Mediation ordered at pre-trial review between Superdry and Manchester City Football Club

A recent High Court order in the case of DKH Retail Limited and others vs City Football Group Limited^[1] has seen the first reported decision by a court using its amended powers under Civil Procedure Rules 1.4 and 3.1, which were effective as of October 2024. In November 2024, a pre-trial review for a dispute between the owners of Superdry and Manchester City Football Club, saw the High Court order, in an IP case under the Shorter Trials Scheme, that the parties engage in mediation in a bid to resolve the dispute outside of court.

Summary of the dispute

Superdry brought a claim against Manchester City Football Club for trade mark infringement on the basis their kit bore the words “super” and “dry”, which created a suggestion that Superdry the clothing brand was an official sponsor of the club when in fact the Manchester City had agreed a sponsorship deal with the Japanese beer Asahi.

Claimants’ argument

The claimants’ argued that this is a case where the court should exercise its powers to order mediation, citing the Court of Appeal’s decision in Churchill v Merthyr Tydfil County Borough Council^[2]. The decision by the Court of Appeal allowed English courts to require the parties to engage in alternative dispute resolution outside of court. This decision saw a change to the Civil Procedure Rules which previously only allowed the court to promote, rather than require, the use of alternative dispute resolution (ADR). The changes were affective as of October 2024.

The claimants, as part of their arguments for mediation, referred to the Civil Justice Council ADR Working Group’s findings that mediation has worked in “complex and entrenched disputes, including where ADR process appeared to be unlikely to succeed”, arguing that this particular case was not a complicated one, “with several variables in the dispute between the parties which might allow an out-of-court compromise”. Superdry reinforced this by referring to the overriding objective within the Civil Procedure Rules and that the court should ensure its resources are properly allocated. Whilst Superdry acknowledged that there had been unsuccessful settlement negotiations to date, they felt a “short, sharp mediation of one day” may well be all this dispute needed to avoid further costs.

Defendants’ argument

Manchester City argued that, whilst they did not dispute the court’s powers to order alternative dispute resolution - they argued that the Court should only make such an order where there is a realistic prospect of success – something which City argued was unlikely in this case. City argued that mediation was too late in the judicial process, given the significant legal costs already incurred and the imminent trial. Further,, City specifically stated that they wanted to know position to be judicially determined, something only a trial could deliver.

Outcome

The Court ordered mediation to take place, with the aim to resolve the dispute, and that this should take place in December 2024, with the parties reporting back to the court the outcome.

Whilst acknowledging City’s point in relation to the submission for mediation being late in the process, the court said that a later mediation has some advantages in that the parties’ positions were clear as a result of their completed pleadings and served witness statements. By contrast the Court commented that where mediation is proposed too early, often the respective position of the parties isn’t clear,. The court highlighted that the mediation experience can “overcome an entrenched reluctance of parties to negotiate”, and held that mediation was unlikely to disrupt preparations for trial, being short and sharp with only brief documentation required

Comments

The key takeaway from this decision is that the Court has altered its position post Churchill, and is now willing to require parties to mediate even in the face of one party’s opposition, provided that the order will not impair the claimant’s right to a judicial hearing, and where the order is proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost.

It is notable that in Churchill, the Court of Appeal ordered the mediation without the need to stay the proceedings so the impact on the trial timetable is a relevant factor to consider. In Superdry, Mr Justice Miles expressly called out the opportunity for a more creative solution through mediation, he said, “the range of options available to the parties to resolve the dispute through mediation goes beyond the binary answer a court could provide. There may be solutions other than yes or no.” Parties should always carefully consider a request to mediate irrespective of the stage of the proceedings given the opportunity to resolve disputes cost efficiently, and potentially with a more creative solution.

Article co-authored by Grace Agambar, Solicitor Apprentice at CMS
 

^[1] Neutral Citation Number: [2024] EWHC 3231 (Ch)

^[2] Neutral Citation Number: [2023] EWCA Civ 1416