Mediation
Refusal

Yet another high profile case PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288 has been the latest casualty of being sanctioned by the Court of Appeal, for refusing mediation.

In the 2004 case of Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002 the Court of Appeal set a precedent of using their discretion that where it can be shown that a party had refused to enter into the alternative dispute resolution process, specifically mediation, they could be penalised on costs if successful at trial if the mediation refusal was deemed to be unreasonable.

The Halsey judgment highlighted that certain factors would need to be taken into consideration when deciding whether or not refusing mediation could be classed as unreasonable.

1. The type or nature of the dispute in question.

2. The individual circumstances, merits of the particular case.

3. What other settlement methods had been attempted, if any and to what extent.

4. Would the cost of alternative dispute resolution be disproportionately high.

5. Arranging or the delay of the alternative dispute resolution process, attendance of the same and would it prejudice matters.

6. The likelihood that the mediation, alternative dispute resolution process entered into had a reasonable prospect of success.

Since 2004 the lessons learnt from Halsey, guidelines if you will, have been applied in a number of cases, the majority of which have centred around the reasonableness of refusing mediation in the particular circumstances of a dispute.

In the recent case of PGF the defendant was likely to recoup a significant amount of costs due to the claimant accepting a Part 36 offer of settlement prior to trial. It was established that early on in the case mediation services had been offered on more than one occasion which was simply met by silence by the defendant. The original trial judge established this was a case of an unreasonable refusal to mediate, stripping the defence of the costs to which they would have been entitled.

On appeal it was contended fiercely that silence did not constitute a refusal, even if it was, it was justified. The Appeal Court disagreed and expanded the principles of Halsey to incorporate staying silent when alternative dispute resolution had been proposed was unreasonable.

Lord Justice Briggs, highlighted that mediation was now an established method of resolving disputes. The Court of Appeal let the sanction of the defendant being deprived of all costs to serve as a lesson to others that the risk of being silent, failing to engage in mediation, can lead to this unfortunate conclusion.