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Rolf v Gijerin, Court of Appeal, 9 February 2011

10 March 2011
The issues

Building dispute – costs – mediation.

The facts

The case concerned a building contract between a homeowner and a builder. It was heard over four days at the Central London County Court. Mrs Rolf, the homeowner, was dissatisfied with works done by Mr Gijerin, the builder. In July 2008 she issued a Claim Form. Mr Gijerin filed a Defence and made an Application to strike out the claim, which was unsuccessful. Mrs Rolf was ordered to provide proper Particulars. By then Mr Gijerin had ceased acting for himself and had retained solicitors. Eventually Mrs Rolf also instructed solicitors. By then amended Particulars of Claim and a new Defence were served.

In June 2009 Mrs Rolf’s solicitors made a Part 36 offer to settle her claim for £14,000 plus costs. The letter also offered formal mediation or a round table meeting.

There was no reply to that letter. Three weeks later a chaser was sent and there was no reply to that either.

In January 2010, a week before Trial, Mr Gijerin’s solicitors offered to settle the claim for £14,000 plus costs, to be paid over 36 months. The next day Mrs Rolf’s solicitors “amended” her Part 36 offer to accept £21,000 plus reasonable costs in settlement and again offered to mediate or meet to discuss settlement. Later that day Mr Gijerin’s solicitors agreed to mediation. However, they also said their client was in financial difficulty and they would not be representing him at Trial and that any further negotiations would have to be directly with him. In the end the Trial took place between 11th – 15th January 2011, Mr Gijerin representing himself and Mrs Rolf represented by Counsel.

The Judge gave Judgment to Mrs Rolf in the sum of £2,500 in respect of one of three allegations of defective work, but otherwise dismissed her claim. The Judge made an Order that there should be no Order for costs until the 24th June, which was the date of Mrs Rolf’s offer but that thereafter the Defendant should recover costs against the Claimant on the basis that the offer which had been made was too high.

The Defendant Appealed.

The decision

The Judge erred fundamentally in his appreciation of the significance of Mrs Rolf’s Part 36 offer. There was nothing about the Part 36 procedure which stated that an offeror was to be prejudiced as to costs because he had expressed his willingness to accept less than his open position. That would make the procedure a most dangerous one to use. The Judge appeared to have taken the view that apart from the offer, the justice of the case was reflected in no Order for costs. The Judge had not articulated his reasoning but the assumption was that although Mrs Rolf had been awarded £2,500 in damages, nonetheless she had failed on other elements of her claim and had won a relatively small amount. The right Order was the one that the Judge instinctively thought was the right Order to make, namely no Order for costs throughout the action.

The Claimant had been the overall winner, but only just. She had succeeded in getting £2,500 out of a claim which varied between an incoherent £44,435.90 and potentially £92,515.90. In its final form the claim was put at £70,366.90. The largest single element of the claim was considered wholly unreasonable by the Judge. On an issue based approach it was apparent that Mrs Rolf had failed on two of the three main allegations of breach and on the issue of repudiation of the contract. She succeeded on one issue relating to contract law, which took about half a day out of four days of the Trial. On an issue based approach therefore Mrs Rolf came out somewhat lower than even.

Thirdly, there was the fact that the main ground on which Mr Gijerin had prevailed, on the issue of repudiation, had been unpleaded and not even reflected in his two witness statements.

Fourthly, Mrs Rolf had indicated a willingness to settle. Mr Gijerin had spurned the offer until it was too late. He had given various reasons.

He had said that he wanted his day in Court. That of course was a reason why the Courts had been unwilling to compel parties to mediate rather than litigate, but it did not seem to be an adequate response to a proper judicial concern that parties should respond reasonably to offers to mediate or settle. The Court had to have regard, as part of “all the circumstances” in considering costs, to the conduct of the parties. There is authority that such conduct included the reasonableness of a party’s response to a call for mediation – see Dunnett v Rail Track Plc (Practice Note) 2002.

In Hallsey v Milton Keynes General NHS Trust the Court had given consideration as to circumstances in which it might be said that a party had not acted unreasonably in refusing ADR.

In Birchall v Bullard, the Court of Appeal had stated that small building disputes were par excellence the kind of dispute which led themselves to ADR.

In Lord Jackson’s report into costs, Review of Civil Litigation Costs: Final Report, the virtues of ADR were documented.

In this case no reasons had been given for rejecting mediation and the reasons advanced at the Appeal bore no real examination. The spurned offers therefore ought to bear materially on the outcome of the Court’s discretion as to costs.

No Order as to costs did substantial justice between the parties.

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