Overview of Dispute Resolution

1. Analysis of Merits of Claim or Defence

This section focuses on case analysis. A lawyer will not be acting in the best interests of their client if they encourage them to pursue a case that is hopeless from the outset or has only limited prospects of success. Taking full instructions at the first interview assists in this regard. The client will be less anxious if the solicitor can demonstrate that the issue is appreciated, and will want to be assured that there is a satisfactory solution achievable at a reasonable cost. At the same time, the solicitor needs to obtain the relevant information from the client, based on the legal problems identified, in order to give preliminary advice on liability and quantum.

1.1.1 Essential Questions

When carrying out a case analysis, ensure that you answer the following questions. These questions form the backbone of every merits assessment and are themselves a frequent SQE examination point.

Have all possible causes of action and potential defendants been identified?

What, as a 'matter of law', must the client establish?

What 'material facts' will the client have to establish?

What evidence is currently available to establish the material facts?

What evidence needs to be obtained?

How strong is the client's case?

1.1.2 Cause of Action

1.1.3 Case Study

Assume that you act for Alice. She owns an apartment and has agreed to rent it out to Matthew. One day, Matthew lost control of his car when driving up Alice's driveway. Alice's garden and the extension were all damaged. What will you do for the next step?

The first step is to establish whether Alice has any cause of action for making a claim against Matthew. The most obvious claim is negligence. The next step is to consider what, as a matter of law, Alice must prove to make a claim of negligence against Matthew. Here, we need to establish:

That Matthew owed Alice a duty of care;

The material facts that establish a breach of that duty;

The material facts that establish that the damage to Alice's property was caused by the breach of that duty;

That, as a consequence of the crash, Alice suffered damage and loss.

Then, you have to consider what evidence is currently available to establish the material facts and what evidence needs to be obtained. This might be presented in a simple case analysis grid, as shown in the table below.

For the next step, we need to consider the strengths and weaknesses of the known case.

Duty of care

A driver owes a duty of care to another road user, and the standard of care is that a driver must reach the standard of a reasonably competent driver. By entering the driveway in his car, Matthew owed Alice a duty to drive with reasonable care. This is unlikely to be an issue unless Matthew is able to establish that he is a learner driver who does his best — and even a learner will not be liable for negligence if the court is satisfied that he has reached the standard of a reasonable learner driver. Ultimately, in each case, the court will determine the standard of care required for the activity or task in question.

Breach of duty

The issue of breach involves the application of a two-stage test:

The court first needs to assess how the defendant ought to have behaved in the circumstances — i.e. what standard of care the defendant should have exercised — a question of law.

Then, the court needs to decide whether the defendant's conduct fell below the required standard — a question of fact.

2. Arbitration, Mediation, and Litigation

Dispute resolution offers a spectrum of options. At one end sits litigation in the courts; at the other sit the various forms of ADR. This section examines the nature of ADR, the role of the independent third party, and then the two ADR mechanisms examined by the SQE — mediation and arbitration — before contrasting them with litigation.

1.2.1 The Nature of ADR

ADR, such as mediation, is a means of resolving disputes with the assistance of an independent third party who may facilitate the process to help the parties reach a solution but cannot impose a solution. It is voluntary, confidential and is conducted on a 'without prejudice' basis. In other words, if it fails and court proceedings are taking place, the parties are not allowed to disclose any part of the ADR to the court. The exception is where a document or correspondence produced during the ADR is marked 'without prejudice save as to costs' — then the judge will be made aware of the relevant documents when dealing with the issue of costs. The parties may choose to initiate the process and can withdraw at any time before a settlement is reached.

Arbitration is also voluntary, but only in the sense that the parties either voluntarily entered into an arbitration agreement or agreed to decide the matter in this way once a dispute arose. If there is an arbitration agreement, the parties are obliged to arbitrate, otherwise it will be a breach of contract, provided that the original contractual agreement to arbitrate is valid.

By comparison, litigation is less flexible. Once court proceedings are initiated, the court will impose the case management timeline and make orders that must be complied with by the parties; failure to do so may result in contempt of court. Once judgment is handed down, the court will also order the payment of costs. The usual rule is that the loser will pay the winner's costs.

1.2.2 The Independent Third Party

The independence and impartiality of the third party is an essential feature of ADR. It is important to safeguard these features so that the parties are more likely to be open in their discussions and less likely to be aggressive towards each other; the prospects of reaching a settlement may therefore be higher. A further advantage is that the independent third party will not only be trained to act as a neutral but should also have the appropriate industry or commercial knowledge required to understand the dispute. This may allow them to come up with ideas the parties may not have thought of and to reach common ground.

1.2.3 Mediation

As previously touched upon, mediation is a non-determinative form of ADR, which means that the outcome is non-binding unless it is reduced to a settlement agreement and becomes enforceable as a normal contract. In the event that one of the parties fails to fulfil its obligations under the settlement agreement, the aggrieved party will need to bring a fresh claim for breach of contract and seek enforcement from the court — bringing the case back to litigation.

Mediation can take place at any point after a dispute arises. If court proceedings have been issued, the parties can usually apply to the court for a stay of the proceedings to allow for settlement under CPR r 26.5. After a settlement agreement is reached, it is preferable for the settlement to be recorded in a consent order and filed with the court (which will be made public). The effect is to permanently stay the proceedings on agreed terms — but not to discontinue them — making enforcement easier if the terms are not honoured. If any part of the settlement agreement is confidential, the parties can choose to lodge a Tomlin Order, with the confidential content annexed to the order in a schedule so that it is not disclosed to the public.

In practice, it is not uncommon to see mediation or settlement negotiation running in parallel to the court proceedings; parties can come in and out of settlement negotiation during any stage of the litigation — even after judgment is handed down but before the appeal.

Some commercial contracts may provide for mediation as part of the contractually agreed dispute resolution mechanism. Where there is no such clause, the parties will need to agree to conduct mediation separately and appoint a mediator by mutual consent. The most commonly used mediation service provider in the UK is CEDR, which can monitor and manage the mediation process for a fee depending on the value of the claim, and can appoint mediators on the parties' behalf.

Mediation is largely a parties-driven process, meaning the parties must agree every step of the way: the choice of mediation platform, the appointment of the mediator, the costs split, the venue and the mode by which the mediation should take place. The parties will usually agree to pay their own legal costs of the mediation if there is a successful outcome.

1.2.4 Arbitration

International arbitration is a very popular dispute resolution mechanism, often adopted in international commercial contracts and sometimes combined with mediation to make 'Med-Arb' — a hybrid process that captures the flexibility of mediation and the binding force of arbitration.

There are a handful of arbitration institutions worldwide, each with its own arbitration rules and procedures to administer the proceedings, such as the International Chamber of Commerce ('ICC'), the London Court of International Arbitration ('LCIA'), the Singapore International Arbitration Centre ('SIAC'), the Hong Kong International Arbitration Centre ('HKIAC'), and the International Centre for Settlement of Investment Disputes ('ICSID').

A complete arbitration clause usually includes the following elements, agreed by the parties with a degree of flexibility:

The seat of arbitration;

The designated arbitration institution;

The number of arbitrators and the appointment process;

The language of arbitration;

The substantive law governing the contract;

The curial law governing the arbitration proceedings.

In terms of the appointment of arbitrators, the arbitral tribunal is often made up of one or three arbitrators with experience and expertise in a particular field or profession related to the dispute. For example, if the case concerns intellectual property rights in the aviation industry, an aviation engineering specialist might be chosen; in a construction dispute on a real estate development, a construction engineer might be chosen. The arbitrators do not have to be legal practitioners and can come from any background, provided they are experts in the relevant field with the required expertise.

Most arbitration rules provide that, for a sole-arbitrator arbitration, the appointment should be mutually agreed by the parties. Where the tribunal is formed by three arbitrators, each party nominates one arbitrator, and the two nominated arbitrators jointly nominate the third (presiding) arbitrator. Each party may challenge the appointment of any arbitrator. A common ground for challenge is the lack of impartiality and independence (Halliburton Company v Chubb Bermuda Insurance Ltd [2020] UKSC 48).

On average, a large international arbitration case can take up to one to two years from beginning to close; smaller arbitrations can be conducted in a shorter interval — some even within six months with expedited procedures. The arbitration award is recognisable and enforceable in England and Wales under ss 100-104 of the Arbitration Act 1996 through the New York Convention.

The UK is traditionally a pro-arbitration jurisdiction, and the Arbitration Act 1996 aims to limit the court's power to intervene in arbitration proceedings. This is reflected in some of the key provisions of the Act:

There are only limited circumstances under s 103 AA 1996 in which an arbitration award will not be recognised or enforced in England and Wales — such as where the award was obtained by fraud, the parties were not properly notified, or the award is contrary to public policy.

The arbitration award is final and binding. It is only possible to challenge an award in court if the arbitral tribunal lacks substantive jurisdiction (s 67 AA 1996) or there is serious irregularity causing substantial injustice (s 68 AA 1996) — for example, a failure by the tribunal to deal with all the issues put to it. Subject to the arbitration agreement, the arbitrator's decision is final on questions of fact: there is no right of appeal to the courts on factual grounds.

An appeal on a question of law is available under s 69 AA 1996; but if the arbitration is conducted under the LCIA Rules, those rules have contracted out of s 69, making it impossible for the parties to appeal on a point of law.

It is relatively rare in practice for lawyers to be asked to advise on whether to choose litigation or arbitration, because for the majority of cases the mode of dispute resolution is already settled in the dispute resolution clause of the underlying contract. Where there is no dispute resolution clause, or where you are advising on drafting one, the following factors should be considered:

Whether there is a need to obtain specific injunction orders from the court to assist in pursuing the claim — e.g. a freezing injunction, mandatory injunctions, quia timet injunctions, etc.;

The client's commercial objectives — e.g. whether maintaining amicable business relations is important;

The legal budget and time the client is willing to invest in resolving the dispute.

1.2.5 Litigation

Litigation can be further divided into civil and criminal litigation. The focus of this section is civil commercial litigation. In the international commercial contracts we see these days, the well-drafted ones often include a dispute resolution clause specifying the governing law of the contract and the jurisdiction — i.e. the appropriate forum to which the case should be brought if a dispute arises.

3. Pre-Action Considerations and Steps

When a dispute arises, a solicitor should discuss with the client the availability of ADR, making the client aware that considering ADR forms part of a solicitor's professional obligations under the SRA Principles and Codes of Conduct. If the client is willing (or has already agreed) to participate in ADR, it should be used unless (in very broad terms and on a case-by-case basis) one of the following applies:

It is obviously inappropriate;

The other party is unlikely to co-operate in the process;

The other party cannot be trusted to comply with an award; or

The client needs an injunction or security for costs, which can only be ordered by the court.

Although ADR is actively promoted by the courts, there is no point in engaging in ADR if it will inevitably fail. Nevertheless, a party who decides not to engage in ADR must be made aware that penalties may well be imposed for unreasonable refusal, unless they can justify their stance to the court. The Pre-action Protocols of civil litigation also specifically require the parties to consider the use of alternative dispute procedures if appropriate. Consequently, parties who choose to litigate may receive judicial encouragement to attempt ADR and — following Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 and the CPR amendments of 1 October 2024 (CPR rr 1.4(e), 3.1(o)) — may now also be ordered by the court to engage in ADR, provided that doing so does not impair the right to a judicial hearing and is proportionate.

The importance the court attaches to proposals for ADR is evidenced by the provisions of the Civil Procedure Rules 1998, which dictate how a case is litigated. A failure to respond to a reasonable proposal to attempt settlement by ADR may have a significant impact on any subsequent order for costs.

The message is clear: clients should always consider ADR and engage in the process unless there are convincing reasons not to do so — and even then, they should be prepared to justify their decision before a sceptical judge if necessary.

4. Key Notes (Chapter Summary)

The following summary table consolidates every key term and authority examined in this chapter. Treat it as a revision checklist — you should be able to define each row from memory and recall the associated authority.

5. Task

Apply the case-analysis framework from Section 1.1 to the following scenario. Work through the negligence elements in order and link each to the material facts and the evidence Alice would need.

Scenario — Alice owns an apartment and has agreed to rent it out to Matthew. One day, Matthew lost control of his car while driving up Alice's driveway, causing damage to Alice's garden and the extension of her property.

Task — Identify and explain the key elements Alice must establish to make a successful claim of negligence against Matthew. Additionally, outline what types of evidence Alice would need to support her claim.

6. MCQ Practice — Three SQE-Style Questions

Each of the following questions mirrors the style, length and difficulty of the SQE1 FLK1 single best answer questions. Attempt each question closed-book, write down your answer, then turn to the answer key. The answer key explains why each option is correct or incorrect — read every explanation in full.

A. There is no need for the client to engage in ADR unless they choose to do so.

B. The only options of ADR available to the client are mediation and arbitration.

C. In ADR, a third party selected by the claimant will assist the parties in resolving their dispute.

D. The client may decide not to engage in ADR but should be prepared to justify this decision to a judge.

E. If the client fails to engage in ADR, the court will impose costs sanctions.

A. Mediation, because it is a cheaper and faster option than litigation.

B. Arbitration, because the decision is binding on both parties.

C. Mediation, because it takes place in private and will ensure that other warehouses do not become aware of the dispute.

D. Arbitration, because an expert on information technology can determine the dispute.

E. Mediation, because it is more likely that the parties will preserve their business relationship.

A. Have all possible causes of action and potential defendants been identified?

B. What, as a 'matter of law', must the client establish?

C. What 'material facts' will the client have to establish?

D. What is the defendant's personal information?

E. How strong is the client's case?