24.07.2024

UK Court of Appeal rules that courts can order parties to engage in ADR: Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416

The England and Wales Court of Appeal (EWCA) has held that in certain circumstances, the courts can order parties to engage in alternative dispute resolution (ADR) or stay proceedings to allow the parties to engage in ADR.  In Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 the Court was asked to stay proceedings to allow the parties to progress through the County Borough Council’s internal complaints procedure.  Although the Court declined the stay on the specific facts before it, the Court confirmed that it could lawfully stay proceedings to require parties to engage in non-court based dispute resolution processes in certain circumstances.

Facts

Mr Churchill bought a property adjacent to property owned by the local Council in 2015.  Shortly after, he noticed Japanese knotweed encroaching on his property from the Council’s land.  Mr Churchill brought a claim in nuisance and sought compensation for losses caused by the encroachment of the Japanese Knotweed.  The Council applied to the Court to stay the proceedings and require the parties to follow the Council’s internal complaints procedure first. 

The District Judge dismissed the Council’s stay application on the basis of earlier authority 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”.  

The Council appealed.

EWCA decision

The EWCA held that the court can lawfully order the parties to engage in ADR or stay existing proceedings to allow parties to engage in ADR.  The Court did not limit its decision to the Council internal complaints procedure here, and had the benefit of multiple ADR organisations acting as intervener.  However, such an order must not impair the claimant’s right to proceed to a judicial hearing, and it must be proportionate to settling the dispute fairly, quickly and at reasonable cost. 

The EWCA noted that the power to order unwilling parties engage in ADR is a matter of the court’s discretion, and it was not willing to impose a fixed set of determinative principles.  Notwithstanding that, the court provided some guidance on the factors that may be considered, including the form of ADR that would be used, whether the parties were legally advised or represented, and whether ADR was likely to be effective or appropriate without such advice or representation.

The EWCA acknowledged that while the Council’s complaints procedure was plainly intended to operate before proceedings have been issued, there would be little value in staying the proceedings at this stage.  The EWCA declined to order a stay of the proceedings but allowed the appeal on the principled points of law. 

Civil Procedure Rules 

The UK has a set of Civil Procedure Rules (CPR) that govern how all civil claims are to operate.  Within the CPR, there are protocols referred to as the Practice Direction on Pre-Action Conduct and Protocols (PD Protocols).  The PD Protocols explain the conduct and set out the steps the court would normally expect parties to take before commencing proceedings for particular types of civil claims.

The PD Protocols provide that before commencing proceedings, the court expects the parties to have exchanged sufficient information to try to settle the issues without proceedings, consider a form of ADR to assist with settlement and reduce the costs of resolving the dispute.  Litigation is expected to be a last resort, and, notably, the PD Protocols also provide that where there has been non-compliance, the court may order that sanctions are to be applied or that the “proceedings are stayed while particular steps are taken to comply” with the PD Protocols.

Some rules within the CPR directly relate to the PD Protocols.  These rules provide that the court must further the overriding objective of the CPR by actively managing cases,[1] and that where the court gives directions, it will take into account whether or not a party has complied with the PD Protocols.[2]

Our Comment

The Churchill decision demonstrates the UK judiciary’s robust support of parties engaging in ADR prior to litigation.  ADR can be highly effective when engaged appropriately, and can result in a cost-effective and time-efficient method of resolving disputes.

In New Zealand, ADR (such as mediation and arbitration) requires the consent of both parties.[3]  In the construction industry, ADR clauses are usually contained within the construction contract, setting out the parties’ agreement on their preferred form of recourse.  The courts are unable to impose mediation and arbitration on litigating parties, even if it is mandated within the parties’ construction contract.  Rather, costs sanctions are the usual form of intervention that courts will adopt for such a failure to engage in these processes. 

New Zealand’s equivalent to the CPR is the High Court Rules 2016 (HCR), which regulates the practice and procedure of the Court.  The objective of the HCR is to secure the just, speedy, and inexpensive determination of any proceeding or interlocutory application.  Rule 7.79(1) of the HCR allows a Judge to, at any time before the hearing of a proceeding, convene a conference of the parties for the purpose of negotiating for a settlement of the proceeding or of any issue, and may assist in those negotiations.  Rule 7.79(5) also gives the Judge the power to make an order at any time directing the parties to attempt to settle their dispute by the form of mediation or other alternative dispute resolution agreed to by the parties, and with the consent of the parties.  The key difference between 7.79 HCR and the equivalent in the CPR is that the HCR require the consent of the parties.

Due to the narrow parameters of the HCR only allowing court mandated ADR with the consent of both parties, it is unlikely that a similar approach to that in Churchill will be adopted in New Zealand at this stage.

If you have any questions about alternative dispute resolution or a related topic, please get in touch with our Construction Team or your usual contact at Hesketh Henry.

 

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

 

[1] CPR 1.4(1).

[2] CPR 3.1(4).

[3] An exception to this is s 145 of the Trusts Act 2019, that gives the court the power to order that parties must partake in ADR (usually mediation).  

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Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

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