Superdry 1 - Manchester City 0: Understanding ordered mediation
Manchester City Football Club (Manchester City) and retail giant Superdry learnt their lesson the hard (and expensive) way when the High Court ordered the parties to mediate shortly before the parties were due to participate in the pre-trial review (PTR).
Following the case of Churchill v Merthyr Tydfil [2023] EWCA Civ 1416, the Civil Procedure Rules (CPR) were amended meaning that from 1 October 2024 the Courts have had the authority to order unwilling parties to engage in mediation (a form of alternative dispute resolution (ADR)).
Whilst parties in litigation have always had a duty to consider using methods of ADR, the courts were only able to promote that parties use ADR and were not able to order them to do so.
Mediation is also now compulsory in small claims matters (being claims under £10,000) issued after 5 November 2024, and this is being trialled until 2026.
Georgia Barber, a solicitor in our dispute resolution team, explores the importance of considering ADR ahead of litigation proceedings.
What is mediation and how is it beneficial?
Mediation is a confidential process in which parties in contemplation of litigation, or parties already in litigation, attempt to settle their differences and to prevent or dispense with the need to go to trial. The mediator appointed is agreed between the parties and the mediator’s fees are usually shared equally between the parties.
The mediator’s role is not to pass judgment on the case, rather, it is to try to help the parties come to a commercial solution.
Superdry versus “Super City” (a.k.a. DKH Retail Ltd & others v City Football Group Ltd)
Whilst this is not the first time the court has exercised its new powers to order parties to mediate, it is now the leading authority on ordering a mediation. This is a particularly interesting case in circumstances where the parties both had adequate resources to proceed to trial and had even attempted settlement discussions (although not a mediation) before (but failed to settle).
The dispute centred around Manchester City’s partnership with Japanese beer brand Asahi and its sponsorship of the club’s training kit. Asahi used the opportunity to promote its “Super “DRY” Asahi 0.0%” non-alcoholic beer front and centre on the club’s training top. Superdry, the claimant, argued that the use of the words “super” and “dry” could cause confusion with the public between the Superdry and Asahi brands.
As a result, Superdry issued a claim against Manchester City alleging trademark infringement and passing off. Despite Asahi’s brand and intellectual property (IP) being the issue, the claim was issued against Manchester City because they were the party responsible for affixing the alleged infringing IP to the clothing and, therefore, were the party accountable for the alleged infringement.
Whilst it would have been interesting for the matter to progress to trial, and for a judge to consider the strengths and weaknesses of both sides’ arguments in relation to the alleged infringement, the recent settlement of the case has prevented any airing of the potential IP issues that can arise out of kit sponsorships like this one.
Ordered to mediate
Just before the PTR (the penultimate hearing before the trial itself is heard), Superdry made an application to the court for a compulsory mediation order.
Superdry argued that although settlement negotiations had previously been unsuccessful, the dispute was capable of resolution, and it considered that part of that resolution was likely to include commercial terms that the court would not be able to make orders in relation to, i.e. changing the sizing of the words “Super Dry” on the training top.
Manchester City argued that it was “too late in the day” for mediation considering that they had already spent hundreds of thousands of pounds in legal costs, that the trial was imminent, and that they believed that the mediation would fail.
The court granted the application for mediation and the judge commented that he was not able to accept Manchester City’s submission that the mediation had low prospects of success. The judge stated that there were a number of options available to the parties that the court could not order, but which could be agreed in mediation (as Superdry had suggested). The judge also highlighted that the purpose of mediation was to “remove the roadblocks to settlement”, suggesting that mediation should not be dismissed even if the parties think that settlement at mediation is not achievable.
The parties were ordered to attend mediation and subsequently notified the court on 13 January 2025 that they had agreed a settlement.
Post-match analysis
This decision shows that the courts can, and will, order mediation at any stage in proceedings, even in circumstances where (i) there is an imminent trial date; (ii) both parties have the resources to continue to trial; and (iii) one of the parties considers mediation unlikely to be successful.
Parties in litigation (or in contemplation of litigation) may sometimes feel that that a resolution is not achievable without a court judgment, or that they must “have their day in court” for a dispute to come to an end.
However, this case shows that it is more important than ever to seriously consider using a method of ADR before entering proceedings, if possible and/or as early in the litigation process as possible to avoid incurring significant legal costs. This is now particularly important in circumstances where the court may order the parties to mediate further down the line anyway.
If you have any concerns about potential business disputes and/or if you would like advice on the ADR options available, please contact Georgia Barber at [email protected].