Jackson warns of “harsh” costs sanction over mediation frustration

A party that frustrates the mediation process by “delaying and dragging its feet for no good reason” will face a potentially “harsh” costs sanction as a result, Lord Justice Jackson has warned.

Thakkar and Anr v Patel and Anr [2017] EWCA Civ 117 was decided in January but has only come to light recently. It concerned a dilapidations claim and counterclaim for rent repayment over a school in Leicester.

Both parties achieved a measure of success at trial but, finding that the defendant tenants had been unenthusiastic about a mediation being pushed by the claimants earlier in the proceedings, the judge ordered the defendants to pay 75% of the claimants’ costs.

On appeal by the defendants, Lord Justice Jackson (pictured), sitting with Lord Justice Briggs, found: “The defendants, while 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. The judge held that this case was suitable for mediation. He held that, if there had been a mediation, there was a real chance of achieving a settlement. Those findings were plainly correct.”

Had the case settled, he continued, “the vast majority of the litigation costs would have been saved”.

Jackson LJ referred to the Court of Appeal’s 2013 ruling in PGF II SA v OMFS Company. He said: “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. In the present case, the costs sanction was severe but not so severe that this court should intervene.”

PGF II was cited in another Court of Appeal case this week, which included a submission from the losing defendants that the trial judge had failed to make some allowance in their favour for the fact that the claimant refused to or failed to engage with their proposal that the dispute should be referred to mediation.

In Gore v Naheed and Anor [2017] EWCA Civ 369, a dispute over a right of way, Lord Justice Patten said he had “some difficulty in accepting that the desire of a party to have his rights determined by a court of law in preference to mediation can be said to be unreasonable conduct particularly when, as here, those rights are ultimately vindicated”.

He recounted that, in PGF II, a failure to engage, even if unreasonable, did not automatically result in a costs penalty. It was simply a factor to be taken into account by the judge when exercising his costs discretion.

Patten LJ went on: “In this case, the judge did take it into account but concluded that it was not unreasonable for Mr Gore to have declined to mediate. His solicitor considered that mediation had no realistic prospect of succeeding and would only add to the costs.

“The judge said that he considered that the case raised quite complex questions of law which made it unsuitable for mediation. His refusal to make an allowance on these grounds cannot in my view be said to be wrong in principle.”

This post was posted in ACL e-Bulletin

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Costs News
Published date
26 May 2017

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