England and Wales High Court (Family Division) Decisions

IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		05/03/2014

Mr Justice Mostyn :

1. In this case the original consent order for ancillary relief was made as long ago as 8 April 1999. Each party applied to vary it, and in the case of the wife she applied for the maintenance order to be capitalised. On 11 May 2005 Charles J handed down a full judgment disposing of the cross-applications. He ordered the husband to pay a lump sum of £1.3m on a clean break basis; to pay child support; and, together with a company owned and controlled by him, to pay costs of £324,000. The husband sought leave to appeal. Permission was granted on 13 October 2005 on terms that the husband provided security for costs. Thorpe LJ invited the parties to participate in the Court of Appeal mediation scheme. A mediation took place led by His Honour Clive Callman. An agreement was reached which substituted a new figure of £926,000 for the lump sum of £1.3m. The agreement was incorporated in a consent order made by Wall LJ on 21 January 2006. The new figure was to be paid in instalments. The first instalment was £700,000 and was to be paid by 31 December 2006. If an instalment was missed the mediated agreement and consent order of Wall LJ dissolved and the original order of Charles J revived in full. By 31 December 2006 the husband had paid only £315,000. Therefore the agreement and order of 21 January 2006 dissolved and the order of Charles J of 11 May 2005 revived.
2. On 21 April 2010 the wife issued a Statutory Demand for payment claiming that the husband owed her, with interest, just under £2m. The husband applied to set the demand aside. There were a number of hearings. Eventually the parties entered into an agreement on 2 November 2011 by which, inter alia, the wife withdrew the Statutory Demand. On that same day an order was made in the Court of Appeal discontinuing the husband's appeal.
3. The agreement of 2 November 2011 ran to 3½ pages. It states on its face that each party had received legal advice. It was obviously drawn up by a lawyer. It was signed by each party and their signatures were witnessed by solicitors.
4. The first recital to the agreement states that:-

The Parties by the Agreement intend to set out their intention to use reasonable endeavours to attempt to compromise all existing legal disputes between them and to provide for the present and future maintenance of [the wife].

In the definition section "the Mediation" is defined as "a mediation in which the parties intend to participate by the 31 January 2012, on the terms set out below." "The Balance" is defined as "such sum as represents the outstanding balance of monies due under the lump sum award together with interest accrued or accruing, if any, as the parties shall attempt to agree under clause 4."

5. Clause 1 of the agreement recorded that the parties intended the agreement to be binding. By Clauses 2 and 3 the husband agreed to make certain financial payments to or for the wife. Specifically he agreed to pay:-

i) a monthly sum of not less than £4,000 until a binding agreement had been reached in mediation;

ii) a lump sum of £20,000; and

iii) the deposit and rent on a property which the wife would rent at 35 Briardale Gardens London NW3. Further, he would personally guarantee the rent on that property.

6. Clauses 4 to 10 of the agreement provided as follows:

4. The Parties shall use reasonable endeavours to refer to the Mediation the following matters:

i. The determination of the Balance

ii. The amount and frequency of instalment payments to be made by [the husband] to [the wife] in full discharge of the Balance

5. The Parties agree that a mediator ('the Mediator") shall be chosen and appointed by the Chartered Institute of Arbitrators ("the Institute") in accordance with the Institute's Mediation Rules and Practice Guidance ("the Rules") and the Mediation thereafter conducted under the Rules.

6. The Parties agree that they will each contribute 50% of the Mediator's fees and expenses.

7. In consideration of [the husband] entering into the Agreement [the wife] irrevocably agrees and undertakes not to rely upon the Statutory Demand in support of any bankruptcy petition presented by her now or in the future.

8. [The wife] further undertakes not to make any further statutory demand and/or present any petition for [the husband's] bankruptcy prior to the conclusion of the Mediation except in respect of any of the ascertained sums set out above which are overdue by more than 28 days (excluding the day upon which any such sum was due to be paid)

9. [The wife] further agrees that she will not seek or require any clause to be inserted or included in the Binding Mediation Agreement which would have the effect (in whatever form) of entitling her to treat as due and payable any part of the balance not the subject of an overdue instalment.

10. The parties agree to discontinue all subsisting applications and appeals in relation to the Action and Appeal [to set aside the statutory demand] with each side bearing their own costs save as is provided for in the consent order [of the Court of Appeal of 2 November 2011].

7. Following that agreement attempts were made to set up the mediation. Unfortunately they were unsuccessful. I have seen a chronology which sets out the exchanges between the solicitors between 17 January 2012 and 2 May 2013. Each party blames the other.
8. In October 2012 the wife moved from the property 35 Briardale Gardens to a slightly cheaper rented property at 4 St Barnabus Mews, London SW1. The husband paid the rent there until October 2013 when he stopped, claiming that he had run out of money. Arrears of rent of £24,000 have arisen. The husband has paid the lump sum of £20,000 and the monthly sum of £4,000.
9. The wife claims that it was an implied term of the agreement that the husband would pay the rent on a substitute property and that in circumstances where he has breached that implied term he cannot reply on the agreement to mediate. The husband denies that there is any such implied term and claims that he has complied in full with his financial obligations under the agreement. If there is such an implied term the husband claims that it is itself subject to an implied term that his obligations would not stretch ahead indefinitely. He relies, with some force, on the stated intention of the parties to enter into mediation by 31 January 2012.
10. On 16 December 2013 the wife issued an application for general enforcement under FPR 2010 rule 33.3(2)(b). The schedule attached to the application states that the husband owes the wife £831,252 plus interest of £1,111,408, a total of £1,942,660. On 30 January 2014 Bodey J gave directions. The husband says that the wife is debarred from proceeding to enforce by virtue of the agreement to mediate on 2 November 2011. The wife strongly disputes this. She says that the court cannot force or coerce her to mediate, whatever she might have agreed.
11. In order to determine this issue it is necessary to conduct a short survey of the role of ADR in both the civil and family spheres.

ADR in the civil sphere

12. I give here the barest summary of the role of ADR in the context of the CPR. Sir Anthony Clarke MR stated in a speech in May 2008 that ADR "must become an integral part of our litigation culture." Many high authorities have emphasised this.
13. The starting point is CPR rule 1.4(2)(e) which imposes a positive duty on the court to encourage the parties to use ADR if the court considers that to be appropriate. Further, by CPR rule 26.4(2A) the court may, on its own initiative, and whether or not the parties agree, impose a stay on proceedings for a specified period to "allow for settlement of the case." It is tolerably clear (at least to me) that the power under rule 26.4(2A) may be exercised by the court at any time and not just when a party files the completed allocation questionnaire. Curiously, and in contrast to the FPR 2010, the CPR does not contain a Part devoted to ADR.
14. As things stand, the court cannot impose a mandatory order on the parties that they must participate in ADR. This much is clear from Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002. There Dyson LJ stated at para 9 "It seems to us that 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." However, the court can robustly encourage and coerce participation in ADR, specifically by making clear that costs sanctions might await parties who unreasonably refuse to do so. In para 30 Dyson LJ referred to an order commonly made in the Admiralty and Commercial Court which requires the parties to take "such serious steps as they may be advised to resolve their disputes by ADR procedures" and that if the case is not settled "the parties shall inform the court what steps towards ADR have been taken and (without prejudice to matters of privilege) why such steps have failed." Obviously, the second part of the order is there to enable the court to make an order for costs if it formed the view that a party had unreasonably refused to engage in ADR. But as Dyson LJ makes clear the order "stops short of actually compelling the parties to undertake an ADR," although it might be thought that the nature of the coercion amounts to much the same thing. Similarly, in paras 33 and 34 Dyson LJ refers to and approves the eponymous Ungley Order which requires the parties to consider whether the case is suitable for ADR, and the terms of which are designed to bring home to them that, if they refuse even to consider that question, they may be at risk on costs even if they are ultimately held by the court to be the successful party.
15. A recent example of a costs sanction being imposed on a party who unreasonably refused to engage in ADR is PGF II SA v OMFS [2013] EWCA Civ 1288 where a serious and carefully formulated written invitation by the claimant's solicitors to participate in mediation was met with complete silence by the defendant. The offer was repeated just over three months later and, despite promising a full response to the letter in which it was contained, the defendant's solicitors thereafter made no reply or comment about it at all. The defendant was heavily penalised in costs. Briggs LJ stated at para 4 "silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable, regardless whether an outright refusal, or a refusal to engage in the type of ADR requested, or to do so at the time requested, might have been justified by the identification of reasonable grounds."
16. Plainly, the threat of costs sanctions may amount to a powerful incentive to engage in ADR if the parties are represented and costs are being incurred. Such coercion obviously does not work if the parties are self-represented. Such a case was Wright v Michael Wright Supplies Ltd & Anor [2013] EWCA Civ 234. There Sir Alan Ward (who was part of the constitution in Halsey) wondered whether the rule in Halsey ought to be reconsidered. At para 3 he stated:

Does CPR 26.4(2)(b)^[1] allow the court of its own initiative at any time, not just at the time of allocation, to direct a stay for mediation to be attempted, with the warning of the costs consequences, which Halsey did spell out and which should be rigorously applied, for unreasonably refusing to agree to ADR? Is a stay really "an unacceptable obstruction" to the parties' right of access to the court if they have to wait a while before being allowed across the court's threshold?

17. In fact, a stay for "a while" would hardly amount to an order obliging the parties to engage in ADR. Given the clear words of CPR 26.4(2A) such an order would surely be wholly permissible. An indefinite stay probably would not. For my part I am not sure that the kind of order proposed by Sir Alan in fact requires the Court of Appeal "to review the rule in Halsey". I cannot see that it is in fact inconsistent with what was said there, nor in fact inconsistent now with the terms of CPR rule 26.4(2A) whereby the court may, on its own initiative, and whether or not the parties agree, impose a stay on proceedings for a specified period.
18. Highly relevant to the case before me are those cases where the parties have made an agreement to participate in ADR before litigating a dispute between them. Fortunately for me the cases have all been analysed and the principles summarised by Hildyard J in Wah (Aka Alan Tang) & Anor v Grant Thornton International Ltd & Ors [2012] EWHC 3198 (Ch). In his section headed "Relevant guidelines emerging" at paras 56 to 61 he stated:

56 This recitation of authority illustrates the tensions, in the context of provisions for conciliation or mediation of disputes prior to arbitration or court proceedings, between the desire to give effect to what the parties agreed and the difficulty in giving what they have agreed objective and legally controllable substance.

57 Agreements to agree and agreements to negotiate in good faith, without more, must be taken to be unenforceable: good faith is too open-ended a concept or criterion to provide a sufficient definition of what such an agreement must as a minimum involve and when it can objectively be determined to be properly concluded. That appears to be so even if the provision for agreement is one of many provisions in an otherwise binding legal contract, with an exception where the provision in question can be construed as a commitment to agree a fair and reasonable price.

58 However, especially when the relevant provision is but one part of a concluded and otherwise legally enforceable contract the Court will strain to find a construction which gives it effect. For that purpose it may imply criteria or supply machinery sufficient to enable the Court to determine both what process is to be followed and when and how, without the necessity for further agreement, the process is to be treated as successful, exhausted or properly terminated. The Court will especially readily imply criteria or machinery in the context of a stipulation for agreement of a fair and reasonable price.

59 The Court has been in the past, and will be, astute to consider each case on its own terms. The test is not whether a clause is a valid provision for a recognised process of ADR: it is whether the obligations and/or negative injunctions it imposes are sufficiently clear and certain to be given legal effect.

60 In the context of a positive obligation to attempt to resolve a dispute or difference amicably before referring a matter to arbitration or bringing proceedings the test is whether the provision prescribes, without the need for further agreement, (a) a sufficiently certain and unequivocal commitment to commence a process (b) from which may be discerned what steps each party is required to take to put the process in place and which is (c) sufficiently clearly defined to enable the Court to determine objectively (i) what under that process is the minimum required of the parties to the dispute in terms of their participation in it and (ii) when or how the process will be exhausted or properly terminable without breach.

61 In the context of a negative stipulation or injunction preventing a reference or proceedings until a given event, the question is whether the event is sufficiently defined and its happening objectively ascertainable to enable the court to determine whether and when the event has occurred.

19. Therefore, any agreement which stipulates mediation before litigation must have its own specific terms carefully examined. If it is clear in what it says about the subject matter of the mediation; what the parties must do; and how they can bring it to an end then it is likely to be upheld. For as Longmore LJ stated in Petromec Inc and others v Petroleo Brasileiro SA Petrobras and others [2005] EWCA Civ 891 at para 121 "to decide that [an ADR agreement] has no legal content … would be for the law deliberately to defeat the expectations of honest men."

ADR in the Family Sphere

20. As is well known in 1996 by means of a Practice Direction a significant innovation was introduced into the procedure governing ancillary relief proceedings on a pilot basis in certain selected courts. This was the FDR, a form of judge-led ADR. It was a great success, contributing to the settlement of the majority of cases. The scheme was incorporated into the Family Proceedings Rules 1991 and extended nationwide in 2000. The rules governing the FDR are now to be found in Part 9 of the FPR 2010 and in the accompanying Practice Direction PD9A. A good practice guide has been promulgated by the Family Justice Council: Financial Dispute Resolution Appointments: Best Practice Guidance December 2012 [2013] 1 FLR 1109. A FDR is almost invariably ordered in a financial remedy case - PD 9A para 6.1 describes it as "a key element in the procedure".
21. Where a FDR is ordered attendance by the parties is compulsory – see FPR rule 9.17(10). I have never heard of a party refusing to attend and so cannot say from experience what would happen if someone did. It would be a serious contempt of court were a party recalcitrantly to refuse to do so.
22. This aspect of our procedure marks a significant difference to the CPR, and to the rule in Halsey. In financial remedy proceedings participation by the parties in judge-led ADR is mandatory. Accordingly, the need for alternative ADR processes in the family financial sphere is perhaps not as pressing as in the civil sphere, given that the system already provides an in-house one. That said, alternative ADR processes such as mediation and private FDRs are commonplace. And in recent times the much-to-be-welcomed IFLA Family Financial Arbitration scheme is gathering momentum, assisted considerably, no doubt, by the strong words of support given to it by the President in his recent decision of S v S [2014] EWHC 7 (Fam).
23. There are a number of types of financial applications which are not covered by Part 9 of the FPR. These are listed in Part 8. In addition, for obvious reasons, enforcement applications are not governed by Part 9 and do not have a FDR procedure.
24. Given the precedent established by the FDR procedure there ought to be a power to compel parties to engage in ADR in those proceedings not covered by the Part 9 procedure. Specifically, the court ought to be able to order participation in ADR in enforcement proceedings. However, for reasons that I will explain I am doubtful whether the rules permit such an order to be made.
25. ADR has its own berth in Part 3 of the FPR 2010. There is no counterpart in the CPR. Rule 3.2 provides that "the court must consider, at every stage in proceedings, whether alternative dispute resolution is appropriate." This applies across the full range of family proceedings, whether the subject matter is money or children. Rule 3.3 provides that:

(1) If the court considers that alternative dispute resolution is appropriate, the court may direct that the proceedings, or a hearing in the proceedings, be adjourned for such specified period as it considers appropriate –

(a) to enable the parties to obtain information and advice about alternative dispute resolution; and

(b) where the parties agree, to enable alternative dispute resolution to take place.

26. It can be seen that this rule differs slightly from CPR rule 26.4(2A). That latter rule talks of staying a case while FPR rule 3.3 talks of adjourning it. That is a distinction without a difference. More importantly, the power under FPR rule 3.3(1)(b), while capable of being exercised on the court's own initiative, can only be exercised if the parties agree. In contrast, under the CPR counterpart the court can impose a stay in favour of ADR whether the parties agree or not.
27. If the parties have made an agreement to engage in ADR then I am of the view that the court can exercise its powers under FPR rule 3.3(1)(b), even if one party is trying to back out of that agreement. However if there has never been an agreement to engage in ADR I cannot see that the rule can be invoked. And if the rule cannot be invoked then it is hard to see how a separate power could exist to order the parties to engage in ADR in those proceedings not governed by Part 9, and thus subject to the FDR process.
28. In my respectful opinion the Rules Committee should give consideration to deleting the words "if the parties agree" from rule 3.3(1)(b) so that it is put on the same footing as its CPR counterpart.
29. As I have stated, if there is a written agreement to engage in ADR before going ahead with a Part 8 or an enforcement application then I consider that the rule may be invoked to adjourn the application for a specified period to enable ADR to take place, even if one party is trying to back out of the ADR agreement. Such an adjournment may be coupled with an Ungley Order to make clear that an unreasonable refusal to participate in the ADR may well attract a costs sanction. But an indefinite adjournment could not properly be ordered. Not only would this amount to a denial of the right of access to justice but it would be giving effect to the ADR agreement in a way that falls foul of the terms of s34(1)(a) Matrimonial Causes Act 1973 (which renders void any agreement which purports to restrict the right to apply to the court for an order containing financial arrangements).

Conclusions

30. Mr Warshaw argues that the agreement of 2 November 2011 constitutes a maintenance agreement within the terms of s34 Matrimonial Causes Act 1973 which can only be varied pursuant to the powers in s35. I agree that Clauses 2 and 3 do contain financial arrangements which qualify those clauses as a maintenance agreement. However I firmly disagree that Clauses 4 to 10, set out above, can be classed as a maintenance agreement, even allowing for the extended definition of that phrase in s34.
31. In my judgment the agreement to mediate satisfies all the criteria mentioned by Hildyard J in Tang at para 60. It is clear in what it says about the subject matter of the mediation and what the parties must do. That it does not say how the parties can end it is of no consequence as the intrinsic nature of a mediation is that either party can abruptly bring it to an end, and the reason for doing so would be cloaked with privilege.
32. In my judgment it was not implicit in the agreement that the husband would pay rent for an alternative property. I agree that he has complied with its financial terms.
33. In my judgment it was clear from the definition of "the Mediation" that the mediation would take place quickly. That it has not happened is the fault of both parties. In my judgment they both remain bound by their agreement to mediate.
34. However, it is clear that the agreement cannot be given effect so as to prevent the wife from applying for enforcement until and unless mediation has taken place. A bar of that nature would operate as a restriction on the right to apply to the court. The most that can be done in balancing the obligation to mediate under the agreement and the right of access to justice is for an adjournment to be ordered for a specified period to give the parties a final opportunity to engage in ADR. In my judgment the adjournment should be for 8 weeks.
35. In order for the mediation to have a chance of success there needs to be updated financial disclosure. If the mediation fails then the wife will need the updated material for purposes of the oral examination she wishes to pursue at the adjourned enforcement hearing. There is no opposition to this. Therefore by consent I shall order that within 4 weeks each party shall file a Form E and the husband shall append to his Form E the documents sought by the wife under CPR rule 71.2(6)(b) in the schedule at page 28 of the bundle.
36. I cannot compel the parties to engage in the mediation. But I can robustly encourage them by means of an Ungley Order. I shall therefore make a further order in the following terms:-

i) If either party considers that the case is unsuitable for resolution by ADR, that party shall be prepared to justify that decision at the conclusion of the enforcement proceedings, should the judge consider that such means of resolution were appropriate, when he is considering the appropriate costs order to make.

ii) The party considering the case unsuitable for ADR shall, not less than 7 days before the commencement of the adjourned enforcement hearing, file with the court a witness statement without prejudice save as to costs, giving reasons upon which they rely for saying that the case was unsuitable.

Note 1   Since 1 April 2013 this rule has been substituted by rule 26.4(2A), but its effect, so far as the court acting on its own initiative is concerned, is the same.    [Back]