Recent Court of Appeal decision highlights importance of Mediation/ADR

James McCulloch, solicitor, Cozens-Hardy LLP

A decision by the Court of Appeal in relation to the cost consequences of a refusal to mediate has reinforced the value the Court places on parties engaging in some form of Alternative Dispute Resolution (‘ADR’) to resolve matters before they come to Court.

The recent case centred on a claim by a commercial landlord against a former tenant for dilapidations. The original claim was for a total of approximately £1.9million. Various offers were made throughout the case and the Claimant ultimately accepted one of the Defendant’s offers the day before trial. That offer had been made a significant time earlier in the proceedings.

Under the normal rules the Defendant should have been able to recover their legal costs from the Claimant from 21 days after they made their offer, but the Claimant argued that they had offered to mediate on two occasions and the Defendant had ignored these requests. They therefore argued the rules should not apply. The Court hearing the initial matter agreed with the Claimant and did not order them to pay the Defendant's costs in the normal way.

The Defendant appealed to the Court of Appeal stating that they had not refused to mediate, they had not responded because they did not believe that mediation would have any chance of success. The Court of Appeal rejected this argument and stated that silence in the face of a request for mediation was the same as a refusal. They went on to state that the Defendant should have stated their reasons for not wanting to mediate at the time - but that even if they had done this, those reasons would have needed to be reasonable, which in this case they did not consider them to be. They therefore affirmed the original Court’s decision to refuse the Defendant their costs, although they stopped short of ordering the Defendant to pay the Claimant’s costs (as the Claimant had requested at the appeal).

This case further highlights the importance of ensuring that attempts are made to resolve disputes using alternative methods, and the importance the Court will place on a party failing to engage in such a process where the other party has offered to do so. Consequently, anyone involved in a dispute should make sure that they understand the consequences of an offer to participate in ADR/Mediation, and it is likely that requests to do so will continue to rise.



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