PROJECT MANAGEMENT OF DISPUTE RESOLUTION
Keynote lecture by Lord Justice Rupert Jackson at SCL 2016 on 13th September 2016
Contents
1. Introduction
2. What is proportionality?
3. Proportionality in adjectival law
4. Application to case management
5. Application to recoverable costs
6. Conclusion
1. INTRODUCTION
This lecture. The purpose of this lecture is to explore how the disciplines of project management should be applied to litigation, arbitration and other forms of dispute resolution.
Definitions. In this lecture:
“Action” means an action commenced in court.
“C” means the claimant.
“CPR” means the Civil Procedure Rules of England and Wales
“D” means defendant.
“LCIA” means London Court of International Arbitration.
“TCC” means the Technology and Construction Court in London
“Tribunal” means judge, arbitrator or panel of arbitrators, depending upon context.
Construction projects. Construction activity, unlike manufacturing or commerce, consists almost entirely of projects. The skill of successful designers, engineers and builders does not lie only in designing, engineering and building. Their over-arching skill is project management.
Dispute resolution. Dispute resolution also consists of projects. Each arbitration and each action is a separate project. It therefore requires project management. This means that all involved must control the length of the proceedings, the work involved and the cost.
The construction industry has a head start. Because construction professionals have long experience of project management, they find it easier than others to accept reforms which bring project management into litigation. This may be the reason why – in the UK – the TCC was swifter than the Commercial Court to embrace the new discipline of costs management. I am pleased to say that both courts and their practitioners are now operating the costs management rules effectively for the benefit of their clients.
What is the touchstone for project managing litigation and arbitration? In other words, how do you decide the amount of time, effort and expense that should be allocated to the resolution of any given dispute? It is submitted that the answer is by reference to proportionality.
2. WHAT IS PROPORTIONALITY?
Aristotle’s long shadow. Aristotle’s twin conceptions of justice embody proportionality. Izhak Englard, in his essay on corrective and distributive justice,(1) has demonstrated how the Scholastic movement picked up and developed these ideas. Aquinas, in Summa theologica, appreciated that corrective justice was not a simple equal measure, but a proportionate measure adapted to the particular circumstances.(2) Through the Scholastic movement Aristotle’s ideas came to infuse modern European jurisprudence.
Professor Zuckerman’s analysis. Professor Zuckerman classifies proportionality as a civilian principle. He describes it as a tool of administrative law “for assessing the use of authority by state organs, such as the police, so as to determine whether their use of power was excessive or unnecessary in relation to the particular intended objective”.(3) Whilst accepting that summary, it is right to say that similar principles are embedded in the common law and they are not limited to administrative law.
Proportionality as a restraining principle. It is, therefore, a long established feature of both civil and common law jurisdictions that there are limits upon the extent to which the law can intrude upon private rights. The proportionality principle is one way of expressing those limits.
Lord Reed’s analysis. Lord Reed traced the emergence of proportionality as a principle of both common law and civil law in Bank Mellatt v HM Treasury (No. 2) [2013] UKSC 39; [2014] AC 700 at [68]-[76]. Although Lord Reed did not specifically cite Englard, Summa Theologica or Zuckerman, his analysis is along the same lines as set out in the preceding paragraphs.
A European concept. The principle of proportionality has underpinned the European Community (now the EU) since it was established in 1957. The fourth paragraph of Article 5 of the Treaty on the European Union provides: “Under the principle of proportionality, the content and form of Union action shall not exceed what is necessary to achieve the objectives of the Treaties.” This is widely accepted as enshrining the proportionality principle. In R v Ministry of Agriculture, Fisheries and Food, ex p Fedesa and others (Case C-331/88) [1990] ECR I-4023, the European Court of Justice stated at paragraph 13:
"The Court has consistently held that the principle of proportionality is one of the general principles of Community law. By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued."
So what does proportionality actually mean? Proportionality means that there is a proper relationship between subject and object. If applied to the action of an administrative body, it means that there is a proper relationship between the administrative action and the objective to be achieved. If applied to a judicial decision, it means that there is a proper relationship between (a) the subject matter of the litigation and (b) any remedy ordered and/or any steps taken to achieve that remedy. Proportionality is the antithesis of ‘zero tolerance’. The concept also has a place in adjectival law.
3. PROPORTIONALITY IN ADJECTIVAL LAW
Adjectival law. Adjectival law is a collective term for the rules of procedure and practice which enable persons (a) to enforce the rights and remedies conferred by substantive law or (b) to resist baseless claims. Some of these rules embody fundamental principles, for example audi alteram partem – listen to both sides before deciding. Even so, the rules of adjectival law are not ends in themselves. They are subordinate to the principles of substantive law. You don’t listen to both sides just for the fun of it. You do so in order to decide the relevant issue in accordance with substantive law. As Sir Jack Jacob observed in the Eighth Upjohn Lecture, 1979: “Procedure is not the master but the servant of justice, and its function is ever to study and conform to the needs of the times.”(4)
The procedural rules must not licence a free-for-all in which every point is pursued without limit. As Bentham noted two hundred years ago,(5) it is not possible to deliver perfect justice in every case without regard to costs or delay. Such an approach would be a denial of justice because most litigants could not afford to participate in the process. The question therefore arises as to what restrictions should be placed upon the obtaining and presentation of evidence. This question becomes all the more acute in the digital age. In many cases the potentially relevant electronic documents are unlimited. Parties can produce with ease pleadings, witness statements, expert reports and written submissions of inordinate length. The more the written material expands, the more there is to talk about at oral hearings.
How should litigation and arbitration be regulated in the digital age? The answer is that the principle of proportionality, which has now emerged in substantive law, should also be the guiding principle of adjectival law. Sorabji describes this approach as “the revolutionary change that the Woolf and Jackson reforms brought about”.(6)
How should the proportionality principle be formulated for this purpose? The proportionality principle in the context of adjectival law may be formulated as follows: “Procedural requirements should be proportionate to the subject matter of the litigation.” This proposition is subject to qualifications, for example in the event of misconduct by parties.
4. APPLICATION TO CASE MANAGEMENT
The case management of construction disputes is essentially project management transplanted from site to courtroom.
Tools for case management. There will no doubt be much discussion in the course of this conference on case management techniques. Suffice it to say that the following are, or should be, tools to ensure that the process is managed in a manner proportionate to the dispute:
- Setting a firm timetable
- Building in windows for ADR at appropriate stages
- Focusing and limiting discovery of documents
- Regulating the content and length of witness statements and expert reports
- Time limited hearings
- Concurrent expert evidence (“hot tubbing”)
Arbitration. Most arbitral rules give the tribunal wide powers to determine procedure. The 2014 LCIA rules are a good example in that regard.
Litigation. Whether the courts have similarly wide powers will depend upon local procedural law. The Federal Court of Australia is a good example of a court with flexible powers of case management, well suited to business disputes of all kinds.
Recent procedural reforms in England and Wales. Reforms made to the CPR in April 2013 give the court wide powers to manage litigation actively. These include powers to:
- Limit expert evidence to particular issues
- Restrict the number, length and scope of witness statements
- Direct concurrent expert evidence.
Shorter and flexible trials. A procedure for shorter and flexible trials was established as a pilot in London during 2015 under Practice Direction 51N. This applies in the TCC, the London Mercantile Court, the Commercial Court, the Patents Court and the Chancery Division. Cases under the scheme are normally managed and tried by the same designated judge. Pleadings are kept short. Discovery, witness statements and expert evidence are strictly limited. Trials are normally confined to their originally estimated length.
5. APPLICATION TO RECOVERABLE COSTS
Costs shifting. Costs shifting is the norm in most jurisdictions outside the USA. It is also the norm under most arbitral rules.(7)
Costs follow the event. Although under most costs shifting regimes the tribunal has a discretion as to the award of costs, the normal guiding principle is that costs follow the event. In other words, the winner recovers its costs, subject to any appropriate discount because of (a) bad litigation/arbitration conduct or (b) adjustment for any substantial issues on which it was unsuccessful.
But how much costs? Traditionally the winner has recovered all costs reasonably incurred in conducting the litigation. But that approach can give rise to nonsenses. Suppose that C successfully sues or arbitrates to recover £100,000, but spends £1 million on the process. Absent fraud by D or some other exceptional circumstance, it would be absurd to award costs of £1 million, however reasonable each step taken by C may have been.
The new proportionate costs rule. The courts of England and Wales have recently grasped this nettle. In April 2013 they adopted new rules to limit recoverable costs to that which is proportionate. Those new provisions of the CPR read as follows:
“44.3 (2)
Where the amount of costs is to be assessed on the standard basis, the court will –
(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and
(b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party
(5) Costs incurred are proportionate if they bear a reasonable relationship to –
(a) the sums in issue in the proceedings;
(b) the value of any non-monetary relief in issue in the proceedings;
(c) the complexity of the litigation;
(d) any additional work generated by the conduct of the paying party; and
(e) any wider factors involved in the proceedings, such as reputation or public importance.”
Self-evident consequence of the amendments to rule 44.3. At the risk of stating the obvious, any court assessing recoverable costs under the new rule 44.3 will sometimes find itself constrained to cut down substantially the costs which the receiving party reasonably incurred in order to ‘win’ the case.(8) The court will have regard to the subject matter of the litigation, as well as the other factors set out in rule 44.3 (2), and will only award such sum as is proportionate.
And how is that working out in practice? So far there has been very little litigation about the new proportionate costs rule. There is no Court of Appeal decision on the issue, but that might change over the next year or so.
Should other jurisdictions arbitral institutions follow suit? That is not for me to say. You may wish to see how these new rules are working out in practice. Nevertheless, if you adopt the project management model of litigation, you may conclude that it is right to limit recoverable costs to a proportionate level.
Don’t parties need to know where they stand early on? Yes they do. In some cases where recoverable costs have been slashed at the end of a case on the basis of rule 44.3, the winners have complained that they were taken by surprise. In other cases the losers have complained when they were ordered to pay out much more by way of costs than they expected.
So what’s the answer? The answer is to introduce costs management. The parties should prepare budgets at the start, the tribunal should approve them or amend them as necessary and then manage the litigation in accordance with the approved budgets. Everyone will know (a) what they will recover if they win and (b) what they will pay out if they lose. This again is the application of the project management principle to litigation.
Does anybody actually do that? Yes, the Courts of England and Wales introduced costs management in April 2013 (after an initial pilot in the TCC and Mercantile Courts). Despite some resistance from both the judiciary and the profession, the costs management regime is now bedding down.(9)
Should we not introduce costs management in arbitration? Professor Doug Jones made a proposal to that effect in his Roebuck Lecture on 9th June 2016. Delegates may care to consider that proposal in the course of this conference.
6. CONCLUSION
It is submitted that the project management model should guide the fashioning of procedural rules for all litigation and arbitration in the ‘business’ sphere. Indeed, this probably is the model which - consciously or unconsciously - has influenced much procedural reform in recent years.
Construction professionals such as yourselves and the construction industry generally are better placed than almost everyone else to spot that principle and to apply it. The project management theme may well run through much of the conference this week.
Rupert Jackson
13th September 2016
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(1) Corrective and distributive justice: from Aristotle to modern times, Oxford University Press, 2009.
(2) See Englard’s analysis of at page 20 of Corrective and distributive justice: from Aristotle to modern times.
(3) Zuckerman on Civil Procedure, Third edition, Sweet & Maxwell, 2013, chapter 1, paragraph 1.35.
(4) Jacob, The reform of civil procedural law, Sweet & Maxwell, 1982, page 2.
(5) See Introductory view of the rationale of judicial evidence and Principles of judicial procedure.
(6) English civil justice after the Woolf and Jackson reforms, Cambridge University Press, 2014, pages 2-3.
(7) See Defining issues in international arbitration, ed. JC Betancourt, Chartered Institute of Arbitrators, 2016, chapter 27.
(8) As happened in BNM v MGN Ltd, [2016] EWHC B13 (Costs).
(9) See the lecture on 13th May 2015, Confront costs management: https://www.judiciary.gov.uk/announcements/harbour-lecture-by-lord-justice-jackson-confronting-costs-management/.