Refuse to mediate at your own Peril!

In the case of Northamber PLC -v- Genee World Ltd & Ors [2024] EWCA Civ 428 the Court of Appeal reinforced the cost implications of a party’s refusal to mediate.

The Court of Appeal were asked to consider, amongst other things, whether the Trial Judge had failed to consider that the Claimant had proposed mediation and the Defendant had failed to respond.

The factual background to the claim is that on 16 February 2022, the Claimant wrote to the Defendant reminding them of their obligations under paragraph 7 of the Case Management Order dated 5 October 2021, namely that;

“At all stages the parties must consider settling this litigation by means of alternative dispute resolution. Any party not engaging in any such means proposed by another must serve a witness statement giving reasons within 21 days of that proposal; such witness statement must not be shown to the trial judge until questions of costs arise.”

On 4 April 2022, the Defendant responded stating that they were taking instructions however, no further correspondence was received from the Defendant in respect of the mediation.

The Trial Judge rejected the Claimant’s contention that the Defendant had failed to comply with the Order of 5 October 2021, and therefore rejected that the costs Order should be adjusted.

The Claimant appealed contending that the reasoning amounted to an error principle and referred to the case of Halsey -v- Milton Keynes General NHS Trust [2004] EWCA Civ 576, regarding the Defendant’s unreasonable refusal to participate in ADR.

The Appeal Judge agreed stating that the “[Defendant was] silent in the face of an offer to mediate. That was in itself unreasonable. To compound matters, they breached an order of the court requiring them to explain their failure to agree to mediation. If breaches of such orders are ignored by courts when deciding costs, parties will have no incentive to comply with them. That would undermine the purpose of making them, which is robustly to encourage parties to mediate.”

The Court refuted that the onus was on the Claimant to chase the Defendant for a response and went on to say that costs had been incurred which could have been avoided by a successful mediation.

The difficulty for the Court was determining how the Defendant’s conduct should be reflected in the costs award given that there was no automatic penalty to impose. It was found that the refusal to mediate should be considered a factor to be considered among the other circumstances of the case.

The Court ultimately allowed the Claimant an additional 5% in respect of the initial award to take into account the Defendant’s refusal.

This case is another reminder of the importance of taking offers to mediate seriously as it may well come to bite you at the conclusion of the claim. Whilst there is no specific sanction, it is likely that the Court will consider the position of the litigation when the refusal occurs and make a decision as a result of the same.

The full case can be read here.

Karl Robson can be contacted here.


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