Has litigation gone out of style? The corridors of the Technology and Construction Court are empty; the Bar is howling at the lack of work; the litigation departments of City firms have become dispute-resolution departments.
Since the implementation of the Civil Procedure Rules, the number of claims issued out of the Technology and Construction Court has fallen dramatically. In 1997, 721 new claims were issued. In 1998, the last year before the introduction of the Civil Procedure Rules, 615 new claims were issued. In 1999, only 495 claims were issued, and only 257 new claims were issued to 6 July 2000. So, why is the Technology and Construction Court so quiet?
The Woolf Report of July 1996 noted that litigation under the old rules was “too expensive … too slow … too unequal … too uncertain … too fragmented and the rules of court all too often are ignored”. The last major overhaul of High Court procedure took place in 1873, so a review was long overdue.
1 Civil Procedures Rules 1998 Part 1 para 1.1.
2 Trust and Money: Interim Report of the Joint Review of Constructual Arrangements in the United Kingdom Construction Industry, Sir Michael Latham 1994.
The Civil Procedure Rules, which came into effect on 26 April 1999, sought to remedy the deficiencies noted by Lord Woolf by providing, among other things, “overriding objectives” that the courts and the parties are required to follow in order to deal with cases justly. These include saving expense and dealing with cases in ways proportionate to the amount of money involved, the complexity of the case and the financial position of each party.
The Civil Procedure Rules have been a success. In a recent survey by the Centre for Dispute Resolution, 80% of the lawyers polled expressed satisfaction with them.
Other theories have been advanced to explain the drop in new claims: perhaps lawyers were unfamiliar with the new rules, or the rules gave too much power to judges? But the real reason is that most disputes now start and finish in adjudication. It is also the duty of the court to encourage the parties to use – and to facilitate the use of – alternative dispute resolution procedures, including adjudication, as the first tier of dispute resolution. There is research to suggest that simply adding tiers to contractual dispute resolution procedures makes settlement more likely.2 Disputes are frequently begun in anger and settled in boredom. After all, it requires considerable stamina to pursue a dispute through negotiation, mediation, adjudication and then on into the courts.
The role of the court in construction disputes is increasingly centred on the supervision of the adjudication process. A London solicitor recently remarked that the Construction Industry Law Letter, which reports new case law, should rename itself the Adjudication Industry Law Letter because it reports only jurisdiction disputes arising out of adjudications.
It appears that the Technology and Construction Court’s role is now primarily to enforce an adjudicator’s decision, or to test a challenge to an adjudicator’s jurisdiction. Arguably, this is as it should be: judges are public servants and they should be deciding law, not resolving disputes between businessmen.
Judges are public servants and they should be deciding law, not resolving disputes between businessmen
Adjudication is not a condition precedent to commencing litigation or arbitration. A party simply has the right to proceed by way of adjudication if it chooses to do so, as in Herschel Engineering Ltd vs Breen Property Ltd (unreported) 14 April 2000.
A party may elect to proceed by way of litigation rather than adjudication – although it runs the risk of its opponent starting a parallel adjudication, which will result in a binding decision long before the court case comes to trial.
Even if a party chooses to begin an action in court, then the court has the power to encourage the use of any alternative dispute procedure. In Kinstreet Ltd vs Balmargo Corporation Ltd (unreported) 3 August 1999, His Honour Judge Arden stayed the litigation and ordered that the case go to an alternative dispute procedure, even though the defendant objected. Judge Arden made the order, having in mind the potential costs of the case and the requirement of proportionality.
Kinstreet Ltd vs Balmargo Corporation Ltd is, however, an unusual case and seems to be the only one since the introduction of the Civil Procedure Rules in which the judge has mandated the use of an ADR procedure.
In its response to the Lord Chancellor’s Department ADR discussion paper, even the Centre for Dispute Resolution did not go that far. To the question: “How strongly should the courts be able to encourage the use of ADR?”, it responded that courts should vigorously encourage ADR in order to overcome the reluctance to negotiate where conflict is high. While they should draw the line at mandating mediation, costs sanctions should be available where parties have unreasonably refused to enter ADR, engaged in ADR in bad faith or behaved in clearly inappropriate ways.
Certainly, the question of costs should be in any claimant’s mind if it elects to proceed straight to litigation without first attempting any other means of resolving the dispute. In the recent case of Bovis Lend Lease Ltd vs Braehead Glasgow Ltd (2000) CILL 1634, Bovis failed in an application for summary judgment and an interim payment, and had indemnity costs awarded against it.
Mr Justice Dyson stated: “For a reason which has not been explained to me, Bovis decided to resort to litigation rather than seek to negotiate further with Braehead.”
The corridors of the Technology and Construction Court are quiet. But, in the construction industry, there have already been as many disputes this year as there were in 1997. The difference is that most parties are now sensibly trying to resolve them by negotiation, mediation and adjudication rather than by litigation.
Lawyers are still heavily involved and will continue to be because adjudication is a judicial process and lawyers are skilled in presenting legal argument. The difference is that claimants who go straight to court face either being ordered to attempt ADR or being sanctioned with costs.
1 Civil Procedures Rules 1998 Part 1 para 1.1.
Christopher Hill is a managing partner of Norton Rose construction and engineering team.