Dispute update - September 2011

Alternative Dispute Resolution

Alternative Dispute Resolution (ADR) is the collective term for the ways that parties can settle civil disputes often with the help of an independent third party and without the need for a formal Court hearing.  There are a number of ADR options available to parties in dispute.  Choosing alternative dispute resolution can be a cost effective and satisfactory way to resolve a dispute without recourse to litigation.  The process is private and confidential and often a settlement can be achieved rapidly as the procedure is not bound by the rigidity to which proceedings conducted before the Courts are subject.  This article gives a brief overview of the most popular forms of ADR.

Negotiation

Of course to negotiate you do not need to appoint an independent third party.  Negotiation is the most flexible and informal of the alternative dispute resolution methods.  Discussions usually take place between the parties on a without prejudice basis.  If the negotiations do not succeed in settling the matter the parties’ rights are not prejudiced.  Resolution of disputes by way of negotiation often enables reputations and relationships to remain intact. 

Mediation

Mediation is a process whereby parties, with the assistance of an independent third person (the mediator), identify the issues in dispute, explore the options for resolution and attempt to reach agreement. 

Mediators undergo specialist training and come from a number of different professional backgrounds and therefore an appropriate mediator can be selected having regard to the nature of the dispute. During mediation parties resolve issues by negotiations themselves. The mediator’s job is to carry proposals between the parties at the meeting.  He communicates offers and suggestions and highlights common points. The mediator will often persuade each side to justify its position which may lead to a party modifying its position.  The mediator does not look at the merits of the case unless invited. 

If settlement is reached at the mediation it is a cost effective and private form of dispute resolution.   By itself the outcome of mediation is not binding. However, a properly executed settlement agreement, which is the desired outcome of mediation, is usually binding.

Taylor & Emmet offers a dedicated mediation service and more information can be obtained by clicking here.

Expert Determination

Expert determination is a process whereby an expert is appointed by the parties to determine an issue which is usually of a technical nature.  Although this is an informal process it produces a binding decision.  As an expert’s decision is an evaluation the approach is treated as having different legal characteristics to an arbitration award. The expert is not an arbitrator and therefore the procedure is not subject to arbitration legislation.

Adjudication

Adjudication is a method of dispute resolution which is common in the construction industry for decades.  In fact, since the introduction of the Housing Grants, Construction and Regeneration Act 1996 parties to certain construction contracts have a statutory right to refer disputes to adjudication.  Standard forms of contract often provide equivalent or similar rights to adjudicate disputes.  The adjudicator is a neutral third party who weighs up the evidence and gives his decision.  His decision is binding unless the parties agree to alter its effect or decide to refer the dispute to an arbitrator or the Courts for final determination. 

Arbitration

Arbitration is generally used when all parties agree to the process. A contract may contain an arbitration clause which may specify what type of disputes will be subject to the arbitration procedure, how costs will be dealt with, where the arbitration will take place, what rules will apply, the language that will be used at the hearing, what remedies will be available to the parties and whether the arbitration procedure will apply to any related agreements.
Arbitration is a private forum in which an independent arbitrator (or more than one) makes an award in a judicial fashion to finalise the dispute.  The outcome is final and binding on the parties.  The arbitrator focuses on the issues presented by the parties.  There are limited grounds to apply to the Court to set aside the award. 

The subject of ADR will be covered in more detail at our next litigation seminar which will take place on 17 November 2011.

Legal Update

Hirose Electrical UK Limited v Peak Ingredients Limited [2011] EWCA Civ 1987

Peak was a manufacturer of food additives on a light industrial estate in Milton Keynes.  Hirose was a manufacturer of parts for mobile phones. Hirose occupied the unit adjacent to Peak and the units were separated by a porous breeze block party wall.  Curry-type odours from Peak passed through the party wall.  From 2002, Hirose complained of strong smells wafting intermittently from Peak's premises and allegedly causing harm to the health of Hirose's employees and a nuisance to its premises.

In 2008, Hirose vacated its unit. In 2009, Hirose moved out and then brought a nuisance claim against Peak seeking an injunction and damages for the rent on their unit. Hirose complained that the smell badly affected the well-being of some of its staff and inflicted resulting financial loss, including the cost of leasing alternative accommodation.

The claim was dismissed by the High Court which found that the odours did not constitute a nuisance in the context of business premises on the industrial estate. Taking account of the evidence as to frequency, intensity and effect, the odours reaching Hirose's unit did not amount to a nuisance. The degree of interference with its business and its employees’ comfort was immaterial and insufficient, having regard to the estate's character which was light industrial as opposed to residential.

There was also nothing unreasonable in Peak's use of its unit for normal operations, which were not out of place on a light industrial estate. Peak's use was permitted on both planning grounds and by its lease and there was no objection by the relevant authorities on environmental or health and safety grounds. It was suggested that the occupier of a unit on such an estate must expect the possibility of disagreeable smells.

The Court of Appeal dismissed Hirose’s appeal holding that the High Court had applied the law correctly and was able to take the view that the circumstances were not a nuisance. Clearly, the Court of Appeal saw no reason to move away from the principle that the character of a property's locality is important in deciding whether activities carried on constitute an actionable nuisance.

Baldwins (Ashby) Ltd v Maidstone [2011] EWHC B12 (Mercantile)

In this case the High Court held that the seller of an accountancy business had breached a restrictive covenant that prohibited him from canvassing, soliciting or endeavouring to entice away from the business any person who during the two years prior to completion had been a client of the business. Both canvassing and soliciting involved an approach to customers with a view to appropriating the customer's business or custom, and enticing away had to be interpreted similarly.
The court decided that there had to be an active component and a positive intention, and the approach to the customer had to involve some direct or targeted behaviour. The evidence was overwhelmingly of a secret agreement between the seller and a rival firm of the buyer to introduce new business to the rival firm and solicit it from the buyer's client base acquired from the seller while the seller was working for the buyer.
The evidence also showed that the seller had actively solicited for the rival firm the custom of five clients in breach of the non-solicitation clause, and that the buyer had lost one year's gross fee income for each of those clients.
The court found that the leaving party can advise clients that they are leaving , but anything done with a view to appropriating the customer’s business would generally fall foul of a non-solicit covenant.