The Court of Appeal handed down, on 29 November 2023, its long-awaited decision on whether the court could order parties to mediate or engage in non-court dispute resolution. The answer to the long-awaited question is an emphatic YES.
Background:
The case of Churchill v Merthyr Tydfil County Borough Council ("Churchill") is born out of a nuisance claim concerning Japanese knotweed. The appeal is being heard in the Court of Appeal because the claimant refused to engage in the defendants' Internal Complaints Procedure ("ICP"). It is the defendant's position that their ICP is a form of alternative dispute resolution. The defendant appeals the order of DDJ Kempton-Rees dated 12 May 2022 sitting in Cardiff County Court where he refused an application to stay the proceedings requiring the claimant to engage in the ICP. The judge expressed the view that he would have granted the stay but for the precedent set in Halsey v Milton Keynes NHS Trust [2004] EWCA 576 ("Halsey"). which was of the view that compulsory mediation would constitute a breach of article 6 of the European Convention of Human Rights ("ECHR").
This appeal gained the interest of no less than seven interveners, including the Civil Mediation Council ("CMC"), the Chartered Institute of Arbitrators ("CIArb") and the Centre for Effective Dispute Resolution ("CEDR"). The judgement being highly welcomed by these bodies.
Judgment breakdown:
The Court of Appeal was asked to decide on four principal issues:
- Was the judge right to think that Halsey bound him to dismiss the Council’s application? This involved a consideration of whether the passages in Halsey relied upon by the judge were part of the main reasoning of that decision.
- If not, can the court lawfully stay proceedings for, or order, the parties to engage in a non-court-based dispute resolution process?
- If so, how should the court decide whether to stay the proceedings for, or order, the parties to engage in a non-court-based dispute resolution process? This involves a consideration of the relevance of the specific kind of non-court-based dispute resolution process being considered.
- Should the judge have acceded to the Council’s application to stay these proceedings to allow Mr Churchill to pursue a complaint under the Council’s internal complaints procedure?
Sir Geoffrey Vos, Master of Rolls in giving the leading judgment, focused on these four issues. A summary on each point is set out below.
Was the judge right to think that Halsey bound him to dismiss the Council’s application?
In considering this question the context in which the case of Halsey was heard and what the courts were asked to consider was important. In Halsey, the Claimant was appealing a costs order on the basis the Defendant refused to mediate. Sir Geoffrey Vos, having taken into account the full reasoning behind the decision in Halsey, concluded that DDJ Kempton-Rees was not bound by the decision in Halsey.
If not, can the court lawfully stay proceedings for, or order, the parties to engage in a non-court-based dispute resolution process?
The answer perhaps being the one most anticipated. The Court of Appeal considered a wide array of domestic case law as well as ECHR cases and pre-Brexit cases from the Court of Justice of the European Union ("CJEU"). This extensive review led the Court of Appeal to determine that the courts did have the power to lawfully stay proceedings for, or order, the parties to engage in a non-court-based dispute resolution process. Sir Geoffrey Vos, in his judgement states “if the power exists, it must be exercised so that it does not impair the very essence of the claimant’s article 6 rights, in pursuit of a legitimate aim, and in such a way that it is proportionate to achieving that legitimate aim." Therefore, concluding that " the court can lawfully stay existing proceedings for, or order, the parties to engage in a non-court based dispute resolution process."
If so, how should the court decide whether to stay the proceedings for, or order, the parties to engage in a non-court-based dispute resolution process?
However, the Court of Appeal was reluctant to outline fixed principles as to how and when proceedings should be stayed. Instead, it left it to the courts discretion. Therefore, it will be up to the sitting judge in future cases to decide if a party is acting unreasonably in refusing to engage in non-court dispute resolution and decide if it will indeed be beneficial for the matter for the parties to be ordered to engage.
Should the judge have acceded to the Council’s application to stay these proceedings to allow Mr Churchill to pursue a complaint under the Council’s internal complaints procedure?
In this case, Sir Geoffrey Vos was clear in stating he would have stayed the proceedings to allow the Claimant to engage in the ICP when the Defendant first made their application. However, given the stage the case has now reached, he did not consider it reasonable to stay the proceedings. The matter had become too advanced and there was "little point" of returning the matter to the Councils ICP.
Takeaways
This decision overturns a precedent set over 20 years ago in Halsey, making it clear that a court ordering a stay where it deems it appropriate is not a breach of article 6. The Court of Appeal also chose to use the phrase non-court dispute resolution instead of alternative dispute resolution ("ADR"). Thus, widening the meaning of what could be classed as ADR. By using the phrase non-court dispute resolution, the Court of Appeal is making it clear that an internal resolution process or one that does not involve a legal representative is potentially suitable for out of court resolution.
This decision was welcomed by many, with the Chief executive of CEDR, James South, stating “we will now enter a new era of positive change. When justice is looked at from the perspective of the disputants, they want their dispute resolved in a cost-effective and fair way, ensuring they have the opportunity to be heard, and that resolution meets their commercial and personal needs. Mediation can provide this, and today’s judgment gives the courts the tools to actively encourage settlement by allowing courts for the first time to order parties to mediate, if in their discretion they consider it reasonable to do so”. A feeling echoed by both the CMC and CIArb.
The Court of Appeal has declined to set out fixed principles for precisely when judges should order parties to engage in non-court dispute resolution, especially where one party is strongly opposed. The courts have always had the power to order a stay of proceedings, usually where all the parties are agreed, but Sir Geoffrey Vos has made it clear this need not be the case. A stay does not compel a party to engage or for it to reach a conclusion outside of court. However, if such a stay is ordered, the reluctant party will carefully have to consider what cost consequences might follow if they continue to refuse to engage in the non-court dispute resolution process.
As we usher in a new era of litigation, where the ever-growing importance of non-courts dispute resolution is at the forefront of the courts mind, parties must ensure at each stage of the proceedings and during pre-action process, that due consideration has been given to non-court dispute resolution, if they are to avoid both unnecessary sanctions and adverse cost consequences.
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