27 Mar 2014
Chancery modernisation - a source of wider reform for the use of mediation as well?
by Tony Allen
Solicitor, Mediator and Senior Consultant to CEDR
One of the most unexpectedly interesting pieces of reading for those interested in the development of civil justice and its relationship with ADR is Sir Michael Briggs’ Final Report in his Chancery Modernisation Review, (published December 2013). He was commissioned by the Chancellor of the Chancery Division to look at ways in which the work of that division might be improved, especially in the light of the April 2013 amendments to the CPR but also in terms of capturing the undoubted benefits of housing the Chancery Division with the Commercial and the Technology and Construction (TCC) Courts (both technically within the aegis of the Queen’s Bench Division) within the “Business Court” concept represented by the Rolls Building.
Sir Michael’s final report incorporates much of what he put into his Preliminary report, modified by the further consultations and research carried out since then, in the hope that his final report will be the sole source of information and wisdom. His main recommendations are about enabling the growth of full docketing by judges, who would case manage the cases they hear, as happens in the TCC and to some extent in the Commercial Court, where judges case manage, but do not necessarily hear what they manage. He points out that the Chancery Division is by far the largest “business” court of the three, with 18 full-time judges only rarely distracted from chancery work, as opposed to 8 Commercial Court and 3 TCC judges, all of whom may be required for Administrative Court, circuit or other Queen’s Bench business, especially crime. Yet he reports widespread opinion among Chancery Division consultees for there to be significant changes to Chancery procedure, views which have buttressed a number of his recommendations.
There are several points of major interest in Sir Michael’s review when it comes to its possible impact on mediation. Firstly, his diagnosis of the problems besetting chancery work and what is needed to reform it is fascinating and has much wider application to civil justice in general. Here we have someone who was an extraordinarily successful practitioner (a leader in Chancery work in more fields than any other Silk when in practice, an experienced deputy and then full-time Chancery judge with considerable experience of case management, and recently promoted to the Court of Appeal) who examines the CPR and the 2013 amendments with a cool and practical eye. He remains loyal to the new Jackson-inspired overriding objective with its bolted on requirements for proportionality and greater discipline (if these strictly are “objectives” rather than manifestations of action), and he accepts that front-loading as inspired by the Woolf reforms has broadly not worked. However, he sees that the new costs budgeting requirements are likely to add to front-loaded costs.
He perceives the need for the Chancery Division’s procedures to be competitive in an international market place where choice of forum is open. This is a commercial approach which may shock some purists but is one that is, in my opinion, rightly consumer-focused in endeavouring to meet users’ business needs for excellent timely and affordable dispute resolution. He also notes the possibility of domestic competition in default of Chancery reform. Where there is a possible choice, parties may choose to issue in the Commercial Court, which managed to negotiate an opt-out from costs budgeting. These concerns translate into his recommendations for ensuring that trial dates must be as early as possible, trials should be given fixed dates and not be delayed or extended beyond the allocated time, and that costs must be kept down. He fears that the costs budgeting reforms will create more work for judges handling case management, while the savings made will benefit parties without alleviating pressure on the judges themselves. In fact it is beginning to emerge that good costs budgeting will almost certainly require considerably more costly fee-earner preparation work as well, whether by internal or external costs specialists, if solicitors are not to lose out on what they can recover in the event of a favourable outcome at trial or settlement. This too keeps up the front-loading pressure, as the Briggs report admits.
While the most optimistic view may be that better case management and costs budgeting by docketed trial judges will improve efficiency and shorten trials, so as to free up time for more docketing, Briggs sees a time-lag before this can be achieved. He points to the startling fact that nearly 50% of trials overrun. I have always guessed that the Woolf reforms were able to be implemented reasonably efficiently in 1999 because they were heralded by a large reduction in short applications to Masters, Registrars and District Judges, brought about by implementing a month or so before the CPR came into force the summary assessment and payment of costs. This almost immediately emptied their lists of such (often tactical and, dare one say, trivial) applications to allow room for case management hearings. The Bear Garden became the Bare Garden, empty of parties and lawyers almost overnight. But there are no such obvious savings of time to be made this time round, apart from transfer of business to regional centres or the Central London County Court to accommodate the extra time for costs management during CMCs, estimated by the Briggs Report as being likely to increase by a factor of between two and four.
On the costs issue, he comments:
[F]ar too many chancery cases, both large and small, are conducted with so little regard to those considerations that they end up being cases which have become, well before trial, in economic terms, cases about costs rather than about the original issues in dispute. By the same token any case of that kind will, almost by definition, have consumed a disproportionate amount of the court’s resources, in addition to those of the parties. Justice is neither accessible nor fair if litigants cannot seek to vindicate or defend their rights without incurring or becoming exposed to liabilities for costs which are wholly disproportionate to the value at risk, or the gravity of the matters at stake, in the litigation.
He argues that case management especially by experienced docketed judges familiar with the case from the start, will do much to increase efficiency and consistency of case management, with the Trial Judge tackling the design of the case early on and throughout its life.
He is also greatly concerned about the effect on uncertainties and delays of the current system on the minds of litigants. Echoing the surprisingly relativist sentiment of Lord Dyson that the courts can only expect to do justice “in the majority of cases”, Sir Michael comments:
The damage caused to business activity by the uncertainties arising from legal disputes is so large and debilitating that reasonable speed in obtaining a fair resolution is more important to most than the obtaining of precisely perfect justice in the outcome. In short, the perfect is the enemy of the good, if the obtaining of perfection causes unacceptable delay.
This is a timely and realistic acknowledgement that justice is not absolute and perfect, but another human institution prey to error and external pressure (especially in terms of public funding) requiring practical solutions designed for the benefit of its users.
Frankly this has always been the case. Court procedural rules have always been drawn up with trial in mind and with little if any overt reference to the need to accommodate and manage the possibility of settlement into the litigation process. Settlement obtrudes by act of the parties and only occasionally as a result of judicial initiative or recommendation. He comments that in many of his first instance trials there had been a previous “unsuccessful” attempt at ADR (inverted commas because of another point I will cover later). He comments that:
[T]he Chancery judiciary has played its part (though not a conspicuously leading part) in encouragement of all forms of ADR,
later characterising the current culture (probably a fair summary of most judicial views, and not just the Chancery Division) as tending to treat ADR as:
[A]n essentially separate part of the dispute resolution process and, save for the occasional word of encouragement, the making of space in a timetable by a stay, and the very occasional imposition of costs sanctions for unreasonable refusal, to let the parties get on with it, or not, as they choose.
My view (and I emphasise Sir Michael does not in any way suggest that he shares this view) is that there have been a few quite senior judges and academics who have over past years at least thought of “alternative” dispute resolution as really being an absolute alternative (perhaps a sinister and unacceptable alternative) to judicial dispute resolution and not as a real adjunct to it. They have at best thought of it as a hived-off activity which might be encouraged to alleviate pressure on judges, at worst a rival to be deplored or ignored. In relation to any such thinking, Sir Michael again calls for a culture change, this time for judges to confer on ADR a regular and proper place within case management decision-making, again reflecting perhaps the reality that over 90% of cases settle at some point after issue. He argues that ADR must be treated as an integral part of the case management process rather than as an optional extra. This idea marries up neatly with the views he expressed in PGF v OFMS where, as well as sanctioning a successful litigant who failed to explain away silence in the face of a genuine invitation to mediate, he added, in discussing reasons why ADR might not be right at a given moment:
Difficulties of this kind constantly arise in civil litigation, and the culture is now well established under which the parties should discuss these difficulties and seek to narrow their differences. This occurs routinely in relation to expert issues, and is now prescribed practice in advance of case management conferences and pre-trial reviews. I can see no reason why the same should not apply to ADR, thereby saving valuable court time in the case management process which, as the practice guides now all make clear, extends to the encouragement of ADR rather than merely to the giving of directions for trial.
This follows his comment in the same judgment (again, controversially, accepting that financial pressures may necessitate culture change):
The constraints which now affect the provision of state resources for the conduct of civil litigation (and which appear likely to do so for the foreseeable future) call for an ever-increasing focus upon means of ensuring that court time, both for trial and for case management, is proportionately directed towards those disputes which really need it, with an ever-increasing responsibility thrown up on the parties to civil litigation to engage in ADR, wherever that offers a reasonable prospect of producing a just settlement at proportionate cost. Just as it risks a waste of the court’s resources to have to try a case which could have been justly settled, earlier and at a fraction of the cost by ADR, so it is a waste of its resources to have to manage the parties towards ADR by robust encouragement, where they could and should have engaged with each other in considering its suitability without the need for the court’s intervention.
The relevant ADR processes to Sir Michael in this context are mediation, “FDR” (or court-run settlement discussion by a judge who is recused from trying the case if settlement fails, imported from family work) or judicial or private early neutral evaluation. Few if any cases are referred to arbitration once issued in the courts except in response to an application to oust the court’s jurisdiction because of an arbitration clause. He calls all these processes “structured ADR”, distinguishing this (as is entirely right in my view) from discussion and negotiation. Mediation commentators have always been irritated by the suggestion that joint settlement meetings or round-table meetings are properly to be regarded as “ADR”. There is a huge qualitative difference between the free-for-all of the latter, which is in effect a well-lawyered piece of standard discussion and negotiation but a long way away from “structured ADR” neutrally managed by an independent chair who takes care to ensure that lay parties participate as much as they wish. Of course RTMs and JSMs settle cases, but cases have always settled. The question which the courts have a right to ask in difficult (and indeed all times) is When and How do they settle? It is good to see a judge noting the significance of structure in ADR, without in any way undermining “unstructured” negotiation.
This also parallels the way Sir Michael dealt in PGF v OFMS with whether to sanction a party who has makes a Part 36 offer? Part 36 is really the only structured settlement process to be found in the CPR, as proposed to mere encouragement or threat of sanction. He was asked by the defendants to excuse their refusal to mediate as reasonable because they had made a Part 36 offer a year before trial which was accepted just before trial (because they produced a new “killer” point, previously unpleaded). He rejected both the argument that an ultimately accepted Part 36 offer proved that from the time it was made, the defendants had a reasonable belief in the strength of their case; and also that as this Part 36 offer indicated a bottom line far removed from the claimant’s position, mediation had no reasonable prospect of success. On the first point, he found that Part 36 offers are often made at a level which is well below what it is feared the trial judge will order, in the hope of tempting the claimant to settle. Secondly, and relatedly, Part 36 offers do not necessarily or usually represent a party’s bottom line. Sir Michael even pointed out that the late-running killer argument was just the kind of thing that could have emerged at a mediation. Incidentally, the approach of both the trial judge and the Court of Appeal in PGF v OFMS on mediation’s ability to cope with apparently intractable bottom lines both contrast markedly with the Court of Appeal’s approach to this topic in Swain Mason v Mills & Reeve  EWCA Civ 498.
Sir Michael issues two good challenges to the ADR providers. Firstly he asks them to liaise with judges in enabling them to understand how to deal with ADR realistically when making management directions. CEDR used to sponsor a Judges’ Forum at which such liaison between the main ADR providers and a range of members of the judiciary was attempted in broad terms, but since the Civil Mediation Council came into being, no such liaison has been attempted or sought. The CMC should act on this quickly. A further simple step to improve things and provide opportunities for discussions of how this might best be developed would be to have ADR providers represented on Court Users Committees. But judicial educational needs go further than that, as Sir Michael accepts, and probably further than the reading of the Jackson ADR Handbook will meet.
His second challenge to ADR relates to mediations which are not “successful” in achieving full resolution. Sit Michael advocates that conscious attention should be given at the end of unsettled mediation meetings towards capturing what is capable of agreement and what might save time when the litigation resumes. Not all mediators and parties have the energy, resourcefulness or the insight to generate some specific use out of such rather deflating gatherings of parties after a hard day of not reaching resolution, and it would be good if this were acknowledged as part of the objectives of the process.
The third area of interest arising from this report, about which Sir Michael is almost silent, is what judges could or should do about policing attempts to settle before issue of proceedings. This is unsurprising and not apt for criticism in a report dealing with Chancery procedure once invoked, but there remain ways of managing cases after issue which would impact in pre-issue conduct to the benefit of courts under strain. One of the profoundest changes to civil litigation culture and practice wrought by the CPR was to empower judges to make decisions within litigation which take account of the way parties behaved before it started. While pre-action disclosure remains the only significant procedure available to parties before issuing claim form, there have certainly been a good number of cases where judges have deplored the way parties have acted before bringing a case before the courts. It is also true to assert that even if approximately 3700 Chancery cases are issued in London and roughly 1300 in the main regional Chancery centres, a good number of these might have been forestalled by pre-action ADR and settlement, thus alleviating the pressure of cases by preventing them from starting as proceedings at all.
The encouragement of pre-issue ADR was one of the most significant ways recommended by Lord Woolf to ease pressure on the courts, and one of the main justifications for front-loading, especially as required by the Pre-action Protocols. Perhaps reflecting Chancery practitioner distaste for the Pre-Action Conduct Practice Direction and Protocols generally reported by Sir Rupert Jackson, Sir Michael merely agrees that the ACTAPS unofficial protocol should be encouraged and observed, but remain voluntary. His report is otherwise silent about pre-action conduct. However, there has been very little evidence that procedural judges in any court have ever sought to capture the intended dividend supposed to arise from proper pre-action activity required by Protocols or the Pre-action Practice Direction. These all includethe obligation to endeavour to settle without initiating litigation. Few procedural judges hitherto have systematically referred parties at the first opportunity to this prior obligation imposed on all parties to try ADR before issuing proceedings. In so doing they could properly decline to afford such parties immediate access to an over-burdened civil justice system until they have properly explored that requirement.
Would this offend Article 6 of the ECHR? The answer must be that if pre-action protocols do not breach Article 6 of the ECHR, then nor would such a step taken by a procedural judge. No one is forced to settle at mediation or to accept a neutral evaluation. But there is no proper reason why parties should not be required - in the absence of any compelling reasons to the contrary – to try to settlethrough a procedure that absolutely protects them from any adverse consequence in the litigation by a level of confidentiality which is firmly and fully acknowledged and protected by the court. In an environment of “constraints which now affect the provision of state resources for the conduct of civil litigation (and which appear likely to do so for the foreseeable future)” , is this not a proper approach to take?
Sir Michael’s careful and elegantly phrased review is very impressive and it repays reading in full, not merely the Executive Summary discreetly located at the end of his report.