By David Watkinson of Garden Court Chambers Mediation.
For some time courts at all levels have sought to encourage parties to mediate or, at least, show that mediation has been seriously considered by imposing costs sanctions in the event of failure to do so. The case of Thakkar v Patel  EWCA Civ 117 (Jackson LJ, Briggs LJ) is a recent example which applies to claimants and defendants alike. The Court of Appeal dismissed a defendant’s appeal against the trial judge’s award to the claimant of 75% of his costs of the claim, having concluded that there were “real prospects of settlement” if a mediation had taken place and that the prime responsibility for it not happening lay with the defendant who had delayed responding about arrangements for mediation and continually rejected proposed dates with “a variety of excuses” until the claimant lost confidence in the whole ADR process.
The dispute concerned a claim for dilapidations and a counterclaim for disrepair arising out of the leasing of a property for use as a school. The claim was for £210,000 and the counterclaim for £41,000+. The trial judge awarded near £50,000 on the claim and near £17,000 on the counterclaim. With interest added, ultimately the balance due to the claimant was just over £32,000. The total costs incurred on both sides was £300,000. At an early stage the defendant had offered £30,000 plus costs to settle both claims which the claimant did not accept. That offer was not made under Part 36. At a later stage the claimant made a Part 36 offer to accept £40,000 in settlement of the claims. The defendant did not accept that offer.
In conclusion, Jackson LJ said “The message which this court sent out in [an earlier case] 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”.
Perhaps the most interesting part of the judgement is where Jackson LJ outlined why in this case mediation was “obviously appropriate”. He gave five reasons:- (1) It was purely about money (2) The gap between the parties was or became a narrow one (3) The costs of litigation were vastly greater than the sum in issue (4) Negotiations had been unsuccessful (5) The mediator would have pointed all this out. “In those circumstances I would be astonished if a skilled mediator failed to bring the parties to a sensible settlement”.
Of course, no two cases are the same (although, particularly in money cases, all or some of the above features are far from unique) and the gap between an “obviously appropriate” case for mediation and an inappropriate one can be narrow. Nevertheless litigants and their advisers need to consider which side of the line their case falls if, following this judgment, they are to avoid the risk of serious cost consequences.