Practico Blog: Assessment v ADR

I have begun to wonder whether the pressure to pursue Alternative Dispute Resolution (ADR) and use detailed assessment only as a last resort is always for the best – and by ‘best’ I mean most cost-efficient.

One of our clients tended to go by the adage that there is no such thing as a bad settlement – but the process can become a significant additional drain on costs. Position statements for mediation can be lengthy, more so if mediation takes place before exchange of points of dispute and replies. And if mediation happens after exchange the costs of detailed assessment are already significant. Neither scenario is inexpensive.

If direct negotiations and without prejudice (WP) discussions have been exhausted, in my experience mediation is the next most effective form of ADR in costs litigation.

Early neutral evaluation (ENE) by a costs judge is outside my current experience although I have long been an advocate of costs judges deciding preliminary issues when they will significantly narrow the parameters for recoverable costs. With ENE I foresee a risk that the parties may just identify those issues where they will need to sharpen their submissions for a full assessment before a different costs judge.

Many anticipated that ADR would receive a boost during lockdown, but it is notable how well the costs courts have adapted to remote hearings. An acceleration of the migration to using electronic bundles is also welcome. It adds to preparation time but increases efficiency and reduces opportunities for ambush during the assessment hearing itself.

There is no golden rule as to when assessment is preferable to ADR; but as a starting point I would suggest that when costs are below £1m and a court hearing could reasonably take up no more than two days, and when the gap between the parties’ WP or Part 36 positions exposes a gap in the range of 30-50% of the total claim, skipping over mediation and going straight to assessment can still satisfy the overriding objective – especially when one takes into account that ADR is not guaranteed to produce a settlement.

Also in the mix is the increased potential for online mediations to drift when the environmental pressure of being cooped up in meeting rooms for hours on end has been removed. Although anecdotal evidence suggests that clients quite like remote mediations because they are more comfortable remaining in their own environment, that doesn’t necessarily mean that more settlements are achieved.

Nevertheless, there is a tipping point when ADR will tend to trump assessment. Once the size of the claim is into seven figures, a skilled mediator with access to the parties’ WP positions will more easily be able to arrow in on the key issues and help to profile how best to compromise around the respective litigation risks. Much can be achieved in a one-day or two-day mediation that might take weeks to resolve in a detailed assessment hearing.

Being open-minded when evaluating the most efficient way to resolve costs litigation is important and the role that the court plays may become surprisingly resurgent.