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Costs consequences for those who drag their heels on mediation

The Court of Appeal has provided a useful reminder that there will be adverse costs consequences for the party to a dispute if they drag their heels on mediation.  It has long been accepted that parties in court proceedings must actively seek to resolve disputes using mediation or another form of Alternative Dispute Resolution (ADR).  The recent case of Thakkar v Patel is a pointed reminder that it is not enough to simply pay ‘lip service’ to mediation, you must participate in the process in a timely and reasonable manner.

The case concerned a claim for dilapidations (repairs) of £210,000 made by a landlord of a commercial premises (Thakkar and another) against its tenant (Patel and another).  The tenants responded by claiming they were owed a sum of just over £41,000 for damage caused by flooding at the premises.

Both parties indicated at an early stage that they were open to mediation to resolve the dispute and the court ordered a pause in the proceedings to facilitate this.  The landlord took proactive steps to arrange this but, whilst the tenant did not refuse to mediate, their conduct was considered to be so slow and inflexible to the point where the landlords lost confidence in the mediation process and notified the tenants of their intention to withdraw from it.

During the lead up to the actual court trial the tenant offered to settle the claim by paying the Landlord £30,000 plus the legal costs incurred at that time – the offer was not accepted.  At trial, having taken into account the tenant’s claim for flooding, the court ordered that the tenant should nevertheless pay the net sum of £28,000.  Ordinarily faced with these facts the court would then have taken the view that the landlord was wrong not to have accepted the offer to settle for £30,000.  Had it done so, much of the legal costs incurred in taking the matter to trial could have been avoided.  Usually the court would have ordered therefore that the landlord should pay a large proportion of the tenants’ costs.  In this case, however, the court (and later the Court of Appeal) took a different view.

The court ordered the tenant to instead pay 75% of the landlords’ costs.  It was apparent that the tenants delay and prevarication had resulted in the failure of the mediation process, which in turn resulted in disproportionate costs being incurred in the court proceedings.

This case gives a very clear message to parties involved in disputes which are appropriate for mediation that they would be unwise not to pursue every possible means of reaching a settlement before progressing their claim to trial.

Whilst the facts of each case will determine whether a party has acted reasonably in attempting to settle a dispute, a party should bear in mind that they cannot prevaricate when dealing with mediation because ultimately the Court can, and will, use its discretion to impose costs sanctions.

If you wish to discuss any issues relating to settlement, then please contact Michelle Footer in our Property Litigation team on 020 7288 4782 or by e-mail at michellefooter@boltburdon.co.uk.

You can also contact one of our other solicitors in the Property Disputes team here.

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