Grand Court confirms inherent jurisdiction to compel parties to participate in ADR

Описание: In the recent decision of Unicorn Biotech Ventures One Ltd v Unicorn Biotech Ventures Two Ltd the Grand Court has for the first time considered the issue of whether it has jurisdiction to compel parties to participate in alternative dispute resolution (ADR) against their wishes, and if so, what factors should be taken into account.

The Grand Court held that it does have the power to do so and the ultimate test will be whether compelling participation in ADR has a real prospect of furthering the overriding objective by bringing about a fair, speedy and cost-effective solution to the dispute.

The application arose in the context of two actions commenced by limited partners of an exempted limited partnership in which they sought declarations regarding the conduct of the fund by the general partner, and the winding up of the fund. There had been a complete breakdown in the personal relationships between those behind the corporate entities which are the LPs and GPs. Notwithstanding proximity to trial, the GP sought orders compelling the parties to attend a mediation at the same time that the parties were due to be exchanging witness statement and preparing for trial. The application raised two issues which had not previously been considered by the Grand Court.

Does the Grand Court have the power to compel parties to attend mediation or other means of ADR against their wishes?

The Grand Court, following the guidance set out by the English Court of Appeal in Churchill v Merthyr Tydfil, held that it does have inherent jurisdiction to compel parties to participate in ADR in a suitable case. The English Court had observed that courts regularly adjourn hearings and trials to allow the parties to discuss settlement and it would be absurd if they could not to do simply because one of the parties resisted the adjournment. In addition, the court has a long-established right to control its own process including by staying or delaying existing proceedings whilst a settlement process is underway. Justice Asif noted that by virtue of section 11 of the Grand Court Act, the Grand Court has the same jurisdiction as the High Court of Justice in England.

His Lordship held that the decision in Churchill was of very persuasive value and should be applied in the Cayman Islands, and it is consistent with the overriding objective to assist the parties to a resolution of their dispute which may be quicker and cheaper than a court-based determination.

What are the factors that the Court should consider in determining how to exercise its discretion?

Examples of potentially relevant criteria (as raised in Churchill) include the form of ADR proposed, whether parties are represented, the urgency of the case and reasonableness of the delay caused by ADR, whether any delay would vitiate the claim or give rise to limitation issues, the costs of ADR in real terms, relative to the claim and parties' resources, whether there is any realistic prospect of resolution through ADR, any imbalance in bargaining power, and the reasons given by a party not wishing to mediate. However, Justice Asif held that the decision whether to order ADR is multifaceted and declined to lay down any particular criteria to be applied. Ultimately, the test is whether compelling participation in ADR has a real prospect of furthering the overriding objective by bringing about a fair, speedy and cost-effective solution to the dispute and the proceedings. It is not a balance of probabilities test but whether ADR would have a "real prospect of a useful outcome".

Outcome

The Grand Court declined to compel the parties to attend mediation. The Court considered that the positions taken by the parties to date, and the nature of the dispute and relief sought, meant there was no prospect that mediation would be successful. The GP's application was also late in the day and imposing a mediation at the same time that parties were preparing for trial would be a time-consuming distraction. Overall, the Cou...