In a recent decision concerning the power of the court to compel parties to enter into alternative dispute resolution (ADR), it was held by the Court of Appeal that compulsory referral by the court is an option that parties may now be faced with. Below we look at the decision in Churchill v Merthyr Tydfil County Borough Council & Ors [2023] EWCA Civ 1416, and the circumstances in which a court can order the parties to try to settle their dispute without committing to litigation.

What are the facts in Churchill?

Mr Churchill claimed that, since 2016, Japanese knotweed had encroached onto his property from adjoining land owned by the council. This caused damage to his property, as well as a reduction in its value and loss of enjoyment. In response to a letter of claim sent by Mr Churchill's solicitors, the Council’s response queried why Mr Churchill had not made use of its Corporate Complaints Procedure. It was also said that, if Mr Churchill were to issue proceedings without having done so, the Council would apply to the court for a stay. Despite that warning, Mr Churchill issued proceedings in nuisance against the Council and the Council duly issued its stay application.

In dismissing the stay application, and notwithstanding a finding that Mr Churchill and his lawyers had acted unreasonably by failing to engage with the Council's complaints procedure — conduct which was said to be contrary to the spirit and the letter of the relevant pre-action protocol — the Deputy District Judge (DDJ) held that he was bound to follow the statement of Lord Justice Dyson in Halsey v. Milton Keynes General NHS Trust [2004] EWCA Civ 576, [2004] 1 WLR 3002. Dyson LJ had stated in Halsey 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."

Still, permission to appeal was granted and the matter referred to the Court of Appeal (CA) on the grounds that it raised an important point of principle and practice applicable to other similar cases.

What was decided in Churchill?

In allowing the appeal, in part, the CA was satisfied that the relevant section of the judgment relied upon by the DDJ in Halsey was not a necessary part of the reasoning that led to the decision in that case and so, as a matter of law, the DDJ was not bound by what Dyson LJ had said.

Further, it was unanimously held 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 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."

What does the Churchill decision mean?

The headline question in Churchill was whether a court can lawfully order the parties to court proceedings to engage in a non-court-based dispute resolution process, and, if so, in what circumstances it should do so. A question also arose as to whether and in what way the nature of the non-court-based dispute resolution process should be taken into account by the court where, on the facts of Churchill, the kind of dispute resolution in issue was an internal complaints procedure operated by a local authority, to which the claimant was not contractually bound.

In answer to the headline question, the CA was wholly satisfied that the power does exist for the court to lawfully stay proceedings for, or order, the parties to engage in a non-court-based dispute resolution process. However, in delivering the lead judgment, Sir Geoffrey Vos declined to lay down fixed principles as to what will be relevant in determining the question of a stay of proceedings or an order that the parties engage in dispute resolution outside of the courts.

The question of whether an order would impair the claimant’s right to proceed to a judicial hearing, or whether a particular process is appropriate for the purpose of bringing about a fair, speedy and cost-effective solution to the dispute, will be at the discretion of the judge tasked with deciding an application for a stay in these circumstances. As such, given the court’s wide discretion in ordering any suitable form of dispute resolution process, parties will now need to think more carefully about what form of ADR may be appropriate in their case and when.

Legal disclaimer

The matters contained within this article are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law in England and Wales and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, either express or implied, is given as to its’ accuracy, and no liability is accepted for any errors or omissions.

Before acting on any of the information contained herein, expert advice should always be sought.