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Should a Mediation Settlement Be Binding?

Should a Mediation Settlement Be Binding?


In a recent case, the court emphasised the importance of upholding agreements made during mediation. The parties agreed in a settlement to the sale of a house based on an independent valuation, but one party backed out, claiming they needed more information. The court ordered them to pay indemnity costs as a penalty for reneging on the agreement. Do you believe they should have to pay?

Indemnity costs order where a person reneges on a settlement agreement in mediation

What happens when parties renege on an agreement reached in mediation?

In this case Denny v Babaee & Ors [2023] EWHC 1490 (TCC) (19 June 2023) the Court considered the position:

“I turn to the second potential ground for an indemnity costs order. The parties engaged in mediation in November 2022. They entered into a settlement agreement dated 29 November 2022 signed by the Claimant and the First Defendant. It was not possible to reach a binding agreement for the sale of the land because of the provisions of section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989, but the settlement agreement provided in essence for the house to be subject to independent valuation followed by the purchase by either the First or the Third Defendant (or their nominee) at the valuation price. In addition the Third Defendant was to pay the Claimant the sum of £200,000 by way of damages. The Claimant contends that, notwithstanding the obtaining of a joint valuation in accordance with the agreement on 6 December 2022, which valued the house at £1.3 million, the Defendants did not fulfil their side of the bargain by purchasing the house.

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