In PGF II SA v OMFS Company and another [2012] EWHC 83 (TCC), the High Court ordered that both parties should bear their own costs after expiry of the relevant (21 day) period for acceptance of a Part 36 offer, due to the defendant’s unreasonable refusal to mediate.  This displaced the claimant’s liability to pay the defendant’s costs and interest incurred during that period, after its acceptance of the defendant’s offer some nine months after it was made.For its part, the claimant had suggested mediation twice in correspondence and on both occasions the defendant had failed to respond.  This was interpreted by the court as a refusal to mediate.  The court went on to hold that, considering the six factors in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, the defendant’s refusal to mediate was unreasonable.

In particular, the court found that just because certain issues in the dispute had not, and were not likely to have, come to light at the time of the prospective mediation, there could nevertheless be a reasonable prospect of a mediation succeeding.  The court also clarified that the impact on costs of the refusal to mediate should apply at the point at which a party unreasonably refuses to mediate, not when the hypothetical mediation would have taken place.

This decision is a warning that failure to respond to a suggestion of mediation may be interpreted as a failure to mediate. If a party considers mediation will not be beneficial at that stage, it is advisable to set out reasons in writing. The judgment also suggests that the courts may be sceptical of arguments raised retrospectively as to why mediation would not have had a reasonable prospect of success.