Effective from the 1 October 2024, the Civil Procedure Rules (CPR) have been amended to include rules to further encourage the use of Alternative Dispute Resolution (ADR) in the English civil justice system. These changes follow the Court of Appeal’s decision in Churchill v Merthyr Tydfil CBC [2024] EWCA Civ 1416.
Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416
This case concerned damage and the loss of enjoyment to the Claimant’s property, caused by Japanese knotweed that had originated from the Council-owned land next to his.
The parties engaged in pre-action correspondence, where the Council took the position that if Mr Churchill was to initiate proceedings without engaging in their complaints procedure first, they would make an application to stay the proceedings and recover their costs. The Claimant continued to issue proceedings against the Council, and the latter filed the stay application. Deputy District Judge Kempton Rees considered the Defendant’s application, but ultimately dismissed it on the basis that he was bound by Dyson LJ’s decision in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, [2004] 1 WLR 2002, that to oblige unwilling parties to refer their disputes to mediation would unacceptably obstruct their right of access to the court.
However, the Court of Appeal overturned this decision, finding that proceedings could be lawfully stayed in order for the parties to engage in ADR, provided that it did not infringe on the Claimant’s right to proceed to a hearing and aligned with the overriding objective.
The Effect of Churchill
- CPR 1.1(2)(f) and 1.4(2)(e)
The overriding objective now includes “promoting or using Alternative Dispute Resolution” and the Court’s duty of active case management now extends to “ordering or encouraging the parties to use, and facilitating the use of, Alternative Dispute Resolution”.
- Part 44
CPR 44.2(5)(e) has been amended to include “whether a party has failed to comply with an Order for ADR, or unreasonably failed to engage in ADR”.
This amendment to Part 44 introduces compliance with ADR orders as a factor in costs assessments. This means that if a party unreasonably refuses to participate in ADR or does not comply with an ADR order, they may be penalised in costs. This provision is designed to incentivise parties to engage meaningfully in ADR, as failure to do so could have financial repercussions.
- CPR 3.1(2)(o)
This enables the courts to order parties to engage in ADR. This is a pivotal development because, prior to this amendment, the courts did encourage ADR but they lacked a clear and express power to mandate participation. The introduction of this rule remedies that by giving judges explicit authority to direct ADR, thereby reinforcing the court’s commitment to ensuring that parties explore all avenues for settlement before proceeding to trial.
Additional Amendments
ADR vs. NDR
There is a shift in terminology from ADR to Negotiated Dispute Resolution (NDR), particularly in the Commercial Court Guide. The term ADR traditionally suggested that these methods were an “alternative” to litigation, implying that they were secondary or inferior. By using “NDR,” the courts are signalling that negotiated processes should be seen as integral to the dispute resolution landscape, not as alternatives to litigation but as complementary tools that can be used alongside or instead of traditional court proceedings.
Practical Implications
These amendments will have several practical implications:
- Increased ADR Orders: Lawyers should anticipate a higher likelihood of courts ordering ADR, particularly in cases where settlement seems feasible. Practitioners will need to be prepared to advise clients on ADR options and the potential consequences of non-compliance with ADR orders.
- Costs Risk: The possibility of adverse costs orders for failing to engage in ADR means it is now more important than ever to consider ADR seriously.
- Drafting and Strategy: ADR should be considered from the outset and statements of claim and correspondence should be drafted with an eye towards potential ADR processes.
Conclusion
While the amendments to the CPR are aimed at promoting ADR, their impact depends largely on how robustly the courts shall exercise their powers. Inconsistent application of the rules could lead to uncertainty. There remains some debate about the appropriateness of compulsory ADR, particularly in cases where one party feels strongly about their legal position. The balance between encouraging settlement and respecting a party’s right to have their case heard before a court will need careful management. Overall, the success of these reforms will depend on consistent judicial application and the willingness of parties to engage in ADR.
