at ADR Communications?

Courts will look at material where:
• There is a dispute about whether a settlement was reached, or what its terms are.
• The settlement is challenged for fraud, misrepresentation, or undue influence.
• An estoppel is alleged based on a settlement communication.
• There is an allegation of perjury, blackmail, or 'unambiguous impropriety'.
• A professional negligence claim arises from the ADR process itself.
• It is necessary to protect a child or prevent a criminal act.
• A statutory duty to disclose exists (e.g. under the Proceeds of Crime Act 2002).

Courts will not look at material to:

• Decide why a mediation or other ADR process failed — this is protected to preserve the integrity
of the process.
• Decide whether a party was unreasonable in refusing ADR (unless the material is marked 'without
prejudice save as to costs').
• Support an application for indemnity costs, unless all parties have waived privilege.
• Hear evidence from someone who attended the ADR process.
Confidentiality of Settlement Terms
• Parties frequently agree that the terms of a settlement are kept confidential — this is a standard
contractual term.
• If one party fails to comply with the settlement and the other is forced to go to court to enforce it,
confidentiality may be lost.
• Non-disclosure agreements (NDAs) are enforceable in England and Wales but must be drafted
carefully and not used to conceal improper conduct or to put pressure on a party.
Part 4 — Ethics and Professional Responsibilities in ADR
Source: Sime, Blake & Browne — Chapter 6

Overview
Lawyers' professional codes of conduct apply in full to ADR — not just to court proceedings. Because
ADR is largely private and subject to limited court oversight, professional and ethical conduct is
especially important. The codes provide relatively general duties which must be applied carefully to
ADR contexts.

SRA Principles — Solicitors

The following SRA Principles are particularly relevant to ADR:
• Uphold the rule of law and the proper administration of justice.
• Uphold public trust and confidence in the solicitors' profession.
• Act with independence, honesty, and integrity.
• Act in the best interests of each client.
• Do not mislead clients, the court, or others — whether by acts, omissions, or complicity in others'
acts.
• Ensure clients can make informed decisions about all their options.

BSB Core Duties — Barristers

The following BSB Core Duties are particularly relevant to ADR:
• Act in the best interests of each client (CD 2).
• Act with integrity and honesty (CD 3).
• Maintain independence (CD 4).
• Not behave in a way likely to diminish public trust in you or the legal profession (CD 5).
• Keep the affairs of each client confidential (CD 6).
• Provide a competent standard of work and service to each client (CD 7).

Acting in the Client's Best Interests

• This duty includes advising on ADR options, not just on litigation strategy.
• Clients must be informed of the potential costs penalties for unreasonably refusing ADR.
• Acting in a client's best interests does not mean conducting the case as 'litigation warfare' —
Halsey and subsequent cases make this clear.
• Clients must be placed in a position to make informed decisions about all the options available to
them.
Halsey v Milton Keynes NHS Trust [2004]: all litigation lawyers must routinely consider ADR with their
clients. Burchell v Bullard [2005]: the legal profession must fully acknowledge the value of mediation.
Acting Within Client Instructions
• A lawyer must always act within client instructions. This is especially important in ADR, where the
lawyer may play a substantial role in shaping the outcome — particularly in negotiation.
• Obtain clear written instructions on: whether to use ADR; which type of ADR; and what the client's
objectives are.
• Check instructions before finalising any settlement.
• Exception: a lawyer should not act on instructions to behave improperly in an ADR process. The
duty to the court, to uphold the law, and to act with integrity takes precedence.

Confidentiality
• The duty of confidentiality to a client is a continuing obligation — it does not end when a matter
concludes.
• A lawyer must not disclose client information during an ADR process without the client's clear
permission. This applies even to disclosure to an independent third party such as a mediator.
• This duty can come into tension with the duty not to mislead. If this conflict arises, the lawyer
should discuss it with the client.
• Confidentiality is not absolute — limited exceptions apply, and data protection obligations also
arise.

Duties to Opponents in ADR

• A lawyer must not mislead an opponent or take unfair advantage.
• A lawyer must not construct facts or advance contentions not supported by instructions or
properly arguable.
• There is no positive duty to volunteer information beyond what is required — but a lawyer cannot
withhold information that would make other information significantly misleading.
• A lawyer should not accept instructions to behave improperly in an ADR process.
• Using ADR as a delaying tactic rather than a genuine attempt to settle is a breach of the duty of
integrity.

Duties to Funders
• Where external funding is involved (legal aid or third-party funder), the funder must normally be
notified of any settlement offer, and their approval may be needed before finalising terms.
• A lawyer must always act in the client's best interests, not the funder's.
• Lawyers acting under a CFA or DBA (conditional or damages-based fee arrangements) must give
objective advice — their own financial interest in the outcome creates a risk of bias that must be
carefully managed.

Duties to the Court

• Both solicitors and barristers have a primary duty to the court that overrides all other duties.
• The duty of confidentiality to a client may limit what can be raised in court about the ADR process.
• The without prejudice principle means that courts cannot normally investigate why an ADR
process failed.
 • Assisting the court on ADR issues may create tensions with client instructions — the duty to the
court prevails.

Lawyers Who Also Act as ADR Providers

• Professional conduct rules continue to apply when a lawyer acts as a mediator, arbitrator, or
evaluator.
• Any connection to the parties must be disclosed to all sides before proceeding.
• The lawyer cannot proceed without written consent from all parties.
• If the individual holds a separate qualification as a mediator or adjudicator, an additional code of
conduct for that role may also apply.
Part 5 — Court Powers, Stays and Contractual ADR Clauses
Source: Sime, Blake & Browne — Chapter 9

Court Powers to Support ADR

• CPR r 3.1(1)(o) — from October 2024, the court can order parties to engage in ADR as part of
case management.
• CPR r 1.4(2)(e) — active case management now expressly includes ordering or encouraging
ADR.
• The court can stay proceedings, order ENE, order tailored disclosure to support ADR, or require
attendance at court to facilitate settlement.
• Sanctions — including adverse costs orders — can be imposed if an ADR order is not obeyed.
• A party may be ordered to file a witness statement explaining why it considers ADR inappropriate.
Churchill v Merthyr Tydfil CBC [2023]: confirmed that courts can order non-court dispute resolution.
The order must not remove the claimant's right to a hearing, and must be proportionate to achieving
fair, quick and cost-effective resolution.

How Stays Work

• A stay suspends proceedings entirely. Neither side is required or permitted to take any steps
while the stay is in place.
• Default period: 1 month, though extensions are routinely granted. Extensions are usually no
longer than 4 weeks at a time unless clear reasons are provided.
• A stay can be ordered by the court on its own initiative, or on a party's application — and can be
ordered even if both parties oppose it.
• Once the stay ends or is lifted, proceedings resume exactly from the point they were at when the
stay was imposed.
• If settlement is reached during the stay, the parties formally dispose of the proceedings — usually
by consent order or Tomlin Order.
• If no settlement is reached, the parties apply to lift the stay and obtain further directions to resume
litigation.
Hamon v UCL [2023]: the court ordered an 8-month stay in a COVID tuition dispute where group
litigation was anticipated. Long stays are possible where the potential benefit justifies the delay.

Contractual ADR Clauses — When Will the Court Enforce Them?

A court will enforce a contractual ADR clause and stay proceedings commenced in breach of it if the
clause satisfies the following requirements:
• Enforceable obligation — the clause must create a genuine binding obligation to engage in ADR,
not merely express a vague intention to try.
• Sufficiently clear process — the process must be capable of being followed by objective criteria,
including how a mediator or decision-maker is appointed, without requiring further agreement
between the parties.
 • Does not need to say 'condition precedent' — courts do not distinguish between a mandatory
obligation and a condition precedent when deciding whether to enforce (Children's Ark v Kajima
[2022]).
• Court's discretion — even if the clause is enforceable, the court exercises discretion. It will
consider: compliance with Pre-Action Protocols; suitability of the dispute to the agreed ADR type;
relative costs; and whether a stay fits the overriding objective.

Courts WILL enforce Courts will NOT enforce

• Arbitration, adjudication, expert • Vague expressions of intention without a
determination and mediation clauses defined process
• Tiered clauses — negotiate, then mediate, • Clauses with no mechanism to appoint a
then arbitrate mediator without further agreement
• Clauses requiring 'good faith discussion' • A bilateral clause unsuitable for a multi-
before arbitration party dispute
• Clauses referencing a named ADR • Where enforcing would be contrary to the
provider's published rules overriding objective

Breach of a Contractual ADR Clause

• The court can stay proceedings and require the parties to pursue the agreed ADR process.
• Damages may also be awarded for breach — covering costs wasted by the party who litigated in
breach — but only where those costs are not already recoverable in the proceedings themselves.
• Damages can also be assessed on the basis of what the claimant might have recovered had the
contractual ADR process been followed.

The Digital Future — ADR and the Online Court

• The Online Procedure Rules Committee (OPRC) was established in 2023 to create online
procedure rules integrating pre-court and court-based processes.
• The aim is a single digital justice system where parties can access legal advice, ADR services,
and court processes online — without needing to issue proceedings in every case.
• The Road Traffic Accident Small Claims Protocol (from May 2021) already uses automated
negotiation portals.
• OCMC and Damages Claims pilots are testing online claims processes in the County Court.
Part 6 — Costs and Cost Shifting in ADR
Source: Sime, Blake & Browne — Chapter 10

Who Pays for an ADR Process?

• Each party pays its own costs in an ADR process unless they agree otherwise.
• Standard practice: the ADR provider's fee is split equally; each party bears its own legal costs.
• In non-adjudicative ADR, the cost arrangements can be varied by agreement at any time.
• In arbitration, the tribunal can award costs between the parties if given that power (Arbitration Act
1996 s.61).
• The court has no power to vary a contractual agreement the parties have already reached about
ADR costs.
• A party's legal costs of preparing for and attending ADR may be treated as 'costs in the case' in
any subsequent litigation.

How ADR Affects the Court's Costs Decision

The court's general discretion on costs under CPR r 44.2 takes into account the parties' conduct in
relation to ADR throughout the case. Key factors the court will consider:
• Conduct before and during proceedings — including compliance with Pre-Action Protocols and
how the party responded to ADR proposals.
• Whether a party succeeded in part only.
• Any admissible offer to settle — open offers and 'without prejudice save as to costs' offers can be
placed before the court on costs.
• Since October 2024, CPR r 44.2(5)(e) expressly requires the court to consider whether a party
failed to comply with an ADR order or unreasonably failed to engage with ADR.

Part 36 Offers — The Key Points

Part 36 is a formal mechanism under the CPR that creates specific costs consequences. It sits at the
interface between litigation and ADR and is an important tool in any settlement strategy.
• Must be in writing; must state it is a Part 36 offer; must state what it covers; must include interest.
Must not contain terms about costs — costs consequences are automatic.
• The offer remains open even after it is rejected or a counter-offer is made — until it is formally
withdrawn.
• Making a Part 36 offer does not excuse a party from also considering mediation — they are
separate obligations (PGF II).
• If a claimant beats their own Part 36 offer at trial: the defendant pays enhanced interest and
indemnity costs from the relevant date.
• The offer must be a genuine attempt to settle — courts are alert to offers cynically designed just to
trigger Part 36 consequences.
• Review Part 36 offers regularly as the case and evidence develop.
Fixed costs (from October 2023)
Fixed costs now apply to fast track cases (up to £25,000) and intermediate track cases (up to
 £100,000). Specific fees are allowed for ADR in the intermediate track. This regime creates strong
financial pressure to settle early rather than build up litigation costs.

Qualified One-Way Costs Shifting (QOCS)

• Applies in personal injury and clinical negligence cases from April 2013.
• A claimant can recover costs if successful, but generally cannot be ordered to pay the defendant's
costs if the claim fails.
• QOCS protection is lost if the claim is struck out as having no reasonable grounds, as being an
abuse of process, or where the claim is found to be fundamentally dishonest.
Part 7 — Sanctions for Refusing ADR
Source: Sime, Blake & Browne — Chapter 11

What Sanctions Can the Court Impose?

• Deprive a winning party of all or part of their costs.
• Order a winning party to pay the other side's costs.
• Order costs on an indemnity basis — a higher rate, harder to reduce on detailed assessment.
• Award a higher rate of interest on damages, or deprive a party of interest.
• For small claims, fast track, and intermediate track cases subject to fixed costs: reduce or
increase fixed recoverable costs by 50% (CPR r 45.13).

The Halsey Factors — When Is Refusing ADR Unreasonable?

The leading case is Halsey v Milton Keynes NHS Trust [2004]. The party who lost at trial bears the
burden of showing that the winner's refusal to use ADR was unreasonable. The court considers all the
circumstances, with particular attention to:

1. The nature of the dispute

Most disputes are not inherently unsuitable for ADR. Refusal may be reasonable where: a pure point of
law must be decided by the court; a legal precedent is needed; fraud allegations require a trial; urgent
injunctive relief is essential; or the case is a test case.

2. The merits of the case

A party's reasonable belief in a strong case is relevant — otherwise ADR could be used to extract
nuisance settlements. However, a belief that you will win does not automatically justify refusing ADR,
particularly in borderline cases. As the court noted in DSN v Blackpool FC [2020]: 'No defence,
however strong, justifies on its own a failure to engage in any kind of ADR.'

3. Other settlement attempts

Making a Part 36 offer is relevant but does not substitute for mediation. Mediation can succeed where
direct negotiation has already failed. Both parties must proactively attempt settlement throughout the
case — not just at the beginning.

4. The cost of ADR

Rarely a good reason to refuse, particularly in small claims (free mediation scheme available) or fast
track cases (fixed-fee mediations available at low cost).

5. Delay or prejudice
A proposal made very close to trial (e.g. two to three weeks before) may make refusal reasonable, as
ADR at that stage would likely require the trial to be vacated.
6. Reasonable prospect of success
The burden is on the party seeking the costs sanction to show that ADR had a reasonable prospect of
success — not that it would definitely have succeeded. This is a low threshold and should not be
difficult to satisfy in most cases.

When Courts Have Accepted Refusal as Reasonable

• The relationship between the parties was so damaged that mediation had no realistic prospect.
• One party was incapable of a balanced assessment of the facts.
• The claim was clearly unfounded and mediation was proposed only to extract a nuisance
payment.
• The parties were very far apart with no realistic room for compromise.
• ADR was proposed so close to trial that proceeding would have required vacating the trial date.
• Waiting for a key court decision first — e.g. an application to strike out the other side's case.
• Needing further expert evidence before a meaningful ADR process could take place.

Silence = Refusal — The PGF II Rule

Ignoring an ADR proposal without responding is treated as an outright refusal. This is itself
unreasonable conduct and can attract a costs sanction — even if there was actually a valid reason to
decline at the time. Courts will not accept retrospective justifications invented months later at a costs
hearing.

Key rule
Never ignore an ADR proposal. Respond promptly, in writing, with clear and full reasons. Failure to
respond will be treated as an outright refusal.

PGF II SA v OMFS [2013]: silence in the face of an ADR proposal is itself unreasonable conduct
meriting a costs sanction. Northamber v Genee World [2024]: Court of Appeal penalised a party for
silence and for breaching a court order requiring them to explain their failure to agree to mediation.

Prevarication — Dragging Feet

Even if a party eventually agrees to use ADR, unreasonable delay in responding, or creating difficulties
over finding a mutually convenient date, can attract a costs sanction. Both parties must get on with it
promptly once ADR is clearly appropriate.
Thakkar v Patel [2017] (Jackson LJ): 'It behoves both parties to get on with it. If one party frustrates
the process by delaying and dragging its feet for no good reason, that will merit a costs sanction.' The
defendant was ordered to pay 75% of the claimant's costs despite the claimant failing to beat the
defendant's settlement offer.

Backing Out of Agreed ADR

• Agreeing to mediate and then pulling out shortly before it is due to take place is likely to attract a
costs sanction.
 • Once a party has agreed to mediate, it is very difficult to argue later that it had no realistic
prospect of success.
• Examples: withdrawing the day before on insurer instructions (costs penalty); pulling out two days
before the agreed date (costs of appeal denied); withdrawing days before and being ordered to
pay costs thrown away by the late cancellation.

When Both Parties Are at Fault

If both parties behaved unreasonably in relation to ADR, the court may refuse to make any costs order
at all — whatever the outcome of the case. A court will not penalise the winner for refusing ADR if the
other party was equally unreasonable.
Rolf v De Guerin [2011]: no costs order made where the claimant barely won and the defendant had
unreasonably refused all offers to negotiate or mediate before trial.

Indemnity Costs — When Is Conduct Serious Enough?

• Indemnity costs require unreasonable conduct 'to a high degree' — conduct that takes the case
outside the normal and reasonable conduct of proceedings.
• Refusing ADR despite a direct court order to engage — high risk of indemnity costs order.
• Failing to accept a reasonable offer that should obviously have been accepted.
• Reneging on a settlement agreement reached in mediation.
• Refusing to file a witness statement explaining why ADR was refused, in breach of a court order.
• Issuing proceedings during a mediation without prior warning.

Without Prejudice Privilege and Sanctions

What IS protected What is NOT protected

• All communications made within an ADR • Correspondence exploring whether to use
process ADR — this is usually open
• The court will not investigate why a • A letter marked 'without prejudice' that
mediation failed contains no specific offer
• Without-prejudice material cannot support • Proposing mediation in general terms does
an indemnity costs application unless not attract privilege
privilege is waived

How to Mark Correspondence Correctly

• Mark ADR proposals 'without prejudice except as to costs' if you want the court to see them when
costs are argued.
• If marked simply 'without prejudice', the court may not be able to look at the correspondence at all
on costs.
• Sending as an open letter is often the better approach for ADR proposals.
• Privilege can only be waived if all parties to the communication consent.
Jones v Tracey [2023]: a letter proposing ADR marked 'without prejudice' was held to be open — it
contained no specific offer, so the privilege label did not apply. Correspondence exploring whether to
 mediate is not the same as making an offer in mediation.

Checklist — Responding to an ADR Proposal

Always do this Never do this

• Respond promptly — never ignore it • Ignore the proposal — silence = refusal =
• Reply in writing with clear, full reasons if potential sanction
declining • Give vague or unsupported reasons for
• Mark your reply 'open' or 'without prejudice declining
except as to costs' • Write a reply that closes off ADR entirely at
• Keep a dated record of all ADR-related any future stage
correspondence • Construct retrospective justifications
• Leave open the possibility of ADR at a later months later at a costs hearing
stage • Back out of agreed ADR without good
reason close to the agreed date
Part 8 — ADR and Active Case Management
Source: White Book (Civil Procedure), Volume 2, para. 14-1

Background — From Halsey to Churchill

For nearly twenty years after Halsey [2004], it was accepted that courts could encourage ADR but
could not mandate it. Halsey itself said — in a statement that was technically obiter (not strictly
necessary to the decision) — that ordering unwilling parties to mediate would impose an unacceptable
obstruction on their right to court access.

That position was reconsidered in Churchill v Merthyr Tydfil CBC [2023]. The Court of Appeal confirmed
that Halsey's comments on mandatory ADR were obiter and did not bind the courts. Churchill
established a new framework.

The Churchill rule

Courts can lawfully stay proceedings for, or order, the parties to engage in a non-court-based ADR
process, provided that: (1) the order does not remove the very essence of the claimant's right to
proceed to a judicial hearing; and (2) the order is proportionate to achieving fair, quick and cost-
effective resolution of the dispute.

Important limit
Churchill does not authorise courts to mandate a binding ADR process such as arbitration. Mandatory
binding ADR would remove the claimant's right to a hearing and would not satisfy the Churchill
provisos.

The October 2024 CPR Amendments

Following Churchill, the Civil Procedure Rules were amended with effect from 1 October 2024:
• CPR r 1.4(2)(e) now provides that active case management includes 'ordering or encouraging the
parties to use, and facilitating the use of, alternative dispute resolution'.
• CPR r 3.1(2)(o) — the court can order parties to engage in ADR.
• CPR r 3.1(2)(p) — the court can order Early Neutral Evaluation.
• CPR r 44.2(5)(e) — failure to comply with an ADR order, or unreasonable failure to engage with
ADR, is a relevant factor when the court makes a costs order.
• CPR r 29.2(1A) — when giving case management directions in a multi-track case, the court must
consider whether to order or encourage ADR.

The Court's Discretion — Factors to Consider

Churchill did not lay down fixed rules about when to order ADR. The court must consider all the
circumstances of each case. The Bar Council (intervening in Churchill) identified the following relevant
factors:
• The form of ADR being considered and whether it is suited to the dispute.
 • Whether the parties are legally represented — some ADR processes work better with
representation.
• Whether there is a realistic prospect that ADR would resolve or narrow the dispute.
• The urgency of the case and whether ADR would cause harmful delay.
• Whether any delay would affect limitation or prejudice a party's position.
• The cost of ADR in absolute terms and relative to the value of the claim and the parties'
resources.
• Whether there is a significant imbalance in bargaining power or resources between the parties.
• The reasons given for not wishing to use ADR — e.g. a recent unsuccessful attempt is a
legitimate reason.
• Whether it was made clear to the parties that they remain free to pursue their case if ADR does
not resolve it.
• The reasonableness and proportionality of any sanction for non-compliance.

DKH Retail Ltd v City Football Group Ltd [2024]: the court ordered mediation just before trial despite
the defendant's objection. The court noted: 'Experience shows that mediation is capable of cracking
even the hardest nuts.' The case settled.

The Parties' Continuing Duty

The parties' duty to consider ADR is not a one-off obligation — it is a continuing duty throughout the
litigation. It arises at every stage and is not discharged simply because ADR was considered and
rejected at an earlier point in the case.
Garritt-Critchley v Ronnan [2014]: the duty to consider ADR continues throughout the litigation and is
not a one-time obligation. OMV Petrom SA v Glencore [2017]: parties are 'obliged to conduct litigation
collaboratively and to engage constructively in a settlement process'.

The Timing of ADR — Case Management Guidance

Timing is one of the most important questions in ADR strategy. The case law consistently identifies the
same tension:
• Too early — issues may not be clear, positions may not be formed, and a failed ADR attempt can
harden attitudes on both sides.
• Too late — costs have accumulated to a level where they themselves become an obstacle to
settlement.

The judicial view on timing

Nigel Witham Ltd v Smith [2008] (Coulson J): 'The trick in many cases was to identify the happy
medium: the point when the detail of the claim and the response were known to both sides, but before
the costs that had been incurred in reaching that stage were so great that a settlement was no longer
possible.' Ivey v Lythgoe [2025]: 'The best chance of resolving the matter will come earlier, when fewer
costs have been incurred, compared to later.'

Using ADR for Discrete Issues — Not Just the Whole Case
ADR does not have to aim at settling the entire claim. Courts have increasingly ordered or encouraged
ADR to resolve specific issues within a case, including:
• Agreeing a complex costs budget — avoiding a lengthy Costs and Case Management Conference
(CCMC).
• Agreeing a bill of costs — avoiding a detailed assessment hearing.
• Resolving particular factual or expert issues — narrowing what needs to be tried.
• Settling multi-party cases in stages — the Grenfell Tower Litigation is a notable example of
sophisticated use of ADR within complex group litigation.

Grenfell Tower Litigation [2022] — Senior Master Fontaine: 'I consider that the ADR process being
established is the obviously appropriate course to attempt before proceeding with litigation involving
more than 1,000 Claimants and multiple Defendants.'

How the Court Facilitates ADR in Practice

The court has a wide toolkit. Methods include:
• Staying proceedings — the most direct intervention, allowing a defined period for ADR.
• Issuing standard directions — Model Paragraph A03 requires any party refusing ADR to serve a
witness statement giving reasons within 21 days.
• Ordering Early Neutral Evaluation (ENE) — even without consent of all parties (CPR r 3.1(2)(p);
Lomax v Lomax [2019]).
• Ordering a Chancery Financial Dispute Resolution (Chancery FDR) or judge-led ENE in
appropriate cases.
• Refusing applications unless ADR is first attempted.
• Ordering a preliminary issue to be tried first, with a view to the rest of the case then going to ADR.
• Making a costs order (or warning of a future costs order) for failure to engage with ADR pre-
action.
• Using the Commercial Court, TCC, or Chancery Guide ADR order templates.

The Personal and Emotional Dimension

Courts now expressly recognise that ADR's benefits extend beyond saving costs and court time. The
impact of litigation on the parties themselves is a legitimate case management consideration.
• A party who conducts litigation in a way that prolongs and exacerbates the other side's distress
can face a financial penalty (Bell v Commissioner of Police of the Metropolis [2024]).
• Courts recommend mediation to avoid 'further costly and emotionally wearing court hearings'
(Rogers v Wills [2025]).
• Even in the most serious cases — including medical treatment disputes for children — mediation
is ordered because it can 'achieve a greater understanding by the parties of each other's
positions' and reduce distress, even where it does not achieve settlement (Great Ormond Street
Hospital v Yates [2017]).

Public Authorities and ADR

Public authorities face particular scrutiny when they fail to use ADR. The courts have repeatedly
emphasised that, where public money is involved, the failure to use ADR is difficult to justify.
R (Cowl) v Plymouth City Council [2001]: the Court of Appeal required the High Court to scrutinise
ADR proposals in disputes between public authorities and members of the public. The court noted that
insufficient attention was being paid to resolving such disputes without recourse to judicial review.
Lord Woolf: 'Today, sufficient should be known about alternative dispute resolution to make the failure
to adopt it, in particular when public money is involved, indefensible.'
Part 9 — Pre-Action Conduct and Protocols
Source: White Book (Civil Procedure), Volume 1 — Practice Direction on Pre-Action Conduct and
Protocols; Pre-Action Protocol for Personal Injury Claims

Section A — The Practice Direction on Pre-Action Conduct

What This Practice Direction Is

Before anyone issues a claim, the courts expect both parties to have already taken steps to try to
resolve the dispute. This Practice Direction sets out the general rules governing pre-action conduct for
all civil disputes where no specific approved protocol applies. It sits behind and supports all the specific
protocols.

The Six Objectives of Pre-Action Conduct

Before commencing proceedings, the court expects parties to have taken steps sufficient to:
• Understand each other's position.
• Make informed decisions about how to proceed.
• Try to settle the issues without proceedings.
• Consider ADR as a means of achieving settlement.
• Support efficient case management if proceedings do become necessary.
• Reduce the overall cost of resolving the dispute.

The Steps Required

Where no specific protocol applies, the parties should take the following steps, proportionate to the
circumstances:
• The claimant sends a clear letter setting out: the basis of the claim; a summary of the facts; what
the claimant wants; and if money, how the amount is calculated.
• The defendant responds within a reasonable time: 14 days for a straightforward case; up to 3
months for a complex one. The response must say whether the claim is accepted or disputed, and
if disputed, explain why.
• Both parties disclose key documents relevant to the dispute.
• Both parties consider whether ADR could resolve the dispute without proceedings.

Proportionality rule
The pre-action process must not be used as a tactical device. Only reasonable and proportionate
steps should be taken. Disproportionate pre-action costs will not be recoverable as part of the costs of
the proceedings.

Experts
Parties should be aware that court permission is needed before expert evidence can be relied upon
(CPR r 35.4). In low-value claims, consider using a single jointly instructed expert with costs shared
equally.

ADR — Litigation as a Last Resort

The Practice Direction is explicit: litigation should be a last resort. Parties must consider ADR at the
pre-action stage and must continue to consider it even after proceedings are issued. Options include
negotiation, mediation, arbitration, ENE, and ombudsman schemes.

What happens if ADR is ignored

If proceedings are issued, the court may require evidence that ADR was considered. Silence in
response to an ADR invitation, or unreasonable refusal to participate, can lead to the court ordering
the party at fault to pay additional costs.

The Stocktake
Where the dispute has not been resolved after following the pre-action steps, both parties should
review their positions — looking at all the papers and evidence — to see whether proceedings can still
be avoided, and at minimum to narrow the issues before the claim is issued.

Consequences of Non-Compliance
If a party fails to comply with the Practice Direction, the court may:
• Stay the proceedings while the required steps are taken.
• Order the non-complying party to pay some or all of the other party's costs.
• Order those costs to be paid on an indemnity basis.
• If the non-complying party is the claimant: deprive them of interest, or award interest at a lower
rate.
• If the non-complying party is the defendant: order interest on damages at up to 10% above base
rate.

Limitation periods are not extended

The Practice Direction does not alter statutory time limits. If a claim is close to becoming time-barred,
issue proceedings to protect the position — then apply to the court for a stay while the pre-action steps
are followed.

The 18 Specific Approved Protocols

There are currently 18 specific pre-action protocols approved by the Master of the Rolls, covering areas
including:
• Personal injury (general fast track cases).
• Low-value road traffic accident personal injury claims.
• Low-value employers' liability and public liability personal injury claims.
• Resolution of clinical disputes.
• Construction and engineering.
• Professional negligence.
 • Judicial review.
• Disease and illness.
• Housing condition claims.
• Possession claims by social landlords and for mortgage arrears.
• Debt claims.
• Package travel claims.
• Media and communications claims.

Section B — Pre-Action Protocol for Personal Injury Claims

What It Covers
This is the specific protocol for personal injury claims likely to be allocated to the fast track — broadly,
claims up to £25,000. It does not apply to low-value RTA portal claims, clinical negligence, disease and
illness claims, or the RTA small claims protocol. The general approach should still be followed in
higher-value cases not covered by another protocol.

The Aims of the Protocol

• Encourage early and full exchange of information about the dispute.
• Promote better pre-action investigation by all parties.
• Enable the parties to avoid litigation by settling before proceedings are issued.
• Support efficient management of proceedings where litigation cannot be avoided.
• Promote early medical and rehabilitation treatment for the claimant — not just in high-value cases.

Step 1 — Letter of Notification (optional)

The claimant may send an early notification letter before the full Letter of Claim is ready — for example,
where the defendant has limited knowledge of the incident, or where the claimant needs rehabilitation
funding quickly. This does not start the formal response timetable but must be acknowledged within 14
days.

Step 2 — Rehabilitation (ongoing obligation)

The parties must consider, as early as possible and throughout the entire protocol period, whether the
claimant has needs that could be met by medical treatment or rehabilitation. The Rehabilitation Code
provides a framework for identifying and addressing those needs. Any rehabilitation assessment
document obtained for this purpose is not to be used in litigation (except by consent) and the assessor
cannot be called as a witness.

Step 3 — Letter of Claim

The claimant sends two copies of the Letter of Claim to the defendant — one for the defendant, one to
be passed to the insurer within 7 days. The letter must include:
• A clear summary of the facts.
• The nature of the injuries and their impact on daily life and prognosis.
• An outline of financial losses.
• Enough information for the defendant to assess liability and estimate the likely value of the claim.
Once the Letter of Claim is sent, no further liability investigation is required until the defendant's
response is received.

Step 4 — The Response

• The defendant must acknowledge the Letter of Claim within 21 days (42 days for overseas
claims).
• The defendant then has up to 3 months from acknowledgment (6 months for overseas claims) to
investigate and respond fully.
• If liability is admitted, the admission should say: the accident occurred; it was caused by the
defendant's breach of duty; the claimant suffered loss; and there is no limitation defence.
• If liability is denied, the defendant must give its version of events and disclose relevant documents
in its possession.
Pre-action admissions
An admission made under this protocol may bind the party in subsequent litigation. Court permission is
required to withdraw an admission once proceedings have been issued.

Step 5 — Expert Evidence

Parties should try to agree on the expert to be used before instructing one. The claimant nominates one
or more experts; the defendant has 14 days to object. If a mutually acceptable expert is agreed, the
defendant cannot later instruct its own expert in that field without court permission or the claimant's
agreement.

For whiplash injury claims specifically:

• Medical reports must be obtained through MedCo — a regulated online database of accredited
medical reporting organisations.
• No offers may be made or accepted on the whiplash element of a claim until a fixed-cost medical
report from a MedCo-accredited expert has been disclosed.
• Whiplash injury tariffs set by the Whiplash Injury Regulations 2021 apply to claims arising from
road traffic accidents after 31 May 2021.

Step 6 — Negotiations and ADR

Once liability is admitted, the claimant sends the defendant all relevant medical reports and a schedule
of past and future losses. The claimant should then wait 21 days before issuing proceedings, to allow
the parties to negotiate a settlement.

The protocol expressly states that litigation should be a last resort. Parties must consider:
• Negotiation (including Part 36 offers and apologies).
• Mediation.
• Arbitration.
• Early neutral evaluation.

ADR and the court's power to mandate

The protocol's statement that 'no party can or should be forced to mediate' must now be read in light of
the October 2024 CPR amendments following Churchill. Courts now have express power to order
 parties to engage in ADR, including mediation.

Step 7 — Quantification of Loss

Once the defendant admits liability, the claimant must send a schedule of past and future losses as
soon as reasonably practicable. The schedule should be as detailed as possible, identify ongoing
losses, and be updated as the case progresses. The claimant should keep the defendant informed of
the ongoing rate of financial loss throughout the protocol period.

Step 8 — Stocktake
If the protocol has not produced a settlement, both parties should review their positions — assessing
the strengths and weaknesses of their case — and together consider whether litigation can still be
avoided or the issues narrowed before a claim is issued.

Where the defendant is insured, the claimant or their solicitor should invite the insurer to nominate
solicitors to act in proceedings 7 to 14 days before the intended issue date.

The Protocol Flowchart (Annex A)

The protocol includes an illustrative flowchart (Annex A) showing the likely progression of a personal
injury claim from initial instructions through to issue of proceedings, including the key decision points,
time limits, and parallel rehabilitation and settlement tracks.