Courts do have the power to order parties to engage in ADR

The dispute

The case concerned a property owned by Mr Churchill where Merthyr Tydfil Council Borough Council (“the Council”) owned land adjacent to the property. Mr Churchill claimed that the Council's land had Japanese knotweed which was encroaching on his property and causing damage. Mr Churchill elected not to use the Council’s Corporate Complaints Procedure (“the Procedure”) and instead sent a letter of claim to the Council. The Council asked why he had not made use of the Procedure and stated that it would apply for a stay should he litigate without doing so. Mr Churchill proceeded with his court claim. In response, the Council then applied to the court for a stay of the proceedings on the basis that Mr Churchill had not engaged in alternative dispute resolution (“ADR”) in the form of the Procedure.

The initial decision – Halsey principle

At first instance the judge dismissed the application for a stay, on the basis that he felt that he was bound by a principle established in the case of Halsey -v- Milton Keynes General (“the Halsey Principle”). The Halsey Principle states 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”. Although the judge felt he was bound by the Halsey Principle and so was not able to order a stay, he found that Mr Churchill had acted unreasonably in failing to comply with the Procedure. As a result, he granted the Council permission to appeal, believing that this case gave rise to an important point of principle.

Crucially, the Council’s appeal did not consider whether it was unreasonable for Mr Churchill to refuse to comply with the Procedure. The appeal was brought on the basis that: (1) the judge was initially wrong to believe that he was bound by the Halsey Principle, and (2) the CPR and overriding objective states that litigation should be a last resort, therefore the court should have the power to stay this claim as Mr Churchill had refused to comply with the Procedure.

The four issues that were dealt with in the appeal can be summarised as follows:

1. Whether the judge at first instance was correct in believing that he was bound by the Halsey Principle.
2. Whether the court can lawfully stay proceedings or order parties to engage in ADR.
3. If the court can, how should the court decide whether to exercise these powers.
4. Whether, on the facts of this dispute, the judge at first instance should have granted the Council’s application for a stay of proceedings.

The Court of Appeal decision

Issue 1: Whether the judge at first instance was correct in believing that he was bound by the Halsey Principle

The issue was whether the Halsey Principle was a key and necessary part of the court’s reasoning in deciding the original Halsey case. The court held that the Halsey Principle was not part of the key reasoning of that decision primarily based on the following:

1. The case of Halsey -v- Milton General concerned the issue of costs sanctions and not whether the parties should be ordered to participate in ADR.
2. The issue of judicial compulsion to use ADR was not raised at first instance in the case and was not raised in any of the skeleton arguments on appeal.
3. The judge in Halsey was providing general guidance on how to deal with the costs issues raised and factors that should be considered in determining whether a refusal to agree to ADR was unreasonable.

As the Halsey Principle was found not to be a key and necessary part of the reasoning used to come to the decision in Halsey, it was found that the judge at first instance was not bound by it.

Issue 2: Whether the court can legally stay proceedings or order parties to engage in ADR

One of Mr Churchill’s arguments was that the court did not have the power to stay the proceedings on the basis that Mr Churchill had not complied with the Procedure. He submitted that this was because the Procedure was unsatisfactory and was a disproportionate restriction on his right of access to the court for the following reasons (“the Factors”):

1. No neutral third party was involved in the Procedure.
2. No legal advice was available to Mr Churchill.
3. There was no written procedure governing the Procedure.
4. The Procedure had no statutory backing.
5. The Procedure had no fixed timescale.
6. There was no provision for the payment of Mr Churchill’s costs.
7. The limitation period was not suspended during the Procedure.
8. There was no provision for the payment of compensation in the Procedure.

However, the Court of Appeal believed that Mr Churchill was confusing the issue of the exercise of the court’s powers and the existence of the powers itself. The court held that the Factors are considerations that should be taken into account in deciding whether to exercise this power. Ultimately, however, the court has the power and discretion to control its own proceedings and has the power to stay proceedings legally in order to allow the parties to engage in ADR.

Issue 3: How should the court decide whether to exercise these powers

As noted above, the Court of Appeal ruled that considerations such as the Factors should be taken into account when deciding whether to exercise these powers. However, the court refused to lay down fixed principles by which judges should decide when to exercise these powers. The Court of Appeal concluded that judges are best placed to decide on a particular set of facts as to whether a particular form of ADR would be appropriate to bring about a fair, speedy and cost-effective solution.

The court held that it is for a particular court to decide how to exercise its power to stay proceedings and whether to do so to provide the parties an opportunity to attempt ADR.

Issue 4: Whether, on the facts of this dispute, the judge at first instance should have granted the Council’s application for a stay of proceedings

The court noted that the judge at first instance would probably have granted a stay of proceedings if he had been aware he was not bound by the Halsey Principle. However, the court believed that there was little point in granting a stay of proceedings at this point as the parties are already embroiled in a year-long dispute. However, the court allowed the appeal and considered that it would be best to discuss the Procedure on another occasion. The court suggested that the parties consider using mediation as a form of ADR to resolve the dispute.

Key takeaways for potential litigants

It has been suggested that the winds of change have been blowing in a pro-ADR direction for some time, and this Court of Appeal decision has continued that trend. With the courts coming under increasing pressure as the waiting lists for court hearings grow, this is perhaps not a surprising decision.

A key takeaway from this is that the court seems to be increasingly flexible about what can be considered an ADR mechanism. The court also showed itself to be reluctant to lay down strict guidelines as to what could be considered an acceptable form of ADR, and has indicated that an internal complaints form and process could qualify as an ADR mechanism.

We see that there are two key actionable takeaways from this decision:

1. Give serious consideration to the use of ADR throughout the dispute resolution process: The benefits of ADR have been widely discussed in recent years. Litigation can be expensive and increasingly time-consuming and successful use of ADR can save both time and money not to mention the benefits in terms of keeping a party’s affairs confidential and avoiding reputational damage. Now that the Court of Appeal has confirmed that courts can order a stay to enable parties to engage in ADR, it is likely that the courts will use this ability more readily in the future. Potential litigants should consider ADR very seriously and if they decide against using it, should record their reasons in writing.
2. Consider the effectiveness of existing internal complaints procedures: The Court of Appeal was clear in emphasising that the exercise of its power must be balanced against the right of access to court. The court seemed to suggest that this balancing act will consider the appropriateness of the ADR that has been offered to a claimant. Potential litigants should take steps to ensure that their complaints mechanisms are fair, accessible, as impartial as possible and be capable of providing the appropriate remedies for the complainant.

Should you require any assistance with the management of your existing disputes and/or strategy to avoid or mitigate potential future disputes, please contact the author of this article.

With thanks to Chibu Akpakwu for his help in drafting this article.