PGF – don’t ignore an offer to mediate

Lord Justice Briggs in the Court of Appeal case of PGF II SA v OFMS Company 1 Limited gave further clear guidance as to the perils of ignoring an opponent’s offer to mediate a case – and made comments that should give all litigators food for thought.

In PGF one party made a proposal to mediate the case. The other party did not respond to that specific proposal, though ultimately was the ‘successful’ party in the case. PGF argued that it should not have to pay all of the opponent’s costs because of the failure to mediate.

In his judgment Lord Justice Briggs set out the Halsey principles, including the fact that the court can take into account a party’s unreasonable refusal to mediate to deprive a successful party of some or all of its costs.

He went further by quoting recent statistics showing that mediation often results in settlement (around 70% of all cases mediated settle on the day, according to CEDR research).

In addition he underlined the fact that the constraints that ‘…now affect the provision of state resources for the conduct of civil litigation (and which appear likely to do so for the considerable future) call for an ever-increasing focus upon means that ensuring that court time…is proportionately directed to those disputes which really need it, with an ever-increasing responsibility thrown upon the parties to civil litigation to engage in ADR, wherever that offers a reasonable prospect of producing a just settlement at proportionate cost.’

This in itself raises some interesting questions about what type of case is ‘worthy’ of occupying the court’s time and how such analysis fits with state provision of a justice system to resolve disputes.

The judgment also gave credence to the ADR Handbook, published in 2013, that includes advice such as not ignoring an offer to engage in ADR and responding promptly in writing giving full and clear reasons why ADR is not appropriate
– based if possible on the Halsey guidelines.

He concluded: ‘In my judgment, the time has now come for this court firmly to endorse the advice… 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.’ He allows for the possibility of some excuse to justify relief from that proposition but the burden will be on the silent party to assert it.

While arguments such as took place in this case will only realistically occur at the end of a contested costs dispute this decision puts significantly greater pressure on a party that simply ignores an offer to mediate – even if they end up winning.

PGF II SA v OMFS Company 1 Limited [2013] EWCA Civ 1288