Rise of the fudge
24 July 2006
4 November 2013
7 January 2014
11 December 2013
English Commercial Court enforces obligation to resolve disputes by friendly discussion prior to arbitration
8 July 2014
16 June 2014
The increased use of mediation has altered dramatically the English litigation system - and not necessarily for the better, argues Arshad Ghaffar
In the past 15 years the English litigation landscape has changed enormously. The important question is whether this is for the better. Conventional wisdom says yes. But is that really so?
The litigation practitioner in the England of 1990 still generally found Europe a distant place. English courts did things in English ways, despite some vivid statements about “incoming tides” by the judiciary. The bar was still seen as a ’gentleman’s’ profession. Solicitors were trusted and respected and their clients deferred to their judgements in legal matters. Generations of law students had grown up understanding why the UK had no need for a written constitution or a Human Rights Act, why the adversarial system was a good thing and why the courts generally, and not some other authority or body, were best placed to resolve disputes. Of course, the system was not perfect. Delays were legion. Party control over the litigation process was greater than it should be, with the resulting ability for some to ’play the game’ exploitatively.
Today the influence of Europe and of European law is immense. New forms of business enterprise and the limited-liability partnership have entered the picture. Public access to the bar, something unheard of in 1990, has taken hold. Solicitor-advocates are not uncommon. The Civil Procedure Rules (CPR) have replaced the rules of the Supreme Court and created a new procedural culture. Fewer claims are issued. Fewer trials take place. Costs orders departing from the norm of ’loser pays’ are more frequent. Wasted costs orders are increasingly made. Litigation is front-loaded. Conditional fee arrangements are used regularly. The common feature of these changes is to do with money and resources and their best use.
Just as significantly, in 1990 alternative dispute resolution (ADR) was an ephemeral territory, not often visited by the majority of practitioners. Specialised arbitrations did occur, and in particular in technical areas and those where the cross-border nature of the underlying activity meant that some form of assimilation of different legal cultures was necessary, but the acronym ADR was not known to most. Today, however, it trips off the tongues of all lawyers as an answer to all the difficulties encountered when two parties fall out. Momentum from Europe, with a proposed directive on mediation in civil and commercial matters, is also there.
In England the CPR without doubt encourage the use of mediation. Under CPR 1.4, part of the court’s active case management function includes encouraging the parties to use ADR procedures if thought appropriate. Under CPR PD 29 the court can now, of its own initiative, order the parties to consider ADR, and if a party considers the case is not suitable for ADR it must file a witness statement setting out the reasons why. The Protocols PD, in paragraph 4.7, encourages implicitly the use of ADR before resorting to litigation. Under CPR 26.4, any party may, at a very early stage of a dispute, seek a one-month stay of the proceedings while the parties try to settle the case by ADR or by other means. And then there is the costs sanction that can follow in cases of unreasonable refusals to mediate.
Notwithstanding the decision in Halsey v Milton Keynes NHS Trust (2004), this remains a real source of tactical manoeuvring for the litigation lawyer - as was borne out by the facts of Halsey itself. Given that the incidence of costs can, and often does, end up being the most significant practical aspect of a case for a party, this can render any success altogether nugatory.
The purpose of all these rules and directions is to encourage non-judicial dispute resolution. That is laudable. But the possibility presented by ADR of an exit route from litigation, and so the flipside of enabling litigation to be used when it should not, can also be sinister. One result is the appearance of a cynical culture of initiating claims procedures based on client enthusiasm and self-righteousness alone, without early detailed consideration of evidence, merits and law.
The head note in the recent collapsed BCCI litigation makes the point: “The Bank of England was entitled to indemnity costs because of the hopelessness of the allegations and the way in which they were pursued. The extraordinary manner in which C’s case was made to change to fit the exigencies of the moment would alone justify an award of indemnity costs… C were prepared to make fanciful allegations plainly unsupported by and/or inconsistent with the documents and, when confronted by the hopelessness of an allegation, twisted and turned so as to preserve the allegation and the ability to put it in cross-examination. C’s case was unsound and the allegations of dishonesty made in support of it were also without foundation. Allegations of dishonesty had been levelled against the Bank of England’s officials for no better reason than that if their conduct was presumed to have been honest it represented an insuperable obstacle to C proving their case…”
The BCCI case was discontinued. But in many others, much the same features as identified there - allegations without foundation, shifting sands - also exist. Not all of these cases are discontinued, but many do not get to a final judgment. Rather, they can find themselves in the ADR arena, and private and confidential settlements are then achieved. Increasingly they take advantage of the exit route provided by mediation. But the object of mediation at this stage is only to achieve a satisfactory subjective resolution. The theory is that this, even if wholly imprecise and departure from the result that the application of the law may have come to, equates to objective justice: if the parties are each as happy as possible, justice must have been done. Rights-based mediations are far less frequent than facilitative or evaluative mediations.
However, and even though reform of the House of Lords and of the system of administration of justice in England continues to be considered, there is no question that England is today, and is likely to remain for some time, a common law jurisdiction with its own distinct national character. Its laws have evolved over many centuries, with the doctrine of precedent and the adversarial, as opposed to the inquisitorial, system being the major driving forces. This ’common law’ model has successfully been imported all over the world, even if some of its more peripheral features as applied in practice in England have not always been understood.
Such incomprehension was based around a failure to understand the nature of English justice - itself widely regarded as of the highest quality. Thus ’fair play/fair fight’ has long been regarded as a quintessential English virtue, recognising that in any fight there will be a winner and a loser, but what matters is that the fight should be fair. A resolution based on ’fudge’ was, therefore, no resolution at all. Sometimes this led to hard decisions, but on the whole it worked. And through such win/lose decisions, the common law grew incrementally, with general principles being extracted from and applied to the particular facts of a case. In the current legal climate, and in particular with ever greater resort to mediation, this system can slowly begin to break down.
So do pseudo-legalised dispute resolution processes such as mediation actually contribute to a healthy legal environment by giving rise to ever increasingly refined legal principles under-pinning commercial and social intercourse, or not? The jury is still out.
Arshad Ghaffar is a barrister at XXIV Old Buildings