This was an appeal by the defendant, Manuel Revert, from a decision of His Honour Judge Hegarty QC delivered on 6 December 2002. The Judge ordered that the claimant, Virani Limited, was entitled to damages which were to be assessed in US dollars. Manuel was a purchaser of cloth, while Virani was an English importer of cloth within the European Union. The parties entered into a contract by which Virani was to supply 350,000 m of cloth to Manuel. Manuel refused to take delivery of the cloth and a dispute arose. Virani sold the cloth to an Italian company and then claimed the difference between the price that Manuel should have paid and the price obtained from the Italian company. Virani won, and the question that came up was the appropriate currency for the award of damages.
The issue was whether the parties, when entering into the contract, had reasonably contemplated that the appropriate currency for any future damages would be in US dollars. However, at appeal a further and perhaps more interesting issue arose in respect of ADR. When the Court of Appeal gave permission for appeal, the Court of Appeal's court annexed mediation service was offered to the parties. Manuel, refused to engage in mediation, or indeed in any form of ADR and even refused to negotiate with Virani.

Reference

On the first issue, the Court of Appeal held that it must have been in Virani's reasonable contemplation that Virani would have tried to have taken steps to protect itself against currency fluctuations because it was operating within an international market. Manuel was also an international player, and so therefore would be familiar in the taking of such steps. The US dollar was therefore the appropriate currency. In respect of Manuel's failure to take up the Court of Appeal's suggestion, the Court of Appeal stated that when single Lord Justice in the Court of Appeal granted an appeal and suggested that the Court of Appeal's mediation service be offered, it was expected that the parties would take up that offer. As Manuel had failed to engage in any form of ADR or even to negotiate with Virani then Manuel would have to pay Virani's costs on the penalty indemnity basis.

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Postscript

This is yet another case dealing with the costs sanctions that might be attracted for a failure to engage in ADR, mediation, or indeed any form of negotiation. It has now become clear that a court will not necessarily force a party to mediate, as any formof ADR may be acceptable. Indeed, it appears that a court would be willing to accept a party's serious attempts at round table talks in order to reach a negotiated settlement. However, a failure to enter into any of those processes will most clearly lead to cost penalties. In this case Virani won at first instance and then again on appeal. Therefore, Virani following the general rule would have obtained its costs in any event, but only on a standard basis. The penalty on Manuel for failing to engage in any form of ADR was that Virani's costs would be assessed on an indemnity basis, such that Virani would obtain a greater proportion of its costs.