knowledge 15 December 2015 |

Court Invitations to ADR: Court must have regard to complexity and cost of mediation and suitability for the case

The plaintiffs owned an oyster fishery in Cork Harbour. It was alleged that the fishery had been contaminated by the discharge of inadequately treated sewage in the vicinity of the oyster beds. A first set of proceedings against Cork County Council and the Minister for the Marine had been settled. A second set had then been brought seeking damages and a declaration that the defendants had repudiated the settlement. Additional State defendants had been joined and the plaintiffs had also sought a declaration that the original foreshore licence granted to the council had been ultra vires the power of the Minister, unconstitutional, in breach of the Foreshore Act 1933 and null and void. The plaintiffs had also raised issues in relation to the Minister’s wider duty of care when granting a foreshore licence. The court had previously ordered, on the agreement of the parties, that the issue of liability should be first determined, leaving the issue of quantum over pending that decision. The plaintiffs had subsequently invited the defendants to mediate the dispute. While the council was generally willing to do so, the State defendants had declined. The plaintiffs brought an application under Order 56A RSC.

Court power to invite parties to use ADR process

Order 56A rule 2(1) provides that:

“The Court, on the application of any of the parties or of its own motion, may, when it considers it appropriate and having regard to all the circumstances of the case, order that proceedings or any issue therein be adjourned for such time as the Court considers just and convenient and… invite the parties to use an ADR process to settle or determine the proceedings or issue…”

However, this provision comes with a sting in the tail in the form of Order 99 rule 1B. This provides that the court, when awarding the costs of any action or appeal, may where it considers it just, have regard to the refusal or failure of any party without good reason to participate in any ADR process where invited to do so by the court. This exposes a party to the risk that, even if successful in the proceedings, they may fail to obtain an order for their full costs as the court may conclude that their refusal to engage in ADR was unreasonable.

In bringing the application, the plaintiffs argued that the proceedings could substantially benefit from mediation, if only to narrow the issues for trial.

However, the State defendants argued that mediation was inappropriate having regard to the disputed legal issues which should be determined by a court and that the plaintiffs knew that, given the nature of the dispute, the State defendants could not reasonably be expected to mediate and that the application would trigger the plaintiffs’ entitlement to argue that they should not pay the full costs of the proceedings if their claim failed against those defendants.

Decision

Irvine J observed that the rule was written in fairly neutral language. It did not seek to impose any particular burden on either party.

She said the court should only exercise its discretion to invite the parties to use an ADR process if it considered it “appropriate” to do so having regard to all of the circumstances of the case. This meant that the court should be satisfied that the issues in dispute were amenable to the type of ADR proposed. Only if satisfied on this point need the judge consider any other “circumstances of the case” that might weigh for or against granting relief. It would be a waste of the court’s time to consider such ancillary circumstances unless first satisfied that the ADR process had a realistic prospect of resolving or substantially narrowing the issues in dispute. This approach was supported by the language of the rule whereby the parties could be invited to use an ADR process to “settle or determine the proceedings or issue”. It could be inferred from these words that the court, when exercising its discretion, ought to be satisfied that the ADR process proposed was one which was capable of determining the proceedings or the issues between the parties.

If the judge answered this first question in favour of the applicant, the court should then consider any other relevant circumstances such as whether the application was bona fide or for the sole purposes of triggering the costs provisions in Order 99 rule 1B. The court should not make the order if satisfied that the application was brought by a party who knew that an invitation would for good reason be refused and/or where satisfied that the applicant had no real interest in the ADR proposed but was motivated by knowing that the refusal would allow them proceed to trial while holding the sword of Damocles over their opponent until the very end of the litigation.

The court might be influenced by the following and other factors:

• the manner in which the parties had conducted the litigation up to the date of the application;
• the existence of any relevant interlocutory orders;
• the nature and potential expense of the proposed ADR;
• the likely effect of the order on the progress of the litigation if the ADR was unsuccessful;
• the potential saving in time and costs that might result from the acceptance of an invitation;
• the extent to which ADR could or might potentially narrow the issues;
• any proposals from the applicant concerning the issues that might be dealt with in the ADR; and
• any proposals as to how the costs of such a process might be borne.

Application of principles to current case

The plaintiffs had raised a novel point of law against the State defendants and it was unclear how mediation could determine any of the legal issues unless the State abandoned its defence to the issues of liability. It was not unreasonable for the party against whom complex legal claims had been made to maintain its entitlement to have those issues resolved by the court.

In addition, the parties had agreed to a split trial on the issues of liability and quantum. The claim for damages was very complex and could not readily be met by the State defendants without incurring substantial costs. It was wholly unreasonable to expect them to accept an invitation to mediate when, depending on the outcome of the liability issues, they might never have to address the damages claim at all.

The mediation would undoubtedly be complex, time consuming and expensive. The costs burden likely to be borne by the party who was reluctant to engage with that process should be taken into account by the court when deciding how to exercise its discretion. An unsuccessful mediation could add a very significant additional layer to the costs of the proceedings. The party who ultimately lost the litigation would likely have to bear those additional costs. Even a party who was successful in the litigation might be adversely affected if their opponent was not a sound mark for the additional costs incurred.

The extent to which the costs of the proposed mediation should weigh on the court’s mind should be proportionate to their scale. Here the proposed mediation would not be short. Even after the significant preparation and substantial expenditure associated with the damages issue, the mediation could take a significant amount of time. The defendants would be expected to pay substantial sums, not only for their own legal and other costs, but also for the mediator’s fees and all at a time when it was anticipated that the liability issues between the plaintiffs and the State defendants were likely to be determined shortly by the courts. For all of these reasons an invitation to mediate under Order 56A would not be appropriate.

Comment

The introduction of Order 56A reflects an evolving policy to encourage the increased use of ADR. The courts will carefully consider the circumstances of each individual case before inviting parties to participate in an ADR process and will be alive to potential abuse of the provision and will have to be satisfied that the issues in dispute are reasonably suitable to resolution by ADR.