Court-ordered mediation: a sea-change in the English Court's approach to ADR?

In the wake of the first High Court-ordered mediation (against one party’s express wishes), in DKH Retail Ltd & Ors v City Football Group Ltd[1], we examine what court-ordered mediation means for litigants before the English courts.

On the face of it, there were compelling reasons why Manchester City opposed DKH Retail’s application for court-ordered mediation. This was a case in which both sides, they said, needed a judicial decision as to whether the football club was entitled to use the Asahi “Super Dry” branding on its kit and other merchandise – with the Claimants, the owners of the Superdry clothing brand, contending that this infringed their trademark rights and constituted passing off. The trial was imminent – the application for mediation was made at the pre-trial review – and the parties had each spent hundreds of thousands of pounds on the litigation. Previous settlement negotiations had not resulted in settlement. Mediation, Manchester City said, would fail.

Mr Justice Miles disagreed. While he found some of Manchester City’s arguments convincing – including the submission that in a long-running dispute with sophisticated lawyers on both sides, one would expect settlement to have been reached by this stage, if it could be reached at all – the Judge found that the club’s opposition to mediation did not “do full justice to experience, which shows that bringing the parties together through mediation can overcome an entrenched reluctance of parties to negotiate, even where sincere… Experience shows that mediation is capable of cracking even the hardest nuts.“[2] At a hearing on 21 November 2024, he ordered a “short and sharp“[3] mediation, to take place during December, and reminded the parties that “the range of options available to the parties to resolve the dispute through mediation goes beyond the binary answer a court could provide. There may be solutions other than yes or no.”[4]

The Manchester City judgment provides an unequivocal answer to the question raised by the 2023 case of Churchill v Merthyr Tydfil County Borough Council[5]: would the Court go so far as to force unwilling parties to mediate? In Churchill, the Court of Appeal determined that the Court had the power to order unwilling parties to participate in alternative dispute resolution (“ADR”). The Civil Procedure Rules provisions in relation to ADR were amended following Churchill; as of October 2024, the Overriding Objective includes the promotion or use of ADR, and the “active case management” in which the Courts are required to engage under CPR 1.4 now expressly includes “ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution“. The court’s case management powers under CPR 3.1 have been amended to include the power to order the parties to participate in ADR; and under CPR 29.2(1A), when giving directions, the court must consider whether to order or encourage the parties to participate in ADR.

Both the amendments to the CPR and the Manchester City judgment have followed fairly quickly on the heels of the Court of Appeal’s confirmation that compulsory court-ordered mediation is permissible. What does the decision in the Manchester City case mean for litigants before the English courts who do not wish to mediate? Are they likely, as a result, to be deprived of their “day in court”, and if so, are they unfairly being deprived of access to “justice”? Prior to the Court of Appeal’s confirmation in Churchill, Lord Justice Dyson had suggested (obiter) in Halsey v Milton Keynes General NHS Trust[6] that “to oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the court”[7], the argument being that compulsory ADR would breach a litigant’s Article 6 ECHR right to a fair trial. But the Court of Appeal in Churchill was clear that “in controlling its own process, the court can obviously delay resolution of a claim to allow the parties to negotiate, whether they all want to or not“.[8]The Court endorsed the view advanced in the Civil Justice Council’s June 2021 Report on Compulsory ADR that “any form of ADR which is not disproportionately onerous and does not foreclose the parties’ effective access to the court will be compatible with the parties’ Article 6 rights”.[9]

The Court of Appeal declined to provide a “checklist” of factors which would weigh in favour of an order for compulsory mediation, though the view was expressed that the Court should only stay proceedings for, or order, the parties to engage in a non-court-based dispute resolution process “provided that the order made does not impair the very essence of the claimant’s right to proceed to a judicial hearing, and is proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost“.[10] The Court considered it likely that some or all of the following factors (cited by the Bar Council in the Appeal) would often be relevant[11]:

(i) The form of ADR being considered;

(ii) Whether the parties were legally advised or represented;

(iii) Whether ADR was likely to be effective or appropriate without such advice or representation;

(iv) The urgency of the case and the reasonableness of the delay caused by ADR, including whether that delay would vitiate the claim or give rise to or exacerbate any limitation issue;

(v) The costs of ADR, both in absolute terms, and relative to the parties’ resources and the value of the claim;

(vi) Whether there was any realistic prospect of the claim being resolved through ADR;

(vii) Whether there was a significant imbalance in the parties’ levels of resource, bargaining power, or sophistication; and

(viii) The reasons given by a party for not wishing to mediate: for example, if there had already been a recent unsuccessful attempt at ADR.

In short, while the Manchester City judgment makes clear that unwilling parties may well be ordered to engage in ADR, even shortly before a trial and where there are at least some compelling reasons why ADR may not result in settlement, it is clear that not all cases will be deemed suitable for court-ordered ADR. But this early indication of the Court’s enthusiasm for compulsory ADR should encourage litigants to consider – perhaps at a relatively early stage, such as the close of pleadings – whether ADR would assist in the resolution of their dispute.

It remains to be seen, of course, how reluctant parties will respond to court-ordered mediation. They might, of course, engage more seriously with ADR when compelled by the Court – particularly if refusing would lead to significant adverse costs orders – but there is a risk that an unwilling party will view the process as a mere formality and fail to take the opportunity to reach a genuine resolution.

It is possible, too, that the prospect of the Court ordering the parties to mediate will remove some of the perceived difficulties in being the party to propose ADR early, including the inference that the party proposing mediation is less confident in its case than the pleadings suggest, or more ready to compromise in order to avoid a trial. In this context, court-ordered mediation may, paradoxically, give litigants greater control over the outcome of their dispute, by providing an opportunity for parties to engage on an equal footing to negotiate a more flexible solution than the Court might have otherwise imposed.

60-70%

of disputes settle on the day of the mediation

Mediation is known to have a very high success rate – the latest figures from CEDR (the Centre for Excellence in Dispute Resolution) suggest that 60-70% of disputes settle on the day of the mediation, with a further 20% settling in the following weeks. While parties can be reluctant to mediate – whether because they want the vindication of a court judgment or are unwilling to spend time and costs on a process which may not result in resolution – it is clear that the process of preparing for and attending a mediation can effect a significant change in their attitude to the dispute.

And the result of the Manchester City mediation? It appears at paragraph 45 of Mr Justice Miles’ judgment: