The Risks Of Refusing To Mediate

There have been a number of cases where the courts have expressed a desire to encourage parties to mediate especially where the costs of resolving the dispute are likely to be disproportionate to the amounts at stake. The Court of Appeal's decision in the case of Rolf v De Guerin [2011] EWCA Civ 78 provides a further good example of this judicial encouragement.

The Facts

Mrs Rolf entered into a contract with Mr Guerin to build a garage for £34,000 and a loft for £18,000. It was agreed that 25% would be paid in advance and the rest in weekly instalments. The building works did not go smoothly, primarily due to the tendency of Mrs Rolf's husband to interfere with the works. This, together with the eventual cessation of weekly payments, resulted in a repudiation of the contract by Mrs Rolf in August 2007. At the time of this repudiation, the garage had been substantially constructed but the loft had barely been started. Following the breakdown of the contract, Mrs Rolf instructed other builders to finish the garage and claimed she had spent some £20,000 completing it.

Mrs Rolf claimed for damages. The value of her claim varied prior to trial between £44,435.90 at its lowest and £92,515.90 at its highest. By the time of the trial, however, the claim was for around £70,000.

Prior to trial, Mrs Rolf's solicitors made a Part 36 offer to settle her claim for £14,000 plus her costs stating that the offer was open for 21 days. No response was received from Mr Guerin. After the expiry of the offer, they chased and, at the same time, offered to mediate. Again Mr Guerin did not respond. Just prior to the trial, following a change of solicitors, Mr Guerin wrote out of the blue and offered to settle the claim for £14,000 plus reasonable costs payable in monthly instalments over 36 months. The next day, Mrs Rolf's solicitors amended her Part 36 offer to accept £21,000 plus reasonable costs (reflecting a recent re-pleading of her case) in settlement. Again they emphasised a willingness to mediate or discuss settlement. Mr Guerin then offered £14,000 over 3 years as his best offer emphasising his financial difficulties. The offer stated he was prepared to agree to mediation or settlement meeting but none occurred.

Mrs Rolf was awarded just £2,500 by the Judge who held that there should be no order to costs between the parties until three weeks from the date Mrs Rolf's first Part 36 offer expired. From that date Mrs Rolf was to pay Mr Guerin's costs. This was...