The Court of Appeal recently reminded litigants that they must give mediation proper consideration and that anything less will result in cost penalties being imposed.
In the recent case of Thakkar v Patel, the claimant owned a building that was leased to the defendant. The property was vandalised and as a consequence suffered flooding. The claimant delayed carrying out repairs for several months during which time the building could not be used. The lease subsequently came to an end and the claimant made a £210,000 claim for dilapidations. The defendant counterclaimed for £41,875 in respect of rent which it had paid when the premises could not be used.
The claimant proposed mediation and, following an initial agreement to mediate, was proactive in making arrangements and identifying possible mediators. The defendant, by contrast, was slow to respond and raised hurdles that ultimately frustrated the claimant’s efforts. The claimant eventually lost patience and told the defendant that they no longer had any confidence that mediation could be arranged.
At trial, both parties were successful with their respective claims. The claimant was awarded £44,933.52 and the defendant was awarded £16,750 on their counterclaim.
In deciding the issue of costs, the court examined the parties’ conduct in relation to mediation. It found that neither had refused to engage in mediation or ignored the request to consider it. However, the claimant had been more proactive and, by contrast, the defendant was unenthusiastic and had shown no flexibility when it came to agreeing the mediation arrangements. The court considered that there had been real prospects of a settlement being achieved had the parties engaged in mediation. For those reasons, it held that the defendant should pay 75% of the claimant’s costs and the claimant should pay the costs of the defendant’s counterclaim. The defendant appealed.
The Court of Appeal held that the vast majority of the costs of the proceedings would have been saved had there been a settlement and, while the decision to penalise the defendant in costs was tough, it was not so tough as to warrant interference by it. The appeal was therefore dismissed.
In a clear warning to all litigants, Lord Justice Jackson stated: “…in a case where bilateral negotiations fail but mediation is obviously appropriate, it behoves both parties to get on with it. If one party frustrates the process by delaying and dragging its feet for no good reason, that will merit a costs sanction.”
This case acts as a reminder to all parties that they are required to give proper consideration to mediation. Avoiding it is not an option. The parties cannot ignore a request to mediate; they cannot blankly refuse to mediate; they should engage in the process rather than simply pay lip service to it. Failure to do so will result in costs penalties being awarded against them.