A recent ruling in the Court of Appeal could make the use of alternative dispute resolution methods more widespread, particularly in trust and probate disputes. James Seed, a legal director at Gateley Legal, explains what this could mean for financial advisers and their clients.
A form of alternative (i.e. non-court-based) dispute resolution, mediation has been around in England and Wales since the early 1990s. It involves parties working with an intermediary to find a solution to a dispute, without involving the courts.
Its use is also increasing, both in commercial disputes and contentious trust and probate disputes, as it avoids the lengthy, expensive, and sometimes emotionally straining process of legal proceedings.
The success rate of mediation is also high. According to a survey by the Family Mediation Council, 70 per cent of mediations are successful, with parties negotiating and agreeing terms that are acceptable to everyone.
Encouraged or required?
The benefits of mediation, both for the courts and for the parties involved, have meant its use is frequently encouraged.
Standard court forms and questionnaires that parties must complete when seeking a timetable to trial, for example, often explicitly provide for parties to request a one month stay (or pause) where attempted negotiation, or another form of alternative dispute resolution, is desired.
The courts can also give directions to stay proceedings so that parties can explore a possible settlement outside of the courtroom.
Participation in mediation, however, has historically been voluntary, and depends on the agreement of both sides. This has been a barrier to its more widespread adoption, particularly as the courts have often been unwilling to compel mediation during proceedings.
This unwillingness stems from a ruling made in 2004 by Lord Justice Dyson in the case of Halsey v Milton Keynes General NHS Trust. According to Lord Justice Dyson: “To oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the court.”
Unwilling parties, particularly those with strong claims, have also been able to ‘dig their heels in’ and insist on fighting to trial, safe in the knowledge that the usual costs order in favour of
the winner of the litigation is rarely reversed to punish a successful party for rejecting alternative dispute resolution at an earlier stage.
Mediation at the court’s discretion
This could be about to change, however. On 29 November 2023, a much-anticipated decision was made in the Court of Appeal regarding the case of Churchill v Merthyr Tydfil County Borough Council.
This concerned whether the court should use its discretion to order a stay in litigation proceedings and require the claimant to follow the defendant’s alternative dispute resolution procedure first.
As part of this judgment, the Court clarified several points concerning mediation and active case management at an early stage of litigation, including whether Lord Justice Dyson’s comments in Halsey bound judges to refrain from ordering parties to engage in alternative dispute resolution.
According to the Court of Appeal, judges do have the power, and discretion, to order parties to engage in a non-court-based dispute resolution process, albeit without impairing a party’s right to a fair trial within a reasonable time under Article 6 of the European Convention on Human Rights (EHRC). Orders must also be proportionate to achieving the legitimate aim of settling a dispute fairly, quickly, and at reasonable cost.
As such, the courts need to exercise their discretion based on specific facts of the case, such as urgency of resolution, the reasonableness of any delay, and the costs involved. According to the Court of Appeal, there are no fixed principles on which the court must decide these matters, leaving such a decision to a judge’s wide discretion.
Good news for IFAs
Following the Churchill decision, it’s safe to assume that the use of stays for compulsory mediation is likely to increase.
For financial advisers and their clients, particularly those facing issues and disputes relating to contentious trust and probate, this may help to avoid the financial ‘black hole’ that litigation is perceived to be.
More parties involved in disputes may now be given the opportunity to settle their differences outside of court by a formal, tried and tested process such as mediation, an attractive option to add to the otherwise stark choice between costly legal proceedings or simply throwing in the towel.
Based on mediation’s already high success rates, this may lead to an increase in the number of early settlements, while making it harder for stubborn, intransigent parties to resist invitations to alternative dispute resolution, and thus ramp up costs.
Financial advisers whose clients are facing contentious trust and probate disputes should, therefore, seek early strategic advice from private wealth litigators – ideally, those that specialise in both litigation and mediation. In doing so, financial advisers can be sure that they, and their clients, get the best possible result from a dispute, whether it is resolved in a courtroom, or outside of one.
