Weeding out a knotty problem – the fallout from Churchill v Merthyr Tydfil

7 December 2023

The background

Alternative Dispute Resolution (ADR) has come on in leaps and bounds in the last few decades. Most people will immediately think of mediation when they hear the term “ADR”, but in reality ADR can refer to any form of dispute resolution that doesn’t involve the court system.

One of the issues that has been hotly debated for years is whether a court could compel a party to undertake some form of ADR if they were unwilling to do so. There could be all sorts of reasons why a party did not want to undertake ADR such as mediation: one piece of research showed that many parties simply did not want to meet their opponents face to face at a mediation. Perhaps a party thinks it has an unassailable case and does not want to waste time with a mediation. Another may want their day in court – a hearing that will vindicate them in a very public setting. There are many possible reasons and individual parties may have multiple reasons for not wanting ADR. But could the court force them to go through ADR against their wishes?

The leading case (until recently)

The leading case in this area is undoubtedly Halsey v. Milton Keynes General NHS Trust [2004] EWCA Civ 576. This case was not concerned with whether either of the parties should be compelled to mediate: this was highly relevant to the Churchill case we are just about to consider. There were two connected appeals in Halsey: the first claim was one under the Fatal Accidents Act 1976 and the claimant had already lost. The question was more narrowly focused on the defendant’s claim for costs. The claimant said that the defendant had unreasonably refused to mediate and that it should therefore recover less in costs than it was otherwise entitled to.

The actual decision in that particular case can be simply stated: the Court of Appeal found that the claimant “…has come nowhere near showing that the Trust acted unreasonably in refusing to agree to a mediation.” The defendant, in short, was not to be deprived of any of its costs. The Court of Appeal pointed out that, while the case was not unsuitable to ADR, the defendant thought it had a strong defence and had reasonable grounds for thinking so. The requests for mediation were tactical, thought the judge, and the costs of mediating would be disproportionately high compared to the relatively small value of the claim. The Court of Appeal thought that the defendant “… was entitled to regard this as a factor strongly militating against mediation“.

The important point coming out of Halsey, however, was the view of the Court of Appeal that a court simply did not have the power to order an unwilling party to mediate (or undertake any other form of ADR). As Dyson LJ put it at paragraph 10,

“But if the parties (or at least one of them) remain intransigently opposed to ADR, then it would be wrong for the court to compel them to embrace it.”

Such has been the law ever since: the court will not order the parties to undertake ADR, but if a refusal is unreasonable, then that unreasonableness can be taken into account when it comes to considering any order as to costs. There has been a tsunami of cases since then looking at the question of the reasonableness of any refusal to take part in ADR.

The leading case (now)

The question came up for consideration and decision in the case of Churchill v Merthyr Tydfil [2023] EWCA Civ 1416. The facts are easily stated.

Mr Churchill bought land neighbouring property owned by the Council. His allegation was that the Council had committed a nuisance by allowing Japanese knotweed to encroach on Mr Churchill’s property leading to damage and a reduction in its value. His claim was for damages for these losses. The Council’s first response to Mr Churchill’s letter of claim was to direct him to their complaints procedure. This procedure was, apparently, a fairly common one in use by councils generally. The Council in this case said that their procedure was akin to ADR, and that it was unreasonable of Mr Churchill to refuse to file a complaint first.

So the question came fairly and squarely before the court for decision: could a court stay proceedings and effectively compel Mr Churchill to file a complaint with the Council before proceeding with his claim before the courts? The judge at first instance found that he was bound by the decision of the Court of Appeal in Halsey and declined to stay the proceedings to allow Mr Churchill to comply. However, he did find that Mr Churchill had behaved unreasonably in failing to engage with the Council’s complaints procedure, that being contrary to the spirit and intent of the applicable pre-action protocol.

In the Court of Appeal

For those who delight in legal Latin, the Court of Appeal decided that the views expressed on compelling a party to undertake ADR were not part of Halsey’s “ratio decidendi” (meaning the actual decision of the Court) but were just “obiter dicta” (just a non-binding expression of opinion). This meant that the Court of Appeal was not bound to follow Halsey on this point and could consider the matter afresh.

The Court of Appeal reviewed a wide array of case-law, coming from England and the EU, taking in the European Court of Human Rights. The view expressed in Halsey and elsewhere was that, by compelling a party to undertake ADR, this would or might infringe on a party’s rights under Article 6 of the European Convention on Human Rights (dealing with a person’s right to have unfettered access to justice).

After reviewing the authorities, the Court of Appeal concluded that it could stay proceedings for, or order, the parties to engage in ADR (or “non-court-based dispute resolution process” as the Court of Appeal preferred to put it). The judgment put some safeguards around this power (so that the exercise of the power could not “impair the very essence of the claimant’s article 6 rights” and it had to be “proportionate“).

Now for the tricky part: precisely when and in which precise circumstances could the court make such an order? The Court of Appeal referred to many different factors that could be taken into account, including citing the various factors that were given by the Bar Council in its submissions as one of the intervenors. However, the actual decision of the Court of Appeal was quite simple:

“I do not believe that the court can or should lay down fixed principles as to what will be relevant to determining those questions. … It would be undesirable to provide a checklist or a score sheet for judges to operate.”

Parties going forward will doubtless scrutinise the factors listed by the Court of Appeal in paragraphs 61 to 63, and will also think up new factors to convince judges in future either to order, or not to order, ADR.

As for the Council’s complaints procedure, the Court of Appeal noted that things had moved on and they did not think it would now be worthwhile ordering a month’s stay of proceedings to allow for the Council’s complaints procedure to be initiated. As the Court of Appeal observed, the complaints procedure seemed most apt for complaints by a council tax payer about the Council’s services and was aimed at being used prior to proceedings, not while they were underway.

What does it all mean?

The takeaway is that the court can now in effect order ADR, even against an unwilling participant. We just do not know when and in what circumstances this will be ordered and we can expect a plethora of cases going, doubtless, in all different directions taking into account a whole range of factors, both those mentioned in Churchill and others besides. The Court of Appeal took note that ADR, even with initially unwilling participants, can still be “successful”: the criterion for “success” here seems to be that the parties managed to come to an agreement.

Is that really so? If a claimant has a good claim for £1m, but on a long mediation day exhaustion sets in and he accepts £0.5m, that might well be a success for the defendant who ground the claimant down, but could hardly be seen as a success for the claimant. From an external point of view, it might be a “success” as agreement was reached.

Very often, requests for mediation are made by parties with less good cases (whether on the claimant’s or the defendant’s side); a claimant may well request mediation because it has no intention of moving forward with litigation or a defendant may request mediation if it wants to drag things out. True it is that ADR can be cheaper and quicker than full-blown litigation, but if a party is not going to settle anyway, why should they be forced to undertake the additional time and costs of a mediation? Preparing for a mediation is a not insignificant amount of effort in a large commercial case.

In fact, the Court of Appeal in the Halsey case noted that the judge at first instance had thought that the claimant’s requests for mediation in that case were “tactical”. As the Court of Appeal said,

“We think that, if anything, this was an understatement. The extraordinary letter written to the Secretary of State very early on was an attempt to extort a sum (plus costs) in settlement of a very small claim which, at best, was speculative. The writing of no fewer than 5 letters asking the Trust to agree to mediation was of a piece with this early letter.

Will we now see more tactical attempts to compel mediation (or other forms of ADR) simply in an attempt “to extort a sum (plus costs)” (as was the suspicion in Halsey)? The trend for many years has been towards ADR and so Churchill will only accelerate that trend. The result is of course in line with what ADR providers have been advocating for some years and it is in line with the conclusions of the report on Compulsory ADR published by the Civil Justice Council back in 2021. It was recently announced that smaller claims in the County Court (up to £10,000) will be subject to compulsory mediation as part of a wider roll out of ADR still to come. So the trend towards ADR is only accelerating.

Only time will tell how that trend will play out. The decision is extraordinarily vague and short on detail: what exactly are the factors to be taken into account in ordering ADR? When is it “proportionate”? When could it impinge on a claimant’s rights under Article 6 of the ECHR? The Court of Appeal did not tell us – it means we have to watch out for case after case as the judges are asked to grapple with these issues.