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ADR invitations not always appropriate
PRACTICE AREA GROUP: Commercial Litigation and Dispute Resolution
Under the Rules of the Superior Courts, the High Court can invite parties to litigation to engage in a process of alternative dispute resolution (ADR) – defined in the rules to encompass conciliation and mediation. The Court of Appeal(1) has confirmed that although ADR is worthwhile in many cases, it is inappropriate for a direction to be made inviting the parties to mediate in all cases.
The underlying dispute between the parties related to the effects of sewage discharge on the plaintiffs' oyster fishery. Ultimately, the plaintiffs had to cease operations due factors allegedly relating to the sewage discharge and brought proceedings for losses incurred. During early Summer 2014, the plaintiffs invited the defendants to participate in a process of mediation, which the defendants declined. Consequently, the plaintiffs applied for an order from the High Court inviting the parties to mediate. In the affidavit grounding the motion, the plaintiffs' solicitor posited that the proceedings "could substantially benefit from mediation, if only to narrow the issues for trial". Judge Gilligan refused to exercise his discretion to invite the parties to mediate on the basis that the purpose of the plaintiffs' application was artificial. He felt that the plaintiffs knew that an invitation to mediate would be rejected even if an order were made and that the plaintiffs' real purpose was to seek to "copper fasten" their position with regard to a future application for costs. The plaintiffs appealed.
Order 56A, Rule 2(1) provides:
"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:
(i) invite the parties to use an ADR process to settle or determine the proceedings or issue, or
(ii) where the parties consent, refer the proceedings or issue to such process,
and may, for the purposes of such invitation or reference, invite the parties to attend such information session on the use of mediation, if any, as the Court may specify."
Order 99, Rule 1B further provides:
"in considering the awarding of the costs of any appeal or of any action, [the court] may, where it considers it just, have regard to the refusal or failure without good reason of any party to participate in any ADR process referred to in Order 56A, rule 1, where an order has been made under rule 2 of that Order in the proceedings."
The Court of Appeal decision was issued by Judge Irvine, who considered the principles to be applied. She felt that it was clear from the language used in Order 56A that the court should exercise its discretion only if it considers it "appropriate" to do so, "having regard to all of the circumstances of the case". She went on to opine that the court should not determine it "appropriate" to make such an order, unless it is first satisfied that the issues in dispute between the parties are amenable to the type of ADR process proposed. In this regard, she noted that Order 56A, Rule 1(i) envisages the court inviting the parties to use ADR to "settle or determine the proceedings or issue", from which she said it could be inferred that, in exercising its discretion, the court should be satisfied that the ADR process proposed is capable of determining the proceedings or issues between the parties.
If this is answered in the affirmative, the court must move on to consider other relevant circumstances, which may include considering whether the application is made bona fide in the belief that issues can be disposed of and that the applicant will genuinely engage, instead of it being made with a view to triggering the costs provisions arising from a counterparty's refusal to accept the invitation made by the court.
Without seeking to anticipate the wide range of circumstances relevant to the exercise of discretion, Irvine opined that the following factors could influence a court:
- the manner in which the parties had conducted the litigation up to the date of the application;
- the existence of any interlocutory orders;
- the nature and potential expense of the proposed ADR;
- the likely effect of making the order sought on the progress of the litigation, should the invitation be accepted and the ADR prove unsuccessful;
- the potential savings in time and costs that might result from acceptance of the invitation;
- the extent to which ADR can or might potentially narrow the issues between the parties;
- any proposals made by the applicant concerning issues that might be dealt with in the course of the ADR; and
- any proposals as to how the costs of such a process might be borne.
Taking all of these into account, and relying on the fact that the plaintiffs had raised a "particularly novel point of law" which was "complex" and had "ramifications that extend well beyond the confines of the proceedings", Irvine felt that it was inappropriate to invite the parties to mediate and upheld the High Court ruling. Irvine said that she could not see how mediation could determine any of the legal issues, unless the defendants were prepared to abandon the defence on which they had relied from the outset. Moreover, given the novel and complicated issues involved, and the broader implications that the outcome of the proceedings would have, it was not unreasonable for the defendants to maintain their entitlement to have their obligations clarified by the court. Ultimately, the legal issues involved were not suited to an ADR process and the defendants' opposition was entirely bona fide.
Although Irvine acknowledged that in many cases "mediation is a thousand times more preferable than litigation",(2) there are still cases where, because of the legal issues involved, it would be inappropriate to invite parties to mediate under Order 56A. Although she observed that, due to the scarcity of judicial resources, "it behoves the Court proactively to encourage parties to try, wherever possible, to resolve their disputes through participation in the ADR process", this case was an exception.
The decision identifies (albeit non-exhaustively) the circumstances that the court may consider when faced with an application to issue an invitation to mediate under Order 56A. While the decision acknowledges the importance of ADR in resolving disputes, and accepts that in many cases invitations under Order 56A might issue, it is not true for all cases. This case is one such example where the novelty of the legal issues involved and the broader ramifications of the ultimate determination mean that making the order sought is inappropriate. Before considering making an application for such an order, a party should consider not only the issues and ramifications of the case, but also the other circumstances enumerated by Irvine.
(1) Atlantic Shell Fish Ltd v Cork County Council  IECA 283.
(2) Citing Judge Hogan from Lyons & Murray v Financial Services Ombudsman  IEHC 454.
This article first appeared in the International Law Office Litigation newsletter, 22 March 2016.