A new way to litigate? Proposed CPR changes will enable Courts to order parties to engage in alternative dispute resolution

The Civil Procedure Rule Committee ("CPRC"), the UK body responsible for making and amending the Civil Procedure Rules ("CPR"), has opened a consultation inviting views on incorporating mandatory Alternative Dispute Resolution ("ADR") into the CPR. The consultation flows from the recent Court of Appeal judgment in James Churchill v Methyr Tydfil Borough Council [2023] EWCA Civ 1416, which held that the court could stay proceedings or order parties to "engage in a non-court- based dispute resolution process" provided that:

1. It does not impair the claimant’s right to proceed to a judicial hearing.
2. It would be proportionate to settle the dispute fairly, quickly and at a reasonable cost.

Following the judgment, HMCTS has recently published guidance on upcoming changes to small claims mediation. It will require parties to cases allocated to the small claims track to mediate, a step that can be perceived as a practical implementation encouraging parties to engage in ADR. The first stage of these changes will take effect from 22 May 2024 for claims made on paper and through the HCTMS "legacy" systems, in which parties will be required to attend a free one-hour mediation and a case will not be transferred to court until mediation has taken place.  The requirement for claims submitted through the Online Civil Monies Claims will be introduced at a "later date". The changes already in place for the small claims track are being considered on a wider scale in the consultation.

The decision in Churchill

Following the purchase of his home, James Churchill noticed Japanese Knotweed growing in his garden. The defendant acknowledged that they had previously treated Japanese Knotweed on land adjoining the claimant's property over many years. Consequently, the claimant sought compensation for the losses he had incurred as a result of the Japanese Knotweed growing and damaging his land. The defendant denied responsibility and referred him to their internal complaints' procedure. Rather than following that procedure though, the claimant instead chose to issue proceedings. In response, the defendant argued that proceedings should be stayed because the claimant should first complete the process under their internal complaints' procedure.

The judge held in the first hearing that the claimant had acted unreasonably and not in keeping with the Practice Direction for Pre-Action Conduct by issuing proceedings when he did, but nevertheless the court dismissed the defendant's application to stay the proceedings. This decision was appealed by the defendant.

The Court of Appeal held that it could lawfully order parties to engage in ADR provided that it doesn’t diminish the claimant's right to progress to a judicial hearing and is in compliance with the overriding objective; namely that the decision is proportionate to achieving the legitimate aim of settling a dispute fairly, promptly and most cost effectively.

In the matter of Churchill, the Court of Appeal held that a stay of proceedings would not be ordered, but the parties should agree to a temporary stay to allow ADR to take place.

What is ADR?

ADR is an alternative method of resolving issues and disputes between parties, with the aim to avoid engaging in protracted litigation and ultimately ending up at a fully contested trial in court a few years down the line. It can be cheaper, more efficient, and less stressful than court proceedings, and upholds the overriding objective of the CPR to deal with a case proportionately and justly. Some forms of ADR include mediation, expert determination, and a without prejudice meeting, and could include a non-mandatory complaints procedure.

Consultation

In addition to the current requirements in the small claims track, the consultation invites views on the following proposals:

• CPR 1.1 (overriding objective) – adding the use of ADR to the overriding objective: dealing with the case justly and at proportionate cost would include, so far is practicable, using and promoting ADR methods.

• CPR 1.4 and 3.1 (court's duty and powers of management) – amendment to clarify the position established in Churchill, being that judges may order as well as encourage parties to participate in ADR.

• CPR parts 28 (fast/intermediate tracks) and 29 (multitrack) – a requirement that courts must consider whether to order or encourage parties in these tracks to participate in ADR.

• CPR part 44 (general rules about costs) – adding that failure by a party to comply with an order for ADR or unreasonable failure to participate in ADR proposed by another party would come under the consideration of the conduct of parties when deciding on a costs order.

Impact of Decision

The proposed changes are unlikely to be seismic given that it was largely perceived as unreasonable conduct to refuse to mediate and/or engage in ADR, which gave the court the discretionary power to impose cost sanctions on the refusing party. However, this case overturns the court's long-standing stance in the previous case of Halsey v Milton Keynes General NHS Trust [2004] which held that such an order would be incompatible with Article 6 of the European Convention of Human Rights. That being said, the court has been reluctant to lay down principles of when and how an ADR order might be made, and the court acknowledged in Churchill that "it would be undesirable to provide a checklist or a score sheet for judges to operate".  

However, the decision in Churchill, the new changes in the small claims track and the consultation, signals a clear direction of travel in civil justice towards out-of-court solutions, the importance of engaging in ADR and only proceeding to trial in exceptional circumstances.

The increased use of ADR will have significant implications, and may lead to either increased or decreased costs depending on the complexity of the litigation. In some instances, ADR may slow down proceedings but ultimately lead to earlier settlements and lower costs. In others, ADR may simply increase costs by introducing a further procedural step where parties have already explored ADR as an option and failed to reach a settlement. 

If you need any guidance or have any queries relating to a dispute and how to navigate the process, please get in touch.