Compulsory ADR is here – James Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416

29th November 2023

Elizabeth England appeared on behalf of the Social Housing Law Association who were an Intervener in this landmark case on whether the court can order parties to compulsory non-court based alternative dispute resolution.

The Court of Appeal has today (29 November 2023) handed down its decision in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416. The root of the case lies in an alleged infestation of Japanese Knotweed in Mr Churchill’s garden, said to have migrated from the Council’s land and caused a nuisance on Mr Churchill’s land. At the first hearing, the Council sought a stay of proceedings in order that the matter might progress through the Council’s internal complaints procedure.

The Deputy District Judge dismissed the application. He held that he was bound to follow Dyson LJ’s statement in Halsey v. Milton Keynes General NHS Trust [2004] EWCA Civ 576 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 DDJ stated that: “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.”

The Council sought permission to appeal, arguing that the passage relied on in Halsey was obiter and/or no longer good law. The Court of Appeal granted permission to appeal directly to the Court of Appeal rather than the County Court. The key questions of principle for the Court of Appeal were (1) is Halsey still good law or was the passage relied on obiter? (2) can truly unwilling parties be compelled to engage in a particular form of ADR? If so, when? And can an internal complaints procedure be treated as ADR?

The Court determined that (1) the passage in Halsey was obiter (see paragraph [20] of the Judgment) and therefore (2) parties can be compelled to engage in some alternative, non-court based, ways of resolving their disputes (paragraphs [59]-65]).

At paragraph [59] of his judgment, Vos MR said “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.” This opens the way to the court compelling initially unwilling parties to at least attempt some ADR.

The key passage setting out the conclusion to the second issue, is found in paragraph [65]. Vos MR said;

[65] The court should only stay proceedings for, or order, the parties to engage in a non-court-based dispute resolution process 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.

As to the method of alternative or non-court based dispute resolution, Vos MR said that this is a matter for the court’s discretion (paragraph [59]). However, the particular method of non-court based dispute resolution will be relevant as to the exercise of that discretion (paragraph [60]). He pointed to the Bar Council’s list of suggested factors which might be relevant to the exercise of discretion, although he held that to lay down fixed principles would be too restrictive and the court should use the totality of its discretion [66]. The Bar Council’s factors are set out in paragraph [61] and are as follows;

a) the form of ADR being considered,
b) whether the parties were legally advised or represented,
c) whether ADR was likely to be effective or appropriate without such advice or representation,
d) whether it was made clear to the parties that, if they did not settle, they were free to pursue their claim or defence,
e) the urgency of the case and the reasonableness of the delay caused by ADR,
f) whether that delay would vitiate the claim or give rise to or exacerbate any limitation issue,
g) the costs of ADR, both in absolute terms, and relative to the parties’ resources and the value of the claim,
h) whether there was any realistic prospect of the claim being resolved through ADR,
i) whether there was a significant imbalance in the parties’ levels of resource, bargaining power, or sophistication,
j) the reasons given by a party for not wishing to mediate: for example, if there had already been a recent unsuccessful attempt at ADR, and
k) the reasonableness and proportionality of the sanction, in the event that a party declined ADR in the face of an order of the Court.

The Court held that these principles are relevant to a decision made on an application to stay a claim at any point in ongoing litigation (paragraph [65]).

What does this mean for parties in litigation?

The Civil Procedure Rules provide a consistent guide to the Court and to parties to litigation which includes a pathway to both the parties and the court to order compulsory ADR;

– CPR 26.5(1) allows a party, when filing a completed directions questionnaire to “make a written request for the proceedings to be stayed while the parties try to settle the case by alternative dispute resolution or other means”.
– CPR 26.5(3) also allows the court to stay the proceedings, even without the parties requesting it, “if the court otherwise considers that such a stay would be appropriate”.

Either a party (using r.25.5(1)) or the court (using r.25.5(3)) can compel a party to use some alternative, non-court based method of resolving a dispute.

If a party wishes to compel another party to engage in a non-court based dispute resolution process, evidence should be presented to what the process is. It would be wise to address the matters identified by the Bar Council, but these matters are not restrictive and there are other matters that may be relevant in the particular circumstances.

Importantly, such a process does not need to involve an independent third party, that is, to be a traditional ADR such as mediation or arbitration. However, if it involves an internal complaints procedure or other process where there is not an independent third party, some evidence needs to be given that it will not cause delay, that it is fair, and the parties will not be prevented from coming back to court if it is unsuccessful. In order not to create an inequality of arms, it may also be worth considering whether the court should direct that the recoverable costs to each party within the process are to be limited.

Landlord and Tenant Cases

The case was of particular interest to landlords and tenants in the context of housing conditions claims. Indeed the Social Housing Law Association and the Housing Law Practitioners Association were two of the seven interveners. Tenants often complain that their landlord has delayed in putting right a repair of which the landlord is on notice, and point to the unfairness of the landlord’s internal complaints procedure which only serves to delay the repairs further. Landlords, and in particular social landlords, complain that they are harassed by claims farmers who charge tens of thousands in costs to pursue a few hundred pounds for their clients.

Will Churchill assist social landlords to filter cases through an internal complaints process and avoid the high costs of housing conditions claims farmers? It depends on how robust the internal complaints process is. For organisations, in any context, wishing to persuade a court to order compulsory ADR there is a responsibility to demonstrate that the alternative is going to be completed in a timely manner, and be fair – particularly if the other side is not going to be represented.

The next question is whether a tenant can insist on having a solicitor within the internal complaints process. It is difficult to argue against this when the calculation of general damages is complex and based on factors which are alien to those who are not legally sophisticated. The controversy is always in costs. It may be that a court could be persuaded to limit the recoverable costs of each party who is obliged to refer to ADR. This is, perhaps, a matter for another day or indeed, a matter of argument on costs by utilising the many and various costs provisions which exist within the CPR.

Commercial Cases

As the Court of Appeal has held that a court can lawfully stay proceedings for, or order, the parties to engage in a non-court dispute resolution process (provided that any order made does not impair 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), the impact of this case will be felt beyond just landlord and tenant cases.

Whilst most commercial litigants recognise the benefit of utilising ADR, there are still some which seem to be implacably opposed to its use, sometimes for no apparent good reason. It is anticipated that this ruling, taken together with measures such as initial disclosure contained in CPR PD57AD will encourage parties that a cards on the table approach to see if settlement is possible at an early stage, without recourse to the courts.

It is also worth stating that compulsory ADR might be detrimental to some claimants, for example where the defendant is dishonest or is cynically trying to obstruct the litigation process or increase the claimant’s costs. In such cases, a proactive approach by the claimant’s legal advisers might assist in keeping the proceedings on track and minimising cost and delay.

The ruling follows the general direction of travel for compulsory ADR. Indeed, there are government proposals to make ADR compulsory for the small claims track claims. More can be discovered about these proposals in the link below

UK government confirms plans for compulsory mediation in the County Court and decides against statutory regulation of the mediation sector

Elizabeth was instructed by Katrina Robinson MBE of Capsticks LLP.

Barristers at Five Paper will be delighted to discuss the case and provide training on what compulsory ADR may mean for you and your case.