DKH Retail Ltd v City Football Group Ltd Case: A Turning Point for Compulsory Mediation

The High Court’s decision in DKH Retail Ltd v City Football Group Ltd [2024] EWHC 3231 (Ch) marks one of the earliest and most significant applications of the Court of Appeal’s ruling in Churchill v Merthyr Tydfil County Borough Council within the realm of commercial litigation. This case clearly demonstrates the judiciary’s willingness to order compulsory mediation even when no contractual obligation exists, fundamentally transforming the litigation landscape.

Background of the Dispute

The dispute arose between DKH Retail Ltd, owner of the well-known Superdry brand, and City Football Group Ltd, which manages the commercial operations of Manchester City Football Club. The core issue concerned whether the promotional branding on the players’ kits—featuring the words “Super” and “Dry”—would be perceived by the public as referring to the Superdry brand or the defendant’s sponsor, Asahi’s Super “Dry” 0.0% lager.

This raised complex trademark questions involving public perception, brand identity, and commercial interests. Given the high stakes—both reputational and financial—the parties were engaged in intense, costly litigation, having already invested substantial sums in trial preparations.

The Court’s Power to Order Mediation Post-Churchill

The pivotal question emerged during a pre-trial review, when DKH Retail sought a court order for compulsory mediation under the revised Civil Procedure Rules (CPR), which explicitly empower courts to mandate Alternative Dispute Resolution (ADR).

The defendant accepted that the court had the power to order mediation but argued it was unsuitable in this case. They contended that mediation had little realistic chance of success given the complexity of the issues and their preference for a definitive judicial ruling on their right to use the Asahi branding. They also stressed that mediation at such a late stage, following significant litigation investment, would be an inefficient distraction.

However, Miles J firmly dismissed these objections. He emphasised that mediation’s strength lies in its ability to resolve even the “hardest nuts.” As the judgment stated:

“Experience shows that mediation is capable of cracking even the hardest nuts. The process sometimes succeeds in cases where the parties appear at first to have intractable differences.”

The judge further noted that mediation offers a range of potential solutions unavailable in a court judgment, which is limited to a binary yes-or-no outcome. Mediation could explore alternatives regarding the timing and manner of branding presentation, financial settlements, or other creative compromises.

Weighing the Benefits Against Costs and Timing

Importantly, Miles J recognised that the mediation would likely be brief and would not significantly disrupt the parties’ ongoing trial preparations. This practical consideration highlighted that court-ordered mediation at an advanced procedural stage can be both efficient and effective, despite initial resistance. The judgment signalled clear judicial support for proactive case management under the updated CPR, designed to promote ADR as a tool to reduce litigation burdens and costs.

Aftermath and Wider Impact

In a telling postscript to the judgment, the parties informed the court shortly afterward that they had reached a settlement through mediation. This immediate success validated the court’s intervention and sets a strong precedent for future cases.

The DKH Retail case sends a powerful message to litigants and practitioners alike: mediation is no longer simply optional but increasingly a compulsory step imposed by courts. This reflects a fundamental shift from the previous paradigm, where mediation was mostly voluntary and contingent on party consent.

What DKH Retail Means for Commercial Litigation Strategy

1. Early preparation for mediation: Even when litigation is anticipated, parties should expect court-ordered mediation and plan their strategies accordingly.

2. Flexibility and openness: Given that courts may mandate mediation despite party objections, maintaining a constructive and realistic approach toward ADR is essential.

3. Cost and risk management: While mediation incurs upfront costs, it often reduces overall litigation expenses and risk.

4. Judicial backing: Courts are actively exercising their powers to encourage settlements and alleviate trial backlogs, in line with broader civil justice reforms aimed at improving efficiency and access to justice.