First order for compulsory mediation

Rebecca Taylor-Onion, Principal Associate who specialises in the defence of clinical claims against the NHS, discusses what is understood be to the first reported court order compelling parties to mediate in the case of DKH Retail Ltd and others v City Football Group Ltd.

First order for compulsory mediation

In the recent case of DKH Retail Ltd and others v City Football Group Ltd [2024] EWHC 3231 (Ch), a trademark dispute, the High Court granted the Claimants' application for an order for compulsory mediation. This appears to be the first time a court order compelling the parties to mediate has been reported. In DKH Retail Ltd the order was made shortly before trial and the claim was settled.

Decision in Churchill v Merthyr Tydfil

In Churchill v Merthyr Tydfil CBC [2023], the Court of Appeal held:

“The court can lawfully 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.”

The Court of Appeal therefore concluded that mediation can be ordered provided this does not infringe a party’s right to a fair trial under Article 6 of the European Convention on Human Rights.                        

Whilst the Court of Appeal highlighted factors that may be relevant to whether a court should order a stay or mandatory dispute resolution, it emphasised that other circumstances may also be relevant. Some of the factors cited by the Court of Appeal included:

• Is there any realistic prospect of the claim being resolved through dispute resolution?
• Is there a significant imbalance in the parties’ levels of resource, bargaining power, or sophistication?
• The urgency of the case and the reasonableness of the delay caused by dispute resolution.
• The reasons given by a party for not wishing to mediate, for example, a recent failed dispute resolution.

Subsequent amendments to the Civil Procedure Rules

After the decision in Churchill v Merthyr Tydfil CBC [2023] EWCA Civ 1416, the Civil Procedure Rules (CPR) were amended to empower courts to order compulsory mediation. The CPR were amended to clarify that the courts can order the parties to engage in dispute resolution when appropriate and now state the courts’ general case management powers include:

• CPR 1.4(2)(e) – Ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution.
• CPR 3.1(o) - Ordering the parties to engage in alternative dispute resolution.
• CPR 3.1(p) - Taking any other step or make any other order for the purpose of managing the case and furthering the overriding objective, including hearing an Early Neutral Evaluation with the aim of helping the parties settle the case.      
• CPR 44.2.1(e) has also been amended so that when the court exercises its discretion on costs and is considering the parties’ conduct, it may include “whether a party failed to comply with an order for ADR or unreasonably failed to engage in ADR.”

Decision in DKH Retail Ltd and others v City Football Group Ltd

In the High Court case of DKH Retail Ltd and others v City Football Group Ltd [2024] EWHC 3231 (Ch), the Claimants proposed a "short, sharp" mediation in a trademark claim. The Defendant resisted the Claimants’ application on various grounds, including that mediation should only be ordered where there was a "realistic prospect of success", both parties wanted a judicial determination, the application was "very late" and the Defendant’s availability was limited before the date on which trial was listed to commence.

Having referred to Churchill v Merthyr Tydfil and the new case management powers in the CPR, the court ordered compulsory mediation. Whilst the court acknowledged there was some force in the Defendant’s submissions, it considered there was benefit in the parties' respective positions having been fully pleaded in mediation before trial. Mr Justice Miles noted that “mediation is capable of cracking even the hardest nuts” and settlement was in fact subsequently agreed without proceeding to trial.

Impact

The changes to the CPR aim to promote quicker, more cost-effective resolution of disputes, reducing distress to the parties and the burden on the courts, and are indicative of increasing recognition of the value of dispute resolution by the government and the courts. The power of courts to order dispute resolution is applicable to all civil claims so is likely to have significant repercussions across all types of civil claims and, in the future, we are likely to see more orders made for compulsory dispute resolution.

However, it is currently unclear what other circumstances may influence a court’s decision whether (or not) to order dispute resolution and how courts will decide on the most appropriate form of dispute resolution to order. We will have to wait for the case law to develop on these points. Furthermore, in addition to costs penalties, are courts likely to take a dim view at trial of a party who objected to court-ordered dispute resolution? Will the parties ultimately feel obliged to settle claims where the court orders dispute resolution and could this impact on perceived fair resolution of claims and access to justice? 

What is certain, however, is the courts expect parties to engage fully in dispute resolution to air all issues in the claim and as a genuine attempt to achieve settlement. Any party who objects to dispute resolution will have to demonstrate to the court very good reasons for doing so.