In the landmark case of DKH Retail Limited and others v City Football Group Limited [2024] EWHC 3231 (Ch), the High Court has issued a compulsory mediation order; the first recorded decision of its kind.
Background
The case involved a trademark dispute between the owners of the Superdry clothing brand and City Football Group, which manages Manchester City Football Club’s commercial operations.
The core issue was whether promotional branding used on the players’ kit would be identified by the public as being that of the Superdry brand or, instead, that of the Defendant’s sponsor, Asahi Super “Dry” 0.0% lager, due to the words appearing on the kit including both “Super” and “Dry”.
The Claimants applied to the Court in relation to, amongst other matters, a request for compulsory mediation of the dispute before trial.
In support of their position, the Claimants relied upon the decision of the Court of Appeal in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416. In that case, the Court had referred in particular to a report of the Civil Justice Council ADR Working Group which expressed the view 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” and “we think the balance of argument favours the view that it is compatible with Article 6 for a court or a set of procedural rules to require ADR.”
The Claimants noted that, following Churchill, the Civil Procedure Rules were amended, effective from 1 October 2024, to include the express power to order parties to make use of ADR, even in “complex and entrenched” disputes “where the ADR process appeared to be unlikely to succeed and where one or other party believed that he or she had a strong case.”
Indeed, the Claimants contended that these developments “recognise a sea-change in the approach of the courts to ADR.”
In contrast, the Defendant submitted that the court should only order compulsory ADR where “there was a realistic prospect of success”, which was not the case here as “both parties wanted their position to be judicially determined.” In any event, it was submitted that “mediation was not realistically likely to lead to settlement” and that, in any event, it was too late in the day.
Ruling
In granting the order for compulsory mediation, the Court referred both to Churchill, in which it was found the Court had the power to order parties to engage in ADR, and to the amendments to the Civil Procedure Rules, which included amendments to the overriding objective encouraging ADR (CPR 1.4), the Court’s case management powers to order ADR (CPR 3.1) and that when giving directions consideration must be given to ordering the parties to participate in ADR (CPR 29.2(1A)).
The Court said that “experience shows that mediation is capable of cracking even the hardest nuts,” even where the parties appear to have intractable differences. Although the Court recognised the Defendant’s objection on the grounds of lateness, this was ameliorated by the fact that the parties’ respective positions, by that point in the process, would have crystalised. Ultimately, given mediation offers a range of solutions beyond the binary answer a court might give, it is effective at overcoming the entrenched reluctance of parties to compromise, notwithstanding the fact that by virtue of being well represented such a compromise may already be thought to have been found if it existed.
Taking into account the various factors identified by the parties, the Court was satisfied that it was appropriate to order the parties to mediate, with the outcome communicated to the Court.
Discussion
As the first recorded order of its kind, the Judgment emphasises the importance the Courts place on parties making best use of ADR options, particularly mediation. The Court’s comment that mediation is “capable of cracking even the hardest nuts” suggest it will have little sympathy for parties unwilling to engage.
It is particularly notable that the Defendant in the case was manifestly indisposed towards resolution by mediation. It positively asserted that it sought judicial determination and that the parties were so far apart as to make the outcome of mediation an inevitable failure. Despite this, the Court’s view was that even where parties’ positions were diametrically opposed, ADR could lead to positive outcomes as parties were given the opportunity to recognise that settlement was a more desirable outcome than enforcement of their strict legal rights. It therefore appears that the threshold to convince a Court not to order mediation is high.
Although a seemingly firm line taken by the Court, it is arguably well supported. Though practitioners noted that mediation still appeared to be an underutilised tool, the 10th CEDR Audit, which reviewed the status of mediation between 2020 and 2023, found an overall success rate in civil and commercial mediation of 92%, with expected savings to participants of approximately £5.9bn a year in wasted management time, damaged relationships, lost productivity and legal fees.
In any event, the Court will feel vindicated in its approach: a postscript to the Judgment reads “on 13 January 2025 the parties notified the court that they had settled their dispute.”
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