UK: Litigation Press - A Regular Bulletin of Selected Issues and Developments

Last Updated: 20 January 2000

CONTENTS

Editorial: Winning with Woolf
Iain Mackie, Litigation Partner

The start of a new year is, of course, a time for looking forward. In this edition of "Litigation Press", we consider the new litigation landscape which we all face since the new Civil Procedure Rules were introduced in April 1999.

Those new rules do not merely affect people when they get to court. They must be considered as soon as a dispute appears likely. If not, benefits will be lost and penalties may be incurred. The best course under the new rules is to adopt their spirit as soon as a problem is discovered. An open and constructive approach is now essential. There is little to be gained by being over-aggressive, seeking to surprise the other side or adopting similar tactics which have been so prevalent in the past; the courts will penalise litigants who do not respect the new spirit.

On the other hand, we have often been asked in the past few months "Whatever happened to winning?" Does this new approach simply mean that, rather than trying to win a dispute, parties are to be encouraged to settle at an early stage, with the inevitable element of compromise which even a good settlement will involve.

We think not. Parties to disputes who follow the spirit of the new rules from the outset will put themselves in a better position to obtain the best possible outcome (or terms of settlement), whether by a form of alternative dispute resolution or by simple negotiation. Pressure can be brought to bear by taking positive steps at an early stage by:
  • making an early and realistic offer to settle ("Part 36 offers")
  • providing full information to the other side at the outset, in order that it can be made aware of the weakness of its position, or
  • showing a willingness to have the whole dispute resolved by an independent expert, whose decision will be binding on the parties (a truly aggressive step but one which is being used in practice more and more, to good effect).

Where a case is strong, the new rules provide opportunities; but potential litigants who seek to use the threat or commencement of proceedings as a tactic to bring pressure to bear on the other side will be quickly found out by the new rules and, in the end, find themselves subject to punitive costs orders.

As before, in this issue of "Litigation Press", we review some of the main cases over the past few months and highlight the progress of significant legislation. We also focus on the activities of our ADR group and begin a new series of informal reviews of the court system and the judiciary by looking at who judges are, and how they are assigned to deal with your cases. A new feature picks up on the theme of building a better position in the event of litigation, by looking at how brand owners can protect their rights by registering trade marks and internet domain names.

At the start of this new year, we look to the continued development of the new regime towards a system where "litigation" is not to be feared, but offers comprehensive options for resolving disputes in a rapid and commercial way.

ADR in Practice
Craig Perry

Since the new Civil Procedure Rules were introduced in April 1999, one of the best known ADR bodies (the Centre for Dispute Resolution "CEDR") has recorded a dramatic increase in the use of ADR. CEDR's figures show that the number of cases being referred to ADR has increased by 100% compared to the same period last year, and there is no sign, in the short to medium term, that this dramatic increase is likely to slow down or level off. In comparison, the number of claims issued in the High Court since April 1999 has fallen by approximately one third.

Over recent months, numerous articles have been written which highlight the benefits of ADR but, notwithstanding the amount of material available, little is heard about the potential downsides or how ADR really compares to other forms of dispute resolution. This is particularly relevant if one considers that, historically, the vast majority of High Court litigation (80-85%) normally ended in an out of Court settlement without any formal reference to ADR.

The benefits of ADR are often listed under the following headings:

  • Cost
  • Speed
  • Flexibility
  • Confidentiality

However, the problems with ADR are rarely discussed. Some of the most obvious can be summarised as follows:

  • The parties must first agree to refer a matter to ADR and this is often the most difficult stage in the whole process.
  • Referring a matter to ADR may increase costs, especially if the reference fails and High Court litigation is ongoing.
  • A substantial amount of time must be set aside by both advisors and clients in order to prepare properly and ADR should not be seen as an easy "short cut" to dispute resolution.

Anyone who is involved with ADR must therefore seriously consider whether its perceived benefits do actually give it an advantage over Court litigation on the one hand, and normal negotiation on the other. Macfarlanes' ADR Group (see below) have, collectively, been involved with ADR for many years. Indeed, both Macfarlanes' senior partners in the group, David Wyld and Tony Blackler, are accredited mediators and have been closely involved in the increased use of ADR as a way of resolving commercial disputes. The overall impression that the ADR Group has is that, although ADR will not always be suitable and it can never guarantee a satisfactory conclusion, it does provide a very real and effective alternative that the parties to a dispute should always consider, no matter what stage they have reached in a dispute.

In July 1999, members of Macfarlanes' ADR Group were involved in a one day mediation that provides a practical example of how the process can be used to good effect. The matter was not one that automatically identified itself as being suitable for mediation, as the central issue was principally a question of law. However, after disclosure had taken place, the parties agreed to refer the matter to mediation. Macfarlanes acted for the Claimant and the dispute related to financial advice that had been provided by the Defendant firm, and its failure to monitor and administer the Claimant's investments. The claim was sizeable, over £1 million, and the mediation involved the solicitors for the parties, experts and the Defendant's insurers. No Counsel were instructed. As with all mediations, it required detailed preparation, as the mediators wanted a clear understanding of the relevant arguments and the parties wanted to understand the cases that were to be made against them. Short written submissions were therefore exchanged and a bundle of core documents was prepared. Both the bundle and the submissions were provided to the mediators some days before the start of the mediation, so that they were able to do some preparation.

After initial presentations and closed sessions between the parties and the mediators, the crucial moment came when the two experts were allowed to swap views and opinions in open session. It very quickly became clear that one expert was weaker than the other on a number of points and the exchange of views in open session enabled the mediators, the clients and the Defendant's insurers to hear the strengths and weaknesses of the relevant arguments. Very soon after the open session had come to a close, the mediators were able to encourage the two principals to meet face to face, without advisors, and this very quickly resulted in a successful conclusion to the dispute. Not only did the Claimant feel that he had recovered a suitable amount, compared with the total loss that he had incurred, but the settlement also covered other issues, such as who would have the benefit of the investment if there was a residual value, and the future relationship between the parties. Indeed, the basic terms upon which the Defendant would continue to advise the Claimant were included in the wording of the settlement agreement.

This was only one example of a mediation which although it did not appear immediately suitable for ADR, does highlight the benefits that are available to parties when they choose an alternative way of resolving a dispute.

  • Cost: The matter was resolved before the parties had to go to the expense of preparing for trial.
  • Speed: The dispute was resolved in one day, just after disclosure, rather than the week in 6 months time that had been set aside for the trial.
  • Flexibility: The settlement made provision for the future relationship between the parties.
  • Confidentiality: The parties were able to put forward evidence, especially from experts, in the knowledge that nothing said or written could be referred to in the event that the litigation was reactivated.

The parties in this mediation not only left Macfarlanes' offices at the end of the day on affable terms but they also left knowing that they had saved a considerable amount in time and costs. How often can that be said of Court litigation? The reference to ADR also allowed the parties to discuss the dispute in a structured way and this would not have been possible if settlement negotiations had been left on an informal basis or through normal without prejudice correspondence.

In summary, the great attraction of ADR is that it has the potential of allowing both parties to win, or at least feel as though they have accomplished something, and this compares to the often unsatisfactory feeling that is left by normal litigation, when even the successful party has to face the prospect of paying the irrecoverable costs of an often long and expensive trial.

The Macfarlanes' ADR Group is responsible for keeping abreast of all developments in this field and it organises the firm's education and training programme on ADR. Any member of Macfarlanes' ADR Group is available to advise on the following:

  • Whether a dispute is suitable for ADR
  • Model ADR procedures
  • Draft dispute resolution clauses
  • Third party providers of ADR services (such as CEDR)
  • Recommendations on the identity of individual mediators, adjudicators, arbitrators, experts etc

The group is headed by two litigation partners who are also accredited mediators, Tony Blackler and David Wyld. The group also includes another partner, Simon Nurney, and a number of assistant solicitors who have particular experience of ADR.

If you wish to know more about particular forms of ADR or ADR generally, please contact:
David Wyld, Tony Blackler, Simon Nurney, Charles Lloyd, Craig Perry, Debbie Marks or Emma Colquhoun.


STOP PRESS! The Competition Act is Coming into Force

The "new" Competition Act 1998 comes into force in full in April 2000. Some of the main changes will be:

  • New domestic rules regarding anti-competitive agreements
  • Important contractual provisions being declared void
  • New powers for the OFT, including dawn raids and the power to demand information
  • Additional fines (up to 10% of UK group turnover) for contravention
  • Third party damages clauses
  • Personal liability for directors and employees

Businesses around the country clearly need detailed advice on the new legislation. Macfarlanes has produced a practice note on the subject of the new Competition Act. For a copy, please contact our professional support lawyer, Jane Larner, who will in turn put you in touch with one of the lawyers in our European and Competition Unit.

We will be writing about the main changes under the new Act in the next edition of Litigation Press.

The Woolf Reforms - The Story So Far
Jane Larner

Key Issues

  • The Rules - still under construction nine months on
  • Pre-action protocols
  • The Court's power to strike out for delay - how is it being used?

It is now almost 9 months since the Civil Procedure Rules (CPR) were brought into force, and practitioners and judges alike are quickly becoming accustomed to the new procedures, forms and terminology introduced by the Woolf reforms. A significant body of case law has already been built up clarifying the operation of the CPR, which although stated to be a "procedural code", still require further explanation in places. Early signs are that the reforms have been successful in at least one of their aims, that of reducing the number of matters which proceed to litigation. Courts across the country are reporting a dramatic decrease in the number of cases coming before them. In the Commercial Court alone new cases issued have fallen by 26% since April, while interlocutory applications have dropped by 31%. On the other hand, mediations are increasing, with CEDR (the Centre for Dispute Resolution) reporting a doubling in the number of mediations carried out by them in the last year.

The Status of the Rules and Pre-action Protocols
The CPR themselves are not quite finalised - since their introduction in April there have been ten sets of additions and amendments. New rules for enforcement of judgments, appeals and costs are currently under consultation. Also still being drafted are additional "Pre-action Protocols". These are guidelines for the conduct of a dispute prior to the issue of formal court proceedings and cover such things as the content of letters before action, early provision of information, pre-action procedures and so on. Two pre-action protocols were included in the original CPR, but these were limited to personal injury and medical negligence cases.

Since then, various others have been drafted and are awaiting approval by the Vice Chancellor. Of particular relevance to commercial firms are the pre-action protocols governing professional negligence cases, debt recovery and more specifically to lawyers, solicitors' negligence cases. There is even a pre-action protocol currently being formulated to deal specifically with actions arising out of the millennium bug, or 'Y2K' litigation. These subsequent pre-action protocols are being drafted by bodies and firms interested in and working within the particular commercial field itself and so should reflect the concerns of the organisations and businesses which will be most affected by them.

Compliance with pre-action protocols is not compulsory, but failure to follow the guidelines laid down in them may result in costs penalties or other sanctions should the matter come before a Court.

Striking Out
One new power given to the courts by the new rules which is having a considerable impact is the power of the court to strike out proceedings of its own volition, for a variety of reasons, including delay. Although this power has always available to the court under its inherent jurisdiction, it has not been widely used. However, since the introduction of the CPR we have already seen several reported cases where successful applications to strike out claims for delay have been made on the basis that the delay has been prejudicial, or that continuation of the proceedings would be an abuse of the process of the court. The indications are that the courts are becoming less reluctant to use this extreme measure when the conduct of the parties in progressing the matter is found wanting.

The attitude of the courts to delay was considered by the Court of Appeal in Biguzzi v Rank Leisure plc, a case heard in early October. The Court stressed that under the new CPR the keeping of time limits was even more important than it had been previously. This was reflected in the overriding objective in the very first part of the CPR (that of "enabling the court to deal with cases justly") and the unqualified power of the Court to strike out a statement of case where there had been a failure to comply with a rule, practice direction or court order. However, the court also emphasised that its powers to deal with non-compliance with time limits under the CPR is broad and in many cases there would be a more appropriate and just method of dealing with a party's default than by taking the draconian step of striking out his claim or defence.

Three cases decided recently, all featuring an application by the defendant to strike out the claimant's claim for delay, illustrate the differing circumstances in which a court may decide to strike out, or may decline to do so.

In the first case, West Riding Automobile Co Ltd v West Yorkshire Passenger Transport, decided on 26 October 1999 in the Chancery Division, the claimants claimed certain moneys from the defendants. In July 1994, directions for discovery and exchange of lay witness evidence had been ordered to be completed by the end of August 1994, and the case was to be set down for trial by the end of December 1994. Neither party complied with the order. In August 1995 the claimants appointed accountants to draft reports. In June 1997 draft witness statements were prepared which were sent to the defendants' solicitors in April 1999. The defendants alleged that the delay amounted to a total disregard of the court's orders and demonstrated that the claimants had no intention of bringing the action to a conclusion. They applied to strike out the action on the grounds of delay and abuse of process of the court.

The Court agreed. Under CPR rule 3.4 it had the power to strike out a case if there was anything 'unfair in letting the case go to trial'. In this case there had been a lengthy delay, which meant that oral testimony would have to recount events which took place over 13 years earlier. Significant documents were missing. It was now impossible for the case to be fairly tried. The claimants' disregard of court orders was so wholesale that it could not be believed that they ever intended seriously to use the court process to resolve the dispute. The claim was struck out.

In the case of Target Holdings Ltd v Oxborough decided two days later by the Court of Appeal, a different conclusion was reached. In this case, the claimant mortgage company had taken mortgages over the defendants' homes in 1989. In 1990 the claimant sought possession of the properties on the grounds of the defendants' default in paying the instalments due. In 1991 settlement negotiations began, which although lasting until March 1998, were ultimately unsuccessful. During the negotiations the proceedings progressed only slowly. In July 1998 the defendants informed the claimant that they intended to apply to have the matter struck out for want of prosecution or abuse of process. The claim was struck out in February 1999 by the District Judge. An appeal to the High Court failed on the ground that it was unconscionable for the claimant to continue with the action, bearing in mind its failure so far to progress the matter.

The claimant appealed to the Court of Appeal. Although the Court agreed that the claimant had failed to progress the claim expeditiously, it could not be accused of the 'complete, total and wholesale' disregard for the rules of procedure deserving the striking out of its claim. Claims can only be struck out where it is fair and just to do so. In this case, the failures merely amounted to delay, which on its own was not a sufficient reason to strike out an action. The case was reinstated, the claimant being awarded its costs both of the Court of Appeal hearing and the court below.

The most recently decided case, that of UCB Corporate Services v Halifax (SW) Ltd, decided by the Court of Appeal on 6 December, approved the sitting out of the claimant's claim for what was termed "wholesale disregard" by it of the rules and orders of the court. While acknowledging the approach in Biguzzi v Rank Leisure plc, the court maintained that in more serious cases of abuse, strike out remained the appropriate remedy, if that was what justice was required.

The differing results in these three cases were due to the exact facts and circumstances in each one. However, it is clear that the courts are willing to use their power to strike out cases when the interests of justice, now widely defined, demand it.

How the CPR have fared in practice is to be considered at an evening seminar to be given by the Macfarlanes litigation department in the new year. If you would like further information on this seminar please contact Suzanne Clark in the Marketing Department or see the enclosed invitation.

In the Press

The Times
FRIDAY DECEMBER 10 1999
Court attacks DTI over package holidays
THE Department of Trade and Industry yesterday suffered an embarrassing reverse when the Court of Appeal ruled that it had acted unconstitutionally in its attempts last year to clamp down on the package holiday industry...

Macfarlanes, the city law firm that represented Thomson, said it was the first time a judicial review had been successful in the area of competition law and could have implications for the official inquiry into car pricing, on which the Office of Fair Trading will shortly submit its report.

The Independent
FRIDAY DECEMBER 10 1999
DTI suffers travel industry rebuff
...The ruling could have far-reaching implications, but not only for the travel sector, but for all areas of business which are or have been the subject of an investigation by the Competition Commission.

John Cook, a partner at Macfarlanes, the law firm which represented Thomson said: "this is the first time that judicial review has been successful in this area of competition law and the Court of Appeal's judgment will stand as the leading authority on the proper role and powers of Ministers following an adverse report from the Competition Commission"...

...Lord Justice Laws yesterday found the order was invalid because it "travels far beyond the legitimate objectives and could not possibly conform to the regime for regulating monopolies on its proper construction".

Brand Protection
Debbie Marks

The concept of effective brand protection is of vital importance to many businesses who want to protect the reputation of their goods and services, in which they have invested large amounts of money. This article sets out some guidelines as to how brand owners can best protect their brands.

Trade Mark Registration
The most obvious way of protecting a brand name in the UK is to register it as a trade mark under the 1994 Trade Marks Act. Registration of a trade mark gives the brand owner an exclusive right to use the mark in respect of the goods or services for which it has been registered. The registration lasts initially for 10 years, and can be renewed for successive 10 year periods without limit.

The application for registration of the trade mark must specify the goods or services for which registration is sought. There are forty-two categories of registrations, covering everything from chemicals to entertainment. However, a word of warning - one cannot simply apply to register one's trade mark in respect of every existing category of goods or services, as there is a requirement that the applicant must intend in good faith to use the trade mark in respect of the goods and services covered by the application for registration. Also beware - if a trade mark is not used for five years, a third party could apply to have the registration revoked.

Endless possibilities exist for registration of trade marks under the 1994 Trade Marks Act, since the Act provides that "any sign capable of being represented graphically" can be registered, as long as it has a distinctive character. The word "sign" has no specially defined meaning, so music, and other sounds, colours, packaging, smell, slogans and even distinctive gestures or movements are in principle all registrable.

Protection Afforded by a Registered Trade Mark
A brand owner will be able to take action against any third party who infringes the registered trade mark by doing any of the following in the course of trade:

  • using an identical mark in respect of goods/services covered by the registration; or
  • using a similar mark in respect of goods/services covered by the registration (where the use is likely to confuse the public); or
  • using an identical mark in respect of similar goods/services to those covered by the registration (where the use is likely to confuse the public); or
  • using a similar mark in respect of similar goods/services to those covered by the registration (where the use is likely to confuse the public); or
  • using an identical or a similar mark in respect of dissimilar goods/services (where the mark has a reputation in the UK and the use takes unfair advantage of, or is damaging to, the distinctive character or repute of the registered mark).

Community Trade Marks
From 1 April 1996 it has been possible to obtain a single Community Trade Mark registration which gives protection which extends to the entire European Union. The main advantage of this is the fact that only one application needs to be filed and examined centrally. Previously, a trade mark owner would have had to apply for registration in each EU State separately, which is both time consuming and expensive.

However, as the Community Trade Mark is a relatively new concept, brand owners should take specific advice on whether it is the appropriate way to protect their trade marks; and this will depend to some extent upon how much of a reputation the brand owner has outside the UK.

The Problem of Trade Marks becoming Generic
Over time, certain trade marks can become synonymous with all products of a particular kind. For example, the word "Hoover", originally a brand in its own right, is now synonymous with vacuum cleaners. The possibility of a trade mark becoming generic is a real problem for any brand owner. Indeed, other words which were originally registered trade marks have now become common generic terms; for example, tabloid, aspirin, biro and Jacuzzi. Once a trade mark becomes generic, a trade mark owner is at risk of losing its exclusivity in the mark. This is why you should always be careful to use a trade mark in exactly the way in which it has been registered, taking extra care, for example, to use the correct case, spelling (and, if appropriate, colour and typeface).

Trade mark owners must be vigilant, and deal seriously with incidents of misuse of registered trade marks as soon as they arise. In addition, trade mark owners should only allow their marks to be used by third parties with their express permission under a licence or other written agreement and should ensure that they use the trade mark in the correct way.

Passing Off
Even if a brand owner has not yet registered its trade marks, there is always the possibility of protecting unlawful exploitation of its reputation by virtue of the law of "passing off" (also known as unregistered trade mark protection). Briefly, the law of passing off requires no formality or registrations will prevent a brand owner's competitors from misrepresenting its names, trade marks, product get-up or style in a way that causes confusion between the brand owner's products and their products, with the result that the brand owner suffers a decline in trade or goodwill. The law of passing off can also protect a brand owner from unfair competition from trade rivals who copy elements of a brand owner's style or get-up which would not be registrable as trade marks.

Names on the Internet
Since the Internet has become an important medium of communication, many companies have been quick to register the name of their company as their domain name and set up company websites. Many brand owners have also taken steps to register associated brand names as domain names. The domain name registration system is administered on a "first come, first served" basis, so on payment of a registration fee, it is possible to register any available name as a domain name. This has caused various legal problems for genuine brand owners, who have discovered that individuals have registered their famous brand names or names very similar to them as domain names before the brand owners have done so.

However, a recent case brought by a number of brand owners, including Marks & Spencer plc, against One in a Million Ltd, a company in the business of registering domain names, has shown that the Courts will not tolerate the practice of "cybersquatting", i.e. the deliberate registration of domain names similar or identical to well-known trade marks with the intention of holding trade mark owners to ransom. In that case the Judge ordered the defendant company to transfer the names to the trade mark owners. Nevertheless, in order to avoid such problems arising, brand owners ought to consider which of their corporate and brand names ought to be registered as domain names.

Legal Consideration

  • Trade Marks Registration
  • Problems Of Generic Marks
  • Passing Off
  • Internet Domain Names

Practical Alarm Bells

  • Have your brand names or slogans been registered as trade marks and Internet domain names?
  • Are you monitoring the use of your trade marks?
  • Are you acting to prevent third parties from using your brand names and trade marks?

For further information about Brand Protection, please contact Debbie Marks or Geoff Steward.

Partner Profile
Willie Manners - Head of Litigation


Willie joined Macfarlanes in 1976 and qualified in 1980. After spending a year in Texas with the law firm Fulbright and Jaworski gaining experience of US and international litigation he returned to become a partner in 1987.

Willie's practice is diverse, his time being divided between contentious property matters, employment law and general commercial litigation. For example, he has recently fought off a restrictive covenant injunction for a client in the recruitment sector, acted for a number of departing executives following the merger of two advertising agencies and is currently acting in the BSE enquiry, advising the Southwood Working Party who wrote the initial report advising the (then) Government on the implications of BSE.

As an assistant Willie developed a number of unusual ways to serve writs on unwilling recipients. He recalls disguising himself as an interflora delivery man and surprising the unsuspecting female defendant with the writ from behind a bunch of flowers. In another case Willie caught the defendant in his bath. The burly Scandinavian answered the door virtually naked. Having been told that the writ had physically to touch the defendant in order to be properly served, Willie threw the documents at the dripping man. He remains convinced that had the chap not been clutching his towel, a swift left hook would have followed. When he is not surprising defendants Willie can be found at home in Hampshire with his wife, two daughters and pet dog, working in the garden and planting trees.


New Rights for Third Parties

Key Issues

  • In force 11 May 2000
  • Confers benefits, not burdens
  • 'Crystallised' rights may not be altered without consent
  • Effects of Act can be excluded

New legislation is about to effect a radical change to the fundamental principle of English law that only those who are parties to a contract can enforce rights under that contract. The Contracts (Rights of Third Parties) Act ('the Act') will enable contracting parties to confer benefits, but not burdens, on others. The Act received Royal Assent on 11 November and will come into force in May next year. The main incentive for the new legislation was to benefit consumers and individuals, but as drafted, the Act will apply to every sort of contract, with only very limited and specific exceptions.

The Act's main provisions
The Act is not retrospective and will only affect contracts made after it becomes law, unless the parties to the contract agree that its provisions should apply earlier to a particular deal. The Act is facilitative only, and it is easy to exclude the effects of the Act on particular contracts if this is what is required. When the Act comes into force a third party will have rights under a contract

  • first, where the contract expressly states that the third party may enforce a contractual term
  • secondly, where a contract term "purports to confer a benefit" on the third party.

The third party must be identified, but not necessarily by name - it could be identified as a member of a class or as answering a particular description e.g. "all future tenants or occupiers". Indeed, the third party need not even be in existence at the time when the contract is entered into (for example, a company yet to be incorporated, an unborn child or a future spouse). Where there is room for doubt, the burden of proof will be on the parties to the contract to prove that it was not the intention that a third party should take a benefit. The Act provides that the third party will be treated as if he had been a party to the contract for the purpose of enforcing any rights given to him, so he will be able to sue for damages or seek an injunction or an order for specific performance. Once the third party's rights have "crystallised" then the original contracting parties will not be able to alter those rights without the third party's consent.

The Act will not apply to:

  • Bills of exchange, promissory notes or other negotiable instruments.
  • A company's memorandum and articles.
  • Employment contracts.
  • Contracts for the carriage of goods by sea, rail, road or air.

The Act's Likely Impact
The Act applied to virtually all contractual situations, however, it is of particular relevance to property and construction matters. In the property industry there are arguably many contracts which purport to confer benefits on third parties. An everyday example would be a lease containing a covenant by one tenant of a shopping centre not to cause any annoyance or nuisance to adjoining tenants. It may be that those adjoining tenants could now sue the annoying tenant as if they were parties to the lease.

Another good example of an area in which this Act may have a considerable impact is the construction industry. A characteristic feature of construction contracts is that these are frequently made with the intention of benefiting someone who is not a party to them, such as a future owner or occupier of the building. At the moment, such a third party generally has no right to sue for breach of the relevant contract notwithstanding that he is most likely to be affected by any defective work. Instead, future owners and occupiers of buildings are protected by collateral warranties and side contracts. One side effect of the Act might be the death of the collateral warranty which will no longer be needed.

Steps to take
As an initial fall back position exclusion of the Act is probably the more prudent course. Even where third parties are to be given rights, contract provisions should make it clear that the original contracting parties still have the right to vary or rescind the contract without reference to that third party.

This note is intended to give a general overview of the Contracts (Rights of Third Parties) Act only. If you require advice on the consequences of the new legislation in a specific situation, please contact Tony Blackler or Emma Colquhoun. If you would like a copy of the Macfarlanes Practice Notes published on this topic, please contact Jane Larner.

A User's Guide to ...... Judges
Iain Mackie


You are the claimant in a large commercial dispute. All attempts at settlement have failed. The other side, completely unreasonably, refuses to admit liability and pay up. The case will be heard in the High Court in London next week. But you don't even know who the judge is going to be.

The identity of the judge is, invariably, one of the most important aspects of a civil case. With limited exceptions, juries have no place in High Court disputes, which are determined by a sole judge. Who are these judges, and how are they assigned to hear cases?

Judges are appointed by the Lord Chancellor's Department, which is the Government ministry headed by Lord Irvine. Although the LCD produces a report every year on the appointments of judges, the process remains secret. There has been recent media criticism of the make-up of the judiciary:

  • There are 97 High Court judges
  • Only 7 are women
  • All are white
  • Most are Oxbridge educated
  • Most of them are entitled to a free bus pass
  • Of the 35 Court of Appeal judges, all but one are white males, with an average age of 62.

What is the background of these 97 High Court judges? Many are former barristers, a small number were practising solicitors who began their judicial careers by sitting part-time as "deputy judges", and subsequently are appointed full judges. In some of the more specialised areas, such as patents, trade marks, construction disputes, etc, it has long been the practice that the most eminent Queen's Counsel become the judges responsible for those specialisations. In other words, where you have a dispute in one of the specialist fields, there is a very high chance that you will find yourself before one of the leading experts in the subject - as you are entitled to expect. These judges are of course known to us, and we can advise on the way in which they approach hearings.

However, for more general, run of the mill commercial disputes, the position is far less certain. It is established practice that judges hear a wide range of civil and (sometimes) criminal matters, from divorces to murder trials! Some judges obviously develop a greater understanding of one area rather than the other. It is therefore quite common for a judge with predominantly criminal experience to end up hearing civil cases. In a recent case in which this firm was involved, a very complicated judicial review application raising important questions of competition law was assigned at the last minute (5pm the day before the trial was due to begin) to a judge with an almost entirely criminal background, who was therefore completely unfamiliar with the issues. The end result was that the case had to be adjourned, and the judgment (when finally given) was successfully appealed by us.

The LCD does try to assign judges to cases for which they should have some understanding and aptitude. At the start of each court "term" (court terms are similar to the three school terms, with long holidays also!), the officers of the various divisions of the court responsible for listing cases makes a provisional list of which judges shall hear which cases. However, cases overrun; cases settle. Other matters need to be heard at short notice. In other words, nothing is certain, and it is these last minute changes that often lead to unavoidable problems.

The system is sometimes unpredictable. Not all trials have a fixed commencement date; some are entered in what is called the "warned list", which means that you are simply told that the case may come on for hearing (usually on 24-48 hours notice) any time after a specified date - sometimes, this is several weeks after that date.

There is also a common perception that judges are out of touch. In our experience, this is less true of judges who hear civil matters than it may be in relation to criminal matters. As a result of their background as leading barristers, judges will often, in a previous existence, have advised commercial clients on the rights and wrongs of commercial disputes. Many are now also completely up to speed with IT, taking notes (even in court) on a laptop, sending out judgments by e-mail, etc. Some of the younger judges have also embraced the spirit as well as the letter of the new Civil Procedure Rules, dealing with applications on paper, or on the telephone.

So why does the judiciary bear little, if any, relation to the make up of its users. The answer is probably that it results from the imbalance in the legal profession itself. It is a striking fact that, while 25% of those qualified as barristers are women, less than 1% have become QCs. Similarly, over 50% of solicitors qualifying each year are women, but only a small number of these reach the top of the profession. With only this unrepresentative (albeit talented) pool to choose from, it is no wonder that the judiciary is so heavily dominated by a white, male Oxbridge majority.

On the other hand, in our experience, it is comparatively rare that a judge assigned to a matter is unable to deal with it justly and comprehensively. It is also rare for a litigant to be adversely affected, especially in civil cases, by the judge's identity, character or background. Of course, difficulties do arise, but it is this potential for difficulty that is one of the factors in the "risks of litigation" which lawyers speak about when advising clients on the merits of settling disputes.

In our next edition of Litigation Press, we will be considering the appeal process for civil cases, right up to the House of Lords and in a later issue, the recent controversy over whether judges really are impartial.

New and Forthcoming Legislation


A round-up of recent legislative developments affecting the commercial world.

  • After a last minute hiccup the Contracts (Rights of Third Parties) Bill received Royal Assent on 11 November and so becomes the Contracts (Rights of Third Parties) Act 1999. It had returned to the House of Lords for further consideration and approval of amendments moved by the Commons, including an effective extension of the Act to arbitration agreements. The Act does not come into force until May 2000.
  • Section 34 (4) of the Employment Rights Act 1999 was brought into force on 25 October. Under this provision the maximum amount of compensation which may be awarded by a Employment Tribunal in a claim for unfair dismissal is increased from £12,000 to £50,000. Other new provisions which recently came into force (15 December) include the right for time of work for 'maternity and parental leave' and 'time off for dependants'.

Macfarlanes has published two new Practice Notes setting out the effects of the Contracts (Rights of Third Parties) Act 1999 and the changes to employment legislation. For copies of the Notes, please contact Jane Larner.

  • The outstanding provisions of the Defamation Act 1996 (principally the provisions dealing with the offer to make amends and summary disposal of claims) should be brought into force on 1 January 2000. A consultation paper has been issued by the Lord Chancellor's Department setting out the necessary changes to the Civil Procedure Rules to implement the provisions and the defence of qualified privilege.
  • The Freedom of Information Bill has been put out to consultation, to make it 'a stronger and more effective piece of legislation', the Home Office has announced. The draft Bill, which was published in May, has already been considered by the Select Committee on Public Administration and an ad hoc House of Lords Committee. The results of the consultation will be published in due course.

Forthcoming Seminars

Litigation seminar

15 February 2000, 5.00pm

Civil Procedure Reforms: Winning with Woolf

Since the new Civil Procedure Rules were introduced in April 1999, the nature of Litigation has changed dramatically. We will review some of the main developments since the new rules were introduced.

In-house lawyer - Breakfast seminar programme

Our programme of breakfast seminars are aimed at in-house lawyers to help them keep up to date with current legal developments.

18 January 2000, 8.00am
Woolf - how litigation has changed

26 January 2000, 8.00am
Privity of contract abolished: Contracts (Rights of Third Parties) Act

10 February 2000, 8.00am
The new Competition Act

24 February 2000, 8.00am
Share options and employee issues on takeovers

If you would like further details about any of these seminars or would like to be placed on our mailing list for forthcoming seminars, please contact Penny Rutterford or Suzanne Clark on 020 7831 9222.

Macfarlanes' Litigation Press is intended to provide general information about developments which may be of interest. It is not intended to be comprehensive nor to provide any specific legal advice and should not be acted or relied upon as doing so. Professional advice appropriate to the specific situation should always be obtained. If you would like further information or specific advice, please contact Iain Mackie, the editor of Litigation Press, or our Professional Support Lawyer, Jane Larner. The other member of the Editorial Committee is Geoff Steward.

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