Halsey applied! A note on PGF II SA v OMFS Company [2012] EWHC 83 (TCC)

Another strong decision has emerged from the Technology and Construction Court as a warning that judges will not look kindly on a failure to respond to a proposal for mediation. In PGF v OMFS [2012] EWHC 83 (TCC), Recorder Stephen Furst QC sat as a Deputy High Court judge to hear a dilapidations claim for just over £1 million brought by PGF in respect of premises in Lombard Street, London. Trial was to start on 11 January 2012, but on the previous day PGF accepted a Part 36 offer of £700,000 made by the defendant OMFS nine months earlier on 11 April 2011. This terminated the substantive claim, and while PGF were entitled to costs up to the date of the Part 36 offer, they sought a court order under CPR 36.10(4)(b) for OMFS to pay their costs from April 2011 until settlement, seeking to challenge their normal liability to pay OMFS’s costs after late acceptance under CPR 36.10(5)(b).

PGF argued that the ordinary expectation that they should be liable for OMFS’s costs following late acceptance should be varied for three reasons:

1. it was only on 10 January 2012 (the day before trial) that OMFS made it clear that they were going to argue that they were not liable for defects in the ventilation system because that system was actually outside the demised premises (a point that they had not pleaded) and about which OMFS would need to amend at trial;

2. that this was “information” within the meaning of CPR 36.14(4) available (or not) to the parties at the time the Part 36 was made, which if available would have materially affected their decision as to whether to accept it or not;

3. PGF had proposed mediation in a Part 36 offer of their own in April 2011, and again in July 2011, both of which had been ignored by OMFS: these amounted to unreasonable refusals, giving rise to grounds for varying the normal costs order.

The judge broadly found against the claimant PGF on the first two points, which left only the refusal of mediation as a basis for disturbing the ordinary costs pattern. The judge applied the tests and burden of proof established by Halsey v Milton Keynes NHST carefully.

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by Tony Allen

Tony Allen is a Solicitor, Direct Mediator and Senior Consultant for The Centre for Effective Dispute Resolution (CEDR).