Forced to mediate?

The Court of Appeal has, in a unanimous recent decision, held that the courts have the power to compel parties to disputes in court to engage in forms of Alternative Dispute Resolution, or ADR.

ADR includes a number of out-of-court dispute resolution processes, which are often quicker and certainly less costly than full-blown court proceedings. It includes mediation, (possibly the most used ADR process), where the parties appoint an independent third party to help resolve the issues between them. The process does not preclude court proceedings being brought or advanced: it simply delays the parties’ participation in such proceedings while attempts to resolve the issues at mediation are undertaken.

The Court of Appeal has given its ruling in the much-anticipated case of James Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, impacting on ADR.

The Churchill case has looked at the effect of ADR mechanisms (in this case internal complaints processes) and reviewed the previous decision in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576. That case dealt with whether a claimant who unreasonably refuses to engage in alternative dispute resolution  can be prevented from bringing or advancing a claim in court. It was authority  that the court can only encourage, but cannot compel, parties to engage in ADR. The Halsey decision, which dates back to 2004, has, over the years, been much criticised for not going far enough and for not requiring compulsory compliance with ADR. It is clear that in the intervening years ADR and mediation has become a much more popular choice for parties engaged in disputes.

In Halsey the court held that to compel unwilling parties to mediate would constitute a breach of the European Convention of Human Rights, as it undermined the parties’ Article 6 right to a fair trial. This decision, has been particularly criticised, insofar as it applies to mediation, notwithstanding that even if the parties are required to participate in the mediation process, they are not compelled to actually settle their issues and, most importantly, they retain access to the courts in the event that agreement cannot be reached.

The decision in Churchill therefore goes wider than the internal complaints processes to which it relates and applies to all ADR procedures including mediation.

Facts

The claim is a fairly simple one and the value of the claim is fairly small (circa £40,000). Mr Churchill brought a claim against the council for damage to his property caused by the encroachment of Japanese knotweed from a neighbouring property owned by the council, and for an injunction to prevent further encroachment. The council argued that Mr Churchill should have used its internal complaints procedures before commencing court proceedings.

First instance

At first instance, the council applied for a stay of Mr Churchill’s claim in order to complete the internal complaints process. The judge determined that Mr Churchill had acted unreasonably in his pre-action conduct, but the judge refused to stay the claim citing Halsey, i.e. that the court did not have the power to stay the claim in order to compel Mr Churchill to engage with the internal complaints process. The judge indicated that, but for the decision in Halsey, he would have granted the application for a stay.

The case was leapfrogged to the Court of Appeal, where three leading commercial mediation organisations – the Civil Mediation Council (CMC), the Chartered Institute of Arbitrators (CIArb) and the Centre for Effective Dispute Resolution (CEDR) – were granted permission to intervene in the proceedings, with the aim of having the Halsey decision reviewed and possibly overturned.

Court of Appeal decision

The Court of Appeal has in a unanimous recent decision held that the courts have the power to compel parties to engage in ADR. It has been made clear that Halsey is not a bar to that power. The power is derived from the Civil Procedure Rules. So, now that Halsey no longer prevents a court from ordering a stay in circumstances where an ADR process have not been followed, the courts can use their powers to make such an order requiring parties to engage in ADR (including an internal complaints procedure). The more difficult question is how the courts should exercise that discretion.

The Master of the Rolls, Sir Geoffrey Vos said in the judgment: “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. They 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”.

The Court of Appeal was equally keen to stress that  a stay for ADR should only be ordered where it was clear that the order made “does not impair the very essence of 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.”

So, whilst there is now a balancing exercise to be carried out, in appropriate circumstances the courts have the power to suspend court proceedings and compel parties to mediate (or participate in other ADR), even if the parties do not wish to do so.

On the facts of the current case, the Court of Appeal declined to order a stay partly because the claimant had not formally appealed on the ground that his refusal to engage in the ADR process was not unreasonable due to deficiencies in the ADR model. It did remit the question to the County Court to decide the merits of the defendant’s internal complaints procedure and whether it would be open or appropriate to compel the claimant to engage.

Why is the decision important?

Lady Justice Andrews in the Court of Appeal (permission stage) has said: “This case raises an extremely important issue relating to access to justice, namely whether a claimant who unreasonably refuses to engage in ADR in breach of the requirements of the Practice Direction (Pre-Action Conduct and Protocols) can be precluded from bringing or advancing a claim in court.”

The decision is especially important for all businesses and organisations that are involved in multiple small-value claims, where the legal costs of dealing with the claims are often disproportionate to the sums claimed so, for example, for public bodies and local authorities. To be able to require that claimants can no longer issue or progress claims without trying to resolve disputes via ADR will be very welcome.

Even for parties that have larger or more infrequent disputes, the decision may be welcome, as the upside of requiring ADR/mediation against an unwilling or intransigent opponent with the possibility of a resolution will be great compared to the costs for all sides of taking a claim to a full trial with all the risks that that entails.

Without doubt, the general direction of travel since the Halsey decision has been to encourage ADR and mediation in particular. The government, earlier this year, has announced that it will introduce compulsory mediation as a mandatory procedural step in all small claims in the County Court.  This means that all parties in cases allocated to the small claims track (i.e. valued below £10,000) will be required to attend a free mediation appointment with a court appointed mediator before their case can progress to a final hearing. The Churchill decision further reinforces that approach.

For further information on this topic, please contact qualified mediator, Iain Campbell and professional support lawyer, Moya Clifford.