Recent case law provides a reminder of the penalties the Courts may impose on a party for only paying lip service to ADR.
In Thakkar and another v Patel and another  EWCA Civ 117, the Court of Appeal emphasised the importance of following through with an agreement to mediate, and upheld a hefty costs order against Defendants who failed to do so.
The Defendants had agreed to mediate but made excuses every time the Claimant tried to make firm arrangements. After around a year of regular attempts to set up a mediation, the Claimant decided to abandon the process having lost faith in the Defendants' intentions to take part. The Court blamed the abortive mediation on the Defendants' conduct and a 'tough' cost penalty was imposed as a result.
The case related to a dilapidations claim brought by the Claimant landlord for £210,000. The Defendants disputed this and counterclaimed for £41,875 for rent paid while the property was unfit for occupation.
At trial, both parties achieved some success, resulting in a balance of £28,183.52 due to the Claimant. The judge then turned to the question of costs.
The trial judge ordered the Defendants to pay 75% of the Claimant's costs of the claim. This was despite the Claimant failing to beat a (withdrawn) settlement offer of £30,000, made by the Defendants in July 2011.
The Defendants appealed, arguing that the Claimant ought to have accepted their offer and should therefore be ordered to pay their costs from the date the offer was withdrawn in August 2011. The Court of Appeal disagreed, and upheld the original costs order. Their reasoning was based on the Defendants' conduct in response to the Claimant's attempts to arrange a mediation, and the high chance of settling had the mediation taken place.
The Claimant had proactively sought to arrange a mediation at an early stage of the dispute. In the decision, Jackson LJ found that the Defendants “... whilst not refusing outright to mediate, dragged their feet and delayed for so long that the claimants lost confidence in the process and closed it down.” Further, "if there had been a mediation there was a real chance of achieving a settlement". At the time, the parties offers were only £10,000 apart, the litigation costs were vastly disproportionate to the sums in issue and the dispute was only about money. In those circumstances, the judges "would be astonished if a skilled mediator failed to bring the parties to a sensible settlement.”
The Courts have already confirmed that silence in response to a request to mediate is unreasonable conduct meriting a costs sanction, unless exceptional circumstances apply (PGF II SA v OMFS Company 1 Ltd). In Thakkar v Patel, the Courts have extended this to a party taking too long to decide in circumstances where mediation is obviously appropriate.
The case provides a salutary reminder that mediation must be taken seriously. Failure to do so, without good reason, is likely to result in a hefty costs sanction whatever the outcome at trial. In this case, the total costs came to approximately £300,000. The Defendants were left with a bill for 75% of these costs, which it could have avoided by mediating.
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