Thakkar Reminder to Mediate

Thakkar –v- Patel [2017] EWCA Civ 117; a reminder of the cost consequences where there is a failure to mediate

It is known that the courts have a wide discretion on what costs orders to make during proceedings and after trial. Ordinarily, the successful party will recover its costs, however as the recent case of Thakkar –v- Patel [2017] EWCA Civ 117 (‘Thakkar’) reiterates, the importance of Alternative Dispute Resolution (‘ADR’) should not be underestimated as in certain circumstances even an unjustified delay to engage in ADR can result in successful parties having a cost order made against them!

In 2013, the case of PGF II SA –v- OMFS Co & Anr [2013] EWCA Civ 1537 (‘PGF II SA’) saw the Court of Appeal consider whether silence in response to a mediation proposal was the equivalent of a refusal to mediate. In determining that indeed it was, Lord Justice Briggs stated that “silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable…”.

This is not to say that mediation is mandatory, however it does show that a sensible explanation of why mediation is refused should always be given.

In the more recent case of Thakkar, the Court of Appeal were once again asked to consider the issue of cost sanctions with regards to mediation, in this instance however both parties agreed to mediate. A window of availability was provided, however the Claimants could not get any further with fixing the details of mediation, and instead, were provided with excuse after excuse as to why this window of availability was no longer suitable.

Lord Justice Jackson determined that whilst the Defendants did not refuse to mediate “they dragged their feet and delayed until eventually the claimants lost confidence in the whole ADR process”.

When comparing this case to the issues in PGF II SA he said “the message that the court sent out… 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 case where mediation is unlikely to succeed”.

With regards to the Thakkar case he said “the message which the court sends out in this case is that in a case where bilateral negotiations fails 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”.

This is not the first time that costs sanctions have been considered where one party has dragged their feet, and delayed ADR. In Car Giant Ltd & Anor –v- London Borough of Hammersmith [2017] EWHC 464 (TCC) (‘Car Giant’), the Defendants argued that the Claimants had unreasonably delayed mediation and ADR. The Claimants had taken the view that mediation was more likely to succeed when the expert views had been fully set out.  This was a perfectly acceptable point of view, and on this basis the court held that whilst there was some delay on the Claimants part in responding to correspondence, the delay was not so great as to justify cost sanctions.

The crucial difference here between Car Giant and the Thakkar case was that in Thakkar there was no reasonable explanation for the delay, and the court concluded that there was a real prospect of settlement if a mediation had taken place. Lord Jackson noted in Thakkar that offers had already been made and were close, the dispute was a commercial one, a matter of numbers rather than complex issues, and the costs of litigation were vastly greater than the sums in dispute.

With this in mind, it is crucial to act promptly when receiving offers to enter ADR. Wherever possible a response should always be given, and litigators should be reminded that silence will be deemed to be a refusal. Likewise, whilst mediation is not mandatory, any refusal should always be supported with clear reasoning, with matters of tactical importance being more likely to be deemed reasonable than a delay occurring simply because one party struggles to find suitable dates for the mediation to take place.