Alternative Dispute Resolution – can a court order parties to engage?

Churchill v Merthyr Tydfil Borough Council 

Here we explore the impact of the judgment in Churchill v Merthyr Tydfil Borough Council, handed down in November 2023, on alternative dispute resolution.

What is alternative dispute resolution?

Alternative dispute resolution (“ADR”) is an attempt to resolve issues between two parties, prior to going to court. ADR can be cheaper and more efficient than proceeding to court and can assist with the overriding objective of dealing with a case justly and at proportionate cost. Common forms of ADR include:

Mediation: an independent third party assists the parties to come to a mutually acceptable outcome.

Arbitration: an independent third party considers the facts and takes a decision that’s often binding on the parties.

The court’s powers regarding alternative dispute resolution

It has previously been established that  courts could not order disputing parties to engage in ADR, this precedent having been established in Halsey v. Milton Keynes General NHS Trust [2004] EWCA Civ 576, [2004] 1 WLR 3002. Should a party refuse ADR, courts would usually apply cost penalties to the refusing party. The cost penalties applied by the court were the main deterrent for parties refusing to engage in ADR. The incentives to refuse ADR could often outweigh the potential consequences.

The government has recently announced reforms to small civil claims, by providing free compulsory mediation to the disputing parties. It is expected over 180,000 parties will be referred automatically to a free telephone mediation, with a professional mediator provided by the courts. It is estimated that the increased use of mediation could positively impact up to 92,000 cases per year, potentially freeing up to 5,000 sitting days a year which, in theory, should help reduce the court backlog and provide a quicker and more efficient court service.

However, a recent decision in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, has effectively given the courts the discretionary power to order parties to engage in ADR. This has now provided a strong deterrent to parties who refuse to attempt ADR, who not only have potential cost penalties looming, but may also be ordered to engage in ADR.

Background

In 2015 James Churchill (the “Claimant”) bought a house in the borough of Merthyr Tydfil. Merthyr Tydfil Borough Council (the “Council”) owns the adjoining land and, since 2016, the Claimant alleged that Japanese Knotweed encroached onto his property causing damage, a reduction in its value and loss of enjoyment. The Claimant sent the Council a letter of claim on 29 October 2020, seeking damages for private nuisance.

The Council responded on 20 January 2021 denying liability and requesting the Claimant use their Corporate Complaints Procedure, through which the Japanese Knotweed could be treated. The Claimant actively refused to engage with the Council’s Corporate Complaints Procedure and issued proceedings against the Council in July 2021 seeking damages of £42,840.80 for private nuisance. On 15 February 2022, the Council issued a stay application.

The claim

The claim was first heard in the County Court by Deputy District Judge Kempton Rees, who dismissed the Council’s application to stay the proceedings on 12 May 2022. In his judgment, Deputy District Judge Kempton Rees stated he was bound by the previous statement of Dyson LJ's statement in Halsey v. Milton Keynes General NHS Trust [2004] EWCA Civ 576, [2004] 1 WLR 3002 (“Halsey”) which effectively states: "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".

Deputy District Judge Kempton Rees followed that up by stating: “if Halsey remains good law, then this does not get around the difficulty for the Defendant that it would appear that I cannot compel the Claimant to engage in a particular form of ADR.”

Deputy District Judge Kempton Rees held that the Claimant and his solicitor had acted unreasonably by refusing to engage with the Council through their internal Corporate Complaints Procedure. The actions of the Claimant were contrary to the spirit and the letter of the relevant pre-action protocol.

The Council was given permission to appeal to the Court of Appeal by HH Judge Harrison on 4 August 2022.

Court of Appeal decision

The appeal was heard by Dame Sue Carr, Lady Chief Justice; Sir Geoffrey Vos, Master of the Rolls; and Lord Chief Justice Colin Birrs. The issue to be decided by the Court of Appeal was whether the Claimant should have engaged in the dispute resolution service provided by the Council via the Corporate Complaints Procedure.

On 29 November 2023, the Court of Appeal unanimously decided that courts did have the power to stay proceedings and order the parties to engage in ADR, as long as it does not restrict the claimant’s right to a judicial hearing and is “proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost”. Therefore, any order for the parties to engage in ADR must be proportionate and not restrict the claimant’s right to a judicial hearing.

The Court of Appeal said that a clear part of the reasoning in Hasley was that the claimant had “come nowhere near showing that [the defendant] acted unreasonably in refusing to agree to a mediation” - this also contributed to the Court of Appeal’s decision and demonstrated the differences between this claim and Hasley.

It was stated that “Experience has shown that it is extremely beneficial for the parties to disputes to be able to settle their differences cheaply and quickly. Even with initially unwilling parties, mediation can often be successful”. The Court of Appeal continued on to say that non-court based resolutions are generally cheaper and quicker. However, the Court of Appeal stopped short of making ADR mandatory, allowing the court a degree of discretion over any decision to order the parties to engage in ADR.

Impact of the judgment

The discretionary power to order parties to engage in ADR is a powerful new tool in the court’s arsenal. It provides the courts with a further deterrent, for parties who refuse to engage in ADR.

Allowing courts to essentially force ADR is likely to deter more parties from refusing ADR, as there is a possibility they will still be ordered to engage in ADR at some point. The courts having stronger powers relating to ADR can help them to satisfy the “legitimate aim of settling the dispute fairly, quickly and at reasonable cost”.

Additionally, there is the potential that parties may be able to settle their dispute prior to going to court. Should more cases be settled earlier, it would mean less claims go to court, which in turn could lead to a reduction in the backlog of the courts.

It is clear the government has been trying to find a solution to this with the reforms to small civil claims being announced in July 2023. The strain on the courts has been a large problem and the decision in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 has the potential to help relieve that strain. However, it remains to be seen how effective the deterrent, of courts being able to order parties to engage in ADR, will be, given the length of time that courts can take to deal with cases generally.

The Hamlins Real Estate Disputes team has expertise in both commercial and residential matters. We seek to obtain the best outcome possible for every client, no matter how big or small the issue may be. If you would like a conversation to find out how we might help you, please get in touch.