Following the Court of Appeal’s guidance in relation to mediation (Halsey v Milton Keynes General NHS Trust  EWCA Civ 576 and PGF II SA V OMFS Company 1 Limited  EWCA Civ 1288), the High Court has recently considered the cost consequences which may ensue should a proposal to mediate be unreasonably refused.
The litigation between the parties concerned the question of whether a binding agreement had been reached as to the issue of shares.
In an effort to avoid the issue of proceedings, the Claimant stated in its Letter Before Claim that it was willing to enter into an appropriate form of ADR with the Defendants, such as mediation. The response from the Defendants was that it did not wish to engage with the offer of mediation at that stage.
At the time of filing its Allocation Questionnaire, the Defendants made plain that they were still unwilling to mediate on grounds that the parties were “too far apart”.
When asked by the Claimant why they were unwilling to mediate, the Defendants stated that they were “well aware of the penalties the Court might seek to impose” if found to have unreasonably refused mediation but that they were “confident of their position” and did not consider there to be any realistic prospect that the Claimant would succeed.
On numerous subsequent occasions, the Claimant proposed mediation, but the Defendants dismissed each of these proposals. Nearing trial, the Claimant made a Part 36 offer to settle for £10,000 plus costs, to be paid on the standard basis. This offer was rejected by the Defendants. The only attempt the Defendants made to negotiate settlement was to propose that the claim be discontinued and that the Defendants would pay three quarters of the Claimant’s costs.
The matter proceeded to trial, which started on 14 January 2014. The trial took place over four days but, before final judgment was handed down, the Defendants decided to accept the Claimant’s earlier Part 36 offer.
The Claimant sought to recover it costs on the indemnity basis, owing to the Defendants’ unreasonable refusal to mediate.
HHJ Waksman QC ordered that the Defendants pay the Claimant’s costs on an indemnity basis, to be subject to detailed assessment if not agreed. In reaching his decision, HHJ Waksman QC considered the correspondence between the parties and the explanations provided by the Defendants as to why they had refused mediation.
Applying the leading Court of Appeal authority, HHJ Waksman QC took the view that the dispute between the Claimant and Defendants was a classic example where mediation should have been considered. The Defendants’ refusal to engage in mediation was therefore found to have been unreasonable.
This decision of the High Court is yet a further reminder to litigants of the costs consequences which may follow should proposals to mediate be turned down. Parties who refuse to mediate run a serious risk of facing severe costs sanctions at trial stage, particularly when they are unable to provide very good reasons for their refusal.
For further information, please contact Georgina Squire or the Partner with whom you usually deal.