Do I Have to Mediate My Dispute?
What is ADR?
ADR stands for Alternative Dispute Resolution, and refers to any form of resolving disputes without resorting to the courts.
There are several different types of ADR, but the most common in construction disputes are mediation and adjudication.
Click here to see a summary explanation of mediation. Click here to see a summary explanation of adjudication.
Is ADR Mandatory?
ADR is not mandatory by default: a party cannot ordinarily be prevented from commencing a claim in the courts because it has not tried to resolve the dispute by ADR first.
However, two recent decisions made by the courts show that (when the circumstances are right) a court might be willing to force the parties to pause their participation in the litigation and try to resolve their dispute in ADR instead. This can even be ordered by the court when one party says there’s no point trying to resolve the claim by ADR because the prospects of reaching an agreeable settlement are slim to none.
The Court’s Approach
In 2023, the Court of Appeal gave judgment in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 which concerned the interaction between litigation and ADR. The court decided that it has the power to force parties to participate in ADR, and can stay the litigation in order to ensure ADR takes place under certain conditions:
when doing so does not impair a claimant’s right to a fair trial under Article 6 of the European Convention on Human Rights;
when the order is made in pursuit of a legitimate aim, namely the fair, quick, and economical settlement of the dispute; and
when it is proportionate to so order.
This marked a change, because the Court of Appeal had decided 20 years beforehand (Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576) that forcing unwilling parties to refer their dispute to ADR (in that case, mediation) would impose an unacceptable obstruction of their right of access to the courts, and that even if it had jurisdiction to order unwilling parties to refer their disputes to mediation, it was difficult to conceive of circumstances in which it would be appropriate to exercise that jurisdiction.
The Churchill v Merthyr case changed that. A test applicable to the exercise of the court’s discretion to order ADR (or stay the proceedings for ADR) was not set, but the court did identify the following factors as being of potential relevance:
the form of ADR being considered;
whether the parties were legally advised or represented and, if not, whether ADR was likely to be effective or appropriate without such advice or representation;
whether the parties understand that, if they did not settle the dispute as part of the ADR process, they remained free to pursue their claims and/or defences before the court;
how urgent resolution of the dispute is, and what length of delay to that resolution the ADR might cause;
whether any such delay could impact the claim, such as by giving rise to limitation issues;
the likely costs of participating in the ADR, and the proportionality of those costs both in relation to the sums in dispute and the parties’ resources;
whether there was a realistic prospect of the dispute being resolved by the ADR
the existence and significance of any imbalance in the parties’ resources, bargaining powers, and commercial sophistication; and
any reasons given by one or both parties for not wanting to participate in ADR.
Churchill v Merthyr was not a construction case, but the Court of Appeal’s decision was not confined to any specific area of law, or any particular form of ADR. The construction industry is heavily reliant upon ADR – specifically adjudication. A discretionary statutory right to adjudicate often exists under the section 108 of the Housing Grants, Construction and Regeneration Act 1996. Further, many standard form contracts (such as the JCT suite) provide a discretionary contractual right. Some construction contracts seek to make adjudication of disputes mandatory, before litigation can be commenced.
The TCC is therefore familiar with ordering a stay of court proceedings to allow for adjudication to take place. Such a stay will usually be ordered where there is a mandatory adjudication clause, but may nevertheless be ordered if it is discretionary (see DGT Steel & Cladding Ltd v Cubitt Building & Interiors Ltd [2007] EWHC 1584 (TCC)).
But in light of Churchill, the TCC may go a step further, and order (potentially even unwilling) parties to participate in adjudication regardless of whether the parties have a right to adjudicate.
A year later, in DKH Retail Ltd v City Football Group Ltd [2024] EWHC 3231 (Ch) the courts confirmed for the first time that they will force parties to engage with ADR (in this case, mediation) even where one of them is unwilling.
The case concerned an argument between the Superdry clothing brand, and Manchester City Football Club who used clothing branded by its sponsor, Asahi Super “Dry” 0.0% lager. The parties agreed that the court had the power to compel mediation, but argued that mediation should only be ordered where there was a realistic prospect of success, which they said was lacking in the circumstances.
The court disagreed with that and ordered mediation anyway, holding that:
whilst a trial was imminent, there was in fact value in mediation taking place at that time (i.e. after pleadings and witness evidence had been exchanged);
whilst the parties were commercially sophisticated and had experienced solicitors, that is not to say that a settlement would have already been reached if one was possible: mediation often breaks entrenched positions even where parties are resistant; and
a mediation in this particular case could be quick and focused, and would not unduly disrupt trial preparation.
DKH Retail was therefore an example (possibly one of the first) of the High Court forcing parties to engage with ADR even when one of them thought that doing so was pointless. However, it should be noted that the court was careful to consider whether the dispute suited mediation, and whether it could be carried out without undue disruption to trial preparation, and so it is easy to see that the application might be decided differently in a different case.
The final paragraph of the DKH Retail judgment states “Postscript: on 13 January 2025 the parties notified the court that they had settled their dispute.” Assuming that this settlement arose from the ordered mediation (which may not be the case), the view taken in Churchill v Merthyr and effected in DKH Retail – that ADR might resolve litigation even when the parties think it will not – is one which the courts might increasingly be encouraged to take.
The recently published TCC Guide expressly adopts the approach that ADR might be ordered, stating in paragraph 7.1.2 that the TCC “may order the parties to undertake ADR” and “will use this power where it is necessary and appropriate to do so”. For an overview of the 2026 TCC Guide, click here.
If you are involved in TCC litigation, or need help with ADR, contact Hamshaw today.