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24.06.14

The potential cost consequences of ignoring a request to mediate

Parties to civil litigation should be under no illusion of the court’s eagerness for them to engage in Alternative Dispute Resolution (ADR) before taking their cases all the way to trial.  Since the implementation of the Civil Procedure Rules, there has been a growing emphasis on ADR as a means of reducing the burden on the courts and nipping costly litigation in the bud.  In Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, the Court of Appeal prescribed six criteria for determining whether a refusal to mediate would be taken into account in any costs decision.  Those non-exclusive factors include:

(a)     The nature of the dispute;

(b)    The merits of the case;

(c)     The extent to which other settlement methods have been attempted;

(d)    Whether the costs of the ADR would be disproportionately high;

(e)     Whether any delay in setting up and attending the ADR would have been prejudicial;

(f)      Whether the ADR had any reasonable prospect of success.

However, the Court of Appeal pointed out that they could not and should not compel the parties to mediate.  Since Halsey was decided, there has been growing pressure on parties to consider mediation (although the courts still stop just short of compulsion).  This pressure comes from the CPR itself which reminds parties of their obligations to comply with the overriding objective and, perhaps, the withdrawal of legal aid from vast areas of civil litigation which focuses the mind sharply on the costs associated with a refusal to attempt settlement at an early stage.

Lord Justice Jackson, in his well-known review of costs in litigation, also advocated a wider adoption of ADR and published the ADR Handbook last year, giving further guidance on these issues.  The endorsement for ADR ties in neatly with the reforms to civil litigation costs and the perceived need to reduce costs from spiralling further out of control.  ADR is one way of achieving this if it is successful (concluding the litigation) or even where it narrows the contentious issues between the parties to some degree.

The recent decision of the Court of Appeal in PGF II SA and OMFS Company 1 Limited [2013] EWCA Civ 1288, decided in late 2013, gave further guidance on when it would be appropriate to sanction a party that had failed to mediate despite an invitation to do so.  The Defendant in that case had failed to respond to the Claimant’s mediation proposal and had not provided any reason for not doing so.

Lord Justice Briggs at paragraph 34 of the Judgment stated:

 “In my judgment, the time has now come for this court firmly to endorse the advice given in Chapter 11.56 of the ADR Handbook, that silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable, regardless whether an outright refusal, or a refusal to engage in the type of ADR requested, or to do so at the time requested might have been justified by the identification of reasonable grounds.”  

Briggs LJ considered that this decision would assist with the forensic difficulties that the courts were faced with when there had been no reason disclosed as to why a party had refused or failed to engage with the proposal to mediate at the time of the invitation.

The Court of Appeal in PGF II SA was also tasked with considering whether the first instance judge should have, in light of the Defendant’s conduct, ordered that they were to pay some of the Claimant’s costs (despite the Claimant being the 'unsuccessful party').  LJ Briggs highlighted that there was no recognition of this discretion in the Halsey case although it would seem logical that the court had the power to make such an order.  However, he was of the view that this should be "reserved for only the most serious and flagrant failures to engage with ADR."  He suggested that such a case may be where the court had actively encouraged ADR and that encouragement was ignored by the parties.

This case acts as a poignant reminder to parties conducting civil litigation of their obligations to consider a reasonable request to mediate and the possible consequences of failing to do so.


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Articles are intended as an introduction to the topic and do not constitute legal advice.


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