In what is believed to be the first High Court ordered mediation following recent changes to the Civil Procedure Rules, and despite reluctance on the part of the defendant, the parties settled their dispute.

In this insight, we look at the Court's decision to order mediation, and how mediation can succeed even when the parties appear entrenched.

Background

For many years, the courts in England and Wales have encouraged parties to engage in forms of alternative dispute resolution (ADR) in an effort to resolve their disputes out of court, saving court time and taxpayer money.

In November 2023, the Court of Appeal in Churchill v Merthyr Tydfil County Borough Council held that the courts have the power not only to encourage parties to mediate, but also to compel them to do so.

In October 2024, that decision was embedded in an update to the Civil Procedure Rules, which now specifically empower the court to encourage or order the parties to use ADR (for more information see our full report in our article on Civil Procedure Rules and ADR).

The recent decision in DKH Retail Ltd & Ors v City Football Group Ltd [2024] EWHC 3231 (Ch) (a judgment from November 2024, but only recently reported) appears to be the first time the courts have used that power when, shortly before the trial of the matter, the High Court ordered the parties to mediate the dispute.

The dispute

This was a trademark dispute, revolving around branding on Manchester City's football kit. The core issue in the case was whether that branding, which included the words "Super" and "Dry", was likely to be seen by the public as denoting the team's sponsor, Asahi Super "Dry" 0.0% lager, or the well-known Superdry clothing brand.

At the pre-trial review, the claimants applied for an order for compulsory mediation before trial. This was resisted by the defendant, and so the court was left to decide whether to use its power to order an unwilling party to engage in ADR.

Objections to mediation

While each case of course turns on its own facts, the judge's responses to the defendant's objections are instructive:

  • No prospect of success? The defendant contended that the court should only order mediation where there was a realistic prospect of success, and submitted this was not such a case, as the defendant wanted a judicial determination of its position. The parties were legally represented and if there was realistically to be a settlement, it would have been reached already. The judge however was unpersuaded, saying "experience shows that mediation is capable of cracking even the hardest nuts" and often succeeds even "where the parties appear at first to have intractable differences".
  • Too late in the day? The defendant also argued that mediation now was too late – the parties had already spent hundreds of thousands of pounds preparing for the imminent trial. The judge however found that this militated towards ordering mediation. Unlike in many cases where the parties say mediation would be premature, here the parties' positions had crystallised through the pleadings and evidence, leaving no uncertainty about their cases – and despite the substantial sums already expended on the case, a short sharp mediation even now could save them many hundreds of thousands more.

Taking account of all the considerations raised by the parties, the judge was satisfied that he should order them to mediate.

Despite the defendant's initial reluctance, a postscript to the judgment reports that, on 13 January 2025, the parties notified the court that they had settled the dispute.

Flexible solutions

ADR can often be a valuable means of settling or at the very least narrowing a dispute. As this case neatly demonstrates, even where the parties are diametrically opposed, ADR can open up new channels of communication and solutions.

As the judge in this case emphasised, one of the key potential benefits that mediation or other forms of ADR can offer (and one of the key reasons they can succeed) is more flexibility of outcomes than the often-binary litigation process. While litigation can sometimes produce only a yes/no result with limited remedies, in a mediation everything is up for grabs. In this case for example, the claimant suggested that at mediation the parties would have freedom to agree terms about the form and size of any logo or lettering on the kit; payment of money and timing of any changes. In this way, mediation allows the parties to, as the judge said, "focus on possible solutions rather than raking over historical grievances".

The fact that the parties can now be not only encouraged but also ordered to engage in ADR means that parties should give it serious consideration throughout a dispute - not only as a box-ticking exercise, but as a potential means of removing "roadblocks to settlement".

If you have any questions about the issues explored in this article, or would like advice on how mediation can remove the roadblocks to your settlement, please contact Michael O'Shea, a Partner in Gowling WLG's Construction team and CEDR accredited mediator.