Court-ordered mediation – where are we?

Whilst those of us who practice in the defence of professional negligence claims against solicitors are regular users of mediation, and we can often cite the benefits of engaging in that process (whilst acknowledging its pitfalls), for a mediation to happen - let alone work - usually requires the consent of both parties to a dispute.

It can feel, however, that some cases are unsuitable for mediation, particularly where a claimant has not done enough to evidence their claim, or where a claimant is so unreasonable that a mediation is unlikely to do anything than cause costs to escalate.

Parties do, however, need to be mindful of their obligations to consider ADR, including mediation, under the Pre-Action Protocol for Professional Negligence, but also given changes to the Civil Procedure Rules (CPR), as well as some recent Court decisions demonstrating a more interventionalist approach.

A change in approach

The Court of Appeal decision in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 in November 2023 marked the first example of the Court lawfully staying proceedings to accommodate a “non-court-based dispute resolution process”. This was a significant change from its previous stance, that the Court could encourage but not compel the use of ADR.

The difficulty with Churchill, however, was that it created uncertainty as to when the Court might make an order to compel the use of ADR. The Court held that it was a matter for its discretion and declined to lay down fixed principles as to what relevant factors would be considered when determining the issue.

Subsequently, the Civil Procedure Rules (CPR) were amended to grant the Court the power to order unwilling parties to engage in ADR:

• Specifically, CPR 1.4(2)(e) extended the Court’s purview of furthering the overriding objective to include “ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution”.
• Similarly, CPR 3.1(2)(o) expressly bestowed upon the Court that power within the context of case management.

Where are we now?

The recent decision in DKH Retail Ltd & Ors v City Football Group Ltd [2024] EWHC 3231 (Ch)   suggests that the Court will take a robust approach when deciding whether to order that parties engage in ADR.

The claim was a trademark dispute between the owners of the well-known “Superdry” brand, and the Defendant company tasked with running Manchester City Football Club’s commercial operations. The dispute centred on whether promotional branding appearing on players’ kit was likely to be seen by the public as branding denoting the “Superdry” brand, or as branding denoting the Defendant’s sponsor, a brand of lager with “Super Dry” in its name.

The Claimants successfully applied for an order for compulsory mediation before trial. They submitted that the dispute was capable of resolution by mediation - it was not overly complex, with various levers which could be used to help achieve a compromise.

The Defendant resisted. It argued that mediation should be ordered only where there was a ‘realistic prospect of success’. It added that the matter was unsuitable for mediation because even if the Claimants were prepared to compromise, the Defendant wished to have a decision as to whether it could place its sponsor’s branding on the kit.

Although the Defendant’s submissions were held to have some force, the Court held that mediation can overcome an entrenched reluctance of parties to negotiate and granted the Claimant’s application. The Judge remarked that “mediation is capable of cracking even the hardest nuts”, accepting the Claimants’ submissions that “everything would be up for grabs at a mediation”, and that the dispute was self-contained so that a mediation could focus on solution generation.

The Court also observed that parties are often unwilling to mediate where the parties’ positions are unknown. This was not an issue in this case, as the parties’ positions had been articulated in pleadings and witness statements ahead of the imminent trial. A “short and sharp” mediation was considered appropriate, and the Defendant accepted it would not significantly disrupt the parties’ preparations for trial.

Conclusions

DKH Retail is a High Court decision only, and as is often true, its applicability will likely turn on the circumstances of each matter. It does, however, provide insight into the Court’s willingness to exercise its powers under the CPR to order mediation, even when a party is opposed to it. (That approach appears to have paid off in this case, with a postscript to the judgment indicating that the parties did in fact reach settlement a few weeks later).

Declining to mediate is now a far riskier course than it was before and could result in being on the receiving end of an application for Court-ordered mediation, as well as the resulting costs risk.

Whilst mediations do not always work, and it is a process not without limitations, we always recommend attending mediations in good faith and in the spirit of compromise.