BULLETIN: Mediation and ADR - Autumn 2013 update

Posted by Susie Dryden on

Welcome to the Autumn update from the Mediation and ADR team at Blake Morgan, in which we look at important mediation news and topical legal updates.

In this edition, we explore:

  • Claim struck out as unreasonable where full redress was available under ADR: Binns v Firstplus Financial Group Plc [2013] EWHC 2436
  • Alternative and online dispute resolution for European consumers
  • PD51I The Second Mediation Service Pilot Scheme
  • CEDR and CPR to jointly promote the CPR 21st Century Pledge

Claim struck out as unreasonable where full redress was available under ADR: Binns v Firstplus Financial Group Plc [2013] EWHC 2436

In the context of a recent payment protection insurance ('PPI') mis-selling claim, the High Court had to consider whether pursuing a claim was reasonable where full redress was available under an alternative dispute resolution ('ADR') scheme.

The claimants in this case had been mis-sold PPI relating to a credit agreement with Firstplus Financial Group Plc ('FFG'). They made a claim against FFG under an ADR scheme set up by the then Financial Services Authority ('the ADR scheme'), reserving the right to litigate. FFG accepted the complaint and offered a refund of the amount paid for the PPI plus interest.

The claimants sought to recover an additional sum for legal costs but FFG refused, following which a County Court claim was issued. FFG applied to strike out the claim on the grounds that it was an abuse of process as full redress had already been offered under the ADR scheme. The District Judge refused to strike out the claim as she was of the view that there was a prospect of further damages under the Consumer Credit Act 1974. FFG appealed arguing that the Court should not encourage expensive and unnecessary litigation.

The question before the High Court was whether there were reasonable grounds for bringing the claim when there had been an offer of speedy justice and a full redress under the ADR scheme. The appeal was allowed and the claim was struck out as unreasonable on the following grounds:

(a) Where there has been a perfectly acceptable means of redress offered under an ADR scheme, a court claim will only be allowed if there are realistic prospects of obtaining larger amount of damages or other material advantage;

(b) Where the only advantage of issuing a court claim is the possibility of an award of costs, litigation should not be allowed to proceed as costs are not a part of the claim itself but an adjunct to it;

(c) "Where a person has already achieved all that they could upon any reasonable assessment of the case, it cannot be reasonable to add to the burden of the Court or the defendant by continuing litigation" (para 23);

(d) In this case, the ADR offer remained open. Had it been withdrawn, the claim would have been allowed to proceed, with the usual cost consequences of refusing to pursue ADR.

Whilst this case is fact specific to PPI it can have wider applicability to other ADR forms. In the wake of the Jackson reforms to civil litigation, it provides a timely reminder that courts will be reluctant to allow costs to be incurred unnecessarily. The case is also a reminder that courts have a duty to encourage ADR. Any unreasonable refusal to use ADR may have costs consequences.

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Alternative and online dispute resolution for European consumers

Following our previous update on this topic, on 18 June 2013, Regulation (EU) 524/2013 of the European Parliament and of the Council on online dispute resolution for consumer disputes ('ODR Regulation') and Directive 2013/11/EU of the European Parliament and of the Council on alternative dispute resolution for consumer disputes ('ADR Directive'), were published in the Official Journal.

The two legislative acts ent ered into force on 8 July 2013 and aim to offer faster, easier and cheaper out-of-court settlement procedures for resolving disputes between consumers and traders concerning the sale of goods and services.

The ODR Regulation (with a few exceptions) will apply from 9 January 2016. The ADR Directive must be implemented into domestic law by Member States no later than 9 July 2015.

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PD51I The Second Mediation Service Pilot Scheme

The latest update to the Civil Procedure Rules (CPR) saw the extension of the Second Mediation Service Pilot Scheme (PD 51I) for further 6 months. The scheme, which was initially intended to run until 30 September 2013, has now been extended until 31 March 2014. This change will have effect from 29 September 2013.

The Scheme is intended to operate in the County Court Money Claims Centre ('CMCC'), the Production Centre and Money Claim Online ('MCOL') service and follows a six-month Mediation Service Pilot Scheme (Practice Direction 51H) which was first introduced in October 2012.

The Scheme applies to claims issued at the CMCC, the Production Centre or MCOL with a value of up to £10,000, where both parties have indicated their willingness to mediate. The scheme excludes road traffic accident, personal injury or housing disrepair claims.

If the claim is settled through mediation, the proceedings will be stayed automatically. The parties will then have liberty to apply to bring the settlement into effect, unless they agree that the claim should be dismissed or discontinued.

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CEDR and CPR to jointly promote the CPR 21st Century Pledge

On 20 August 2013, the International Institute for Conflict Prevention and Resolution ('CPR') and the Centre for Effective Dispute Resolution ('CEDR') announced that CEDR will be CPR’s exclusive 21st Century Corporate Pledge Partner in the United Kingdom.

The 21st Century Corporate ADR Pledge provides for signatories to commit to managing and resolving disputes through negotiation, mediation and other ADR processes when appropriate.

The two organisations have agreed to jointly promote the CPR 21st Century Pledge and to collaborate on programs and initiatives to further the goals of the Pledge.

Further information is available on the CEDR website.

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About the Author

Susie heads the Commercial Litigation team on the South Coast. The team were rated number one in the area (Southampton and surrounds) for Dispute Resolution in Chambers 2013.

Susie Dryden
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023 8085 7159

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