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Silence is unreasonable

<p class="MsoNormal">This was a multitrack commercial matter dealing with the cost of building repairs.</p> <p class="MsoNormal">During negotiations…

In PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288 the Court of Appeal considered the importance of alternative dispute resolution ("ADR"), relying heavily on the case of Halsey v Milton Keynes General NHS Trust . . .

This was a multitrack commercial matter dealing with the cost of building repairs.

During negotiations the claimant made two distinct requests for the defendant to enter into ADR and the defendant made no official response, although statements were made to the effect that such a response would follow.

Ultimately the claimant accepted a Part 36 out of time, the ordinary consequence of such late acceptance being that the claimant would be obliged to pay the defendant's costs, unless the court ordered otherwise (CPR 36.10 (4) & (5)).  However, the claimant sought an order for costs in its favour due to the defendant's conduct, including the unreasonable refusal of ADR.

Mr Recorder Furst QC, sitting as a deputy judge, decided that the defendant's silence amounted to a refusal and secondly, applying the Halsey guidelines, that refusal had been unreasonable.  He therefore deprived the defendant of the costs to which it would otherwise have been entitled under Part 36, but did not further order the defendant to pay the claimant's costs.  Both parties appealed.

Whilst the Court of Appeal felt the Deputy Judge had applied a very strict costs order, he had exercised his discretion and to alter the same would dilute the impact.  The message to civil litigants must be clear: engage with all serious invitations to participate in ADR, otherwise the court may use robust costs sanctions to encourage more proportionate conduct in litigation.

Brian Jelley, Solicitor (brian.jelley@weightmans.com)

For further information contact victoria.cargill@weightmans.com or solving.disputes@weightmans.com.