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

Last Updated: 27 October 2014
Article by Ben Rees

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 party's reasonable belief that it has a watertight case may be a sufficient justification for refusing to mediate, parties should not ignore the "positive effect that mediation can have in resolving disputes even if the claims have no merit" (at paragraph 59). In this case, BAE's reasonable view was "a factor which provides some but limited justification for not mediating" (emphasis added, paragraph 60).

(iii) Extent to which other settlement methods were attempted: the request to mediate and the 'posturing' by the parties was, in the eyes of the court, a classic situation where a mediator could have knocked heads and "cut through the positions of the parties" (paragraph 62). The court did also have a mind to the drop hands settlement offer made by BAE.

(iv) Costs of ADR: The court accepted that the costs associated with a mediation may well have been in the region of £40,000; in a dispute where the legal costs of both parties' totalled £500,000, and where the claim was for £3m, it could not be said that the ADR costs were unreasonably high.

(v) Prejudicial delay caused by ADR: there would have been no prejudicial delay in this case, and so this head was not a relevant consideration.

(vi) Prospects of successful ADR: the court, in looking at the case of two parties with entrenched positions and ever-souring relationships, considered it a "classic case" where a mediator could have brought the parties together.

Having considered these principles the court concluded that, despite its reasonable belief that it had a strong case, BAE's failure to mediate was unreasonable; this, as we know from Halsey and PGF, would normally result adverse costs consequences. Not here – the court holding that, as set out in CPR 44.2(4), a refusal to mediate was but one of the factors a court must take into account when considering costs. Another such factor was "any admissible offer to settle made by a party which is drawn to the court's attention, and which is not an offer to which costs consequences under Part 36 apply" (CPR 44.2(4)(c)).

NGM's refusal to accept BAE's drop hands offer (an admissible offer - which NGM did not beat at trial) was clearly a relevant factor; had it been accepted, costs plainly would have been saved. Whilst the making of the offer could not justify BAE's refusal to mediate, it was nonetheless conduct that the court could take into account when exercising its discretion on costs.

In essence, BAE's unreasonable refusal to mediate and NGM's failure to accept an offer that it did not beat at trial, served so as to cancel each other out – the court's rationale that the refusal to mediate and the failure to accept the offer both meant that the parties lost the opportunity to resolve the case without a hearing. The court therefore made a standard costs order, namely that NGM, as the losing party, pay BAE its costs on the standard basis.


With a glance only as to the costs ruling, the case may be seen as a weakening by the courts of its stance on an unreasonable refusal to mediate (as had been clearly set out in Halsey and PGF). On closer inspection, this is not so – the court finding that BAE had been unreasonable in refusing to mediate despite this being a case where: (i) it was seen as an 'all or nothing' dispute based on a discrete contractual interpretation; (ii) the winning party had correctly identified the strength of its position; and (iii) the party refusing mediation could demonstrate a detailed and measured consideration as to its refusal.

In avoiding an adverse costs order in this case, BAE was able to point to its drop hands offer, and NGM's rejection of it, as conduct which restored a level of equality to the court's costs balancing exercise.

The case highlights the importance, not only of ADR, but also of the other factors set out in CPR 44.2(4) on which the court can place weight in deciding the costs order it is to make. Further, it serves to add some further meat on the bones of the Halsey principles, thereby assisting parties (and their legal teams) in identifying those cases (which, from the PGF and NGM judgments will be rare) in which would be reasonable to refuse to mediate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Ben Rees
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions