Halsey and beyond: The Court of Appeal’s discretion on compelling parties to use ADR

Jaaved Fareed, Bar Vocational Studies student at City, University of London, analyses the Court of Appeal’s decision in Churchill v Merthyr Tydfil

Article 6 of the European Convention on Human Rights (ECHR), the right to a fair trial, played a crucial part in Lord Dyson’s comment in Halsey v Milton Keynes General NHS Trust. He said that the “compulsion of ADR would be regarded as an unacceptable constraint on the right of access to the court and, therefore, a violation of article 6”. However, Churchill v Merthyr Tydfil County Borough Council marks a crucial turning point in the law. In this groundbreaking judgment, the Court of Appeal took a substantial leap forward in the development of dispute resolution in England and Wales.

Catherine Dixon, director general of the Chartered Institute of Arbitrators, once commented that “Halsey has proved hugely problematic for the wider adoption of mediation. It is generally considered to be bad law and this case (Churchill) offers the Court of Appeal the opportunity to clarify that referring parties to mediation does not breach their human rights.”

The facts

The case concerns damage caused by Japanese knotweed growing on Merthyr Tydfil County Borough Council land encroaching onto Mr Churchill’s property whose gardens adjoined the Council’s land. The claimant sent the Council a letter of claim in 2020 which prompted the Council to query why the claimant declined to use the defendant’s own complaints procedure. Instead, the claimant issued proceedings against the defendant in nuisance to which the defendant applied for a stay (and costs), claiming that the claimant needed to follow its own complaints procedure before issuing proceedings.

Deputy District Judge Rees initially ruled against compelling the parties to engage in non-court based dispute resolution processes, stating that he was bound to follow Dyson LJ’s statement 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”.

The application was dismissed, but the defendant was given permission to appeal to the Court of Appeal on the ground that the appeal raised an important point of principle and practice.

The judgement

Sir Geoffrey Vos, Master of the Rolls (with whom Lady Carr, Lady Chief Justice, and Lord Justice Birss agreed) gave the leading judgment in the Court of Appeal. He considered that the main issues which the Court had to resolve were as follows:

i. Was the judge right to think that Halsey bound him to dismiss the Council’s application?

ii. If not, can the court lawfully stay proceedings for, or order, the parties to engage in a non-court-based dispute resolution process?

iii. If so, how should the court decide whether to stay the proceedings for, or order, the parties to engage in a non-court-based dispute resolution process?

iv. Should the judge have granted the Council’s application to stay the proceedings to allow Mr Churchill to pursue a complaint under the Council’s internal complaints procedure?

The Court of Appeal, in considering, whether the judge was bound by the decision in Halsey considered whether the relevant paragraphs in Halsey were a necessary part of the reasoning that led to the decision in the case (ratio decidendi) or, in fact, obiter. In Halsey, it was stated that compelling a party who is not willing to undertake ADR would be wrong. According to the Court of Appeal, Dyson LJ’s reasoning in Halsey, regarding whether the Court had the authority to order ADR was not a “necessary” [19] part of the reasoning leading to the decision. As a result, it was unanimously concluded that Dyson LJ’s observations were merely obiter dicta, therefore not part of the ratio decidendi and as such, not binding.

The Court of Appeal then assessed the second part which is whether the court can lawfully stay proceedings in an attempt to allow parties to engage in a non-court based dispute resolution process.

To begin with, the courts can stay proceedings to order parties to engage in ADR. However, the Court in exercising its power must be careful so that it does not impair the very essence of the parties’ rights under Art 6 ECHR. Rather, this power needs to be exercised proportionately to “achieving the legitimate aim of settling the dispute fairly, quickly and at a reasonable cost” [65].

The Master of the Rolls, Sir Geoffrey Vos, however, declined to “lay down fixed principles as to what will be relevant to determining” [66] whether the proceedings should be stayed or whether to order the parties to engage in a non-court based dispute resolution process. It was held to be “undesirable to provide a checklist or a score sheet for judges to operate ”. Rather he said that this should be left to the discretion of the judges who “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”.

Ultimately, the Court considered whether the judge should have granted a stay in the proceedings. The Court of Appeal considered the merits of the council’s internal complaints procedure and found that “whilst the Council submits that its internal complaints procedure is crucial, …it may not be the most appropriate process” given the specific nature of this dispute. As a result, a stay was not ordered here. The parties were, however, encouraged “to consider whether they can agree to a temporary stay for mediation or some other form of non-court-based adjudication.”

Implications

In response to The Civil Justice Council’s report on compulsory ADR (2021), Sir Geoffrey Vos said, “ADR should no longer be viewed as “alternative” but as an integral part of the dispute resolution process; that process should focus on “resolution” rather than “dispute”. The recent Court of Appeal’s decision aligns with this point of view.

The direct implication of this case is that the court have the power to lawfully stay proceedings for, or order the parties to engage in a non-court-based dispute resolution process provided that the order made does not impair the very essence of the claimant’s right under Article 6 ECHR. Each case will be fact-sensitive and hence parties who opt not to engage in ADR will need to justify their positions. Additionally, when instructing parties to mediate, the court should consider factors such as cost, financial situations of the parties, urgency, suitability for mediation and legal representation.

The judgment is especially important for businesses and organisations dealing with multiple small-value claims, where legal costs often exceed the claimed sums. The decision enables courts to demand that claimants attempt to resolve disputes through ADR before pursuing court claims, which is seen as a positive development. Even in larger or infrequent disputes, the decision is welcomed as it promotes the potential for resolution through ADR, avoiding the costs and risks associated with a full trial.

The clarity provided by the Churchill decision is expected to empower judges to increasingly promote or order parties to use ADR, aligning with the overarching objective of the Civil Procedure Rules to handle cases justly and at a proportionate cost.

Jaaved Fareed is currently pursuing his Bar Vocational Studies at City, University of London. Holding a commercial pupillage, Fareed demonstrates a keen interest in alternative dispute resolution (ADR), planning and environment law, and commercial litigation.