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Can a refusal to mediate be reasonable?

9 October 2014

In the case of Northrop v BAE Systems, the court had to determine costs after giving judgment in favour of BAE. Northrop submitted that BAE was entitled to its costs but those costs should be halved to reflect BAE’s unreasonable refusal to mediate.

The court examined all the circumstances including the conduct of the parties and the usual factors for determining costs but with specific focus on alternative dispute resolution (ADR).

The court held that whilst BAE had a reasonably held view that it had a strong case, that only provided limited justification for a refusal to mediate as mediation could have had a positive effect (even if the claim had no merit) with the mediator bringing an independent perspective. However, Northrop did not accept an offer of settlement which, had it done so, would have been better than the result achieved at trial.  Therefore, the court held that the fair outcome was that it would not depart from the normal costs rule, with Northrop being ordered to pay BAE’s costs on the standard basis.

This case demonstrates that the courts continue to send out a strong message to litigants that ADR should be considered even if one party believes their case to be effectively a ‘slam dunk’.

Click here to read our bulletin on this case.

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