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PGFII SA v OMFS Company 1 Ltd

On 23rd October, in PGF II SA v OMFS Company 1 Ltd (2013) EWCA Civ 1288 the Court of Appeal (Kay, Beatson, Briggs LJJ) took the opportunity to consider

... and reinforce the principles of Halsey v Milton Keynes General NHS Trust (2004) 1 WLR 3002 by refusing to allow an appeal against a first instance costs order penalising the Defendant by reason of an unreasonable refusal to engage in mediation. Delivering the leading judgment, Briggs LJ considered that the order made by the Judge at first instance may have been more draconian that the Court of Appeal would have made themselves, but it was nevertheless within the Judge’s “broad discretion” as to costs, and:

“The court’s task in encouraging the more proportionate conduct of civil litigation is so important in current economic circumstances that it is appropriate to emphasise that message by a sanction which, even if a little more vigorous than I would have preferred, nonetheless operates pour encourager les autres”.

Leaving aside that the use of Latin may have been banished from the Court of Appeal, but the use of French appears acceptable de nos jours, PFG II SA sets out the emphasis that the Court will now place on the contents of the recently published Jackson ADR Handbook (Blake, Brown, Sime) and the paramount need for practitioners to “engage” with a proposal for ADR. The Court does not suggest that such a proposal may not, in appropriate circumstances, be properly refused by a party to litigation: nevertheless, it is clear that unless such refusal is soundly based upon Halsey principles and that the refusal is couched and communicated to the other side in accordance with the principles set out in PFG II SA and the Jackson ADR Handbook, a party refusing to engage with a carefully formulated invitation to ADR runs serious risks in costs sanctions irrespective of the outcome of the litigation itself. While the Defendant in PFG II SA discovered, to its considerable cost, that complete silence was neither golden nor an appropriate response to such an invitation to mediate (even when there were Part 36 offers being exchanged and not accepted by either party), the case is not restricted to its particular facts, but a helpful restatement of the Court of Appeal’s general approach to issues of mediation and costs.

Clive Blackwood / 1st Nov 2013


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