Northrop Grumman Mission Systems Europe Ltd v BAE Systems (Al Diriyah C4i) Ltd

October 10, 2014

Here is another judicial endorsement to those already embarked on court proceedings to refer to the ADR Handbook, to remind parties of the risk of refusing to mediate and consider the issue of costs if an offer to mediate is not taken up.

Following on from the decisions in PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288 and in Garritt-Critchley & ors v Andrew Ronnan and Solarpower PV Ltd [2014] EWHC 1774 Ch, Mr Justice Ramsey has had to consider the issue of costs where Northrop (‘NGM’) suggested mediation and BAE refused to mediate and BAE ultimately won. One of the main issues of dispute was in respect of contractual interpretation. Ramsey J found, ‘in all such claims a skilled mediator can assist the parties in resolving the dispute by finding a solution to disputes which each party would regard as incapable of being settled and would be unable to settle without such assistance’. The Court went on to find that the nature of the case was ‘susceptible to mediation and that mediation had reasonable prospects of success’. Despite BAE’s view that it had a strong case, the court still found that it was unreasonable for BAE to reject NGM’s offer to mediate.  Thus the previous position in Halsey –v- Milton Keynes General NHS Trust [2004] EWCA 3006 Civ 576 which stated that where a party reasonably believes it has a watertight case may be sufficient justification for a refusal to mediate, this will not always be the case. Here, Ramsey J found it provided BAE with ‘limited justification for not mediating’ but that didn’t make the refusal reasonable.

Ultimately it was the fact that BAE made a without prejudice offer to NGM, which it refused to accept and which it did not better in court, which led the court to rule that BAE was entitled to its costs without any reduction on a standard basis. The ground has shifted slightly since Halsey and the message appears to be, tread carefully when refusing to mediate.


Garden Court Mediation

Garden Court Mediation