The claimant was a landlord seeking to determine whether or not notices served by the tenant to terminate a lease were valid. At trial, the tenant's first notice was held to validly terminate the lease, except in respect of an area known as the store room. The tenant therefore argued that it had effectively won and was entitled to its costs.
The landlord had expressed on a variety of occasions a willingness to mediate the claim, but the tenant had refused. A large part of the dispute related to the factual question of whether vacant possession was required under the lease, and the tenant had effectively lost the factual argument. Further, the Lord Chancellor Department on 23 March 2001 issued a formal pledge that all government departments should settle cases using alternative dispute resolution wherever possible. The issue, therefore, was whether the tenant Secretary of State for Defence was entitled to its costs for winning the issue in respect of the notice when it had lost the factual position, and refused to mediate in the light of the Lord Chancellor's press notice.

Reference

The judge held that the key factor in the issue of costs was the landlord's willingness to mediate, which was refused by the tenant. The formal pledge given by the Lord Chancellor's Department was to be taken seriously and the tenant should have abided by that pledge. As the tenant had not abided by the pledge it was not entitled to recover its costs from the landlord. In conclusion, no order was made as to costs.

For further information, call Tony Francis or Nicholas Gould on 0207 956 9354

www.fenwick-elliott.co.uk

Postscript

There have been series of cases dealing with the effect that a refusal to mediate will have on the ability to recover the costs of an action. The most widely known is Dunnett vs Railtrack. In that case the winning party was not awarded their costs because of their unreasonable refusal to mediate. This is another case that follows that reasoning. However, this case also highlights the importance of the Lord Chancellor's formal ADR pledge that was issued on 23 March 2001. The pledge states that all government departments and their agencies will seek to use ADR wherever possible in order to avoid litigation. As a result of this case it is clear that all of the government departments and their agencies must now seriously consider ADR in order to avoid adverse cost consequences.