ReSolution Issue 14, August 2017 | Page 8

ReSolution: In Brief

Refusal to mediate will not always preclude costs recovery in the UK
The UK courts have increasingly encouraged parties to mediate specifically (although not exclusively) by applying costs sanctions to those parties that unreasonably refuse to mediate.









The “usual rule” in litigation is that the winning party will have a proportion of its costs paid by the losing party. However, the Civil Procedure Rules give the court a wide discretion when it comes to determining both who should pay the costs of litigation, and how much. One factor that has recently influenced the judicial exercise of discretion is whether or not a party has unreasonably refused to take part in a mediation. The decision in the 2013 case of PGF II SA v OMFS Company 1 marked a high point for judicial encouragement of mediation - the winning party was prevented from recovering any of its costs as it had failed to respond to an invitation to mediate. Emphasising the need for the courts to encourage parties to participate in ADR, Briggs LJ said in that case that silence in the face of an invitation to mediate should, as a general rule, be treated as unreasonable. This is regardless of whether a refusal to mediate might in the circumstances have been justified.

... a refusal to mediate will not always be seen as unreasonable and will not always preclude a successful party from recovering its costs...
However, the recent Court of Appeal decision in Gore v Naheed and Ahmed [2017] EWCA Civ 369 marks a shift away from the black letter approach taken in PGF and serves as a timely reminder that a refusal to mediate will not always be seen as unreasonable and will not
always preclude a successful party from recovering its costs, particularly where complex issues of fact and/or law are involved. In Gore, the court held that a refusal to mediate may be considered reasonable. Putting the point succinctly, Patten LJ said:
“I have some difficulty in accepting that the desire of a party to have his rights determined by a court of law in preference to mediation can be said to be unreasonable conduct particularly when, as here, those rights are ultimately vindicated.”
Instead, Patten LJ noted that a failure to engage in mediation will not always be unreasonable and will not automatically result in a costs penalty. He emphasised that conduct as regards participation in ADR is simply one factor, usually of many, to be taken into account when a judge exercises his or her discretion on costs. Here the case was complex, and the claimant’s solicitor suggested that the dispute was unlikely to be capable of settlement at mediation; both factors influenced the decision of the first instance judge, with whom Patten LJ agreed.