Arbitration and litigation: benefits in the context of ADR

By Nicholas Gould
Paper prepared for International Business Conferences Summer School
August 2003

Introduction

Traditionally, the more dominant form of final dispute resolution technique used in the construction industry was arbitration, closely followed by litigation. However, developing alternative dispute resolution processes, together with the introduction of adjudication has re-distributed the resolution of disputes amongst a wider variety of techniques. In order to consider these developing trends this paper focuses on:

1. Whether the benefits of arbitration are still valid.
   
2. The impact of adjudication and ADR on arbitration and litigation.
   
3. Three key developing areas of the new Civil Procedure Rules:

   a. The role of the expert witness and single joint experts
   b. Part 36, settlement offers and costs
   c. The impact of ADR on litigation

Arbitration

Arbitration is a method of private dispute resolution in which the parties to the dispute agree to have it settled by an independent third party and to be bound by the decision he makes. This agreement may be entered into after the dispute has arisen or it may be included within a contract in a clause which refers any future dispute which might arise out of that contract to arbitration. The third party may be chosen by agreement between the parties themselves or may be appointed by a nominating body named in the contract, for example the Chartered Institute of Arbitrators.

The jurisdiction of the arbitrator and the scope of the arbitration are fixed by the terms of the arbitration agreement and the arbitration will be conducted according to certain prescribed procedural rules. These rules may be expressly agreed by the parties but where the parties do not make such a choice, or where the rules which they choose are silent on a particular point, the procedure of the arbitration will be governed by the arbitration law of the country in which the arbitration takes place.

In England the guiding principles are set out in the 1996 Arbitration Act, governing arbitrations taking place from 31 January 1997 onwards. Section 1 of that Act provides in (1)(a) that

the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;

and sub-Section (b) states that

the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest.

Section 33 provides that the tribunal shall:

(a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and

(b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.

This section, which is mandatory, stands as a clear statement in broad terms of the way in which the tribunal is to approach its task in order to achieve the objective set out in Section 1 and is a vital and central provision, establishing the parameters within which the tribunal should act in order to be seen to be doing justice as between the parties.

The corresponding mandatory duty imposed upon the parties to conduct themselves properly and expeditiously, and to co-operate with the tribunal, is at Section 40, which expressly provides for the parties to comply “without delay with any determination of the tribunal as to procedural or evidential matters, or with any order or directions of the tribunal....”. Again, this section is mandatory and the parties are therefore not able to avoid the effect of the section by agreement.

Advantages and disadvantages of arbitration

The advantages of arbitration over litigation are traditionally stated to be:

Privacy and confidentiality

Arbitration is, for the most part, a private and exclusive procedure. Except in the very small number of cases in which the right of appeal to the Courts has been agreed by the parties, or where leave to appeal has been given by the Court, the procedure is confidential, self-contained and final.

Privacy is a major hallmark of arbitration, confirmed by the Court of Appeal in Ali Shipping Corporation v Shipyard Trogir [1991] 1 WLR 314. This is in contrast to the open and public nature of the Courts when dealing with litigation.

Choice of arbitrator

The parties can choose the arbitrator or arbitration tribunal. If they cannot agree upon a particular person or persons, they can almost invariably agree upon some institution to make the appointment and thereby agree upon the qualifications of the person(s) to be appointed. If the parties cannot agree upon an appointing institution, the Court will appoint an arbitrator and before doing so will consider any submissions as to what qualifications the person appointed should possess (ss 18-19, AA 1996).

Arbitrators are, of course, usually chosen because of their expertise or experience in the subject matter of the dispute, especially in commodity, insurance and construction disputes. Particularly popular are those arbitrators who are both technically and legally qualified.

If a party to a contract does not wish to be exposed to the decision of one person, then he can stipulate arbitration by a tribunal of three, one of whom is to be appointed by him. This is of particular significance where the parties to a contract are from different countries or cultures; each can then be sure that the tribunal will include at least one member familiar with his country or culture.

The parties can take into account the personality, professional qualifications, availability and cost of possible arbitrators before committing themselves; if they cannot agree upon the selection of the tribunal, the appointing body will in practice also have regard to all those factors before making the appointment. In litigation, on the other hand, an action may be heard after a long delay by a judge with no experience in the field in which the dispute arises. The composition of an arbitral tribunal is a matter for the parties to decide. They can arrange a mixed tribunal, for example three technical experts from different disciplines, or two experts and a lawyer, or one expert with a legal assessor.

Flexibility

Despite the new Civil Procedure Rules and accompanying Practice Directions, arbitration is and will remain a much more flexible and versatile process than litigation. Different disputes will often require entirely different approaches, which is why arbitration, rather than litigation, is so particularly appropriate in certain circumstances.

The parties to an arbitration remain free to a very large extent to choose their own rules, with great procedural and substantive flexibility. For example, the parties may decide that the dispute should be determined on documents only, or within a certain period of time, or according to notions of fairness rather than strict rules of law: under Section 46 of the Arbitration Act 1996 there is the formal introduction into English Law of “equity” arbitration, otherwise known as ex aequo et bono or “amiable composition”. The section states:

(1) The arbitral tribunal shall decide the dispute…

(b) If the parties so agree, in accordance with such other considerations as are agreed by them or determined by the tribunal.

There is a far wider choice of procedure in arbitration than in litigation, including, if the parties wish, replacing the traditional English adversarial procedure by an inquisitorial procedure for issues for which this is more appropriate.

Parties can represent themselves or be represented by anyone of their choice. Rights of audience by representatives are not limited to lawyers as in the Courts and, in particular, a company or corporation can be represented by a director.

Time and cost factors

In an arbitration, the parties must pay the fees of the arbitrator(s) and pay for the facilities of the arbitration, thereby theoretically increasing the cost over that of litigation. However, as in many circumstances the parties will agree fast track and flexible procedures to make the arbitration process far more streamlined and efficient than litigation, there should overall be costs savings. For example, the tribunal itself can take part in the preparation of the issues for arbitration, helping to strip out the inessentials and reading the documents before, rather than at, the hearing, which can shorten the hearing time enormously. It is possible to have an extremely fast-track arbitration in certain cases, used now to great advantage in determining adjudicators’ jurisdiction.

If the arbitration mirrors litigation, with a full-scale hearing and lawyers on each side, it is likely to be appreciably more expensive than corresponding litigation. But now the arbitrator has the duty to keep the party incurred costs within reasonable bounds and can do so because of his ability to control the preparations, and because of the variety of procedures open to him under the 1996 Arbitration Act including the ability to cap the parties’ recoverable costs (Section 65).

Security and enforceability

It remains the case that an arbitration award, whether domestic or international, is generally more secure than a judgment of the Court. Firstly, the grounds of appeal against an arbitration award are considerably more restrictive, and exclude appeal on fact. Even on a point of law and given the new requirement for universal permission, a judge must be demonstrated to be “arguably wrong” whereas an arbitrator must be “obviously wrong” (Section 69(3)(c)(i)).

Judges have found that there are in the main three kinds of errors by arbitrators in the conduct of an arbitration. The first is where the arbitrator has arrived at a crucial decision on grounds which have not been raised or addressed by either party. This usually means that the award has to be set aside and remitted for reconsideration after the parties have been given the opportunity of making submissions on the matters which prompted the arbitrator’s conclusion.

Another kind of error is where the arbitrator has made a decision on material matters relied on by one party which have not been brought to the attention of the other party and to which he therefore has not had the opportunity to respond. This situation can easily arise in a “documents only” arbitration.

The third kind of error is where the arbitrator covers in his award matters which were not referred to him for decision.

Secondly, arbitration awards are readily enforceable in many countries. The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards has been ratified and acceded to by over 90 states. An arbitration which takes place in one Convention state is readily enforceable in another Convention state and the grounds for objection under the Convention are more restrictive even than the grounds which apply in the case of a domestic award.

Disadvantages include:

Difficulty of joinder of parties

In disputes between more than two parties, where the parties have not already contracted for a consolidated arbitration, as provided for in some of the standard forms of building contract used in the construction industry (and the parties will not agree to arbitration), going to court is the only way of resolving interlocking disputes by the same tribunal. Courts have extensive powers by way of third party procedures, consolidation of actions and directions that actions be heard together, to ensure that such interlocking disputes are heard, together or consecutively, by the same judge.

Institutional rules provide an opportunity to consolidate arbitrations, although multi-party arbitration is difficult to manage.

Procedural and substantive uncertainty

The flexibility given to arbitrators in deciding the procedure can create uncertainty among the parties. In addition, an arbitration tribunal will occasionally allow a party to make whatever arguments it likes even when they have no merit so that it cannot later be alleged that the arbitrator has breached the rules of natural justice. This can increase the time and cost involved in the arbitration.

Legal Aid

The Legal Aid system in England and Wales is not available in arbitration.

Comparison between arbitration and adjudication

Arbitration and adjudication are similar in one major respect. They both seek to establish the contractual rights, duties and obligations of the parties. Both the arbitrator and the adjudicator have, in principle, to act in a way that complies with the concepts of fairness and natural justice.

An adjudicator can be named in the contract if so desired by the parties or once a dispute has arisen, he can be agreed by the parties or failing this, appointed by a third party.

The enactment of the Housing Grants, Construction and Regeneration Act 1996, introduced adjudication as a statutory right for any party to a construction contract (as defined). In that respect it is therefore not a consensual process as is the case with arbitration.

Some adjudications have been described as “rough justice” and providing “a quick fix”. Its fans say that it is better to obtain the decision of a respected professional person acting as adjudicator on the basis of limited information in a very short period of time than to spend months, if not years, reaching perhaps a not dissimilar result at considerably greater expense. However, there are possible problems with the application of such a process to major disputes in that the obligation to pay large sums of money as a result of a possibly superficial examination of the facts may not be well received by the paying party.

A typical construction dispute revolves around a multitude of events, which may or may not have caused delay or disruption. If each of these events can be examined by an adjudicator and a decision reached as to the effect of each of them, the opportunity for the development of a complex claim is very much reduced.

The principal difference between arbitration and adjudication, other than the timescale for making the decision, is the aspect of finality. Whilst a decision reached by an adjudicator is as binding on the parties as an arbitrator’s award, the dispute that has been the subject of adjudication proceedings can be the subject of completely fresh arbitration or litigation. The adjudicator’s decision remains in place and must be honoured whilst the arbitration or litigation reconsiders the dispute from first principles.

Arbitration enjoys, on the whole, the benefit of finality. The awards that do get into the Courts are a minority; most arbitrators’ awards are accepted by the parties and no further proceedings arise.

It is fundamental to the Arbitration Act 1996 that, so far as is consistent with the requirements of public policy, parties to arbitration agreements should have the maximum possible freedom to choose how their tribunals are to be structured, how their cases are to be run, what their awards are to contain, etc. Most of the Act’s provisions are non-mandatory, in the sense that parties can agree these matters themselves; the mandatory provisions have been kept to a minimum. Equally, court intervention is available only to support arbitration, not to interfere with it.

The impact of adjudication upon arbitration

As Lord Donaldson said in the case of Chilton v Saga Holidays [1986] 1 ACR 841, “both courts and arbitrators in this country operate an adversarial system of achieving justice”. However, some argue that arbitrators have become too used to taking a back seat, expecting each party to come armed with its own team of lawyers, experts and witnesses in a mirror image of litigation. As Professor John Uff QC said in his talk to the joint meeting of the Society of Construction Law and Society of Construction Arbitrators on 3 July 2001, “analogies with test cricket are tempting, but even test matches are usually concluded in five days”.

Under the Arbitration Act 1996, arbitrators are to “take the initiative”. Not enough of them are, however, prepared to be sufficiently robust to do so, whether as a result of being intimidated by the parties’ legal representatives or otherwise. Arbitrators need to be more interventionist and get a grip on the proceedings right from the start.

Arguably, arbitration has lost out to both litigation and adjudication over the last couple of years. There is now a choice in the JCT Standard Forms of Contract as to which method of dispute resolution the parties are to use and many now opt for litigation instead of arbitration as arbitration is currently perceived to be a lengthy and expensive process, with proceedings in the Technology and Construction Court these days being considerably quicker and thus costing significantly less.

The vast majority of disputes referred to adjudication do not proceed to subsequent litigation or arbitration. The adjudicator’s decision either brings the matter to an end or agreement is reached to bring the dispute(s) to a conclusion. Adjudication is not mandatory. Section 108(1) of the HGCRA 1996 provides that “a party to a construction contract has the right to refer a dispute arising under the contract for adjudication …”. However, it is a clear first choice amongst claimants, with the obvious benefit being that they will receive a decision, which is at least temporarily binding, from the adjudicator within 28 days of referring the dispute to him (unless time is extended as provided for in the HGCRA) and the costs will, inevitably, be significantly less than in arbitration or litigation. It is common for the costs in adjudication proceedings to be under 5% of the amounts claimed, whereas in litigation or arbitration one is often talking about 10% or more.

Litigation has also suffered as a result of adjudication, so arbitration is not the only victim. There was a distinct decline in the number of claims issued at the Technology and Construction Court in London, with figures showing the following:-

Claims issued:

1997 611
1998 538
1999 346
2000 344
2001 354
2002 386

However, the number of claims issued in 2001 has risen. Of the claims issued in 2000, approximately 25% related to enforcement of adjudicators’ decisions. The reduction in numbers for that year may, however, have been as a result of the introduction of the pre-action protocol for construction and engineering disputes, which took effect on 2 October 2000 and which, combined with the other requirements of the CPR, may result in a higher incidence of settlement before proceedings are instituted at all.

On 15 May 2002 at the SCL Annual Dinner, Graham Watts of the CIC reported on the CIC’s survey of adjudicators. A total of 302 adjudicators responded to the survey. The responding adjudicators were more active than the average adjudicator, and the survey covered approximately 62% of the adjudication appointments made between May 1998 and September 2001 by AMBs. During that period appointments were made for 4,707 adjudications, of which 3,475 progressed to a decision. There was a rising trend in the number of adjudications each month, reaching a peak in the last month of the survey.

Nearly 60% of the decisions were made in less than 30 hours, but in only 2% of the cases did it take more than 100 hours for the adjudicator to come to a decision. The responding adjudicators were employed on adjudications for approximately 15% of the time that they had available. Adjudicators therefore have ample capacity to meet increasing demands made by the industry.

Approximately one third of the adjudications covered in the survey were between a contractor and a client, whilst almost two-thirds were between contractors and subcontractors. Only around 6% were between the layers of subcontractors and sub-subcontractors, whilst only 4% involved consultants.

The client’s perspective these days is often that arbitration is time consuming and costly; in addition to the fees of the lawyers, the experts and the arbitrator, it takes time to progress the arbitration and this will have an inevitable impact on the client’s business activities. Lawyers are often criticised for “hijacking arbitration”, using procedural tactics to lead to delays and increase costs. Sometimes, of course, delay or procedural shenanigans may increase one party’s position, in which case it is all the more important that the arbitrator is sufficiently robust and strong properly to control the proceedings, introducing innovative procedures, as is now possible under the Arbitration Act 1996, to culminate in a time and cost efficient resolution of the dispute.

Arbitration is learning from adjudication, in the sense that arbitrators are often now acting in an inquisitorial manner, ferreting out the facts and the law rather than sitting back and waiting for something to happen. The words “take the initiative” appear within Section 34(2)(g) of the Arbitration Act 1996, dealing with a list of “procedural and evidential matters” which it is for the tribunal to decide upon, “subject to the right of the parties to agree any matter” in Section 34(1). So, subject to the parties’ agreement, the arbitrator is thus empowered to take the initiative “in ascertaining the facts and the law”.

In his paper “Dispute Resolution in the 21st Century: Barriers or Bridges?”, published in the February 2001 edition of Arbitration, Professor John Uff QC stated that:-

It needs to be restated that any relief capable of being awarded by an adjudicator could be awarded with equal facility by an arbitrator exercising powers under the Arbitration Act 1996, Section 39 (Provisional Relief).

Section 39(1) provides that “the parties are free to agree that the tribunal shall have power to order on a provisional basis any relief which it would have power to grant in a final award”. Under Section 39(2) this includes:-

(a) a provisional order for the payment of money or the disposition of property as between the parties …”

Section 39(3) states that “any such order shall be subject to the tribunal’s final adjudication; and the tribunal’s final award, on the merits or as to costs, shall take account of any such order”. Unless the parties agree to confer such power on the tribunal, then, under Section 39(4), the tribunal has no such power. In any event, this section does not affect the tribunal’s powers under Section 47, providing for awards on different issues, etc.

Professor John Uff QC went on to say:-

Similarly, a procedure complying with the requirements of HGCRA Section 108 could readily be drafted so as to fall under Arbitration Act 1996. In this event, all the current difficulties concerning enforcement of adjudication decisions, which are presently taking up the time of the Courts in London and Edinburgh, could be solved more readily by reference to a century of commercial law already available in the field of arbitration. The perceived difficulty, however, is that the suggested process would be branded as arbitration. The parliamentary debate over the HGCRA Bill left no doubt that arbitration was regarded, both by the government then in power and by the opposition, as offering no solution to the perceived problem of the construction industry. Adjudication, on the other hand, offering a rough and ready means of ensuring cash flow, was regarded as both appropriate and politically acceptable, apparently in ignorance of what was already (in 1995) contained in the Arbitration Bill. Both the Bill published in 1995 (which led to the 1996 Act) and the Bill published in 1994 (which was substantially superseded) contained new and ground breaking powers enabling arbitrators to give “provisional” relief equivalent to the summary processes previously available only through the courts.

At the end of his paper, Professor John Uff QC summarises his various proposals as follows:

1. All means of privatised dispute resolution should be regarded as potentially included within the term “arbitration” …
2. Means of dispute resolution involving powers which fall short of the final and binding determination of rights should be regarded as forms of restricted arbitration, subject to AA 1996 except where otherwise agreed.
3. Parties should be encouraged by suitable arbitration agreements and rules to empower arbitrators, where appropriate, to make alternative use of forms of restricted arbitration, including mediation and adjudication.
4. Future development of all forms of arbitration, including restricted arbitration, should be harmonised, as should the approach to training, qualification and promotion of all forms of dispute resolution.

He has, elsewhere, described this as “the holistic umbrella of arbitration”. Others do not agree that the protection afforded by this umbrella is as wide as Professor Uff portrays it, but it is clear that a considerable amount of determined and pragmatic work needs to be carried out to revive the benefits of arbitration and restore it as a premier means of dispute resolution for the 21st Century.

Recent Issues in Arbitration

CIMAR have produced an optional 100-day arbitration procedure. If this procedure is adopted then the Arbitrator has an overriding duty to make his award within 100 days of the date on which the statement of claim is delivered to him or the other party, whichever is the later. The time limit includes Saturdays, Sundays and any Bank Holiday. Positive obligations are placed upon the Arbitrator, such as serving within two days of his appointment a timetable requiring the parties to:

1. Serve a Statement of Claim, if not already served, within 14 days;
2. Serve a Statement of Defence within 21 days;
3. Serve any Reply (and Defence to Counterclaim if any) within 14 days;
4. At the same time, serve all documents, statements of witnesses and experts’ reports relied upon as part of the above pleadings;
5. No further documents to be served by either party unless requested by the Arbitrator.

An oral hearing should then take place within 28 days after the conclusion of the pleadings. The oral hearing should not exceed 5 days in duration. If the Arbitrator requires final written submissions then these should be served simultaneously within 5 days from the end of the hearing.

Finally, the Arbitrator is to make his award within 18 days of the end of the hearing. A default provision in respect of costs provides that the parties shall bear their own costs of the arbitration, and should pay the fees and expenses of the Arbitrator in equal share. Finally, within 50 days of the Arbitrator’s appointment, he or she is to send the parties his estimate of the total fees and expenses which are incurred or are likely to be incurred up to the making of the award. The Arbitrator is not allowed to have a lien under the award.

In the case of Hussmann (Europe) Limited v Ahmed (Pharaon) formerly t/a Al-Ameen Developments & Trade Establishment [2003] EWCA Civ 266, the Court of Appeal held that where Arbitrators made an award in favour of persons who were not a party to the arbitration reference, then their award would be set aside or declared of no effect because they lacked substantive jurisdiction. However, the Arbitrators would not have exhausted their jurisdiction and so would be capable of making a valid final award on the merits in favour of the correct party.

Pharaon was a businessman in Saudi Arabia who traded under the name of Al-Ameen Developments & Trade Establishment (“the Establisment”). He entered into sales and service agreements with Hussmann, such agreements containing an arbitration clause. Pharaon then incorporated his business into a limited liability company. Hussmann brought an arbitration in 1997 pursuant to the 1990 agreement. The tribunal made an award in favour of the limited company. Thomas J held that Pharaon was the only party to the contract and so to the arbitration clause such that the award made in favour of the limited company was made without jurisdiction and was of no effect. Pharaon invited the Arbitrators to make an award in favour of Pharaon formerly trading as the Establishment. Hussmann then challenged that second award under Section 67 of the Arbitration Act 1996 on the basis that Pharaon was not a party to the reference to arbitration.

The Court of Appeal held that Thomas J was correct to conclude that the first award was made without jurisdiction and was of no effect. The principle of setting aside the award meant that the arbitration reverted to the position that it was in before the tribunal published their award. As a result the tribunal was not functus officio and the Arbitrators had power to issue a binding final award in respect of a substantive claim in favour of the correct party.

The recent Court of Appeal case of Lesotho Highlands Development Authority v Impregilo Spa & Ors [2003] EWCA Civ 1159 considered whether Arbitrators had exceeded their powers under Section 68 of the Arbitration Act 1996 by making an award in a currency that was different from that provided for in the contract. The Claimants in the arbitration were a joint venture of European countries involved in the construction of the Kats dam in Lesotho. The Claimants brought a claim for reimbursement of high wages paid to its workers. The dispute was referred to arbitration. One of the issues was the currency in which an award was to be made. A second related to the payment of interest. The procedural rules were those of the Arbitration Act 1996 and the ICC Rules of Arbitration. The tribunal concluded that they had power to order payment of any sum of money in any currency. They also awarded interest.

The Court of Appeal held that where the contract identified the currency of account and the currency of payment and specified that proportions of any payment to be made under the contract were to be apportioned in different currencies then the Arbitrators should have interpreted that contract in accordance with that basis which had clearly been agreed between the parties. Section 48(4) of the Arbitration Act 1996 merely codified the established case law and did not give the Arbitrators power to depart from the contract between the parties. The Arbitrators had therefore exceeded their powers under Section 68 of the Arbitration Act 1996.

They also exceeded their powers in respect of the award of interest. Once again, they should have applied the substantive law of the contract rather than relying on their discretionary powers under Section 49(3) of the Arbitration Act 1996.

Expert Witnesses and Single Joint Experts

Introduction

Every expert witness in England and Wales should be familiar with the seven key principles of expert evidence set out by Mr Justice Cresswell in The Ikarian Reefer [1993] 2 Lloyds Rep 68, at page 81.

1. Expert evidence should be and should be seen to be the independent product of the expert, uninfluenced by the exigencies of litigation;
2. The Court should be provided with independent assistance by the expert witness in the form of an unbiased, objective opinion in relation to matters within his expertise. An expert witness should never assume the role of advocate;
3. Facts or assumptions on which expert opinion is founded should be stated, together with material facts which could detract from his concluded opinion;
4. If an issue falls outside the scope of an expert’s expertise, he should make it clear that it does so;
5. An expert must say when an opinion has been inadequately researched due to the inadequacy of data, and indicate that his opinion is provisional. If an expert cannot aver that his report contains the truth, the whole truth and nothing but the truth, that qualification should be made clear;
6. If, following the exchange of reports, an expert changes his mind on a material matter, this shift in opinion should be communicated to the opposing side via legal representatives without delay, and, when appropriate, to the Court;
7. Photographs, plans, survey reports and other documents referred to in evidence must be provided to the other side at the same time as the exchange of reports.

These principles were endorsed when the case was appealed to the Court of Appeal, and became the standard by which experts were judged. Despite the general acceptance of these criteria, that acceptance did not take effect quickly enough to prevent growing judicial dissatisfaction with the way in which expert evidence was presented. Lord Woolf highlighted three problems: excessive cost, lack of impartiality and the emergence of an “expert industry”.

A number of decisions followed which clearly took note of some of these principles. Whilst Mr Justice Dyson’s attack, in Pozzolanic Lytag Ltd v Bryan Hobson Associates (1998) CILL 1450, on the conduct of experts and their “prolix reports”, was widely publicised. The Courts were also alive to the second of Lord Woolf’s concerns, namely lack of partiality. In London Underground Ltd v Kenchington Ford plc and Others (1998) CILL 1452, HHJ Wilcox criticised one expert for adopting a partisan approach, noting that he“… signally ignored his duty to both the court and his fellow experts” and “continued to assume the role of advocate of his client's cause”. This undoubtedly affected the weight given to that evidence, characterised as being “invalid and unscientific”.

In a second case, Munkenbeck and Marshall v Kensington Hotel (1999) 15 Const LJ 231, HHJ Wilcox went further and expressly downgraded the evidence of an expert who“…badly lost sight of the proper role of an expert assisting the court in the determination of issues…adopted the stance of an advocate. The value of his evidence was thus very greatly diminished. I was wholly satisfied with the evidence of Mr Melvyn; an impressive witness and a fair and objective witness.”.

These criticisms were reinforced by the Court of Appeal in Clonard Developments Limited v Humberts (unreported, Court of Appeal 15 January 1999), which upheld a trial judge’s decision to reject the evidence that was “unhampered by impartiality” of the expert witnesses of both parties. The Court of Appeal warned that:

A judge sitting at first instance must always be astute to the possibility that the expert before him may not be fulfilling his role as an impartial or objective adviser to the court and is seeking to espouse the cause for which he has been instructed … If this were his perception it was his duty to say so and to act accordingly by rejecting or discounting those parts of their evidence which were so tainted.

The new Civil Procedure Rules (CPR) are now in force. Part 35 relates to expert witnesses. Three key points should be borne in mind:

(i) The accompanying Practice Direction is as important as Part 35 itself;
(ii) Judges have undergone considerable training in the new Rules and the cultural changes intended to accompany them.
(iii) Regard must be had to the new Rules as a whole, particularly the overriding objective, set out in Part 1, of “enabling the court to deal with cases justly”.

By way of example, the Practice Direction sets out what the expert’s report must cover. Following the impatience shown by the Court with an expert unfamiliar with the new Rules and culture in Stevens v Gullis, (see below), it is crucial that the expert’s report does cover these requirements.

Single joint expert

The headline change was the single joint expert. Whilst the notion that the Courts will promote the appointment of single joint experts to be “shared” by the parties is not new, the former power was rarely used, and the expected implementation of this part of the CPR is a radical departure. Given the prominence of this proposal it is expected to become a popular measure with the Courts.

Rule 35.7(1) provides that “where two or more parties wish to submit expert evidence on a particular issue, the court may direct that the evidence on that issue is to be given by one expert only …”

Rule 35.7(3) states that:

where the instructing parties cannot agree who should be the expert, the Court may

(a) select the expert from a list prepared or identified by the instructing parties; or
(b) direct that the expert be selected in such other manner as the Court may direct.

Under Rule 35.8(1), each party may give instructions to the single joint expert; under Rule 35.8(4), before such an expert is instructed, the Court may:-

(a) limit the amount that can be paid by way of fees and expenses to the expert; and
(b) direct that the instructing parties pay that amount into court.

Under Rule 35.8(5), unless the Court otherwise directs, the instructing parties are jointly and severally liable for the payment of the single joint expert’s fees and expenses.

In an Admiralty Case, (Owners of the Ship “Pelopidas” v Owners of the Ship “TRSL Concord” 8 October 1999), Judge David Steel QC reiterated that expert evidence was not admissible without leave of the Court. If parties sought expert advice without an Order enabling them to do so, those costs would not be recoverable. He also noted the potential advantages of a single expert to run the software necessary to plot the course of ships: something specific to those courts maybe, but a useful pointer to judicial thinking in general. However, this may not be the case, at least in more complex matters, in every court. The Commercial Court Guide says parties:

… should be prepared to consider the use of single joint experts. However, cases… frequently are of a size and of a complexity or nature such that the use of single joint experts is not appropriate. In such cases, parties will generally be given permission each to call one expert whom they have retained in each field requiring expert evidence.

Note the references to “size” and “complexity”. The Courts are still concerned about costs and the possibility of extensive expert evidence. In simple cases one expert may be considered enough. Great weight is given to proportionality.

In the case of Grobbelar v Sun Newspapers Limited (TLR, 12 August 1999), Lord Justice Potter said that the trial judge now has power under the CPR to exclude evidence (Rule 32.1(2)). This power has no express limitation but must be exercised to deal justly with the case. Under the CPR, dealing justly with a case includes considering whether the likely benefit of taking a particular step justifies the cost of taking it. In Thermos v Aladdin Sales (Chancery Division, Patents Court ILR, 13 December 1999), the Court observed that where an issue in dispute is factual and obvious, the Court is unlikely to benefit from expert evidence.

Mr Justice Dyson, when he gave a brief “whistlestop” tour of the reforms just after they were implemented, entitled “The Future of Civil Litigation Post Woolf or The Official Referees in Sheep’s Clothing”, made a similar point:

I would tentatively suggest that the court is most likely to order a single expert where (i) the sums at stake in the litigation are small in relation to the costs likely to be incurred, (ii) the expertise consists of personal judgment or “feel” derived from experience (such as valuation evidence), (iii) the evidence which the court needs to have explained is relatively uncontroversial or (iv) the issue is relatively peripheral to the case.

In Kranidiotes v Paschali & Anr [2001] EWCA Civ 357, the Court of Appeal had to consider the actions of a judge who had appointed a single joint expert to prepare a report on the market value of shares. A fee cap of £10,000 was set. The expert realised that the extent of the material supplied was such that he could not prepare a report within the fee cap and accordingly sought directions from the Judge.

The Judge decided he had to achieve a fair result and also one which was proportionate to the issues in dispute. The maximum sum recoverable by the claimant was £80,000. The expert suggested that his costs could amount to £70,000. Therefore, the Judge decided to use his discretion and dispense with the services of the first expert and appoint a cheaper one.

The Court of Appeal declined to interfere with this case management decision since it felt that the Judge had not exceeded his discretion. The Judge believed that the cheaper option would still ensure that guidance could be given at trial on the claims being made. The sum of money in issue had not warranted a payment of substantial costs and the Judge had stressed at all times the need to achieve a fair and proportionate result.

In Cosgrove & Anr v Pattison & Anr (unreported, 27 November 2000), Mr Justice Neuberger considered the Court of Appeal case of Daniels v Walker (see below) when allowing an appeal by the defendants that they be permitted to instruct an expert of their own since they were unhappy with the report prepared by the single joint expert. Amongst the relevant factors were the facts that thousands of pounds were at stake and the hearing was some way off. Permission was given. The Judge held that whether or not to grant permission for a separate expert depends on the following criteria:

• The nature of the dispute
• The fiscal amount and nature of the issues at stake
• The number of disputes to which the expert evidence was relevant
• The reason that the expert was needed
• The effect on the conduct of the case of permitting the additional expert
• The delay the appointment of a further expert might cause
• Any other special reasons and the overall justice to the parties in the context of the litigation

In an appropriate case, the Court will direct that a single joint expert should provide evidence on whether a company claimant would be able to pay the costs of a successful defendant, for the purpose of a security for costs application (in Guinle v Kirreh, unreported 3 August 1999).

In March 2001, the Lord Chancellor’s Department published a report entitled “Emerging Findings”, reviewing the changes introduced by the CPR. When focusing on the use of the single joint expert, the report declared that the “use of single joint experts appears to have worked well. It is likely that their use has contributed to a less adversarial culture, earlier settlement and may have cut costs.”

According to the LCD report, the single joint expert has been used in 41% of the cases where there has been expert evidence. The report does not, however, distinguish between particular types of cases. It remains likely that in the larger, more complex cases, even if a single expert has been appointed, the parties will appoint their own expert to shadow the Court appointed expert, thereby not achieving the costs saving which was part of the whole point of this particular change.

This has been recognised by Lord Woolf, who, in the case of Daniels v Walker [2000] 1 WLR 1382, said:

In a case where there is a substantial sum involved, one starts, as I have indicated, from the position that, wherever possible, a joint report is obtained. If there is disagreement on that report, then there would be an issue as to whether to ask questions (under CPR 35.6) or whether to get your own expert’s report. If questions do not resolve the matter and a party, or both parties, obtain their own expert’s reports, then that will result in a decision having to be reached as to what evidence should be called. That decision should not be taken until there has been a meeting between the experts involved. It may be that agreement could then be reached; it may be that agreement is reached as a result of asking the appropriate questions. It is only as a last resort that you accept that it is necessary for oral evidence to be given by the experts before the court …

The great advantage of adopting the course of instructing a joint expert at the outset is that in the majority of cases it will have the effect of narrowing the issues. The fact that additional experts may have to be involved is regrettable, but in the majority of cases the expert issues will already have been reduced. Even if you have the unfortunate result that there are three different views as to the right outcome on a particular issue, the expense which will be incurred as a result of that is justified by the prospects of it being avoided in the majority of cases.

Where the Court has directed that the evidence on a particular issue is to be given by one expert only and there are a number of disciplines relevant to that issue, the Practice Direction to CPR 35.7 says that a leading expert in the dominant discipline should be identified as the single joint expert. He should prepare the general part of the report and be responsible for annexing or incorporating the contents of any reports from experts in other disciplines. The task of the lead expert may be complicated by conflicting opinion evidence from the other experts or by the lead expert disagreeing with some of the other experts’ opinions.

The opinion of the joint expert is not binding on the parties; it may be that they will agree that the evidence need not be given at trial or that it may be submitted as a written report without the expert being called. However, it could be the case that the single joint expert will be called to give oral evidence at trial so that both parties have the opportunity to cross-examine him.

If the single joint expert is asked questions, either in writing or under cross examination, then, as Lord Woolf anticipated, a party may appoint its own expert to advise it, known as a “shadow expert”. As a shadow expert’s role is not to give evidence themselves, they do not have an overriding duty to the Court and Part 35 of the CPR does not apply to them.

The appointment of single joint experts has an additional advantage which may not have been foreseen when the Court rules were changed; in the case of Holmes v SGB Services Plc [LTL 19 February 2001], the Court of Appeal allowed the claimant to postpone his trial when the Court appointed single joint expert put forward a different explanation as to why an accident had happened than the claimant had previously put forward. This was done so as to give him time to amend his case to include the new explanation. It is highly unlikely that the Court would have postponed the claimant’s trial if his own expert had produced such an explanation so close to the trial as the problem would then have been of the claimant’s own making.

The recent (unreported) decision of HHJ Wilcox in A de Grouchy Holdings Ltd v House of Fraser Stores Ltd gives a good example of the single joint expert at work in the TCC. Here the expert understood his role to “put myself in the shoes of the PQS and provide a report to the court”. HHJ Wilcox said of the Court expert:

The only expert evidence before me is that of Mr Wishart. I judge him to be an independent witness, who is both highly experienced and impressive. The court’s duty is to consider his evidence as evidence in the case in the light of the instructions he has been given by the parties and to give it the appropriate weight after cross examination and any testing there may be, together with all of the other evidence there may be. Merely because a witness is a jointly instructed expert does not mean that he is deciding the case on these issues. Nonetheless, where the approach of the expert is careful and reasoned and where by his approach he demonstrates that he is both an experienced and well qualified witness in the field that he is giving evidence in, the court would have to have a very good reason for substituting another view and for not giving considerable weight to his evidence. It is evident in this case that Mr Wishart was put under pressure of time. That of course can affect the degree of care that can be given to the consideration of the technical issues. Where it did so, Mr Wishart properly pointed that out. Where he would have wanted substantiation, and either none was available, or incomplete substantiation was provided, he said so and the effect upon his ascertainment figures was apparent and clear to the court …

The case of Roger James Leyland and Deborah Ann Leyland v Fairview New Homes plc & Others [2002] EWHC 1350 (Ch) concerned the Claimants’ appeal from a decision of Mr T.J.A. Hooper, QC, who dismissed their claim on the ground that the single joint Court appointed expert considered that the Claimants had suffered no loss. The Claimants had purchased a new flat from the First Defendant, and at that time the Second Defendant was planning to build and subsequently did build an incinerator and power plant nearby. The Claimants sought damages from Fairview and/or Lewisham on the ground that they had failed to lawfully disclose the proposals in respect of the plant. The Court appointed expert (pursuant to CPR 35.7) considered that there had been no diminution in value.

It was on the basis of that report that the Defendants applied for dismissal of the claim, and the Judge dismissed the claim. The Claimants had, however, sought to adduce further evidence comprising two further expert valuations which sought to show that the Claimants suffered diminution in value to their flat.

Neuberger, J in the Chancery Division held that although the Claimants’ case was weak it could not fairly be said that there was no realistic chance of success. The Judge at first instance should therefore have allowed the Claimants to explore the single joint expert’s report in the cross-examination with a view to persuading either the expert or the Court that there was a diminution in value.

The role of the expert witness

The CPR states that the expert owes a duty to the Court, not their client or instructing solicitor. Rule 35.3 is clear:

1. It is the duty of an expert to help the Court on the matters within his expertise.
2. This duty overrides any obligation to the person from whom he has received instructions or by whom he is paid.

The Rules provide support for experts. The right for an expert to file a request at court for directions, given by Rule 35.14, is at least partly a tool to provide a way out when put under pressure by those instructing him.

In Stevens v Gullis (TLR 6 October 1999), the Court of Appeal upheld a judge’s rulings in May 1999, debarring the defendant from calling his expert witness to give evidence in the main trial and in third party proceedings. Prior to the introduction of the CPR at the end of April 1999, the expert had failed to comply with an order regarding the drawing up of a memorandum of agreement/disagreement following an expert’s meeting. As a result, the Judge ordered the expert to comply with paragraph 1.2 of the Practice Direction to Part 35, which sets out the requirement for details to be included in an expert’s report.

The expert failed to comply and the Judge therefore ruled that the expert could not be called to give evidence for the defendant. The Court of Appeal emphasised that the Court has the power to control evidence given at trial, and that this expert had demonstrated by his conduct that he had no concept of the requirements of expert witnesses under the CPR. Furthermore, the expert witness’s overriding duty is to the Court rather than to the party instructing him. For these reasons the Judge was entitled to make the order he did.
Lord Woolf said:

The position was made clear in numerous authorities but, in particular, in the decision of Cresswell J in the Ikarian Reefer [1993] 2 LLoyd’s Rep 68.…There can be no excuse, based upon the fact that the CPR only came into force on 26 April 1999, for the fact that Mr Isaac did not understand the requirements of the courts with regard to experts. Those requirements are underlined by the CPR. It is now clear from the rules that, in addition to the duty which an expert owes to a party, he is also under a duty to the court.

The requirements of the Practice Direction that an expert understands his responsibilities, and is required to give details of his qualifications and the other matters set out in paragraph 1 of the Practice Direction, are intended to focus the mind of the expert on his responsibilities in order that the litigation may progress in accordance with the overriding principles contained in Part 1 of the CPR.

The expert must understand exactly what is required of him as an expert witness under the CPR. If he does not then the sanctions are likely to be draconian. That duty includes the need to make oneself available to do the necessary work when it is required. Deadlines are tighter under the new regime. The penalties for failing to meet them can be severe, ranging from costs to the dismissal of a case. Just as costs awards can (and will) be made against solicitors, it is not inconceivable that an expert might find himself vulnerable to such a finding from the Court.

In Matthews v Tarmac Bricks and Tiles Limited (TLR 1 July 1999), the Court of Appeal confirmed the need to take all practical steps to ensure that witnesses, including experts, are available for the trial. The Court will not necessarily be sympathetic if an expert is unavailable, since he has made a deliberate career choice to follow this particular field. In that case, the Court of Appeal upheld the Judge’s refusal to vacate trial dates owing to the unavailability of expert witnesses. Lord Woolf said that experts had to be prepared, as far as practicable, to rearrange their diaries to meet the commitments of the Court.

Rule 35.3 states that the Court’s permission to call expert evidence is required in all cases. This complete court control is probably the biggest change of all. Whilst there will always be cases where expert evidence is necessary, whether that evidence is called or not is ultimately up to the Court and up to the Court alone.

Rule 35.3 was affirmed by Mr Justice Cresswell, in giving judgment in the prosecutions of Balfour Beatty and Geoconsult (R v Balfour Beatty Civil Engineering Ltd and Geoconsult GES (1999) CILL 1487) following the collapse of the Heathrow Tunnel, where he confirmed “the importance of compliance with these principles in all cases where expert evidence is called”. The Court of Appeal has now also given firm guidance.

In the case of Baron v Lovell (TLR 14 September 1999), the Court of Appeal dismissed an appeal against a judge’s decision not to allow a defendant to call an expert witness whose report had been disclosed long after directions for service had expired, and at the same time as he made a Part 36 settlement offer. The Court of Appeal held that the Judge had exercised his case management powers under Part 1 of the CPR correctly. The defendant had failed to disclose the report in the time prescribed and was thus at the mercy of the Court. In addition, it was not in the spirit of the Woolf Reforms for experts’ reports to be disclosed on the day offers under Part 36 were made, since the other party would have little time to consider the report and decide whether to accept the offer.

Under the CPR, there is a new requirement that an expert’s report must contain details of the substance of all material instructions, whether written or oral. It is clear that this requirement, coupled with the fact that instructions are discloseable, or can be the subject of questioning if the Court considers the expert’s statement of instructions is incomplete or inaccurate, and with the overriding duty of experts to the Court, is affecting the way parties work with experts. More formal, arm’s length relationships appear to have developed and it also seems that, especially in large cases, parties are beginning to rely on separate experts to advise in preparing the case and the instructions to the “testamentary” expert, thus increasing rather than decreasing costs.

In the case of Anglo Group Plc v Winther Brown [2000] All ER 294, HHJ Toulmin QC held that it is normally inappropriate for the same expert to undertake both the role of expert witness and claims consultant. In that particular case, the defendant’s expert “was unable to distinguish” between these roles and could not be relied upon.
As long as the expert understands that his primary duty is to the Court, it is, however, permitted, for the expert to be an employee of one of the parties (Field v Leeds City Council TLR 18 January 2000).

In Mutch v Allen [2001] E.W.C.A. 716, the Court of Appeal considered Rule 35.6 of the CPR, which enables a party to submit written questions to the other side’s expert. At a case management conference, a District Judge had allowed the defendant to put written questions to the claimant’s medical expert. This order was reversed on the basis that the replies did more than merely clarify the report.

The Court of Appeal disagreed. The District Judge had given permission for the questions to be put. The claimant had not objected. Had the expert been called to give oral evidence, the defendant would have asked the same questions in cross-examination.

One of the essential reforms behind Rule 35 was to ensure that an expert witness no longer served exclusively the interests of the party by whom he had been instructed and to ensure that his expertise was available to all so that the Court was provided with all relevant material in the most cost-effective way. By way of example, Rule 35.11 provides that one party can use the other party’s expert report even if that party chooses not to rely upon it themselves.

In Mann v Chetty & Patel (unreported, 26 October 2000), the Court of Appeal considered the principles to be applied when giving leave to amend a claim to adduce expert evidence. These include:

(i) how cogent the proposed expert evidence would be;
(ii) how helpful the proposed expert evidence would be in resolving the issues in the case; and
(iii) how much it would cost in proportion to the sums at stake.

In the case of Pride Valley Food Limited v Hall & Partners (Contracts Management) Limited (4 May 2000), HHJ Toulmin QC held that expert evidence on whether a project manager had been negligent was inadmissible, as it usurped the function of the Judge and there was no recognisable profession of project managers. He stated:-

[The Claimant’s expert] is a member of the Royal Institute of British Architects and of the British Academy of Experts. His report runs to over 100 pages with another 100 pages of appendices. It deals with a number of questions which appear to have been posed by his own solicitors. Many of these are questions for the court and not questions for the experts. The report contains throughout many expressions of opinion as to what [he] himself would have done in similar circumstances. He purports to make many findings of fact on questions which are matters for the Judge. He makes judgments from the standpoint of a professional architect and designer on matters of professional practice which must be judged from the stand point of a chartered surveyor who is acting as a project manager. His report offends against the established basis on which experts should give evidence.

The same judge, Judge Toulmin, updated the Ikarian Reefer principles in the case of Anglo Group Plc v Winther Brown & Company Limited [2001] All ER 294; he included the following new, or substantially revised, requirements:

1. The expert’s evidence should normally be confined to technical matters on which the court would be assisted by receiving an explanation, or to evidence of common professional practice. The expert witness should not give evidence or opinions as to what the expert himself would have done in similar circumstances or otherwise seek to usurp the role of the Judge.
2. He should co-operate with the expert of the other party or parties in attempting to narrow the technical issues in dispute at the earliest possible stage of the procedure and to eliminate or place in context any peripheral issues. He should co-operate with the other expert(s) in attending without prejudice meetings as necessary and in seeking to find areas of agreement and to define precisely areas of disagreement to be set out in the joint statement of experts ordered by the court.
3. An expert should be ready to reconsider his opinion, and if appropriate, to change his mind when he has received new information or has considered the opinion of the other expert. He should do so at the earliest opportunity.

In that case, the expert evidence was rejected by the Judge on the ground of lack of independence. The Judge found that one expert had “failed to conduct himself in the manner to be expected of an expert witness”.

In Brown & Another v Bennett (TLR 2 November 2000), Mr Justice Neuberger confirmed that when a litigant had agreed to pay an expert witness, he should not be able to get away without paying that fee by issuing a Witness Summons.

In Barings Plc (in liquidation) v Coopers & Lybrand (No. 2) (9 February 2001, Chancery Division), by an interlocutory order made on 14 April 1999 the Court gave liberty to the parties in both actions to call expert evidence directed to “banking management”. That order was later varied that each defendant should be at liberty to call two experts on issues described as “banking management and settlement issues”. The expert evidence in question was filed in support of a defence of lack of causation or contributory negligence to the claims and in support of a third party claim, and was directed to the question of whether various officers or employees of the claimants or ING Baring Securities Japan (“BSJ”) ought to have become aware of Mr Nick Leeson’s unauthorised trading without the assistance of the auditor defendants and to have taken action to stop him by alerting the claimants.

After the evidence was filed the claimants applied to strike out the whole or parts of three expert reports filed on behalf of the defendants. Each of the claimants and BSJ submitted that the reports were inadmissible in whole or in part because they dealt with matters which were said to be not properly the subject of expert evidence.

The Judge held that the three expert reports directed to banking management filed by the defendants were admissible under Section 3 of the Civil Evidence Act 1972. In the (pre-CPR) decision of the Court of Appeal on 27 November 1995 in United Bank of Kuwait v Prudential Property Services Limited (unreported) the Court defined the purpose of expert evidence as being “that the Court should reach a fully informed decision”. The Court’s powers to control evidence generally derived from CPR 32.1 and the power to control the evidence of experts arose in particular from CPR 35. It was for the party seeking to call expert evidence to satisfy the Court that expert evidence was available which would have a bearing on the issues which the Court had to decide and would be helpful to the Court in coming to a conclusion on those issues.

The test whether expert evidence in any particular case was to be received was two stage, the first stage being whether the evidence was admissible as “expert evidence” for the purposes of Section 3 of the 1972 Act, and the second stage whether the Court should admit it as being relevant to any decision which the Court had to arrive at, i.e. as helpful for that purpose.

In his judgment the authorities established the following propositions:

(i) that expert evidence was admissible under Section 3 of the Civil Evidence Act 1972 in any case where the Court accepted that there existed a recognised expertise governed by recognised standards and rules of conduct capable of influencing the Court’s decision on any of the issues which it had to decide, and the witness to be called satisfied the Court that he had a sufficient familiarity with and knowledge of the expertise in question to render his opinion potentially of value;

(ii) that evidence meeting that test could still be excluded by the Court if it took the view that calling it would not be helpful in resolving any issue in the case justly.

In the Judge’s judgment, there was such a body of expertise with recognised standards in relation to the managers of investment banks conducting or administering the highly technical and specialised business of futures and derivatives trading. It was significant that this was an area of commerce which was highly regulated. No attempt had been made to show that any of the experts lacked sufficient knowledge or familiarity with the expertise and, in the absence of any such attack, it followed that the Court would treat the expert evidence as admissible.

The next question was whether that evidence should nonetheless be excluded. The objections raised to the effect that the reports were expressions of opinion based on the experts’ experience and were not made by reference to any objective standard - and (in the case of one report) to the effect that it was inappropriately tendentious and based on sources biased in favour of the defendant’s case - were not in his lordship’s judgment sufficient to justify striking out the reports. Whether the reports were based on inaccurate facts or were tendentious were matters which could be tested in cross-examination.

A further recent case is The Royal Brompton Hospital National Health Service Trust v Frederick Alexander Hammond and Others, Technology and Construction Court, His Honour Judge Richard Seymour QC (2001 CILL 1714).

The Claimant (“the Trust”) entered into a contract with Taylor Woodrow Construction Limited for the construction of a six-storey hospital in Chelsea, London. The Trust also engaged Watkins Gray International (UK) (“WGI”), the eighth Defendant, as architect for the project and subsequently engaged Project Management International (“PMI”), a partnership, collectively the first to seventh Defendants, to act as project managers. The works were delayed and WGI granted Taylor Woodrow several extensions of time, both before and after practical completion which was certified on 22 May 1990. Inter alia, extensions of time were granted in respect of four grounds. In this sub-trial the Trust alleged negligence on the part of WGI and PMI in relation to the extensions of time granted to Taylor Woodrow on these four grounds, contending that in the case of the first two, no extensions at all should have been granted and in the case of the last two that the extensions granted were of such excessive length that no reasonably competent architect or project manager could possibly have considered them justified. The parties relied solely upon expert evidence and no witness of fact having direct knowledge of the progress of the works was called.

This judgment contains some remarkably trenchant views upon the nature of expert evidence in heavyweight construction disputes. The Judge was particularly damning of experts who allow themselves insufficient time to get properly au fait with the paperwork, and who accept from their instructing solicitors, or themselves make, factual assumptions intended to circumvent a full investigation. The Judge also made some scathing remarks about the lack of contemporary knowledge of experts who no longer actively practise in the field but who devote most of their time to providing expert or consultancy services. Certain passages within this judgment will make very uncomfortable reading for some expert witnesses.

Having also criticised the conclusions of the single joint expert appointed by the Court, Judge Seymour made it clear that in the absence of any credible expert evidence, the Court may only substitute its own judgment and commonsense in the most straightforward of cases. The Court is not in a position to provide a view on any matter in respect of which any special skill, training or expertise is required to make an informed assessment. Judge Seymour’s one finding of negligence against WGI was based upon correspondence which made it clear that WGI was addressing its mind not to the likely completion date of the works as a whole (in respect of which the extension of time was granted), but rather the likely extended date for completion of the floor works alone. This is a finding he felt able to derive from the documents in the absence of any witnesses of fact or any credible expert evidence.

Part 36, Settlement Offers and Costs

The introduction of Part 36 under the new civil procedural rules has had a noticeable effect on the conduct of litigation. The majority of parties in dispute are seeking to settle the matter and direct the entirety of their attention to the running of their businesses. The Civil Procedure Rules seek to encourage negotiation and/or ADR, and indeed any attempts to settle the matters in dispute. Settlement will, of course, involve some element of compromise, and one or other of the parties may seek to use the litigation process either to push the other party towards a compromise, or progress the matter towards a binding resolution in the failure of compromise.

The purpose then of Part 36 is to force the parties to consider the strengths and weaknesses of their case and compromise their position. A claimant may specify the amount that he would be willing to accept, or alternatively a defendant may offer a sum of money to the claimant in order to bring the matter to a close. If the claimant accepts the offer then the relevant cause of action ends and the claimant would generally be entitled to his costs to date. The pressure to settle arises from the effect that a Part 36 Offer has in respect of costs.

If a Part 36 Offer does not settle the matter, then the parties are taking an increased risk in respect of costs. There are, basically three potential outcomes of a trial:

1. If the claimant fails to recover more than the Part 36 Offer (or by that stage the payment into Court) then the Judge will usually make two costs orders. First, the claimant will be awarded its costs up to the date of the payment in, or the earlier Part 36 Offer. Second, costs from that date will be awarded to the defendant. The result is that the claimant pays a substantial part of both parties’ costs even though he has in effect won the action.
2. If the claimant is awarded more than the Part 36 Offer then the offer has failed to resolve the matter, and costs will be decided in the usual way.
3. If the claimant is awarded more than his offer then the defendant is likely to suffer heavy financial penalties in the form of additional interest and costs from the date of the offer.

The Part 36 Offer can be made by either the claimant or the defendant, and Rule 36.10 provides that pre-action offers may be made providing that they comply with the particular provisions of that Rule. The Court will then take pre-action offers into account when making any order as to costs. A Part 36 Offer may be made at any time after the proceedings have commenced, including during appeal proceedings, but a party that is offering to pay an amount of money must be prepared to pay that amount of money into court.

A substantial number of decisions have been reported in respect of Part 36 Offers. A search on Lawtel in August 2002, identified over 800 cases dealing with Part 36 Offers in the preceding 12 month period. Many of these cases deal with particular applications of specific sections of the Rules, although some have wider applications. Generally, the Courts have taken a purposive approach, and the message from the Courts is that Part 36 Offers are to be encouraged, and a party that has made a sensible attempt to settle the matter will be looked upon favourably by the Court. It is clearly not possible to cover all of these cases, but set out below are several developing themes, which are of particular application in favour of construction law.

First, the provision of adequate information in order for the Offeree to make an informed decision about whether to accept or reject the Part 36 Offer. Little is said in Part 36 about the requirement to provide the Offeree with information in respect of a Part 36 Offer. However, Part 36 Rule 21(5) states that the Court is required to have regard to the information available to the parties at the time when the Part 36 Offer or Part 36 payment was made.

In the case of Ford v G.K.R. Construction Limited [2000] 1WLR 1397, Part 36 Offers were made before the commencement of litigation. The Court of Appeal was asked to consider a first instance cost award where the Judge had granted the Claimant her costs in the personal injury case, despite the fact that she was awarded a sum which was less than that paid into court. The Defendant introduced new evidence at a late stage in the proceedings and the Court of Appeal considered that it should have been introduced much earlier. Lord Woolf MR stated at page 1403 (paragraphs D to E):-

If the process of making Part 36 Offers before the commencement of litigation is to work in the way in which the CPR intended, the parties must be provided with the information which they require in order to assess whether to make an offer or whether to accept that offer. Where offers are not accepted, the CPR make provision as to what are to be the cost consequences; Rules 36.20 and 36.21. Both these Rules deal with the usual consequences of not accepting an offer which, when judged in the light of the litigation, he should have accepted.

It seems then, that if an offeror has not provided information to the offeree which would enable them to assess whether or not to accept an offer then that non-disclosure may be a material matter for the Court to consider when deciding what order to make in respect of costs. An important aspect of this case was that the offer was made before the commencement of litigation, and so before any material disclosure. It seems that if one party is seeking to make an early Part 36 Offer then that party should provide sufficient supporting documentation to the offeree to enable the offeree to assess the Part 36 Offer.

More recently, in the case of Challenger and Challenger v Watkins and Watkins [2002] EWCA Civ 281, an appeal was made against the Judge’s order that both parties should pay their own costs. The case concerned a claim that one party was entitled to the benefit of a right of way over the Defendant’s land without being under an obligation to repair the right of way. The Defendants initially disputed that right, but conceded the point. The sole issue at trial was whether there was an obligation on the Claimants to repair the lane over which they had right of way. The Defendant’s Part 36 Offer was that both parties share equally the costs of repairing the lane. At trial the Judge decided that the Claimants had no obligation whatsoever to contribute to the costs of repair. The Judge went on to hold that the Claimants had issued the proceedings precipitately and as a consequence no order was made in respect of costs. He also concluded that the Claimants had not done any better than the Part 36 Offer, because the Defendants were under no duty to carry out repairs, and so if the Claimants chose to carry out some repairs then the Claimants would have had to pay for the entirety of those repairs.

The Court of Appeal held that there was nothing precipitate about the commencement of proceedings and that the Claimants had clearly succeeded on the only issue at trial. However, while the Claimants did not have to contribute to the costs of repair, there was no obligation placed upon the Defendants to repair the lane either. Nonetheless, the Claimants had still improved upon the Part 36 Offer made by the Defendants in that the Claimants were free from any obligation to contribute. Therefore the Claimants should have been awarded the entirety of their costs.

A Part 36 Offer is not restricted to financial amounts. In the case of Rosalind Huck v Tony Robson (2002) 3 AER 263, a Part 36 Offer was made by which the Claimant agreed to apportion liability for a road traffic accident in the ratio of 95:5. The Judge at first instance disregarded the offer on the grounds that it was “illusory”, in that no judge would have apportioned liability in such a way. The Court of Appeal decided that the decision to award indemnity costs was discretionary, and so it was therefore permissible to ignore tactical offers, but the first instance Judge was still wrong to ignore the offer even if it was unlikely that a judge would have apportioned liability in such a way. The offer was a genuine attempt at settlement, and the Defendant had rejected it at his peril.

When a judge considers a Part 36 Offer while making an order in respect of costs, only substantive issues should be considered. In other words, costs themselves were not relevant when deciding whether a judgment was more advantageous than if the Part 36 Offer had been accepted. In the case of Mitchell and Others v Ron James and Others [2002] EWCA Civ 997, a party had made what they described as a Part 36 Offer, the terms of which included a term that the Claimant and Defendant were to bear their own costs, including those in the third party proceedings, and that they would also bear half of the accountant’s costs. The offer also stated that the business would be sold and that a fixed sum would be paid to the Plaintiff and that the Defendant’s counterclaim would be dismissed. The Claimant was found to be entitled to half of the shares in the company and the counterclaim was dismissed. The Claimant therefore argued that this order was more advantageous than the terms of the Part 36 Offer, and therefore they should receive costs on an indemnity basis. This Defendant did not agree. On appeal, the Claimant accepted that it was not possible to establish whether the shares to which it was found to be entitled were of a greater value than the fixed sum set out in the offer. However, the Claimant contended that after taking the cost order into account they were in fact better off.

The Court of Appeal held that the question of whether a judgment was more advantageous than a Part 36 Offer was intended to refer to the substantive issues only rather than the ancillary matter of costs. A term in offer in respect of costs was not within the scope of a Part 36 Offer. However, the party could make an offer in respect of costs and the Court would have regard to exercising its discretion after the trial in respect of that offer, but such a term could not be used to obtain an order for indemnity costs.

In the case of Perry Press t/a Pereds v (1) David Chipperfield (2) Evelyn Stern (Court of Appeal, 25 March 2003) in the Court of Appeal Buxton LJ and Dyson LJ decided that a judge was entitled to conclude that an offer made during the proceedings was not clear and concise such that he did not need to take it into account when considering the costs of the matter. The Defendants had sent a letter to the Claimant headed “without prejudice save as to costs” in which they offered to settle the claim for £5,400 plus a contribution to the legal costs. The Defendants asked the Claimant what it considered would be reasonable costs.

The Claimant rejected the offer. The first instance Judge held that the offer was not clear and concise, and was certainly not made in the manner of a Part 36 Offer. The Court of Appeal agreed. They thought that the letter was merely an offer to enter into serious negotiations rather than a clear offer that could be accepted.

The term “contribution” to legal costs was not an offer to pay a particular sum nor an agreement to pay a particular proportion of the legal costs. It was certainly not an offer to pay all of the legal costs. It therefore did not have the clarity required of an offer when considering the costs of an action.

Islam v Ali (Court of Appeal, 26 March 2003). In this case Mr Islam sought remuneration in respect of his services as a chartered accountant during a period when he ran the Defendant Mrs Ali’s late husband’s accountancy business. He had received around £72,000 for that period, but sought a further £84,000. He was awarded £12,746.41. Mrs Ali had argued that Mr Islam ran the business purely as an agent and was only entitled to reasonable remuneration. However, the only offer that she made to settle the action was that Mr Islam should pay her legal costs of £15,000 plus disbursements. On the other hand, he had offered to settle for £45,000 plus interest plus £15,000 in respect of his legal costs. The trial Judge ordered Mrs Ali to pay Mr Islam’s legal costs.

Mrs Ali argued, on appeal, that the judgment was not really a true “win” for Mr Islam as he only managed to obtain a relatively small sum of money in contrast to his much larger claim. The Court of Appeal agreed, accepting that he was only entitled to reasonable remuneration. Therefore, Mrs Ali was the true winner and the Judges ordered that Mrs Ali pay Mr Islam costs in substitution for an order that there be no order as to costs. This is perhaps slightly surprising given that the Claimant did in fact receive a sum of money, and the Defendant did not really make any offer whatsoever in respect of that sum. Nonetheless the case demonstrates that the Courts will now look to the reasonableness of the issues argued, and the proportionality of the claim by comparison to the amount eventually awarded.

A fresh Part 36 Offer may well need to be made in respect of appeal proceedings. In the case of Various Claimants v (1) Bryn Alwyn Community (Holdings) Limited (2) Royal & Sun Alliance plc [2003] EWCA Civ 383, the Court of Appeal found that the machinery of Part 36 was not available to the Court of Appeal during appeal proceedings. During the substantive proceedings the Claimant made Part 36 Offers and obtained judgment for more than those offers. The Second Defendant appealed the award of interest on the general damages, and in response the Claimants challenged the refusal to award interest on an indemnity basis. They sought to argue that the “date of judgment” for the purposes of Part 36.21(2) related to the judgment of the Court of Appeal.

The Court of Appeal held that the date of judgment under Part 36 could only have been the date of the original judgment. The Court of Appeal would only be able to use the machinery of Part 36 if a fresh offer had been made during the appeal proceedings. They refused to use their discretion to achieve a similar result by reference to the pre-appeal Part 36 Offer.

In another case relating to Part 36 Offers the Court of Appeal allowed an appeal in Alpha Chauffers Limited v (1) Citygate Dealership Limited (t/a HR Owen) (2) Lombard North Central plc [2002] EWCA Civ 207. In that case Alpha purchased a Rolls-Royce from HR Owen, and the Second Defendant, Lombard, provided the finance. Alpha did not find the car satisfactory and rejected it. At trial the Judge concluded that HR Owen was in breach of contract and that HR Owen should pay Alpha’s costs before the date of the Part 36 payment, but then ordered Alpha to pay HR Owen’s costs thereafter. Lombard was to pay Alpha a considerable portion of its costs, including the cost payable by Alpha to HR Owen.

Lombard appealed. The Court of Appeal held that in general terms Alpha was the successful party in the litigation, while HR Owen and Lombard were unsuccessful. In respect of liability between HR Owen and Lombard the burden of satisfying Alpha’s claim was the responsibility of HR Owen. The application of the general rule that the costs followed the event led to the conclusion that the cost of the litigation should be paid by HR Owen rather than Lombard. The trial Judge was therefore incorrect to find that the burden of the costs action should fall on Lombard.

The formal service of documents rules contained in CPR Part 6 do not apply to the making of Part 36 Offers. In the case of Dennis Charles v NTL Group Limited (Court of Appeal 13 December 2002) it was held that it was insufficient that the offer was communicated in writing to the Offeree and the Offeree received it. At first instances the Judge made no adjustment to the order of costs in order to reflect the attempts made by NTL to compromise the action. The Court of Appeal held that justice in that case required the Judge to exercise the power available to him under Part 36. Part Rule 36.1(2) made it clear that a party was able to make a Part 36 offer by post or indeed by fax. There is no need for formal service.

In other respects the rules relating to the making of offers under Part 36 are analogous to contract law. In the case of (1) Hubert Scammell (2) Dora Scammell (3) Donald Green v Margaret Kathleen Vicar (21 December 2000), the Court of Appeal held that offers to settle made under CPR Part 36 did not exclude the general law of contracts, and so could be withdrawn at any time before acceptance. An offer had been made on 9 March. On 13 March the Defendant withdrew that offer. The Respondent contended that the Part 36 Offer which was expressly open for acceptance for 21 days could be accepted although purported to be withdrawn. The Court of Appeal held that there was nothing in Part 36 stating that an offer could not be withdrawn. Part 36.5(6) required a Part 36 Offer to be open for 21 days. However, the general law of contract was not excluded and there was nothing that stopped a party from withdrawing its offer.

Costs

Rule 44.3 deals with the Court’s discretion and circumstances to be taken into account when exercising that discretion in respect of costs. Generally, the unsuccessful party will be ordered to pay the other side’s costs, but the Court may make a different order by taking into account several factors, including the conduct of the parties, any offer made into court in respect of a Part 36, and whether a party has succeeded on part of his case even if not wholly successful.

All parties to litigation have an obligation to comply with the overriding objective and to assist the Court. Rule 1.1 of the CPR sets out that which is required by the parties’ solicitors in order to comply with the overriding objective. One of those tasks is to prepare a “case plan”. This requires those conducting litigation to assess in advance the likely values of the claim, its importance and complexity, and then to plan the necessary work and the appropriate level of fee earner in order to carry it out at an appropriate manner but with an appropriate estimate of costs for each stage. In some low value construction cases the complexities of establishing breach of contract and causation etc may appear to be out of proportion to the potential claim for damages. If this is the case, one approach is to serve a Part 36 Offer as early as possible in order to put the Defendant on notice that non-acceptances may lead to penalisation by way of indemnity costs.

Proportionality is a term which is now frequently raised in respect of the issue of costs. Paragraph 11.2 of the Cost Practice Direction states:

In any proceedings there will be costs which will inevitably be incurred and which are necessary for the successful conduct of the case. Solicitors are not required to conduct litigation at rates which are uneconomic. Thus in a modest claim the proportion of costs is likely to be higher than in a larger claim, and you can equal or possibly exceed the amount in dispute.

Therefore, if a step is necessary for the purpose of taking the proceedings forward then a reasonable amount of costs will be allowed for that step. If any step appears to be unnecessary, then the costs in respect of that course of action will be disallowed. More guidance from the Courts is slowly becoming available. For example, in respect of unreasonable behaviour and the non-compliance with a Pre-action Protocol, it has been held that the appropriate sanction is an order that the Claimant pay the costs of the action on an indemnity basis (Paul Thomas Construction Limited v (1) Damian Hyland (2) Jackie Power (2002) CILL 1748).

The case of Dick Van Dijk v Anthony Wilkinson (TA Hff Construction) [2002] EWCA Civ 1780 concerned an appeal from a decision of HHJ Bowsher QC in which he had ordered a Defendant to pay one half of the Claimant’s costs. The dispute arose out of building work carried out by the Defendant to the Claimant’s property. The Judge found that there was a repudiatory breach of contract by the Defendant contractor and a sum of money was awarded in that regard. However, the Defendant was partially successful on his counterclaim in respect of the final account. Finally, the Defendant was ordered to pay half of the Claimant’s costs.

The Defendant appealed on the basis that the Judge had:-

1. had failed to reflect the relative success of the Defendant in the proceedings;
2. failed to take account of the Claimant’s unreasonable conduct; and
3. failed to take account of an open offer by the Defendant to accept £15,000 in full and final settlement.

The Court of Appeal held that the Judge had erred in his discretion in respect of costs. His order should have reflected the fact that the Defendant had succeeded on his counterclaim and enjoyed success in relation to his defence of the defects claim. The Judge had also failed to take into account the Defendant’s open offer, which CPR 44.4 expressly required him so to do. Further, the Defendant’s complaints about unreasonable conduct also carried significant weight. The appeal was therefore allowed and the appropriate costs order was that the Claimant should have had two-thirds of his costs in respect of the repudiation issue, but that the Defendant should have had the balance of the costs of the proceedings.

The Court should also have regard to Part 36 Offers made and the effects that refusal of those offers had on costs. The case of SCT Finance v Bolton [2002] emphasises the need for judges to exercise their discretion, but to remain within the Part 44 Rules. In that case the Judge had failed to comply with Part 44 by failing to consider the effect of the Part 36 Offer. It seems then that whilst he has a discretion in respect of costs, a Judge must properly consider the effect of a Part 36 Offer and make an award of costs in the light of that offer.

In the case of Robert Crosby v (1) Stephen Munroe (2) Motor Insurance Bureau [2003] EWCA Civ 350, the Court considered the meaning of cost proceedings in the context that the claim had been settled before proceedings had been issued. The parties were involved in a road traffic accident in July 2002. The Claimant’s claim was settled before any proceedings were served for just over £1,500. The Claimant’s solicitors served a bill of costs for £4,800.25. Agreement was not reached, and they commenced costs only proceedings under CPR 44.12A claiming the sum of £5,310.84. The Defendant offered to take £2,650 under CPR 47.19. The Claimant’s solicitors accepted that offer, and then sought the cost of their costs only proceedings. The District Judge held that the offer to settle included the costs of the costs proceedings. The Court of Appeal did not agree. The term “proceedings” in CPR 47.19(1)(a) related to the dealings between the parties for the disposal of the substantive claim, not the costs only proceedings.

The case of Excelsior Commercial & Industrial Holdings Limited v Salisbury Hammer Aspen & Johnston & Others [2002] concerned an appeal from the Costs Order of HHJ Bladbury. Joint Defendants made a Part 36 Offer of £100,000 one day before the start of the trial. The Claimant was awarded nominal damages of £2 against the Second Defendant. The Judge ordered that the Claimant pay the Defendant’s costs up to 8 June 2001 on the standard basis, and thereafter on an indemnity basis. The Claimant argued that it was successful against the Second Defendant and the Judge’s order was therefore wrong. The Claimant also tried to persuade the Court of Appeal to set up guidelines for judges when considering such issues.

The Court of Appeal refused to set out the guidelines, stating that there were an infinite variety of situations that might go before a court, and that the Judges should exercise their discretion, but within the width of discretion provided in Part 44. It was not possible for the Court of Appeal to “second guess” the costs order, as the trial Judge was in a far better position to determine where the costs ought to lie. The appeal was therefore dismissed.

Finally, the case of the Spanish fisherman against the Secretary of State for the unlawful prohibition from fishing in the United Kingdom territorial water continues to raise its head from time to time. Most recently an issue arose in respect of contingency fees. In R (Factortame Limited & Ors) v SOS for Transport, Local Government and the Regions [2002] EWCA Civ 932, the Court of Appeal considered the preliminary issue as to whether an accountant’s contingency fee arrangement was champertous.

A firm of accountants had agreed with the Claimants that they would prepare and submit claims for loss and damage suffered as a result of the prohibition on the basis of an 8% payment for any damages recovered. The Claimant was successful, and the Secretary of State argued that the arrangement amounted to maintenance and champerty. The Court of Appeal recognised that conditional fees were now permitted in certain circumstances. There was, however, the undesirability of a clash of interest in respect of officers of the Court and expert witnesses. The accountants had not been employed as expert witnesses and had no role to play in the issue of liability that was heard in the House of Lords. Therefore, public policy was not affronted by the agreement and the agreement was upheld.

The Impact of ADR on Litigation

There have been several highly significant decisions regarding costs orders against successful litigants on the basis that those litigants failed to seriously consider mediation. The first of these was Susan Dunnett v Railtrack Plc [22 February 2002] in the Court of Appeal. Susan Dunnett’s three horses had been killed when the gate to her paddock, which had been replaced by Railtrack, had been left open, allowing the horses onto the line. The gate was not padlocked, nor was there any mechanism for automatically closing the gate, despite the fact that Susan Dunnett had warned Railtrack that people left the gate open. There was an appeal and cross-appeal from the first instance decision, and in granting permission to appeal the Lord Justice stated that mediation or a similar process would be highly desirable in this particular case because of its inherent flexibility. Regardless of the Court suggestion Railtrack refused to engage in mediation. Railtrack effectively won the appeal, but the Court of appeal found that as Railtrack had refused to mediate then a costs order should not be made against the unsuccessful claimant. One of the Court of Appeal judges said that a skilled mediation could achieve results far beyond the Courts, and a party who dismissed the opportunity for mediation without proper thought would suffer uncomfortable consequences.

The Court of Appeal was in effect following the view of Lord Woolf in Frank Cowl v Plymouth City Council [The Times 8 January 2002]. In that case Lord Woolf emphasised the need for parties in dispute with public bodies to consider ADR. Lord Woolf said that “today sufficient should be known about ADR to make the failure to adopt it, in particular where public money is involved, indefensible”. In Dunnett v Railtrack Lord Justice Brooke stated that:

When asked by the Court why his clients were not willing to contemplate alternative dispute resolution, […] said that this would necessarily involve the payment of money, which his clients were not willing to contemplate, over and above what they had already offered. This appeared to be a misunderstanding of the purpose of alternative dispute resolution. Skilled mediators are now able to achieve results satisfactory to both parties in many cases which are quite beyond the powers of lawyers and the Courts alike…

Given that the CPR requires the parties to consider ADR, then that obligation is extended into the pre-action protocols, there is now clear obligation on the parties to seriously consider some form of mediation or other ADR process. It seems that that obligation will, if ignored, lead to cost consequences, even if the party concerned is successful. However, there may be some circumstances when a failure to mediate is justified.

The case of Hurst v Leeming [9 May 2002] gives some guidance as to when a refusal to mediate might be justified. The case concerned the dismissal of an action against a barrister, Leeming. The Claimant argued that despite the dismissal of the action he should still receive his costs as Leeming had refused to mediate. Leeming raised five reasons as to why he had refused to mediate:-

1. The legal costs already incurred were high
2. The seriousness of the allegation, as it related to professional negligence
3. The total lack of substance of the Claimant’s claims
4. The lack of any prospects of successful mediation; and
5. The obsessive character and attitude of Hurst, and his history of litigation.

Lightman, J in the Chancery Division considered each of these grounds and decided that the first three were insufficient. Therefore, the matter of legal costs already incurred, the seriousness of the allegation and the fact that there is no substance to the claim do not give valid reason for refusing to mediate. However, lack of any prospects of a successful mediation, given the obsessive character and attitude of the Claimant and his repeated history of litigation, which demonstrated that it was highly unlikely that the Claimant would make any serious attempts to settle during a mediation, was sufficient. Therefore, Leeming was not deprived of his full entitlement to costs.

The Court of Appeal has also recently held that there are circumstances within which it is reasonable to refuse to mediate. In the case of Alan Valentine v (1) Kevin Allen (2) Simon John Nash (3) Alison Nash (29 July 2003) the Respondents had put before the Court considerable correspondence which made it clear that real efforts to settle the dispute had been made, and that the offers were reasonable and generous. The Respondents had also tried to arrange a “round the table” meeting. Those offers were refused by Valentine who sought the payment of a large sum of money in settlement. The Court of Appeal therefore distinguished this case from the case of Dunnett v Railtrack Plc even though the Respondents had refused Valentine’s offer of mediation. The Court of Appeal held that their refusal to mediate was reasonable, and so Valentine would pay the Respondent’s costs in resisting the appeal.

Conclusion

In summary then, adjudication has arguably had an impact upon arbitration and litigation. The use of adjudication has become more widespread in the industry, and there has been an increasing use of adjudication in the sizeable post-practical completion final account claims. Recent research suggests that few claims progress beyond adjudication, perhaps supporting a decrease in the use of arbitration and litigation. Nonetheless, the number of claims served in the Technology Court during the past 12 months has risen.

One of the reasons for the increase in claims served may be due to the pre-action phase in litigation. It used to be possible to serve a writ and then investigate the detail of the claim during the initial phases of the litigation process. Under the CPR the pre-action protocols demand a detailed claim letter together with identification of supporting documents. There is then a period of time for a response and then a pre-action meeting before commencing proceedings. This procedure delays the issuing of a claim form, and also provides a timeframe for consideration of the case and attempts at settlement.

In respect of CPR, a joint expert has not become the norm, but the Courts are taking a hard line when experts fail to understand their duty to the Court, are unfamiliar with the documents and fail to provide unbiased expert opinion. Part 36 Offers are having considerable impact on the conduct of litigation because of the heavy cost consequences on the parties. The Judge has a considerable discretion in respect of the costs of the matter, but must stay within the boundaries of Part 44.

Finally, the recent cases of Dunnett v Railtrack and Hurst v Leeming further demonstrate the emphasis of the CPR and the Courts in moving parties away from an exclusively adversarial approach to the resolution of dispute and towards negotiation and ADR.

Coupled with the pre-action protocols, more cases are being argued between the parties’ lawyers in the pre-action phases before service of a claim form. The threat of failing to properly consider the case arises in the form of cost sanctions, and thus one should not just seriously consider ADR, but also seek protection in the form of Part 36 Offers.