If you Receive an Invitation to Alternative Dispute Resolution – Never Ignore It!

Written by Dorothy McMahon

Recent developments have further emphasised that Alternative Dispute Resolution (“ADR”) must always be considered by parties to litigation.

Not only have the Jackson reforms placed a renewed emphasis on Alternative Dispute Resolution (“ADR”), but the recently decided Court of Appeal case of PGF II SA v OMFS [2013] EWCA Civ 1288 (“PGF”) has picked up where Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002 (“Halsey”) left off nine years ago, and has consolidated and broadened its guidelines, in conjunction with the ADR Handbook

In the PGF case, the leading Judgment of Lord Justice Briggs highlighted the importance and usefulness of ADR as a route to settlement of disputes.

The Judge at first instance decided that since the Defendant, the winning party had ignored an invitation to mediate it should be deprived of costs that would usually be recoverable.

The Judge at first instance held that silence in the face of an offer to mediate constituted a refusal and that it was unreasonable of the Defendant not to respond to the suggested mediation and therefore, not to agree to mediate this dispute.

He agreed with the Claimant that the factors considered in Halsey making it unreasonable to refuse to take part in a mediation were present, including the consideration that there was a reasonable prospect that the mediation would be successful.

He further held that as it was unreasonable for the Defendant to refuse to mediate, and that conduct should be taken into account in the exercise of his discretion as to the costs to be awarded.

In the Court of Appeal, Lord Justice Briggs in his decision to dismiss the appeal stated that the discretion as to costs sanctions further to a refusal to mediate is clearly that of the Judge. He considered that the Judge was plainly conscious throughout that he was exercising a broad discretion, and his approach to the basis upon which the court could properly depart from the otherwise automatic costs consequences were entirely correct. To deprive the Defendant of the whole of its costs during the relevant period (subsequent to a Part 36 offer) was within the range of proper responses to the seriously unreasonable conduct which the judge identified.

Lessons to be learned

In refusing to accept an invitation to use ADR, a party should consider the following points:

  • Never ignore an offer altogether;
  • Respond to the offer (using the Halsey Guidelines as a checklist) and set out in detail why it is that at the particular time ADR is not considered to be appropriate;
  • Engage in dialogue or correspondence to obtain more information or documents that might qualify your view that ADR is not suitable;
  • Look at other forms of ADR to see if they may be more attractive either at the current or a future time, for example at the close of pleadings or once disclosure has been completed. Be constructive and reasonable, and summarise your position in a letter that can be placed before the court on the question of costs at the appropriate time if the case reaches trial.

In short, an invitation to consider ADR should be ignored only at your Peril!

Contact the Author

Dorothy McMahon

Gordon Dadds