Silence is not golden
Ignoring a suggestion of Mediation is unreasonable.
Halsey V Milton Keynes General NHS Trust (2004) 1 WLR 3002 decided that while a Court cannot compel a party to mediate, it can “robustly encourage” mediation, including by depriving the successful party of costs because it refused unreasonably to mediate.
In PGF II SA V OMFS Company 1 Ltd (2013) EQCA Civ 1288, the Court of Appeal congratulated itself on the durability of the rules laid down in Halsey, but acknowledged that PGF raised a slightly different issue. The Defendant had not actually refused to mediate; instead, D had ignored two invitations to mediate. The parties exchanged Part 36 offers but, when D found a new point at the door of the Court, C accepted D’s Part 36 offer. Since the acceptance was out of time, C would ordinarily be required to pay D’s costs from the time of the offer (CPR 36.10 (5)). A Court will only depart from this if the Court considers the normal Order unjust (SG V Hewitt  EWCA Civ 1053).
In PGF, the Court of Appeal said that silence in the face of an invitation to mediate is always unreasonable. This is therefore a rare instance of the Courts laying down a strict rule, here motivated by the policy of encouraging mediation. This policy required a salutary rule to force parties to consider the possibility of mediation. A party won’t be allowed to invent retrospectively reasons why it would have refused.
However, the Court stressed that an unreasonable refusal to mediate is only one factor in the Court’s decision as to costs. The first instance Judge had deprived D of its costs from the time of the offer because of D’s implicit refusal for mediation, but did not order D to pay C’s costs for that period. The Court of Appeal considered that this was correct and that it would only be in the most serious and flagrant cases (e.g. where the Court itself has suggested Mediation) that a Court would order a mediation recalcitrant to pay costs. On the facts, the Court of Appeal considered that the Judge may even have gone a bit far in depriving D of all its costs after the offer, but did not overturn the decision because it fell within the legitimate area of judicial discretion. A salutary rule at the first stage, but not at the second; ultimate discretion is therefore restored.
However, the bottom line remains that if the otherside proposes mediation, you must respond. Refusal is risky. Is it better to waste the time and cost of going through a mediation that you think will be futile rather than, by declining to mediate, to give the other side an argument that you should not get your costs if and when you win? The cost of a failed mediation can be recovered in costs. And if you aren’t confident of success, mediation may be helpful.
Source – Lexology