The costs of litigating in the United Kingdom have escalated to a point where only the very rich, the very brave or the very stupid can afford to see a court case through to its end. Time and time again the parties discover to their horror that the liability for inter-party costs ends up more important than the original sum in dispute.
We have known for some time that the courts of England and Wales have been encouraging parties to mediate disputes rather than to continue to clog up the court schedule. Some of you may even be familiar with the case of Halsey v Milton Keynes General NHS Trust 2004 in which the Court of Appeal laid down general guidelines for deciding whether, in particular cases, a refusal to participate in mediation could be shown to be unreasonable and therefore ought to be subject to a cost sanction as a consequence. These general guidelines can be summarised as follows:
In order to decide whether a refusal to mediate was unreasonable, and worthy of cost sanction it would be necessary for a court to consider (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; and (f) whether the ADR had a reasonable prospect of success.
Lord Justice Jackson’s final review and report on civil litigation costs, issued in 2009, concluded that the benefits of participating in a form of Alternative Dispute Resolution could only be realised if the courts were to support the principles developed in Halsey.
Fast forward to the present day and, with the above background in mind, the Court of Appeal case of PGF II SA -and- OMFS Company 1 Limited issued on 23 October 2013 comes as no surprise to mediation zealots. I confess to being one of these.
The facts of this appeal involve PGF seeking to avoid a cost order made in the High Court which required it to pay OMFS’ costs of the litigation. PGF argued that because OMFS had ultimately accepted a Part 36 Offer made by it, the normal rules should apply and OMFS should meet all costs incurred from the date of PGF's Part 36 Offer up to the conclusion of the litigation when the offer was ultimately accepted by OMFS.
OMFS for its part argued that it had made several offers to mediate the dispute throughout the course of the litigation which PGF had simply ignored. As a consequence PGF asserted that OMFS should be denied recovery of its costs even though it was acknowledged that PGF was technically the victor by virtue of OMFS' ultimate acceptance of PGF's Part 36 Offer.
In its judgement the Court of Appeal concluded that "silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable, regardless of 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".
So, in summary, any party receiving an offer to mediate must acknowledge the offer and either accept the offer to mediate or provide very convincing grounds for refusing the offer of mediation.
To quote Lord Justice McFarlane "this case sends out an important message to civil litigants, requiring them to engage with a serious invitation to participate in ADR, even if they have reasons which might justify a refusal, or the undertaking of some form of ADR, or ADR at some other time in the litigation."