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The Court of Appeal has sent a clear signal to litigants confirming that it expects them to mediate within the court process: Thakkar v Patel [2017] EWCA Civ 117.

The court refused to overturn a costs sanction on a party who had agreed to mediate but then “dragged its heels” in the arrangement of the mediation, where the other party abandoned the process.

The Court expects litigants to use alternative dispute resolution if it is offered and has previously said that ignoring a mediation proposal will usually warrant a costs sanction even if the circumstances were such that an outright refusal to mediate would have been justified (PGF II SA v OMFS [2013] EWCA (Civ) 1288).

The latest case confirms that, where mediation is appropriate, the parties should cooperate and act proactively in arranging the mediation:

“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”.

In this most recent case, the claimants were landlords claiming for dilapidations of commercial premises. The tenants had counterclaimed for reimbursement of rent paid when the premises could not be occupied due to flooding. The trial judge awarded damages on both the claim and the counterclaim, with a balance of £28,183.52 (before interest) payable to the claimant.

However, when looking at costs, the court considered (a) a settlement offer made by the defendants which the claimants would have failed to beat if not for the addition of interest; and (b) the parties’ conduct regarding attempts to arrange a mediation during a period when the matter was stayed to allow for ADR.

The trial judge thought that there were real prospects that a mediation would have resulted in a settlement. Both parties had initially expressed a willingness to mediate, so there was no refusal, rejection or silence. However, the court decided that the claimants had been “more proactive” and the defendant:

“was to say the least apparently relatively unenthusiastic or lacking in preparedness to be flexible”.

The claimants had made all reasonable efforts over a period of about four months to arrange a mediation but had been prevented by the defendant being slow to respond to proposals of mediators and suitable dates and, when a period was finally agreed, making a variety of excuses as to why the dates were no longer suitable.

In fact it was the claimants who stopped the attempts to schedule the mediation and decided to have the stay lifted and move forward with the proceedings.

The trial judge said that “to some extent they can be criticised (for not) continuing to press for mediation and going the extra mile” but “the reality is that it was the defendants who were the less keen to participate”.

After taking into account the defendant’s conduct regarding the mediation, the judge ordered them to pay 75% of the claimants’ costs of the claim notwithstanding their “well-judged” settlement offer.

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The defendants’ appeal was dismissed. Lord Justice Jackson, giving the lead judgment, agreed that the defendants, whilst not refusing outright to mediate, delayed for so long and raised such difficulties that the claimants lost confidence in the whole ADR process.

The court also agreed that the case was clearly suitable for mediation, highlighting that:

1. the dispute was a commercial one, purely about money
2. the settlement offers made by the parties were only a small distance apart
3. the costs of the litigation were vastly greater than the sum in issue
4. bilateral negotiations between the parties had been unsuccessful.
Jackson LJ commented:

“In those circumstances I would be astonished if a skilled mediator failed to bring the parties to a sensible settlement.”

He found that the costs sanction was “a tough order, but it was within the proper ambit of the judge’s discretion” as the Defendants were primarily responsible. Jackson LJ concluded by saying:

“The message which this court sent out in PGF II was that to remain silent in the face of an offer to mediate is, absent exceptional circumstances, unreasonable conduct meriting a costs sanction, even in cases where mediation is unlikely to succeed. The message which the court sends out in this case is that 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 decision confirms that, even if a party has formally agreed to mediate, delaying or frustrating attempts to arrange the mediation without good reason may constitute unreasonable conduct.

Parties who try to play the system by agreeing to mediate but then rely on logistical “difficulties” to prevent it actually proceeding are likely to be penalised.

If a party faces this kind of behaviour they would be wise not to give up because they may also be criticised in such circumstances.

We would say that parties are well advised to not delay – mediate today – or the Costs you will pay!

For any advice about mediation, or whether your case is suitable for mediation, we are always happy to help.