Infra.Law

Compulsory Alternative Dispute Resolution?

By Sam Johnson & Nina Brown

Churchill v Merthyr Tydfil County Borough Council

The rule of law and right to a fair trial is a cornerstone of the English and Welsh legal system. However, the overriding objective of the Civil Procedure Rules is to enable the courts to deal with cases justly and at proportionate cost. As a result of this, the courts have put a significant emphasis on the use of alternative dispute resolution (“ADR”) as an important pre-trial tool, to save time and money for both the parties to a dispute and the courts themselves, with potential cost consequences for failing to consider ADR. In the recent case of James Churchill v Merthyr Tydfil County Borough Council[2023] EWCA Civ 1416, the Court of Appeal considered if a court could lawfully order the parties to court proceedings to engage in non-court-based dispute resolution process? And, if so, in what circumstances should it do so?

Facts:

Mr Churchill bought a property in 2015. The Council owned land adjoining the garden of the property. Mr Churchill claimed that since 2016, Japanese knotweed had encroached from the land causing damage and a loss of value and enjoyment. When Mr Churchill issued a letter of claim in 2020, the Council queried why he had not made use of its corporate complaints procedure. It said if he were to issue proceedings without having done this, the Council would apply for a stay and costs. Mr Churchill issued proceedings claiming nuisance and the Council applied for a stay. Deputy District Judge Kempton Rees dismissed the Council’s application, holding that he was bound to follow Dyson LJ’s statement in Halsey v. Milton Keynes General NHS Trust [2004] EWCA Civ 576, [2004] 1 WLR 3002 (“Halsey”) to the effect 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”.

However, DDJ Rees also stated that Mr Churchill and his lawyers had acted unreasonably by failing to engage with the Council’s complaints procedure and that this was not in the spirit of the relevant pre-action protocol. The Council was granted permission to appeal as this raised an important point of principle and practice which might affect multiple other cases.

The Court of Appeal considered four questions:

Was the judge correct to think that the Halsey case bound him to dismiss the Council’s application to stay the proceedings?

The Court of Appeal held that Dyson LJ’s comments in Halsey were not a necessary part of the reasoning that led to the decision in that case and did not therefore bind the judge in this case. In reaching this decision, the Court of Appeal noted that:

Dyson LJ was providing guidance as to the general approach to take when deciding whether a refusal to agree to ADR was unreasonable;
the Halsey decision was about costs sanctions and not whether to order parties to participate in mediation; and
the part of the Halsey judgment relied upon was in a section named ‘general encouragement of the use of ADR.’

If not bound to dismiss the stay application, could the court lawfully stay proceedings for, or order, the parties to engage in non-court-based dispute resolution process?

Yes, the courts ultimately control their own processes and have the requisite power to stay proceedings provided that it does not impair the right to a fair trial under Article 6 of the European Convention on Human Rights (“ECHR”). The order should:

not impair the very essence of the claimant’s right to a fair trial,
be made in pursuit of a legitimate aim, and
be proportionate to achieving that legitimate aim.

If able to do so, how should the courts decide whether to stay the proceedings for, or order, the parties to engage in a non-court-based dispute resolution process?

The Court of Appeal decided against laying down fixed principles as to what will be relevant as a number of differing factors may be relevant depending on all of the circumstances of the case. Though not to be treated as a checklist or score sheet for judges to operate, the Court of Appeal agreed that the following factors raised by the Bar Council (together with those mentioned in Halsey and Mr Churchill’s submissions) would likely have some relevance:

the form of ADR being considered,
whether the parties are legally represented or advised,
whether ADR is likely to be effective or appropriate without such advice or representation,
whether it was made clear to the parties that, if they did not settle, they were free to pursue their claim or defence,
the urgency of the case and the reasonableness of the delay caused by ADR,
whether that delay would vitiate the claim or give rise to or exacerbate any limitation issue,
the costs of ADR, both in absolute terms, and relative to the parties’ resources and the value of the claim,
the realistic prospects of success through ADR,
any significant imbalance in the parties’ level of resource, the bargaining power or sophistication,
the reasons given for not wanting to use ADR, and
the reasonableness and proportionality of the sanction, in the event that a party declined ADR in the face of an order of the Court

Should DDJ Rees have granted the Council’s application to stay the proceedings to allow Mr Churchill to pursue a complaint under the Council’s internal procedure?

The Court of Appeal declined to make any order for a stay of the proceedings at this stage for reasons including that the Council’s complaints procedure:

was plainly intended to operate before proceedings have been issued,
seemed to envisage a complaint about the Council’s services to council tax payers as opposed to private law claims against the Council as a neighbour, and
may not be the most appropriate process for an entrenched dispute of this kind.

Whilst the stay was not granted and no costs order given for this appeal, it was noted that the parties ought to consider whether they could agree to a temporary stay for mediation or some other form of non-court-based adjudication.

Discussion:

In summary, the Court of Appeal’s decision in Churchill v Merthyr Tydfil confirms that the courts are able to stay proceedings or order the parties to engage in ADR (but will not be obliged to do so), provided that such an order does not impair the right to a judicial hearing and is proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost. This is unsurprising, as it correlates with the overriding objective under the Civil Procedure Rules and the principle that taking a case to trial should really be the last resort. Whilst the cost consequences of failing to consider ADR have been in place for some time, this is a positive decision which gives the courts the discretion to require parties to engage in a more cost-effective, confidential and co-operative means of settling their dispute, rather than taking the matter straight to trial (which can take some time and may leave the parties unhappy with the court’s decision and the cost of getting there in the first place).

There may be some concern that by ordering parties to engage in ADR, reluctant parties may simply attend a mediation (or similar) and incur the costs of doing so, but with no real intention to settle the claim. However, this is likely to be a factor taken into consideration by the courts before any such order is made. Even where a settlement is not reached, ADR can also provide an opportunity to narrow the issues in dispute so that any trial may be shorter and more cost effective. Time will tell whether the ramifications of this decision mean that fewer cases make it to trial, however this could be an important step in furthering the overriding objective.

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