English High Court flexes its pro-mediation powers in commercial disputes

In late 2023, we reported that in a landmark judgment the Court of Appeal had confirmed that the English Courts can order parties to attempt mediation to resolve their dispute before proceeding via court. We can now update you on the first reported High Court decision exercising those powers, in a way more wide-ranging than before.

Recap of Churchill -v- Merthyr Tydfill CBC

In Churchill, the Court of Appeal decided that English civil courts have power to order unwilling parties to engage in some form of alternative dispute resolution (“ADR”) before their case could proceed in court. In that case, the alternative was mediation. This overturned some 20 years of orthodoxy that English Courts could not order unwilling parties to mediate, as this would “impose an unacceptable obstruction on their right of access to the court”.  

Following this judgment, on 1 October 2024 the Civil Procedure Rules (“CPR”) were amended to make this power explicit. A new strand to include promoting or using ADR was added to the Courts’ Overriding Objective (CPR 1.1); the Courts’ powers to manage cases was expanded to include “ordering or encouraging the parties to use” ADR (CPR 1.4(e)); and when giving directions the Court must decide whether to exercise that new case management power to order or encourage ADR (CPR 29.2(1A)). There is no time restriction – these powers can be exercised at any time during a case.

In DKH Retail Limited & Others -v- City Football Group Limited [2024] EWHC 3231 (Ch), the High Court exercised these explicit new powers to compel the parties to attempt mediation shortly before trial, unlike in Churchill when mediation had been sought at an early stage.

The facts of the dispute in DKH

DKH and its co-claimants were the owner of rights to the Superdry trade mark for clothing in the UK (“Superdry”). City Football Group (“City”) is the commercial arm of Manchester City FC.  City had a sponsorship agreement with the Japanese beer manufacturer Asahi, in relation to their best-selling “Super” “Dry” alcohol-free beer. Superdry commenced High Court proceedings against City alleging trade mark infringement, arising from Asahi beer branding using both “Super” and “Dry” appearing together on Manchester City players’ kits.

Superdry applied for disclosure of the sponsorship agreement between City and Asahi, and also asked the Court to exercise its power to compel Superdry and City to mediate. Both applications came before the Court at the pre-trial review, a short time before trial. The case proceeded in the Shorter Trials Scheme, for trials of four days or less. 

The Court’s reasoning in compelling the parties to mediate

Superdry sought an order that City participate in mediation by arguing that the Churchill case and the amendments to the CPR represented a sea change and that this was the last chance to save court time and further costs for the parties with a final structured negotiation before trial. Importantly, this is an order to attempt mediation: no one can be ordered to settle their dispute via negotiation, only to attempt to do so.

City submitted that mediation stood no real prospect of success, because there had been several failed attempts to achieve a settlement previously despite both participants being sophisticated commercial parties advised by experienced solicitors. City also argued that it was too close to trial to mediate, that significant legal costs had already been incurred and City wanted the certainty of a court judgment on its rights.

In giving his judgment, Mr Justice Miles decided that mediation was “capable of cracking even the hardest nuts” and directed the parties to attempt mediation before the existing trial date some two months later. The Judge was not persuaded that the case was so intractable that a negotiated resolution was beyond reach from a “short and sharp” mediation, without risking the trial date, and he was not prepared to accept City’s submission that they had very little availability in December 2024 to mediate.

A postscript to the judgment notes that the Judge was informed some weeks later that the Parties had settled their dispute prior to trial, effectively achieving the Court’s Overriding Objective including the saving of court time and resources.

Key takeaways

This case sets a useful precedent on the circumstances in which the English civil courts will exercise their powers to compel parties to mediate. The Churchill judgment and the CPR amendments that followed were untested, and Mr Justice Miles’ judgment shows that the Courts will not be shy in applying those powers throughout the whole life of a case, even shortly before trial.

Parties to commercial disputes should take away the following points:

• A party resisting mediation or an order to mediate cannot assume that the Court will accept submissions that a dispute is too difficult or intractable. Mr Justice Miles heard exactly those submissions and nevertheless decided that a litigant would face a high bar to show that there was a truly impregnable dispute. Even bitterly contested disputes can be capable of settlement out of court.
  
• Churchill concerned a case at the start of litigation. Superdry/City’s dispute was at the end of that journey, shortly before trial. Many commentators believed that Churchill might set a precedent that the Court will intervene to slow litigation at the outset, but the Court has now shown that it will actively consider ordering ADR (and mediation specifically) even if trial is imminent.
  
• The impact on the Court’s resources could be crucial: the Judge was certain that there would be no disruption to the existing timetable, that the trial date was not put at risk and the Parties’ preparations would not be adversely affected.  This could be one of the few reasons for a Court refusing to order mediation.

Continuing our analysis above, the Civil Procedure Rules for both the Commercial Court (CPR 58.11) and Circuit Commercial Court (CPR 59.13) will be updated, effective 6 April 2025, to require those Courts to consider whether “to order or encourage the parties to engage in ADR”. This highlights the scope of the change in approach of the courts post-Churchill and suggests judges will be more willing to order ADR, particularly mediation, in the future. 

With thanks to Ben Leffman for his help in drafting this article. 

If you would like to discuss this case and how it affects litigation tactics and managing disputes, we would be pleased to hear from you – our contact details are to the right.