The impact of Churchill v Merthyr Tydfil on modern commercial dispute resolution
Jane Colston
Brown Rudnick, London
jcolston@brownrudnick.com
Bethany Williams
Brown Rudnick, London
bethanywilliams@brownrudnick.com
Background and Court of Appeal decision
Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 originated as a claim for nuisance against a local authority for overgrown Japanese knotweed, which was encroaching on Mr Churchill’s private property. The Council claimed that Mr Churchill should have engaged with non-court dispute resolution (NCDR) options, such as their Complaints Procedure, before issuing court proceedings, and applied for a stay.
The stay was not granted on the grounds that the obiter of Dyson LJ in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, [2004] 1 WLR 3002 stood, with Deputy District Judge Kempton Rees stating 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 [under Article 6 of the ECHR, the right to fair trial]’. The Council appealed.
The Court of Appeal unanimously decided to overrule the decision in Halsey and determine that the court has the power to:
- Order a stay to proceedings for parties to engage in NCDR; and/or
- Order parties to engage in NCDR before continuing with the court process.
The basis for this decision was that the precedent created by Lord Dyson in Halsey was merely obiter dicta and ‘not a necessary part of the reasoning that led to the decision in that case’ (paragraph [20]). Therefore, Halsey is not binding on lower courts.
It was also determined that the scenario of a court forcing NCDR on parties was not a breach of Article 6 of the ECHR, provided the stay is ‘proportionate’ and does not impact on the ‘very essence’ of the parties’ Article 6 right (paragraph [50]).
No set guidance was provided by the Court regarding the factors relevant to the exercise of the Court’s discretion on when to impose NCDR or the precise nature of such orders. Master of the Rolls, Sir Geoffrey Vos (‘Sir Vos’) stated in his judgment at paragraph [66] that all ‘relevant’ factors should be considered ‘depending on the circumstances’. It was suggested that such factors could include whether the parties were legally advised or represented; whether it was made clear to the parties that, if they did not settle, they were free to pursue their claim or defence; and whether there was any realistic prospect of the claim being resolved through NCDR (paragraph [61]).
Commentary
NCDR has held a significant and growing role in the modern legal landscape in some jurisdictions, especially in England and Wales since the recent introduction of automatic referral of small claims with a value of less than £10,000 to mediation. The intervention of parties including The Law Society of England and Wales, The Bar Council and The Civil Mediation Council in Churchill demonstrates the support this judgment will have from legal practitioners and litigants alike. As Sir Vos comments at paragraph [59], mediation can resolve disputes ‘quickly and cheaply’ which, for parties faced with the undesirable stress, publicity and costs of proceedings determined at trial, is a welcome reprieve.
The Court of Appeal’s decision to give judges broad powers to authorise NCDR processes, such as negotiation between the parties, mediation, early neutral evaluation or any other process that has a prospect of allowing the parties to resolve their dispute, is also reflective of the heterogenous nature of commercial disputes. Remote NCDR, for example via videoconferencing, could additionally facilitate parties’ improved access to justice where their circumstances would otherwise limit their ability to attend trial. Ultimately, Churchill both gives greater flexibility to litigants and validates the current sentiment of many in the legal market.
Notably, the Court of Appeal did not go so far as to make NCDR mandatory during the court process or expand upon the Court Rules and Practice Directions, requiring parties to consider whether ADR is an appropriate step to take before issuing a claim in court. Mandatory NCDR would have been an overt limitation on Article 6 rights. With NCDR being able to be ordered by the Courts of England and Wales in cases where circumstances suggest it would be beneficial or productive, cases burdening the judicial system will be resolved faster. This should leave the Courts of England and Wales with more capacity to give due attention to cases which require judicial intervention, facilitating improved access to justice for those who need it most.
It remains to be seen, however, how litigants intent on resolving their grievances at trial, those more focused on the ‘dispute’ than the ‘resolution’, will fit into the new pro-NCDR environment. Issuing or defending proceedings is always considered within a litigant’s wider disputes strategy, involving their commercial, reputational and financial aims. Parties pursuing tactics such as applying for Court ordered NCDR as a means of drawing out litigation or taking part merely as a ‘tick box’ exercise, should seriously analyse the risks of being viewed as being obstructive to proceedings.
It is entirely probable that an inadequate response to or an unwillingness to engage appropriately with NCDR, especially if ordered by the Court, will be met with significant sanctions and costs orders in line with the implications of breaching any other court order. This further emphasises the importance of the Court engaging with the particular position of each party when considering the merits of imposing NCDR in each particular case, lest litigation becomes more fraught and costly due to this additional intervening factor.
Willing participants should likewise be cautious of the potential cost implications of court-ordered NCDR. Churchill enables the Court to order NCDR at any stage once court proceedings have commenced, therefore it is possible that parties could have accumulated significant costs during protracted litigation before mediation is ordered. Any settlement reached would therefore have to factor in such costs. Nevertheless, the aspiration must be that the decision in Churchill fundamentally changes the approach of prospective litigants and the Court, encouraging them to seek resolution via NCDR early in proceedings, saving all parties time, costs and valuable resources.
Conclusion
Mandatory NCDR would have placed unlawful limits on prospective litigants’ access to justice, however Churchill opens the door to a new era of effective case management via alternative dispute resolution. The benefits of NCDR to litigants, the judicial system and the pursuit of access to justice for all cannot be overstated and we eagerly await the first post-Churchill orders from the Courts.