It is trite law that, where a party unreasonably refuses to engage with an alternative dispute resolution (ADR) procedure, that party risks being penalised in costs (Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576). Remaining silent in the face of an invitation to engage with ADR is, as a general rule, unreasonable conduct, even if a refusal may be justified by the identification of reasonable grounds (PGF II SA v OMFS 1 Ltd [2013] EWHC Civ 1288). That principle was reinforced by the Court of Appeal in the recent decision of Northamber Plc v Genee World Ltd and others [2024] EWCA Civ 428.

A district judge had made a case management order which required the parties to engage with ADR and, if any party did not do so, then that party was required to serve a witness statement giving reasons which could only be shown to the trial judge on the issue of costs. The claimant wrote to the defendants indicating its willingness to engage with mediation. The third defendant’s solicitors replied by saying that they would take instructions, but there was no further response, and the second defendant did not respond at all. Neither party served a witness statement as required by the case management order.

Following the trial, the judge awarded the claimant 70% of its costs. However, the judge refused to penalise the defendants in costs for their failure to comply with the case management order because there was no evidence that the claimant had chased the defendants for a reply to their invitation to engage with mediation. On appeal, the claimant argued that this aspect of the judge’s decision amounted to an error of principle.

Giving the judgment of the Court of Appeal, Arnold LJ agreed that the judge had fallen into error. He noted that the defendants had remained silent in the face of an offer to mediate which was, in itself, unreasonable. To compound matters, the defendants had breached the case management order requiring them to explain their failure to agree to mediation. As Arnold LJ explained: ‘If breaches of such orders are ignored by courts when deciding costs, parties will have no incentive to comply with them. That would undermine the purpose of making them, which is robustly to encourage parties to mediate.’ The judge’s reasoning ignored these points. The fact that the litigation had been under way for some time and the parties had incurred substantial costs was relevant to the exercise of the court’s discretion as to how to respond to the defendants’ conduct.

Furthermore, the litigation had continued for a further eight months, including a nine-day trial, and the parties incurred substantial costs which could have been avoided by a successful mediation. Arnold LJ also observed that the judge had wrongly concluded that the onus for chasing for a reply to its letter to mediate lay with the claimant; after the letter was sent ‘the ball was in [defendants] Mr Singh’s and IES’s court’.

The more difficult question was how the defendants’ conduct should be reflected in costs. Arnold LJ explained that ‘although costs sanctions have been imposed in a number of cases for an unreasonable refusal to mediate or for silence in response to an offer of mediation, it does not automatically follow that a costs penalty should be imposed: see Gore v Naheed [2017] EWCA Civ 369, [2017] 3 Costs LR 509 at [49] (Patten LJ). Rather, it is a factor to be taken into account among the other circumstances of the case.’ Arnold LJ rejected the claimant’s contention that the defendants should be ordered to pay 100% of the claimant’s costs, but did increase the claimant’s costs recovery by an additional 5% to 75% in total.

Although the costs penalty in Northamber Plc was modest, it was, nonetheless, significant in reinforcing the principle that a party’s silence in the face of an invitation to ADR will be considered as unreasonable conduct for the purposes of costs. The decision also upholds and furthers the principle of proportionality which underpins the civil justice system.

As Briggs LJ succinctly put it in PGF, ‘the constraints which now affect the provision of state resources for the conduct of civil litigation (and which appear likely to do so for the foreseeable future) call for an ever-increasing focus on means of ensuring that court time, both for trial and for case management, is proportionately directed towards those disputes which really need it, with an ever-increasing responsibility thrown on the parties to civil litigation to engage in ADR’. (This article was published in Law Society Gazette on 14 June 2024 and is available here.)

Categories: Lal Akhter

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Lal Akhter

Lal Akhter is the chief executive of DocketLive. He read law at the University of Leicester and completed his post-graduate diploma in barristers training from the BPP University and subsequently called to the Bar at Lincoln’s Inn. He also holds another undergraduate degree in Mathematics and a master's in computer science. He writes on topics of civil procedure rules, expert witnesses, costs, and various other topics. He can be reached at or through his LinkedIn profile.