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To mediate or not to mediate; that is the question

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In one high value and complex commercial case I am dealing with the other side recently proposed a mediation and I responded by proposing the names of 3 individuals who I considered would be suitable mediators for the dispute.

Nothing unusual there but there was no response and then came a deafening silence and I was left wondering what the opposition was playing at.

So what is the Court’s attitude to parties who refuse to mediate, particularly in light of the Jackson reforms; the answer has been provided by the Court of Appeal in its recent decision in PGF II SA v OMFS Co 1 Ltd [2013] EWCA (Civ) 1288.

In a nutshell, the PGF II SA case involved a claim by a landlord for breach of repairing covenants in a commercial lease. The landlord made two CPR Part 36 offers of settlement of £1.25m and £1.125m and then proposed mediation. The tenant did not respond to the offer of mediation and made its own CPR Part 36 offer of £700,000. Shortly before trial the landlord accepted the tenant’s offer and would therefore, pursuant to CPR Part 36, be expected to pay the tenant’s considerable legal costs from 21 days after the tenant’s offer had been made. However, the Court decided that the tenant had acted unreasonably in refusing to participate in a mediation and exercised its wide discretion when considering costs to refuse to make the usual costs order on acceptance of a CPR Part 36 offer.

The tenant then appealed to the Court of Appeal and the Court of Appeal upheld the decision of the lower Court. The message to take away from the PGF II SA case is that not responding to an offer of mediation, notwithstanding the fact that there might be a good reason to refuse mediation, will put you at significant risk of an adverse costs order. To minimise this exposure if you do not want to mediate then make sure you give the other side cogent reasons for refusing the invitation to mediate.
 

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