Wednesday, 18 December 2013

Talk it through to save penalties

Companies that refuse to consider mediation as a way of solving disputes could pay a stiff penalty if the case reaches court, according to one of our legal experts.

Andrew Oranjuik’s comments follow a landmark Court of Appeal ruling which presented a London commercial property tenant with a sky-high legal bill.

The landlord, PGF, was seeking more than £1 million in damages from its former tenant, OMFS, over the alleged disrepair of three office floors in a building on London’s Lombard Street. It had invited OMFS to mediate on two separate occasions, but been met with silence, and appeal court judge Lord Justice Briggs said a lack of response in the face of such an invitation was “unreasonable”.

Andrew, who is from our commercial team, said: “As a result of this, OMFS  was not allowed to recover a substantial proportion of its costs which it would otherwise have recovered. So the message is clear. If you are in a dispute, you can expect to be penalised if the idea of mediation has not been at least considered.”

He said: “Although not every case is suited to mediation, our experience is that it is very often an effective method of resolving disputes much quicker and cheaper than fighting in the courtroom to the bitter end.”

Mediation has been a popular alternative to court proceedings for 10 or 15 years when it comes to resolving commercial disputes. It involves both parties attending a session with a neutral third party, in an attempt to negotiate an out-of-court settlement.

“The Court of Appeal’s decision in the PGF case reiterates the importance of being prepared to consider the option of mediation. Although courts do not have the power to compel businesses to go down this route, the potential and costly consequences for a party that fails to engage in the process are now crystal clear. Failure to consider mediation could land a company with a significant bill which could have been so easily avoided.”