Traditionally, parties in litigation have enjoyed an option to engage in alternative dispute resolution (ADR) to try to resolve their dispute and avoid protracted court proceedings or trial. The perceived wisdom as to why it has not been a compulsory element of litigation (in the same way disclosure of documents and witness statements are) is because of the risk that it might breach a party's right to a fair trial under Article 6 of the European Convention on Human Rights. However, on 1 October 2024, following the landmark Court of Appeal decision in Churchill v Merthyr Tydfil Borough Council, the Civil Procedure Rules (the procedural code governing court proceedings in England and Wales (CPR)) were revised to empower a court to order parties to engage in ADR.
The facts and consequences of Churchill
In Churchill, a claim was brought against the council regarding Japanese knotweed in a council tenant's garden. The council argued that the claimant should have engaged in ADR before issuing proceedings, namely the council's internal complaints process. The court had to decide whether a claimant who unreasonably refuses to engage in ADR could be blocked from issuing a claim. The court concluded that it had the power to order parties to engage in ADR, so long as there was no breach of Art. 6.
Courts' powers following Churchill
As a result of Churchill, the overriding objective in CPR r1.1 was updated to allow the court to factor in "promoting or using alternative dispute resolution" when dealing with cases justly and at proportionate cost. Changes were also made to CPR r1.4, allowing the court to issue directions "ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution". This is reinforced in CPR r.3.1, which empowers the court to "order the parties to engage in alternative dispute resolution".
When considering making an order for parties to mediate, the court has to consider factors including: the costs of ADR (having regard to the financial situation of each party); the urgency of the claim; whether the case is suitable for ADR; and any reasons that a party might refuse to engage in ADR.
The court can impose adverse costs orders, order a party to engage in ADR and even halt a claim if a party unreasonably refuses to engage with ADR.
What does this mean for commercial property?
Particularly for commercial landlords and tenants, a party who wishes to utilise an expert determination provision in a lease might now find the court supports them. Opposing the use of a contractual ADR provision such as expert determination or arbitration is likely to be more difficult to achieve.
If you are a commercial landlord or tenant seeking to resolve a dispute involving a lease covenant, or if you have any concerns or questions about the impact that compulsory ADR might have on you or your business, please do not hesitate to contact our Real Estate Disputes team or your usual Brodies contact.