Mr Justice Ramsey has backed the transformative power of mediation to resolve commercial disputes by finding that BAE was unreasonable in refusing to mediate, even though it reasonably believed that it had a strong case. However, the Defendant’s failure to accept an offer which it did not beat was also unreasonable, so it was a no score draw!
In Northrop Grumman Mission Systems Europe Limited v BAE Systems Ltd (2014) The Judge found that “where a party to a dispute, which there are reasonable prospects of successfully resolving by mediation, rejects mediation on grounds which are not strong enough to justify not mediating, then that conduct will generally be unreasonable.”
This was a matter where BAE had reasonably considered that it had a strong case, and where a party faced an unfounded claim and wished to contest it rather than buy it off – the Court was to be slow to characterise that as unreasonable conduct. A watertight case could be sufficient justification for refusal. Mediation could have a positive effect, even if the claim had no merit.
The mediator could bring a new independent perspective to the case. Nonetheless, BAE’s refusal to mediate was unreasonable.
Each time the Claimant offered mediation, the Defendant had asked for costs information which could not be provided. The judge found that a mediation would have cut through the positions taken by the parties and would have cost £40,000, not delayed the litigation and the cost was not disproportionately high. It was likely that there would have been a mediated settlement and there were reasonable prospects of success, so it was unreasonable to reject it.
Even with a watertight case, refusal to mediate can be unreasonable conduct.