Court’s decision in Churchill
On 29 November 2023, the Court of Appeal handed down its landmark judgment in the case of Churchill v. Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 (Churchill) exploring (a) whether a court can lawfully order parties to engage in dispute resolution processes outside of courts – alternative dispute resolution (ADR) – and (b) in what circumstances it can do so.
By way of reminder, the underlying claim in Churchill was for nuisance allegedly caused by Japanese knotweed, which had allegedly spread from the council’s land onto Mr Churchill’s property. Mr Churchill did not exhaust the Council’s internal complaints process before issuing court proceedings.
The Court of Appeal in Churchill stated that courts can lawfully stay proceedings for, or in fact order, parties to engage in a non-court-based dispute resolution process. Whether courts should order or facilitate any particular method of non-court-based dispute resolution in a particular case is a matter of discretion, to which many factors will be relevant, but the power must be exercised so that it does not impair the parties’ right to a fair trial under Article 6 of the European Convention of Human Rights. The decision marked a significant change in the ADR landscape, effectively removing the barrier to court-mandated mediation previously put up by Halsey.1
For further details about the decision in Churchill, please see the link to our podcast and our previous article.
Case law following Churchill
Following the landmark decision in Churchill, recent case law highlights the clear shift in the ADR landscape, the courts’ support for ADR and their attitude towards parties who unreasonably fail to engage in ADR.
a. Conway v. Conway & Another (Rev1) [2024] EW Misc 19 (CC)
In Conway, the Defendants were criticised by the court for refusing to mediate, despite being successful at trial. The Claimant had made three offers to mediate – both prior to the issuance of proceedings and during the proceedings as well as without prejudice offers to settle. The Defendants chose not to consider the Claimant’s offers as they were confident in their prospects of success at trial.
Despite their success, the Defendants’ recoverable costs were reduced by 25% as a penalty for their failure to engage in the Claimant’s numerous offers to mediate.
b. Northamber PLC v. Genee World Ltd & Ors (Rev1) [2024] EWCA Civ 428
In Northamber, a court management order required the parties to consider settling the litigation by means of ADR at all stages of the proceedings following a case management conference. Any party not engaging in the ADR proposed by another was required to serve a witness statement setting out their reasons (the Order).
Despite the court’s direction and the Claimant’s invitation to mediate, as well as a reminder of the Order, the Defendants failed to respond to the Claimant’s proposal for mediation. The Defendants also failed to provide a witness statement setting out their reasons for refusal.
At first instance, the judge rejected the Claimant’s argument that the Defendants’ failure to mediate and comply with the Order should result in a costs sanction. The court referred to the lack of evidence that the Claimant ever chased for a response to its invitation to mediate. Furthermore, as the Claimant’s mediation proposal was made after “very considerable costs had been incurred”, it represented a “half-hearted attempt” to suggest mediation [para 102].
The Court of Appeal disagreed, finding that:
- After the offer to mediate was received, substantial additional costs were incurred, which could have been avoided by a successful mediation; the offer should not have been described as “half-hearted”.
- Any suggestion that the onus was on the Claimant to chase the Defendants for a response is incorrect; “[T]he ball was in [the Defendants’] court” [para 105].
- At first instance, the judge had ignored the Defendants’ breach of the Order resulting from their failure to explain their refusal to mediate: “[I]f breaches of such orders are ignored by courts when deciding costs, parties will have no incentive to comply with them” [para 104].
The Court of Appeal then considered the impact of the Defendants’ conduct on costs and imposed a “modest, but not insignificant” costs penalty of 5% [para 107].
c. DKH Retail Ltd and others v. City Football Group Ltd [2024] EWHC 3231 (Ch)
In DKH Retail, the Claimants had, together with the amendments to the Civil Procedure Rules (CPR) set out below, referred to Churchill in their application for an order for compulsory mediation. While the Claimants had valid reasons to seek mediation (i.e., simplicity of dispute, increasing costs and compliance with the overriding objective), the Defendant resisted the application on various grounds, including that mediation should only be ordered where there is “a realistic prospect of settlement” [para 35] and that the application was made very late, and close to trial.
While the Defendant’s argument that the order was sought late in the proceedings was found to hold merit, the court held that the matter was capable of being resolved and that the parties’ respective positions at that stage, having been fully pleaded, would aid settlement.
On the basis of these findings, the court ordered the parties to engage in “short and sharp” mediation, which would not significantly disrupt the parties’ trial preparations [para 41]. The parties settled the dispute shortly after the court’s order for mediation.
Updates to the Civil Procedure Rules post Churchill
As well as a shift in the approach of the courts, there have been substantial changes made to the CPR. On 1 October 2024, CPR 1 (the Overriding Objective) was amended to make clear that the courts’ obligation to deal with a case justly and at proportionate cost includes “promoting or using alternative dispute resolution” (CPR 1.1.(2)(f)). The courts’ active case management duty now also includes “ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution” (CPR 1.4(2)(e)).
The courts may also “order the parties to engage in alternative dispute resolution” (CPR 3.1(2)(o)) as part of their general case management powers and, in deciding any orders on costs, the courts will have regard to all the circumstances including “whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution” (CPR 44.2(5)(e)).
CPR Parts 58 and 59 have also been amended to clarify the application of ADR to the Commercial Court and the Circuit Commercial Court. The courts’ case management powers include that the courts will “order or encourage parties to engage in alternative dispute resolution” (see CPR 58.13(2)(c) and CPR 59.11(2)(c)).
Mediation as a compulsory measure?
On 22 May 2024, the Small Claims Track Automatic Referral to Mediation Pilot Scheme was introduced (PD 51ZE). The pilot runs from 22 May 2024 to 21 May 2026 and requires all money claims that would normally be allocated to the Small Claims Track to be referred to the Small Claims Mediation Service to take part in a compulsory free one-hour mediation. The pilot does not apply to claims submitted through Online Civil Money Claims or road traffic accident and personal injury claims.
Moreover, in circumstances where mediation is compulsory but the case fails to settle, the court must consider whether to penalise a party for refusing to mediate during the hearing itself (changes made to CPR 27.8 pursuant to PD 51ZE) and in relation to costs issues (changes made to CPR 45.13 pursuant to PD 51ZE). Additionally, the courts have the power to reduce or inflate fixed costs by up to 50%.
The standard directions for small claims have also been modified to require parties to explain their failure to attend a mediation (PD 27A App B).
The change in approach to mediation in lower-value claims could be indicative of future developments in mediation and larger-value claims.
The future for mediation – the Singapore Convention and beyond
On 3 May 2023, the UK signed the United Nations Convention on International Settlement Agreements Resulting from Mediation, known as the Singapore Convention. The Singapore Convention is an international treaty that provides an international framework for the enforcement of settlement agreements resulting from mediation. The Singapore Convention is currently in force in 14 countries, and will come into force in Bahrain, Costa Rica, Israel and Paraguay later in 2025. In addition to the UK, a further 43 countries are signatories to the Singapore Convention but have yet to ratify it.
On 17 May 2023, (then) Justice Minister Lord Bellamy KC revealed plans to ratify the Singapore Convention in 2024, with it coming into force across the UK six months later. However, it was not ratified in 2024, possibly due to last year’s general election. The UK’s ratification of the Singapore Convention would only further promote mediation and its place in dispute resolution in the UK by providing a uniform and efficient framework for recognising and enforcing mediated settlement agreements across member states.
The most senior judge in England has made clear her views as to the importance of mediation within the broader context of dispute resolution. In her lecture to the British Institute of International and Comparative Law on 28 January 2025 titled ‘Mediation after the Singapore Convention’, Lady Chief Justice Carr emphasised the importance of mediation in promoting the rule of law, both domestically and internationally. Lady Carr advocated for the integration of mediation alongside litigation and arbitration, and promoted the establishment of a London Dispute Resolution committee, with the aim of positioning the UK as a leading centre for international mediation.
Conclusion
Churchill has made substantial changes to the ADR landscape in England. There has been a definite shift in the courts’ approach, evident in the decisions referred to above, which demonstrate the courts’ willingness to encourage and order parties to engage in ADR, and penalise those who are unwilling to do so, even where their reasons for reluctance appear to be valid, as evidenced in later case law.
In addition to case law, the changes to the CPR make it clear to all litigating parties that the encouragement and now requirement to pursue ADR are here for the long term. Legal advisors must consider the impact of the changes to the CPR – particularly the Overriding Objective – when advising clients in relation to the prospect of mediation and dispute resolution more generally. The shifting ADR landscape will undoubtedly compel unwilling parties to negotiate disputes that, prior to Churchill, would have been regarded as too complex or unnecessary due to time and cost constraints.
Key takeaways from recent cases:
- Unreasonable refusal to participate in ADR constitutes a form of unreasonable litigation conduct to which the court may properly respond by applying a costs sanction (although it does not automatically follow that a costs penalty should be imposed for a refusal to mediate).
- Silence in the face of an invitation to participate in mediation is, as a general rule, of itself unreasonable, even if a refusal might have been justified by the identification of reasonable grounds.
- The imminence of trial does not negate the prospects of success of mediation, and the court does not regard such imminence as a reason to determine that the dispute is incapable of being resolved out of court. Instead, the preparations for trial (i.e., pleadings and presumably the exchange of evidence between the parties) may facilitate more informed and considered discussions, with greater and more realistic prospects of success.
- Halsey v. Milton Keynes General NHS Trust [2004] EWCA Civ 576, [2004] 1 WLR 3002
In depth 2025-207
