An offer you can refuse?

The Civil Procedure Rules, along with the principles of proportionality and the like, are being paid little more than lip-service by litigation practitioners. Judges, charged with case management responsibilities, may express their exasperation with the prevalence of bad old adversarial habits, but there is little they can do to stamp them out.

Many practitioners have adapted to CPR by using them as just another element in the tactical game. What lies at the heart of the problem here is the principle that, in deciding the responsibility for the overall costs of the proceedings, the courts should take into account the parties' willingness to explore mediation. A number of recent decisions suggest that, whatever the final outcome of the litigation, the courts are likely to impose cost penalties on a party that has rejected an offer to mediate.

Now, there can be all sorts of reasons why mediation is simply not a real option. It may be because the dispute, for whatever reason, requires a court decision. Or it may be because the parties are so far apart that there is no prospect of mediation working. Such cases are in the minority. Much more common is the situation where one side is simply going through the motions of proposing mediation in order to secure an advantage on costs.

This problem has been clarified by a recent decision of Mr Justice Lightman in a most unfortunate case involving a partnership dispute. Few types of dispute generate more heat and vindictiveness, and there can be few partnership disputes that have given rise to such a veritable torrent of litigation as Hurst vs Leeming (see Tony Bingham's "A tragic obsession", 20 September 2002, page 58).

Having fallen out with his partners, Mr Hurst took them to court seeking an account of profit. He lost at first instance in the Chancery Division and then on appeal to the Court of Appeal and the House of Lords. By this stage he must have been facing a mountain of legal costs and no doubt this contributed his bankruptcy.

That, however, was not the end of the matter.

There can be few partnership disputes that have given rise to such a veritable torrent of litigation as Hurst vs Leeming

Mr Hurst was unhappy with the advice he had received from his barrister. Being unable to sue him because of the dispensation against action that barristers at that time enjoyed, Mr Hurst did the next best thing: he sued his solicitor. He got nowhere with this and permission to appeal was refused.

The irrepressible Mr Hurst then decided to bring a further claim against his solicitors. That claim was also rapidly struck out as an abuse of process. The final chapter in this sorry saga was when Mr Hurst took advantage of the lifting of the dispensation by suing his barrister in the Chancery Division.

When this claim came to trial, it appears that Mr Justice Lightman had a private word with Mr Hurst and persuaded him to abandon his claim. However, this left open the issue of costs. Mr Hurst argued that his former partner Mr Leeming should pay his costs since the latter had refused an offer of mediation that Mr Hurst had made before the case came to trial.

The evidence showed that Mr Leeming had rejected the offer of mediation for a number of apparently strong reasons. First, there was the considerable costs that had already been incurred. Second, there was the serious nature of the allegations against him. Third, it was clear that Mr Leeming believed he had a watertight case and, finally, he had provided a full and detailed refutation of the grounds of claim.

In deciding costs in Mr Leeming's favour, the judge identified the test as being whether it could reasonably be said that when the offer was made, mediation had no real prospect of success. The judge pointed out that, in that light, any refusal to mediate would be a high-risk strategy. However, taking the view that Mr Hurst had become "incapable of a balanced evaluation of the facts", the judge decided that there had never been any prospect of a successful mediation.