Mediation Update: To What Extent Can A Judge Nudge?

Judges encouraging parties to attempt to mediate their differences is certainly not a new phenomenon. However, the degree to which parties can be coerced into mediation is subject to the constant evolution of judicial guidance. This article seeks to illustrate the current state of play by bringing to light some recent developments.

The Halsey guidelines and PGF II

Last November, we reported on the case of PGF II SA v OMFS Co 1 Ltd [2013] EWCA Civ 1288, in which it was held that silence in the face of an invitation to participate in Alternative Dispute Resolution ("ADR") is, as a general rule, itself unreasonable and therefore liable to provoke judicial sanction on costs.

The case effectively extended the guidelines from the Court of Appeal in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, which set out the following factors that will generally be instructive as to whether or not a party was unreasonable in refusing to mediate:

The nature of the case – The courts recognise that not all disputes are suitable for mediation (although such cases are exceptional); The merits of the case - A party might refuse to mediate because it has the utmost confidence in the strength of its case. If such a belief is reasonable, it may justify a failure to mediate; Other settlement methods have been attempted – It is relevant if other offers to settle have been made by the party who refused to mediate; The costs of mediation would be disproportionately high – The courts are naturally concerned that costs remain proportionate in relation to the amount in dispute; Delay – The time at which mediation is proposed is a relevant factor, so that a party refusing to mediate in the face of a proposal "at the court's door" may well escape the court's wrath; 6. The mediation's prospect of success – The Court also recognised that parties are entitled to proceed to litigation if the mediation objectively stands no chance of succeeding. Recent Decisions

This month has seen two decisions of note in this area, both in the High Court, and both underlining the importance of the above guidelines, with one in particular raising the question of how far a judge may go to compel the parties to engage in ADR.

In Northrop Grumman v BAE Systems (Al Diriyah C4I) Limited [2014] EWHC 3148 (TCC), BAE successfully defended the claim before Mr Justice Ramsey in the Technology and Construction Court. On the issue of costs, Northrop Grumman argued that BAE's costs should be...