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Josep Galvez[1] & Arran Dowling-Hussey[2]


Background

4-5 Gray’s Inn Square information covered the decision, Churchill v Merthyr Tydfil County

Borough Council [2023] EWCA Civ 1416, at the end of 2023. As Arran Dowling-Hussey and Elizabeth

Nichols noted at the time in ‘ADR: Halsey superseded by Churchill v Merthyr Tydfil Borough Council’:

‘The Court of Appeal held that the courts have the power to order a stay of proceedings and order

parties to engage in Alternative Dispute Resolution (‘ADR’) before, if applicable, continuing with the

court process.’

This marked a significant departure from the position following Halsey v Milton Keynes General NHS

Trust [2004] EWCA Civ 576, [2004] 1 WLR 3002. As Dowling-Hussey and Nichols commented 18

months ago:

‘The court held that the passages in Lord Dyson’s judgment in Halsey, dealing with pre-trial ADR

processes, were merely obiter dicta and “not a necessary part of the reasoning that led to the

decision in that case.”[para 20]. Therefore, that part of the Halsey judgment, which had been

thought to bar the courts from ordering parties to engage in alternative dispute resolution (ADR), is

not binding. Previous concerns that compelling parties to engage in ADR would be a breach of Article

6 of the European Convention on Human Rights (‘ECHR’), which deals with the right to a fair trial,

were addressed by the Court in Churchill, holding that a ‘proportionate’ [para 20] pre-trial stay did

not impact on Article 6 rights.’

Churchill is now starting to impact disputes. However, since neither the Churchill judgment nor the

revised Civil Procedure Rules (CPR) provides a straightforward test for when mediation will be

ordered, it is necessary to observe how courts apply these powers in practice. A recent case offers

some guidance. Before examining that case, it is helpful to recap the changes to the Civil Procedure

Rules introduced at the end of last year.

Amendment of Civil Procedure Rules

Following Churchill, amendments to the CPR were necessary. The CPR Committee established a multi-jurisdictional working group, and after consultation, the changes were finalised. The CPR, as amended on October 1, 2024, confirmed the courts’ power to compel parties to engage in out-of court ADR.

Overriding Objective - This remains the principal thread running through the CPR, and its

amendment reflects the evolving approach to ADR. CPR 1.1(f) now refers to “promoting or using

alternative dispute resolution.” CPR 1.4(e) has been expanded to actively manage cases, allowing

courts to “ordering or encouraging the parties to use, and facilitating the use of, [ADR],” replacing

the previous wording that merely encouraged ADR.

Case management powers - under CPR 3.1(o) now expressly include the power to “order the parties

to engage in alternative dispute resolution.” Additional provisions, such as CPR 28.7, 28.14, 29.2, and

PD29.4.10(9), require courts to consider “whether to order or encourage the parties to engage in

alternative dispute resolution” when giving directions.

Costs sanctions - On October 1, 2024, revisions to CPR 44.2(5) introduced cost sanctions,

empowering courts 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

exercising discretion on costs.

A ‘Churchill Order’ in Practice – DKH Retail Ltd v City Football Group Ltd

In DKH Retail Ltd and others v City Football Group Ltd [2024] EWHC 3231 (Ch), the High Court

granted the claimants’ application and ordered mediation before trial, despite the defendants’

objections. However, for the CPR amendments and the Churchill decision, such an order would not

have been possible. Notably, once mediation was compelled in DKH, the parties engaged and

ultimately settled their dispute out of court.

DKH, the owners of the well-known Superdry clothing brand, brought a trademark dispute against

City Football Group, the company operating Manchester City Football Club’s commercial arm. The

issue concerned branding on Manchester City’s professional kit, which included the words “Super”

and “Dry.” The claimants argued that the public might associate this branding with the Superdry

clothing brand, while the defendant maintained it referred to the club’s sponsor, Asahi Super Dry

0.0% lager.

The defendant objected to mediation on several grounds, arguing that it had no realistic prospect of

success, that it required a judicial determination for finality, and that the claimant’s application was

made at a very late stage with trial imminent. The Court rejected these arguments, emphasising that

mediation can be effective even in seemingly intractable disputes. The judgment noted:

‘In many cases, the parties’ positions in the litigation are diametrically opposed, and it may easily be

said that each party requires a judicial determination. Nonetheless, the parties come through ADR to

recognise the desirability of settling for less than their strict legal rights and compromising their

positions. Experience shows that mediation is capable of cracking even the hardest nuts. The process

sometimes succeeds in cases where the parties appear at first to have intractable differences.’

Conclusion

DKH rejected arguments that had traditionally been used to resist compulsory mediation. There is

now a clear trend towards court-ordered mediation, and parties must carefully consider whether

they will oppose such orders. If they maintain that position, they must present a substantive

justification beyond vague assertions that mediation is unlikely to succeed or is too late in the day.

Following DKH, old ‘buzz word’ excuses like ‘unlikely to succeed’ or ‘too late in the day’ carry far less

weight.

Members of 4-5 Gray’s Inn Square Chambers ADR group regularly act in mediations as counsel or

mediators, both in the UK and internationally, including in Singapore and the United Arab

Emirates. Chambers also supports training in mediation and other ADR methods. Queries

regarding the professional availability of members of the group can be directed to Deputy Senior

Clerk, Stephen Somerville, at +44 (0)20 7404 5252 or by email to [email protected].

[1] Josep Galvez is a barrister and abogado practising from 4-5 Gray’s Inn Square Chambers. He can be contacted

at [email protected].

[2] Arran Dowling-Hussey is a barrister practising from 4-5 Gray’s Inn Square Chambers. He is an adjunct

professor of law at several universities. Arran can be contacted at [email protected].