A Reasonable Refusal to Mediate

The Court of Appeal’s decision in Dunnett v Railtrack plc [2002] 2 All ER 850 highlighted the necessity for lawyers and parties to consider ADR, failing which a party may be penalised in costs (see Litigation e-bulletin – Issue No. 2). This has been further highlighted by the judgment of Lightman J in Hurst v Leeming [2002] EWHC 1051.

Background

The claimant, Mr Hurst, was a partner in a firm of solicitors which was later dissolved. Disputes arose between Mr Hurst and his former partners and Mr Hurst issued proceedings against them. Part way through the trial of those proceedings, Mr Hurst instructed Mr Leeming QC through his solicitors.

Mr Hurst lost at first instance, in the Court of Appeal and in the House of Lords. Those unsuccessful proceedings led to his bankruptcy. Mr Hurst blamed the failed proceedings and his consequent financial situation on his legal advice and representation at the time he instructed Mr Leeming. He was unable to bring proceedings against Mr Leeming, his counsel, due to the immunity from suit for negligence in the conduct of proceedings enjoyed by barristers at that time.

Therefore, Mr Hurst sued his solicitors, in effect as vicariously liable for the alleged negligent conduct of the proceedings by Mr Leeming. Mr Hurst issued these proceedings in the Chancery Division. The action was struck out and Mr Hurst was refused permission to appeal by the Court of Appeal. Mr Hurst then commenced fresh proceedings against the solicitors in the Queen’s Bench Division. That action was struck out as an abuse of process.

Following the House of Lords decision in Arthur J.S. Hall & Co. v Simons [2000] 3 WLR 543 removing counsel’s immunity from suit, Mr Hurst brought proceedings against Mr Leeming alleging negligence.

This action was dismissed by Lightman J who then had to deal with the issue of the costs of the action. In the ordinary case Mr Leeming would be entitled to his costs as the successful party, but Mr Hurst submitted that no such order should be made as both prior to and after the commencement of the proceedings, he had invited Mr Leeming to proceed to mediation and Mr Leeming had refused.

Mr Leeming gave a number of reasons for refusing to proceed to mediation:

1. the legal costs already incurred in meeting the allegations and the threat of proceedings;
2. the seriousness of the allegations of professional negligence;
3. the total lack of substance of the claims made;
4. the lack of any real prospect of a successful outcome to the mediation proceedings, given Mr Hurst’s objective to obtain a financial payment from Mr Leeming when there was no merit in his claim; and
5. the character of Mr Hurst as revealed by his actions – that he would not be able or willing to adopt the attitude required if a mediation was to have any prospect of success.

The Judge had to consider whether Mr Leeming was justified in refusing to proceed to mediation.

Decision

Lightman J concluded after ‘anxious consideration’ that ‘quite exceptionally’ the defendant was justified in taking the view that mediation was not appropriate because, viewed objectively, it had no realistic prospect of success. Amongst the factors he took into account were the previous actions commenced by Mr Hurst against his solicitors, the fact that as a bankrupt he had nothing to lose in the proceedings, together with Mr Hurst’s underlying motivations. Mr Leeming was therefore awarded his costs.

Lightman J rejected, however, the suggestion that heavy costs already incurred afforded any form of justification – this was merely a factor to be taken into account in the mediation process. Nor did he think it sufficient that there was an allegation of professional negligence. He commented that practically all allegations of negligence against a professional man or body are serious but that was no reason why an attempt should not be made at mediation. The reflection on the professional competence of a party may need to be reflected in the course of the negotiations and in any settlement, but could not of itself take any ordinary case outside the purview of mediation. Lightman J further commented that the fact that a party believes he has a watertight case is again no justification for refusing mediation and a full and detailed refutation of the opposite party’s case isn’t necessarily sufficient of itself, though may well be a very relevant consideration.

Comment

Lightman J acknowledged that mediation is not compulsory in law. Nevertheless, referring to the decisions of the Court of Appeal in Dunnett v Railtrack and in Cowl v Plymouth City Council [2002] 1 WLR 803, he said:

“..alternative dispute resolution is at the heart of today’s civil justice system, and any unjustified failure to give proper attention to the opportunities afforded by mediation, and in particular, in any case where mediation affords a realistic prospect of resolution of dispute, there must be anticipated as a real possibility that adverse consequences may be attracted.”

Although he accepted that a party may refuse to proceed to mediation with impunity if there is, objectively assessed, no real prospect of success (as was exceptionally the case in these proceedings), he described such a refusal as “a high risk course to take”.

The decision in Hurst v Leeming follows the Court of Appeal’s decision in Dunnett v Railtrack plc and emphasises the need for litigants to consider ADR carefully. Lightman J has gone further and has provided some useful clarification on the factors to be taken into account (and those not deemed relevant) in deciding whether or not, viewed objectively, it is reasonable to refuse to proceed to mediation and, more particularly, the criteria relevant to whether or not there is a reasonable prospect of mediation succeeding.

© Herbert Smith 2002

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