In edition 21, we reported on the CA decision in Dunnett v Railtrack Plc where the CA penalised (in costs) the refusal of the Defendant to take up the Court's suggestion that an attempt be made to settle the dispute through ADR. There have been two recent Court cases, which confirm that a party must take care before deciding to reject a genuine ADR proposal.

In addition to this, the Lord Chief Justice, Lord Woolf, has announced that he is supporting an initiative by CEDR to help the Government achieve the Lord Chancellor's pledge to avoid litigation where possible. CEDR are to audit the Government's mediation practices and produce guidance on the best way to develop mediation in a public sector context.

In the first case, Malkins Nominees Ltd v Societe Financiere Mirelis SA and others, Etherton J found in favour of the Claimant in respect of a disagreement over the existence of a conditional agreement. However, he was not prepared to award the successful Claimant all of its costs, since prior to a directions hearing the Defendants had made an offer for ADR which had been rejected by the Claimant. Etherton J took the view that the dispute was one suitable for ADR, and only awarded the Claimant 75% of its costs.

As a consequence the Claimant applied to have the costs order reconsidered. In particular, the Claimant said that when the ADR offer had been made only the Claimant and not the Defendants had given disclosure. The offer of ADR was merely a tactical manoeuvre. The Claimant also pointed out that the Master at the first hearing had not granted the Defendants' application for a stay of proceedings pending ADR.

Whilst on the basis of the new evidence, the Court did recognise that there were reasons why the Claimant had refused ADR, there was no suggestion that the offer was made because the Defendants knew that they would be unsuccessful at trial. The Court remained of the view that the case was one that was suitable for ADR. Therefore, the Defendants were ordered to pay 85% (not 75%) of the Claimant's costs.

In Hurst v Leeming, the Claimant's professional negligence claim against a barrister was dismissed. However, the Claimant suggested that the Defendant was not entitled to his costs because both before and after the commencement of the proceedings, he had refused the Claimant's proposal of mediation. The Defendant put forward a number of reasons for refusing mediation. These included the seriousness of the allegations of professional negligence, the lack of substance of the claims, the fact that legal costs had already been incurred when the proposal was made, the lack of any real prospects of the successful outcome of the mediation and the fact that the Claimant was a man "obsessed with the notion that an injustice had been perpetrated on him, he would not be able or willing to adopt in the course of a mediation the attitude required if a mediation was to have any prospect of success.".

The Judge said,

"mediation is not in law compulsory, and the protocol spells that out loud and clear. But 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 any case where mediation affords a realistic prospect of resolution of dispute, there must be anticipated as a real possibility that adverse consequences [of any refusal to mediate] may be attracted."

The critical factor was whether the mediation had any real prospect of success. If not, a party may with impunity refuse to proceed via mediation. Here, the Claimant suggested that mediation would have led him to accept that his case was weak. The Court disagreed. The Claimant was bankrupt and having nothing to lose in proceedings, may not have been prepared to accept a mediation, which did not result in him obtaining money.

Thus Lightman J recognised that on the facts of this case, mediation was not appropriate because there was no realistic prospect of success owing to the character and attitude of the Claimant. However, he also stressed that this was an exceptional case in that it was clear that the Claimant was plainly wrong about the strengths of this case. Therefore care should be exercised by anyone who rejects a genuine offer of mediation in the future.

Expert Determination

In Inmarsat Ventures Plc v APR Ltd, Tomlinson J had to consider the jurisdiction provided by an expert determination clause. Under an agreement between the parties, the Claimant agreed to inject funds into a joint venture company on the satisfaction of each of four milestones. Clause 7.3 of the Agreement provided that if the parties "cannot agree as to whether or not the relevant milestone has been achieved, the dispute as to whether or not the milestone has been achieved shall be referred to a suitably qualified independent expert".

The expert's decision was to be final and binding. The expert was to act as an expert and not an arbitrator. The parties were to supply the expert with such information as the expert requested and both parties were entitled to supply the expert with such information as they believed the expert required to make his determination. Other disputes under the contract were to be decided by the Courts.

A dispute arose about the first milestone and the Claimant commenced proceedings. It claimed that clause 7.3 did not apply to the dispute because the claim concerned the proper construction of the agreement as well as factual issues regarding whether preconditions of the milestone had been met. The Claimant said that the expert was only there to resolve technical issues relating to the systems, which were the subject of the Agreement. The Claimant said that the matters in dispute were matters of law concerning interpretation of a shareholders' agreement together with the factual questions concerning whether contractual preconditions to the first milestone had been met.

The Court held that the clause was clear. The expert (and therefore not the Court) had exclusive competence to decide whether the milestone had been achieved. Resolution of that question would involve both issues of construction of the contract and questions of fact. There was a range of issues of construction, law and fact, which could arise in relation to the question as to whether any of the milestones had been achieved.

The discipline of the expert was not specified. This was quite possibly because of the range of issues that might arise. The parties were given flexibility to appoint an expert suitable to the particular dispute. It was not the case that the choice of expert would simply be between different types of technical expert. It was also of significance that the dispute resolution clause did not concern the resolution of every dispute that might arise under the agreement but was solely in relation to a single specific and limited dispute.

Expert Evidence

In Great Future International Ltd v Sealand Housing Corporation and others, the CA confirmed that, in general, the proportionate sanction of the failure to serve an expert report on time was that the defaulting party would not be allowed to rely upon that report.

Here the Judge had originally suggested that, owing to the particular circumstances of the case (the Defendants had previously been found guilty of fraud, perjury and forgery), if the expert reports were not served on time, then the Defendants would be barred from defending the hearing. The CA held that this sanction, even though they understood the circumstances in which the original order was made, was disproportionate. The correct approach was to set down a new timetable based on information as to when the reports were ready. If the Defendants failed to meet these deadlines then they would not be allowed to rely upon the reports in question.

Health & Safety

The death of two workers, who were demolishing a kiln when the kiln collapsed burying them under the rubble, has resulted in the conviction for manslaughter and the imprisonment of their employer, Brian Dean, for 18 months. Mr Dean had failed both to provide a safe system of work and to provide the information, instruction, training and supervision necessary to ensure the health and safety of those who died. The demolition had not been carried out under the control of an appropriately experienced individual. It was Mr Dean's responsibility to ensure that such an individual was in control.

In addition, the client was fined £125,000 (plus costs of £10,000) having pleaded guilty to two breaches of the Construction (Design and Management) Regulations 1994. The client had failed both to appoint a planning supervisor and to ensure that a health and safety plan was prepared. A client who commissions work should ensure that work does not begin until there is a health and safety plan in place.

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