Resolving Property Disputes In The Millennium

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INTRODUCTION

The attractive feature of this particular lecture is that it allows us to say almost anything about the state of dispute resolution in this Millennium year and, more importantly, it is an invitation for us to talk about dispute resolution in the coming years. We do so at a time when the Lord Chancellor’s Department are looking at alternative dispute resolution (ADR) processes and at a time when the Civil Procedure Rules introduced last year are getting their first reviews.

DEFINING THE TASK

If we are to focus on property, then let us least define our remit. For our purpose, property disputes include disputes that arise from or are in some way connected with: all interests in land or buildings, such as boundary issues, construction disputes, planning matters, valuation (including rent reviews), landlord and tenant matters, contamination and all environmental issues, rating, compulsory purchase and compensation. We have in mind all those disputes where property is a significant element of the dispute but not necessarily the only one.

WHAT’S SO SPECIAL ABOUT PROPERTY?

The property sector has sufficient distinguishing features for it to warrant separate and different treatment in respect of dispute resolution. Property matters are issues of public interest since it is not necessary to have a legal interest in a particular property or area of land to be interested in it. Planning and environmental matters touch all of us. Property is special since we all occupy property either as tenants or as owners. Furthermore, property is special because its value underpins a high proportion of the both the personal and the corporate bank loans of the UK, and in that guise, it is an integral part of many other contractual disputes that would otherwise be characterised in some other way.

Another important distinguishing feature of property is its contentious contractual style which is illustrated by the fact that building construction contracts lie at the root of so much litigation. It is also seen in the many cases that arise out of landlord and tenant law, particularly the Landlord and Tenant Act 1954 matters – although questions are now being raised as to the relevance of the 1954 Act provisions. Looking ahead – perhaps we should also not forget the Human Rights Act 1998 and the Contracts (Rights of Third Parties) Act 1999, both of which might well be a fertile source of problems and disputes.

When we mention construction and landlord and tenant in the same context, does it not strike you how rarely these topics are linked when dispute resolution is debated? The extent of this specialisation into separate watertight boxes may have inhibited the development of a comprehensive property dispute resolution service.

Fortunately, to an extent this has now been recognised and the newly created RICS Dispute Resolution Faculty should provide a far higher profile than ever before.

OUR THESIS

The key concepts that we wish to put forward for debate are very simple and yet they may be considered by some to be somewhat radical. We recognise that there are bound to be those who will be dismayed at our suggestion that the status quo should be reviewed and revised.

Our premise is that:

* ADR (in which we include arbitration) is a preferable dispute resolution process to litigation, in the vast majority of property disputes.

* Regardless of what dispute resolution process is adopted, it is more effective if the tribunal or neutral has expertise in the field of the dispute.

* A central property dispute resolving agency should be established that would provide the full range of ADR facilities and draw upon the resources of the most senior members of the surveying and legal professions.

* Consumers would be better served by a Court dedicated to property, in the widest sense of that expression.

* The new Court and the new agency would be closely linked with a common ethos directed towards resolving rather than simply deciding disputes.

* The RICS should take the lead in developing dispute resolution procedures which are tailored to meet the requirements of the property industry.

DISPUTE RESOLUTION – THE PROVISION OF A SERVICE

Let us put it into perspective. Dispute resolution is simply the provision of a service. It so happens that the conventional dispute resolution service, that is litigation, is deeply rooted in tradition and by tradition that service is provided or funded by the State. But there is no reason why one should not look at the possibility that an independent central agency should not provide a parallel service, at least in part. The service would, in effect, be outsourced but it could also be Public-Private partnership. We will be proposing that existing institutions such as the RICS and the Lands Tribunal together have the potential to provide such an organisation.

For such radical change to be contemplated, there must be justification. We suggest there are sufficient shortcomings to at least warrant that serious debate should be initiated. There is certainly widespread anecdotal evidence that users are not entirely satisfied with the existing structures but there is a dearth of hard evidence. We have initiated our own modest straw poll and we will comment upon this shortly.

Surveys designed to measures consumer satisfaction are beset with difficulties. The views of the actual consumer largely remain unheard and are generally represented by the professional advisors. The views of the disputing parties are obfuscated by the layers of professionals that separate them from the dispute resolution process. Indeed, there can be few consumer services where the interface between the consumers and the service is so apparently impenetrable.

Even the conventional vocabulary itself acts as a barrier, notwithstanding the many changes that have been introduced by the new Civil Procedure Rules.

THE DISPUTE RESOLUTION CHOICES

Let us put the established terminology aside for a moment and, using plain English, consider what alternative services can be offered to the consumer in dispute.

* To have a decision handed down judicially by a wise person

* To have a decision imposed by an expert

* To have a decision handed down judicially by a wise and expert person

* To negotiate and settle the dispute himself but with the assistance of an independent facilitator

* To negotiate and settle the dispute himself but with the assistance of an independent facilitator who is an expert

* To present his case to a panel of experts so that they may deliver an expert but non-binding opinion.

We hope that those (reasonably) plain English descriptions can be recognised as the judge or the arbitrator, the independent expert, the arbitrator with expertise, the mediator, the mediator with expertise and finally the process of early neutral evaluation. We have omitted to refer to the adjudicator since we believe that he can be regarded as a hybrid neutral.

The title of this paper requires us to consider the state of Property Dispute Resolution now, in this Millennium year. We have understood the title as a question as to where this sector of dispute resolution should go in the coming years.

But first what are the yardsticks by which one can assess the benefits of a particular form of dispute resolution? The disputing parties are primarily seeking some or all of the following:

* Fairness

* Speed

* Cheapness

* Control

* Publicity or the lack of it

* Establishment of a principle

* Common sense decisions

Of this list, the prime requirements for most disputing parties must be fairness, control, cheapness, speed and common sense decisions, by which we mean resolutions that can be rationalised in a commercial context.

SPECIALIST RESOLUTION SERVICES

Resolutions that make sensible commercial sense are more likely to come from resolvers that have expertise. Disputing parties have more confidence in dispute resolvers that understand the specialist language, the customs and have current experience of the market. An expert arbitrator or judge is more likely to produce an award that is recognised as being commercially rational and it will therefore have greater market credence. Similarly an expert mediator has a better possibility of facilitating an agreement between the disputing parties.

Whilst noting the long accepted collective wisdom that justice imparted by a judge without specialist knowledge is more objective, we have to ask whether this is, in fact, to the benefit of the customers – even if it is correct. It does that appear that the market is demanding more expert tribunals and these specialist tribunals and commercial dispute resolution groups are on the increase. The Council on Tribunals now has over 80 tribunals in its jurisdiction and the Lord Chancellor’s Department report that there are over 100. Other new dispute resolution bodies are specialising in the new scenarios. For example, the World Intellectual Property Organisation offers arbitration and mediation services for technology, entertainment and IP disputes and Internet domain disputes in particular are being catered for by new organisations.

The Lord Chancellor’s Department has now thought it necessary to reconsider how tribunals operate and has just announced a new Review of Tribunals which will be chaired by Sir Andrew Leggatt. This review will not be specific to a particular tribunal but its establishment underlines the relevance of the subject matter of this paper. When Lord Irvine introduced the review on 18 May 2000 he said that “the growth of tribunals since the 1950’s had been astonishing” but more importantly for the future of ADR he said “the administrative justice system now handle more cases than the courts”. I referred a short while age to our view that dispute resolution is simply a service, there for the benefit of the consumer. Lord Irvine also refers to this when he said:

“Our drive for a more modern, integrated Government, puts the emphasis on what the user needs, not the provider.”

THE COURTS AND THEIR RELATIONSHIP WITH OTHER DISPUTE RESOLUTION GROUPS

There are many alternative dispute resolution processes now available.

Who should be advising the parties on the merits of each process? At present, it seems that that is largely left to the lawyers. Are they necessarily the best people to do it? In many cases, yes – but that requires experience and, at least as far as mediation is concerned, not a little enlightenment.

Many disputes and in particular many property disputes should not go to the courts, either because a specialist property tribunal would be more effective or because mediation would be more appropriate. That is not to say that litigation in not necessary – not least of all because it appears that mediation operates most effectively under the shadow of litigation. In the short term, we recognise that many cases will continue to go to court, almost by default. But how can the courts best apply the Woolf principles and deflect cases to ADR?

Frank Sander of Harvard Law School some years ago coined an interesting concept. The Multi-door Courthouse. His concept was that one entered the courthouse via a single door at the front but once inside you were presented with a number of different doors that led to different dispute resolution processes and to different skills. This model differs significantly from our normal system where the court will stay the proceedings and may suggest mediation but will not refer to a particular dispute resolution body. Court appointed arbitrations have been used but are not common.

But it appears that this passive approach may be changing in some regions. It has recently been announced that Judge Holman of the Liverpool and Manchester Court Service is, with Michael Black QC, setting up a system for cases to be referred to a panel provided by the Association of Northern Mediators. The scheme is to be administered by the Law Society. A similar system was initiated several years ago in Leeds for the Combined County Court and High Court and that scheme is just about to get going.

In our view, this direct link between the courts and providers of ADR should be encouraged throughout the country. Parties will have greater confidence in mediation, for example, if the Judge declares that the parties should attempt to mediate and this is the organisation to which you should apply. The unsatisfactory but more common alternative is that the court officers simply keep lists of ADR providers and hand them out on request.

The link between the courts and the ADR providers should be close so that the judges begin to see themselves as part of the process of resolving disputes and not simply as the agency for deciding them.

Complaints about dispute resolution fall into two categories. Those concerning costs and delay and those concerning the quality of the decision or judgement and the fact that the parties are caught up in a chain of events over which they have little control. In recent years, much has been made of issues of cost and delay but, in the property sector, it is the latter issues which now deserve closer attention.

The parties wish to feel that they are in charge of the process and have control over it and indeed this is the key advantage of post 1996 Act arbitration and also of mediation. They also want to know that their arguments and assertions will be properly understood. The Courts cannot guarantee to provide a judge with current experience in a particular sector but an arbitration nominating body with a detailed database such as the RICS can. A database such as this can be an assurance of quality control. Interestingly, many mediation authorities assert that an experienced mediator does not require expertise in the particular topic. Our perception however is that, even when not looking for an expert determination, the parties do look to the judge, arbitrator or mediator for an understanding of the topic and a reasonable working knowledge of the vocabulary and customs in the sector. CEDR report that, in probably 90% of their applications, the parties require a mediator with expertise. The requirement varies from simply insisting that the mediator has the appropriate professional qualifications in the field to insisting on detailed knowledge of the specific matter under dispute.

We can see evidence of this outside the world of property. New specialised tribunals are being created in order to be centres of excellence for newly expanding dispute resolution areas. New forums include for example, dispute resolution facilities dealing with Intellectual Property Rights (WIPO) and disputes arising from the use of internet domain names. Is it not clear that property requires the same?

JUDICIAL WISDOM

In preparing for this paper, we were not certain (despite our own views) that the responses to our survey would indicate a preference for the Judge/arbitrator/independent expert/mediator to be an individual who had knowledge and experience of the subject matter. We envisaged that some parties would prefer the third party to come to the question with not necessarily an empty mind but certainly one uncluttered by pre-conceptions, or even prejudices, based upon his or her own previous experience.

We do not suggest that our survey was so large as to be properly representative of our industry but we do believe that it provides us with some useful indicators of thinking and attitudes.

Thus, for example, 98 per cent of our respondents indicated that they would prefer their dispute to be resolved by an individual who had experience of it. The rest did not mind either way. Not one person wanted the dispute resolve to come to the matter “fresh”. In commenting upon the best and worst features of litigation, however, respondents were less unanimous. 21 per cent identified the quality of the judiciary as one of the best features of litigation whilst 27 per cent identified it as one of the worst. Inevitably, such responses must be conditioned to a large extent by one’s own experiences of a particular case and particular Judge. Those in the property industry who have appeared before Mr Justice Neuberger are hardly likely to identify the quality of the judiciary as one of the least satisfactory features of the Court process. Many others, however, have been less fortunate.

There is something deeply unsatisfactory about conducting a case for two or three years where the clients, the expert witnesses brought in and the lawyers involved all have a clear understanding of the issues only to find that the matter comes before a Judge who does not. Sitting in Court to hear a Judge ask one of the advocates what ITZA stands for is depressing for any lawyer. Imagine how it must sound to a client, for whom this case is possibly the most important event in his or her business life – and upon whose outcome a career or business might well depend.

How many of us have heard judicial comment to the effect of “I think that it helps in a case like this to go back to fundamentals” or “Perhaps it might assist us if we look at the matter from first principles”? The Judge is telling the lawyers that he has not got the faintest idea what the case is about and needs the lawyer to explain it to him if he is to have any chance of coming up with the right answer.

In considering this and other issues, we wondered whether England and Wales were unique in the way in which we approached dispute resolution.

Some interesting facts emerged from a brief comparative study of our near (that’s both geographically and culturally) neighbours.

FRANCE

In France, magistrates of the judicial order do not deal exclusively with cases involving property. Following a rigorous examination procedure, they receive a generalised training covering most areas of the law, from where they are allocated to a post of their choice, according to availability. There are specialist divisions dealing with child and family matters, and there is a commercial court but nothing specifically related to property. The French high court deals with a large variety of disputes and traditionally has jurisdiction to hear property related issues. The French Supreme Court of Appeal is divided into five chambers, the third of which deals more particularly with property issues.

As to the alternatives, arbitration is currently little used in France as a way of resolving property disputes. One of the principal reasons for this is the cost of arbitration proceedings, although it is being introduced more and more in the construction field. Conciliation and mediation are even rarer. This is despite the fact that Article 21 of the French Code of Civil Procedure states that: “It is part of the Judge’s objectives to reconcile the parties”. Laws introduced between 1995 and 1998 are designed to increase the amount of conciliation and mediation which takes place in France. It is worth noting, however, that the qualification to become a conciliator is simply to have had at least three years’ experience of legal matters.

Civil procedures in France have undergone a similar review to that led by Lord Woolf here. On 29 October 1997, the French Minister of Justice said: “The resolution of disputes by mediation, conciliation and settlement agreement, alternative methods of dispute resolution must be developed in order to encourage research into solutions which avoid trials”. Following a review of procedures headed by the President of the French High Court, a decree was introduced in December 1998, which was designed to change rules and procedures in order to simplify and modernise the judicial institution and, in particular, to speed up the Court process. Several further areas of reform are currently anticipated. One in particular is the possible specialisation of a part of the French High Court to deal with the more technical disputes involving property.

GERMANY

In Germany, dispute resolution still depends very much upon the Court system. ADR is widely discussed but is still of little practical importance. There are two principal reasons for this in the property sector: first, agreements for the sale and purchase of land require attestation by a notary whose task it is neutrally to advise both parties on risks they might incur. This tends to result in such agreements being carefully negotiated and well balanced. As a result, the need for dispute resolution is much less likely to arise than in some other contracts. Second, tenants of leases in Germany have neither the right to assign the benefit of the lease nor the ability to require an extension of the lease upon its expiry. Most German leases are for 10 years only, with a renewal option for another five or 10 years. The renewal is contractual and the parties have to re-negotiate on an open market basis at the expiry of the lease.

Another factor in the lack of advanced dispute resolution techniques outside the Court system has been the economic stability within Germany. This has led, for the most part, to rental payments being indexed to the General Consumer Price Index. Consequently, disputes over the rent to be paid for a lease of commercial premises have been extremely rare. As a result, there has been less need for determination by property experts as opposed to Judges.

As to the Court system, most first instance Courts in Germany do allocate property disputes to specialised chambers so that the Judges can be expected to have some expertise in this area of law. Crucially, the Courts are generally very reluctant to decide for themselves any factual questions that do not fall within their own legal competence. If, for example, the value of the piece of land or the appropriate rent payable under a lease is the relevant question for determination in the case, the Court will ask an independent expert to deliver a written opinion on that question. The role of the expert is only to give an opinion as to facts and not as to the legal implications of those facts. The parties have the opportunity to comment on the opinion and to ask for amendments or correction of mistakes. If the Court comes to the conclusion that the opinion is insufficient, or that the expert was biased in his preparation of it, the Judge will appoint a new expert.

These independent experts are appointed by the local Chambers of Commerce for different sectors. The quality of their work is generally regarded as high. The main problem is that there is a shortage of them. As a result, it generally takes between six months and 12 months for an expert to deliver his opinion. This can be a substantial cause for delay in the hearing of Court cases.

Nevertheless, the use of independent experts within the Court system has been another factor in the lack of encouragement for the alternative forms of dispute resolution, such as arbitration and independent expert. The latter is, however, becoming more popular in the construction sector.

Mediation has gained virtually no acceptance at all in Germany, save only in the area of family law. Some consideration is now being given to its use in other areas. The construction of Munich airport took over 25 years from first plans to completion and it was several times the subject of decisions of the Federal Administrative Court. As a result of that, the planned construction of a new runway for Frankfurt airport was referred to mediation in order to select the best site for the runway. Unfortunately, environmental groups contested the fundamental question of whether or not a runway was needed at all and this was not one of the questions referred to mediation. The upshot was that the result of the mediation was immediately objected to by opponents and it seems inevitable that the project will be the subject of several Court cases in the years to come.

UNITED STATES OF AMERICA

Under the US system, only certain areas of law are dealt with by a specific group of Judges. Most notably, once again, family law falls into this category. In New York, for example, most Judges preside over a range of commercial disputes – although a few may be more likely to be assigned to “complex commercial litigation”. New York also has a Landlord and Tenant Court but it is unlikely that large commercial property cases will end up there.

Arbitration and mediation are both widely used alternatives to the traditional litigation process. They are both being applied increasingly to the real estate sector. The US was, of course, the home of mediation and it took several years to cross the Atlantic. We can, therefore, perhaps learn something from the way in which it has become an accepted part of US culture.

Quoting from a Real Estate Law Journal article written in 1992, one can perhaps substitute the word “English” for “Americans” and place the article in the year 2000:

“Due to the rise in litigation costs and the crowding in Court dockets, alternative ways to resolve disputes are being sought more and more. Over the last few years mediation has been introduced to the area of real estate. … Americans, particularly in the past three decades, have become more and more litigious. Due to this and proliferation of new laws in areas such as employment relations, the environment and products liability, the Courts are becoming over-burdened. The medium wait for a case in Federal Court is 14 months, when in some State Courts, such as Washington State, the wait for a trial can be as long as 30 months. The expense of litigation has also become astronomical. In light of these statistics it is no wonder that there has been a phenomenal growth recently in other means for settling disputes, aptly called alternative dispute resolution (ADR). ADR includes such methods as arbitration, mediation, minitrials, summary jury trials, Court-annexed arbitration, neutral case evaluation, and even rent-a-judges. … In the last few years, the National Association of Realtors (NAR) has attempted to introduce mediation to the real estate industry.”

Substitute there the efforts of the RICS and the recent establishment of the Dispute Resolution Faculty and its encouragement of mediation and one can see very clear parallels.

NORTHERN IRELAND

In Northern Ireland one finds an entirely different beast: the Lands Tribunal. The Lands Tribunal is very much a specialist Court. It has a similar jurisdiction to the Lands Tribunal in England and Wales in that it deals with rating cases, compulsory purchase compensation and the removal of restrictive covenants. Its jurisdiction also goes much further. It deals with lease renewals and also with the question of reasonableness of consents to assign. It also deals with disputes over easements and the like.

The effect of all of this is that there is a wide body of property dispute resolution which is undertaken by a single entity which has a clear and detailed knowledge, expertise and experience of the property sector. Writing in 1994, Norma Dawson (then a senior lecturer in law at Queen’s University of Belfast and now a professor) observed, in relation to lease renewals, that:

“The relative speed and informality of proceedings before the Lands Tribunal, and the awareness shown by members of the Tribunal of contemporary commercial life, seem to have gained the confidence of those who deal with business tenancies on a regular basis. By contrast, delays in Court proceedings in England, often exploited by tenants, led to the introduction in 1969 of the special procedure for interim rents to be paid pending renewal, a procedure which has been unnecessary – so far – in Northern Ireland.”

An interesting perspective.

One caveat, however. In terms of scale, the Lands Tribunal in Northern Ireland is very much smaller than that serving England and Wales.

A recent Interim Report produced by The Civil Justice Reform Group suggests an extended role for the Lands Tribunal in Northern Ireland, with the High Court and County Courts having power to refer points to it for advice or determination on land issues.

SOME PRELIMINARY CONCLUSIONS

None of these countries have a specialist Court dealing with property matters exclusively. Northern Ireland probably gets closest and there are indications that France may be moving in that direction. Nevertheless, there does not appear to be a general groundswell of opinion in those jurisdictions that the Court process is unsatisfactory or unsuited to the resolution of property disputes. Indeed, in mainland Europe, such is the stranglehold of the Court process that alternative forms of dispute resolution, such as arbitration, expert determination and mediation, are almost entirely irrelevant.

In England and Wales, the movement is in the opposite direction. The Courts are to be treated as only of last resort. The message could not be much clearer. Settlement is to be encouraged: whether by negotiation or by other means.

The cultural shift effected by the Civil Procedure Rules introduced only 13 months ago is already so great as to be unlikely to be reversed in the foreseeable future. As he turns his attention to the criminal Courts, Lord Woolf will probably be comforted to note that 72 per cent of our respondents believed that the Civil Procedure Rules had effected some improvement in the litigation process. Yet this fact alone indicates how change, even for the better, often has to be forced upon professionals. The normal process of evolution (particularly in the thinking of conservative lawyers) is very often too long to be worth waiting for.

Amongst our questions, we asked respondents to identify the most appropriate method of dispute resolution for certain kinds of property dispute.

For rent review, the majority said arbitration. For negligence cases, the majority said litigation and for lease renewals, the majority said PACT. Why these differing responses? Does it reflect some detailed intellectual analysis of the issues involved in each of these disputes and the considered conclusion that the benefits of arbitration, litigation and PACT are such as to make them best suited for respectively rent review, negligence and lease renewal?

The answer, of course, is “no”. People think that arbitration is the best way of resolving rent reviews because, independent expert determination apart, that is the way it has been done since the RICS had the foresight to persuade the Law Society to incorporate arbitration clauses in all leases. In the meantime, negligence cases get heard in Court. That is just the way it is – although the Solicitors Indemnity Fund is certainly doing its bit in encouraging the adoption of mediation, as are many of the leading Professional Indemnity insurers. As for lease renewals, the joint RICS/Law Society initiative is generally accepted by all concerned to be entirely sensible and so PACT gets the vote of our respondents. But what is PACT? In essence, it is reference outside the Court system to third party arbitrators or independent experts. Had we asked the same question two years ago, we have not the slightest doubt that virtually none of our respondents would have suggested that arbitration or independent expert were the most appropriate means of determining lease renewal disputes. They would virtually all have said litigation.

The mind set can be changed. The mould can be thrown away. Invariably, however, it needs somebody else to take the lead. Somebody to force practitioners to change their habits or at least to re-assess their expectations.

Mediation was introduced to this country about 10 years ago. Apart from a few brave souls who took it on board at the outset (the presenters of this paper being two of them), it simply did not catch on. Many explanations have been put forward. Probably the most realistic is that lawyers did not encourage it – possibly fearing it, possibly fearing a loss of fee income. Whatever the reason, it has taken the introduction of the Civil Procedure Rules to transform the outlook for mediation.

The RICS have the means to move things on to a new level. There is no doubting the fact that the incorporation of the standard “on application to the President of the Royal Institution of Chartered Surveyors” arbitration clause in to all modern leases was a huge spur to the appointment of members of the RICS as arbitrators and to the resolution of disputes by that means. Mediation is undoubtedly here to stay. It is surely now time for the RICS and the Law Society to consider the incorporation of references to mediation in dispute resolution clauses.

THE EXISTING INSTITUTIONS

There a number of institutions which provide dispute resolution training and or appointing facilities for the property sector. They include the RICS, the RIBA, the Chartered Institute of Arbitrators, CEDR, the ADR Group, the Academy of Experts, and, of course, the judiciary. The PLA is also contemplating the provision of an appointment facility. At the moment only the RICS can claim to be property specialists. (the courts being arguably the least specialised.)

These institutions are effectively competitors, although it is questionable whether that is necessarily to the advantage of the consumer. The consumer erroneously believes that all the organisations offer the same services but that is not so. To the extent that they do offer similar services, they cannot offer them all with equal confidence. For example, CEDR is the pre-eminent body in the field of mediation but it is now also becoming involved in the appointment of independent experts. The Chartered Institute is highly respected in the world of arbitration but now also offers mediators, although it does not train them. In fact, an applicant that approaches any one of these organisations seeking a property specialist is very likely to be offered a chartered surveyor but these organisations do not hold the detailed professional databases on chartered surveyors that the RICS holds and, therefore, they cannot be as selective.

THE LANDS TRIBUNAL

To the best of our knowledge, the Lands Tribunal is unique as a specialised property tribunal. It is a respected and now long-established body. But if it were to be criticised as an institution it would be precisely because of the relatively narrow range of its remit, which goes back to its roots when it was established with the specific purpose of dealing with rating and restrictive covenants. From the outset, however, it was envisaged that its jurisdiction would, in due course, be extended. In fact, the remit has been extended from time to time to cover, for example, matters concerning blight and service charge disputes.

If the Lands Tribunal had greater resources it would have the potential to have a much wider remit. As we have mentioned, the Lands Tribunal of Northern Ireland is in the process of review by The Civil Justice Reform Group. In their Interim Report published in April 1999 they said that they would welcome an extended role for the Lands Tribunal. The Group then suggested that where cases are listed before the civil court that involve conflicting evidence of value then the High Court and the County Court should have the power to refer points to the Tribunal for advice or determination. Our understanding is that they are recommending that the Courts should have the power to refer any specialist property valuation matters to the Tribunal; that is, to people who understand them.

THE ROLE OF THE ADVISOR

Legal advisors have a special responsibility regarding property dispute resolution. A very high proportion of their clients will take their advice without questioning it. This is perhaps rather surprising. Very few of us would submit ourselves for major invasive surgery without obtaining a second opinion yet we are prepared to risk our finances on the strength of a single view. We are not seeking to challenge that touching faith in lawyers, but simply to underline the power and importance of the lawyer’s role and the fact that that power brings with it the important responsibility of directing how parties should pursue their disputes.

Should there perhaps be some form of guidance from the Law Society that discussing the possibility of ADR with a client should be considered best practice. Certainly, in the present climate, it does seem that a solicitor who does not do so may well be leaving himself vulnerable. Most lawyers welcome processes that assist their clients to obtain a better resolution to their disputes. But some are still fearful of losing control. Two weeks ago, the BBC radio programme “In Business” broadcast an interesting programme devoted to ADR and mediation. It was well balanced and clear. But during the programme, a barrister stated that mediation was less effective than litigation because it reduced the control of the legal advisor. This is a sad distortion of the reality. One of the chief benefits of the process is that mediation hands control to the parties who are entitled to it. Control can still be directed by the advisor – provided that it is an advisor who understands the process. Our experience as mediators is that an experienced advisor is of great value in obtaining the maximum value from ADR.

MANAGING THE CHANGE

As the Lord Chancellor has said, the consumer wants that control. The climate is right for change now and the legal profession can make that change happen in the most advantageous way for the consumers.

To obtain better use of ADR in all of its forms, awareness needs to be raised. We are encouraged to note that a new campaign is shortly to be instigated by the Lord Chancellor’s Department. We wish it well and hope that it will be accepted favourably. Professionals do not always like to be told what to do. One spirited response from a lawyer to the recent consultation document on ADR deplored the fact that Lord Chancellor’s Department had issued so much material in favour of mediation, saying “it is as if the Department of Health were to issue leaflets advocating the use of aromatherapy”. Perhaps he has had as little experience of the process.

Change will occur but, for a real quantum leap, we need a more radical approach to the drafting of property and construction dispute resolution clauses.

Such changes are happening in the United States. For example, whilst architects still regard arbitration as a means for resolving disputes, the basic contract provides for the dispute to be first mediated according to the procedures of the American Arbitration Association.

We can see no good reason why most dispute resolution clauses should not require mediation as the first recourse with arbitration as the second. We would make a notable exception for rent review clauses where we are less convinced of the usefulness of mediation. Cost is not a valid reason for rejecting this concept. The cost of mediation is ridiculously low compared to other forms of resolution. Neither is delay a convincing reason for excluding mediation. A mediation can be set up in a fraction of the time needed to arrange an arbitration or obtain a court hearing and the process itself, in 90% of all cases, is disposed of in a day.

DISPUTE RESOLUTION AND THE INTERNET

Any Paper that has any pretences about looking to the future cannot but make some reference to the internet; that confusing “place” where we can check our bank balances, order our groceries, research projects, sell our house, book our holidays and a million other things besides. But can it dispense Justice? And, if so, is it relevant to resolving property disputes.

Certainly the law already has a major stake in the internet. There are websites that offer dispute resolution services and there are even sites that offer online resolution facilities. There are already American based online mediations in operation. Our experience of ADR however is that face to face interaction is a crucial element and so we have reservations for the widespread use of this activity except perhaps in the case of a single issue dispute. We do not yet see this being a medium for property disputes where so often it is necessary to visit the site (that is, the property site – not the web site!).

In making this pronouncement, we are keenly aware that, as has been the case with so many internet matters, we will probably be proven wrong in time!

HOW HAVE ARBITRATION, PACT AND MEDIATION GROWN?

The RICS continues to be the focal point for rent review and construction disputes. But the statistics for third party appointments on rent review disputes show how it reflects market conditions.

Rent Review Arbitration Referrals:

1990 – 13,341

1995 – 4,578

2000 (to date) – 2,941 probably 8000 for the year,

The above figures do not include commercial non-rent cases, adjudications or agricultural cases.

The figures for PACT appointments are disappointingly low:

1999 – 8

2000 (to date) – 4

Non-rent cases (which includes construction industry disputes):

1990 – 436

1995 – 394

2000 (to date) – 509 (344 adjudications to date)

The ADR Group currently have 80 member law firms throughout the United Kingdom. Referrals of cases to ADR Group for mediation come predominantly through member and non-member law firms with in-house banking and insurance referrals running a close second.

The ADR Group have made available to us the statistics showing the number of mediations arranged by them over the last ten years:

1990 – 48

1995 – 44

1996 – 95

Since 26 April 1999, the ADR Group have seen a three fold increase in the number of cases mediated. This increase was immediate following the introduction of the Civil Procedure Rules and has been maintained during the last year. ADR Group currently mediate just over one case every working day.

The mediation figures available from CEDR only go back to 1997:

1997 – 1998 – 130 commercial cases (approx)

1998 – 1999 – 192 commercial cases

1999 – 2000 – 462 commercial cases

The arbitration figures show that the RICS maintains its strong position in this sector. The mediation statistics show very considerable growth. CEDR mediations have increased 141% on the previous year. The number of mediations is increased to 550 cases if outside referrals such as Central London County Court are included. The ADR Group figures have almost trebled in the last year.

From the property perspective, it is interesting to see that construction, engineering and property, and professional negligence disputes accounted for 17% of CEDR mediations and that the construction industry remains the single largest user of mediation.

One in five cases were referred to CEDR by the courts, being twice as many as the previous year which shows an encouraging trend and, of the recent court referred cases, most of them were in the last few months. The conclusion must be that this is the result of the change in the way that judges now manage their cases, as a result of the introduction of the new Civil Procedure Rules last year. The number of cases referred to the ADR Group has also increased and 35% to 45% of cases referred to ADR Group are Court referred. Interestingly, these cases are also proving more difficult to settle: this appears to be principally because mediation is a voluntary procedure and the parties will not settle if dragged kicking and screaming to the mediation just because the Court wants them to do so.

We wonder how much of this reluctance is the result of legal advisers being insufficiently supportive or encouraging of the process. A lawyer who does not understand mediation or is frightened of it or who is just cynical is unlikely to react positively to a Court direction to try mediation. The client who has never heard of mediation is not going to find such a person particularly encouraging.

… AND WHAT IS HAPPENING TO LITIGATION?

The statistics available from the Lord Chancellor’s Department tell their own very interesting story.

A simple illustration is provided by the figures for the number of actions begun in the Chancery Division:

1997 – 7,000

1998 – 6,878

1999 – 2,135 1 January to 25 April

3,271 26 April to 31 December

The annualised 1999 figure for pre-Woolf actions is 6,776 (consistent with previous years). The annualised post-Woolf figure is 4,775.

There has been a dramatic decline in the number of cases being commenced in the Courts generally. Initial suggestions that this was because lawyers were getting cases out of the way before the Civil Procedure Rules took effect are plainly incorrect.

A combination of factors has produced this downturn. These include the costs penalties for unreasonable behaviour and lack of co-operation, the requirement for Statements of Truth, the pre-action protocols requiring information to be exchanged prior to commencement of proceedings and the Part 36 settlement procedure which, incidentally, was regarded by those who responded to our survey as one of the most positive features of the litigation process. All of these have had the effect of achieving Lord Woolf’s objective of treating litigation as “a last resort”.

Undoubtedly, the decline in numbers will stop but it seems highly improbable that litigation will, as this Millennium progresses, be the most widely used form of dispute resolution. In the property sector, this development will probably be welcomed.

Most people in the industry regard litigation as an unnecessary distraction from their day to day business. They are people who are constantly “doing deals” and doing deals with each other. The industry thrives on communication, co-operation and on, to mix metaphors, swings and roundabouts and the scratching of backs.

There can be little doubt at all that the importance of litigation in the 21st Century will be significantly less than it was in the 20th Century.

LOOKING TO THE FUTURE

So, it is now time for us to look ahead: to consider where dispute resolution might be heading, to consider how the property industry might be best served by dispute resolution processes.

In preparing this paper, we were prepared to contemplate starting again, to have a blank sheet of paper. At the same time, however, we were very keen to ensure that we did not make the mistake of throwing Leo out with the bath water . Indeed, we needed to envisage what needed to be in place for the time when Leo was old enough to have followed in his parents’ footsteps and donned his metaphorical wig.

In analysing the results of our brief survey, we were struck by the overwhelming desire of surveyors and lawyers alike and (and this is more important than both) of their clients to have their property disputes resolved by a individual who understands the property sector. For us, that must be the guiding light as we go forward. Lawyers are expensive; too expensive many would say. Litigation is expensive. Litigation is uncertain. It should not also be a lottery. Systems must be developed which ensure that the right people decide the right cases in the right forum.

We all must recognise that the nature and the scope of property disputes will change in the coming years. As leases get shorter, the number of lease renewals will grow – until the day comes, and it surely cannot be that far away, when the Landlord & Tenant Act 1954 is abolished. As leases get shorter, the number of rent reviews will diminish. Indeed, if economic stability becomes the norm, indexation may replace valuation.

In place of these traditional disputes may come new contractual disputes arising out of the proliferation of PFI/PPP projects. These complicated, and hitherto unforeseen, transactions have involved some groundbreaking drafting and some new and imaginative concepts. Perhaps the only thing that is certain about them is that sooner or later somebody will fall out with somebody else and a dispute will need resolving.

So let us look at some real illustrations:

Construction disputes

The construction industry seems to have got things reasonably well organised.

They have their own specialist section of the High Court (the Technology and Construction Court, or TCC). They have a newly introduced process of adjudication. They have a long track record of acceptance of arbitration. They were one of the first to embrace mediation and are, by far, the largest users of it. They may be something of a role model for all of us. Their flexibility perhaps explains why our survey showed that all forms of dispute resolution (except PACT) were seen as attractive to our respondents.

Rent reviews

Arbitration and independent expert determination are now firmly established as the appropriate means for determining rent reviews, where negotiation has failed. Following the introduction of the Arbitration Act 1996 and the additional powers given to arbitrators, the school of thought is emerging that the independent expert is a dying breed . Mediation appears unnecessary. Either surveyors can negotiate the rent review or they cannot. If they can, they do. If they cannot, they get somebody else to determine it for them.

What about points of law? It is when these go into the Court process that litigation comes into disrepute. Some of the most bizarre judgements ever to be put in writing have concerned rent reviews. The industry is finding its own way around this problem by enabling arbitrators and independent experts to resolve legal issues with the assistance (where they need it) of legal assessors; barristers and solicitors who specialise in the property sector. A number of cases, however, continue to go through the Court system. Whilst Mr Justice Neuberger probably hears more than most, he cannot, and should not, hear them all. The “What does ITZA mean?” syndrome remains a real concern.

We should remember also that an experienced surveyor has more to offer than merely resolving the valuation aspects of a dispute.

Dilapidations

Respondents to our survey lacked any sort of unanimity in telling us how they thought that these disputes ought to be resolved. One thing, however, was reasonably clear. At present, the vast majority of dilapidations disputes which are not settled end up being heard by a Judge, sometimes in the experienced forum of the TCC but by no means always. Only 36 per cent of our respondents said that litigation was the best way of resolving these disputes.

Surely the majority are right. What is a dilapidations dispute about? It is about building surveying, quantity surveying, valuation and, sometimes but not always, about the correct interpretation of a repairing obligation in a lease. Why expose those disputes to the vagaries of the Court process? Why not follow the rent review surveyors and get specialist surveyors sitting as arbitrators or independent experts and allow them to take legal advice from barristers and solicitors with expertise when difficult points of law arise? As a variation on a theme, why not extend PACT to dilapidations disputes?

Professional Negligence

Surveyors have been on the receiving end of professional negligence claims for several years now. Lawyers too, but with slightly less publicity in the property sector. 63 per cent of our respondents accept that the Court is the appropriate forum to decide such issues. That may be true but there is an inconsistency amongst our respondents. They nearly all tell us that they want

their disputes heard by somebody who understands the industry and yet seem content for professional negligence cases to be heard by somebody who may very well not. In fact, an increasing number of negligence cases are now going to mediation with the encouragement of many of the Professional Indemnity insurers.

Can we not produce a litigation system which imports the best of both worlds for those situations where negotiation and mediation and other forms of settlement have all failed?

Lease Renewals

PACT has been with us now for nearly three years now. We, and our respondents, welcome it and wish to see it encouraged and yet nothing much seems to be happening. Why not? Are we kidding ourselves? Are we just pretending that we do not like County Court Judges deciding lease renewals? We do find ourselves in the rather bizarre situation that it is precisely because we do not want County Court Judges resolving lease renewals that we have found the ultimate form of dispute resolution. If the last thing you want is for the Judge to hear your case, then you are going to do pretty much everything you can to make sure that you settle it.

In approaching our task today, perhaps we have quite missed the point. Perhaps we are trying too hard to find a process which works when the real solution is to find one that does not work and thereby increases the likelihood of settlement.

Tempted though we may be, at this point, to recommend that all property disputes should, in future, be referred to County Court Judges who specialise in matrimonial work and crime, we believe we owe it to the memory of Lionel Blundell to end this Paper on a slightly more intellectual footing.

SOME SUGGESTIONS

What has become clear to us is that the property industry needs to find for itself a form for dispute resolution which enhances the capacity for settlement whilst delivering, as a last resort, a mechanism for resolution by an individual who understands the industry and knows what makes it work.

We have considered a number of alternatives.

We have considered following the example of Northern Ireland and empowering our own Lands Tribunal. Extending the jurisdiction of that body to all manner of commercial property disputes and increasing its woefully inadequate resources (both in terms of experienced individuals and financial resources) would achieve many of our objectives. Bringing within the over-riding jurisdiction of the Lands Tribunal mediation, arbitration, expert determination and adjudication arms would achieve still more. We suspect, however, that, whilst we are prepared to “think the unthinkable”, such a proposal would meet with huge judicial resistance.

We have also considered the possibility of a new division being established within the Court system to sit alongside the Chancery Division, the Queen’s Bench Division and the Family Division in the High Court. To us, a Property Division would make a huge amount of sense. The number of cases being reported on a weekly basis suggests that there could well be sufficient work to sustain such a Division. Once again, however, we envisage enormous resistance to such a proposal – not least of all on the very simple footing that property has no greater right to its own Division than many other areas of business.

Having said that, we already have a Patents Court, which is part of the Chancery Division, and a Commercial Court and even an Admiralty Court as part of the Queen’s Bench Division. The Commercial Court’s remit extends to “any case arising out of trade and commerce in general”. In fact, that generic description covers an apparently random selection of business interests. It includes:

the export or import of goods;

the carriage of goods by land, sea, air or pipeline;

the exploitation of oil and gas reserves;

insurance and re-insurance;

banking and financial services;

the operation of markets and exchanges; and

arbitration.

Meanwhile, by way of example, libel cases are allocated to a relatively small number of judges. Surely that is the very least that the property sector is entitled to expect. In fact, we believe that it deserves something much better than that. Something more formal and structured.

One possibility is simply to extend the jurisdiction of the TCC to cover all property cases. For this purpose, of course, the number of Judges, the resources and the administrative back up would all have to be increased. Within a short space of time, however, a substantial body of experience would be created. This solution is possibly the simplest to effect and the one which ruffles fewest judicial feathers.

Another more radical option would be the creation of, in effect, a Property List, within the existing Court system. It is not altogether clear to most users why there is a Chancery Division and a Queens Bench Division in the High Court. Lord Woolf probably missed an opportunity to bring that procedure into the 21st Century. It is not too late. One single Commercial Division with separate Lists, such as property, insurance, maritime, banking etc, would seem to make a great deal of sense. It would not be necessary for Judges to be confined exclusively to one List provided that the number of Judges for each list was restricted to ensure that only those with experience and expertise in the subject area sat in judgement on others whose livelihoods depended on them.

Such a group of specialist Judges would also be better placed to encourage other forms of dispute resolution and to do so in a realistic manner. The RICS, the Chartered Institute of Arbitrators, the Academy of Experts, CEDR and the ADR Group and other such bodies would be able to affiliate to the List so as to ensure that references could be made by people who knew what they were talking about to people who knew what they were talking about. The then Vice Chancellor had not heard of PACT until he attended an ARBRIX conference in November 1999. We do not criticise him for that because property is one of many areas that was within his purview. Creating a small specialist group of Judges for whom property was the bulk, or all, of their responsibility would help eliminate such ignorance. Until that group established itself, more use could be made of Deputy High Court Judges – barristers from the specialist property sets.

The concept could be applied equally well in the County Courts. It may well be that there are insufficient property cases, although we doubt it, being heard in the County Court to justify a Property List but what of it? It still makes sense for there to be certain Judges allocated to that List in order at least to give us some prospect of achieving a much better understanding of the property industry amongst our judiciary than appears presently to exist.

In putting forward these thoughts on reforms to our Court systems, we do not claim to have found the solution to all of the problems of the property industry in the dispute resolution field. Indeed, as we intimated in our introduction, there are even some fairly basic issues of definition and terminology which would need to be resolved. What is a property case? Landlord and Tenant – yes. Trespass and neighbour disputes such as rights of light also. But what about the surveyor’s negligent valuation for a lending bank? Others might call that a banking case, or if a solicitor was negligent, probably an insurance case. What of the dispute between joint venture partners of a major town centre re-development – is that a company commercial case? Can planning appeals and judicial review cases sensibly be taken out of The Crown Office where there is precisely the specialist knowledge of a particular sector which we, and we believe our “customers”, are seeking for property as a whole?

What we do believe that we have done is to identify a problem which has to be addressed and which it is the responsibility of all involved in the sector to address. We recommend that the sponsors of this Blundell Memorial Lecture (the Bar Council, the Law Society and the RICS) set up a working party to consider our proposal for the establishment of, at the very least, a Property

List and to make recommendations to the Lord Chancellor’s Department accordingly. We would also urge that that working party should ensure that the Lands Tribunal receives a significant increase in the resources allocated to it and the possible transference to it of additional jurisdiction.

When we formulated our conclusions to this Paper, we were unaware that a similar process of review was being undertaken in the environmental field. In February 2000, the Department of Environment, Transport and the Regions, produced a Paper by Malcolm Grant on the feasibility of establishing for England and Wales a specialist environmental Court . The study was undertaken in the Department of Land Economy in the University of Cambridge and the work was overseen by a Steering Committee appointed by DETR, comprising representatives from the Planning Inspectorate and from the administrative and legal branches of DETR.

There are a number of features of the review which run in parallel with our own thinking. Probably chief amongst there is the perceived weaknesses derived from the want of expertise in Magistrates Courts to handle complex environmental, criminal matters or regulatory appeals (such as contaminated land remediation notices). Quoting from a Paper delivered by Malcolm Grant to the UKELA Conference 2000, we find that we are sharing the same “hymn book”:

“An “environmental” Court or tribunal implies a body whose members are specialists in environmental issues, from whatever disciplinary perspectives. It implies a body that is distinct from the normal Courts, and whose purpose is to focus exclusively on environmental suits. It does not, however, imply that its members must all be judges from a legal background. If it is too much of a challenge to professional hegemony to envisage that non-lawyers might be judges then there are other designations available, such as commissioners, inspectors or assessors”.

We believe that there is much to be said for the bringing together of arbitrators, independent experts, adjudicators, mediators and others within one property organisation. At present, the RICS leads the way in that the Dispute Resolution Faculty offers all of those services, albeit not, in any significant way, outside its own surveying profession. Surely it makes sense for those specialist property lawyers who presently act as arbitrators, independent experts, adjudicators, mediators and legal assessors also to be available as a pool of experience and expertise. It may be that this can be done by annexation to the Courts or to the Lands Tribunal. It may be that the RICS can work with such authorities to establish an overarching body which maintains standards of professionalism and quality control which ensure that the users of alternative dispute resolution get what they are looking for – which is, more than anything else, their dispute resolved as quickly as possible by, or with the assistance of, somebody who really knows what they are talking about.

The Lord Chancellor’s Department’s Discussion Paper on alternative dispute resolution posed a number of interesting questions. Amongst them were:

* Do you think there should be a system of approval for ADR schemes/ADR providers?

* Do you think the ADR providers should be encouraged to establish such a system?

* What should the role of Government be?

* What sort of scheme should be included?

The Summary of Responses was published by the Lord Chancellor’s Department in May 2000. For our part, we believe that the property industry could, and should, take a lead in promulgating a system of self-regulation of, and for, ADR providers. We believe that this is an opportunity for the RICS to lead the way. It is uniquely placed to do so. By working with property specialists within the legal profession, it can do so with authority and conviction – to the benefit of both professionals and consumers.

If it can carry the judiciary with it, then that really would be an achievement worth striving for.

A TIME FOR REFLECTION

Even assuming that these thoughts meet with any approval amongst our audience, such changes as those we propose will take time to implement – in the absence of any political will to drive them forward with the speed and conviction that Lord Woolf was able to bring to his reforms.

In the meantime, the legal and surveying professions should look to themselves to devise systems which better achieve what the users of dispute resolution desire above all else. We would encourage the Law Society and the RICS to make a full scale marketing campaign to re-launch PACT – not with solicitors and with surveyors (who really ought to know about it by now) but with County Court Judges. By that means, change will happen. The Woolf reforms have indicated a sad reality which is that far too many lawyers will carry on doing something until somebody else tells them that they cannot. Only then will they change, even though the change is so obviously for the better.

We would also encourage the RICS Dispute Resolution Faculty to invest resources in the promotion of its arbitration service for the resolution of dilapidations disputes. We would urge lawyers to see arbitration (and indeed mediation) as a more appropriate means of dealing with disputes.