Churchill v Merthyr Tydfil – a landmark decision for dispute resolution

On 29 November 2023, the Court of Appeal handed down its highly anticipated judgment in the case of James Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416. This decision is set to change the way disputes are managed, after it was confirmed that the courts have the authority to stay (or suspend) proceedings and order the parties to engage in Alternative Dispute Resolution (“ADR”).

Background to Churchill v Merthyr Tydfil

Mr Churchill made claims that Japanese knotweed had encroached from land that the Council owned (which was adjacent to his property) on to his property, causing damage, a reduction in value and loss of enjoyment. Mr Churchill’s solicitor sent a letter before action to the Council in relation to these claims. The Council responded pointing Mr Churchill to their internal complaints procedure, and warned that if Mr Churchill proceeded to issue a claim without making use of the procedure, they would apply to the court for a stay so that it could be followed, and for Mr Churchill to pay the costs they would incur in making that application. Mr Churchill proceeded to issue a claim against the Council without making use of the complaints procedure, and the Council subsequently made a stay application in response. The stay application was initially dismissed by the court at first instance, but the Council was granted the permission to appeal.

Pre-action protocol

The judgment helpfully sets out the relevant elements of the Practice Direction on Pre-Action Conduct and Protocols ( the “Pre-Action Protocol”), which the parties to prospective litigation are expected to follow. The sections dealing with  ADR of particular note are:

i)  3. Before commencing proceedings the court will expect parties to have exchanged sufficient information to:

(c) Try to settle the issues without proceedings

(d) Consider a form of ADR to assist with settlement

(f) Reduce the costs of resolving the dispute.

ii)  8. Litigation should be a last resort … the parties should consider whether negotiation or some other form of ADR might enable them to settle their dispute without commencing proceedings

iii) 11. If proceedings are issued, the parties may be required to provide evidence that ADR has been considered. A party’s silence in response to an invitation to participate or a refusal to participate in ADR might be considered unreasonable by the court and could lead to the court ordering that party to pay additional court costs

iv) 14. The court may decide that there has been a failure of compliance when a party has … (c) unreasonably refused to use a form of ADR, or failed to respond at all to an invitation to do so

v)  15. Where there has been non-compliance with [this protocol] the court may order costs sanctions or that the proceedings are stayed while particular steps are taken to comply.

Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, [2004] 1 WLR 3002

In spite of the clear aims and intents of the Pre-Action Protocol, its application, and the court’s ability to mandate it, was uncertain. In Halsey v Milton Keynes General NHS Trust, for example, the court suggested that forcing unwilling parties into mediation might infringe their right to court access. Deputy District Judge Kempton Rees, the judge who dealt with the Council’s stay application, concluded that he was bound to follow the reasoning in Halsey.

Court of Appeal decision

Sir Geoffrey Vos, Master of the Rolls, took a different view when reviewing the case on appeal. He concluded:

i. The judge in the first instance was not bound by Halsey to dismiss the Council’s application for a stay of proceedings. Sir Geoffrey Vos was of the view that this was not part of the essential reasoning of Halsey

ii. The court has a power to stay proceedings for, or to order, the parties to engage in a non-court based dispute resolution process. It would not breach of Article 6 ECtHR (right to a fair trial) to make such an order, provided 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

iii. The court should use its discretion when deciding to stay the proceedings, and the characteristics of the particular method of the non-court based dispute resolution process being considered will be relevant to the exercise of the court’s discretion as to whether to order or facilitate it. Sir Geoffrey Vos did not think it was suitable to provide an exhaustive list of factors to consider, but gave an indication that the following are likely to be relevant, depending on all the circumstances:

(a) The form of ADR being considered

(b) Whether the parties were legally advised or represented

(c) Whether ADR was likely to be effective or appropriate without such advice or representation

(d) Whether it was made clear to the parties that, if they did not settle, they were free to pursue their claim or defence

(e) The urgency of the case and the reasonableness of the delay caused by ADR

(f) Whether that delay would vitiate the claim or give rise to or exacerbate any limitation issue

(g) The costs of ADR, both in absolute terms, and relative to the parties’ resources and the value of the claim

(h) Whether there is any realistic prospect of the claim being resolved through ADR

(i) Whether there is a significant imbalance in the parties’ levels of resources, bargaining power, or sophistication

(j) The reasons given by a party for not wishing to mediate: for example if there had already been a recent unsuccessful attempt at ADR

(k) The reasonableness and proportionality of the sanction, in the event that a party declined ADR in the face of an order of the Court.

iv. The court ruled that in these specific circumstances the order to make a stay of the proceedings to follow the Council’s internal complaints procedure would not be imposed, but suggested the parties agree a stay to facilitate an alternative form of ADR.

Conclusion

The decision by the Court of Appeal in this case will set the scene for how parties should treat ADR going forward. This does not just include the commonly known forms of ADR (negotiation, mediation, early neutral evaluation etc.), but it also covers any other process that has a prospect of allowing the parties to resolve their dispute.

In his judgment, Sir Geoffery Vos made a notable comment, “…it is obvious that the judge would have stayed the claim back in May 2022, had he been able to see this judgment”. This shows the impact the decision will have on any future cases where ADR has not been explored, and the significance the Court of Appeal attaches to proactive engagement in ADR by the parties to disputes, both before, and during the course of proceedings. It remains to be seen whether this matter will be subject to appeal or not.

We will be following up this article with a more in depth, detailed look at mediation, which is one of the most common, and successful forms of ADR available to parties involved in commercial disputes.