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Court gives guidance on 'reasonable' attempts to negotiate or mediate in disputes

Parties to legal disputes will welcome guidance from the Court of Appeal on their expected conduct during attempts to negotiate settlement and their approach to mediation, to avoid costs penalties in subsequent court proceedings.

A landlord blocked up an internal door leading to a swimming pool, failed to maintain the gym, and replaced a communal jacuzzi with a sauna. A tenant sued for loss of amenity and won on every point.

Usually, the losing party is ordered to pay the winner's legal costs. However, the landlord argued that the tenant's legal costs in this case were incurred, in part, by her unreasonable failure:

  • to mediate or negotiate a settlement before the dispute reached court;
  • to respond properly to the landlord's attempts to settle or compromise.

He argued her legal costs were, therefore, due in part to her unreasonable conduct and he should not have to pay all of them.

The court found both parties had tried to agree dates for mediation, but the tenant had genuinely been unable to attend on any of the landlord's dates. It therefore rejected the landlord's argument that she had unreasonably refused mediation.

The court also rejected the landlord's argument that the tenant had unreasonably failed to negotiate. It ruled that the proper test was whether the landlord had made reasonable offers which the tenant had unreasonably rejected. Applying this test, it found that the tenant's conduct in refusing the landlord's offers (which failed to include compensation and proposed each side bear its own costs) was not unreasonable.

Recommendation

Parties to disputes should ensure their conduct is reasonable, notably including:

  • any pre-conditions they set;
  • the terms of settlement offers made;
  • their responses to offers from the other side;
  • their approach to negotiation;
  • their willingness to engage in mediation.

Otherwise, they risk costs penalties, especially where they win but are awarded less than they originally claimed.

Case ref: Newman v Framewood Manor Management Company Ltd [2012] EWCA Civ 959

 



Jonathan Waters
is the founder of Helix Law. Before qualifying as a Solicitor he worked in industry and in investment banking for over a decade. He was also the Partner in charge of Commercial Litigation, Employment Law and Property Litigation at Stephen Rimmer LLP. Jonathan has wide experience of helping and advising businesses to avoid or to deal with commercial disputes and in particular construction disputes. 

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This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law is not responsible or liable for any action taken or not taken as a result of  this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice. 

Contact Helix Law on 01273 761 990 or email info@helix-law.com

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Helix LawHelix Law Limited is a limited liability company registered in England and Wales. Registration Number 07845461. A list of Directors is available for inspection at the Registered Office: 1 Frederick Terrace, Brighton, BN1 1AX. Authorised and regulated by the Solicitors Regulation Authority.