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Ignore an invitation to mediate at your peril

Thu, 31 October 2013

On 23 October 2013, the Court of Appeal handed down judgment in the case of PGF II SA v OMFS CO 1 Ltd, providing strong guidance on the duty to take part in alternative dispute resolution (ADR). If you do not want to mediate, you therefore now need to have a good explanation as to why. 

The ruling

The judge held that OMFS was not entitled to its costs, as they had unreasonably refused PGF’s invitations to mediate. 

OMFS subsequently appealed; on 23 October 2013, the Court of Appeal handed down its judgment.  OMFS’s appeal was rejected, and they were ordered to pay PGF’s costs of the appeal and of the original action.

The Court of Appeal held that:

  • Silence in the face of an invitation to ADR is, as a general rule, unreasonable.
  • Failure to respond to an invitation to ADR will make a party liable for penalties in costs, at the court’s discretion.
  • Not providing reasons for refusal to mediate means that the other side is unable to try to accommodate them.  A reasoned response could encourage the parties to re-consider their position.
  • Reasons provided subsequently - at trial, for example - will be disregarded. 
  • A specialist mediator may spot the game-changing point (here: the air conditioning system), much earlier in the case.
  • The Court depriving the Defendant of all costs claimed was “vigorous”, but an exercise of the Court’s discretion, and should compel others to agree to ADR.

Practical implications

If you do not want to mediate, you need to have a good explanation as to why.  These may include:

  • Exceptions to the general rule, in particular cases involving reputational matters, including criminal cases, and fraud cases, where public vindication may be key.

The Dispute Mediation Consultancy offers specialist mediators with a strong property background, many of whom are Chartered Surveyors. For more information on our panel please click through to Find A Mediator pages

Dispute Mediation

Mediation is a practical yet sophisticated process designed to address the real issues and obstacles behind conflict in reaching a commercially viable solution.

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