Recorder Stephen Furst QC, sitting as a Deputy High Court Judge has demonstrated just how in touch and functional the modern judiciary can be.
His decision was PGFII SA v OMFS Company (2012) EWHC 83. Yes, this is a Technology and Construction Court case, but don’t go away – those with mixed practices, or specialist practices elsewhere should take careful note. The TCC has led the way in mediation matters for the rest of the specialist Bars.
A trial of issues between the two companies, PGF and OMFS was due to start on 11 January 2012. The day before trial, PGF accepted a long-standing Part 36 offer made by OMFS in April 2011. This compromised the substantive claim. But what about costs?
In the ordinary course of events, PGF would not have stood a ghost’s chance of resisting OMFS’ costs from the date of offer to the eve of the trial. PGF’s acceptance of the Part 36 offer was extremely late and out of time. PGF should have been in dire straights with the judge.
However, PGF had made two offers of mediation, the first round about the time OMFS made their Part 36 offer, and the second in July 2011. OMFS had ignored both.
Were OMFS justified in dismissing the offer of mediation?
It is right to observe that the parties had attempted to mediate another issue unsuccessfully in 2010. OMFS sought to blame PGF for its failure. Would this rescue OMFS, and how would the judge deal with this suggestion?
Well, as you expected, the answers to the questions were ‘no’ and ‘no’. Recorder Furst showed what Tony Allen, Solicitor, Mediator and Senior Consultant to CEDR described as “an excellent understanding of the dynamics of mediation”.
Recorder Furst started by applying Halsey v Milton Keynes NHST perfectly. Had PGF shown that mediation had a reasonable prospect of success? Yes, their offer was genuine and was repeated. Had OMFS behaved reasonably? No, they had simply ignored the invitations, shutting themselves out from arguing the ‘prospect of success’ point. Did the previous unsuccessful attempt at mediation make a difference? No, “the court should be wary of arguments only raised in retrospect as to why a party refused to mediate or as to why it cannot be demonstrated that a mediation would have had a reasonable prospect of success”. Would the court look into the reasons why a previous mediation had not been successful? No, “courts wish to encourage mediation”, and to dive into that pool (my words) would be to be to undermine the confidentiality of the earlier mediation.
Other key phrases fell from the lips of the learned Recorder. In answer to the question of reasonable refusal he said, “the skill of a mediator lies in drawing out seemingly intractable positions” – “the essence of all successful mediations is a willingness to compromise and/or the realisation that certain points are not as strong as the party believed”.
Even though they had accepted OMFS’ early offer, PGF were awarded costs up to the expiry date of OMFS’ offer, and resisted being punished in costs thereafter, with a no-costs order.
Lessons learned? First, don’t ignore a request to mediate, no matter what you may think of it. If you are determined to take this risk, at least set out cogent arguments at the time for your refusal, and keep your fingers crossed that a judge will agree with you later – but don’t count on it! Second, wouldn’t you be better off to take the risk and try the mediation? If costs escalate and your refusal is held to be unreasonable, you may end up with a legal costs bill that eclipses your claim. Third, look out for the filter-down effect of this judgment into other civil and family courts. Where the TCC goes today, other courts will follow.