To ADR or not to ADR? Recent judicial guidance

There are a number of perceptions about mediation that will be difficult to change despite its ever increasing popularity. One such perception is that if you agree to mediation then, as a Claimant, you are willing to compromise to some extent or, as Defendant, you are willing to pay.

It is often difficult tactically in such a culture to be the first to suggest ADR for fear that this will give the impression that you are not confident about your case. Sometimes the issue is, as a result, left to “arise naturally during the course of the litigation rather than any party seizing upon what can often prove to be a perfect opportunity for early resolution and costs savings.

Two recent cases may help to overcome these obstacles as they demonstrate an increasing expectation amongst the judiciary for the parties to have seriously considered mediation long before a case comes to trial.

In Dunnett v Railtrack (CA 22 Feb 2002), Railtrack was successful in its defence of Ms Dunnett’s claim both at first instance and on appeal. However, the Court refused to order that Ms Dunnett pay Railtrack’s costs because of their earlier refusal to agree to the Claimant’s suggestion of mediation.

The case concerned some horses that Ms Dunnett kept in a field adjacent to a railway line. A gate on to the track was left open and some of her horses escaped on to the track and were killed. Ms Dunnett had previously been told (incorrectly) by Railtrack contractors that the gate could not be padlocked.

Litigation ensued against Railtrack, but the initial case against them was dismissed.

Ms Dunnett sought leave to appeal which was granted, but the Judge suggested to Ms Dunnett that she consider mediation. She subsequently suggested this to Railtrack, but they refused. However, they did make a Part 36 offer to settle the case for £2,500 inclusive of interest and costs. They also offered to allow the appeal to be withdrawn without any cost penalty against Ms Dunnett. Given their success at first instance this may appear, at first blush, like a generous offer.

Ms Dunnett, however, pressed on to the Court of Appeal where she was, again, unsuccessful. Despite the proposals made by Railtrack to settle the dispute before the hearing, the Court still refused to award Railtrack their legal costs. The courts did so solely as a result of Railtrack’s refusal to consider mediation. This is the first time that a Court has imposed such a sanction for refusal to consider mediation, although the possibility of such action being taken had been raised in earlier cases.

It is fortunate in many senses that the case law has moved on from Dunnett as it could not have been the intention of the Judge that all cases, however unsuitable, must be mediated should one of the parties request it.

Hurst v Leeming decided on 9th May 2002 by Mr Justice Lightman, provides further useful guidance. Mr Hurst withdrew his case against Mr Leeming following a frank discussion about the case with Mr Justice Lightman. Mr Leeming QC had been Mr Hurst’s Counsel in an earlier unsuccessful case which resulted in Mr Leeming himself being sued.

Whilst Mr Hurst agreed to withdraw his claim, costs remained in issue and Mr Hurst argued that he should not have to pay costs because an earlier offer to mediate had been refused.

Mr Leeming set out five reasons to justify his refusal to mediate:

• the high level of costs that had already been incurred in defending the proceedings
• the allegations were of serious professional negligence
• the claim lacked any substance. The Claimant was unable to make a balanced evaluation of the facts
• there were no real prospects of the mediation being successful.

The Judge did not regard the level of costs, the nature of the allegations nor the strengths of the case as sufficient reason to refuse to mediate. However, he did stress that each case must be viewed objectively and that if mediation can have no real prospect of success that would be reason enough to refuse. In his case he agreed with Mr Leeming QC that the prospects of mediation being successful were extremely unlikely.

The Judge stressed that refusal to mediate is a high risk strategy because the mediation process itself can:

“bring about a more sensible and conciliatory attitude on the part of the parties

that perhaps would not be apparent if mediation was not attempted.

Hurst v Leeming therefore serves as a warning that if mediation is not considered, the costs consequences can be serious in all but the most exceptional of situations.

No longer is it the case therefore that any agreement to mediate should be seen as a sign of weakness in view of the serious consequences that may otherwise follow.

For further information please contact Colin Masson at [email protected] or on +44 (0)20 7367 2282.