Court of Appeal sends further message on mediation: Don't drag your heels in arranging it

A recent Court of Appeal decision is the latest instance of the court expressly sending a message to litigants confirming what it expects of them regarding mediation within the court process: Thakkar v Patel [2017] EWCA Civ 117.

Upholding a first instance decision which it described as "severe, but not so severe that this court should intervene", the court refused to overturn a costs sanction on a party who had agreed to mediate but then "dragged its heels" in the discussions over the arrangement of the mediation, to the point where the other party ultimately abandoned the process.

The Court of Appeal has in recent years made clear to litigants that it now expects them to be proactive and engage constructively with each other during proceedings to fully explore the potential for the dispute to be mediated - to the point where ignoring a mediation proposal will usually warrant a costs sanction even if the circumstances were such that an outright refusal to mediate would have been justified (PGF II SA v OMFS [2013] EWCA (Civ) 1288).

The present case confirms that, where mediation is appropriate, the constructive engagement expected by the court also requires that the parties cooperate and act proactively in the arrangement of the mediation: "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". 

Background

The claimants were landlords claiming for dilapidations of commercial premises. The tenants had counterclaimed for reimbursement of rent paid when the premises could not be occupied due to flooding.   The trial judge awarded damages on both the claim and the counterclaim, with a balance of £28,183.52 (before interest) payable to the claimant. 

In assessing the appropriate costs order, the court considered (i) a settlement offer made by the defendants which the claimants would have failed to beat if not for the addition of interest; and (ii) the parties' conduct regarding aborted attempts to arrange a mediation during a lengthy period when the matter was stayed to allow for ADR.  

The trial judge considered that there were real prospects that a mediation would have resulted in a settlement.  He noted that both parties had initially expressed willingness to mediate, so it was not a case of simple refusal or rejection or silence.  But having reviewed the chronology of events (including contemporaneous correspondence that was apparently not without prejudice, at least as to costs), the court concluded that "the claimants were more proactive" and the defendant "was to say the least apparently relatively unenthusiastic or lacking in preparedness to be flexible".  The claimants had made all reasonable efforts over a period of approximately four months to arrange a mediation but had been thwarted by the defendant being slow to respond to proposals of mediators and suitable dates and, when a clear window was finally agreed, later providing a variety of excuses as to why the dates were no longer suitable.

It was not in dispute that it was in fact the claimants who had ultimately closed down the attempts to schedule the mediation and decided to have the stay lifted and move forward with the proceedings. The trial judge observed that "to some extent they can be criticised (for not) continuing to press for mediation and going the extra mile". However, that was tempered by the finding that "the reality is that it was the defendants who were the less keen to participate".

After taking into account the defendant's conduct regarding the mediation, the judge ordered them to pay 75 per cent of the claimants' costs of the claim notwithstanding their "well-judged" settlement offer (the court did not indicate what the costs award would have been in the absence of the adverse findings regarding mediation). The defendants appealed.

Decision

The appeal was dismissed.   Lord Justice Jackson, giving the lead judgment, agreed with the trial judge's characterisation of the parties' respective conduct regarding the attempts to schedule a mediation.  He accepted that the defendants, whilst not refusing outright to mediate, delayed for so long and raised such difficulties that the claimants lost confidence in the whole ADR process and closed it down.

The court also agreed that the case was plainly suitable for mediation, highlighting that:

• the dispute was a commercial one, purely about money
• the settlement offers made by the parties were only a small distance apart 
• the costs of the litigation were vastly greater than the sum in issue
• bilateral negotiations between the parties had been unsuccessful.

Jackson LJ observed "In those circumstances I would be astonished if a skilled mediator failed to bring the parties to a sensible settlement."

In light of the trial judge's finding that most (albeit not all) of the blame for the aborted mediation lay with the defendants, the costs sanction was "a tough order, but it was within the proper ambit of the judge's discretion".   Jackson LJ concluded his judgment with the following message to litigants:

"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."

Comment

The decision can be seen as the latest in the courts' continually increasing exhortations for litigants to fully explore any potential for proceedings to be resolved through mediation and to actively engage with each other in this regard.  

While there are relatively frequent examples of first instance decisions considering the reasonableness or otherwise of parties' conduct regarding mediation, such decisions do not necessarily present a consistent picture as to where the relevant line will be crossed and they depend to some extent on the particular trial judge's attitude to the merits of ADR generally.  However, when such cases reach the Court of Appeal they can, as in this case, provide more reliable guidance on what will and will not be regarded as unreasonable conduct.  

This decision confirms that, even if a party has formally agreed to mediate,  conduct that delays or frustrates attempts to arrange the mediation without good reason may constitute unreasonable conduct.  

This clearly is a warning to parties who might be tempted to formally "agree" to a mediation but then rely on logistical "difficulties" to prevent it actually proceeding. It should also provide some comfort to parties who are faced with such conduct by their opponents and are deliberating whether they can say "enough is enough" and give up on the process.  However, such "innocent" parties should bear in mind the trial judge's comment in this case that the claimtants' abandonment of the process could also be criticised to some extent (a conclusion which the Court of Appeal mentioned without apparent disapproval) and would be well advised to err of the side of "going the extra mile" to exhaust all reasonable efforts to have the mediation proceed.