AFM Logo
          in partnership with the CMC

Mediation Refusal

Case law on penalties for unreasonably refusing to mediate

Reference can also be made, as appropriate, to the case law relating to costs penalties for failing to mediate. In the leading case on this issue, Halsey v Milton Keynes General NHS Trust ([2004] EWCA Civ 576) the Court of Appeal confirmed a court may penalise a party which unreasonably refuses an offer to mediate. It provided a non-exhaustive list of factors which may be grounds for reasonably refusing:

  • The nature of the dispute;
  • The merits of the case;
  • Other settlement methods have been attempted;
  • The costs of mediation would be disproportionately high;
  • Delay; and
  • Whether the mediation had a reasonable prospect of success.

There has been a series of recent cases which have made it clear that it can be difficult to persuade the courts that any of these reasons do in practice justify a refusal to mediate.

In PGF II SA v OMFS Company Limited ([2013] EWCA Civ 1288) the Court of Appeal upheld a High Court decision not follow the usual Part 36 costs rules and disallow a party £250,000 costs on the basis that it ignored offers to mediate. This failure to respond was considered to be in itself an unreasonable refusal to mediate justifying a costs penalty.

In the (so far unreported) case of Phillip Garritt-Critchley & Others v Andrew Ronnan and Solarpower PV Limited ([2014] EWHC 1774 (Ch)) the High Court awarded indemnity costs after a trial against a party that repeatedly refused offers to mediate and dismissed the various “Halsey” reasons the party had put forward for refusing.

In Northrop Grumman Mission Systems Europe Ltd v BAE Systems (Al Diriyah C4I) Ltd (No 2) [2014] EWHC 3148 (TCC) the court held although the defendant reasonably believed that it had a strong case its refusal to mediate was unreasonable Ramsey J said:

“As stated in Halsey, the fact that a party reasonably believes that it has a watertight case may well be sufficient justification for a refusal to mediate.

The authors of the Jackson ADR Handbook ( £34.99) properly, in my view, draw attention at paragraph 11.13 to the fact that this seems to ignore the positive effect that mediation can have in resolving disputes even if the claims have no merit. As they state, a mediator can bring a new independent perspective to the parties if using evaluative techniques and not every mediation ends in payment to a claimant.”

The next step, where a party unreasonably refuses to mediate, is to make an application to the court. The CPR gives the court the power to order a stay at any time to encourage parties to attempt settlement. Further, the latest standard directions include direction Paragraph A03-ADR which reads:

“At all stages the parties must consider settling this litigation by any means of Alternative Dispute Resolution (including Mediation); any party not engaging in any such means proposed by another must serve a 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.” A03-ADR.doc)

So, you could apply for a stay or for this standard direction to get the opponent’s refusal on the record for future reference.

If an application is made to the court, it will usually be prepared to consider any ancillary directions required to facilitate the mediation, such as a direction for limited disclosure.

© Copyright 2017 APIL FOIL MASS. All Rights Reserved.