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ADR: prevaricate at your peril

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29/12/2013

The case of PGF II SA v OMFS Company Ltd [1] concerned High Court proceedings in which the claimant had made a serious and carefully formulated written invitation to mediate as an alternative to costly litigation. The invitation, even though it was repeated, was met with complete silence by the defendant. Following a last minute settlement of the claim except as to costs, the court was asked to rule upon costs, taking into account the defendant’s conduct in relation to the proposal to mediate.

The High Court judge ruled that the defendant’s silence amounted to an unreasonable refusal to mediate. On appeal, Lord Justice Briggs took the opportunity to emphasise and endorse the effectiveness of mediation as a form of ADR and to highlight the focus on mediation and ADR generally in post-Jackson civil procedure.

Extending the Halsey principles (taken from the 2004 Court of Appeal case of Halsey v Milton Keynes General NHS Trust [2], which provide that while the court should not compel parties to engage in ADR, it may encourage them to do so, robustly where appropriate, and may impose costs sanctions where a refusal to engage is unreasonable), Briggs LJ stated that: “…the time has now come for this court to firmly endorse the advice given in …the [Jackson] ADR Handbook, that silence in the face of an invitation to participate in ADR is, as a general rule, of itself, unreasonable, regardless of whether an outright refusal, or a refusal to engage in the type of ADR requested, or to do so at the time requested, might have been justified…”. The Court of Appeal has effectively implemented a presumption in favour of ADR, characterising a refusal to engage as prima facie unreasonable.

In any commercial contract or other civil dispute, therefore, parties will ignore the prospect of ADR at their peril.

[1] [2013] EWCA Civ 1288
[2] [2004] EWCA Civ 576

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