Since 2004, parties to a commercial dispute have been encouraged to refer their case to mediation, or some other form of Alternative Dispute Resolution (ADR), as a means to settle a case without the costs, delay and, often, acrimonious, process of preparing for and attending a trial.
The court’s powers were limited to ‘encouraging’ parties to consider mediation, with no power to force them to, and also included powers to make adverse orders for costs against a party who refused to do so.
In 2023, that position shifted, when the court in the case of ‘Churchill v Merthyr Tydfil County Borough Council [2023] said that the courts did have the power to stay, or pause, litigation proceedings so the case could be referred to mediation, or another form of ADR, but only where it was proportionate and the parties retained the right to take their case to trial.
This left open the ability of parties to a commercial dispute, who did not want to mediate, to refuse to do so.
There remained open the question of when the court could order an unwilling party to refer a case to ADR, including mediation.
This has now been clarified, by both amendments to the court rules (Civil Procedure Rules) and by the decision of the Court of Appeal in the case of ‘DKH Retail Ltd & Others v City Football Group Ltd [2024].
This case involved a dispute over the branding on the shirts of players for Manchester City Football Club. The case had progressed towards trial and the parties had already spent hundreds of thousands of pounds in legal costs, when the case was listed for a pre-trial review hearing, where the Judge was expected to give final directions of the steps to take to prepare for the imminent trial.
The lawyers for DKH Retails Ltd, the company behind the ‘Superdry’ brand, asked the court to stay the case and order the parties to refer the dispute to mediation. Manchester City’s lawyers did not agree and said the case had been ongoing for a long time, that both parties had experienced commercial lawyers and so if there was a settlement to be had, that would already have happened.
The court rejected Manchester City’s arguments and said it failed to take into account the experiences of commercial lawyers, which was that bringing the parties together at a mediation could, and often did, bring about a settlement of even the most contentious claims.
The court ordered the parties to mediate and it did indeed result in a settlement of that claim at mediation, proving the judge right.
One important reason behind the judge’s decision was that at mediation the parties can agree to solutions to ongoing disputes which the court could not order at the end of a trial.
This freedom to enable the parties to agree a practical, workable and cost effective solution to their dispute gives parties far wider opportunities to settle their differences.
At Stephensons, we have promoted the use of mediation, and other methods of ADR, for many years. We approach our cases from the outset with a view to achieving a settlement of commercial disputes at the earliest stage in proceedings.
Most cases can be resolved without the need for expensive legal proceedings, provided both parties actively and willingly engage in the process.
In our experience, some commercial disputes can be settled on terms which enable the parties to end their dispute and at the same time, resolve other issues between them in ways which the court could not enable. For example, we have found this freedom to approach settlement discussions in a creative way has brought parties together and enabled them to settle their differences and form new business terms or relationships, which would not have been achieved by proceeding with legal action to trial.
This ‘everything is on the table’ approach has been successful in claims involving commercial contracts, service level agreements, restrictive covenants, shareholder and partnership disputes, amongst many other types of cases.
The Civil Procedure Rules have already been amended to give the court power to order parties to engage in mediation, where it is proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost.
In April, the Commercial Courts rules will be further amended to explicitly provide for cases to be stayed pending a referral to mediation. This extension of the courts powers is a welcome development for parties involved in commercial disputes, as it should end the practice of one party refusing to mediate as a tactic to wear down their opposite party; will undoubtedly save costs of expensive trials and leave the courts free to deal with those remaining claims which, for whatever reason, cannot be settled amicably.
Stephensons’ commercial litigation team have wide ranging expertise and decades of experience in dealing with business, commercial and trade disputes, ranging from shareholder and partnership disputes, banking and finance claims through to restrictive covenant claims and disputed debts. In all our cases, we consider the suitability of the case for mediation at an early stage and guide our clients through the process, with the aim of achieving the positive outcome they require.
For more information on how Stephensons can help you resolve your commercial dispute, contact us on 0161 696 6170.
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