In Thakkar v Patel (2017), the Claimants failed to beat the Defendants' settlement offer, yet recovered 75% of their costs. Is this fair? The Defendants thought not and appealed. The Court of Appeal confirmed this ruling.
Facts The Claimants leased a building to the Defendants and it was used as a school. Thieves stole lead from the roof. It rained. The school was unusable from the water damage. The Claimants sought £210,000 for dilapidations and the Defendants sought compensation of £41,875 for rent during the period that the school was unfit for habitation as a result of the water damage. Initially the parties seemed to want to settle. In July 2011, the Defendants offered £30,000 plus costs with a drop hands on the counterclaim which the Claimants did not accept but made a Part 36 offer to accept £86,400 in August 2011. The Defendants then withdrew their offer and the case was stayed to enable alternative dispute resolution. Both parties expressed a willingness to mediate. The Claimants were proactive and the Defendants were slow to respond to letters and raised difficulties. Nearly a year later no progress had been made on a mediation date and by October 2012, directions were given to progress matters for a trial in October 2013. The Trial was part heard and the Claimants made a Part 36 offer to accept £40,000 in February 2014. The Defendants rejected this and the Trial resumed with a net award (taking account of the counterclaim) of £28,183.52 due from the Defendants together with a subsequent award of interest. The Trial Judge noted that the Defendant's original offer of £30,000 was "well judged" but that it could not have the usual costs consequences of a Part 36 Offer as it had been withdrawn. The offer remained relevant to costs (under CPR Part 44.2(4)(c)) if it should have been accepted within 21 days, but on the facts the Claimant did not have sufficient information to assess the offer at that time. The Trial Judge then considered the failed mediation. Although the Claimants called off the process, the Defendant was "unenthusiastic" and "less keen to participate". There would have been a real prospect of settlement if a mediation had taken place and the Trial Judge ordered the Defendants to pay 75% of the costs with the Claimants paying the costs of the counterclaim. Court of Appeal The Court of Appeal agreed with the Trial Judge that both parties were in a similar position concerning their knowledge of the Claimants' claim but only the Defendants had knowledge of their counterclaim and were better placed to assess litigation risk. The Court of Appeal affirmed the Claimants were reasonable. The Court of Appeal then addressed mediation and agreed that the Claimants "took proactive steps", whereas the Defendants had "dragged their feet and delayed for so long that the claimants lost confidence in the process". The Court of Appeal gave five reasons why a mediation would have had a real chance of settlement: