UK Court of Appeal Ruling on Alternative Dispute Resolution Aims to Weed Out Resolvable Litigation | Latham & Watkins LLP

A recent ruling confirms judicial discretion to stay proceedings and instruct parties to seek non-court-based alternatives to litigation.

 

The UK Court of Appeal has ruled that the court has the authority to stay proceedings and direct the parties to engage in a “non-court based dispute resolution process”. The court can exercise such authority provided the order does not impair the essence of the claimant’s right to proceed to a judicial hearing and is proportionate to achieving the aim of settling the dispute fairly, quickly, and at reasonable cost.[1]

Consistent with the overriding objective which requires the court to actively manage cases and facilitate alternative dispute resolution (ADR), the ruling clarifies the court’s case management powers and signals a potential move toward court-mandated dispute resolution processes.

Background

The claimant, Mr Churchill, issued nuisance proceedings against Merthyr Tydfil Council (the Council) in July 2021 alleging that Japanese knotweed, originating from the Council-owned adjoining land, had been encroaching onto his property since 2016 and causing damage. The Council’s response to the claimant’s initial letter of claim queried why he had not made use of its Corporate Complaints Procedure and threatened that if Mr Churchill issued proceedings without doing so, it would apply for a stay. Despite this, Mr Churchill issued his claim in July 2021 and the Council applied to stay the proceedings (as threatened).

The judge at first instance dismissed the application. Although he held that Mr Churchill had acted unreasonably, he considered himself bound by the Court of Appeal’s decision in Halsey.[2] The judge concluded “that 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”[3] of the Human Rights Act which seeks to protect the right to a fair trial, indicating that “everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”.[4]

Judgment

Upon the Council’s appeal, the Court of Appeal disagreed with the judge’s position and determined that Dyson LJ’s comments in Halsey should not be regarded as “part of the best or preferred justification for the conclusion he reached”. They were not a “necessary part of the reasoning”, and therefore obiter dicta and not binding.[5]

Referring to wide-ranging domestic and international authorities, the Court of Appeal concluded that the court has the power to stay proceedings for, or order the parties to engage in, non-court based dispute resolution, provided that the power is exercised so as (i) not to impair a claimant’s Article 6 rights, (ii) in pursuit of a legitimate aim, and (iii) in “such a way that it is proportionate to achieving that legitimate aim”.

The Court of Appeal declined to lay down explicit, fixed principles on what will be relevant in determining whether a court applies its discretion to exercise this power, stating that judges would be “well qualified to decide”. The Court of Appeal indicated, however, a number of factors that may be relevant depending on all the circumstances:

  • the form of ADR proposed and whether it is suitable, considering any significant power imbalance between the parties
  • whether the parties have had, or are able to have, the opportunity to obtain legal representation or advice (and, if they have not, whether ADR is likely to be effective and appropriate)
  • the urgency of the case and reasonableness of any delay caused by pursuing ADR, including with respect to any limitation issues that may arise as a result
  • the costs of ADR, in absolute terms and relative to the parties’ financial means and the claim’s value
  • whether the claim has any realistic prospect of being resolved through ADR
  • any reasons given by a party for not wishing to pursue ADR
  • the reasonableness of any sanction if a party declined ADR in the face of an order

The Court of Appeal found that the judge at first instance would have granted a stay had he not concluded that he was bound by Halsey to refuse one. However, it also found “little point” in now granting a stay because things had moved on considerably since that application.

Takeaways

This decision furthers a growing trend towards the use of ADR in civil proceedings. ADR has been adopted as a mandatory step of the dispute process in the small claims track and certain family proceedings. Although the Court of Appeal did not specifically evaluate the adequacy of the Council’s complaints procedure, its references to “non-court based dispute resolution” potentially indicate a widening acceptance of different forms of resolution process beyond the conventional forms of ADR highlighted in the Pre-Action Protocol.

Practical Implications

This case emphasises the importance of parties engaging properly with potential or prescribed dispute resolution processes at the early stages of a dispute, including prior to initiating proceedings. Parties should do so not only to demonstrate a commitment to the overriding objective and compliance with the Pre-Action Protocol, but also to mitigate any risk that the court may restrict progression of the proceedings at a more advanced stage to order ADR.

Further, parties should be able to demonstrate to the court if required that they have been actively contemplating ADR at various stages of the process. They must also be prepared to provide more detailed justification as to why they have chosen not to pursue a form of non-court based dispute resolution.

For contractual disputes, parties should also consider whether they have agreed to attempt alternative dispute resolution. The power of the court to stay proceedings for ADR may be a further factor in favour of complying with such requirements, even when litigation appears inevitable.

Ultimately, the mere threat of such intervention by the court can act as a powerful incentive for parties to engage voluntarily in dispute resolution processes, which will often be the best path to resolution of the dispute. As a result, the Court of Appeal’s decision may result more in changes to parties’ behaviour than in regular implementation of this power by the courts.

This post was prepared with the assistance of Amelia Mason in the London office of Latham & Watkins.

Endnotes


[1] Churchill v. Merthyr Tydfil Borough Council [2023] EWCA Civ 1416.

[2] Halsey v. Milton Keynes General Hospital NHS Trust [2004] EWCA Civ 576.

[3] Halsey, paragraph 9.

[4] Article 6, Schedule 1, Part 1, Human Rights Act 1998.

[5] Churchill, paras 18 and 20.

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