Background
DKH Retail Ltd v City Football Group Ltd involved a trademark dispute between the owner of Superdry, DKH Retail Ltd, and the defendant, City Football Group, who own Manchester City Football Club. The central issue of the dispute was the fact that Asahi’s Super Dry lager is a kit sponsor of the football club. The claimants contended that the words “Super” and “Dry” appearing would lead the public to believe that the Superdry clothing brand were sponsoring Manchester City. The claimants’ position was entrenched due to the concern that as a result of football fans’ “notoriously tribal” nature, the implied association would be increasingly detrimental to the claimant’s brand.
The parties had spent significant time and resources preparing for a trial that was approaching. The claimants applied to the court for an order for mediation, at a stage in the proceedings that would traditionally be viewed as being late. The defendant respected the court’s authority to grant such an order but contended that any mediation would ultimately be unsuccessful and would be an unwelcomed distraction at such a late stage.
Decision of the court
The court set a date for the mediation to occur in December 2024. The court’s decision confirmed a willingness to order compulsory mediation and is a seminal application of Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416. The case of Churchill altered the foundational approach of the court when considering methods of alternative dispute resolution, which are now central to resolving disagreements. In light of both DKH Retail and Churchill, the courts are seen to be increasingly comfortable with referring unwilling parties to compulsory mediation even where no contractual obligation exists to do so.
The late-stage referral to mediation also goes against a belief held by some that late-stage alternative dispute resolution is not conducive to success. However, in this case the court believed the fact that the parties’ positions had become ‘crystallised through pleadings’ was advantageous in terms of achieving a positive outcome through mediation. The court believed the mediation would be “short and sharp” and would not impede the parties’ preparations for trial if it proved unsuccessful; mediation would instead allow the parties to explore a commercial compromise rather than seeking a legal declaration. The fact that the parties may have strongly opposing positions did not impact the court’s attitude towards ordering a mediation as compulsory mediation is “capable of cracking even the hardest nuts”.
The parties were referred to mediation by Judge Miles in December 2024 with the parties notifying the court in early January 2025 that they had settled their dispute, further asserting the view that compulsory alternative dispute resolution can result in settlements.
Implications
Alternative methods of dispute resolution, such as mediation, have become increasingly commonplace throughout all types of commercial dispute over the last 25 years. The Woolf reforms (Civil Procedural Rules 1998) shifted the English judiciary’s attitude towards alternative dispute resolution generally, although alternative dispute resolution was still viewed as a purely optional method of resolving disputes, with both parties requiring to be ‘on board’ for it to take place (and be a meaningful process). The recent judgements in Churchill and DKH Retail confirm the attitude towards compulsory alternative dispute resolution, including mediation, has shifted, and mediation is now considered by many as part of the judicial process, whether or not both parties wish for that to be the case.
The shift towards compulsory mediation greatly impacts the approach that parties must take regarding their commercial litigation strategy. Even when there is an intention to litigate a dispute, flexibility is required when considering litigation strategy as mediation may be ordered by the court throughout the judicial process and even at a late stage in the judicial timetable.
This development has the potential to reduce the burden on the civil courts and result in the more efficient resolution of disputes that do require judicial intervention. The impact of this decision and the English court’s attitude to compulsory mediation should be monitored to see how the shift in attitude impacts the alternative dispute resolution landscape in Scotland.
Key takeaways
Courts in England are increasingly likely to refer disputing parties to compulsory mediation during the litigation process.
Parties should be flexible and factor in mediation to their commercial litigation strategy.
Alternative dispute resolution methods can be considered at any stage in a dispute, from before formal legal proceedings are commenced, to during proof and trial preparation once parties’ legal positions are well-known and understood.
A full link to the judgement can be found here.
If you would like to discuss any of the issues raised in this article, or have questions relating to construction disputes, please get in touch with a member of our construction, engineering and infrastructure disputes team.
This article was co-authored by Trainee Ruaridh Brown.