The Court of Appeal has today released its judgment in James Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 (“Churchill”).

In Churchill, the Court of Appeal considered, amongst other issues, whether the court has powers to stay proceedings and compel parties to engage in non-court based dispute resolution processes and, if the court does have such powers, how the court should go about making such a decision.

In this article we set out the key takeaways from today’s judgment.

The Facts

In 2015, Mr. Churchill bought a property in Merthyr Tydfil to which Merthyr Tydfil County Borough Council (the “Council”) owned adjoining land. In July 2021, Mr Churchill issued proceedings in nuisance against the Council seeking damages for an alleged infestation of Japanese knotweed in his garden, which he alleged had originated from the Council’s adjoining land. In February 2022, the Council issued an application seeking to stay the proceedings so that the parties could engage in the Council’s internal complaints procedure.

In May 2022, Deputy District Judge Kempton Rees dismissed the application. Whilst DDJ Rees found that Mr Churchill and his lawyers had acted unreasonably by failing to engage with the Council’s complaints procedure, ultimately, he considered he was bound by Dyson LJ’s statement in Halsey v. Milton Keynes General NHS Trust, “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 August 2022, HH Judge Harrison granted the Council permission to appeal and referred the matter straight to the Court of Appeal on the grounds that the case raised important points of principle and practice.

Key Takeaways

Can the court lawfully stay existing proceedings for, or order, the parties to engage in a non-court based dispute resolution process?

Following today’s decision, the courts have the power to order a stay of proceedings or order the parties to participate in a non-court based dispute resolution process providing that the order made (a) does not impair the very essence of the claimant’s right to a fair trial, (b) is made in pursuit of a legitimate aim, and (c) is proportionate to achieving that legitimate aim. The Court of Appeal acknowledged that courts, in controlling the litigation process, readily stay or delay existing proceedings to allow the parties to discuss settlement, whether they all want it or not.

Does that power include a stay of proceedings to engage in an internal company complaints procedure?

Yes. The court adopted the definition ‘non-court based dispute resolution process’ which is wide enough to include, in theory, any internal complaints procedure. The Court heard submissions about whether an internal complaints procedure of the kind offered by the Council is properly to be regarded as a species of ADR at all and thought this was academic. It emphasised the court can “stay proceedings for negotiation between the parties, mediation, early neutral evaluation or any other process that has a prospect of allowing the parties to resolve their dispute. The merits and demerits of the process suggested will need to be considered by the court in each case.”

In Churchill, the ‘non-court-based dispute resolution process’ was an internal complaints procedure operated by a local authority, to which Mr Churchill was not contractually bound. Mr Churchill sought to argue that no stay could be granted for any resolution process that (i) does not allow the parties to be represented by lawyers, (ii) does not allow for the payment of the claimant’s legal costs, and (iii) is not independent of the defendant’s management. The Court of Appeal acknowledged that whilst these were factors that could affect the court’s discretion in exercising its power, they did not go to the existence of the power itself.

The Court of Appeal did not think such order would by deemed to be an unacceptable restraint on ECHR and endorsed the approach of the Civil Justice Council’s June 2021 Report on Compulsory ADR which expressed the view that “any form of ADR which is not disproportionately onerous and does not foreclose the parties’ effective access to the court will be compatible with the parties’ Article 6 rights”, and “we think the balance of the argument favours the view that it is compatible with Article 6 for a court or a set of procedural rules to require ADR”.

How should that power be exercised?

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. The key word here is ‘many’. Although the Court of Appeal referenced the matters mentioned by the Bar Council, Mr. Churchill and the Court of Appeal in Halsey (e.g. whether the parties are legally advised or represented, whether it was made clear to the parties that, if they do not settle, they are free to pursue their claim or defence, amongst others), it confirmed that the court cannot and should not lay down fixed principles as to what will be relevant to determining the question as to whether a stay should be imposed in order to pursue non-court based dispute resolution.

The characteristics of the particular non-court-based dispute resolution process being considered will be relevant to the exercise of the court’s discretion as to whether to order or facilitate it. Any party seeking an order to compel the parties to engage in a non-court based dispute resolution process, especially an internal complaints procedure should be prepared to demonstrate the robustness of the process. Can it be completed in a timely manner, be fair, be reasonable in cost and not impair the claimant’s right to proceed to a judicial hearing? The Court of Appeal noted “Other factors too may be relevant depending on all the circumstances”.

Therefore, the Court of Appeal made clear that the court has a broad discretion in making a decision in this regard, with Sir Geoffrey Vos acknowledging that judges 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 and the proceedings, in accordance with the overriding objective.

In Churchill, the Court of Appeal ultimately declined to order a stay of the proceedings to pursue the Council’s internal complaints procedure as ‘things had moved on’ and various factors including the entrenchment of the parties seemed to persuade the court of this. It did not make comment on the Council’s complaint procedure, noting it “is better in my judgment to allow the appeal to the extent already stated and to allow the merits and demerits of this particular internal complaints procedure to be resolved on another occasion.” Despite this, Sir Geoffrey Vos stated: I would also indicate that it is my provisional view that: … (ii) the parties ought to consider whether they can agree to a temporary stay for mediation or some other form of non-court-based adjudication.

Comment

In line with the Practice Direction on Pre-Action Conduct and Protocols, Churchill highlights that before a party issues proceedings it must give proper consideration (which can be evidenced) of whether it should participate in alternative dispute resolution to attempt to reach a settlement and thereby avoiding litigation. Otherwise, that party may find itself on the receiving end of an adverse costs order and/or be ordered to engage in some form of alternative dispute resolution by the court in any event.

There is strong encouragement from the court in this judgment for parties to engage in non-court-based dispute resolution before issuing proceedings. Sir Geoffrey Vos stated: “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 statement arguably comes as no surprise to those who are familiar with dispute resolution processes, especially in light of the Civil Justice Council’s latest report on pre-action conduct, CJC Review of Pre-Action Protocols. In certain cases, non-court based dispute resolution can be extremely effective in allowing parties to reach a resolution to their dispute even when the parties (and those acting on behalf of the parties) consider this to be futile. Solicitors often cite the benefits of non-court dispute resolution processes, and this viewpoint was echoed by the Court of Appeal, noting, they are often “in general terms, cheaper and quicker than court-based solutions.”

However, most non-court based dispute resolution processes are voluntary processes, which are most effective when both/all parties to a dispute are willing to meaningfully engage in that process. Mediation is a prime example. If parties are forced by the court to participate in what are otherwise voluntary processes then it may be that a significant number of those court ordered alternative processes will not lead to cheaper and quicker resolution of disputes but instead may delay and increase the costs incurred by the parties in resolving the dispute via the court.