Court of Appeal backs compulsory alternative dispute resolution (ADR)

Andrew Koffman
Head of Litigation

A recent Court of Appeal judgment confirmed for the first time that the court can now compel litigating parties to take part in alternative dispute resolution (ADR), such as mediation, even if the parties have not agreed to do so between themselves.

Previously it had been understood, including by the trial judge in the latest case, that the law was as set out in a 2004 Court of Appeal case (Halsey v Milton Keynes General NHS Trust).  While the courts were able to encourage litigants to take part in ADR (strongly if necessary, with the right to impose costs penalties for unreasonable refusal), to compel them to do so would interfere with their basic right of access to the court to resolve disputes under the European Convention on Human Rights (ECHR) – which incidentally also applies to businesses in this context.

The latest case was Churchill v Merthyr Tydfil CBC [2023] EWCA Civ 1416.  Although not a business dispute, the judgment will undoubtedly have an impact on such disputes in future.

The case arose out of Japanese knotweed encroaching from land owned by the council onto Mr Churchill’s land. He brought a claim for nuisance, saying it had reduced the value of his property. The council tried to insist that Mr Churchill follow their internal complaints procedure, which included a form of ADR (although he was sceptical about aspects of it), and they applied for the case to be “stayed” until he had done so.

The County Court judge initially dismissed the application for a stay, believing he was bound to follow the Halsey judgment and that any insistence on the use of ADR would interfere with the parties’ right of access to the court, and to a fair trial, under the ECHR.

However, the Court of Appeal overturned the decision and decided that Halsey did not deprive the court of the right to order ADR and a stay until it had been attempted).  However, on the facts, it was found that there was no purpose in granting a stay given that time, and the case, had moved on in the meantime.

The position now is that “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: (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.”

This is the first clear confirmation, at Court of Appeal level, that the court has the power to order parties to take part in ADR.

The court also has the power to order a stay. In fact, up to now, courts have regularly ordered short stays of cases for ADR even where the parties have not necessarily been in agreement on the point, but it would now appear that the court can impose a longer-term stay of an action to bring it to a halt unless and until ADR has been tried.

This is still a discretionary power and may not be used in every case (as indeed it was not in Churchill).  It is also important to bear in mind that mediation (unlike other non-court processes such as arbitration and expert determination) is not binding on the parties; they can only reach a mediated settlement by agreement.

However it is clear that the courts see ADR as an increasingly essential part of the litigation landscape.

This judgment is likely to result in the settlement of more cases before trial than previously, since some claims will no doubt settle at mediation against expectations.  However there are also likely to be more unsuccessful mediations.  For SME businesses that already find the costs of litigation a daunting prospect, there is likely to be further expense and the risk that ADR will be used as a tactic by some litigants (usually defendants) to delay matters and put their opponents to additional expense.

Where there is a contractual or other internal dispute resolution procedure which involves ADR (as many businesses’ trading terms include), or when an opponent requests ADR at an early stage, it will be crucial to consider ADR before starting a court claim, and to agree to it unless there are good grounds not to.  An SME, that does not do this, risks having their claim stayed, resulting in further costs and disruption in the midst of an already stressful, and often expensive, process.

For further information regarding the changes, please contact Andrew Koffman or a member of our Litigation and Dispute Resolution team.