Mediations - when is it acceptable not to partake?

Increasingly, the process of mediation is used to resolve commercial disputes. However, parties should bear in mind that mediation is not a compulsory process. A party is entitled to refuse to take part in a mediation, but he must give very good reasons for his refusal and must be aware that refusal to mediate is a risky business which, if misjudged, can result in severe penalties.

In the case of Hurst v Leeming decided on 9 May 2002 the claimant, who lost his case, argued that no costs order should be made against him because both before and after proceedings had been issued he had asked the defendant to proceed to mediation and the defendant had refused. The defendant gave a series of reasons for refusing to proceed to mediation, as follows:

1) the legal costs already incurred in meeting the allegations and the threat of proceedings;

2) the seriousness of the allegations (professional negligence);

3) the lack of substance of the claims made;

4) the character of the claimant as revealed by the actions he had commenced and the claimant’s response to the explanation of the defendant’s conduct; and

5) the lack of any real prospect of a successful outcome to the mediation proceedings.

Mr Justice Lightman dismissed the first four reasons as inadequate justification for refusing to mediate. However, he held that if a mediation can have no real prospect of success, a party may, with impunity, refuse to proceed to mediation on this ground. Costs of the action were awarded in favour of the defendant.

The individual facts of a case must always be viewed objectively when deciding whether to proceed to mediation. In this case the judge held that the defendant was justified in taking the view that mediation was not appropriate because the claimant was obsessed with the injustice which he considered had been perpetrated on him and was a bankrupt who had nothing to lose in bringing the case to court. He stressed, however, that the facts of this case were “quite exceptional”, and that any unjustified failure to give proper regard to mediation options, would risk adverse consequences.

For further information, please contact Sophie Elboz at [email protected] or on +44 (0)20 7367 2958 or Claire Paget at [email protected] or on +44 (0)20 7367 3789.