Indemnity Costs Penalty for Refusal to Mediate

The High Court has added to the line of cases where a party has been penalised in costs for unreasonably refusing an offer to mediate. In the case of Garritt-Critchley v Andrew Ronnan and Solarpower PV Ltd there were repeated offers to mediate and repeated refusals. The matter eventually went to trial and the judgment was reserved. Before judgment was delivered the defendant accepted a pre-trial part 36 offer of £10,000. The claimant asked the trial judge to award them indemnity costs on the basis the defendants had unreasonably refused an offer to mediate.

The defendant put forward a number of “Halsey” and other reasons for refusing which were each dismissed as follows:

  • There was no natural middle ground because it was an all or nothing case:
    “To consider that mediation is not worth it because the sides are opposed on a binary issue, I’m afraid seems to me to be misconceived.”
  • The defendant was confident no settlement would be reached at mediation:
    Given the nature of the dispute it was unrealistic for the defendant to say that all the odds are so stacked in his favour that there is really no conceivable point in talking about settlement. The lack of any application for summary judgment confirms this.
  • There was a considerable dislike and mistrust between the parties.
    “They [mediators] are well trained to diffuse emotion, feelings of distrust and other matters in order that the parties can see their way to a commercial settlement.
  • The parties were too far apart.
    “Parties don’t know whether in truth they are too far apart unless they sit down and explore settlement. If they are irreconcilably too far apart, then the mediator will say as much within the first hour of mediation. That happens very rarely in my experience.”
  • The costs of mediation were disproportionate to the sums involved in the claim (after the claimant’s £10,000 offer).
    “The point is that you compare the costs of a mediation with the costs of a trial. And the costs of a mediation, on any view, would have been far less than the costs of the trial, as both parties costs figures demonstrate.”

The defendant argued, referring to the case of PGF II SA v OMFS Company Ltd, that they had not ignored offers to mediate. The court accepted they had engaged in discussion about ADR but the product of those discussions was an unreasonable refusal to mediate.

What experience have you had of these arguments on costs? Post a comment below.

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