Pre-action protocols - a move to mandatory mediation?

Introduction

On 21 August 2023 the Civil Justice Council (the Council) issued the first part of its final report into the role of pre-action protocols. This is an impressive document and the full text is here.

The Council commenced its review in late 2020; published its interim report in November 2021 and had a large number of responses to its consultation, which closed in January 2022.

The Council decided to conclude its review in two phases. The first phase (this report) is dedicated to examining the role of pre-action protocols in the civil justice system, and in particular the potential benefits of digitalising pre-action processes, and consideration of amendments to the current general pre-action protocol. The second phase, which is still to come, will be focused on potential reforms to litigation specific protocols and/or the creation of new litigation specific protocols including one for complex high value commercial litigation.

The report recommends the text for a revised general protocol. The Council is not formally responsible for the drafting of pre-action protocols but instead is responsible for the making of policy recommendations. The Civil Procedure Rule Committee is responsible for the drafting of protocols and we await to see whether and to what extent the Rules Committee adopts the recommendations. There is no time scale provided for that exercise, but for reasons explained below, it may be that a full adoption will be delayed until after the publication of the second part of the Council’s report.

In this post, I do not discuss the section of the report dealing with the digitalisation of the pre-action process; I will leave that to the appropriate experts.

I discuss what I consider to be the two most important features of the recommended general protocol to the conduct of claims before proceedings can be issued. These are: (a) the mandatory obligation to engage in a dispute resolution process; and (b) the mandatory obligation on the parties to “stock-take” the issues in agreement and disagreement, including explaining any failure to provide requested disclosure.

Obligation to engage in dispute resolution process

It is clear that the judiciary and policy makers believe that too many cases go to trial.

There are two related issues. First is the number of issued cases that do not settle and go to trial - that has created the debate around mandatory mediation for certain categories of litigated claims. The second is the number of issued cases in the first place and the lost opportunity to settle during the pre-action phase.

The current general protocol already seeks to reduce the number of litigated claims - it provides that “litigation should be a last resort… the parties should consider whether negotiation or some other form of ADR might enable them to settle their dispute without commencing proceedings.”

The Council agrees that the current advisory obligation (“should consider negotiation”) has not achieved the desired result and so consistent with the other tailwinds promoting mediation it has recommended a mandatory obligation to participate in a “dispute resolution” process - if adopted this will make mediation, or other ADR involving a neutral, in the pre-action phase the norm, if not quite compulsory.

The draft general protocol provides that the parties are required to engage in a dispute resolution process with each other prior to any proceedings being issued. This dispute resolution process may involve, but is not limited to:

• mediation;

• non-binding early neutral evaluation;

• any applicable ombudsman scheme;

• any dispute resolution scheme that the parties have joined.

As a result, the obligation is solely a process-based obligation and involves no substantive obligation to settle or compromise the claim.

Parties may be concerned about the added cost burden and time delay this creates, but implicitly the working group believes the provision will ultimately save costs overall and achieve speedier resolution of claims. Further, those concerns are addressed by the default option of a “pre-action” meeting (see below) which the working group has deliberately chosen because it would impose the least time and resource burden on the parties.

If the parties are unable to agree on a particular dispute resolution process involving a third party neutral then there is a default option of a pre-action meeting to discuss the scope of their dispute, its root causes, and ways it might be resolved or narrowed. Although this is subject to an obligation that the parties must take reasonable steps to find out if the dispute can be resolved or narrowed by agreement, it may be that this default option will be used to circumvent a genuine attempt to resolve the dispute prior to issue.

The effect of these proposed changes to the protocol will depend in part on the sanctions imposed for non-compliance. The draft general protocol provides that if one or both parties fail to take part in a dispute resolution process, the court will have the power to stay the proceedings or make other appropriate case management orders or make any order for costs it considers appropriate. In so doing, the court can examine communications regarding the adherence to the process itself but not regarding the substance of any negotiations.

One point the working group specifically addresses is the relationship between a pre-action dispute resolution obligation and other reform proposals which would require parties to engage in ADR in litigated claims. Accordingly the draft protocol provides that where the parties have engaged in a dispute resolution process involving an independent third party (for example by mediation) then the parties will not be required to engage in another mediation if court proceedings are started. That exemption will not apply if the parties have adopted the default option of a pre-action meeting.

Because there is an alternative (i.e. the default option for a meeting between the parties to narrow the issues), the general protocol is stopping just short of compelling the parties to mediation (or other ADR involving a neutral) as a precondition to issuing proceedings. Nevertheless, given the thrust of the recommendations the Civil Procedure Rules Committee will no doubt wait for, and consider closely, the Court of Appeal judgment in Churchill v Merthyr Tydfil before deciding whether or not to implement them.

Stocktake

The current general protocol has a provision that the parties “should review their respective positions. They should consider the papers and the evidence to see if proceedings can be avoided and at least seek to narrow the issues in dispute before the claimant issues proceedings”.

The working group believes that is a valuable process but should be strengthened in order to focus the parties’ minds on the true gap between them, which could then result in a settlement, and if that was not possible it would at least inform what is really important to them in drafting their statements of case. Accordingly the draft general protocol makes the review of the parties’ respective positions both mandatory and more concrete. The concrete aspect is the completion of a stocktake report, which is a joint pre-action report which sets out the following:

• the issues on which the parties agree and disagree;

• the claimant’s and defendant’s respective positions on the issues still in dispute;

• a list of the documents that have been disclosed by the parties, and a list of documents the parties are still seeking disclosure of.

Interestingly, there is a mix of obligatory and advisory obligations in this section of the draft protocol.

The general obligation for the parties to review their positions is mandatory (“the parties must review their positions before the claimant starts court proceedings”) but the text proceeds that “the parties should continue to co-operate and should prepare a [stocktake report]”. Possibly confusingly, the draft protocol then provides that “the stocktake report must be completed within 21 days of the conclusion of the dispute resolution process, and be filed by the claimant with its statement of case when proceedings are started.”

No doubt the precise wording of the obligations will be reviewed by the Civil Procedure Rule Committee before it updates the general protocol - and that will also include the time period for completion of the stocktaking report (the body of the Council’s report speaks of 28 days, whereas the draft protocol speaks of 21 days).

High value commercial disputes

The working group was sceptical of the consultation responses that opposed a concrete obligation to engage in dispute resolution in high value commercial litigation. The working group was not convinced by the argument that mandatory mediation (or similar) was not necessary on the grounds that the parties are sophisticated, well advised, and already understood the benefits of ADR.

Similarly, the working group shrugged off the consultation responses that a formal stocktake in high value commercial cases would undermine the flexibility of the English legal system. The working group cited reforms in Australia to conclude that a concrete stocktake would likely focus the parties on the key issues and improve the pleadings, even in high value and complex commercial disputes.

Nevertheless, the working group acknowledged the strength of the consultation responses opposing both of those proposals amongst commercial lawyers working in high value litigation who stated that they needed a protocol with greater flexibility. For those reasons, the working group has requested the London Solicitors Litigation Association and Commercial and Chancery Bars to consult with their members and about the need for, and potential content of, a bespoke protocol for complex litigation conducted in the Business & Property Courts.

That may lead to an unintended delay in the possible implementation of the draft general protocol. As it currently stands, the proposed general protocol would apply to complex high value commercial disputes but yet the Council has recognised that might not be appropriate pending further consultation. It may be that as a result of that recognition, the Civil Procedure Rules Committee may wish to wait for the second part of the report and its recommendations relating to a bespoke high value commercial litigation protocol before it could implement the wider general protocol, which would otherwise be ready to go.

Simon Goldring

August 2023