Churchill v Merthyr Tydfil County Borough Council: “unknotting” Halsey

Insight

18.12.2023

The Court of Appeal has now handed down judgment in Churchill v Merthyr Tydfil County Borough Council. It has confirmed that the Court can make an order for (i) the parties to engage in non-court dispute resolution (NCDR) and / or, (ii) a stay in proceedings to allow for NCDR to take place. With the case originating as a claim for nuisance relating to Japanese knotweed, the decision provides some much welcome “unknotting” of the position regarding the Court’s power to make such orders following the comment made by Lord Justice Dyson in Halsey v Milton Keynes General NHS Trust 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.”

This judgment is timely and perhaps unsurprising against the backdrop of recent support from the judiciary and the Government, both wanting to encourage the use of mediation. For example, following the Civil Justice Council’s report on Compulsory ADR in July 2021, in July this year in was announced that all civil disputes up to £10,000 will have a free mediation session integrated into the County Court process.

This article examines the Churchill judgment and considers the implications of this on trust, will and estate disputes.

Background: Churchill v Merthyr Tydfil County Borough Council

The Churchill case started as a simple claim of nuisance brought by Mr Churchill against his local council. Mr Churchill bought his property, which bordered property owned by the local council, in 2015. He said that from 2016, Japanese knotweed had encroached on his property from the adjacent council property causing damage to his property, loss of value and loss of enjoyment. In their response to Mr Churchill’s letter before claim, Merthyr Tydfil County Borough Council (the Council) stated that Mr Churchill should have made a complaint using their corporate complaints procedure (the Complaints Procedure) and warned that if a claim was issued, they would apply to the Court for a stay to force the Complaints Procedure route. Mr Churchill issued his claim in July 2021. The Council subsequently applied for a stay in February 2022.

The Council’s application triggered the need for the Court to consider a point with a much more far-reaching scope: whether it has the power to order a stay in proceedings to allow parties to explore NCDR procedures (such as the Complaints Procedure).

In doing so, the Court was required to consider whether Dyson LJ’s comments in Halsey were obiter, and whether ordering compulsory mediation breaches Article 6 of the ECHR, the right to a fair trial. At first instance, Deputy District Judge Kempton Rees stated that he was bound to follow Dyson LJ’s statement.

Court of Appeal Decision

On appeal, there were seven intervening parties, including The Law Society and the combined force of the “mediation community” (the CMC, CEDR and CIArb), who intervened with the aim of overturning Halsey.

The Court of Appeal allowed the appeal in part, ruling that the Courts can stay proceedings to order parties to engage in NCDR, including mediation. Of note, the Court said that Dyson LJ’s finding in Halsey was obiter (and therefore not binding on the lower Courts). An order for parties to mediate (and explore other forms of NCDR) would therefore not be an unacceptable obstruction to their right of access to the court.

In his judgment, the Master of the Rolls, Sir Geoffrey Vos, cited the CJC report that “any form of ADR which is not disproportionately onerous and does not foreclose the parties’ effective access to the court will be compatible with the parties’ article 6 rights”. Therefore, any such order must:

Not impair the claimant’s right to proceed to a judicial hearing, and
Be proportionate to settling the dispute fairly, quickly and at reasonable cost.

The Court did not set out any guidance as to how or at what stage in the litigation it should decide to make such orders, with Sir Vos commenting that “it would be undesirable to provide a checklist or a score sheet for judges to operate”. It is not the case that some form of NCDR will be ordered in every case, rather that mediation and other forms of NCDR are part of the toolbox of case management options which are available to the Court. It will be up to the individual judge to decide whether, when and to what extent it would be appropriate to Order parties to participate in some form of settlement process, taking into account the circumstances of each case.

Commentary

NCDR can be a highly effective and cost-efficient means of resolving a dispute which, if successful, avoids the stress, time, publicity and often very high costs of litigation and trial. In particular, mediation is an increasingly popular and effective form of alternative dispute resolution, with some commentators pitching success rates of a mediation at around 75 to 80 per cent. While on the face of it a dispute may in headline terms be about splitting the finances and / or assets, resulting in a win or lose outcome for the parties, there are often more nuanced and sensitive factors at play in trust, will and estate disputes. Mediation allows the potential for a settlement which takes into account, for example, emotional value or attachment to certain property on which a party may place more importance than pure financial value. In addition, mediation has the advantage of allowing parties the opportunity to preserve confidentiality, reputations and relationships.

In view of this, in our opinion, the Churchill decision should be welcomed as a positive development which enables individual judges and masters to require parties to attend a mediation if, for example, they consider that the parties would benefit from engaging in settlement discussions to explore more creative and cost-effective resolutions than the often draconian “black and white” outcome of a trial.

The fact that the decision in Churchill does not go so far as to make mediation a compulsory step in all court proceedings should ease concerns that it would be unfair and contrary to the inherent nature and purpose of mediation for it to be a mandatory process. After all, in the event that the Court does order that a mediation should take place (making attendance at a mediation compulsory), this does not make the requirement to settle at or after the mediation compulsory, and it does not deny the parties the right to continue with the court process to trial in the event that they do not settle. Furthermore, it is thought that in practice, the Court may be more likely to make orders in the form of a stay to allow for a mediation, as opposed to a direction that the parties must mediate.

Others may be concerned that parties will now be forced to enter into mediation where there is no genuine desire to settle in good faith, and as such that it could be used as a disingenuous “tick box” exercise, or as another “weapon” or pressure tactic in the throes of litigation. Why go to the cost of an extra step in litigation when it may be for nothing? Whilst the Court of Appeal was silent on what sanctions may be applied if a party does not comply with an order for mediation, it is possible that parties could face costs orders or more serious sanctions in the event of non-compliance. Further, even if the parties are initially reluctant to enter into mediation, if an order requiring them to do so is made, then no doubt the parties’ advisers will advise them to balance the risks against potential benefits of mediation and settlement. Not only could mediation save costs, time and relationships, it may also provide an opportunity for parties to narrow the issues in dispute, which may lead to shorter and expedited trials of those issues which have not been capable of being agreed. The Churchill judgment makes clear that mediation should be viewed as being in pursuance of furthering the overriding objective, with Sir Geoffrey Vos commenting that “even with initially unwilling parties, mediation can often be successful”.

The Churchill decision goes some way to bringing this jurisdiction in line with others. For example, Italy and Australia (among others) have made mediation compulsory in many commercial disputes. There have also been changes specifically in relation to will and trust disputes in some jurisdictions, including compulsory mediation for “internal matters” between trustees and beneficiaries or trustees and trustees in New Zealand, an option to initiate ancillary proceedings which effectively makes mediation mandatory in Washington State, and court-ordered mediation programs in states such as California, Florida and Atlanta.

It is worth noting that elements of integrated ADR also already exist within trust, will and estate disputes in England and Wales. For 1975 Act claims issued in the Family Division, the parties can take advantage of a Financial Dispute Resolution (FDR) hearing which is a judge-led hearing (either in court or arranged privately). It has been reported that approximately 50 per cent of cases which have an FDR (of course many cases settle beforehand) settle prior to the Final Hearing.[1]As a result, those issuing claims in the Family Division may benefit by reason of choice of court. To some extent, the Churchill decision takes a step towards resolving the inconsistent approach between the case management of such claims in the Chancery and Family Divisions.

Conclusion

The Churchill decision has potential to have a momentous effect on the case management of proceedings, by directing parties towards settlement at a much earlier stage. The benefits of exploring mediation cannot be understated, and we await and welcome the first post-Churchill order from the Court.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.