PGF II SA v OMFS Company 1 Ltd – The Court of Appeal decides

November 6, 2013

Most litigants now know that silence is not golden. Could the defendant in PGF II SA v OMFS Company 1 Limited [2013] EWCA Civ 1288 have foreseen that the price of silence would have been over £500,000?  Time will tell how many litigants appreciate the potential cost of silence has just turned platinum.

Part 36 is the standard channel for parties to reach settlement prior to trial. Lord Justice Briggs said in PGF II SA v OMFS Company 1 Limited that Part 36 may ‘fairly be described as lying at the interface between litigation and ADR….with a measure of protection against costs risk’.

When on 10th January 2012 the claimant in the above case accepted the defendant’s Part 36 offer of £700,00 two days before trial to settle the case save as to costs, the defendant no doubt expected to recoup its costs of about £500,000 which accrued from 2nd May 2011 when it first made the offer until the acceptance. However in April 2011, the claimant had offered a ‘serious and carefully formulated written invitation….to participate in mediation’ to the defendant, who had remained virtually silent in response. Whether the defendant ought to have foreseen the consequences of not responding to the claimant’s offer of mediation is a moot point given all the publicity about and encouragement to use ADR. There is discussion in the judgment about whether silence can amount to a refusal – yes it can – and whether the refusal was unreasonable – yes it was. Lord Justice Briggs stated that there was ‘no unbridgeable gulf between these parties’ respective Part 36 offers, which could not in any circumstances have been overcome in a mediation’.  Although Lord Justice Briggs says that he personally would have disallowed only part of the defendant’s costs, he did not flinch from delivering a clear message to civil litigants: the Court of Appeal upheld the High Court’s original decision to disallow the defendant all of its costs between 2nd May 2011 and 10th January 2012 as being ‘within the range of proper responses to the seriously unreasonable conduct which the judge identified’.

So perhaps a question worth answering for any party choosing not to respond or not to respond positively to the offer of mediation from the other side is, ‘what’s stopping us saying yes?’ An inability to answer this question comprehensively during the proceedings jeopardises the recovery of costs at court further down the litigation line.

Garden Court Mediation

Garden Court Mediation