Talk is cheap; Litigation can be Costly!

06 July 2010

Karen Cole looks at a recent case and considers why mediation is often better than litigation.

Litigation can often be expensive and there can be many good reasons for achieving a resolution prior to a final hearing. The best course of action will always depend on the individual circumstances of the case.

In a recent case decided before the Technology and Construction Court, settlement was achieved after a prolonged dispute between a landlord and tenant over liability for the sharing of the cost of works to a building. The landlord and tenant entered into an agreement for the lease of a call centre under which the landlord was to bear the cost of the tenant variations and fit-out works. The tenant sought from the landlord nearly £6,000,000. The landlord offered £400,000. The case settled by the landlord paying the tenant £750,000 prior to a final hearing.

The question then to consider was which side would bear the legal costs. The general principle is that the loser bears the winner’s legal costs. In this case, both sides argued that the other should pay; the landlord because the settlement was much lower than the sum claimed and the tenant because the settlement was much more than the landlord’s original offer.

Whilst the court effectively ruled that the tenant was the “winner” it only awarded the tenant 50% of the costs it incurred. The judge considered that the original claim was exaggerated and said that the tenant’s conduct in failing to respond effectively throughout the dispute had driven up the costs unnecessarily. The practical effect of the court’s decision was that the tenant’s irrecoverable legal costs exceeded the settlement awarded.

It is clear that persisting to a final hearing, irrespective of the circumstances of the case, can often prove to be costly.

Where appropriate, it is vital to consider mediation or other forms of dispute resolution in order to achieve a quicker and more cost effective settlement.

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