The Court of Appeal confirms that the courts can compel parties to engage in ADR

On 29 November 2023 the Court of Appeal handed down judgment in Churchill v Merthyr Tydfil County Borough Council, holding for the first time that the court can lawfully stay proceedings for, or order, parties to engage in a "non-court-based dispute resolution process” with certain provisos.

In confirming the court’s power to mandate ADR, this decision settled “an important point of principle and practice”, is anticipated to have widespread impact and departed from precedent as previously understood. However it leaves open new questions about how and on what basis the court will exercise the power - and with what results.

Background

Prior to this decision in Churchill v Merthyr Tydfil County Borough Council[1] (“Churchill”), the courts have taken the position that they could encourage but not compel parties to engage in ADR.  They did so following the Court of Appeal decision in Halsey v Milton Keynes General NHS Trust[2] (“Halsey”), in which Dyson LJ said that ordering unwilling parties to mediate was an unacceptable obstruction on their right of access to the court and likely to be a breach of Article 6 of the European Convention on Human Rights (“ECHR”) (the right to a fair trial).  However, over the years since Halsey, various judges have expressed the wish that the court would review the decision.

Then in July 2021, the Civil Justice Council ("CJC") published a report on "Compulsory ADR" which concluded that mandatory ADR was, in fact, compatible with Article 6 ECHR. Even if parties were compelled to engage in ADR, they were not compelled to reach settlement and could always opt instead to continue the litigation, such that their access to the court was maintained.  Praise for that report came, inter alia, from the Master of the Rolls, Sir Geoffrey Vos - who went on to give the leading judgment in Churchill.

Churchill

This claim concerns damage to the Claimant’s property allegedly caused by Japanese knotweed encroaching from the Defendant council’s neighbouring property. The Claimant declined to use the Defendant’s own complaints procedure but instead issued proceedings against the Defendant in nuisance. The Defendant applied for a stay (and costs), contending that the Claimant was obliged to use its complaints procedure before issuing proceedings.

The County Court applied Halsey and dismissed the application - but given the importance of the point, permitted the Defendant’s appeal straight to the Court of Appeal. The Law Society, the Bar Council, various prominent ADR bodies[3] and two organisations representing housing lawyers[4] were all granted the right to intervene in the appeal.

The Appeal judgment

In a clear and succinct leading judgment, Sir Geoffrey Vos identified and addressed the four main issues for the Court to resolve. We set out those issues below and his conclusions (with which the other two judges, Lady Carr the Lady Chief Justice and Lord Justice Birss, agreed).

1. Was the judge right to think that Halsey bound him to dismiss the Council’s application?

No. Following careful analysis of the Halsey judgment, Sir Geoffrey concluded that Dyson LJ’s views that the court could not compel mediation (as set out above) were obiter dicta in that case and therefore not binding as a matter of law.

2. If not, can the court lawfully stay proceedings for, or order, the parties to engage in a non-court-based dispute resolution process?

Yes, provided that the order made does not impair the very essence of the claimant’s right to proceed to a judicial hearing and is proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost.

Sir Geoffrey reached this view having reviewed the relevant streams of European and domestic authorities. He concluded that they supported the existence of this power, as did the court’s power to control its own process and adjourn/stay proceedings for settlement discussions. Finally, he derived support from the CJC’s report on compulsory ADR mentioned above and its conclusion that mandating ADR was compatible with the parties’ rights under Art 6 ECHR.

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

This will be a matter of the court’s discretion in any particular case, to which many factors will be relevant. Sir Geoffrey declined to lay down fixed principles as to what those relevant factors are or to provide any sort of “checklist” or “score sheet” for judges to operate. But he indicated those relevant factors would include (but not be limited to) the nature/characteristics of the ADR process being considered (and its limitations/flaws), the nature of the parties and any representatives and the features of the dispute.

4. Should the judge have granted the Council’s application to stay these proceedings to allow Mr Churchill to pursue a complaint under the Council’s internal complaints procedure?

Sir Geoffrey did not answer this directly, although he declined to grant the stay himself.  This was not as the result of consideration of all the relevant factors (as discussed in relation to point 3 above) including the merits or otherwise of the Defendant’s complaints procedure. Rather, this was for technical reasons (those factors not being before the court as either the basis of the Defendant’s appeal or any cross appeal by the Claimant) and practical reasons (the factual situation having moved on in a way that would render the stay sought now futile).

Discussion

The impact of this decision is hard to overstate. It makes clear that the court can potentially stay any proceedings and order the parties (even if unwilling) to participate in a “non-court-based dispute resolution process”.

That latter phrase is cumbersome but seems deliberately wider than some definitions of ADR[5] and to encompass “negotiation between the parties, mediation, early neutral evaluation or any other process that has a prospect of allowing the parties to resolve their dispute” (para 64, our emphasis). Accordingly, it appears to include internal complaints procedures of the sort operated by the Defendant here – albeit that if the procedure is unusual or potentially biased, those are factors which may make it less likely that the court will exercise its power to compel engagement (as discussed under issue 3 above).

We say “may”, because this Judgment leaves open a number of key questions, including when an order compelling mediation will be “proportionate” per issue 2 and what factors may be relevant (and to what degree) to the exercise of its power in any case per issue 3. This lack of certainty is not helped by the fact that the court did not end up applying its analysis to the facts of this case for the reasons set out under issue 4.

Such uncertainty of course cuts both ways. While one might expect Defendants to be the party most likely to be seeking an order for compulsory mediation, that will not always be the case - and the uncertainty gives scope for weaponised applications on either side.

That said, it would not be surprising if the courts are keen to exercise this newly confirmed power. That would be consistent with other procedural developments prioritising ADR. These include the announcement in July 2023 that mediation would be made compulsory in all small claims track matters (up to £10,000 in value). Also the report published in August 2023 following the CJC’s review of the pre-action protocols proposing that parties should be obliged to engage in ADR (or hold a pre-action meeting) before proceedings are issued.

Where a court does compel ADR, questions remain about what it would achieve where a party or parties are truly unwilling to participate. Sir Geoffrey was bullish in the judgment that “Even with initially unwilling parties, mediation can often be successful” (para 59) - but where compulsory ADR fails the outcome will be more costs and delay, which serve no one.

Time will tell whether the courts do show appetite to make such orders and with what success. Much will depend on the judges’ skill in exercising their discretion per issue 3 in deciding “whether a particular process is or is not likely or appropriate for the purpose of achieving the important objective of bringing about a fair, speedy and cost-effective solution to the dispute and the proceedings, in accordance with the overriding objective” (para 66).