The Dispute Resolution Review: United Kingdom - England & Wales
Introduction to the dispute resolution framework
i England and Wales, the United Kingdom and the European Union
The United Kingdom (UK) comprises four countries – England, Northern Ireland, Scotland and Wales – which share a common (albeit uncodified) Constitution but have three separate legal systems. England and Wales share a common legal system (often referred to colloquially as 'English law') while Scotland and Northern Ireland each have their own independent system. The Supreme Court of the United Kingdom hears appeals from all three legal systems in civil cases in addition to cases concerning powers devolved to the Scottish, Welsh and Northern Irish executive and legislative authorities. The UK is a Member State of the European Union (EU) and, by virtue of the European Communities Act 1972, certain EU legislation and decisions have effect in the legal systems in force in the UK.2 This chapter focuses on the legal system in England and Wales only.
ii Private and public resolution
Disputes in England and Wales may be adjudicated privately (e.g., by an agreed arbitrator) or litigated publicly in the courts. Although the use of private dispute resolution mechanisms is increasing, the courts still determine the vast majority of adjudicated disputes. The courts remain the only forum in which a claim can be determined without the agreement of the other party. Private forms of dispute resolution are considered separately in Section VII, below.
iii The structure of the courts
Depending on the financial value and nature of the dispute, a party may bring a civil claim in either the County Court or the High Court. Most non-complex civil litigation is dealt with in the County Court through hearing centres in towns and cities throughout England and Wales. Most commercial claims and all complex litigation are heard in the High Court, either in district registries located in provincial cities or in the Royal Courts of Justice in London. Recent changes to the Civil Procedure Rules (CPRs) emphasise that cases can be tried outside London regardless of their size. These changes have been made in the context of the launch of the Business and Property Courts, discussed further below. The High Court has jurisdiction to hear any civil case in England and Wales at first instance, and has an appellate jurisdiction in respect of certain matters in the courts below. The High Court is divided into three divisions, two of which are relevant for commercial disputes, namely the Queen's Bench Division and the Chancery Division.3 Within these divisions there are a number of specialist courts or lists, including the Commercial Court, Financial List, Circuit Commercial Court (previously the Mercantile Court), Admiralty Court, Technology and Construction Court (TCC), Administrative Court, Planning Court, Companies Court, Bankruptcy Court, Intellectual Property Enterprise Court and Patents Court. The High Court, the Crown Court (which deals with criminal cases) and the Court of Appeal are collectively known as the Senior Courts of England and Wales. The Court of Appeal hears appeals in civil cases from the High Court and, in certain circumstances, from the County Court and various tribunals.
Following changes made in October 2017, the Commercial Court, Circuit Commercial Court, Chancery Division (including Companies Court, Patents Court and Intellectual Property Enterprise Court), TCC, Admiralty Court and Financial List are known collectively as the Business and Property Courts of England and Wales. The individual courts retain their identities, but the work of the Chancery Division has been spilt into seven lists according to the substance of the dispute.4 There are also Business and Property Courts in Birmingham, Manchester, Leeds, Bristol and Cardiff, with expansions to Newcastle and Liverpool made in 2018.
The final court of appeal in civil cases (and, in England, criminal cases) is the Supreme Court of the United Kingdom, created by the Constitutional Reform Act 2005. The Supreme Court will generally only hear cases that involve a point of law of general public importance; its decisions bind all courts below.
In addition to the courts, a number of statutory tribunals have been established to hear disputes arising under the jurisdiction granted to them by the relevant legislation. The members of the tribunal will often comprise a legally qualified chairperson as well as lay members with appropriate experience. It is often possible to appeal a decision made by a tribunal to the High Court.
iv Relationship with European courts
There is no general right of appeal to the Court of Justice of the European Union (CJEU),5 although a court or tribunal in England and Wales may refer questions regarding the interpretation of the Treaty on European Union and the Treaty on the Functioning of the European Union or the validity or interpretation of acts of the EU institutions to the CJEU for a preliminary ruling. Having obtained such a ruling, the case will (often after many years' delay) return to the referring court or tribunal, which must apply the CJEU's ruling, together with any non-conflicting national law, to the facts before it. The court or tribunal is not required to make a reference where previous CJEU decisions have already dealt with the point or where the correct application of EU law is so obvious as to leave no scope for reasonable doubt (referred to as acte clair).
The European Court of Human Rights (ECtHR) hears cases relating to alleged violations of the European Convention on Human Rights (the Convention). The Court and the Convention are separate from the EU and its institutions. There is no general right of appeal to the ECtHR. A claimant who alleges breaches of the Convention may apply to the ECtHR only after having exhausted his or her rights of appeal in the domestic courts; in England and Wales, this will usually mean that the claimant must have pursued a claim and all available appeals in the domestic courts pursuant to the provisions of the Human Rights Act 1998. The decisions of the ECtHR are not binding on courts in England and Wales, although Section 2 of the Human Rights Act 1998 requires domestic courts to 'take into account' such decisions.
The year in review
The past year has produced a number of important decisions by the courts. It is not possible to review all the developments that have taken place, but the following are of particular interest.
i R (on the application of Miller) v. The Prime Minister, Cherry and others v. Advocate General of Scotland  UKSC 41
In a landmark constitutional law decision, an 11-member Supreme Court unanimously ruled that the Prime Minister's advice to Her Majesty the Queen to prorogue6 Parliament was unlawful, and so the Order in Council setting out the prorogation was also unlawful and of no effect. On the question of justiciability, the Supreme Court held that the courts did have the jurisdiction to decide on the extent and limits of the government's prerogative power. This power is limited by the constitutional principles of parliamentary sovereignty and parliamentary accountability, and the court would be performing its proper function under the English constitution by ensuring that the government did not act unlawfully. On the legal test for lawfulness of the advice, the Supreme Court looked to the effect of rather than the motive for prorogation: prorogation would be unlawful if it had the effect of frustrating or preventing, without reasonable justification, the power of Parliament to carry out its constitutional functions as a legislature and as the body responsible for the supervision of the executive. On the facts, proroguing Parliament for five weeks rather than the usual four to five days, in the context of what was, at the time, the imminent deadline for the UK's withdrawal from the EU – a fundamental constitutional change7 – was unlawful.
ii Vedanta Resources PLC and another v. Lungowe and others  UKSC 20
This case concerned a claim brought by 1,826 Zambian citizens against Konkola Copper Mines plc (KCM) (incorporated in Zambia) and its parent company Vedanta Resources Plc (Vedanta) (incorporated in England) in respect of pollution caused by a copper mine owned and operated by KCM. As an English-domiciled company, Vedanta was subject to the jurisdiction of the English courts. KCM, as a foreign company, could only be brought before the English court if the claimants could persuade the court that it was a necessary or proper party to the claim against Vedanta. In a jurisdictional challenge by both defendants, the Supreme Court decided that England was the proper place for the proceedings, and considered the scope of a parent company's liability for the activities of its foreign subsidiaries. The court observed that:
- Contrary to the decisions of the High Court and Court of Appeal, the risk of irreconcilable judgments (if the case against KCM was heard in Zambia but the case against Vedanta was heard in England) was not a decisive factor in choosing to accept jurisdiction in England. Zambia would ordinarily be the proper place for the proceedings, given the location of the claimants, the alleged damage, the location of the evidence, and the suitability of the Zambian courts to interpret Zambian law. However, the courts could still accept jurisdiction if satisfied that there was a real risk that substantial justice was not available in a foreign jurisdiction; this was the case here, as the claimants would not be able to afford legal representation in Zambia, and Zambia lacked legal teams of sufficient size and experience to pursue such mass claims effectively.
- Parent company liability depended on the extent to which the parent company took control of or supervised or advised on the management of the operations of the subsidiary's business. It was arguable from Vedanta's published materials that it had asserted its own assumption of responsibility for the maintenance of proper standards of environmental control over the activities of its subsidiaries.
iii Perry v. Raley Solicitors  UKSC 5
The Supreme Court reviewed the law of causation in professional negligence cases, providing guidance on how proving harm in 'loss of a chance' cases should be approached. The court acknowledged the difficulty in assessing what financial or other benefit the client would have obtained in a counter-factual world (where the court had to decide on the claimant's position if the defendants had fulfilled their duty of care) or forming a view about the likelihood of a future rather than past event. In both these counter-factual and future scenarios, the court occasionally departs from the ordinary burden on a claimant to prove facts on the balance of probabilities. However, the basic requirement remained that the claimant had to prove their loss was caused by a breach of duty. In drawing this line, the court affirmed Allied Maples Group Ltd v. Simmons & Simmons  1 WLR 1602: to the extent that the question of whether the client would have been better off depends on what he would have done on receipt of competent advice, this must be proved by the claimant on the balance of probabilities; to the extent that the supposed beneficial outcome depends on what others would have done, this would depend on a loss of chance evaluation.
iv Lloyd v. Google LLC  EWCA Civ 1599
In a significant case in the development of the UK class action and data protection regimes, the Court of Appeal overturned the High Court's decision ( EWHC 2599 (QB)) to refuse permission to serve proceedings on Google in California. Representing more than 4 million iPhone users, the claimants had sought to bring a £3 billion representative action against Google under CPR 19.6 (see Section III.iv, below), for Google's alleged misuse of private data under the Data Protection Act 1998 (DPA 1998). Among the court's findings were the following:
- A person's control over data or their browser-generated information was an asset with value, and damages were capable of being awarded for the loss of control of data under Section 13 of the DPA 1998. On this definition of 'damage', the represented claimants were all victims of the same alleged wrong, and had all sustained the same loss of control over their data.
- The Court of Appeal also confirmed the test in Emerald Supplies Ltd v. British Airways plc  EWCA Civ 1284 that for a claim brought under CPR 19.6, it must be possible to say of any particular person whether or not they qualify for membership of the represented class of persons by virtue of having 'the same interest' as the representative. The class action did not have to rely on the facts of how each individual had been affected to pass the 'same interest' test. However, if it did not, any damages awarded would be restricted to the lowest common denominator. In this case, the represented claimants were not seeking to rely on any personal circumstances, but all had had their browser-generated information taken by Google without consent in the same circumstances.
The case opens the prospect of damages based on breach of the data protection legislation alone, without requiring proof of pecuniary loss or distress. It also appears to invite class actions by lowering the threshold required to establish a common interest between the individuals forming the represented class.
v Robertson v. Persons Unknown (Unreported; 8 August 2019) and Vorotyntseva v. Money-4 Ltd (t/a Nebeus.com) and others  EWHC 2596 (Ch)
In two unrelated and novel cases about the legal status of cryptocurrencies, the High Court held that cryptocurrencies are a form of property that can constitute the subject of proprietary orders. In Robertson, the High Court granted an asset preservation order over 80 identifiable bitcoin in a UK wallet, relying on the 2019 decision of the Singapore International Commercial Court in B2C2 Ltd v. Quoine Pte Ltd  SGHC(I) 03, which held that bitcoin are personal property that can be the subject of a trust. While the court in Robertson refused to grant a freezing order against 'persons unknown' on the basis that neither the 'balance of convenience' nor the 'risk of dissipation' requirements had been met, the later case of Vorotyntseva considered that in that case, there was a sufficient risk of dissipation and so granted a preliminary freezing order over bitcoin and ethereum cryptocurrencies.
i Overview of court procedure
Civil procedure in England and Wales is governed by the CPRs and accompanying practice directions (PDs). These are supplemented by guides produced by different courts summarising particular procedures that apply in those courts. They do not have the force of law but courts will generally expect compliance (and may punish non-compliance with adverse costs orders). These and other sources are available online on the Ministry of Justice's website8 and, with commentary, in The White Book published annually (with interim updates) by Sweet & Maxwell.
ii Procedure and time frames
Time frames and procedure for claims vary depending upon the court and division in which the relevant claim is issued and the nature of the claim itself. The commentary below is based on the procedure in the Chancery Division and is only a general summary.
Before even commencing a claim, a claimant should check whether a specific pre-action protocol applies to the type of claim being made (e.g., claims for professional negligence, defamation and judicial review have specific pre-action protocols that should be followed). Where there is no specific pre-action protocol,9 the claimant will be expected first to write a letter before claim to the prospective defendant setting out in detail his or her claim and allowing the defendant a reasonable period in which to respond (what is reasonable may depend on the complexity of the allegations).
Following any pre-action steps, proceedings are started (and the court is treated as seised) on the date that the claimant issues a claim form in the relevant court. The claim form must then be served on the defendant or defendants within four months of issue (assuming the relevant defendant is within the jurisdiction) or within six months if the defendant is outside the jurisdiction (see Section III.vi, 'Service out of the jurisdiction'). It can be served by a range of different methods, including handing it to the defendant in person or by post. The courts have wide discretion in this area. They have, for example, permitted service of an injunction to be made via the social networking site Twitter against an anonymous defendant who had impersonated the claimant's blog on that site.10 In 2019, in a legal first, the Intellectual Property Enterprise Court granted permission for a court order to be served through Instagram. The claimant must serve particulars of claim with the claim form or within 14 days of service of the claim form; the particulars set out the claimant's case, the relevant facts and basis for the claim in law as well as the remedy sought. Both the claim form and the particulars of claim must be verified by a statement of truth signed either by the claimant (or authorised signatory on behalf of the claimant where the claimant is an organisation) or the claimant's legal representative.
Assuming the defendant intends to defend the claim and acknowledges service by the appropriate court form, his or her response is by way of the defence, to be served within 28 days of receipt of the particulars of claim (note that this timescale can vary between different courts and is in any event subject to extension by agreement between the parties or by court order). The defendant should respond in the defence to each of the allegations made in the particulars of claim by either admitting it, denying it (with explanation), or putting the claimant to proof. Following service of the defence, the claimant has a right of reply in relation to any new issues or allegations raised in the defence, as well as a right to defend any counterclaim raised in the defence. The claimant's reply should be served within 21 days of service of the defence (again, subject to extension by agreement or by court order). From this point on, it is not expected that any further statements of case will be exchanged between the parties (unless permission to do so has been granted by the court).
Following the filing of the defence, the court will send a notice of proposed allocation to the parties (CPR 26.3(1)), which will provisionally allocate the claim to a 'track' and require the parties to provide further information about the claim in the form of a directions questionnaire. The court will then give appropriate directions as to the conduct of the proceedings and ensure that it is allocated to the correct track. The different tracks are used to ensure that the procedure adopted to trial is proportionate to the importance of the issues and amount at stake. Claims below £10,000 are generally allocated to the small-claims track and are dealt with quickly without many of the CPRs applying; for example, parties typically bear their own costs, most interim remedies are not available, there are limited disclosure obligations and witness statements are not normally exchanged before trial. Claims between £10,000 and £25,000 are generally allocated to the fast track, where the claim will still be processed quickly (trial will usually be set for a date within 30 weeks of the allocation decision) but more extensive preparation is permitted than on the small-claims track and interim remedies are available. The multi-track is reserved for the most important and high-value disputes, and the court will adopt a much more hands-on role in ensuring that the procedure adopted to trial is tailored to the requirements of the case.
For multi-track cases subject to costs management under CPR 3.12, parties will be required to complete a costs budget in the form of a template known as Precedent H. Costs management applies (subject to the discretion of the court to apply or disapply the regime) to most multi-track cases commenced on or after 22 April 2014, except for proceedings where the amount of money claimed or value of the claim as stated on the claim form is £10 million or more.11 Parties subject to the regime are required to file and exchange budgets setting out estimated costs for each stage in the proceedings. These must be approved by the court and effectively cap the amount that the winning party can recover from the losing party at the end of the proceedings unless it can demonstrate a good reason for departing from the budget.12
Cases on the multi-track may require one or more case management conferences (CMCs) at which the court will, usually after hearing submissions from the parties, give directions regarding the timetable for disclosure, exchange of factual witness statements and exchange of expert reports (if any), as well as indicating broadly when it expects the trial itself to be listed. For complex matters, it is not unusual for the period between the first CMC and the trial to be at least a year. Once listed, trial dates (across all tracks) are treated as set and only in exceptional circumstances will the court agree to postpone a trial.
CPR 25.1(1) contains a non-exclusive list of interim remedies available from the court, including interim injunctions and declarations, orders for delivery up of goods, orders freezing property, orders for the provision of information and search orders. Interim applications may be made without notice to the person against whom the relief is sought, although the applicant is under a duty to disclose fully and fairly all material facts to the court, even if they are adverse to its case. Overseas lawyers have been encouraged to note that practitioners within this jurisdiction bear this heavy responsibility and that ill-prepared applications are to be avoided.13
iii Court reform
In 2014, the Ministry of Justice announced that between 2015 and 2020, HM Courts & Tribunals Service (HMCTS) would oversee a series of reforms aimed at modernising and improving the efficiency of courts and tribunals. On 5 March 2019, HMCTS stated that it was extending the completion date of the reform programme to 2023. The programme involves substantial investment in digital technology to allow cases to be managed better, with less paper and fewer delays. This will allow a reduction in the number of court buildings, so generating further savings. The digitisation process is considered below (see 'Digitisation', below). Other separate but complementary steps to reform and rationalise court processes are also considered directly below.
Reform of the appeals process
Secondary legislation came into force on 3 October 2016, and is intended to reduce the time it takes for cases to be heard by the Court of Appeal. The Access to Justice Act 1999 (Destination of Appeals) Order 2016 simplifies the appeals process by ensuring that, in most cases, an appeal will lie to the next highest level of judge. In particular, appeals from a decision of a district judge in the County Court will generally lie to a circuit judge in the County Court (the next most senior judicial rung), while appeals from a circuit judge will lie to the High Court. In the High Court, appeals from a master will lie to a full judge of the High Court, and appeals from a High Court judge will lie to the Court of Appeal. The Civil Procedure (Amendment No. 3) Rules 2016 revised CPR Part 52 accordingly. The new Part 52 made two other important changes:
- the removal of the default right to renew, at an oral hearing, a failed paper application for permission to appeal to the Court of Appeal; and
- a clarification of the test for grant of permission to appeal in second appeals (i.e., appeals of appeals) such that a 'real prospect of success' must be shown, or there must be some other compelling reason for the second appeal to be heard.
Shorter and flexible trial schemes
Two pilot schemes, one for shorter trials, the other for flexible trials, began in the Business and Property Courts in London in October 2015. After three years of piloting, both schemes became permanent on 1 October 2018. The objective of the schemes is to achieve more efficient trials in the context of commercial litigation. This was prompted, in part, by a recognition that comprehensive (and costly) disclosure is not always required for justice to be achieved. The Shorter Trials Scheme is open to cases that can be tried in no more than four days – this means cases in which only limited disclosure and oral evidence is required, and in practice means factually complex or multiparty claims (including fraud and dishonesty claims) are excluded. The intention is that a trial will take place within 12 months of the issue of proceedings, with judgment to follow within six weeks thereafter. The first case directly commenced under the Shorter Trials Scheme in March 2016 was National Bank of Abu Dhabi PJSC v. BP Oil International Ltd.14 A one-day trial took place eight months after issue and judgment was handed down two weeks after the hearing, on 22 November 2016. It is also worth noting that an appeal against the judgment was heard in July 2017, quicker than many comparable appeals.
In October 2015, the High Court introduced a specialist Financial List for the determination of claims by judges with expertise in the financial markets. There are three criteria for inclusion (only one of which needs be fulfilled). A claim must either:
- relate to banking and financial transactions where £50 million or over is in issue;
- require particular judicial expertise in the financial markets; or
- raise issues of general importance to the financial markets (see CPR Part 63A).
The Financial List initiative included a two-year pilot financial markets test case scheme, which was extended in May 2017 for a further three years until 30 September 2020. This permits the court to decide cases that raise issues of general importance to the financial markets in relation to which immediately relevant authoritative English law guidance is needed, even where there is no present cause of action between the parties to the proceedings.
In Property Alliance Group Ltd v. Royal Bank of Scotland plc,15 following a contested application to transfer existing proceedings to the Financial List, the Master of the Rolls (the second most senior judge in England and Wales) clarified that when deciding whether to transfer a case to the Financial List, CPR 30.3 and the overriding objective must be taken into account. The instant case was transferred to the Financial List even though the total value of the claim was £29 million (below the £50 million indicative threshold). This was because, in circumstances where the issues in the case were of broad significance for the market and a judgment would affect other proceedings already issued or in contemplation, it was desirable that it be dealt with by a judge of the Financial List, in order for the resulting judgment to carry appropriate weight and respect in the financial markets.
The digitisation of the courts has continued with:
- a new electronic filing and case management system in the Business and Property Courts in London and seven other cities. Since 1 July 2019, the system has become mandatory for professional users in claims issued in the Queen's Bench Division since 1 January 2019;
- the Online Civil Money Claims Pilot Scheme running from September 2019 to November 2021, which tests an online process for unrepresented claimants to start money claims with a value of £10,000 or less;
- the County Court Online pilot, operating from September 2017 to November 2021, by which legally represented claimants can issue certain money claims online at the County Court Money Claims Centre;
- the introduction of pilot programmes allowing the cross-examination of victims and witnesses of crime to be pre-recorded so as to avoid the pressure of a live hearing. It was announced in March 2017 that because of the success of a pilot scheme for the evidence of certain witnesses (mainly children), it was intended that the number of courts where such witnesses can give pre-recorded evidence will be increased. Also, from September 2017, courts in Kingston, Leeds and Liverpool would pilot pre-recorded cross-examination for complainants and witnesses in respect of certain offences; and
- the Courts and Tribunals (Judiciary and Functions of Staff) Act, which permits judges to delegate a range of work to court staff (such as granting an extension of time or issuing a summons) received Royal Assent on 20 December 2018, with some provisions coming into force on 20 February 2019.
iv Class actions
The concept of class actions has been a part of English civil procedure for some time, but does not bring with it many of the characteristics that would, for example, be familiar to a US lawyer. CPR Part 19 sets out the framework for:
- representative actions, where one person brings (or defends) a claim as a representative of others who share the same interest in the claim;16 and
- group litigation orders (GLOs),17 where claims brought by parties that give rise to common or related issues of fact or law are managed together.
Represented persons are not formally parties to the proceedings and are therefore not subject to disclosure obligations or liable for costs (therefore leaving the representative liable for any costs). They do not have to opt in to be represented, although they can apply to the court to opt out. By contrast, parties to claims covered by a GLO are fully fledged parties and are likely to have to pay their share of the common costs of the litigation if they lose. The Court of Appeal confirmed the High Court's rejection of a US-style class action brought against British Airways by two flower importers who sought to bring proceedings as representatives of all direct and indirect purchasers of airfreight services affected by an alleged cartel.18 The Court upheld the first instance decision to strike out the representative element of the claim as it was not in the interest of justice to bring an action on behalf of a class of claimants so wide that it was impossible to identify members of the class before and perhaps even after judgment. This opposition to US-style class actions has been strengthened by the government's decision to remove provisions in the Financial Services Bill (enacted as the Financial Services Act 2010), which would have extended the options for collective actions in the financial services sector to include 'opt-out' actions.
Orders made in a representative action are binding on all represented persons and may be enforced, with the court's permission, against any other person. Judgments issued in claims subject to a GLO are binding on every party entered on the 'group register' (which will have been established pursuant to the GLO).
A single claim can be selected from any set of similar claims (including those governed by a GLO) to be advanced as a test case. There are no formal rules governing test cases and it is usually the parties who decide which cases will be selected to proceed to trial while others are stayed pending judgment in the test case. A recent example of a test case was the bank charges litigation where thousands of customers' claims in the County Court were stayed pending the outcome of the Office of Fair Trading's claim.19
Although there have been some high-profile cases involving representative actions and GLOs,20 class-action proceedings of any kind are still relatively uncommon in England and Wales, in part because of the risks of adverse costs orders against unsuccessful claimants and, more generally, the costs of commencing and maintaining proceedings. Parties are increasingly able to mitigate these risks through the increased availability of after-the-event insurance, third-party litigation funding, conditional fee agreements and damages-based contingent fee arrangements with lawyers who are willing to share the risks with their clients in return for a share of any damages (see Section III.x).
Collective proceedings for breaches of competition law
Section 47B of the Competition Act 1998 as amended came into force on 1 October 2015. It creates a genuine class action regime for the first time in the UK, allowing private individuals to seek collective redress for breaches of competition law. The regime operates in the Competition Appeal Tribunal (CAT) only. It accommodates follow-on damages claims, where a breach has already been established by a regulator, and stand-alone claims, where a claimant must prove breach itself. Claims that would raise the same, similar or related issues of fact or law may be pursued as collective proceedings; they are initiated by a representative of the class of affected persons and it is for the CAT to authorise that representative and make a collective proceedings order (CPO) permitting the proceedings to be continued. That order will also specify whether the proceedings are to be opt-in or opt-out. This places the UK in a minority in the EU (which typically does not support 'opt-out' claims) and may potentially make the UK a more attractive place for large groups of claimants to commence claims.
In mid-2016, an application was made to commence a £14 billion follow-on claim against Mastercard for damages arising from the EU Commission's 2007 decision that Mastercard's European Economic Area (EEA) multilateral interchange fees breached Article 101(1) of the Treaty on the Functioning of the European Union. The CPO application was made by Walter Merricks, former Chief Ombudsman of the UK Financial Ombudsman Service, on behalf of approximately 46 million customers on an opt-out basis). At first instance, the CAT refused to grant the CPO, in a judgment dated 21 July 2017.21 The CAT considered the 'commonality' requirement and confirmed that it was not necessary for an applicant to show that all of the issues that would arise on an individual claim would be common to every other individual's claim. However, the CAT found that the expert methodology put forward by Mr Merricks on the assessment of damages of all the claims was not suitable as it did not satisfy the test set out by the Supreme Court of Canada in Pro-Sys Consultants Ltd v. Microsoft Corp.  SCC 57 (at Paragraph 118):
the expert methodology must be sufficiently credible or plausible to establish some basis in fact for the commonality requirement. This means that the methodology must offer a realistic prospect of establishing loss on a class-wide basis so that, if the overcharge is eventually established at the trial of the common issues, there is a means by which to demonstrate that it is common to the class (i.e. that passing on has occurred). The methodology cannot be purely theoretical or hypothetical, but must be grounded in the facts of the particular case in question. There must be some evidence of the availability of the data to which the methodology is to be applied.
The Court of Appeal overturned this decision in a judgment dated 16 April 2019,22 stating that the CAT ruling had been too narrow. The Court of Appeal agreed that Pro-Sys Consultants Ltd v. Microsoft Corp. provided the correct guidance on the proper approach to claims for aggregated damages. However, the CAT had placed too heavy a burden on the proposed representative at the certification stage, who should not be required to demonstrate more than that the claim had a real prospect of success. The CAT had effectively conducted a mini-trial in requiring detailed specifications as to what data would be available for each relevant retail sector during the infringement period. The CAT had also wrongly directed itself that an aggregate damages award had to be distributed on a compensatory basis; the rights of individual claimants could be vindicated by obtaining the aggregate award itself.
On 25 July 2019, permission was granted for Mastercard to appeal to the Supreme Court, which will make a definitive ruling on the legal test to be applied when certifying claims as eligible for inclusion in the collective proceedings regime.
v Representation in proceedings
Any person who is not a child nor lacks capacity as a result of an impairment or disturbance of the mind has the right to begin and carry on civil proceedings without professional representation. The courts generally seek to accommodate litigants who represent themselves in proceedings.23
vi Service out of the jurisdiction
The court's permission is not required for service of the claim form or other documents out of the jurisdiction where the court has jurisdiction under the Judgments Regulation (Regulation (EU) No. 1215/2012), the Lugano Convention or the Hague Convention on Choice of Court Agreements and the criteria in CPR 6.33 are met:
- there are no proceedings between the parties concerning the same claim pending in the courts of any other Member State or Lugano Convention state; and
- either (1) the party to be served is domiciled in either the UK or a Member State or a Lugano Convention state (Iceland, Norway or Switzerland); (2) there is a jurisdiction clause giving the English courts jurisdiction; or (3) the English courts have exclusive jurisdiction under Article 24 of the Regulation or Article 16 of the Lugano Convention; or
- where each claim against the defendant to be served and included in the claim form is a claim that the court has power to determine under the Hague Convention, and the defendant is party to an agreement conferring exclusive jurisdiction on the English court.
Claim forms must be filed and served accompanied by a statement explaining the grounds supporting service out of the jurisdiction. CPR 6.32 makes specific provision for service without permission in Scotland or Northern Ireland. In all other cases, an application must be made to the High Court for permission to serve a claim form on a party situated outside the jurisdiction. The applicant must establish that it has a good arguable case and that the claim falls within one of the stipulated categories set out in CPR 6B PD.3.1. The categories include claims to enforce a judgment or arbitral award, or for a breach of contract committed within the jurisdiction. The applicant must also satisfy the court that England and Wales is the most appropriate jurisdiction in which to bring the proceedings (i.e., that it is the forum conveniens) and that there is a serious issue to be tried.
viiEnforcement of foreign judgments
In broad terms, there are three enforcement regimes available:
- By European Regulation or Convention – a judgment on an uncontested money claim issued by a court of a Member State and certified by it as a European enforcement order may be enforced very simply under the European Enforcement Order Regulation (Regulation (EC) No. 805/2004) as though it was a judgment of the English court. Other judgments may be enforced using the procedure in the Judgments Regulation, the Lugano Convention or the Hague Convention. This involves making an application to the Queen's Bench Division of the High Court (without notice to the defendant) for registration of the judgment. The grounds on which registration can be challenged are limited; for example, if the judgment was not enforceable in the Member State in which it was given or if one of the specific exceptions in Article 45 of the Judgments Regulation apply. The Judgments Regulation in its recast form applies to judgments in proceedings commenced on or after 10 January 2015; such judgments may be enforced more easily without the need for registration at the High Court.
- By statute – judgments from Commonwealth countries and other countries that have reciprocal enforcement agreements with the UK may be enforced pursuant to the Administration of Justice Act 1920 and the Foreign Judgments (Reciprocal Enforcement) Act 1933 by making an application for registration to the High Court. Once registered under either Act, the judgment is enforceable as though it were a judgment of the English court.
- At common law – judgments for a sum of money from all other jurisdictions (including, e.g., the United States) may be enforced at common law. This requires claimants to issue a claim in debt and then apply for summary judgment to enforce the judgment.
viii Assistance to foreign courts
The English courts will, in certain cases, assist foreign courts in collecting evidence in civil or commercial matters. Courts of EU Member States (other than Denmark) may request that the English courts take evidence on their behalf or grant permission for the requesting court to take evidence in England directly under the Taking of Evidence Regulation (Council Regulation 1206/2001/EC). The grounds for refusing the application are limited (for instance, where the witness has a right not to give evidence under English law or the law of the requesting Member State), and the court must either comply with the request or refuse to do so within 90 days.
Courts of non-EU Member States (and courts of EU Member States, if necessary) can request assistance under the Evidence (Proceedings in Other Jurisdictions) Act 1975 in relation to civil or commercial matters. Generally, the English court will exercise its discretion to assist the foreign court; however, the court will not make orders for pretrial discovery, general disclosure or require a witness to do anything he or she would not be required to do in English civil proceedings.
ix Access to court files
As a general rule, members of the public may obtain copies of statements of case, judgments or orders without the permission of the court.24 Parties or any person mentioned in a statement of case may apply to the court in advance for a pre-emptive order restricting the release of statements of case to non-parties.
The right of access does not extend to documents attached to statements of case, witness statements, expert reports, skeleton arguments and correspondence between the court and the parties, although members of the public may obtain access with the court's permission. In Cape Intermediate Holdings Ltd v. Dring (Asbestos Victims Support Group),25 the Supreme Court confirmed that the default position was that the public should be allowed access not only to the parties' written submissions and arguments, but also to documents that had been placed before court and referred to during the hearing. The court will carry out a fact-specific balancing exercise, considering on the one hand the purpose of the open justice principle and the potential value of the information in question in advancing that purpose, and on the other hand any risk of harm which its disclosure may cause to the maintenance of an effective judicial process or to the legitimate interests of others.
x Litigation funding
Historically, the common law rules against maintenance (support of litigation by a disinterested third party) and champerty (where the supporting party does so for a share of the proceeds) prevented the funding of litigation by anybody who was not party to the relevant litigation. Today, these restrictions are much narrower and third-party funding has become accepted as a feature of modern litigation.
Case law and practice are still developing in this area, but the approach of the courts has so far been to uphold such arrangements provided they contain no element of impropriety that impairs the integrity of the litigation process. Relevant factors in this assessment include the nature of the funder's involvement in the litigation (control of the litigation must not be ceded to the funder); the nature of the relationship between the funded party and the solicitor and the extent to which the funded party can make informed decisions about the litigation (this should be a genuine and independent relationship); the amount of profit the funder stands to make (it has been held that 25 per cent may not be excessive);26 whether there is a risk of inflating damages or distorting evidence; whether the funder is regulated; and whether there is a community of interest between the funder and the funded party.
Lord Justice Jackson recommended in his final report on civil litigation costs, published on 14 January 2010, that a voluntary code should be drawn up to which all litigation funders should subscribe. The Code of Conduct for Litigation Funders was launched on 23 November 2011.27 The Code contains provisions concerning effective capital adequacy requirements, restrictions upon a funder's ability to withdraw support for ongoing litigation and restrictions on a funder's ability to influence litigation and settlement negotiations. Third-party funders may also be potentially liable for the full amount of adverse costs, subject to the agreement between the funder and the litigator. The Court of Appeal considered the basis and extent of funders' liability to a successful opponent in Excalibur Ventures LLC v. Texas Keystone Inc and others.28 Indemnity costs were awarded against the funded claimants on the basis that their 'spurious' claims had been pursued to trial despite having 'no sound foundation in fact or law'. The Court of Appeal dealt with the issue of whether third-party funders could be made liable on the same basis as an unsuccessful party. Agreeing with the trial judge that the litigation was 'egregious' and a 'war of attrition', the Court of Appeal held that a funder should 'follow the fortunes' of the funded party. A funder seeks to derive financial benefit from the pursuit of a claim, just as much as the funded litigant. It cannot avoid any downside that may instead arise (subject to the 'Arkin cap', which limits a funder's adverse liability to the amount of its investment29). In any event, in the matter of liability for indemnity costs it was not appropriate to seek to differentiate between a party to litigation and those who stand behind that party purely on that basis; that would be to misconstrue one of the tests for indemnity costs, which requires a court to consider the character of the action and its effect on the successful party (and not any other party).
Solicitors (and sometimes barristers) acting for clients with the benefit of third-party funding will typically be required, as a condition of that funding, to enter into some form of contingency arrangement in respect of their fees. Two structures, both permitted only insofar as they comply with regulations, predominate:
Conditional fee agreements
Conditional fee agreements (CFAs) are defined in Section 58 of the Courts and Legal Services Act 1990 as agreements between a lawyer and a client by which the lawyer's fees and expenses, in part or in whole, are payable only in specified circumstances (meaning, usually, victory for the client either at trial or by way of settlement). At its most basic, a CFA will provide that a losing client has no liability for its lawyer's fees (no win, no fee) while a winning client will be required to pay its lawyer for work done on the case and, in addition, a success fee, intended to compensate the lawyer for the risk it took of earning nothing at all.
As the market has developed, more sophisticated variants of this model have emerged. For instance, a client may agree to pay its lawyer throughout the life of the case, but on the basis of a discount to the lawyer's usual hourly rate. If the client loses the case, it will have no further costs liability to its lawyer. If the client is successful, it will be liable to top up the lawyer's fees to the full hourly rate and, in addition, pay a success fee calculated by reference to the full hourly rate. Regulations set out the form and permissible limits of a CFA. For instance, any success fee may not exceed 100 per cent of the fees which would have been payable to the lawyer had there been no CFA in place.
Under CFAs entered into before 1 April 2013, a winning party could recover any success fee payable to its lawyer from its losing opponent (in addition to the ordinary fees for which the client was liable to its lawyer). Reforms introduced following Lord Justice Jackson's report on civil litigation costs abolished the recoverability of success fees.
Damages-based agreements (DBAs) are a species of contingency fee arrangement in which the amount payable by the client to the lawyer in the event of a successful outcome is calculated as a percentage of the damages received. Arrangements of this kind, in which the contingent payment is expressly linked to level of the client's recovery, were outlawed in all but employment disputes until Section 45 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO 2012) was brought into effect. DBAs will only be valid if they comply with the requirements set out in the Damages-Based Agreements Regulations 2013 (SI 2013/609).
Contingency fee arrangements do not protect a party to litigation from the risk of adverse costs liability. In other words, a losing claimant with the benefit of a CFA may not have to pay anything to its lawyer, but it will, in the ordinary course, remain liable to pay a large part of the winning party's legal costs. Funded claimants (and sometimes those funding a claim from their own resources) will typically seek to insure against that risk. A large market has grown up for such after-the-event (ATE) insurance (so named because it is usually taken out once a cause of action has arisen and been formulated). Before the Jackson reforms of 2013, ATE insurance premiums were recoverable from a losing party. The end of recoverability does not appear to have significantly reduced the availability of ATE insurance and it is frequently offered in conjunction with third party funding of a party's own legal costs. The liberalisation of the regime for third party funding and the corresponding development of a market for professional funders is making it easier for claimants to commence and maintain proceedings, particularly in relation to class actions where there can be very many claimants and such funding options represent an opportunity to spread the funding risk.
xi Bill of costs
In October 2015, as part of the Jackson reforms, a voluntary pilot scheme was introduced at the Senior Courts Costs Office with a view to establishing a new mandatory model form electronic bill of costs based on uniform task-based time-recording codes. This was aimed at reducing the time and expense of drawing up the bill of costs by aligning it with the time-recording technology used in practice. On 6 April 2018, the electronic bill of costs scheme became mandatory in the Senior Courts Costs Office and the County Court. CPR 47 and the associated PD were amended accordingly.
i Conflicts of interest and information barriers
Conflicts of interest are governed by the rules contained in the Solicitors Regulation Authority's (SRA's) Code of Conduct for Solicitors, RELs and RFLs 2019 (for solicitors) and the Bar Standards Board Handbook (for barristers). Generally, lawyers must refrain from acting in circumstances where there is a real or significant risk that a conflict exists between the interests of two or more different clients in either the same matter or a related matter, or where there is a conflict or a significant risk of a conflict between the lawyer's interests and those of his or her client.
There are two exceptions to this rule whereby lawyers may be permitted to act for two or more clients despite there being an actual or significant risk of a conflict between his or her clients' interests. The first relates to situations in which the clients have a substantially common interest in relation to the matter or a particular aspect of it, as might be the case with a non-contentious commercial transaction. The second is where the clients are competing for the same objective, which if attained by one client will be unattainable to the other (e.g., in the case of bidders competing for the same asset in a private auction).
There are, however, some preconditions that must be met before either exception can be relied on. Most significantly, all relevant issues must be drawn to the attention of clients and they must give their consent in writing. In addition, lawyers must be satisfied that it is reasonable to act in all the circumstances.
If an actual or a significant risk of conflicts of interest exists, it may be possible for an existing client to seek an injunction to prevent the lawyer from continuing to act. Further, if a lawyer is found to have continued to act where there was a real or significant risk of a conflict arising, the retainer may be considered an illegal contract, which would impact the lawyer's ability to recover fees or to rely on any professional indemnity insurance to respond. In addition, he or she may face disciplinary proceedings before his or her relevant professional body.
Lawyers have a duty to protect all confidential information regarding their clients' affairs, unless disclosure is required or permitted by law or the client consents to the disclosure. In addition, a lawyer who is advising a client must make that client aware of all information material to the retainer of which the lawyer has personal knowledge. Where a lawyer's duty of confidentiality to one client comes into conflict with the duty of disclosure to another client, the duty of confidentiality takes precedence (although this does not mean that the duty of disclosure has not been breached).
In addition, lawyers may not represent a potential client (A) in circumstances where the potential client has an interest adverse to another client (or former client) (B) and the lawyer holds confidential information regarding B that may reasonably be expected to be material to A unless:
- effective measures have been taken which result in there being no real risk of disclosure of the confidential information to B; or
- B, whose information the lawyer or his business or employer holds, has given informed consent, either in writing or evidenced in writing, to the lawyer acting, including to any measures taken to protect B's information.
In most cases, a firm will be unable to proceed unless both clients consent, in writing, to the arrangement. In Marks and Spencer Group plc v. Freshfields Bruckhaus Deringer,30 the court confirmed that where a firm is unable to implement effective measures to ensure that its former client's confidential information is protected, the former client may be granted an injunction to prevent the firm from continuing to act for the new client.
ii Money laundering, proceeds of crime and funds related to terrorism
The key money laundering offences are contained in the Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000. These ensure that the balance of responsibility for detecting and preventing financial crime rests more than ever before on the firms participating in the UK financial markets, including law firms.
There are essentially three 'principal' money laundering offences. A person (including a firm, corporation or individual) commits a money laundering offence if he or she:
- conceals, disguises, converts or transfers the proceeds of criminal conduct or of terrorist property;
- becomes concerned in an arrangement to facilitate the acquisition, retention or control of, or to otherwise make available, the proceeds of criminal conduct or of terrorist property; or
- acquires, possesses or uses property while knowing or suspecting it to be the proceeds of criminal conduct or of terrorist property.
There are also essentially three 'secondary' or third-party offences:
- failure to disclose any of the offences from (a) to (c) above;
- disclosing or 'tipping off' that a report of suspicion of money laundering has been made to the authorities in circumstances where that disclosure might prejudice an investigation; and
- prejudicing an investigation in relation to money laundering or terrorist financing offences.
The POCA offences in particular cast a wide net. Criminal conduct is defined as conduct that constitutes an offence in any part of the UK, or would do so if the conduct occurred in the UK. Further, its scope is not limited to offences that might be considered more serious offences with the effect that it is necessary to report relatively minor offences to the National Crime Agency. The 'failure to disclose' offence is subject to an objective test and will therefore be committed if a person does not actually believe that another person is engaged in money laundering but a jury later finds that he or she had reasonable grounds for knowing or suspecting such activity. Lawyers are not required to make a disclosure if the information or other matter on which their knowledge or suspicion of money laundering was based, or which gave reasonable grounds for knowledge or suspicion, came to them in privileged circumstances.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (which implemented the Fourth Money Laundering Directive (2015/849)), came into force on 26 June 2017. This Regulation replaces the Money Laundering Regulations 2007 and the Transfer of Funds (Information on the Payer) Regulations and prescribes standards that regulated persons (including law firms) must meet in relation to, among other things, client identification, employee training and record-keeping. These are designed to prevent firms from being used for money laundering. The Regulation also seeks to give effect to the updated Financial Action Task Force global standards which promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
iii Data protection
The processing of personal data is primarily regulated by the General Data Protection Regulation (Regulation (EU) 2016/679) (GDPR), the Data Protection Act 2018 (DPA) and certain secondary legislation made under the DPA. The GDPR was adopted on 27 April 2016 and entered into force on 25 May 2018 after a two-year transition period.
The principal elements of the GDPR can be summarised as follows:
- both data controllers and data processors have statutory obligations under the GDPR;
- data controllers and data processors must comply with the six data protection principles under Article 5(1) GDPR and the additional accountability principle under Article 5(2) GDPR (the Principles); and
- data subjects have certain rights, including to access personal data held about them, to rectify erroneous personal data, to object to the processing of their personal data and to the erasure of their personal data.
The Information Commissioner's Office (ICO) is charged with policing and enforcing the regime, and has been given enhanced powers under the DPA to do so. The ICO's enforcement powers include the ability to serve four types of notices:31
- an information notice, requiring any person to provide information reasonably required for the purpose of investigating a range of compliance failures (and notably, there is no general exemption for legally privileged or confidential information);
- an assessment notice, requiring a controller or processor to allow the ICO to enter the premises, be directed to documents, examine documents, be given explanations, observe the processing of information, and to interview staff;
- an enforcement notice, requiring a controller or processor to take specified steps or refrain from taking specified steps, or both; and
- a penalty notice, requiring a controller or processor to make a penalty payment of up to €20 million or 4 per cent of the undertaking's total annual turnover in the preceding financial year, whichever is higher.
Data and personal data are widely defined under the GDPR such that any electronic information (and some information held in structured hard-copy filing systems) that relates to an identified or identifiable natural person (the data subject) is likely to be personal data. Processing is also widely defined under the GDPR to include anything that can be done with or in relation to data, including obtaining, recording, holding, organising, altering, retrieving, using, disclosing, transferring and destroying data. A data controller is a natural or legal person, public authority, agency or other body that determines the purposes and means of the processing of personal data. A data processor is a natural or legal person that processes personal data on behalf of the controller.
Access to, analysis of and disclosure of electronic information held by a client (or a third party) by legal professionals for the purposes of advising or acting on a dispute will almost always be subject to the GDPR. This is because such data will usually contain the names, email addresses or other identifying information of the client's employees or customers, or other living individuals and will therefore be personal data. It may also contain sensitive personal data, which is personal data containing information about (among other things) the data subject's racial or ethnic origin, political opinions, religious beliefs, trade union membership, physical or mental health, sexual life or the commission or alleged commission of an offence by the data subject. Additional, more stringent conditions for processing apply in respect of sensitive personal data.
Law firms acting as data controllers or data processors (or both) and the clients who are providing them with personal data (for example, for the purpose of locating relevant documents or evidence in relation to a dispute) need to comply with the new data protection principles. In the context of dispute resolution practice, the relevant conditions for processing personal data for the purposes of the first principle include that the data subject consents to the processing, that the processing is necessary in order to comply with a legal obligation, or that the processing is in the legitimate interests of the controller or a third party. Even when one of those conditions is met, the client and law firm will also need to ensure that the processing is otherwise fair, transparent and that the other principles are complied with.
The new accountability principle contains two elements: first, the data controller is responsible for complying with the GDPR and second, the controller must be able to demonstrate this compliance. Data processors are also liable to the extent that they do not comply with their obligations under the GDPR. The subject access rights under the GDPR can be used as a means to seek relevant information for the purpose of a dispute involving a living individual. Law firms acting in a dispute with an individual and their clients may receive subject access requests by that individual for documents containing personal data relating to that individual. However, information that is subject to legal privilege is exempt from the subject access rights under the GDPR.
The DPA is slightly wider in scope than the GDPR, covering processing relating to areas outside the scope of EU law (such as national security and immigration). The DPA also implements the EU Data Protection Directive 2016/680 (Law Enforcement Directive) into UK law, setting out requirements for the processing of personal data for criminal law enforcement purposes.
Documents and the protection of privilege
Legal privilege in England and Wales is governed by the common law and entitles its holder to refuse to produce the privileged document for inspection. The recognised categories of privilege that may be claimed by a party in respect of its documents or communications are:
i Legal advice privilege
The House of Lords confirmed in its decision in Three Rivers District Council and Others v. Governor and Company of the Bank of England (No. 6)32 that legal advice privilege protects confidential communications between a lawyer and client made for the purpose of receiving or giving advice in the relevant legal context. However, the House of Lords did not interfere with the Court of Appeal's previous ruling in Three Rivers (No. 5),33 which warned that care must be taken when identifying the 'client' for the purposes of legal advice privilege. Particularly in large organisations, but potentially in any organisation, the client may be limited to a defined group within the instructing entity with the responsibility for regular correspondence with the solicitors and not simply any employee or member of the instructing entity. In Serious Fraud Office (SFO) v. Eurasian Natural Resources Corporation Ltd (ENRC),34 although the Court of Appeal affirmed that Three Rivers (No. 5) remained good law, it did acknowledge that the case put large corporations in a less advantageous position than individuals and small businesses, and that English law was undesirably out of step with other common law jurisdictions in this regard. In Re the RBS Rights Issue Litigation,35 the High Court dismissed an application by RBS to withhold from disclosure notes of interviews (which were created in the context of internal investigations). The High Court decided that legal professional privilege did not apply as: (1) applying Three Rivers (No. 5), the notes of interviews were preparatory information gathered from current or former employees who did not form part of the lawyers' client (notwithstanding that the information was collected in order to be shown to a lawyer to enable legal advice to be given to RBS); and (2) the interview notes could not be said to be privileged as 'lawyers' working papers' as it was not sufficiently clear that the notes would give an indication as to the legal analysis or advice undertaken or given to RBS. The UK Supreme Court confirmed in R (on the application of Prudential Plc) v. Special Commissioner of Income Tax36 that legal advice privilege applies only to legal advice provided by members of the legal profession and not to members of other professions who give legal advice in the course of their business (such as accountants who provide tax advice).
ii Litigation privilege
Litigation privilege arises only when litigation is in existence or contemplation.37 In those circumstances, any communication between a lawyer and client, or a lawyer or his or her client and a third party, is privileged if made for the dominant purpose of obtaining or giving legal advice or collecting evidence or information in relation to the litigation. Litigation privilege is wider in scope than legal advice privilege in that it may cover communications with third parties and therefore avoids the difficulties in identifying the client inherent in legal advice privilege. In SFO v. ENRC,38 the Court of Appeal held that, in the context of internal investigations, litigation privilege arises where criminal proceedings are in reasonable contemplation. The Court of Appeal further held that, in both civil and criminal contexts, legal advice given for the purpose of avoiding or settling contemplated proceedings was protected by litigation privilege to the same extent as advice given for the purpose of resisting or defending such proceedings. In WH Holding Ltd v. E20 Stadium LLP,39 the Court of Appeal clarified that litigation privilege did not extend to purely commercial discussions about settlement.
iii Privilege against self-incrimination
Documents that tend to incriminate or expose a person to criminal proceedings in the UK or to proceedings for the recovery of a penalty in the UK (including civil contempt) are generally protected by privilege (although the privilege is subject to statutory exceptions, especially in the context of regulatory investigations). It is sufficient if the document might tend to incriminate or so expose the person, provided the risk is apparent to the court.40
iv Common interest privilege
Common interest privilege arises where communications are made between parties who share a common interest in the legal advice. This will arise where parties share the same interest in litigation (or potential litigation) or in a commercial transaction to which the legal advice relates. In such cases, communications of privileged information between the parties will be privileged even if neither legal advice privilege nor litigation privilege applies.
v Public interest immunity
This immunity applies where production of the document would be so injurious to the public interest that it ought to be withheld, even at the cost of justice in the particular litigation.41 The procedures for claiming this immunity (which in most practical respects operates as another head of privilege) are set out in CPR 31.19.
vi Without prejudice communications
Any communications made in a good faith effort to settle proceedings are covered by without prejudice privilege. However, the without prejudice rule is not absolute and evidence of without prejudice communications may be admitted in certain circumstances; for example, to determine whether the communications resulted in a concluded settlement agreement (and to interpret the terms of such an agreement)42 or whether the agreement was procured by fraud, misrepresentation or undue influence.
The case of Brown v. Rice43 reinforced that without prejudice privilege applies to communications made during a mediation; however, on the facts, the communications were admitted as evidence to establish whether a settlement had been concluded. In Farm Assist Limited (in Liquidation) v. the Secretary of State for the Environment, Food and Rural Affairs (No. 2),44 Ramsey J clarified that without prejudice privilege is the privilege of the parties and not the mediator. On the facts of the case, the parties had waived the privilege, and so the mediator could not rely upon the privilege to resist a witness summons.
Communications between a company and its qualified in-house legal advisers are capable of being privileged to the extent that the communication concerns the lawyer in his or her legal capacity rather than some other managerial role (for example, as company secretary).45 However, the European Court of First Instance and ECJ have ruled that such communications are not privileged in relation to Commission competition investigations.46 Communications with qualified lawyers in other jurisdictions in relation to foreign or English law may also be privileged before the English courts.47
Alternatives to litigation
i Overview of alternatives to litigation
There are a number of forms of alternative dispute resolution mechanisms available in England and Wales. The glossary to the CPR defines alternative dispute resolution (ADR) as a 'collective description of methods of resolving disputes otherwise than through the normal trial process'. ADR encompasses a variety of dispute resolution methods ranging from non-binding negotiations, in which there is no third-party involvement, to formal binding arbitral proceedings.55 ADR has achieved acceptance as it is confidential and normally conducted in private, its outcome is normally subject to agreement of the parties, and it may offer a faster and more cost-effective resolution to a dispute than traditional litigation. The Civil Justice Council ADR Working Group recently considered, and dismissed, the idea of imposing mandatory ADR in its Interim Report, which was published in October 2017. The report notes that in England and Wales there are already a number of ADR processes that are effectively mandatory and introducing compulsory pre-action ADR would be 'too heavy-handed'. The following reasons were cited in the report: the difficulties with avoiding unnecessary cost and hassle, the risk of delay due to difficulties with engaging defendants pre-action and the largely negative feedback about mandatory pre-action systems from jurisdictions such as Italy (which is the only European system with a mandatory pre-action mediation requirement).
The Arbitration Act 1996 (the 1996 Act) restated and aimed to improve the law in England and Wales relating to arbitration pursuant to an arbitration agreement. Certain provisions (listed in Schedule 1 of the 1996 Act) are mandatory and have effect notwithstanding any agreement to the contrary, whereas other provisions apply only in the absence of any agreement between the parties. Key mandatory provisions include:
- Section 9 – a party to an arbitration agreement may apply for a stay of proceedings if proceedings are brought against it in respect of a matter that, under the agreement, should be referred to arbitration. The court in which proceedings are brought shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed;
- Section 40 – the parties are under a general duty to do all things necessary for the proper and expeditious conduct of the arbitral proceedings;
- Section 67 – a party may apply to the court to challenge a tribunal's substantive jurisdiction; and
- Section 68 – a party may apply to the court to challenge an award for 'serious irregularity'.
Section 69 of the 1996 Act permits parties to appeal to the court on a question of law arising out of an award made in the arbitral proceedings, unless they have agreed otherwise. This right to appeal will usually be excluded if the parties have agreed to arbitrate the dispute using institutional rules (see below). A party seeking leave to appeal an award must complete an arbitration claim form within 28 days of the award date stating the reasons for the appeal sought. The court will determine an application for leave to appeal without a hearing unless it appears to it that a hearing is required. On an appeal, the court has the discretion to confirm the award, vary it or set it aside in whole or in part or to remit the award to the arbitral tribunal, in whole or in part, for reconsideration in the light of the court's determination.
Arbitration may be institutional or ad hoc. In institutional arbitration, the parties will agree to submit to an institution to administer the arbitration, applying the rules of that institution. The major institutions used in English arbitration are the Chartered Institute of Arbitrators, the International Chamber of Commerce and the London Court of International Arbitration. There are also established arbitral institutions for industry-specific arbitration, including maritime, construction and engineering, and insurance disputes.
In ad hoc arbitration, parties may agree all procedural issues themselves. The United Nations Commission on International Trade Law (UNCITRAL) procedural rules are widely used in appropriate ad hoc English arbitration.
Section 66 of the 1996 Act (another mandatory provision) governs the enforcement of foreign arbitral awards in England and Wales. It permits the enforcing party to apply to the High Court to enforce the award as if it were a judgment or order of the court to the same effect.
Where an arbitral award is made in a country (other than a country in the UK) that is a signatory to the UNCITRAL Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention), that foreign award is recognised as binding and, with the court's permission, may be enforced in England, Wales and Northern Ireland under Section 101 of the 1996 Act. Section 103 sets out the limited circumstances where a court must or may refuse to allow a foreign award to be enforced: for example, if the award was invalid under the governing law of the arbitration or the seat of the arbitration. If the court permits the foreign award to be enforced, the options available on enforcement will be the same as if it were a judgment of the English court.
The New York Convention applies to arbitration in England and Wales. In IPCO (Nigeria) Ltd v. Nigerian National Petroleum Corp,56 the Supreme Court held that the terms of the 1996 Act and the New York Convention did not enable the court to order a partial enforcement of an arbitral award.
In England and Wales, there are no rules obliging parties to mediate or determining how mediations are conducted or concluded. Parties are free to agree between themselves all aspects of the mediation process.
The potential benefits to parties of being able to resolve their disputes through mediation, even where normal trial processes are contemplated, continue to be recognised by the English courts. The CPRs strongly encourage parties to consider mediation at several stages during litigation, including before formal proceedings commence, when the case is allocated to track and at any CMCs. The court may also impose or grant a request for a stay of proceedings pursuant to CPR 26.4 to enable the parties to attempt mediation.
The Jackson ADR Handbook was published in April 2013 following Jackson LJ's recommendation.57 It has been endorsed by Jackson LJ, the Judicial College, the Civil Justice Council, and the Civil Mediation Council and is the authoritative guide to ADR in England and Wales.
The approach of the court in this area has frequently been to treat mediation and ADR as effectively synonymous terms. In Dunnett v. Railtrack plc,58 the court declined to order that the defeated claimant pay Railtrack's costs because Railtrack had, unreasonably in the court's view, refused to consider an earlier suggestion from the court to attempt ADR. In Halsey v. Milton Keynes General NHS Trust,59 the court stated that it was for the unsuccessful party at trial to demonstrate that the successful party's costs should be reduced because of its unreasonable failure to consider ADR. Relevant factors when assessing whether ADR was unreasonably refused include the nature of the dispute, the merits of the case, the relative costs of ADR to the case, and whether ADR had a reasonable prospect of success. However, in PGF II SA v. OMFS Company 1 Limited,60 the Court of Appeal made it clear that parties are expected to engage with a serious invitation to participate in ADR and they may be penalised in costs if they refuse to do so. In that case, the court refused to award the defendant its costs as it had ignored an offer from the claimant to mediate.
Mediation is becoming increasingly popular in England and Wales for disputes of all sizes. In 2008, the EU adopted Council Directive 2008/52, the Mediation Directive, which applies to all Member States when engaged in cross-border disputes within the EU. The Directive seeks to ensure that Member States facilitate mediation. This includes ensuring that local law does not prevent parties who emerge from unsuccessful mediations from being time-barred from litigation, and that settlement agreements reached in mediation are enforceable under local law.
At present, mediations and mediation services providers are not regulated by a central body, and there are no formal qualifications mediators must possess to be able to practise. In 2004, a voluntary code of conduct for mediators was introduced in EU Member States, and there is increased debate over whether a central regulatory body should be created, along with compulsory training or standardised accreditation for mediators.
iv Other forms of alternative dispute resolution
In addition to arbitration and mediation, there are a range of other processes available to parties seeking to settle their disputes out of court. These include: early neutral evaluation, a non-binding process intended to provide parties at an early stage in a dispute with an independent assessment of facts, evidence or respective legal merits; expert determination, typically a contractually binding determination by a neutral expert of a dispute involving technical or valuation issues; and adjudication, a statutory process which is mandatory for disputes arising under specified construction contracts entered into since 1 May 1998. Ultimately, private dispute resolution can take any form that the parties wish. In most cases, the procedures are non-binding and without prejudice, which allows the parties to commence or continue litigation or arbitral proceedings, if necessary.
Outlook and conclusions
There are a number of upcoming macro-level challenges to the existing state of the English legal system and its component parts, together with some substantive changes to practice and procedure.
i EU Referendum
The UK electorate's June 2016 vote to leave the EU may have a number of legal and practical implications. Please see Chapter 1 for an analysis of the issues as they relate to the resolution of disputes.
ii Reform of the courts
The finish date of the £1 billion HMCTS reform programme has been extended to 2023, building on feedback received from the Public Accounts Committee and the National Audit Office. The reforms comprise an upgrade of facilities as well as the modernisation of technology. A number of procedural reform initiatives have already been rolled out, such as the establishment of the Business and Property Courts, the introduction of a two-year pilot for shorter and flexible trials, and the Financial List (all of which have since been made permanent), as have initiatives aimed at digitising the courts system (see Section III.iii). Heading into its third phase, the reform programme will expand online services, with a view to offering a complete end-to-end service to users. Expected changes include the provision of additional IT infrastructure to courts, including providing Wi-Fi and video conferencing equipment in all courts and tribunals, and delivering additional centralised case administration centres. The recommendations put forward by The Disclosure Working Group, chaired by Lady Justice Gloster, to address the excessive costs, scale and complexity of disclosure, have taken effect in the Business and Property Courts from January 2019 in a mandatory disclosure pilot scheme in PD 51U (see Section VI.i). It is expected that if the pilot scheme is deemed successful, the existing CPR 31 will be revised to incorporate PD 51U and the scheme might be extended to proceedings outside the Business and Property Courts.
iii Witness statements
The Witness Evidence Working Group has conducted a survey and completed a report in relation to the use of witness evidence in the Business and Property Courts (High Court, London), which is expected to be published in December 2019. The Working Group collected court users' views regarding the current rules and practice on factual witness evidence, as well as possible alternatives. Potential reform could address judicial fatigue over unnecessarily lengthy statements or seek to curb the practice of lawyers drafting statements for witnesses to suit the cases being advanced.
iv Video hearings
A one-year Video Hearings Pilot Scheme (PD 51V) was commenced on 30 November 2018, which covers applications to set aside County Court summary judgments heard at either the Birmingham or Manchester Civil and Family Justice Centres. The pilot scheme tests a procedure for these applications to be heard by the court via video link. Members of the public may access a hearing by attending the court in person; the proceedings are projected on a screen. An independent evaluation by academics is expected to commence soon and be published by May 2020. Although it is expected that most hearings will continue to take place in person, reforms are being considered to allow video hearings in appropriate individual cases, for example in case management hearings, to save time and expense for all those taking part.
1 Damian Taylor is a partner and Smriti Sriram is an associate at Slaughter and May. The authors wish to thank Rob Brittain (professional support lawyer at Slaughter and May) for his contribution and assistance.
2 On 23 June 2016, a referendum was held on the UK's membership of the EU in which a majority of the UK electorate voted to leave. For consideration of the dispute resolution implications, please see Chapter 1.
3 The third division is the Family Division, which deals with matrimonial and other family-related matters.
4 These are: business; competition; financial; insolvency and companies; intellectual property; trusts and probate; and revenue.
5 Formerly the Court of Justice of the European Communities (the collective name for the Court of Justice (commonly known as the ECJ), the Court of First Instance (CFI) and the Civil Service Tribunal). Following the Treaty of Lisbon, the collective court is known as the Court of Justice of the European Union (CJEU). The ECJ remains the Court of Justice and the CFI is now known as the General Court.
6 Parliamentary sittings are normally divided into sessions, usually lasting for about a year; 'prorogation' of a parliamentary sitting brings the current session to an end, with the result that Parliament cannot meet, debate, or pass legislation until the next session begins.
7 At the time, the position at EU and UK law was that the United Kingdom would leave the EU on 31 October 2019 whether or not the parties had concluded an agreement setting out the terms of the UK's withdrawal. The European Union (Withdrawal) (No. 2) Act 2019, which required the Prime Minister to seek an extension of this deadline from the European Council, passed all stages in both Houses of Parliament and received Royal Assent on 9 September 2019.
9 See the Pre-Action Conduct and Protocols Practice Direction at https://www.justice.gov.uk/courts/procedure-rules/civil/rules/pd_pre-action_conduct.
10 Blaney v. Persons Unknown (Unreported; October 2009).
11 A recent case has held that costs budgeting and proportionality considerations can be taken into account and directed by the Court in certain circumstances, even in cases exceeding £10 million in value (see Sharp & Ors v. Blank & Ors  EWHC 141 (Ch)).
12 Recent case law on costs budgeting includes Harrison v. University Hospitals Coventry and Warwickshire NHS Trust  EWCA Civ 792, where it was held that in order to depart from budgeted costs already agreed in the claimant's costs budget at the Costs and Case Management Conference, the established principle of 'good reason' was required. However, costs incurred before a budget would be the subject of detailed assessment in the usual way; there was no requirement for 'good reason' to be shown if there was to be a departure from the approved budget. In Seekings & Ors v. Moores & Ors  EWHC 1476 (Comm), where the defendant sought to revise his cost budget upwards, the court held that there had been no 'significant developments' in the litigation to justify the increase because the additional work should have been anticipated.
13 Lewis v. Eliades (No. 1)  EWHC 335.
14  EWHC 2892.
15  EWHC 207 (Ch).
16 CPR 19.6.
17 CPR 19.10–19.15.
18 Emerald Supplies Ltd v. British Airways plc  EWCA Civ 1284; (2010) 160 NLJ 1651. This case was cited and re-affirmed recently by the Court of Appeal in Lloyd v. Google LLC  EWCA Civ 1599;  10 WLUK 6.
19 Office of Fair Trading v. Abbey National plc and Others  UKSC 6;  3 WLR 1215.
20 See, for example, the class actions brought by shareholders of RBS in respect of the 2008 RBS rights issue and the shareholders of Lloyds/HBOS in respect of alleged losses suffered as a consequence of Lloyds' acquisition of HBOS in January 2009 and the subsequent recapitalisation of the merged entity. On the Rights Issue litigation, RBS announced on 5 December 2016 that it had settled with three of the five claimant groups, and in April 2017 further settlements occurred with additional shareholders, resulting in an effective settlement of 87 per cent of the claim (by value). The trial on liability began in May 2017; however further settlements were announced in June 2017, and the High Court vacated the trial. On the Lloyds/HBOS litigation, the High Court has recently handed down judgment in Sharp v. Blank  EWHC 3078, dismissing the claim against the bank and five of its former directors on the basis that the bank's failure to provide sufficient information to its shareholders had not been causative of any loss. See also, the Equitable Life litigation (in the House of Lords: Equitable Life Assurance Society v. Hyman  1 AC 408), where Equitable Life sponsored one defendant, Hyman, to represent around 90,000 of its policyholders to establish the correct interpretation of a life insurance policy it had issued. In January 2017, the High Court granted a GLO that will see a class action against the Post Office regarding claims that sub-postmasters were wrongly punished because of flaws in the Post Office's Horizon computer system. The first two of three timetabled trials, the 'common issues trial' and the 'Horizons issue trial' have taken place; the Post Office have been refused permission to appeal the judgment to the first, and the judgment for the second is expected to be published this year. The third trial, the 'further issues trial', has yet to take place. In March 2018, the court granted a GLO to manage the legal claims brought against Volkswagen Group UK for financial compensation in respect of the NOx emissions scandal. Over 90,000 car owners joined the action. A trial of two preliminary issues of law will be heard in December 2019, and a further trial to determine the Volkswagen Group's liability is likely to be heard in 2021. On 4 October 2019, the court granted a GLO allowing claimants to bring legal action against British Airways following its data breach in September 2018, resulting in the theft of customers' personal data. This is the first UK group action brought under the General Data Protection Regulation seeking to claim compensation for non-material damage.
21 Walter Hugh Merricks CBE v. Mastercard Incorporated and others  CAT 16.
22 Merricks v. Mastercard Inc  EWCA Civ 674;  4 WLUK 253.
23 See, for example, Nelson v. Halifax plc  EWCA Civ 1016.
24 CPR 5.4C(1). In British American Tobacco (UK) Ltd v. Secretary of State for Health  EWHC 3586, the court affirmed that it had inherent jurisdiction to grant access to documents on the court file, even though the documents might not technically fall within the scope of the CPR.
25  UKSC 38.
26 Arkin v. Borchard Lines Ltd and Others  EWCA Civ 655.
27 See http://associationoflitigationfunders.com/code-of-conduct/. An updated version was published in January 2018.
28  EWCA Civ 1144.
29 Arkin v. Borchard Lines Ltd and Others  EWCA Civ 655. In Davey v. Money  EWHC 997 (Ch), the High Court clarified that the Arkin cap is best understood as an approach which the Court of Appeal intended should be considered as a means of achieving a just result in all the circumstances, but it was not a rule to be applied automatically in all cases involving commercial funders.
30  EWCA Civ 741.
31 Sections 142 to 159, DPA.
32  UKHL 48;  1 AC 610.
33  EWCA Civ 474.
34  EWCA Civ 2006.
35  EWHC 3161 (Ch).
36  UKSC 1.
37 It is unlikely that the privilege applies to non-adversarial situations; Re L (A Minor)  AC 16.
38  EWCA Civ .
39  EWCA Civ 2652.
40 See R (River East Supplies Ltd) v. Crown Court at Nottingham  EWHC 1942 (Admin).
41 Burmah Oil Co Ltd v. Governor and Company of the Bank of England  AC 1090.
42 Oceanbulk Shipping & Trading SA v. TMT Asia Limited  UKSC 44;  3 WLR 1424.
43  EWHC 625 (Ch).
44  EWHC 1102.
45 Three Rivers (No. 6)  UKHL 48.
46 See joined Cases T-125/03 and T-253/03 Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v. Commission in the General Court and the subsequent decision of the ECJ in C-550/07 P.
47 Lawrence v. Campbell (1859) 4 Drew 485 and IBM Corp v. Phoenix International (Computers) Ltd  1 All ER 413.
48 (1882) 11 QBD 55.
49 In Kazakhstan Kagazy plc v. Zhunus  EWHC 878 (Comm), the High Court partially granted an order for specific disclosure apparently under CPR 31.12, noting that the proceedings were subject to CPR 31 when standard disclosure was ordered even though 'strictly' CPR 31 no longer applied.
50  1 WLR 627.
51  EWHC 256 (Ch).
52  EWHC 1464 (Ch).
53  EWHC 2759 (Ch).
54  10 WLUK 149.
55 Some practitioners would exclude arbitration as a form of ADR and would emphasise instead the procedural informality of ADR mechanisms. However, since an arbitration can only be commenced with the consent of the parties, it is treated here as an alternative to the formal court process.
56  UKSC 16.
57 Available from Oxford University Press.
58  EWCA Civ 303.
59  EWCA Civ 576.
60  EWCA Civ 1288.