Case law update – Courts pivot to mandatory dispute resolution
On 29 November 2023, the Court of Appeal handed down judgement in the matter of Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 confirming that the court can stay claims and compel parties to engage in alternative dispute resolution.
The position prior to Churchill was determined by the 20-year precent set out within Halsey v Milton Keynes General NHS Trust which held that compulsory mediation could be deemed as a breach to the right to a fair trial, and therefore unwilling parties could not be bound to engage in alternative dispute resolution. The judgement in Churchill reversed this position entirely, now meaning that we enter what has been described as a ‘new era’ of mandatory alternative dispute resolution.
What was this case about?
Mr Churchill’s Garden suffered with Japanese Knotweed, which was suggested to have originated from Merthyr Tydfil County Borough Council’s land. Mr Churchill issued a claim for nuisance against the Council as a result. Once the matter reached first hearing, the Council sought a stay on proceedings, alleging that Mr Churchill had not exhausted their internal complaints procedure, prior to issuing a claim. The court refused the Council’s request on the basis that the Deputy District Judge felt bound by the precent set out within Halsey and would not compel a party to engage in compulsory mediation. The Council appealed this decision and argued that the principles in Halsey were obiter and were no longer ‘good law’. Permission to appeal was granted and there were two questions to be answered – firstly, were the principles of Halsey still deemed ‘good law’ and secondly, could unwilling parties be compelled to engage in alternative dispute resolution. If deemed that parties could be compelled, the court would look to consider when this could happen, and whether following an internal complaints procedure could be sufficient alternative dispute resolution.
On appeal, the court determined that the passage within Halsey (ruling against mandatory alternative dispute resolution) was obiter and therefore does not bind the lower courts. The impact of this being that parties can therefore be compelled to engage in alternative dispute resolution at the court’s discretion.
Within the judgement, Sir Geoffrey Vos held that the previous Halsey ruling was not binding on the lower courts. The judgement, in brief, concluded that the courts can lawfully stay proceedings for parties to engage in dispute resolution, provided that any order made does not’ impair the very essence of the Claimant’s right to proceed to a judicial hearing’ and is a ‘proportionate means of achieving a legitimate aim of settling the dispute fairly, quickly and at reasonable cost’. There was a strong emphasis in the judgement surrounding both the time and cost benefits of alternative dispute resolution. The Court of Appeal also noted that whether a case was suitable for compulsory ADR would be at the courts discretion to determined on a case-by-case basis, and although there were no fixed principles applied, the court did note the Bar Council’s list of suggested factors which may be relevant when a party wishes to apply for a stay pending ADR;
- the form of ADR being considered,
- whether the parties were legally advised or represented,
- whether ADR was likely to be effective or appropriate without such advice or representation,
- whether it was made clear to the parties that, if they did not settle, they were free to pursue their claim or defence,
- the urgency of the case and the reasonableness of the delay caused by ADR,
- whether that delay would vitiate the claim or give rise to or exacerbate any limitation issue,
- the costs of ADR, both in absolute terms, and relative to the parties’ resources and the value of the claim,
- whether there was any realistic prospect of the claim being resolved through ADR,
- whether there was a significant imbalance in the parties’ levels of resource, bargaining power, or sophistication,
- the reasons given by a party for not wishing to mediate: for example, if there had already been a recent unsuccessful attempt at ADR, and
- the reasonableness and proportionality of the sanction, in the event that a party declined ADR in the face of an order of the Court.
Impact
The impact of this to social housing providers is vast. At present, the Civil Procedure Rules give parties the opportunity to stay a claim to explore alternative dispute resolution when filing directions questionnaires (CPR 26.(1)) however in practice, this is rarely explored.
Housing condition claims have seen a large increase over the past years, particularly since the introduction of section 9A and the amendments to section 10 of the Landlord and Tenant Act 10985. Social landlords in particular are facing high volumes of cases within their stock, often without claimants exploring alternative dispute resolution, or engaging fully with the landlords’ internal complaints procedure, which in some cases, could avoid litigation entirely. It is therefore possible that under the new ruling, any claims issued, whereby an internal complaints procedure has not been followed, could be immediately stayed, giving landlords an opportunity to settle matters outside of court. It is unclear at present how firmly the courts will mandate mediation. It is clear that a landlord will need to evidence that they have considered the factors above within any application made requesting a stay pending ADR. If a landlord does want to utilise a stay pending ADR, it will be very importance that they have a clear, concise and effective internal complaints procedure, so that litigants in person can engage within such processes, without the need for instructing solicitors. There is question around funding arrangements as to whether solicitors will accept instructions to support tenants in exploring internal complaints procedures however, as housing condition claims can be very complex when considering quantum, liability and damages payments it seems likely that there will still be a need for tenants to seek legal advice. If legal advisors are necessary for both parties, there will naturally be costs consequences, which could further complicate the internal procedures.
Alternative methods of dispute resolution can be a very powerful tool in resolving matters, in a timely manner and with reduced costs implications. Not only does this judgement give the parties an opportunity to halt proceedings to explore this, but it also serves as a reminder for parties to explore dispute resolution prior to issuing any claim to avoid any such stay being imposed. Clarke Willmott’s social housing sector is well equipped to support all types of dispute resolution. Get in touch if you would like to discuss an issue with one of our legal experts.
Written by Emily Hope
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