Wed 27 Mar 2024

Can unwilling parties be compelled to engage in alternative dispute resolution in litigation?

A recent decision of the Court of Appeal in England resulted in two parties to a dispute being ordered by the Court to engage in alternative dispute resolution ("ADR") proceedings. The case is remarkable in that it departs from the orthodox approach that ADR is a voluntary means of achieving dispute resolution. In this article, we discuss the case and its implications for conducting litigation in Scotland.

Alternative Dispute Resolution

ADR is an extra-judicial (i.e. non-court-based) means of resolving disputes. Its popularity has quickly grown over recent years, given that that parties who successfully engage in ADR usually benefit from avoiding the time and expense of going to court. It is common for commercial agreements to contain clauses requiring parties to engage in ADR to address disputes arising from the contract in an efficient manner before resorting to court. 

ADR takes several forms. Resolving disputes without the need to go to court is frequently achieved through the use of processes such as complaints procedures and negotiation. Mediation is the most commonly used formal means of ADR, and involves a flexible form of procedure whereby a neutral third party helps parties to reach a voluntary settlement of the dispute. Arbitration is more suitable for complex disputes that require a legally binding decision on factual and/or legal matters by an arbitrator, in a confidential forum. Elsewhere, more specialised forms of ADR are used for certain types of disputes, such as mediation in family matters, and adjudication in construction disputes. 

A key distinction between ADR and court-based dispute resolution is that ADR is a voluntary process. The efficiency of ADR can benefit parties, but it is not suitable for all disputes. If parties are not willing to engage in ADR and would rather resolve their dispute in court, that option is open to them (even though it would carry a risk of liability for the costs of the other party if it then lost in court). It is within this context that the Court of Appeal's recent judgment is remarkable. 

Churchill v Merthyr Tydfil County Borough Council

In 2015, James Churchill purchased a property in Merthyr Tydfil, to which the Council owned bordering land. He claimed that Japanese knotweed encroached on his land from 2016 onwards, causing damage to his property and reducing its value. When Mr Churchill issued a letter of claim to the Council, the Council referred him to its corporate complaints procedure and said that if Mr Churchill did not use it and issued proceedings, it would apply to the court for a stay (pause) to compel the parties to use the procedure. Mr Churchill issued proceedings without using the complaints procedure, and the Council applied to the court to stay (i.e. pause) the action. 

At first instance, the Council's application was rejected because the judge considered that he was unable to depart from precedential authority of 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". 

The Court of Appeal overturned that decision, reasoning that Dyson LJ's comments in Halsey were obiter and therefore not binding. While it did not issue an order staying proceedings because the circumstances of the underlying dispute had changed, the Court of Appeal's decision is significant because it opens the door for courts in England to issue orders requiring parties to engage in ADR, even where that is not voluntary. 

The question then turns to the circumstances in which courts might order parties to engage in ADR. In his judgment, Master of the Rolls Sir Geoffrey Vos declined to provide fixed guidelines on the appropriate circumstances in which parties could be ordered to engage in non-court-based dispute resolution processes such as complaints procedures. He reasoned that a number of factors may be considered, including the form of ADR being considered such as the legal representation of parties, the urgency of the case and the costs of ADR, both in absolute terms and relative to the parties' resources. The judgment confirms that in line with case law on human rights, it is essential that when courts use the power to order parties to engage in ADR processes, it does not impair the essence of a litigant's Article 6 right to a judicial hearing, and it must be exercised as a proportionate means of achieving a legitimate aim (settling disputes fairly and in a time-efficient and cost-effective manner). Orders requiring parties to engage in ADR will therefore have to be considered given the features of the case at hand. 

Compulsory ADR in Scotland?

The Churchill judgment prompts an interesting question as to whether we may see the emergence of compulsory ADR in Scotland. 

The Court of Appeal in England partially relied on the Civil Justice Council's Report on Compulsory ADR, which endorsed the adoption of a set of procedural rules by which parties are required to engage in ADR even where they have not agreed to do so. The Civil Justice Council's report highlights that, while unusual, compulsory ADR is not unheard of, and it is found as part of litigation procedure in other jurisdictions. For example, in certain types of civil disputes in Italy, parties are required to attend an initial mediation session before they can pursue their claim in the courts. More broadly, judges presiding over any civil dispute in Italian courts can compel parties to attempt mediation. A similar approach is applied in the procedure governing civil claims in Australian courts. In Ontario, it is mandatory for parties to attempt mediation, conducted by a mediator on a list of approved practitioners, soon after a claim begins; refusing to participate can leave a party liable to the costs of the mediation and the court can apply other sanctions. Compulsory mediation is also a feature of Greek court procedure in claims over a certain value or of a certain nature (e.g. family disputes).

No similar approach exists as part of Scottish court procedure yet, and although the courts have a flexible power to require parties to attend mediation in simple procedure (i.e. low value) claims, on the whole, ADR remains a voluntary means for parties to resolve disputes in Scotland. The extent to which the Court of Appeal's judgment will influence approaches to the interaction of court litigation and ADR in Scotland will be an area to watch. Considering compulsory ADR through a ‘human rights and access to justice’ lens, it may be relevant to Scottish courts that the Court of Appeal decided that ordering parties to engage in an ADR process does not breach their right to a judicial hearing, even if there are constraints on how courts should exercise that power. There has been more active endorsement of compulsory ADR as a feature of procedural reform in England than in Scotland, for example by the Civil Justice Council, and therefore a broader shift towards the use of compulsory ADR in Scotland may still be some time away if it does emerge. However, the Court of Appeal's judgment places compulsory ADR much more firmly on the radar when it comes to potential developments in court procedure in Scotland.

If you have any questions about any of the issues raised in this article, please contact Julie Hamilton, Robin Mackintosh or your usual Morton Fraser MacRoberts contact. 

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