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Failure to mediate : costs consequences following judgment - "a sad case about lost opportunities for mediation" (Rolf v De Gijerin [2011] EWCA Civ 78)

In a recent case relating to a dispute between a homeowner and a builder the Court of Appeal has yet again endorsed the use of mediation to settle disputes, particularly low value claims.  The case demonstrated how, in certain disputes, litigation can be "wasteful and destructive" and a trial should be regarded as a last resort.  

Background  

The case concerned a small building contract between a homeowner (“Homeowner”) and a builder (“Builder”).  The Homeowner contacted the Builder to build the garage and the loft at her home in London. The building works did not go smoothly. Before completion of the works the relationship broke down, particularly as a result of the behaviour of the Homeowner’s husband, and the Builder left the site.

Following the final break down of the contract the Homeowner instructed other builders to complete the work and claimed damages from the Builder for defective work. The Homeowner subsequently wrote 2 letters suggesting settlement negotiations, followed by a CPR Part 36 offer to settle, which included a suggestion for mediation. The Builder rejected this offer. The Homeowner amended her offer and reiterated her willingness to mediate or meet to discuss settlement. The Builder at this stage agreed to negotiate but it was by now too late in view of the imminent trial.

At the County Court trial, the judge awarded the Homeowner only £2,500, otherwise dismissing her claim.  The judge then considered that the Builder had been right not to accept the Homeowner’s Part 36 offer. He made no order for costs up to the date of expiry of that offer but ordered that the Homeowner pay the Builder’s costs thereafter. The Homeowner appealed.  

The Court of Appeal

The Court of Appeal allowed the appeal regarding liability for the costs of the dispute as the facts were that the defendant had refused several offers to mediate until it was too late. The court exercised its discretion to make an order of no order as to costs thus overturning the original judge’s decision on costs.

The Appeal Court believed that the facts of the case indicated that negotiation and/or mediation would have had reasonable prospects of success. It held that the spurned offers to enter into settlement negotiations or mediation were unreasonable and ought to bear materially on the outcome of the court's discretion, particularly in this class of case, a small building dispute. A small building dispute between a homeowner and a small builder is well recognised as one in which trial should be regarded as a solution of last resort, and one which is likely to give an unsatisfactory outcome to the parties at disproportionate cost, to which should be added the cost of disproportionate anxiety.  

Comment

The 2 principal forms of alternative dispute resolution (mediation and negotiation) have proved effective in resolving construction disputes of all sizes. In relation to small building disputes, however, it is particularly important to pursue mediation, in the event that conventional negotiation fails. As this case and many others shows, failure to do so can result in costs penalties. It is important that parties do not leave the first attempt at settlement too late when the expenses of litigation have begun to accelerate and costs are already getting in the way.  

EMW mediators provide assistance in all types of commercial or civil disputes. Call us on 0845 070 6000 and we can help you determine whether mediation is the best way forward.