In the case of Churchill v Merthyr Tydfil [2023], the claimant (Mr Churchill) brought legal action against his local authority upon discovering Japanese knotweed had encroached on his garden which he considered to be coming from adjoining land owned by the local authority. The local authority’s position was that before issuing proceedings Mr Churchill should have explored alternative dispute resolution (ADR) options, such as going through its internal complaints process.
The County Court did not accept this defence and applied the principle of Halsey v Milton Keynes General NHS Trust [2004] which determined that parties in contentious legal proceedings could not be forced to engage in mediation.
The defendant appealed this decision, where the Court of Appeal further considered whether a court can lawfully defer proceedings and order the parties to engage in ADR. It was subsequently decided that the courts have the power to stop a claim from progressing, or to compel parties to go through alternative dispute resolution avenues to at least attempt settlement. The court also found that if ADR failed, court proceedings may resume under the condition that it would not breach or impede on a party’s rights to a fair trial under Article 6 of the European Convention on Human Rights. The considerations of the court in making such an order include:
- The chances of success of the ADR methods (i.e., is it likely that ADR will succeed and court proceedings will no longer be necessary?)
- The urgency and timeline of the case; whether it will be delayed by ADR
- Cost considerations; whether ADR will be less or more costly, and the differences in damages and compensation predicted to be received if pursuing ADR as compared to court proceedings
- Reasons for the parties reluctance or refusal to engage in ADR
- The proportionality and reasonableness of continuing court proceedings as opposed to ordering the parties to engage in ADR: the urgency of the case and whether the disputed issues are so severe that it would be irreconcilable with ADR
Changing the Landscape
Since Churchill, it is now an active requirement under the Civil Procedure Rules to promote ADR. In large-scale commercial disputes, mediation is not generally mandatory before court proceedings begin, partly because of the complexity, proportionality and costs involved. However, the courts still strongly encourage parties to explore mediation before committing fully to litigation.
In practice, judges have also been willing to facilitate this objective through both positive reinforcement and negative sanctions. Shortly after the Churchill judgment, it was established in Northamber v Genee World [2024] that not responding to a mediation offer was unreasonable and would result in severe cost sanctions.
The changing landscape presents certain practical implications for businesses trying to navigate a dispute. Namely, that consequences can extend beyond cost penalties for parties that refuse to mediate. The court has the power to stay proceedings and order parties to engage in ADR, which may result in more time and funds spent on the dispute than if parties engaged in ADR from the beginning.
However, the court also takes into account the parties’ reason for refusal; if there have been genuine attempts at mediation or amicable discussions that resulted in failure, the court will treat it differently than if a party refused to mediate with no constructive reason given.
Businesses are now advised or encouraged to take the initiative in proposing mediation, not only for effective and swift resolution of the dispute, but also to protect their legal position in front of the courts.
If you require help with commercial disputes, please contact Nath Solicitors on 0203 983 8278 or get in touch with the firm online.