...Due to them saying that it is 50% each of our fault I was wondering if I should push for a 50%reduction in the bill and how this would all stand legally due to it being their fault for not billing me and also irresponsibly letting the bill to get to such a high amount. I have been using the service for the time they are billing me...
I'm not sure I see the logic in the 50/50 you propose if you have had 100% service. You have also benefited from the use of the saved charges over the 3 years. Are you proposing to share the savings 50/50?
Whatever, you do need to formalise the position, in writing as suggested. If you have any grievance about accuracy or "irresponsibility" raise a formal complaint strictly in accordance with the O2 complaints procedure.
Where I slightly depart from the previous advice is the reference to a possible outcome of legal action to downplay the potential consequencies of the issue. The main risk you face is a default record on your credit history (for 6 years). On this, mobile phone companies shoot first and ask questions later and if you are not smart enough you will find yourself fighting this on the backfoot when it should be the other way round.
I do not see obvious grounds why you should not (in principle) settle in full but on reasonable repayment terms at O2's cost. A pre-requisite is that you have received a fully itemised bill that you accept is accurate (not just a letter) and that you are guided by the final response to any formal complaint you submit.
Finally, don't get hooked by discussions on a contract renewal. £2000 over 3 years is indicative of either heavy use or poor contract value, but that was your choice initially and then from the expiry of the minimum contract term.