Download a short briefing paper on recent cases involving costs penalties for refusing offers to mediate
PGF II SA v OMFS Company and Bank of Scotland PLC EWHC 83 (TCC) is not the most memorable name for a case but the successful defendant won’t forget it in a hurry. It is one of those rare cases where the court uses its discretion not to follow the normal rules on costs and delivers instead an expensive lesson to the “winner”.
Costs penalty for ignoring an offer to mediate
The case involved a claim for dilapidations on a lease (I know, but stay with me). It settled one day before trial when the claimant accepted a Part 36 offer the defendant had made nine months earlier. The judge ordered that because the defendant had unreasonably refused the claimant’s offer to mediate the court could depart from the normal rule that the claimant pay the defendant’s costs after the period of acceptance had expired.
Don’t make up reasons after the event
The defendant simply ignored the offer to mediate. So the court was unimpressed by reasons it gave at the costs hearing. The judge warned of the dangers of retrospective reasons for not mediating. Such assertions are easy to advance but difficult to prove or disprove. He also said the courts clearly “wish to encourage mediation and whilst there may be legitimate difficulties in mediating or successfully mediating these can only be overcome if those difficulties are addressed at the time.”
Ignoring an offer amounts to refusing it
The judge had little time for the sophism asserted by the defendant that by ignoring the offer had not “refused” it.
Mediation is privileged shocker
The defendant had tried to argue that mediation would have failed because of the experience the parties had had in a previous mediation. The judge was not moved:
… I disregard the contentions made by the Defendant as to the conduct of the previous mediation for two reasons. First because the mediation proceedings are covered by without prejudice privilege which was not waived by the Claimant, see: Farm Assist Ltd (in liquidation) v The Secretary of State for the Environment, Food and Rural Affairs (No. 2). Secondly had the Claimant’s conduct been a reason for refusing to participate in mediation in relation to this matter then one would have expected that to have been put forward by the Defendant’s solicitors in answer to the invitation to mediate.
So, if you don’t want to mediate that’s fine, but make sure you tell your opponent why or run the risks of a real costs penalty.