Jacqui Joyce looks at a recent case which held that it is not enough for parties to agree to mediate. In order to avoid costs penalties they must actively get on with it and not ‘drag their feet’.
There are vast amounts of cases punishing parties in costs when they unreasonably refuse to mediate. What happens when parties agree to mediate but one side gets frustrated by the actions of the other in not actually agreeing to the arrangements? In Thakkar v Patel  EWCA Civ 117 the Court of Appeal considered this question.
This was a dilapidations claim by a landlord for £210,000 plus interest. The tenant counterclaimed for damages of £41,875 in respect of disrepair to the roof. Both sides requested a stay for ADR.
On 21 July 2011 the tenants made an offer of £30,000 plus costs on the basis they would drop their counterclaim. This offer was open for 21 days. The landlords made a counteroffer to accept £86,000 in settlement of the claim and counterclaim. The tenants withdrew their offer and the proceedings were stayed for ADR.
Both parties expressed a willingness to mediate. The landlords were proactive in making arrangements for a mediation and identifying possible mediators. The tenants, by contrast, were slow to respond to letters and raised all sorts of difficulties. Eventually the landlords wrote summarising their attempts to set up a mediation and concluded:
- ‘Our clients have made all reasonable attempts to arrange a mediation but have been thwarted by you clients’ conduct. Since April 2012 countless weeks have been lost through having to chase for responses. When your clients finally gave a clear window of availability we tried to fix a mediation within that period a variety of excuses have been given as to why that date could no longer go ahead.
Understandably, our clients no longer have any confidence that a mediation can be arranged given your clients’ conduct and do not feel that it is reasonable that they should continue to have to amend their travel plans and work commitments of both themselves, their surveyor, and the writer, when the likelihood is that further ‘circumstances’ will arise that will lead to the postponement of any future date.’
The matter went to trial a year later but was adjourned for lack of time after 3 days. Just before the resumption the landlords made a Part 36 offer to accept £40,000 in settlement of the claim and counterclaim. This was not accepted and the trail continued for 4 more days.
The judge awarded £44,933.52 to the landlords on their claim and £16,750 to the tenants on the counterclaim. After adding interest to both claims the balance due from the tenants to the landlords was £32,083.18.
On the issue of costs the judge noted that the tenants’ offer of £30,000 was ‘well judged’ and was relevant if it was one the landlords should have accepted within 21 days.
He then looked at the parties’ conduct in relation to mediation:
‘Both parties initially and superficially were willing, so it is not a case of simple refusal or rejection or silence. But looking at the matter overall and in particular looking at the chronology …, the conclusion I reach is that the [landlords] were more active. The [tenants] … were to say the least apparently relatively unenthusiastic or lacking in preparedness to be flexible. It was, as has been pointed out, ultimately the claimants who closed matters down and decided to move forward. To some extent they can be criticised for closing down the process, rather than continuing to press for mediation and going the extra mile and I accept that point. But it must be tempered by the finding already made that the reality is that it was the [tenants] who were less keen to participate.’
The judge ordered the tenants to pay 75% of the landlords’ costs of the claim and the landlords to pay the tenants’ costs of the counterclaim.
The tenants argued that at the time the landlord could have accepted it’s offer of £30,000 if one took interest into account the tenants owed the landlords £28,692. Therefore, the landlords failed to beat the tenants’ offer and the tenants should have their costs from that point.
The Court of Appeal stated that the judge had taken this non-acceptance into account when exercising his discretion. However, even though they recognised that the costs sanction was ‘severe’, they refused to intervene. They considered that there had been ‘a real chance of achieving a settlement’ and that the vast majority of the £300,000 costs incurred could have been avoided if the parties had had a mediation during the stay.
Jackson LJ concluded by saying that
‘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.’
Application in practice
The judgment does not give details of what precisely the tenants did in ‘dragging their feet’ which is unhelpful. We often see cases where parties have had extensive amounts of correspondence merely trying to fix a mediation and even some where they try to impose preconditions. These are the ones that make it to mediation. There must be many more that flounder. Following this judgment parties, and their solicitors, now need to take more care to show that they are fully engaged in making a mediation happen and not merely paying lip service.
This article first appeared in the Estates Gazette