Pre-action protocols: Civil Justice Council recommends mandatory pre-action ADR but will consider more flexible bespoke protocol for commercial cases

The Civil Justice Council (CJC) has issued a report recommending substantial changes to the regime of pre-action protocols (PAPs) which parties are expected to follow before civil proceedings are commenced in the English courts.

Since 2020, a CJC working group has been undertaking a fundamental review of the role that PAPs play in the civil justice system and considering potential reforms. In an interim report issued in 2021, it invited public views on a range of tentative proposals, summarised in our earlier blog post.  It has now has published Part 1 of its final Report, formally recommending most of the reforms suggested in the Interim Report, with some changes.

Key recommendations

The central proposals (to be implemented by primary legislation to the extent necessary) are:

• To formalise the role of PAPs by adding to the Overriding Objective in CPR Part 1 a reference to the need for PAPs to be followed and enforced
• To make compliance with PAPs mandatory, except in urgent cases
• To replace the current Practice Direction - Pre-Action Conduct (PD-PAC) with a new "General PAP" (as a Practice Direction to CPR Part 1), applicable to all cases not covered by a separate area-specific PAP. The proposed General PAP (summarised below) would mandate a number of sequential steps to be taken by the parties before proceedings are commenced, including:
  • Engaging in some form of dispute resolution process, which may be chosen by the parties but with a default requirement of a confidential pre-action meeting
  • Jointly preparing a "stocktake" report summarising the parties' positions on the issues in dispute and the status of pre-action disclosure.

The Report also examines the potential for digitalisation of pre-action processes, as well as recommendations to streamline the assessment of costs in cases that settle pre-action.

Part 2 of the report (for which no timeframe has been announced) will consider the role of bespoke area-specific PAPs and any proposed changes to the current regime of 15 such PAPs – including the possibility of creating a new PAP for commercial disputes, as discussed below.

Commercial litigation – a chorus of concern

Following the Interim Report, we raised concerns that it did not include any substantive examination of whether the changes proposed via the General PAP were appropriate for all of the types of proceedings to which it would apply by default, particularly with respect to commercial and other complex litigation. As discussed in our earlier post, we consider that in most commercial cases the changes would be not only unwarranted but actually counterproductive to the aims of the pre-action protocols (to encourage settlement and narrow the scope of litigation) and the objective of proportionality.

In a welcome development, the working group has now acknowledged such concerns to at least some extent.

The Report records that many respondents to the consultation involved in higher value litigation considered that the General PAP was too prescriptive and risked undermining the flexibility in the existing PD-PAC which is especially valued in commercial proceedings. While the working group expressed scepticism as to the suggestion that a concrete obligation to undertake pre-action ADR in such cases would be undesirable on the grounds that the parties are sophisticated, well advised, and already understand the benefits of ADR, it acknowledged that "something approaching a chorus" of commercial lawyers had indicated that they needed a more flexible PAP.  It also recognised that high value commercial litigation is an important component of "UK plc" and that parties to such litigation are generally given a greater degree of procedural flexibility than in other areas of the civil system.

For those reasons, the working group has asked the London Solicitors Litigation  Association (LSLA) and the Commercial and Chancery Bars to consult with their members on the need for, and potential content of, a bespoke PAP for complex litigation in the Business & Property Courts.  It will examine the potential scope and content of any such bespoke PAP in Part 2 of the review.

Next steps

The CJC’s role in this area is limited to policy review and recommendations. It will be a matter for the Civil Procedure Rules Committee (CPRC) as to whether and how any of the recommendations are implemented.

Given that the CPRC is unlikely to make any final decisions in this regard until the CJC publishes Part 2 of its report, and that any changes would then need to go through a detailed drafting process, any implementation of the recommendations is likely to be some time off.

Also, there are multiple other ongoing developments which overlap with this CJC workstream - particularly regarding the growing momentum toward relaxation of the fundamental English law prohibition on compelling ADR (under Halsey v Milton Keynes NHS Trust [2004] EWCA 576). Those include:

• The government's and judiciary's ongoing policy drive to integrate ADR fully into the civil justice system, including by compulsion if necessary – as reflected in the recently announced introduction of mandatory ADR procedures in County Court Small Claims and the Employment Tribunals.
• Developing case law regarding the status and application of Halsey. In particular, the Court of Appeal is due to hear an appeal in November (Churchill v Merthyr Tydfil Borough Council) which will consider whether the court has power to stay proceedings to enforce the pre-action ADR provisions in the PD-PAC – including the operation of Halsey in that context. The main UK ADR institutions have been granted permission to intervene in the appeal and, regardless of the result, it is likely to be a key development regarding the scope for compulsory ADR at the pre-action stage and potentially in civil litigation more widely.

While the CJC's review may be taken into account in those contexts, there is also the potential for developments to overtake the CJC recommendations to some extent before they fall to be considered by the CPRC.

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The proposed "General PAP"

Unlike the current PD-PAC, which sets out steps that the court "would normally expect parties to take before commencing proceedings”, the proposed General PAP makes clear that its provisions are mandatory and "must" be complied with, except in urgent cases.

The parties must take three sequential steps before starting a claim, with each subsequent step dependent on compliance by both parties with the previous step:

1.  Exchange of information

• • In response to consultation feedback, the working group scaled back proposals to severely truncate the timeframes for defendants to respond to letters of claim. It settled upon recommending the following two-stage requirement:
    • Acknowledgement of the letter of claim within 21 days, identifying any relevant insurer and confirming that the recipient is the correct entity to respond to the claim (or, if known, identifying the correct entity)
    • Full response within 90 days of the letter of claim
  • The working group decided against recommending that the formal disclosure standards in the CPRs be applied to pre-action document exchange. The requirement in the draft General PAP is limited to disclosing and attaching "key" documents.
  • The working group also decided against recommending: (i) that pre-action letters of claim and responses should be supported by statements of truth; or (ii) potential  costs sanctions for a party materially altering its case from that set out in its pre-action correspondence.

2. Dispute resolution process

• • The working group abandoned its initial proposal to impose a “good faith obligation to try to resolve or narrow the dispute" at the pre-action stage, in response to concerns that this would be too vague.
  • Under the revised General PAP, parties would be "required to engage in a dispute resolution process with each other prior to any proceedings being issued".
  • A non-exhaustive list of possible processes includes mediation, early neutral evaluation, ombudsman or other schemes, or a meeting between the parties (in person, virtually or by telephone) "to discuss the scope of their dispute, its root causes, and ways it might be resolved or narrowed".
  • In the absence of agreement on the appropriate process, the default requirement would be an inter-party meeting.
  • If the process chosen is one involving a third party neutral (but not otherwise), that will satisfy the parties' obligations under any mandatory ADR requirement applicable in the subsequent proceedings (such as the recently announced requirement in Small Claims).
  • The substance of any discussions within a pre-action ADR process would be covered by "without prejudice" privilege (unless a party chose to communicate on an open basis or "without prejudice save as to costs"). However, for the purpose of assessing any alleged non-compliance with the protocol, a court could examine: correspondence regarding proposals to engage in the process, and evidence of the fact that such a process took place.

3.  "Joint stocktake report"

• • The parties would be required to file a jointly-prepared document identifying:
    (i) the issues on which there is agreement and disagreement;
    (ii) the parties’ respective positions on the issues remaining in dispute; and
    (iii) what disclosure of documents has been provided and what further disclosure is sought by each party.

The Report also proposes a new "Notice of Failure to Comply" which one party could serve on the other to raise any complaint of non-compliance, with a seven day timeframe for response. The use of such a Notice would not be a pre-condition to the court imposing sanctions but would be a factor to be taken into account.