Unreasonable Refusal To Mediate Without Adverse Cost Consequences: A Departure From Halsey And PGF?

Author:Mr Ben Rees
Profession:Charles Russell LLP

Northrop Grumman Mission Systems Europe Limited v BAE Systems (Al Diriyah C4I) Limited [2014] EWHC 3148 (TCC) ("NGM v BAE")

In a recent update, consideration was given to Halsey principles relating to the costs consequences of an unreasonable refusal to mediate and the 'modest extension' to those principles in PGF ( click here). This issue is one that has recently been back before the court.

In NGM v BAE the court did not depart from the general rule on costs in circumstances where one of the parties had unreasonably refused to mediate; concluding that, having taken all factors into account (in accordance with CPR 44.2), there was no reason to do so.


Part 8 proceedings were commenced by NGM in October 2013. Prior to issue, NGM made several offers to meet with BAE with a view to resolving the dispute; initially by way of communication between in-house legal teams and, latterly, through a formal request to mediate made by NGM's solicitors.

These requests were rejected by BAE. In their evidence to the court, BAE confirmed that detailed consideration was given by them to each ADR request, but that they had concluded that mediation did not have a prospect of leading to a resolution of the dispute; it was, in their eyes, a matter of contractual interpretation which led to an 'all or nothing' outcome and was therefore not suited to mediation. BAE's solicitors also set out, in response to NGM, that it would not be appropriate to meet or mediate prior to the provision of further information by NGM.

In January 2014 BAE made a without prejudice save as to costs offer of a drop hands. The offer was stated to be non-negotiable and was rejected by NGM.


The Judge gave judgment for BAE. The issue of costs then fell to be determined.

In reaching judgment, Ramsey J applied the Halsey principles to the facts in this case. These principles, and the court's findings in relation to each, can be summarised as follows:

(i) Nature of the dispute: This was a case where the central issue was one of contractual interpretation, with the sum of £3m riding on it. Nonetheless, in such cases 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" (at paragraph 57).

(ii) Merits of the case: BAE considered, reasonably as was borne out by the judgment of the court, that it had a strong case. Whilst a...

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