Northrop Grumman Mission Systems Europe Ltd v BAE Systems (Al Diriyah C4I) Ltd (No 2)
2014
TECHNOLOGY AND CONSTRUCTION COURT
UK
CORAM
- MR JUSTICE RAMSEY
Areas of Law
- Civil Procedure
- Alternative dispute resolution
- Contract Law
2014
TECHNOLOGY AND CONSTRUCTION COURT
UK
CORAM
AI Generated Summary
This costs judgment follows an earlier Part 8 determination in which Mr Justice Ramsey upheld BAE’s right to terminate a Licence Agreement for convenience under Clause 10.4 of the Enabling Agreement. NGM accepted that, as the successful party, BAE was entitled to costs on the standard basis, but asked the court to halve those costs on the ground that BAE unreasonably refused mediation. The court applied CPR 44.2 and the Halsey framework, assessing the nature of the dispute, the parties’ attempts to settle, the costs and timing of mediation, and its likely success. Ramsey J found ADR was suitable and prospects positive; while BAE reasonably believed it had a strong case, that alone was insufficient to justify refusing mediation. However, considering BAE’s admissible ‘without prejudice save as to costs’ offer, which NGM failed to better, the judge concluded the fairest outcome was to leave the general rule intact, ordering NGM to pay BAE’s costs without reduction.
Judgment
Judgment (No 2)
MR JUSTICE RAMSEY:
Introduction
In these Part 8 proceedings I gave judgment upholding BAE’s contention that on a true construction of the Licence Agreement, BAE was entitled to terminate that agreement for convenience under the provisions of Clause 10.4 of the Enabling Agreement which governed the Licence Agreement.
In relation to costs NGM accepted the principle that BAE was entitled to its costs to be assessed on a standard basis if not agreed, but contended that those costs should be reduced by 50% by reason of BAE’s unreasonable refusal to mediate the dispute. BAE challenges both the premise and the appropriateness of any reduction in its costs in this case.
Refusal to Mediate
When the court comes to consider costs and to exercise its discretion under CPR 44.2 , it has regard to all the circumstances including the conduct of the parties before as well as during the proceedings: see CPR 44.2 (4) and (5).
That conduct includes conduct by which a party refuses to agree to alternative dispute resolution: see White Book Part 1 at paragraph 44x.3.21, Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 and PGF II SA v OMFS Company 1 Limited [2013] EWCA Civ 1288 .
In Halsey the particular factors which the Court of Appeal identified as being relevant included the nature of the dispute, the merits of the case, the extent to which other settlement methods had been attempted, whether the costs of ADR were disproportionately high, whether any delay in setting up or attending the ADR would have been prejudicial and whether ADR had a reasonable prospect of success.
In PGF II the Court of Appeal referred to the Jackson ADR Handbook where, at paragraph 11.56, it sets out practical steps which a party should take if it considers it has reasonable grounds for refusing to participate in an ADR process following a request from the other party. Briggs LJ, giving the judgment with which the other members of the court agreed, commented on that paragraph and said at [30]:
“ The ADR Handbook, first published in 2013, after the period relevant to these proceedings, sets out at length at para 11.56 the steps which a party faced with a request to engage in ADR, but which believes that it has reasonable grounds for refusing to participate at that stage, should consider in order to avoid a costs sanction. The advice includes: (a) not ignoring an offer to engage in ADR; (b) responding promptly in writing giving clear and full reason