Parties receive considerable encouragement by the courts to mediate. Recent Court of Appeal decisions reinforce that approach.
In Thakkar v Patel  EWCA Civ 117, the Court of Appeal stated '.if one party frustrates the process by delaying and dragging its feet for no good reason, that will merit a costs sanction'.
What is mediation?
Mediation is a voluntary, confidential and flexible form of Alternative Dispute Resolution where a neutral third party selected by the parties (the mediator) facilitates negotiations between the parties.
Following the exchange of mediation statements and key documents by the parties, the mediation takes place at which each party's perspective on the dispute is given and the mediator moves between the parties in an attempt to negotiate a settlement.
A Mediation Agreement governs the mediation. This will require the parties to treat all discussions and documents which form part of the mediation as confidential and without prejudice. This allows the parties to have a frank discussion without fear of prejudicing their position.
Although the costs of mediation are significantly lower than proceeding to trial, such costs can run to several thousands of pounds including legal fees and the mediator's fee. Each party usually bears its own legal fees incurred in connection with the mediation. The mediator's fee is usually split between the parties.
The approach by the courts
The Court expects parties to engage fully with the mediation process. The decision of PGF II SA v OMFS  EWCA (Civ) 1288 sent a clear message to parties that constructive engagement and proactive communication is key in exploring whether or not the case is suitable for mediation. Ignoring a mediation proposal will result in costs sanctions irrespective of whether refusing to mediate would have been reasonable in the circumstances.
The Court of Appeal has reinforced the message in the recent decision of Thakkar v Patel  EWCA Civ 117, when it stated '.if one party frustrates the process by delaying and dragging its feet for no good reason, that will merit a costs sanction'.
Thakkar v Patel  EWCA Civ 117
In Thakkar the claimant landlords claimed for dilapidations of commercial premises. The tenants brought a counterclaim requiring the reimbursement of rent where a flood prevented them from occupying the premises. Although both parties were awarded damages on their respective claims, the claimant was owed a balance of £28,183.52.
When addressing the question of costs, the court noted that the claimants were proactive in their pursuit of and engagement with the suggestion of mediation whereas the defendant 'was to say the least apparently relatively unenthusiastic or lacking in preparedness to be flexible'.
The claimant endeavoured to arrange the mediation over a period of four months before closing down those attempts and applying to lift the stay and progress with proceedings.
As a direct result of the defendant's conduct in respect of mediation, the court ordered the defendant to pay 75 percent of the claimant's costs of the claim. The defendant appealed.
The Court of Appeal agreed with the trial judge's assessment of the behaviour of the parties. It stated that the case was one which should have been mediated. Jackson LJ commented 'I would have been astonished if a skilled mediator failed to bring the parties to a sensible settlement'. Giving the lead judgment, Jackson LJ's observations included:
- the costs of the litigation were much greater than the claim amount
- the settlement offers put forward by the parties were not far apart
- negotiations had been unsuccessful between the parties
Although the Court of Appeal agreed that the costs sanction against the defendant where both parties were to blame for the failure of the mediation process, it concluded that the order was 'within the ambit of the [trial] judge's discretion'.
The courts are committed to ensuring that parties cooperate to explore whether their dispute can be resolved through mediation.
The Court of Appeal cases of PGF and Thakkar confirm that each parties' conduct in respect of mediation, or the idea of it, will be carefully scrutinised when dealing with the question of costs.
- proactively cooperate, communicate and engage with each other regarding mediation
- avoid delaying the mediation by seeking to rely on logistical difficulties
- 'go the extra mile' and continue to advocate and press for mediation even when faced with a reluctant opponent. Expect to be criticised if you fail to do so
Our Dispute Resolution and Compliance team are skilled in all aspects of mediation and settlement. Please get in touch if we can help.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.