Recent Case Law supports that all reasonable offers need to be accepted to avoid costs sanctions

There has recently been a review of the cases that refer to mediation. It is apparent that more and more parties failing to participate in ADR mediation now face costs sanctions. The Courts have highlighted the advantages of mediation and the dangers of rejecting an offer to mediate. The latest note of cautious comes from the judgment of Lord Justice Jackson in Thakkar -v- Patel [2017] EWCA Civ 117.

In the above case, Lord Justice Jackson issued a clear warning:-

“The message which this court sent out in PGF II was that to remain silent in the face of an offer to mediate is, absent exceptional circumstances, unreasonable conduct meriting a costs sanction, even in cases where mediation is unlikely to succeed. The message which the court sends out in this case is that in a case where bilateral negotiations fail but mediation is obviously appropriate, it behoves both parties to get on with it. If one party frustrates the process by delaying and dragging its feet for no good reason, that will merit a costs sanction. In the present case, the costs sanction was severe, but not so severe that this court should intervene.”

The question on whether a party has acted unreasonable in refusing ADR must be determined having regard to all the circumstance of the particular case. In the matter of Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002, the following factors were considered:-

(a) The nature of the dispute;

(b) The merits of the case;

(c) The extent to which other settlement methods have been attempted;

(d) Whether the costs of the ADR would be disproportionately high;

(e) Whether any delay in setting up and attending the ADR would have been prejudicial; and (f) whether the ADR had a reasonable prospect of success.

“The warning is clear. Parties should always consider mediation and accept all reasonable offers to partake in ADR or risk costs sanctions.”

In  PGF II SA v OMFS Co 1 Ltd [2014] 1 W.L.R. 1386, the Court of Appeal revisited Halsey and, in particular gave guidance as to the proper approach to the issue of costs in cases in which the winning side had failed adequately to articulate its earlier failure to engage in ADR.

“In my judgment, the time has now come for this court firmly to endorse the advice given in para 11.56 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. I put this forward as a general rather than invariable rule because it is possible that there may be rare cases where ADR is so obviously inappropriate that to characterise silence as unreasonable would be pure formalism. There may also be cases where the failure to respond at all was a result of some mistake in the office, leading to a failure to appreciate that the invitation had been made, but in such cases the onus would lie squarely on the recipient of the invitation to make that explanation good.”

The warning is clear. Parties should always consider mediation and accept all reasonable offers to partake in ADR or risk costs sanctions.

The process applies to costs negotiations also and parties should be open to idea of considering mediation in costs too.

Should you wish to consider mediation, in particular mediation surrounding a cost dispute, added to our plethora of legal cost services we now have an accredited mediator in our team. Avi Dolties is an Accredited Mediator, having trained at the London School of Mediation with his observerships completed with only Legal 500 Mediators. With vast experience as both a Solicitor and a Costs Draftsman, Avi is able to consider all aspects of a matter during Mediation to quickly reach an agreement between all parties involved. Don’t make your client wait any longer to finalise their matter – contact Avi on 0161 830 8474 or [email protected].