From 1 October 2024, following a revision to the Civil Procedure Rules (CPR), the English courts are now clearly empowered to order parties to engage in alternative dispute resolution (ADR) to resolve their disputes, rather than simply encourage this to happen. The change itself is perhaps neither unexpected nor controversial. The real question is what difference will it make in practice?

Background

The CPR amendment stems from the recent Court of Appeal decision in Churchill v. Merthyr Tydfil Borough Council [2023] EWCA Civ 1416 (November 2023). The case concerned a dispute between neighbours, Mr Churchill and Merthyr Tydfil Council (the Council) about notorious Japanese knotweed. The knotweed was growing on Council land adjoining Mr Churchill's property and was encroaching on it, resulting in, he claimed, damage to his property, a decrease in its value and loss of enjoyment. Mr Churchill issued County Court proceedings. The Council filed an application to stay the proceedings because Mr Churchill had not engaged with the Council's complaints procedure before he issued the proceedings.

At first instance, the Council's application for a stay was refused. In reaching his decision, the judge held that he was bound to follow the Court of Appeal decision in Halsey v. Milton Keynes General NHS Trust [2004] EWCA Civ 576 and, specifically, Dyson LJ's statement in that case that "to oblige unwilling parties to refer their disputes to mediation would unacceptably obstruct their right of access to the court". The judge therefore concluded he could not order a stay. Permission to appeal the decision was given on the basis that the question whether the court can order a stay was an important one of principle and practice.

On appeal, the Court of Appeal carefully examined Halsey and the passage upon which the County Court judge had relied, and decided that the statement was in fact not part of the "essential reasoning" for the decision (it was, in fact, obiter dictum) and, as such, the County Court was not bound by it. On the important question of whether the court can lawfully stay proceedings for, or order, the parties to engage in the ADR process, the Court of Appeal held that that power does in fact exist. However, in deciding whether to exercise the power in a particular case, the court must ensure that the order does not impair a party's right to a judicial hearing, and so must take care to consider that the alternative process is "proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost".

Impact on the Civil Procedure Rules

The decision in Halsey was taken to establish the principle that parties cannot be compelled to engage in ADR and this had remained the understanding for the past 20 years, reflected in the pre-1 October CPR, which referred to encouragement towards ADR, rather than obligation.

Following the Churchill judgment, the Civil Procedure Rule Committee (CPRC) made the decision to update the CPR to create a clearer framework of measures concerning engagement in ADR. Those changes came into effect from 1 October 2024 with the Civil Procedure (Amendment No. 3) Rules 2024 coming into force.

The first change is to the overriding objective in CPR 1.1 and might be referred to as setting the tone, elevating the importance of ADR within the scheme of the CPR. Following the amendments, the overriding objective now specifically provides that the objective of dealing with cases justly and at proportionate cost includes "promoting or using alternative dispute resolution".

Changes have also been made to CPR 1.4 and 3.1 which concern the court's case management powers in furthering the overriding objective and more generally. Both rules have now been amended to include reference to the court's power to "order" parties to engage in ADR. These changes are supported by amendments to CPR 28 and 29, which concern fast-track and multi-track directions, and which require the court on giving directions to consider whether to "order or encourage the parties to engage in alternative dispute resolution".

Changes have also been made to Part 44, dealing with general rules about costs, and the changes allow the court to consider "whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution", when deciding what order (if any) to make about costs.

The shift in the CPR to a more ADR-focused approach is also in line with the recent introduction, announced by HM Courts & Tribunals, of compulsory mediation for small claims valued under £10,000. The change involves the parties being automatically referred to a free one-hour mediation session with a mediator, which they will be required to attend. Of course, parties are not required to settle at mediation. However, the aim of the change is to provide a swifter resolution should one be possible at the outset of the case.

What do the changes mean in practice?

In our experience, most litigants are generally open to giving ADR a shot – the potential benefits in costs savings, early resolution, relationship preservation and lack of publicity are well known. The renewed focus on ADR in the CPR should ensure that parties continue to consider ADR carefully and have a plan in place, both pre-action and during the course of any following litigation, to ensure they take advantage of the potential benefits of ADR. Whether the CPR amendments will have a material impact on the behaviour of parties is difficult to assess.

Whilst the new rules might be intended to clarify expectation and the extent of the powers of the court, it may be that they in fact foster a new battleground and could indeed be counterproductive if the courts move towards ordering, rather than encouraging, ADR. If a party is not willing to engage in ADR at a certain point (or, more rarely, at all) there is usually a credible reason. Whilst the other party might not agree with that reason, it does not mean it is not valid. When talking about the most common form of ADR (i.e. mediation), its success is dependent on compromise by both parties. Where one party attends to fulfil an obligation, that does not provide a good start point. It would be regrettable if the change results in parties completing ADR to "tick a box" rather than actively and meaningfully engaging in the process. It would be all the more regrettable if case management was forced to descend into examination of whether parties had properly participated in ADR, following an ADR order.

Given the refocus of the rules, we think it will be increasingly difficult for parties to decline to try ADR at all, unless they are prepared to face criticism of the court and sanctions in costs. A recent example of the court being prepared to levy such sanction is Conway v. Conway & Anor (Rev1) [2024] EW Misc 19 (CC), where the court reduced the defendants' costs by 25% because they had rejected offers to mediate without compelling reasons. If a party is uncomfortable with the method of ADR proposed, as in the Churchill case where the claimant raised criticism of the Council's complaints scheme, it will always be open to them to suggest an alternative, rather than decline ADR altogether.

That said, ADR is not going to be right for all disputes – an extreme example may be where a claim is fabricated (or the defendant believes so), a less extreme one, where the case deals with a discreet issue which requires a court determination for that dispute, and potentially others. Being required to hold ADR in these cases would likely not be the right outcome. In the former, the solution for the defendant would probably be to apply to have the case struck out and, if that fails, to accept that it might be required to participate in ADR. In the latter, the court might be more easily persuaded that ADR was not the right route.

The Court of Appeal, rightly we would suggest, did not give guidance on when it will be appropriate to order ADR, or indeed the characteristics and circumstances which make an ADR order "proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost". In balancing competing views on ADR, or indeed considering an ADR order under its case management powers, the court has a wide discretion. The challenge for parties will be assessing what reasons are good reasons, and the weight the court will give to the parties' views on issues such as whether it is the right time for ADR and, if not, the reasons why not. Parties will need to consider even more carefully their ADR strategy, any impediments at the pre-action stage and how and when they might be overcome, and carefully communicate with their opponent how they envisage incorporating ADR into the litigation process. It is likely better in most cases for the claimant and defendant to have worked this through, rather than have ADR imposed.

For now, we anticipate parties will generally proceed as before, but we will need to wait and see how the amendment affects the approach of the courts on case management decisions, and indeed whether ADR orders become a common feature of future proceedings. Our money is on more fulsome encouragement rather than a flood of orders.