In the case of Churchill v. Merthyr Tydfil BC, the claimant opposed an application for a stay by the defendant on the basis that he had failed to use a proscribed complaints procedure. The case was intervened in by a list of interested mediation parties, the Law Society, and the Bar Council.
Churchill v. Merthyr Tydfil BC: Did the court have the power to order such a stay?
The Court of Appeal has made it clear that the court does have the power to order a stay in proceedings to allow the parties to enter into some form of ADR. This is one step closer to mandatory mediation.
Any doubt that the court does not have such power because of what was said in earlier case law (Halsey) has been dismissed on the basis that such comments were not part of the central reasoning of the decision.
The Court of Appeal stressed that a decision to order an ADR stay was a decision within the discretion of the court and referred to a list of ten considerations that may be considered when deciding how to exercise that discretion. It is clear that this list is not exhaustive. However, it is likely to be used as a benchmark for relying on other contended reasons for a stay or otherwise. The decision as to whether a stay should be ordered in the instant case was referred back to the lower courts.
The court has long considered a request on the Directions Questionnaire for a stay of one month to facilitate mediation. What is different now?
The application for a stay can be made at any time in the proceedings. Any order can now, it appears, specify the kind of ADR to be used. The stay can be for longer than a month or can be indefinite until ADR has been utilised.
The CA was at pains to stress that the ability to order a stay should not nullify a party's right to proceed to trial. Does that mean that if a party fails to co-operate in the use of ADR as ordered the other party can apply to have the stay lifted and some sanction applied in costs to the recalcitrant party? The tenor of the decision here is that this is not the case as the CA decided that an order to use ADR is not an alienation of the right to a trial nor does the court have to be granted such a power by legislation. Nevertheless, it will not be surprising to see satellite litigation around the lifting of ADR stays on the grounds of subsequent behaviour.
The basic situation will be that to continue litigation where an ADR Stay order has been made the parties will have to undergo the ADR process.
The Churchill decision gives rise to a number of interesting ramifications:
- When will parties to litigation decide to issue an application as part of litigation? Will we see applications made as soon as a defence is filed? More than likely.
- Will we see satellite litigation if one party fails to meaningfully participate in ADR so as to render the process futile? More than likely.
- Would such behaviour be something that the court takes account of in ordering costs?
- How would such orders sit with the new Fixed Recoverable Costs regime in which the court seems to have little discretion in such matters save to add a percentage to costs reflecting the parties' behaviour? Will that be seen as a sufficient penalty?
- The FRC regime militates against the incurring of costs beyond the FCR limits for stage 1 whereas the Woolf reforms pushed the front loading of costs to the Protocol stage. Parties may have to incur costs to establish the ability to issue and then push the claim to the furthest possible stage to try to recoup overspending. Does this decision give a way of applying further pressure on Claimants to settle at a stage when there is an imbalance between recoverable and incurred costs?
- Lawyers' mediation skills are going to be even more part of the basic skill set and will have to be carefully honed!