Courts have power to compel parties to engage in non-court based ADR

In a potentially important decision, the Court of Appeal in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 explained that courts do have the power lawfully to stay proceedings for the purpose of, or even order parties to engage in, Alternative Dispute Resolution (ADR). This was despite well-known comments made by the Court of Appeal nearly 20 years ago in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 (Halsey), which had been interpreted by some as deciding that courts could only encourage ADR.

The decision of the Court of Appeal has been eagerly awaited, and followed interventions by no less than seven intervenors including the Law Society, The Bar Council and bodies representing professional mediators and arbitrators and those in involved in housing law. While there are powerful policy reasons underlying the decision, which some proponents of ADR would naturally support, the Court of Appeal declined to lay down fixed rules as to when a court should make an order for ADR or stay proceedings to enable ADR, deciding instead to give some guidance. Whether the Court of Appeal’s approach will prevent or promote further dispute is an open question.

 

Background

The salient facts of the case are straightforward. Mr Churchill (the Claimant), owns a property adjacent to land owned by the defendant Council and alleges that Japanese knotweed has encroached from the Council’s land onto his property, causing him loss and damage. In October 2020, the Claimant sent a letter of claim to the Council. The Council’s position was that if the Claimant brought proceedings instead of using the Council’s complaints procedure then it would apply to the court for a stay. The Claimant issued proceedings in nuisance against the Council in July 2021, and in 2022 the Council applied to stay the proceedings.

The Deputy District Judge dismissed the stay application on the basis that he was bound by Halsey and particularly statements of Dyson LJ including 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.” The Council was granted permission to appeal to the Court of Appeal on the grounds that the appeal “raised an important point of principle and practice and that there were many other similar cases.”

 

Decision

The Court of Appeal was unanimous In allowing the appeal. Sir Geoffrey Vos, Master of the Rolls, gave the leading judgment in which he identified and dealt with the four issues set out below.

Issue 1:  Was the Judge bound by Halsey to dismiss the application for a stay?

The Court of Appeal held that in principle the Deputy District Judge was not bound or prevented from ordering a stay by Halsey. On proper analysis, the relevant statements of Dyson LJ  were obiter – i.e. not a ‘necessary part of the reasoning’ that led to the decision in that case.

Issue 2:  Can the court lawfully stay proceedings for, or order, the parties to engage in ADR?

The Court of Appeal held that a court does have the power to stay proceedings for, or order, the parties to engage in ADR, provided that the court’s order:

1. does not impair the very essence of the claimant’s right to a fair trial under article 6 of the European Convention on Human Rights;
2. is made in pursuit of a legitimate aim (of settling the dispute fairly, quickly and at reasonable cost); and
3. is proportionate to achieving that legitimate aim.

In reaching that conclusion Sir Geoffrey Vos carefully analysed a raft of caselaw, both domestic and from the European Court of Human Rights and pre-Brexit decisions of the Court of Justice of the EU, as well as the court rules and relevant legislation. The Court of Appeal specifically rejected the Claimant’s argument that R (UNISON) v Lord Chancellor [2017] UKSC 51, meant that primary legislation was required to enable existing proceedings to be stayed or delayed for a legitimate objective such as achieving resolution of the dispute by other means.

Issue 3: How should the court decide whether to exercise its discretion?

While the Court of Appeal was clear that courts do have the power to make such an order, whether to make such an order was a separate matter and ultimately for the discretion of the judge considering relevant factors in each case.

The Court of Appeal considered that it “would be undesirable to provide a checklist or a score sheet for judges to operate” when exercising their discretion. But the Court of Appeal did note a number of factors that the Bar Council had submitted could be relevant including: the form of ADR being considered, whether the parties were legally represented, whether it was made clear to the parties that they were free to pursue their claim or defence if they did not settle, the urgency of the case, the costs of ADR, whether there was any realistic prospect of the claim being resolved through ADR, the parties’ relative levels of resource, bargaining power and sophistication, and the reasonableness and proportionality of the sanction if a party declined ADR.

Issue 4: Should the court have granted the Council’s application for a stay?

On the facts of the case, the Claimant raised concerns regarding the appropriateness of the Council’s complaints process, including for example the absence of a neutral third party and a settled written procedure, and the inability to recover costs or obtain compensation.Ultimately the Court of Appeal did not decide this issue for technical reasons concerning how the appeal was brought before it, but noted that the Deputy District Judge would have granted a stay to allow the operation of the Council’s complaints procedure if he had not concluded that he was bound by Halsey.

However, as matters had since “moved on”, the relative merits and demerits of the complaints procedure would have to be resolved on another occasion, although the Court of Appeal did encourage the parties to “consider whether they can agree to a temporary stay for mediation or some other form of non-court based adjudication.”

 

Key Takeaways

In simple terms, the Court of Appeal’s decision explains that judges effectively do have the power to order ADR, beyond the threat of costs sanctions for parties who unreasonably refuse ADR.

In that way, this decision emphasises the judiciary’s strong support for resolving cases by ADR and away from formal proceedings where possible, ideally leading to more disputes being disposed of fairly, quickly and cheaply, for the benefit of the court system and users overall. This complements the government’s recent announcement of plans to introduce compulsory mediation as a mandatory procedural step in all small claims in the County Court (as set out here). Similarly, the Civil Justice Council in its work reviewing the pre-action protocols, has recommended that the general pre-action protocol should include an obligation on the parties to engage in a pre-action dispute resolution process (see here).

For good reason then the decision will be welcomed by many claimants and defendants. However, it potentially gives rise to an increased risk of satellite litigation around the exercise of the court’s discretion as to whether to make such an ADR order, and of tactical applications for an ADR order, both of which may have the opposite effect to that intended.

With thanks to Dani Bass for her assistance in preparing this post.