In our recent article, Compulsory ADR on the Horizon, we noted a number of steps being taken towards ADR becoming a compulsory part of the litigation process. One of those steps was the consideration by the Court of Appeal ("COA") as to whether the court can lawfully stay existing proceedings for, or order, the parties to engage in a non-court-based dispute resolution process. The COA has confirmed that it does have this power - we consider the key aspects of the judgment in more detail.

The case

The case in question, Churchill v Merthyr Tydfil County Borough Council and others [2003] EWCA Civ 1416, concerns a dispute relating to the alleged encroachment of Japanese knotweed from land owned by the Defendant Council, onto the Claimant's property. 

Pre-issue, in response to the Claimant's letter of claim, the Defendant asserted that the Claimant should make use of the Defendant's own internal complaints procedure before commencing proceedings and threatened that, if the Claimant did not take this step, the Defendant would look to stay any proceedings issued. Proceedings were issued and a stay applied for. 

The High Court dismissed the Defendant's application for a stay, on the basis that it was bound to follow the finding a previous COA case of Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 and therefore could not compel the parties to engage in a non-court-based dispute resolution process. The court did criticise the Claimant for having unreasonably failed to engage with the Defendant's own complaints procedure. The Defendant appealed.

Halsey

In Halsey, the Judge stated that:

“It is one thing to encourage the parties to agree to mediation, even to encourage them in the strongest terms. It is another to order them to do so. It seems to us 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….it seems to us likely that compulsion of ADR would be regarded as an unacceptable constraint on the right of access to the court and, therefore, a violation of Article 6.”

This had been understood to mean that the court could not compel parties to engage in alternative dispute resolution ("ADR"). The decision had been subject to criticism and debate, but lower courts had considered themselves bound by these words.

The issues on appeal

The COA identified four main issues for it to resolve.

1. Was the High Court right to conclude that it was bound by Halsey and therefore had to dismiss the application?
2. If not, can the court lawfully stay proceedings for, or order, the parties to engage in a non-court based dispute resolution process?
3. If so, how should the court decide whether to do so?
4. Should the Defendant's application for a stay be granted for the Claimant to submit a complaint under the Defendant's internal complaints procedure?

Due to the importance of this decision, third parties including The Law Society, The Bar Council, The Civil Mediation Council, The Centre for Effective Dispute Resolution and The Chartered Institute of Arbitrators were allowed to intervene.

The decision

In a leading judgment given by Sir Geoffrey Vos, Master of the Rolls, the issues were decided as follows:

Was the High Court right to conclude that it was bound by Halsey and therefore had to dismiss the application?

In essence, the question which the COA had to determine was whether the part of the Halsey judgment (quoted in part above) upon which the High Court relied when reaching its decision not to order a stay was a necessary part of the reasoning that led to the decision in that case (the ratio decidendi), or whether it was not necessary, or something that was said in passing (an obiter dictum) . On consideration of the issues in Halsey, the COA reached a “clear conclusion” that it was obiter and therefore was not binding. In other words, the High Court did not have to follow Halsey in this respect.

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

The COA therefore went on to the next issue and in doing so considered domestic and European cases, legislation and rules. The COA noted that courts regularly adjourn hearings and trials to enable the parties to discuss settlement and that it would be “absurd” if they could not do so just because one of the parties does not agree to the adjournment. It continued:

“…in controlling its own process, the court can obviously delay resolution of a claim to allow the parties to negotiate, whether they all want to or not. Likewise, the court can, in my judgment, control its own process, by staying or delaying any existing proceedings whilst any other settlement process is undertaken.”

In response to some of the Defendant's submissions regarding the adequacy and suitability of the proposed out-of-court dispute resolution procedure, the court commented that these were factors relevant to the exercise of discretion as to whether a stay should be granted in the circumstances of the case being considered, and were not relevant to the question of whether the court has the power in the first place.

The court also concluded that directing the parties to engage in a non-court-based dispute resolution process would not be regarded by the European Court of Human Rights ("ECtHR") as an unacceptable restraint on the right of access to the court, as suggested in the above extract from Halsey. Indeed, recent cases in the ECtHR and Court of Justice of the European Union support the proposition 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.”

How should the court decide whether to do so?

The COA found that it will be a matter of discretion as to whether a court should stay proceedings or order parties to engage in non-court-based dispute resolution and many factors will be relevant. These include the characteristics of the proposed method of non-court-based dispute resolution. 

In response to various submissions, the COA noted that the court can stay proceedings for a variety of processes which have prospects 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”.

The COA declined to set out fixed principles which should be used in the court's decision making, but recognised that many factors, including those put before it at the hearing would be relevant. However, it did make clear that any order or stay to facilitate non-court-based dispute resolution should only be made provided it did not impair the Claimant's right to proceed to a court hearing and was proportionate to the legitimate aim of settling the dispute fairly, quickly and at reasonable cost.

Should the Defendant's application for a stay be granted for the Claimant to submit a complaint under the Defendant's internal complaints procedure?

The COA was of the view, taking into account the relevant circumstances, that nothing would be gained if a one-month stay was granted at this stage, as requested by the Defendant. It concluded this point by stating that the pros and cons of the particular internal complaints process advocated for by the Defendant would have to be resolved on another occasion.

The COA's concluding comment was to encourage the parties to consider whether a “temporary stay for mediation or some other form of non-court-based adjudication” could be agreed.

Comment

This is a significant decision in English litigation, which has confirmed that the court does have the power to order parties to engage with each other in a non-court-based dispute resolution process with a view to settling the issues between them. In considering such an order, the court must be satisfied that the order 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.

Engaging in ADR during the process of litigation can add to the costs and we suggest that there is a risk that seeking an order compelling the parties to participate in ADR could be used as a delaying tactic or as a pressure point by a litigating party with deeper pockets than its opponent(s). 

However, ADR can also save significant legal costs (as well as court resource) from being incurred if it is possible for the parties to reach agreement, or at least narrow the issues.

Our Alternative Dispute Resolution Service

Lewis Silkin has an outstanding team of lawyers specialising in all aspects of commercial disputes, with vast practical experience of modern litigation and ADR, with a number of the team being CEDR accredited mediators. We are now using our expertise to offer ADR services bespoke to these unprecedented times. In particular, we can ensure that parties who are facing early-stage contentious issues receive appropriate help, such as settlement facilitation assistance, early neutral evaluations and mediation. Further details of our LS Resolve service can be accessed here.