25 October 2013

There is a duty on all parties to consider negotiation and mediation in connection with live or contemplated disputes. An unreasonable refusal to mediate in connection with live or prospective litigation can affect the recovery of costs even if the refusing party is subsequently successful at trial.

This was set out in the Halsey v Milton Keynes NHS case (2004) describing the following relevant matters for consideration for reasonableness:

  • The nature of the dispute.
  • The merits of the case.
  • The extent to which other settlement methods have been attempted.
  • Whether the costs of the ADR would be disproportionately high.
  • Whether any delay in setting up and attending the ADR would have been prejudicial.
  • Whether the ADR had any reasonable prospect of success.

Just released is PGF v OMFS deals with the slightly different situation where a party simply ignores an invitation to mediate.  

Perhaps unsurprisingly, the Court of Appeal concluded that a failure to respond to an offer to mediate amounted to a refusal to mediate which should be taken into account in relation to costs. However, it actually went further – failure to respond (either way) to an offer to mediate is in itself unreasonable and capable of being punished in costs.

“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.”

The judgment also makes the interesting (but evidentially debatable) comment that in 2012 mediation success rates were 70% on the day and 20% settling thereafter on the basis of the negotiations.

Key points:

  • If your opponent ignores your offer to mediate: make it again and refer to this case in connection with their unreasonable behaviour.
  • Don’t ignore offers to mediate from the other side. If mediation is not appropriate respond with reasoning reflecting the tests from Halsey above.

Ian Tucker comments on emerging issues from a litigation perspective.

Key contact

David Hall

David Hall Partner

  • Dispute Resolution
  • Banking Disputes
  • Business Crime and Regulatory Investigations

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