Compulsory Mediation: Transforming Dispute Resolution

The recent High Court judgment of DKH Retail Ltd and other companies v City Football Group Ltd [2024] EWHC 3231 (Ch) (“DKH Retail”) appears to be the first reported decision where a Court has exercised new powers and ordered the parties to participate in ADR, against the wishes of one party.

Since 1 October 2024, the Civil Procedure Rules (“CPR”) provided the Court with powers to order litigants to engage in alternative dispute resolution (“ADR”). These additional powers were introduced after the Court of Appeal judgment of Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 (“Churchill”) which confirmed that, in appropriate cases, the Court does have the power to order parties to engage in ADR. 

A recap: Churchill 

In Churchill, the Court of Appeal held that the Courts can order parties to engage in ADR, when appropriate. Such orders must be “proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost”.

(Please see our article Will litigants be forced to engage in Alternative Dispute Resolution (“ADR”)? for further details).

The amended CPR

The CPR (as amended on 1 October 2024) reflected the decision in Churchill and places a spotlight on using ADR to resolve disputes. The amended CPR specifically refer to “promoting or using [ADR]” to deal with cases justly and at a proportionate cost, which parties and practitioners must consider throughout the litigation process. The amended CPR also provide a Court with clear authority to suggest or compel parties to use or participate in ADR to assist with this objective.

The amended CPR in action – the High Court’s judgment in DKH Retail

The DKH Retail case was brought by a group of claimants that own the Superdry trademark registered for various clothing items (the “Claimants”) against the operator of Manchester City Football Club's commercial operations (the “Defendant”). The core issue in dispute was a trademark issue, as to whether the branding appearing on sports kits with the words "Super" and "Dry" is likely to be seen as the Superdry brand or as branding for Asahi Super "Dry" lager, the relevant sponsor.   

The Claimants applied for the Court to order mediation under the amended CPR, arguing that the dispute was not particularly complicated and that there were several variables in dispute which might allow an out-of-court compromise, which a Court judgment might not provide (e.g., the form and size of the logo or lettering on the sports kits). The Claimants also argued that trial costs would be high for both parties. The Defendant opposed the application, stating mediation had no realistic chance of success as both parties sought a formal Court decision to resolve the issues. The Defendant also argued it was too late for mediation given the significant expenses already incurred and with the imminent trial date, the Defendant had limited availability for mediation.

The High Court granted the application and ordered the parties to mediate. In reaching its decision, the Court recognised the recent amendments to the CPR which promote ADR, by stating that:

• mediation can be successful even though the parties’ positions appear entirely conflicting;
• while the Defendant argued that mediation was too late, it could be advantageous to the parties to mediate at this stage, after having previously outlined their positions during the pleadings and witness statements stages of the litigation;
• mediation can assist the parties to overcome their reluctance to negotiate;
• during mediation, the options available to the parties to resolve the dispute go beyond that of a binary Court decision;
• mediation was likely to be brief with minimal documentation required and so it would not significantly disrupt the parties' preparations for the upcoming trial; and
• it seemed possible to find a workable mediation date for all parties, despite the Defendant’s limited availability.

The importance of ADR

The judgment in DKH Retail highlights the Court’s ability to order mediation, even if one party is unwilling to participate and demonstrates the shift towards compulsory ADR. This approach is more stringent and marks an evolving landscape of commercial dispute resolution in England and Wales, with a view to resolving disputes more efficiently and cost-effectively. 

We expect the mediation order granted in DKH Retail to be the first of many, following the amendments to the CPR. The decision, and the Court’s wider powers, serve as a reminder to parties and practitioners that ADR should form an essential part of the strategy to resolve a dispute and remains an option at all stages of litigation, even if the parties have become entrenched in their positions and so do not consider a resolution via ADR to be feasible.