The implications of Churchill in 2024 for Detailed Assessment
On 29th November 2023, the Court of Appeal (Carr LCJ, Vos MR, Birss LJ) handed down an important judgment in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 about whether the court can lawfully order parties to proceedings to engage in non-court-based dispute resolution, more commonly known as alternate-dispute-resolution (“ADR”). If it could, in what circumstances would it be appropriate to do so?
In Churchill, land owned by Mr Churchill had been invaded by Knotweed which had spread from adjoining land owned by the Council causing damage. Following a letter of claim, he had issued proceedings claiming damages, whereupon the Council had applied for a stay on the grounds that Mr Churchill had not first engaged in its Corporate Complaints Policy. In the court below, the judge had refused the application because he considered himself to be bound Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 which in his view, had decided that mandatory ADR orders were contrary to article 6 of the European Convention on Human Rights.
Before the Court of Appeal (on appeal by the Council) there were four issues.
- Whether the judge was bound by Halsey?
Vos MR held that he was not. Halsey had concerned whether the court should impose a costs sanction on a party who had unreasonably refused to mediate. Whatever it had said about any power (or lack it) to make ADR mandatory had been obiter viz not a necessary step in reaching the court’s decision.
2. Could the court lawfully stay the proceedings for, or order the parties to engage in a non-court-based dispute resolution process?
Following a lengthy review of the authorities, Vos MR expressed himself satisfied that it was clear from the case law of the European Court of Human Rights and the European Court of Justice, that court-mandated ADR was compatible with article 6, the right to a fair trial. Indeed, the Civil Justice Council’s 2021 Report on compulsory ADR compiled by a working group headed by Asplin LJ, had reached a similar conclusion. Since the court could delay resolution of a claim in order to allow the parties to negotiate whether they wanted to or not, it would be illogical if the court could not also control its own process by staying any existing proceedings whilst any other settlement process was undertaken.
3. How should the court decide whether to stay the proceedings for, or order, the parties to engage in a non-court-based dispute resolution process?
The court did not believe that it could or should lay down fixed principles as to what would be relevant in exercising judicial discretion whether to order parties to engage in ADR. Experience had shown that it was extremely beneficial for parties in dispute to be able to settle their differences quickly and cheaply using ADR. However, whether the court should order or facilitate any particular method of ADR was a matter for the court’s discretion and when that was being exercised, as Vos MR expressed it in paragraph [60]:
“As a matter of legal principle, in my judgment, the court can properly regulate its own procedure so as to stay proceedings or order the parties to proceedings to engage in any non-court-based dispute resolution process. I have no doubt, however, that the characteristics of the particular method of non-court-based dispute resolution process being considered will be relevant to the exercise of the court’s discretion as to whether to order or facilitate it.”
It follows that there are no hard and fast rules as to when the court should, will or must direct that there be a mandatory ADR.
4. Should the judge below have granted a stay in order to go through the Corporate Complaints Procedure?
Whilst he would have done if he could, was the answer to that one, matters had moved on. Having had the jurisdiction point decided in its favour, the Council now wanted a one month stay to allow Mr Churchill to consider whether he would agree to ADR and if he would permit the council to treat the knotweed. That submission failed. The internal complaints procedure was intended to operate before any proceedings were issued, nothing would be gained by a one month stay, and no injunction had been sought requiring Mr Churchill to allow the knotweed to be treated. It followed on that limited basis, that the appeal against the order refusing the stay was dismissed, but with a strong directive from the court that the parties should agree a temporary stay for mediation or for some other form of ADR.
In summary
The court can exercise its discretion to order the parties to engage in ADR and to stay the proceedings until they do so. However, any such order should not impair the essence of the right to proceed to a judicial hearing and should be proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost.
What are the implications of the judgment for detailed assessment under Civil Procedure Rule 47?
The first implication is obvious. Whereas hitherto, courts have only been able to nudge parties towards ADR, now litigants cannot be guaranteed to have their day in court (or to an assessment of their bill before a costs judge) unless they have first gone through an alternative dispute process such as mediation. Already in the Senior Courts Costs Office evidence has been seen of this: the following is a direction is given on the Masters’ corridor: –
“At all stages the parties must consider settling these proceedings by any means of Alternative Dispute Resolution (including Mediation); any party not engaging in any such means proposed by another must serve a witness statement giving reasons within 21 days of that proposal; such witness statement must not be shown to the costs judge until questions of the costs of the detailed assessment proceedings arise”.
Following Churchill it is to be expected that this direction will be beefed up by staying the detailed assessment proceedings until the parties have gone through an ADR process, such as a costs mediation (see below).
The second implication is costs. Halsey is still good law that parties who unreasonably refuse an invitation to use ADR put themselves at risk as to costs if the matter goes to trial, even if they win. However, how the courts will “police” the process is more difficult. If the court orders ADR, say mediation, and one party engages in the process, but the other does not, who is to judge whether that can be true as the whole process is wholly confidential – what goes on in the mediation, stays in the mediation. In Malmesbury v Strutt & Parker [2008] 5 Costs LR 736, Jack J punished a party who went to the mediation without any intention of negotiating, but the judgment does not explain how he came upon this information. No doubt case law will follow where an issue arises about who was, and who was not taking the ADR process seriously.
The third implication is that detailed assessments are likely to become less common. The drive from the senior judiciary is that disputes should be kept out of the courts unless or until litigants have first attempted to settle their differences by ADR. The same will be the case for detailed assessment. What, therefore, should solicitors and their clients (both receiving and paying costs), be thinking about consequential upon the decision in Churchill?
In the first place, there will still be a need for a detailed bill, so that paying parties can see what they are in for, and whether it is reasonable to pay the sums sought. That means that, as now, points of dispute will be required, leading, if necessary to replies. If the exchange of both do not lead to a settlement, the bill will need to be assessed, meaning, in all likelihood, that the court will direct that there first be a mediation or other form of ADR, before the matter is listed before the judge. A better alternative, however, would be to attempt ADR first (thereby potentially saving a court fee of up to £6,640), and only if that does not work, to make the application for detailed assessment.
So far as the practicalities of dealing with costs assessments are concerned after Churchill, at Kain Knight our costs lawyers are ready and waiting to give advice, and to represent their clients in whatever format of ADR is chosen by the court or is agreed between the parties. If it is mediation, the process is quick, inexpensive and confidential, but it is important to remember that the mediator cannot force either party to settle. Thus, the destiny of the parties is always in their own hands, in contrast to the court where what the judge says, goes, meaning that there is always a risk that things may go wrong on the day. That cannot happen at a mediation.
If you would like to know more about Alternative Dispute Resolution, and costs mediation in particular, and how the decision in Churchill will impact upon your costs recovery, whether receiving or limiting what is to be paid, please contact Matthew Kain, Nick McDonnell or Colin Campbell.
CC 29 January 2024
