PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288 (23 October 2013)

Posted on Thursday, December 5th, 2013

The Claimant was the freehold owner of business premises and had issued proceedings in the High Court against the Defendant, who was a tenant in these premises, for breach of repair covenants in a number of leases.  The claim was for £1.9 million.  Soon after proceedings commenced, the Claimant made a part 36 offer that it would accept £1.125m.  This was subsequently increased to £1.125m plus interest following disclosure and a letter was sent to the Defendant at the same time inviting them to mediate, with proposed dates and possible mediators.  However, the Defendant made a part 36 offer to settle in the sum of £700,000.00 on the same day but no response was sent to the invitation to mediation.  The Claimant sent a chaser letter but this was not responded to either.  The claim was finally compromised the day before trial.  The Defendant gave notice of intention to amend the defence and the Claimant accepted the Defendant’s part 36 offer of £700,00.00 out of time, stating that the normal cost consequences shouldn’t apply due to late amendments to the defence.  The Claimant also argued that the Defendant should pay the Claimant’s costs.

The Deputy District Judge acceded in part to the claimant’s application for a costs sanction and found that the Defendant’s silence did amount to refusal to mediate.  However, the Judge refused to order the Defendant to pay the Claimant’s costs for the same period.  Both parties appealed.

The Court of Appeal held that silence in the face of an invitation to participate in ADR is, as a general rule, unreasonable.  However, each party should bear their own costs for the post Part 36 offer period as directed by the trial Judge.

For the full Judgement please click here.

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