The Dangers of Refusing to Mediate

Litigants should think twice before dismissing or even ignoring an invitation to mediate says Contentious Probate lawyer, Naomi Ireson

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

This case illustrates the grave consequences and costs sanctions litigants face when declining or refusing to respond to an invitation to engage in mediation.

The brief facts of the case at first instance are as follows:-

  1. The claimants put forward a serious and carefully formulated written invitation to the defendants to participate in mediation.
  2. The invitation was met with complete silence by the defendant. 
  3. The offer to mediate was repeated three months later.
  4. The defendants again made no reply or comment.
  5. The case was compromised by the claimant’s last minute acceptance of the defendant’s Part 36 offer which gave rise to costs penalties for the claimants.
  6. The trial judge accepted, in part, the claimants’ application for a cost sanction on the grounds that the defendant had unreasonably refused to mediate and therefore should be deprived of the costs which the Defendant would otherwise have been entitled under Part 36.
  7. The trial judge found that the defendant’s silence amounted to a refusal to mediate and that its refusal had been unreasonable.

Both parties appealed.

The claimant sought costs and submitted that silence in response to an invitation to participate in ADR, including mediation, was itself unreasonable regardless of whether it amounted to a refusal. 

The defendant submitted that its silence did not amount to refusal, and even if it did, that refusal was on reasonable grounds. The defendant asserted that the silence was equivocal and attributable to various explanations, only one of which was a refusal. The second was that at no time did the claimant complain about the silence or raise the matter with the court. The defendant also submitted that because of the monetary distance between the parties’ respective Part 36 offers, mediation stood no reasonable prospect of success.

Court of Appeal Judgment

  • The defendant’s silence in the face of two requests to mediate was itself unreasonable conduct of litigation, sufficient to warrant a costs sanction.
  • The burden of proof in establishing the refusal was unreasonable lay firmly with the claimant.
  • The judge held that Part 36 offers do not necessarily, or even usually, represents the parties’ respective bottom lines.
  • The appeals were dismissed and the defendant was ordered to pay the claimants’ costs of the appeal and cross appeal.

The advice in the ADR handbook which Slee Blackwell endorses includes:

  1. Not ignoring an offer to engage in ADR;
  2. Responding promptly in writing, giving clear and full reasons why ADR is not appropriate at the stage, based if possible on the Halsey guidelines;
  3. Raising with the opposing party any shortage of information or evidence believed to be an obstacle to successful ADR, together with consideration of how that shortage might be overcome;
  4. Not closing off ADR of any kind, and for all time, in case some other mother than that proposed, or ADR at some later date, might provide to be worth pursuing.