The Court of Appeal in Thakkar v Patel has recently revisited the issue of whether it is reasonable for parties to refuse to mediate and what the costs consequences will be. In this case Lord Justice Jackson issued the stark warning to parties in litigation that “in a case where bilateral negotiations fail but mediation is obviously appropriate, it behoves both parties to get on with it”.
This case concerned the Claimant’s property at 194 London Road, Leicester, which they let to the Defendant. During the tenancy the Defendant complained to the Claimant that the roof was no longer watertight as thieves had stolen some lead, but the Claimant delayed for some months in repairing the roof. At the end of the tenancy in 2010 the Claimant brought a claim for dilapidations and the Defendant counterclaimed in respect of the flood damage caused during the tenancy.
During the Court proceedings both parties indicated a willingness to settle the claims and requested a stay to pursue Alternative Dispute Resolution. The Claimant was proactive in trying to arrange a mediation, suggesting possible mediators and dates for mediation, but the Defendant was slow to respond and raised difficulties that thwarted the Claimant’s efforts. The Claimant lost patience in August 2012 and wrote to the Defendant to say that they no longer had any confidence that a mediation could be arranged.
At trial both parties were successful in their claims, with the Claimant being awarded £44,933.52 and the Defendant being awarded £16,750 on their counterclaim. At the subsequent costs hearing the Judge considered each party’s conduct in the mediation and also the fact that the Claimant had failed to beat the Defendant’s settlement offer of £30,000. Although the Claimant ought to have accepted the Defendant’s offer to settle and was criticised for abandoning efforts to arrange the mediation, the Defendant’s conduct in delaying and ultimately frustrating the mediation process was such that a costs sanction should be applied. The Court of Appeal upheld the costs sanction that the Defendant pay 75% of the Claimant’s costs of their claim.
It has already been established in the case of PGF II SA v OMFS Company 1 Limited that silence in the face of a request to mediate will, as a general rule, be unreasonable conduct leading to a costs sanction. An unreasonable refusal to mediate will also risk a costs sanction (Halsey v Milton Keynes General NHS Trust). This case now makes it clear that where a party causes unreasonable delays to the mediation process or otherwise frustrates a party’s efforts to arrange a mediation, they will be risking the award of a costs sanction.
The message from the Courts could not be more clear: litigants should make efforts to settle claims through alternative dispute resolution and should be very wary of rejecting or ignoring an offer to mediate.
For more information please contact Eleanor Rutherford, Senior Solicitor in our Dispute Resolution team on 01604 463340 or click here
to email Eleanor.