The Court of Appeal’s hotly anticipated decision in James Churchill v. Merthyr Tydfil County Borough Council¹ has been handed down. It holds that courts have the power to stay proceedings for, or order, parties to engage in a non-court-based dispute resolution process.

Background

James Churchill bought a property adjoining land owned by the Merthyr Tydfil County Borough Council. Churchill claimed that Japanese knotweed encroached from the council’s property to his own, causing damage.

When Churchill issued proceedings, the council issued an application for a stay, on the basis that Churchill was obliged to make use of the council’s corporate complaints procedure.

The council’s application for a stay was dismissed at first instance. The deputy district judge held that the court did not have the power to make such an order, as it was bound by the statement of Lord Justice Dyson in Halsey v. Milton Keynes General NHS Trust,² 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’.

In light of the importance of the point of principle and practice, the appeal was referred directly to the Court of Appeal.

The Court of Appeal’s decision

The Court of Appeal held that Lord Justice Dyson’s statement in Halsey did not form part of the ‘necessary reasoning’ that led to the decision in that case and was therefore not binding. Halsey was concerned with whether the court should impose a costs sanction against a successful litigant on the grounds that he had refused to take part in alternative dispute resolution – not whether to order a stay for the parties to engage in dispute resolution. As the statement did not go to the issue to be decided, it was incidental (or ‘obiter’) to the judgment.

As Lord Justice Dyson’s statement was not binding, the court was free to consider whether courts do, in fact, have the power to stay proceedings for, or order, parties to engage in dispute resolution. The question at the heart of this issue was whether such an order would be contrary to a litigant’s right to a fair and public hearing in a reasonable time (Article 6 of the European Convention on Human Rights). Having considered the three relevant streams of authority (i.e., domestic cases, European Court of Human Rights cases and pre-Brexit cases from the Court of Justice of the European Union), the court determined that the three streams, although based on different foundations, largely coincided. The court can lawfully 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 a fair trial.
• Is made in pursuit of a legitimate aim.
• Is proportionate to achieving that legitimate aim.

In terms of how, and in what circumstances, the court should make such an order, the court concluded that it could not and should not lay down fixed principles. Whether the court should order or facilitate any particular method of non-court-based dispute resolution in a particular case is a matter of the court’s discretion, to which many factors will be relevant. It did, however, note that the following factors submitted by the Bar Council (which was an intervener in the case) and Churchill were likely to be relevant:

• The form of dispute resolution procedure being considered.
• Whether the procedure involves a neutral third party.
• Whether the parties are legally advised or represented.
• Whether the procedure is likely to be effective or appropriate without such advice or representation.
• Whether it is made clear to the parties that, if they do not settle, they are free to pursue their claim or defence.
• The urgency of the case and the reasonableness of the delay caused.
• Whether that delay would vitiate the claim or give rise to or exacerbate any limitation issue.
• The costs of the procedure – both in absolute terms and relative to the parties’ resources and the value of the claim.
• Whether there is any realistic prospect of the claim being resolved through the procedure.
• Whether there is a significant imbalance in the parties’ levels of resources, bargaining power or sophistication.
• The reasons given by a party for not wishing to mediate; for example, if there had already been a recent unsuccessful attempt at dispute resolution.
• The reasonableness and proportionality of the sanction, in the event that a party declines to engage in dispute resolution in the face of a court order.

This list is not exhaustive.

Despite finding it had the power to do so, the court declined to make an order to stay the proceedings on the basis that, due to the change in circumstances since the first instance judgment, there would be little point in doing so as nothing would be gained.

Takeaway

There is little doubt that, appropriately deployed, non-court-based dispute resolution will often achieve quicker and cheaper resolution of disputes. But the wisdom of going beyond encouragement (by way of cost sanction, if necessary) and forcing an unwilling party to the table has nevertheless been the subject of fierce debate – the arguments for and against are well known and in need of no repetition here. Since at least the Civil Justice Council’s June 2021 Compulsory ADR report, which concluded that compulsory alternative dispute resolution (ADR) is compatible with Article 6, the direction of travel has been clear: Court-ordered dispute resolution is coming! It would appear it is now here. The onus is now on the courts to exercise this discretion with due caution. Judges must live up to Sir Geoffrey Vos’s assertion that they ‘will be well qualified to decide 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’.

Footnoted

1 [2023] EWCA Civ 1416.

2 [2004] EWCA Civ 576.