"Silence can be fool's gold" - The potentially heavy costs consequences of ignoring an offer to mediate

Silence can be fool’s gold: the potentially heavy costs consequences of ignoring an offer to mediate – Robert Rhodes QC, FCIArb and Simon Robinson MCIArb consider the implications of recent Court of Appeal caselaw.
In PGF II SA v OMFS Company 1 Ltd. ([2013] EWCA Civ 1288) the Court of Appeal has laid down a clear general rule that failing to respond to an invitation to engage in ADR can cost a party dearly. Whether you’re involved in a civil/commercial case or a family case, this judgement gives you a clear indication of the benefits of engaging in ADR and the risks of failing to do so.
Giving the lead judgement, Briggs LJ updated the principles set out in Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002 for the post-Jackson landscape. The Court specifically considered the advice given in the ADR Handbook to parties, faced with an invitation to engage in ADR, but who believe that there are reasonable grounds for failing to participate, should take in order to avoid an unfavourable costs order. The Court summarised this as recommending constructive engagement, rather than flat rejection or silence.
The Court emphasised the developments since Halsey; particularly the Jackson report on civil costs and the impact of the economic downturn on state resources for civil litigation, requiring courts to focus time and resources on those cases which truly require litigation. These clearly highlight the responsibility “upon the parties to civil litigation to engage in ADR, wherever that offers a reasonable prospect of producing a just settlement at proportionate cost”. Additionally, although a Part 36 offer to settle was made, the Court was not persuaded that this excused the party’s failure to respond. The lesson here is that, regardless of any offers to settle, you should still respond to an invitation to ADR.
Briggs LJ firmly endorsed the ADR Handbook’s guidance, stating that “silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable”. The Court emphasised that a “positive engagement with an invitation to participate in ADR may lead in a number of alternative directions, each of which may save the parties and the court time and resources”.
It’s vital to bear in mind that an invitation to engage is precisely that. It provides an opportunity for the parties to explore the various ways of resolving the dispute and is not limited to the form of ADR initially offered. You could consider other routes such as judicial early neutral evaluation, or discuss who pays for mediation. An advantage of ADR such as mediation is that, even if it doesn’t lead to a complete resolution, it could lead to a narrowing of the issues, as the Court of Appeal pointed out. This point applies not only to commercial but also to family cases. Here, the parties may reach agreement on issues such as pension sharing, whilst leaving others for a judicial determination.
The Court accepted that there might be exceptional cases where it would not be appropriate to penalise a party for simply ignoring a request to mediate Such cases might be administrative error or “rare cases where ADR is so obviously inappropriate that to characterise silence as unreasonable would be pure formalism”. But such examples would indeed be rare, and the burden would lie on the party that received the invitation to mediate to establish its case.
In an admirably clear and direct judgment, Briggs LJ saves his best line for last, stating that the “case sends out an important message to civil litigants, requiring them to engage with a serious invitation to participate in ADR, even if they have reasons which might justify a refusal, or the undertaking of some other form of ADR, or ADR at some other time in the litigation”. Although this case ultimately concerned dilapidations to commercial premises, it is clear that the Court has developed a general rule to apply in all cases. In family cases, this will have an added impact from next year, when mediation will become compulsory.

Robert Rhodes QC is a barrister specialising in Company & Commercial disputes, an accredited mediator, member of the Panel of Mediators of the China Council for the Promotion of International Trade (“CCPIT”) and associate of myBarrister.co.uk the leading barrister portal

Simon Robinson is a barrister specialising in divorce, family and relationship disputes, employment law matters and is a qualified mediator trained in family and relationship mediation.