The dangers of failing to respond to an offer to mediate

Posted 24/10/2013

For some time now, the Courts have focused on alternative dispute resolution, or ADR. The leading case on this is Halsey –v- Milton Keynes General NHS Trust [2004]. In this case, the Courts raised ADR to the level that it became virtually compulsory. Since then, there have been decisions on when it is reasonable or unreasonable to refuse to engage with some form of ADR.The Court of Appeal has recently been asked to look at whether silence in response to an invitation to mediate is of itself unreasonable. In a Judgment handed down on 23 October 2013, (PGF II SA –v- OMFS Company 1 Limited [2013] EWCA Civ 1288), the Court of Appeal gives a very clear Judgment that silence can constitute an unreasonable refusal to take part in ADR.

Although the Court shied away from making it anything more than a general rule, which could therefore be deviated from in certain circumstances, it took great lengths to stress that only in very unusual circumstances would silence in response to a request to mediate be acceptable.This Judgment is entirely consistent with current judicial thinking. The Jackson Reforms that were implemented in April 2013 are designed to help reduce the considerable cost pressure that parties in litigation face. Part of that reasoning includes almost forcing parties to be more willing to engage in ADR. Although ADR is common place now, there are still examples of disputes which somehow avoid it. PGF II SA –v- OMFS Company 1 Limited was just such a case.In this case, the argument was about dilapidations at the end of a tenancy. The parties had no on-going commercial relationship and one could argue that the dispute was simply a legal argument as to how much money would be paid by one party to the other. Unusually in this case, the Defendant “won” in the sense that their Part 36 settlement offer was accepted by the other side “at the doors of the Court”. However, the Defendant had been silent on a request made by the Claimant to mediate six months earlier. Here, the Court departed from the usual Part 36 costs award and ordered that the Defendant’s legal costs would not be recovered.The Court of Appeal stressed that even in an exceedingly commercial dispute, which is essentially only about a sum of money passing from one party to the other, the Defendant should still have engaged properly with the Claimant’s request for mediation. This does not mean that the Defendant was necessarily compelled to mediate, simply that if he/she decided that they did not want to mediate, they were required to explain why properly. This is the first case in what is likely to be a long line of cases which the Court of Appeal will comment on in the wake of the Jackson Reforms. This is part of a move towards making litigation more sensible, user friendly and commercial for litigants, and should be welcomed.