it has long been the case that ignoring a mediation proposal is unreasonable, not just actually refusing to mediate. The two approaches are the same. The Court has, since the cases of Halsey v Milton Keynes [2004] EWCA Civ 586 and PGF v OMFS [2013] EWCA Civ 1288 been prepared to penalise a party to litigation who stays silent and ignores an offer to mediate.
The Courts recently reiterated this principle in the case of Northamber PLC v Genee World Ltd & Ors (Rev1) [2024] EWCA Civ 428. The Court of Appeal reiterated that it is unacceptable to ignore a mediation proposal.
The Court of Appeal were considering a costs Appeal following a judgment relating to breach of an exclusivity agreements in a commercial litigation case.
It was argued that the trial judge failed to take sufficient account of the fact that the claimant had made an offer to mediate and there had been no substantive response from either defendant.
Following a 9 day trial the Court had made a costs order. It was this that was appealed.
Earlier in the case the Court had made the usual order that:
at all stages, the parties must consider settling this litigation by means of alternative dispute resolution. Any party not engaging in any such means proposed by another must’ve witness statement giving reasons within 21 days of that proposal. Such witness statement must not be shown to the trial judge until questions of costs arise.”
one party sent a copy of this order to the other and pointed out that the costs that had been incurred were £450,000 as opposed to budgeted costs of £300,000.
the latter said that whilst the claimant remains committed to pursuing the action, it also remains open to mediation as a method of resolving the dispute. We would ask you to take instructions from your clients and for an indication by return as to their willingness to mediate, you will be aware of the consequences if a party refuses to mediate please note, we are willing to mediate separately or jointly. “
the only response to the letter was that the solicitors were taking instructions, and the other solicitors did not respond at all. Neither party served a witness statement explaining why they had not mediated..
when the judge considered the point, he said as follows:
I have no evidence before me that the claimant ever chased either the second or third defendant solicitors for a reply. I would describe the letter appearing as it did after very considerable costs had been incurred and a long way through the litigation as a half-hearted attempt if indeed, it was an attempt at all by the claimant to suggest mediation, enabling the claimant to say at the end of the trial as it does as it had suggested mediation, but without any expectation that there would be a mediation, but they did not follow it up at all when the second and third defendant solicitors did not reply. “
the Court of Appeal agreed that the judge had fallen into error as the parties had the site had been silent in the face of an offer to mediate that was in its self unreasonable to compound matters they had breached an order of the court requiring them to explain the failure to agree to mediation of breaches of such orders are ignored by Courts when deciding costs parties will have no incentive to comply with them, that would undermine the purpose of making them which is robust need to encourage parties to Mediate .
the court found that the litigation had been underway for a long time and substantial costs had already been incurred which were relevant to the exercise of the courts discretion as to how to respond to the parties conduct the litigation continued for eight further months, including a nine day trial and substantial further costs were incurred which could’ve been avoided by successful mediation the Court of Appeal found that the onus was not on the party, offering mediation to chase the other parties for a response. They had made a clear offer to Mediate and reminded them of the order. After that the ball was in the other parties court that was particularly so where one of the parties had said that they were taking instructions , but did not reply substantively the party offering. Mediation was entitled to assume that the chasing letter would not of met with a positive response. The Court of Appeal did not consider that the offer to mediate should be castigated as half-hearted in the absence of any reasons, explaining the refusal to mediate the judge and not take into account the order to be made by the court
the Court of Appeal said that the more difficult question was how the conduct should be properly reflected in costs although cost sanctions have been imposed on a number of cases for an unreasonable refusal to mediate of silence in response to an offer of mediation. It does not automatically follow. The cost penalty should be imposed. It is a factor to be taken into account among the other circumstances.
the court did not consider that the party refusing to mediate should be ordered to pay 100% of the other parties costs, but did not consider that it would be right to impose new sanctions at all. Therefore, the court imposed a modest, but not an insignificant cost penalty by increasing the cost recovery by an additional 5% to 75%.
we do not know what the level of course would have been and therefore what the exact penalty was in respect of the 5% increase in cost payable, but we can assume that it was a large amount given that the costs had already exceeded £400,000 when the offer to mediate was made.
I hope that this judgment will result in more cases mediating. This would result in tue saving of costs and Court time. It seems that parties would be foolhardy to ignore any offer to mediate. They should at least respond explaining why they do not want to mediate.
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Key Quotes:
- An invitation to participate in mediate is, as a general rule, of itself unreasonable even if a refusal might have been justified by the identification of reasonable grounds.
- The parties: “were silent in the face of an offer to mediate. That was in itself unreasonable. To compound matters, they breached an order of the court requiring them to explain their failure to agree to mediation. If breaches of such orders are ignored by courts when deciding costs, parties will have no incentive to comply with them. That would undermine the purpose of making them, which is robustly to encourage parties to mediate”