In previous articles we have addressed the court’s attitude to parties refusing to mediate and in particular the costs consequences that follow. The cases have resulted in a variety of costs orders where the key factor is the unreasonableness or otherwise of a party in failing to engage in alternative dispute resolution (ADR).
In PGF II S A v (1) OMFS Company (2) Bank of Scotland Plc  discussed in early 2012 the trial judge made an order that over-rode the normal costs sanctions following a successful defendant’s Part 36 offer being accepted by the claimant. The usual costs sanction would be an order that the claimant pay the defendant’s costs after the relevant period of the offer expired but the judge did not make that usual order. The claimant requested an order that the defendant pay the claimant’s costs instead due to the defendant failing to answer several requests to mediate the dispute or indeed give any explanation for its refusal and general silence on the topic of ADR but the judge stopped short of ordering this.
The first defendant appealed on the grounds that its failure to respond to ADR requests and general silence on the topic of settlement was not a refusal to mediate and even if it was, that refusal was on reasonable grounds.
The Court of Appeal has now decided that silence in the face of an invitation to participate in ADR is, of itself unreasonable, regardless of whether an outright refusal, or a refusal to engage in the type of alternative dispute resolution proposed, or at the time requested, might have been justified by the identification of reasonable grounds for refusal (at the time). This is a general rather than an invariable rule. The court considered that there were sound practical and policy reasons for extending the Halsey guidelines in this way. After all, how can a Judge decide months later whether a refusal to mediate was reasonable if there is no contemporaneous explanation given. Who is to say that any belated reasons given would even be genuine at all.
It is therefore important if faced with a request for ADR to respond at the time explaining why the request is refused if ADR is not considered to be appropriate. Failure to do so may result in costs penalties particularly as the court continues to encourage parties to fully consider whether ADR is appropriate.
For more information about the issues raised in this article or to find out more about how the Dispute Resolution team can help you please contact Stephen Baker on 0118 952 7284 or email [email protected].
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.