New Powers for Courts to Penalise Non-Engagement in ADR in Family Trust and Inheritance Cases
Introduction
From 1 October 2024, courts in England and Wales will gain new powers to penalise parties who refuse to engage in alternative dispute resolution (ADR) in family trust and inheritance cases. Specifically, the rules will apply to disputes under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) and the Inheritance (Provision for Family and Dependants) Act 1975 (the “1975 Act”).
Until now, cost sanctions for failing to consider ADR were mostly confined to financial remedy proceedings. By expanding the scope to TOLATA and 1975 Act claims, the courts are signalling a broader cultural shift: litigants must take ADR seriously or risk financial penalties.
For families navigating emotionally charged disputes over property and estates, this reform has wide-ranging consequences. Below, we break down what the changes mean, why they are happening now, and how parties can protect themselves from adverse cost orders.
Background: The Traditional “No Order as to Costs” Principle
Historically, family proceedings have operated under the principle of “no order as to costs.” Unlike civil litigation—where the losing party usually pays—the family courts have emphasised cooperation and preserving relationships.
However, this principle often meant parties could refuse mediation or other ADR methods without immediate financial consequences. In practice, some litigants would dig in their heels, knowing that even an unreasonable refusal would not expose them to cost sanctions.
The introduction of Family Procedure Rule 28.3(7) in April 2024 changed that for financial remedy cases. Now, the same shift is extending to TOLATA and 1975 Act disputes.
Why TOLATA and 1975 Act Cases Matter
TOLATA Claims
TOLATA 1996 governs disputes where two or more people disagree over their interests in land. Typical examples include:
- Cohabiting couples disputing ownership after a separation.
- Family members arguing over contributions to a property.
- Creditors or beneficiaries pressing for the sale of a property.
These disputes often involve deeply personal relationships layered on top of complex property law, making them prime candidates for resolution outside court.
1975 Act Claims
The 1975 Act allows certain people to claim reasonable financial provision from a deceased person’s estate. Claimants often include:
- Spouses or civil partners.
- Cohabitants who lived with the deceased.
- Children or dependants financially reliant on the deceased.
Such claims are inherently sensitive. They involve grieving families, money, and perceived fairness in inheritance—all areas where litigation can inflame tensions and erode relationships permanently.
The Catalyst: Churchill v Merthyr Tydfil
The Court of Appeal’s decision in Churchill v Merthyr Tydfil CBC [2023 EWCA Civ 1416] was pivotal.
For nearly two decades, courts operated under the belief—stemming from Halsey v Milton Keynes General NHS Trust [2004]—that compelling ADR would breach Article 6 of the European Convention on Human Rights (ECHR), which guarantees the right to a fair trial.
But in Churchill, the Court of Appeal ruled that compelling ADR is not a breach of Article 6, provided it does not deny access to justice. This judgment overturned Halsey and opened the door for courts to more actively encourage (and, in some cases, require) ADR participation.
The result? New amendments to the Civil Procedure Rules (CPR) and knock-on reforms to the Family Procedure Rules (FPR), extending cost sanctions for ADR refusal into trust and inheritance disputes.
Engage vs Attend: A Subtle but Important Distinction
Legal commentators Nicholas Allen KC and Rhys Taylor have highlighted the difference between “engaging in” and “attending” ADR under the Family Procedure Rules.
- Attend: A factual requirement—turning up to mediation, arbitration, or another ADR process.
- Engage: Suggests a deeper level of participation—actively negotiating, compromising, or exchanging proposals.
The rules deliberately use “attend” rather than “engage.” This avoids scrutiny of how much effort a party puts into negotiations, which could clash with without prejudice privilege (the principle that settlement discussions cannot be used against a party in court).
That said, parties who attend mediation in name only—stonewalling or refusing to discuss matters—may still be vulnerable to criticism by the court when costs are considered.
Practical Implications for Litigants
1. Greater Pressure to Attempt ADR
Parties in TOLATA and 1975 Act cases will now be expected to attempt ADR seriously. Refusal without good reason (e.g., clear futility, power imbalance, or urgency) may result in cost penalties.
2. Risk of Adverse Cost Orders
Courts can now depart from the “no order as to costs” principle where a party’s conduct regarding ADR is deemed unreasonable. Even a “winner” in the litigation could face reduced cost recovery—or worse, an order to pay the other side’s costs.
3. Need for Legal Advice at the Outset
Solicitors will need to advise clients early on the importance of ADR. Written advice records may help shield clients (and practitioners) from cost consequences if ADR is declined.
4. Emotional and Financial Considerations
For families, this change means disputes are less likely to escalate unchecked. Mediation and other ADR processes can preserve relationships, reduce costs, and speed resolution compared to court proceedings.
Examples of How the New Rules Could Play Out
- Cohabitant Property Dispute (TOLATA): A couple separates after 15 years. One refuses mediation, insisting on a trial to determine property shares. The judge later finds the refusal unreasonable and orders that party to pay part of the other’s legal costs—even though they technically “won” on ownership proportions.
- Inheritance Provision Claim (1975 Act): A child excluded from their parent’s will refuses to mediate with siblings. The court decides the claim had reasonable prospects for settlement and penalises the child with an adverse cost order.
- Blended Family Estate Dispute: A stepchild and surviving spouse fight over financial provision. Mediation could have preserved the family dynamic, but one party refused to attend. The refusal becomes a factor in costs, amplifying financial strain.
Safeguards and Judicial Discretion
It is important to stress that family judges cannot order ADR directly. Unlike in civil proceedings, they cannot compel mediation. Instead, their power lies in the “stick” of costs: attend ADR or risk a penalty.
Judges will also weigh:
- The nature of the dispute.
- The proportionality of ADR costs.
- The history of attempts to settle.
- Any power imbalances (e.g., domestic abuse, controlling relationships).
This ensures that cost penalties are not applied mechanically, but rather in the context of fairness and justice.
Broader Cultural Shift Toward ADR
The expansion of ADR powers reflects a system-wide policy shift: courts want to reduce adversarial litigation and encourage negotiated outcomes.
- It aligns with reforms in financial remedy proceedings earlier in 2024.
- It builds on Churchill v Merthyr Tydfil, reinforcing ADR’s legitimacy.
- It supports the judiciary’s ongoing effort to reduce pressure on court resources.
For family trust and inheritance cases, the message is clear: litigation should be the last resort, not the first.
Practical Tips for Families and Practitioners
- Seek Legal Advice Early – Understand the risks of refusing ADR and explore mediation, arbitration, or collaborative law at the outset.
- Document Your Reasons – If ADR is declined, keep written records explaining why (e.g., cost, urgency, futility). Courts will expect justification.
- Choose the Right ADR Process – Mediation may suit sensitive family disputes; arbitration can work for technical trust matters.
- Prepare Clients for Costs Risks – Ensure clients know they could face penalties even if they “win” in court.
- Use ADR Strategically – Even partial settlements can narrow issues, saving time and money.
Conclusion
The new powers effective from 1 October 2024 mark a turning point for TOLATA and 1975 Act cases. Courts in England and Wales will no longer tolerate blanket refusals to mediate or arbitrate. Instead, litigants face real financial consequences for non-engagement in ADR.
While judges cannot force families into ADR, they can—and will—sanction those who unreasonably refuse. For families caught in the difficult intersection of grief, property, and trust disputes, this reform underscores the importance of seeking early advice, considering ADR options, and engaging constructively.
At Parachute Law, our solicitors can guide you through inheritance and trust disputes, helping you navigate ADR processes and protect your interests in court if necessary.
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