Failing to mediate- the consequences

The case of Gore v Naheed [2017] EWCA 369 was recently decided in the Court of Appeal and considered the issue of costs when one party has failed to mediate.

The facts of the case centred around a right-of-way dispute with the Claimant seeking an injunction against the neighbouring Defendant. In the first instance, the Claimant was successful in his claim and the lower Court granted an injunction against the Defendant and awarded damages in the sum of £2,500 (despite damages not being pleaded by the Claimant nor being sought at trial). Rather unsurprisingly, this decision was subsequently appealed by the Defendant.

In the Court of Appeal, Lord Justice Patten held that as damages had not been pleaded nor the argument advanced at the trial, the award of £2,500 should be overturned. However, the injunction imposed in the lower Court was held to be correctly granted and therefore this element of the appeal was not allowed. In judgment, it was clear the Court of Appeal viewed the Claimant as the “overall winner” so it turned to consider the matter of costs.

The Defendant had argued in both the lower court and in the Court of Appeal that the Judge should make some “allowance” in their favour on the basis the Claimant had failed to take them up on their proposals for mediation.

As part of the judgment in this case, the previous case of PGF II SA v OMFS Co 1 Ltd [2014] 1 W.L.R. 1386, was referenced and examined. In the case of PGF, it was held by LJ Briggs:

“silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable, regardless 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 by the identification of reasonable grounds”.

It was on this basis, in the current case the Defendant argued that the Claimant had been unreasonable by declining their offer of mediation and therefore there should be a cost penalty. However, the Court of Appeal Judge stated that LJ Briggs had been clear in the judgment of PGF that even in the face of an unreasonable refusal to mediate, a cost penalty does not always follow. The Court of Appeal Judge also noted:

“speaking for myself, I have some difficulty in accepting that the desire of a party to have his rights determined by a court of law in preference to mediation can be said to be unreasonable conduct.”

In accordance with PGF, the Judge did take into account the Claimant’s refusal to engage with mediation but did not find it unreasonable in all the circumstances. The Court of Appeal Judge was satisfied in the current case that facts involved quite complex questions of law and mediation was very unlikely to be successful and would have only added to costs.

The case of Gore v Naheed [2017] is therefore a good reminder that despite what appears to be on the face of it very clear guidance that ADR should be used wherever possible, there are exceptions to this rule. However, the warning is clear. If as a solicitor or litigant in person, you are declining to engage with ADR, you must be prepared to argue and justify your decision or face cost penalties at a late stage.