Ruby Keeler-Williams, Author at Elysium Law

CILEX v Mazur in the Court of Appeal

Posted on 31 Mar 202631 Mar 2026 by Ruby Keeler-Williams

The Court of Appeal’s decision in CILEX and others v Mazur and others [2026] EWCA Civ 369 has resolved an issue that, by the time of the appeal, had already caused real uncertainty across the profession.

The legal question on appeal was: If a supervised but unauthorised member of staff issued proceedings, served documents or took some other step that formed part of the conduct of litigation, was that person committing a criminal offence under section 14 of the Legal Services Act 2007 unless they were personally authorised? That was, in substance, the position which Sheldon J’s decision in the first instance had endorsed. The Court of Appeal has now rejected it.

For many years, litigation has not depended on every formal step being taken personally by an authorised solicitor or authorised CILEX lawyer.

The Court of Appeal has now made clear that the Legal Services Act 2007 (LSA) does not criminalise the ordinary and supervised delegation of litigation tasks to unauthorised staff acting for and on behalf of an authorised individual. The authorised person remains the one carrying on the conduct of litigation, provided responsibility remains with them and proper arrangements for supervision, management and control are in place.

This article is therefore about what the Court of Appeal actually decided, why it decided it, what it restores to practitioners and what the episode says about regulatory clarity in an area carrying criminal implications.

What happened in the first instance

Charles Russell Speechlys LLP (CRS) had brought a claim against Mrs Mazur and Mr Stuart for unpaid legal fees of just over £50,000. The claim was issued on its behalf by Goldsmith Bowers Solicitors (GBS) using Money Claims Online. What turned the matter into something much larger was the fact that the Particulars of Claim had been signed by Peter Middleton, who did not hold a practising certificate. Mrs Mazur and Mr Stuart challenged the validity of what had been done on the basis that Mr Middleton was unlawfully conducting litigation.

From that point, a relatively ordinary fees claim became the vehicle for a much wider argument about the meaning of the conduct of litigation under the Legal Services Act 2007 and the lawfulness of delegated litigation work carried out by supervised but unauthorised staff.

The matter first came before DDJ Graham Campbell. DDJ Campbell noted that Mr Middleton had previously been suspended from practice as a solicitor, but that the SRA had later granted GBS permission to employ him as a Senior Litigation Executive. CRS argued that GBS, as an authorised entity, had the right to conduct litigation and that this was sufficient. Mrs Mazur and Mr Stuart argued that it was not, relying in part on authority which they said showed that separate authorisation was required for the individual carrying out the reserved activity.

DDJ Campbell concluded that the fact that Mr Middleton’s employer was an authorised entity did not itself give Mr Middleton the right to conduct reserved legal activities. He then held that if Mr Middleton had issued proceedings, they were a nullity and should be struck out. He did not finally determine the point at that stage, because he considered it inappropriate to do so without giving GBS an opportunity to explain its position. He therefore stayed the proceedings and directed that any application to lift the stay must be supported by evidence from a partner at GBS giving a full explanation.

CRS then applied to lift the stay, supported by the evidence of Mr Ashall, a solicitor and director of GBS. Mr Ashall accepted that Mr Middleton was not himself entitled to conduct reserved legal activities, but nevertheless said that neither Mr Middleton nor GBS had done anything wrong. His evidence was that Mr Middleton had taken various steps in the matter, including giving advice, taking instructions, drafting the claim form, submitting it to the court using the firm’s online account, serving statements of case, having internal discussions with Mr Ashall and instructing counsel. Mr Ashall said that he, as a practising solicitor and authorised person, had the conduct of the litigation and that in issuing proceedings Mr Middleton had merely been supporting him in that role. He explained that GBS employed a number of non-authorised fee earners who issued proceedings in support of authorised persons within the firm and said that this was standard practice in commercial debt recovery. He also described the supervision arrangements in place, including regular discussions on individual cases and monthly face-to-face meetings.

The SRA then became involved in a way that later attracted criticism from the Court of Appeal. On 2 December 2024, after Mr Ashall self-reported, the SRA decided not to investigate. In doing so it said that because GBS was authorised under the LSA 2007, its employees were permitted to undertake reserved activities by reason of section 21(3) and that Mr Middleton had not conducted a reserved legal activity without entitlement. It also said that there were no concerns about Mr Ashall’s supervision of Mr Middleton’s work.

The application to lift the stay then came before HHJ Simpkiss. GBS was separately represented. Mrs Mazur and Mr Stuart again argued that the claim had been issued in breach of the LSA 2007. HHJ Simpkiss accepted that there was no continuing issue of breach and relied in part on the SRA’s confirmation that Mr Middleton had authority to conduct litigation under Mr Ashall’s supervision. He therefore lifted the stay and awarded costs to CRS.

Mrs Mazur and Mr Stuart appealed to the High Court. Before Sheldon J, the arguments shifted. The SRA no longer maintained the position it had adopted in its December 2024 letter. Instead, it agreed with the Law Society that section 21(3) did not authorise an employee to conduct litigation and that an unauthorised person could not themselves conduct litigation under the supervision of an authorised solicitor. Sheldon J accepted that analysis and held that section 21(3) merely brought employees of authorised persons within the regulatory framework, it did not make them authorised persons. The judge distinguished between an unauthorised person supporting an authorised solicitor in conducting litigation (which was permissible) and an unauthorised person conducting litigation under the supervision of an authorised solicitor (which was not). He therefore allowed the appeal from HHJ Simpkiss and overturned the costs order made against Mrs Mazur and Mr Stuart.

That was the decision which went to the Court of Appeal. By that stage, what had begun as a relatively ordinary fees claim was a much broader dispute about the meaning of the conduct of litigation, the lawfulness of supervised delegation and the extent to which modern litigation practice had been called into question.

The issue before the Court of Appeal

At its foundation, the appeal concerned the meaning of the words “carry on the conduct of litigation” in the Legal Services Act 2007. The question was whether unauthorised persons working in a law firm or law centre under the supervision of an authorised individual were themselves carrying on the reserved legal activity of the conduct of litigation, such that they would be committing a criminal offence under section 14.

The point mattered because the distinction drawn had immediate operational consequences. Sheldon J had accepted a distinction between supporting an authorised person in conducting litigation (which was lawful) and conducting litigation under the supervision of an authorised person (which was not).

Once expressed in those terms, the problem for practice was obvious. The difference between “supporting” and “conducting under supervision” was neither self-evident nor easy to administer. The effect was to cast doubt on ordinary delegated work across firms, in particular those that employed Chartered Legal Executives. That is why the appeal acquired a significance far beyond the facts which gave rise to it.

Was the judge right to hold that unauthorised persons were carrying on the conduct of litigation if they did acts which constituted the conduct of litigation under the supervision of an authorised individual? The Court of Appeal’s answer is no.

Why the first instance decision caused such difficulty

As set out above, the issue arose from Particulars of Claim being signed by Mr Middleton, who did not hold a practising certificate. GBS’s evidence was that Mr Middleton was supervised by Mr Ashall, a practising solicitor who said he had the conduct of the litigation and who described regular supervision and review.

Mr Middleton was not an authorised person. The real question was whether he was, in law, the person carrying on the reserved activity, or whether he was acting for and on behalf of the authorised individual who remained responsible for the matter.

The Court of Appeal later observed that, once Mr Ashall’s evidence made clear that he had conduct of the litigation and supervised Mr Middleton, it was hard to see why the litigation had continued for as long as it had.

The problem was compounded by the SRA’s shifting position, to which I will return later. In December 2024 the SRA told GBS that its employees were permitted to undertake reserved activities because the firm was authorised and regulated under the LSA 2007 and that Mr Middleton had not conducted a reserved legal activity without entitlement. Later, before Sheldon J, the SRA disavowed that position and aligned itself with the more restrictive approach.

Sheldon J’s judgment accepted the distinction advanced by the Law Society and the SRA between supporting an authorised solicitor and conducting litigation under supervision. That conclusion decision had a “real world impact”, which was noted by the Court of Appeal. The legal sector understood it as deeply disruptive and there was a scramble by regulators to adjust guidance in light of it. Many Chartered Legal Executives lost their jobs, or had their case loads removed from them.

What the Court of Appeal decided

The Court of Appeal said, in terms, that the role of an unauthorised person is not limited merely to assisting or supporting an authorised individual.

It is not unlawful for an unauthorised person to act for and on behalf of an authorised individual so as to conduct litigation under their supervision, provided the authorised individual puts in place appropriate arrangements for the supervision of and delegation to that person.

This appears most clearly in paragraphs 25 to 27 of the judgment and again in the formal conclusions at paragraph 187 of the judgment. Lady Justice Andrews’ short concurring judgment at paragraph 198 expresses the same point in practical language.

What the Court meant by “carry on the conduct of litigation”

What the Court meant by ‘carry on the conduct of litigation’ appears in paragraphs 21, 162, 170 and 187 of the judgment. The Court of Appeal holds that the words “conduct of litigation” refer to the tasks to be undertaken. The words “carry on” refer to the direction and control of and responsibility for those tasks.

That analysis separates the performance of a task from the legal question of who is carrying on the reserved activity. If an unauthorised person issues proceedings or serves a document for and on behalf of an authorised individual who retains responsibility, that does not mean the unauthorised person is carrying on the conduct of litigation. The authorised individual remains the person who does so.

This clarified that the performance of a reserved task and the carrying on of a reserved legal activity are not always the same thing. It is possible for one person to perform the task and another, in law, to be the person who carries on the activity because that other person retains the requisite direction, control and responsibility.

That point also explains why the appeal could not be resolved simply by listing tasks and asking who physically performed them. The deeper question was who bore the relevant responsibility.

Why the Court looked at the older authorities

One of the strengths of the judgment is that it does not treat the Legal Services Act 2007 as though it arrived in a vacuum. In reaching their decision, the Court of Appeal goes back to the Victorian authorities, then through the 1974 and 1990 Acts and then to the pre-2007 case law.

There had long been a widespread and regulated practice of delegation by solicitors to unqualified staff and that practice had been recognised by the courts. The Court of Appeal says plainly that Parliament must be taken to have understood this when enacting the LSA 2007.

Waterlow is central to that analysis. The House of Lords there recognised that statutory provisions requiring work to be done by qualified solicitors did not necessarily require the solicitor to do every act personally. The act could be done in the solicitor’s name by a competent agent without the agent incurring the penalty.

The same is true of Myers v Elman. Delegation did not absolve the solicitor of responsibility. The machinery of justice worked through clerks and other staff, but the duty remained the solicitor’s. That aligns with the Court of Appeal’s conclusion that delegation is lawful because responsibility remains with the authorised individual.

The court also placed some weight on an article from June 1946 entitled “The Duties and Responsibilities of a Managing Clerk”, which appeared in The Solicitors’ Managing Clerks’ Gazette, which described itself as The Official Organ of the Solicitors’ Managing Clerks’ Association on managing clerks. That article recognised both retained control by principals and the reality that clerks sometimes had to act without prior instructions where circumstances required it. The Court used it to show that the more rigid model of universal prior approval had no convincing basis in the profession’s actual practice.

When considering 1990 Legal Services Act authorities, Hollins is relied on to demonstrate that solicitors had always been able to delegate part of their functions in appropriate cases to appropriate people, subject to proper supervision and retained professional responsibility. Agassi is authority for the narrow construction of the penal prohibition. Since the offence provisions carry criminal consequences, the definition of the conduct of litigation is not to be inflated beyond what the statutory language properly supports. That narrow approach carries forward into section 14 of the LSA 2007.

The LSA 2007 did not silently criminalise ordinary supervised practice

The Court of Appeal’s treatment of Parliament’s intention is one of the most important parts of the judgment. It says that the LSA 2007 was not intended to and did not make a significant change from the 1990 Act in relation to the offence provisions. The Act was liberalising in relation to regulatory structures and was not intended to create a dramatic new category of criminal exposure for ordinary supervised work in law firms and law centres.

That conclusion matters because the more restrictive reading below would have implied a major extension of criminal liability without clear statutory language and against the background of long-established professional practice. The Court of Appeal held that Parliament must be taken to have understood the widespread and regulated practice of delegation by solicitors to unauthorised staff. There was nothing in the text of the LSA 2007 or the preparatory material to indicate an intention to abolish or curtail that practice.

The Court of Appeal also connects this to the regulatory objectives in section 1 of LSA 2007. Undermining delegation would run counter to the objectives including access to justice, the interests of consumers, competition and the encouragement of a diverse and effective profession.

Delegation, supervision and responsibility

The Court of Appeal does not say that anything can be delegated in any way, so long as an authorised person exists somewhere in the background. It says that an unauthorised person may perform any task within the scope of the conduct of litigation for and on behalf of an authorised individual, provided the authorised individual retains responsibility and has put in place proper arrangements for direction, management, supervision and control.

Paragraph 26 of the Judgment is especially important because it explains what retained responsibility means. It is not only formal responsibility for the delegated task, it also includes the professional responsibilities identified in section 1(3) of the LSA 2007: acting with independence and integrity, maintaining proper standards of work, acting in the client’s best interests and complying with the duty to the court.

No requirement of universal prior approval

The Law Society’s original submission drew the boundary in a rigid place. An unauthorised person could prepare a claim form, but could not issue proceedings without prior approval by the authorised individual. The SRA sought to qualify that by accepting that in highly controlled, routine situations, some proceedings might be commenced without the authorised individual seeing every document in advance. The Law Society then adopted that qualification.

The judgment’s answer is that the LSA 2007 does not require universal prior approval. Some situations will require a high degree of control and some routine situations may not. In routine work, regular meetings and sampling may be enough. The level of supervision is fact-sensitive and is properly left to the regulators. What the court rejects is the proposition that the statute itself imposes a rigid prior-approval model.

That part of the judgment is likely to be of immediate operational importance. Firms do not need to restructure on the assumption that every issue, service step or filing must be individually approved in advance by an authorised person on pain of criminal liability, but they do need to be able to demonstrate that the authorised individual genuinely retains responsibility and that the systems of supervision are real rather than nominal.

Ndole and Baxter

The treatment of Ndole and Baxter is likely to be one of the most cited aspects of the judgment because those cases had come to bear more weight in professional discussion than they could properly carry.

The Court says that Ndole and Baxter were cases about unauthorised persons acting for litigants in person. In that context, there is no authorised person with power to delegate and retain responsibility. A litigant in person has a personal right to conduct litigation and that right cannot be delegated to an unauthorised third party.

That is why the “fact and degree” analysis in those cases is different in kind from the situation in Mazur. In Ndole, the question was whether the unauthorised person was merely carrying out a mechanical step or had assumed responsibility for service. In Baxter, the same inquiry arose in the litigant-in-person context. The Court of Appeal says expressly that Baxter has been misunderstood and that it did not expand the scope of the conduct of litigation, it merely applied the Ndole analysis in its own context.

This is an important correction. It means that Ndole and Baxter are not the foundation for a broad prohibition on supervised delegated work in ordinary authorised practice.

Sections 14, 15, 16 and 21(3) of LSA 2007

Section 21(3) LSA 2007 defines “regulated persons”. It includes employees of authorised persons within the scope of a regulator’s rule-making power. The Court of Appeal makes clear that this does not make those employees authorised persons. That is why the SRA’s December 2024 letter was wrong when it suggested otherwise.

Sections 15 and 16 LSA 2007 were relied on in argument to suggest that both employer and employee must be entitled where the employee carries on a reserved legal activity. The Court’s answer is that those provisions do not assist in the present scenario, because on the Court’s construction the unauthorised employee is not carrying on the conduct of litigation when acting for and on behalf of the authorised individual, so sections 15 and 16 are not engaged.

What actually counts as the conduct of litigation

The Court of Appeal does not attempt to provide an exhaustive definition, it says openly that it cannot provide a comprehensive list of all tasks that fall within or outside the conduct of litigation. That is probably right, as any attempt at an exhaustive classification would likely have generated further disputes.

The Court of Appeal does, however, offer useful guidance. Issuing proceedings is plainly within the conduct of litigation. Ancillary functions are limited to formal steps such as service of statements of case. The second limb, dealing with the commencement, prosecution and defence of proceedings, is less clear and is not fully resolved on the appeal.

Paragraph 193 of the judgment is likely to be relied upon repeatedly. There, the Court identifies categories of work which are unlikely to fall within the statutory definition, including pre-litigation work, legal advice in connection with proceedings, correspondence with the opposing party, gathering evidence, instructing and liaising with experts and counsel, signing a statement of truth and signing other documents the CPR permits a legal representative to sign. That part of the judgment will be practically valuable, even though the Court presents it cautiously.

Law centres, supervised fee earners and access to justice

The Law Centres Network intervened because the first instance decision threatened models of practice that depend on supervised but unauthorised staff carrying their own caseloads under the oversight of authorised lawyers. The Court’s treatment of the third issue is brief because it says the answer follows from the first. In practical terms, however, the point is important. The court’s reasoning preserves the law centres model because the same principles of delegation and retained responsibility apply there as elsewhere.

This matters for access to justice more generally. The Court repeatedly treats the regulatory objectives in section 1 of the LSA 2007 as important context, in that it refers to access to justice, consumer interests, competition and a diverse and effective profession. The Court expressly says that undermining the practice of delegation would run counter to those objectives.

For practitioners, the economics and organisation of litigation practice, especially in routine, volume and publicly funded work, depend on lawful supervised delegation. The Court of Appeal recognised that reality without treating it as a reason to bend the statute. It is rather treated it as part of the context in which the statute must be understood.

The SRA’s position on the appeal

The judgment invites some measured consideration of the SRA’s role in this litigation. The Court of Appeal’s own language is fair, but it is plainly critical in places.

The difficulty was not merely that the SRA argued a case and lost, as this is routine for regulators. The concern is that, in a case involving the scope of a criminal prohibition under section 14 of the Legal Services Act 2007, the SRA’s position shifted in a way that left the lower courts and the profession dealing with uncertainty that ought to have been avoided.

The sequence of events is important. In its letter of 2 December 2024, the SRA told GBS that its employees were permitted to undertake reserved activities because the firm was authorised and regulated under the LSA 2007 and that Mr Middleton had not conducted a reserved legal activity without entitlement. The Court of Appeal later said that this was wrong in law and also recorded that the SRA later reversed its own position on section 21(3).

The SRA’s later position before the appellate courts was different, but it did not resolve the problem. The regulator opposed the broader CILEX appeal and supported the argument that an unauthorised person could not themselves carry on the conduct of litigation under supervision in the sense contended for by CILEX. THE SRA submissions were broadly that the LSA 2007 prohibited an unauthorised person from being the person who exercises professional judgment in relation to litigation and assumes substantive responsibility for it. The SRA did introduce an important qualification, in that it accepted that, in tightly controlled systems for routine work such as simple debt claims, some proceedings might be commenced by unauthorised staff without an offence being committed, even if the authorised individual had not seen every document in advance. However, that qualification exposed its weakness, in that once it was accepted that an unauthorised person might perform the formal act without specific prior approval and yet no offence would be committed, the real legal question was plainly where responsibility lay. That was the question the Court of Appeal answered in CILEX’s favour.

The Court of Appeal’s own observations bear repeating. It said that the lower courts were faced with “shifting sands and arguments that were wrong and later abandoned”. It also said that the SRA’s letter of 2 December 2024, relied on by HHJ Simpkiss, was wrong in law. Those observations justify concern, because they reveal an unsatisfactory degree of instability in the regulator’s approach to an issue of obvious practical and legal importance.

That concern becomes sharper when one remembers the subject matter. The issue was not a narrow procedural disagreement, it was whether ordinary supervised practices across firms, CILEX practices and law centres might expose unauthorised staff and potentially others, to criminal liability and contempt. In that context, the profession was entitled to expect clarity and consistency from the principal regulator. The Court of Appeal’s judgment shows that those expectations were not met.

A fair reading of the position is therefore this. The SRA was right to emphasise that responsibility for the conduct of litigation must remain with an authorised individual and the Court of Appeal agreed with that in substance. But the regulator was wrong to support the restrictive legal framework, wrong earlier to rely on section 21(3) as if it answered the issue and left the courts confronting a question that should have been presented more clearly and coherently from the outset. That is a matter which practitioners are entitled to notice and one which ought to inform future regulatory guidance in this area.

There is a further practical point. The Court records that the profession and regulators alike had to adjust guidance and working assumptions in response to the first instance judgment. Where the issue is the scope of a criminal offence in routine legal practice, that kind of instability carries a cost of its own, it disrupts working models, diverts compliance effort and creates unnecessary anxiety for firms and staff who may suddenly be told that long-settled practice is unlawful.

The Court of Appeal has now corrected the law, but the wider lesson is that regulators should be especially careful before advancing interpretations that unsettle established practice in this way, particularly where the statutory language does not clearly compel the result for which they contend.

What practitioners should now take from the judgment

The practical question for firms is not whether an unauthorised person ever performs a task within the conduct of litigation. The real question is whether the authorised individual is genuinely the person carrying on the litigation through retained responsibility, oversight and control.

That means supervision structures matter. In routine work, systems and sampling may suffice, but in more sensitive work, closer review and prior approval may be necessary. The judgment leaves that operational detail to the regulators, but the direction is clear enough.

Lady Justice Andrews’ short concurring judgment at paragraph 198 is very useful here:

“I agree. In essence, the question in any given set of circumstances will be whether the unauthorised person, in carrying out whatever tasks which fall within the scope of “conduct of litigation” have been delegated to him or her, is in truth acting on behalf of the authorised individual. If they are, it is the authorised individual who is conducting the litigation. But if the reality is that the litigation is not being conducted by the unauthorised person for and on behalf of the authorised individual, they will be committing an offence. That is a practical test which firms and compliance teams can actually use.”

The judgment should therefore prompt a careful look at supervision. Firms that already operate disciplined supervision models will feel reassured by the decision. Firms with looser arrangements would be unwise to treat the judgment as a comfort blanket.

Why this judgment matters

The Court of Appeal has restored something that should not have ever needed restoring, namely a coherent understanding of supervised delegation in litigation practice.

It also restores clarity to the role of authorised individuals. The person carrying on the reserved activity is the person who retains direction, control and responsibility, both formally and professionally. The unauthorised person who acts for and on behalf of that individual under proper arrangements does not thereby commit an offence.

That is why the judgment matters. It clarifies the law, removes a serious practical uncertainty and reasserts a distinction that had been lost after the previous decision.

It also leaves behind a fair but uncomfortable question about how such uncertainty was allowed to take hold for so long in an area where the consequences of getting the law wrong were so obvious.

For practitioners, the decision is worth reading in full. For regulators, it should also be enough to prompt some care when questions of reserved activity arise against the background of long-settled professional practice.

For those who have spent the last year trying to reconcile the first instance reasoning with the realities of litigation work, the Court of Appeal has now supplied the answer. Where responsibility, direction and control remain with the authorised individual, the authorised individual is the one carrying on the conduct of litigation.

Introduction to the Civil Procedure Rules in England and Wales

Posted on 10 Mar 202617 Mar 2026 by Ruby Keeler-Williams

People do not usually approach lawyers because they want litigation. They come because something has already happened and they cannot see a safe route through it. A claim may have been issued against them, or they may be locked in a dispute they cannot progress despite repeated attempts to resolve it. The problem starts to drain time and attention. At that point, most clients are not interested in legal theory. They want to know what happens next, what the process will require of them and how the risk can be contained.

What makes English litigation difficult for non-lawyers is not just the law, but the procedure. If you do the right thing at the wrong time, you can still lose ground. If you ignore procedure because it feels secondary, you can create costs consequences that overwhelm the claim itself.

This article explains what the Civil Procedure Rules are, what they are trying to achieve and why CPR Part 1 matters to anyone involved in a civil dispute in England and Wales. It is not a substitute for legal advice on the specific facts.

This is the first article in a series of articles on the CPR. The next articles in the series will deal with specific parts of the CPR in more detail, including pleadings, disclosure, witness evidence, ADR, settlement and costs.

The CPR is the rulebook for how civil disputes are run

The CPR is a procedural code. It governs how civil claims are conducted, from the way parties present their cases through to how the court manages evidence and hearings. It is the framework that turns a disagreement into a case the court can decide.

CPR Part 1 makes that explicit. It identifies the CPR as a procedural code and places at its centre the overriding objective.

The CPR is more than just an academic layer sitting above your dispute. It tells you what must be done, when it must be done and what consequences follow if it is not done properly.

One reason this matters so much is that the CPR does not simply regulate hearings. It regulates conduct from the beginning of a dispute. It influences how parties are expected to behave before proceedings are issued, how the court approaches delay and how costs are treated at the end of the case. In that sense, the CPR is more than a set of courtroom rules, it governs the entire life of a civil dispute from the point at which litigation is contemplated.

CPR Part 1 does not contain the detailed rules on service, pleadings, disclosure, evidence or costs (those appear in later parts of the CPR), but it does explain the principles the court will apply when using those later rules.

CPR 1.2 makes this explicit by requiring the court to seek to give effect to the overriding objective whenever it exercises a power under the Rules or interprets them.

For clients, this can be a useful way of understanding why procedure matters so early.

The court’s priority is management

The CPR is designed to move disputes through courts that have finite resources. That is why the rules begin with the court’s management philosophy rather than with technical procedure.

The overriding objective at CPR 1.1 requires the court to deal with cases justly and at proportionate cost. This is not a simple slogan, it is a key factor for judges when making decisions about timetables, what evidence is permitted, what steps are proportionate and how the parties’ conduct should be treated.

The priority is therefore not simply to decide who is right, but to run cases in a way that is fair to both parties and workable within the court system.

The overriding objective

The overriding objective is set out at CPR 1.1 and it underpins how civil litigation is run in England and Wales. CPR 1.1 states:

(1) These Rules are a procedural code with the overriding objective of enabling the court to deal with cases justly and at proportionate cost.

CPR 1.1(2) explains what “dealing with cases justly and at proportionate cost” means in practical terms. It includes, so far as practicable:

ensuring the parties are on an equal footing and can participate fully and that parties and witnesses can give their best evidence;
saving expense;
dealing with the case in ways which are proportionate to the money involved, the importance of the case, the complexity of the issues and the financial position of each party;
ensuring the case is dealt with expeditiously and fairly;
allotting an appropriate share of the court’s resources while taking account of other cases;
promoting or using alternative dispute resolution; and
enforcing compliance with rules, practice directions and orders.

It is worth considering what that means in reality. The overriding objective is expressly telling you that litigation must not become more expensive, or more oppressive than the dispute requires. That principle affects everything that follows, including which procedural steps are allowed and how strictly time limits are treated.

A dispute may be important to the parties and still not justify every procedural step they wish to take. A case may involve substantial sums and still need to be run proportionately. A party may feel strongly that it has been wronged and still be expected to co-operate on practical matters such as timetabling, disclosure and ADR. This is one reason the CPR can feel counter-intuitive to clients. The rules are not designed to validate the intensity of a party’s position. They are designed to ensure that the dispute is resolved in a way that is fair, efficient and workable within a finite court system.

It is also worth noting that CPR Part 1 has evolved to reflect modern concerns about participation and fairness. CPR 1.1(2)(a) now expressly refers to parties being able to participate fully and to parties and witnesses being able to give their best evidence. CPR 1.6 and Practice Direction 1A then make separate provision for vulnerable parties and witnesses. This is significant because it shows that the overriding objective is not limited to cost and speed, it is also concerned with whether the process enables the court to reach a reliable and fair outcome.

For clients, this is often the most useful single concept to understand early. Litigation is not simply about who is right. It is also about whether the case is being conducted in a way the court considers fair, efficient and proportionate.

CPR 1.2 makes clear that the court must seek to give effect to the overriding objective whenever it exercises any power given by the Rules or interprets them.

The parties’ duties

CPR 1.3 requires the parties to help the court further the overriding objective.

This matters because it places responsibility on the parties as well as the court. It is the reason the court expects:

reasonable engagement at the pre-action stage;
co-operation over procedural steps rather than manufactured obstruction;
realistic consideration of ADR; and
compliance with directions without repeated applications for indulgence.

For a lay reader, this can feel frustrating. It can seem as though the court is asking you to behave reasonably even when you believe the other side has behaved unreasonably.

The reason is straightforward – civil justice can only function if both sides conduct litigation in a way that supports fair and proportionate resolution, rather than treating procedure as a battlefield in its own right.

The court’s duty of active case management

CPR 1.4 requires the court to actively manage cases. This includes identifying the issues early, deciding which issues need full investigation and trial, fixing timetables, controlling the evidence, encouraging the parties to co-operate and encouraging the use of ADR where appropriate.

Modern courts do not simply passively wait for parties to drift towards trial. They set directions and expect compliance.

Clients sometimes interpret this as pressure. A judge wants a timetable now, not later. The court narrows issues rather than allowing everything to be fought about. This is the CPR operating as intended.

CPR 1.4(2) expands upon this by stating that active case management includes identifying the issues at an early stage, deciding promptly which issues need full investigation and trial, encouraging the parties to co-operate, encouraging or facilitating ADR, fixing timetables, considering whether the likely benefit of a step justifies its cost and using technology where appropriate. That list is useful because it shows that case management is a series of practical decisions designed to control scope, cost and delay.

Seen in that light, judicial intervention is part of the court’s attempt to keep the dispute within proper bounds. A party who wants every issue pursued to the end, every document reviewed, every witness heard and every point argued may believe that approach reflects determination. The CPR asks asks whether those steps are justified by the value, importance and complexity of the case, the parties’ financial positions and the court’s obligation to manage other cases as well.

Why compliance matters, even when you think the merits are strong

Part 1 explains why procedural compliance matters even if you believe your case is obviously right. The system is designed to ensure fairness and proportionality, which means the court is required to take account of delay, expense and non-compliance.

This is where sanctions come in. Sanctions are the consequences the court can impose when rules or orders are not complied with. They exist because without enforcement, the overriding objective becomes meaningless. Part 1 expressly includes “enforcing compliance with rules, practice directions and orders” as part of dealing with cases justly.

Clients must understand that the court cannot manage a case fairly if deadlines and orders are treated as optional. Missing a time limit, failing to comply with an order or approaching the court process casually can therefore have consequences that go beyond inconvenience.

Sanctions will be discussed in more detail in a later article in this series, but even at this introductory stage, it is important to understand what sanctions are. They are not simply punishments for bad behaviour. They are part of the court’s mechanism for preserving fairness and control. If one party ignores deadlines, fails to comply with directions, or takes procedural obligations lightly, the prejudice is not always visible immediately. It may appear later in increased costs, compressed timetables, evidential disadvantage, or hearings that could have been avoided. Sanctions are the means by which the court responds to that disruption.

This is also why procedural default is rarely viewed in isolation. The court will often be asking a broader question: what effect has this conduct had on the just and proportionate management of the case? That question sits naturally with CPR Part 1, because Part 1 is where the Rules explain what the court is trying to achieve in the first place.

Procedure also affects how the court exercises discretion

One of the things clients often discover as a case progresses is that judges make a large number of discretionary decisions. Those decisions are guided by the overriding objective.

A party that acts promptly, engages reasonably and conducts the case with discipline is generally easier for the court to manage.

A party that repeatedly misses deadlines, serves defective material or takes a casual approach to its obligations makes the court’s job harder.

That difference can matter when the court is deciding whether to grant extra time, how strictly to enforce directions and how to approach costs.

This is not simply about pleasing the court. It is about understanding the environment you are in and that litigation is a managed process. Your conduct affects how the process is managed.

Why clients should understand CPR Part 1

Clients often want to jump straight to tactics. Should we issue? Should we defend? Should we apply? Should we settle?

Part 1 explains why those questions cannot be answered properly without understanding the court’s priorities. The CPR is built around proportionality, active management, ADR and compliance.

If you approach litigation as though it is primarily about argument, you will often miss the factors that actually shape the outcome of cases.

CPR Part 1 is the foundation on which the rest of the CPR is built. It explains why the court expects co-operation on some matters and firmness on others. It explains why proportionality affects evidence, costs and procedure. It also explains why ADR is treated as part of responsible litigation conduct and why non-compliance can have consequences beyond the immediate breach.

For clients, understanding Part 1 often changes the way litigation feels. What initially appears to be a sequence of technical demands begins to make more sense when seen through the court’s priorities. The rules are not trying to make disputes harder. They are trying to ensure that disputes are resolved in a way that is fair to the parties, proportionate to the issues and manageable within a court system that must deal with many other cases at the same time.

Contact Us

If you are involved in a dispute and need advice on how the court is likely to approach procedure, proportionality and case management, Elysium Law can advise on the practical and strategic steps that follow.

Unfair Prejudice Petitions under Section 994 of the Companies Act

Posted on 20 Jan 202620 Jan 2026 by Ruby Keeler-Williams

Unfair prejudice petitions under section 994 of the Companies Act 2006 remain a significant tool in shareholder disputes. They are also among the most commonly misunderstood.

While the jurisdiction is deliberately flexible, the courts have consistently made clear that it is not a remedy for every commercial disagreement or breakdown in working relationships.

Many petitions arise in closely held companies where trust has eroded and communication has failed. In those circumstances, it is often assumed that the court will intervene to impose a fair outcome, but that is not the case. The focus of the court is not on whether a situation feels unfair, but on whether the conduct complained of departs from the basis on which the shareholders agreed to associate.

This article explains how the courts approach unfair prejudice petitions in practice, with particular reference to 50:50 companies, quasi-partnerships, deadlock and breakdown of trust. It also considers the continuing influence of the House of Lords’ decision in O’Neill v Phillips [1999] 1 WLR 1092 and the strategic importance of buy-out offers in relation to the outcome of the dispute and potential costs exposure.

The statutory framework and the meaning of unfairness

Section 994 allows a shareholder to petition where the company’s affairs are being conducted in a manner that is unfairly prejudicial to the interests of members.

Two elements must therefore be established:

There must be prejudice to the petitioner’s interests as a shareholder; and
That prejudice must be unfair.

The concept of unfairness is not assessed by reference to abstract notions of morality or reasonableness. The court is concerned with whether the conduct complained of breaches the legal or equitable basis on which the shareholders agreed to operate the company. That may arise from the articles, a shareholders’ agreement or from understandings that formed part of the foundation of the relationship.

The jurisdiction is therefore fact sensitive, but it is not open ended. The courts have repeatedly emphasised that section 994 is not a mechanism for correcting every commercial disappointment or personality clash.

The continuing importance of O’Neill v Phillips

The modern approach to unfair prejudice is anchored in the decision of the House of Lords in O’Neill v Phillips [1999] 1 WLR 1092. The judgment remains central because it imposed discipline on a jurisdiction that had, at times, been treated as an invitation to litigate commercial grievances under the banner of equity.

Lord Hoffmann made clear that unfairness will usually require either:

a breach of the company’s constitution or shareholders’ agreement; or
the frustration of a legitimate expectation arising from an understanding or promise on which the petitioner relied.

A mere breakdown in relations, even if severe, is not enough.

Lord Hoffmann also emphasised that the court is not there to resolve all commercial fall-outs or to redistribute risk retrospectively when a business relationship ceases to work.

Quasi-partnerships and legitimate expectations

Despite the constraints imposed by O’Neill, the courts continue to recognise that some companies operate, in substance, as quasi-partnerships, despite being incorporated.

In small, owner-managed businesses, it is not uncommon for personal relationships and informal understandings to sit alongside formal documentation.

Where a company has the hallmarks of a quasi-partnership, the court may look beyond the strict legal rights set out in the articles. Exclusion from management, removal from decision-making or conduct that undermines an agreed basis of participation may amount to unfair prejudice, even if technically permitted by the company’s articles (Re Guidezone Ltd [2000] 2 BCLC 321).

That said, the existence of a quasi-partnership is not assumed, rather it must be established by reference to evidence, including the history of the relationship and the role each shareholder was intended to play. Not every small company will meet that threshold.

Deadlock and breakdown of trust

Deadlock is a common feature of unfair prejudice petitions, particularly in companies with equal shareholdings. However, deadlock alone does not justify relief.

The courts distinguish between:

Neutral deadlock, where parties simply cannot agree; and
Unfair deadlock caused or exacerbated by one party’s oppressive or obstructive conduct.

Where parties are simply unable to agree, the court will not intervene merely because the company is no longer functioning smoothly. By contrast, where one party’s conduct has undermined mutual confidence or deliberately obstructed the company’s affairs, the analysis may be different.

In Re A Company (No 004475 of 1982), the court held that where a relationship of mutual confidence has broken down due to one party’s conduct, relief may be justified even in the absence of technical wrongdoing.

Even in those cases, the petitioner must demonstrate that the conduct crosses the threshold of unfairness. Incompatible personalities or poor communication will rarely suffice alone.

Conduct capable of amounting to unfair prejudice

In practice, successful petitions tend to involve clear departures from the agreed basis of the relationship.

Common examples include:

Exclusion from management contrary to an understanding;
Abuse of majority voting power;
Attempts to force a shareholder to sell at an undervalue;
Diversion of business opportunities;
Withholding financial information; and
Manipulation of remuneration or dividends.

Conduct or behaviour that is merely abrasive, uncooperative or discourteous is unlikely to found a claim unless it forms part of a wider pattern of inequitable conduct. The court is concerned with substance rather than tone.

Remedies and valuation

Where unfair prejudice is established, the court has wide discretion as to remedy. The most common outcome is an order requiring one shareholder to purchase the other’s shares.

In quasi-partnership cases, shares are usually valued on a pro rata basis, without a minority discount and on a going concern basis. The valuation date is typically the date of the order, although the court retains discretion where fairness requires a different approach.

Valuation issues are often as contentious as liability and early consideration of valuation principles can materially influence litigation strategy.

The strategic importance of buy-out offers

A key practical lesson from O’Neill v Phillips is the significance of a properly framed buy-out offer.

An offer is likely to undermine a petition if it:

Is made in good faith;
Reflects a fair value;
Applies orthodox valuation principles; and
Does not seek to exploit the petitioner’s minority position.

Where such an offer is refused unreasonably, the court may view the continuation of proceedings as oppressive or abusive. That can have serious costs consequences, even if some elements of unfairness are established.

From a strategic perspective, early consideration of exit options and valuation can often provide a more controlled and proportionate route to resolution than prolonged litigation.

When to seek advice

Early advice is particularly important in potential unfair prejudice claims. Decisions taken at an early stage can affect costs exposure and the remedies ultimately available. Elysium Law advises both Petitioners and Respondents at this stage, helping to assess risk and determine the most appropriate course before positions become entrenched.

Shareholders should consider seeking legal advice where there is evidence of:

exclusion from management;
misuse of control; or
conduct that appears inconsistent with the basis on which the company was formed.

We can advise on whether those concerns are capable of meeting the statutory threshold under section 994 and how the court is likely to approach them in practice.

Equally, those facing a petition should seek advice promptly to assess the strength of the claim and whether strategic steps, including a properly framed buy-out offer, may limit risk and costs.

Unfair prejudice litigation can be complex, fact-sensitive and potentially expensive. Our role is to provide early, specialist advice that allows parties to assess whether proceedings are justified, how the case is likely to be viewed by the court and whether a negotiated exit or alternative dispute resolution may offer a more proportionate outcome.

Conclusion

Unfair prejudice remains a powerful remedy, but petitioners should be aware that the courts have consistently resisted attempts to use section 994 as a substitute for commercial negotiation or as a forum for airing general grievances.

Successful petitions tend to involve a clear quasi-partnership context, identifiable understandings about participation or reward and conduct that goes beyond friction into the territory of inequitable abuse.

If you are involved in a shareholder dispute and are concerned about whether conduct within the company may amount to unfair prejudice, or if you are facing a petition and wish to understand your position, we can advise.

Elysium Law provides specialist advice on unfair prejudice petitions, including early assessment of merits, strategic options, costs exposure and exit routes.

If you would like to discuss your circumstances in confidence, please contact us to arrange an initial consultation.

Lost Deposits for Kingsway Square Buyers?

Posted on 08 Jan 202608 Jan 2026 by Ruby Keeler-Williams

In my experience from speaking to clients, it is often only when a development delays or fails that buyers understand how their deposit was actually treated under the contract.

Buyers connected with the Kingsway Square development in Liverpool are in this situation. Contracts were exchanged and deposits were paid, but the development did not complete as anticipated. Sourced Development Group’s vehicle, Kingsway Square Limited, is now in administration

When this occurs, it is understandable to focus on the failure of the development itself. In many cases, however, the more immediate legal question is whether the buyer was properly advised by their conveyancer or solicitor before exchange took place about the risks within the contract, including how deposits and pre payments could be handled if completion did not take place.

We have addressed the circumstances in which buyers may have a claim in professional negligence.

In a previous article, we addressed the growing number of failed off-plan property schemes in England and Wales and examined in general terms the duties owed by solicitors in off-plan conveyancing transactions, including the obligation to identify and clearly explain material risks, the exclusion of standard contractual protections, the use of special purpose vehicle developers and the associated risks and the limitations of some security structures relied upon to reassure buyers.

This article is more specific and concentrates on the Kingsway Square development in Liverpool. It explains how the particular contractual structure used in that scheme affected the treatment of deposits, what buyers should look for in their own paperwork and how a lack of clear advice prior to exchange may give rise to a claim in professional negligence.

What buyers often assume about off plan deposits

Many buyers assume that money paid on exchange remains protected until completion.

That assumption is common because in most residential transactions, the deposit is held on a stakeholder basis.

In broad terms, holding the deposit on a stakeholder basis means the solicitor acts for both the seller and the buyer and the funds cannot be released to either party unless there is mutual agreement, or upon completion.

However, some off plan transactions depart from that model, such as Kingsway Square. Here, the deposit was instead held as agent.

Where a deposit is held as agent, the seller’s solicitor who holds the funds may pass the funds to the seller at any time after exchange (potentially immediately).

If the development then fails, which has happened here, a buyer may find that rescission does not automatically lead to a refund, because the money has already been passed to the seller and may have already been spent.

This is often the key difference between a situation where a deposit is recoverable and one where it is effectively lost.

Kingsway Square contract clauses and deposit risk

Buyers who are reviewing whether they were advised properly in relation to a development such as Kingsway Square should pay close attention to how the contract treats deposits and any additional pre payments.

Kingsway Square contracts that we have reviewed include provisions that depart from standard deposit protections. Some buyers who have approached us have raised concerns that these departures were not clearly explained to them by their solicitors prior to exchange.

Where a contract incorporates the Law Society Standard Conditions of Sale, but then disapplies specific conditions relating to how deposits are held, the buyer needs to be told clearly what that means in practice. Some buyers have indicated that this was not explained prior to exchange.

Further, where a deposit is held as agent and effectively treated as the seller’s money from the outset, even though completion may be a long way off, this needs to be clearly highlighted to the buyer before exchange. Unfortunately, it appears this may not have been the case for some buyers in this development.

A buyer may have contractual rights, including rescission, but if the money has been released and spent, they need to be informed that recovery may depend on the solvency of the seller or developer and the structure of any security arrangements. In that scenario, buyers can find themselves in the position of unsecured creditors, which is typically not what they expected when they paid a 20% – 30% deposit.

If money has been released as agent, it is even more important that the position regarding insurance is clearly explained. In the case of Kingsway Square, we have seen cases where buyers were informed that the seller had obtained insurance to protect the deposit. In fact, the contract expressly stated that the only obligation on the seller was to provide information so that the buyer’s conveyancer could themselves apply for a warranty. If the buyer’s conveyancer did not do so, then there was no protection for the deposit.

This is why the wording of the advice you were given matters. If you were not clearly warned that the contract treated the deposit as the seller’s money and had no protection, that is relevant when assessing whether the advice you received met the required standard.

How the deposit release mechanisms operated in practice

Some off plan contracts, such as those in the case of Kingsway Square, do not simply label deposits as being held as agent. They also set out a mechanism for releasing deposits and pre payments during the build. Buyers should look for language that requires the seller’s solicitors to transfer funds out of the client account upon request and for a wide range of purposes. Those purposes may include construction costs, but they may also include acquisition costs, professional fees, marketing and sales expenditure and the repayment of development borrowing.

If the funds can be drawn down for different purposes, the buyer may expect that the purpose of the funds be verified. In the Kingsway Square development, the contracts we have reviewed authorised the seller or developer to request payment from the solicitors upon receipt of a Schedule of Costs, invoice, account, fee note, or voucher. They did not require any form of certification by an independent party, nor impose conditions on how frequently or in what amounts such requests may be made. This allowed the developer to draw down the funds as soon as it produced its own internal paperwork, with no obligation to demonstrate genuine expenditure.

Furthermore, the contract removed any potential oversight by the seller’s solicitors. It expressly provided that the sellers’s solicitors were not required to review, verify, or enquire into the accuracy or authenticity of any Schedule of Costs or supporting documents before releasing the funds. This limited the role of the seller’s solicitors and meant that the release of funds occurred automatically on request.

When release categories are wide and verification obligations are limited, the buyer’s deposit and pre payments can operate in a manner that resembles development finance. Here, the buyers were exposed to the commercial risk that funds would be used up long before completion.

The contract also provided that all deposits and pre-payments received by the seller’s solicitors were irrevocably released to the seller and that the seller’s solicitors must send those funds to the seller or, at the seller’s direction, to the developer upon request. The buyer expressly acknowledged and agreed to this arrangement by entering into the contract. This meant that, once the contract had been entered into, the authority to release the funds could not be withdrawn. As a result, if buyers later became aware of the risks, they were unable to revoke that authority.

None of these items automatically means the contract is unenforceable. The issue is simpler and more practical. The question is whether the buyer was properly advised, in plain terms, that funds could be released early and what that meant if the development did not complete.

Buyers in this situation should ask themselves:

“Was I adequately informed as to how the deposit was treated under the contract and what would happen if the development failed?”

Security trustee arrangements and development finance priority

Kingsway Square documentation also refers to a security trustee structure. A trustee arrangement can, in some circumstances, provide protection and a route to recovery, but the details matters.

Buyers should check whether they have any direct enforcement rights or whether enforcement sits solely with a trustee, as was the case in this development.

Buyers should also be informed if the Trustee is associated with any other party to the contract.

It is also important to understand priority. If there is senior secured development lending, as in this development, lenders usually rank ahead of buyers. If buyer funds have been released and spent, the practical value of trustee security can be limited, particularly where recoveries are directed first to the main funder.

A measured way to think about this is that a trustee does not guarantee that deposits are ring fenced and, if the contract allows early release of funds and if senior secured lending ranks ahead, there may be little preserved value to protect buyers if the project fails.

This is a reminder that buyers should be advised as to the hierarchy and how any recovery would be obtained before they commit substantial funds.

When a claim against your solicitor or conveyancer may arise

Our review of whether you have a claim in professional negligence against your conveyancer will usually focus on the advice given before exchange.

A solicitor or conveyancer is not required to guarantee that an off plan development will complete. They are required to identify material risks and explain them clearly, so that the buyer is fully informed in relation to the agreement they are entering into before they commit to it.

In the Kingsway Square development, material risks included (but were not limited to) the following:

The deposit is held “as agent” rather than stakeholder;
The contract states the deposit or pre payments are “irrevocably released” and transferable out on request;
There is a drawdown mechanism that allows early release of funds during the build;
The permitted uses of funds are broad, including non construction categories;
The purpose for the funds or documentation demonstrating the need for the funds did not need to be verified;
The buyer has limited or indirect enforcement rights under any security structure.

If those features were present, a buyer may reasonably expect their conveyancer to draw attention to them to the forefront of the advice. They should explain the practical consequences and record this advice in writing.

Some buyers will still proceed, and that is their choice. In those circumstances, the conveyancer’s advice will not have caused the loss.

However many buyers, if properly advised, would have declined to proceed to exchange.

That is where causation often lies. The question is not whether the contract looked unattractive in hindsight. The question is whether the buyer would have acted differently if the risk had been properly explained at the time.

Group claims for off plan conveyancing negligence

A group claim approach to matters such as this is sensible where many buyers entered into materially similar contracts and suffered similar losses.

Where a number of buyers entered into materially similar contracts and encountered the same underlying issues, a group claim allows those shared issues to be examined for the group rather than repeatedly in separate cases. This can significantly improve proportionality, as legal costs that would otherwise be incurred individually can be spread across the group, making it more realistic to investigate and pursue claims that might be uneconomic on a standalone basis.

Individual circumstances still matter, particularly when assessing what advice was given and what a buyer would have done if properly advised. However, dealing with the common issues together can reduce duplication and allow us to focus attention on the issues that truly distinguish one claim from another.

There is also a practical benefit in proceeding alongside others who are facing the same situation. Litigation can be isolating and uncertain, particularly for individuals who have suffered significant financial loss. A group claim provides a degree of shared support and transparency, allowing buyers to understand how their position compares with others and how the overall strategy is developing. It does not remove the need for individual decisions or instructions, but it can make the process more manageable and less burdensome.

Our Experience

Elysium Law has represented hundreds of clients worldwide in actions of failed off-plan developments. Our experience and success rate in these claims is outstanding, with many multi-million pound recoveries for our client groups.

We continue to represent small and large groups of purchasers in multiple ongoing actions.

Due to our experience in these types of claims and our use of technology platforms for efficiency, we can offer competitive rates and recover the lost funds for our clients.

Who could benefit from our review

If you purchased an off plan unit at Kingsway Square, paid a deposit of 20%-30% and were not properly advised as to how your deposit was held and whether it was safe before exchange, you may benefit from our review of your circumstances.

Please contact us for a free initial assessment.

We will review your documentation, explain your options and confirm whether your case may be suitable for a group claim.

We will likely ask you to provide the following:

A copy of your Purchase Agreement;
Any correspondence with the developer, agent, or solicitor;
Any legal advice you received;
Evidence of payments made and whether any have been recovered.

The Modern Dispute: Mediation and ADR

Posted on 25 Nov 202525 Nov 2025 by Ruby Keeler-Williams

In my experience, people often do not seek legal advice lightly. By the time most individuals or businesses decide to take legal advice, the dispute has already begun to place serious strain on their time, reputation, financial resources or emotions. Many are uncertain about the direction they should take.

The courts are aware of this pressure. The Civil Procedure Rules (CPR), particularly the Overriding Objective in CPR 1.1, require disputes to be handled in a manner that is fair, efficient and proportionate.

This principle has shaped the courts’ attitude towards settlement and has led to an increased emphasis on Alternative Dispute Resolution (ADR). ADR is the name for a range of processes designed to help parties resolve disputes without the need for formal court proceedings. Mediation, together with other forms of ADR have become part of all modern litigation strategy.

This article sets out information about the purpose of ADR and the different types available. It explains why mediation is frequently the most effective route to resolving a dispute and how mediation fits within the broader procedural obligations imposed by the Civil Procedure Rules.

The Limits of Litigation and the Shift Toward ADR

Litigation is often perceived as the natural route for resolving a dispute. In reality, it has become the exception. The vast majority of civil cases settle before trial because the litigation process is slow, highly structured, expensive and public.

The courts can only grant a narrow range of outcomes and cannot always tailor a solution to the personal or practical realities of the dispute. Furthermore, court proceedings cannot protect a business relationship, preserve confidentiality or acknowledge the emotional context behind a dispute.

The Civil Procedure Rules acknowledge this limitation. CPR 1.4 requires the courts to actively manage cases and CPR 1.4(2)(e) expressly directs judges to encourage the use of Alternative Dispute Resolution. This is not simply a suggestion, but a procedural obligation that reflects judicial recognition of the shortcomings of formal litigation.

Parties must consider ADR before issuing proceedings under the Pre-Action Protocols. They must also show that they have engaged constructively with settlement possibilities. Failure to do so may lead to costs orders against them.

Case law supports this position:

In Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, the Court of Appeal confirmed that an unreasonable refusal to mediate can justify costs sanctions.

In PGF II SA v OMFS Co 1 Ltd [2013] EWCA Civ 1288, the Court of Appeal held that a failure to respond to an invitation to mediate is itself unreasonable.

In Dunnett v Railtrack plc [2002] EWCA Civ 303, the Court emphasised that parties who dismiss mediation without proper consideration may face adverse consequences.

These decisions make it clear that the court expects parties to approach mediation seriously. Refusal to participate must be justified by clear and reasonable grounds. Courts remain alert to the misuse of ADR as a tactic and are prepared to penalise parties who reject mediation without proper reason.

Types of Alternative Dispute Resolution

There are several forms of Alternative Dispute Resolution (ADR) which may be used to resolve disputes without issuing court proceedings. Depending on the nature of the case and position, certain methods will be more appropriate than others.

Negotiation is an informal process in which the parties, through their legal representatives, seek to reach a mutually acceptable settlement through discussion and exchange of proposals. It is often the most cost-effective approach and can be tailored to particular priorities such as ensuring a swift resolution or agreeing confidential settlement terms. Negotiation would usually be the first step before considering other, more structured ADR processes. However, negotiation has limitations compared to Mediation, as it lacks the structure and independent facilitation that a mediator provides, which can make it more difficult to overcome entrenched positions.

Mediation is a voluntary and confidential process in which an independent mediator helps the parties explore settlement options. The mediator does not impose a decision, but facilitates constructive dialogue aimed at achieving a mutually acceptable outcome. Mediation is often particularly useful as the entire process is completely confidential and it enables the parties to engage constructively without risking public scrutiny. A benefit is that you can agree to outcomes beyond what a court could order. This article will analyse Mediation further.

Arbitration is a formal process where the parties agree to refer their dispute to an independent arbitrator (or panel) who makes a binding decision, similar to a court judgment. However, arbitration can only take place if both parties agree or if there is an arbitration clause in the contract.

Early Neutral Evaluation involves an independent and experienced evaluator, often a senior barrister or retired judge, who gives a non-binding assessment of the strengths and weaknesses of each side’s case. This process can help both parties understand the likely outcome at trial and encourage settlement. It can be particularly useful where you may wish to test your position before committing to public litigation. However, it depends on both parties’ willingness to participate and it does not result directly in a settlement.

In most cases, negotiation and mediation are likely to be the most suitable and proportionate ADR methods. Both allow for a private, cost-effective resolution and can help to protect both parties’ reputations while still resolving the dispute.

The Strengths of Mediation

Mediation is neither a diluted form of litigation nor a simple informal discussion. Mediation is a structured process facilitated by a neutral professional whose purpose is to assist the parties in identifying practical solutions to their dispute.

There are many strengths of mediation:

Confidentiality

One of the most significant advantages of mediation is the process is confidential. Everything said during the mediation is confidential and without prejudice (other than in very specific circumstances, such as in the recent case of Pentagon Food Group Ltd and Others v B Cadman Ltd [2024] EWHC 2513 (Comm)).

Confidentiality allows parties to explore options and speak openly without fear that their comments may be used against them later. For individuals with public profiles, regulated professionals and commercial entities, this confidentiality is often essential.

Control Over the Outcome

In litigation, the judge imposes a result. In mediation, the parties create their own solution.

Furthermore, the range of possible outcomes is significantly wider in mediation. For example, parties can include confidentiality clauses, apology terms, non-financial concessions, public or private statements, revised commercial arrangements or future dispute management procedures. Courts do not have the power to order such outcomes.

Mediation allows parties to craft solutions that reflect the reality of the situation rather than being limited to a fixed, judicially imposed solution.

Cost Efficiency

Litigation costs increase rapidly as a case progresses, especially once proceedings have been issued.

Disclosure, witness statements, expert evidence and trial preparation all requires substantial work and thus legal costs.

A mediation is far more contained. It usually takes place within a single day and involves the preparation of a mediation bundle and position statement rather than months of litigation preparation. Mediation therefore reduces cost exposure.

Timing

A common misconception we hear is that mediation should only occur after key documents and evidence have been exchanged. This is not correct. Mediation can take place at any stage, including before proceedings have been issued.

Early mediation often prevents the unnecessary escalation of a dispute. Parties are more open to compromise before they incur substantial costs or adopt entrenched positions.

The Civil Procedure Rules support early and proportionate engagement and mediation achieves this.

The Human Context of Mediation

People and even businesses rarely engage with disputes in a detached or purely analytical state. Disputes are often emotionally charged, a financial burden and/or professionally embarrassing.

Some individuals fear the publicity associated with litigation. Businesses may worry about public confidence or internal morale. Professionals may fear regulatory implications.

Mediation addresses these concerns because it provides:

A confidential and private environment to express concerns.
A process that acknowledges the complexity of a dispute rather than reducing a dispute to legal arguments.
An opportunity to regain control of decision making.
A structure that avoids the long and unpredictable timelines of the court process.

From our perspective as lawyers, mediation provides a disciplined environment in which we can test legal arguments, manage client expectations, reassess litigation risk and refine our litigation strategy.

It exposes the strength of each side’s case in a controlled manner and often clarifies key issues that would otherwise remain obscured or uncertain until trial preparation.

What Does Mediation Require?

Mediation requires that the parties have clear objectives, a realistic assessment of litigation risk and a willingness to engage in problem solving.

It does not require an admission of weakness or an abandonment of legal principles. It simply requires a recognition that most disputes do not need to reach trial to be resolved.

Mediation is not passive and parties do not simply attend and wait for a proposal to appear. They must articulate their objectives clearly (usually via an initial position statement), evaluate the strength of their position with real scrutiny and potentially respond to new information that is revealed.

During the mediation itself, parties must make decisions in real time. Offers need to be crafted with care and litigation risk must be continuously recalculated.

A competent mediator will identify the underlying interests of each party, challenge unrealistic positions and facilitate structured discussion between the parties, test each parties assumptions, probe weaknesses and highlight any inconsistencies.

How is a Mediator Selected?

The choice of mediator is an important part of the process and clients often ask how a mediator is selected. In most mediations the parties agree the mediator jointly. This usually involves each side proposing one or more candidates and then agreeing on an individual who is acceptable to both. Where agreement cannot be reached, a recognised mediation body can nominate a mediator, although this is less common.

The criteria for selecting a mediator depend on the nature of the dispute and the personalities involved. Some mediators take a more facilitative approach and focus on guiding the discussion, while others take a more evaluative approach and challenge the legal or factual assumptions in greater depth. Factors that usually matter include the mediator’s experience in the relevant area of law, their reputation for managing complex personalities and their style of questioning. For disputes involving sensitive personal or reputational issues, it is often helpful to select a mediator with experience in high-conflict or high-profile matters.

Our firm has worked with a wide range of senior mediators, including leading practitioners, highly experienced barristers and retired judges who now practice exclusively as mediators. The head of our firm, Mr Richard Gray, is also an accredited mediator.

Our experience allows us to identify mediators whose skills and style are well-suited to the dynamics of each particular dispute. We guide clients through the selection process to ensure that the mediator chosen is capable of managing the issues effectively, giving the mediation the highest possible chance of success.

What does a typical Mediation look like?

Although each mediation is different, the structure tends to be consistent. This can take place either in person or via video conference.

The Exchange of Position Statements (Usually the Day Before)

Before the mediation begins, the parties usually exchange position statements. These are concise written documents that set out:

the background to the dispute
the key issues from that party’s perspective
the outcome the party seeks
the reasoning, evidence or commercial/economic considerations that support that outcome
any obstacles the party anticipates

Position statements are not witness evidence or legal submissions. They are a clear, strategic overview that assists the mediator in understanding the dispute and helps the parties clarify what they want to actually achieve. They ensure that the mediation begins with a shared understanding of the issues, rather than spending the early stages clarifying basic facts.

Joint Opening Session

On the morning of the mediation, all parties and their legal representatives meet together with the mediator for an opening session. This serves several purposes. The mediator introduces themselves, outlines the structure of the day, confirms the confidentiality of the process and establishes the ground rules. The mediator also reinforces that they are neutral and that the process belongs to the parties.

Each side may then be invited to give a short opening statement. The purpose is not to argue the case. The purpose is to set out what the dispute means to them, what they hope to resolve and what is most important going forward. It also gives the mediator an early sense of the personalities, priorities and any potential areas of tension.

Once the joint session concludes, the parties break into separate rooms.

Private Rooms

Each party occupies its own private room. The mediator will spend time with each side throughout the day.

Everything said in the private room is confidential. The mediator cannot share information without permission. This environment allows each party and their representatives to speak openly about their concerns, objectives for the mediation and their genuine bottom line.

The mediator will examine the party’s position in detail. They will question assumptions, identify weaknesses and probe as to the reasoning behind certain demands.

This is often one of the most challenging aspects for clients because the mediator’s role includes identifying vulnerabilities that must be understood if realistic progress is to be made.

Shuttle Negotiation

Once the mediator has a clear picture of each side’s starting point, they begin the process known as shuttle negotiation. The mediator moves between the rooms, spending time with each party.

The mediator will often begin by challenging the party’s understanding of the dispute. They may play devil’s advocate by raising the strongest points the other side could make, or highlighting risks that the party has not fully considered.

This is not to be adversarial, but rather it encourages realism from the parties. The mediator’s objective is to ensure that each party understands both the strength and the vulnerability of their case. Once the mediator has explored the issues with one side, they will take the revised proposal or counteroffer to the other side and repeat the same exercise there.

The mediator will test the logic of each offer, question whether it aligns with the party’s stated priorities and explore whether adjustments can be made to bring the parties closer. This process continues for as long as progress is possible.

Review and Adjustment

As the day progresses, each party reviews the information brought by the mediator and adjusts its position based on litigation risk, cost, time and other practical issues.

The proposals typically evolve through several rounds of refinement. Many parties begin the day with rigid expectations but end it with a clearer understanding of what genuinely matters to them and what is actually achievable.

For a successful mediation, the parties must be flexible and able to respond rationally to new information.

This is arguably one of the most valuable parts of mediation, as parties are able to reshape their positions freely, without the procedural limitations of litigation, amending claims and the associated cost consequences.

Drafting Settlement Terms

If the parties reach an agreement, the legal representatives draft the settlement terms immediately or shortly after the mediation. These terms are usually recorded in a written settlement agreement that becomes binding once signed.

The settlement agreement may include financial terms, confidentiality provisions, non-financial commitments, clarifications about future conduct or any other terms the parties wish to include.

If the dispute does not settle on the day, the process is still valuable. Parties leave with a clearer understanding of the strengths and weaknesses of their case, an appreciation of the opponent’s priorities a more realistic sense of risk and a foundation for further negotiation. Many settlements occur shortly after mediation as a result.

Who Benefits From Mediation?

Individuals

Individuals benefit from the confidentiality and the reduced emotional and financial strain.

Those with public reputations or sensitive personal issues often require privacy that only mediation can provide.

Businesses

Commercial disputes are costly and can disrupt operations and damage relationships. Mediation can preserve commercial partnerships that litigation would destroy.

Professionals

Professionals who fear reputational damage or regulatory implications often find mediation the safest environment in which to conclude a dispute without escalation.

Lawyers

Lawyers benefit from the process as it tests the strength of the case early, reduces uncertainty and offers clients a flexible and cost effective route to resolve the matter.

Conclusion

Mediation has become the most effective and proportionate method of resolving civil disputes. It provides confidentiality, flexibility, control and efficiency, with the benefit of avoiding unnecessary risk. It is necessary for compliance with the Civil Procedure Rules and to avoid cost consequences.

Litigation has an essential role in society. However, it should be reserved for the disputes that genuinely require judicial determination. In most cases, mediation provides a structured, rational and humane alternative that offers parties the opportunity to resolve their dispute with dignity and certainty.

If you require guidance on whether mediation is appropriate in your case or how to prepare for the process, please contact us for specialist advice.

Failed Off-Plan Property Developments – Do you have a Professional Negligence Claim?

Posted on 29 Jul 202514 Jan 2026 by Ruby Keeler-Williams

Over recent years, off-plan property schemes in England and Wales have been marketed to individual purchasers, particularly those based overseas, as secure, high yield opportunities. These transactions typically involved purchasing residential apartments that were either in the planning phase or under construction, with purchasers required to pay substantial deposits of up to 50% of the purchase price at exchange of contracts.

A significant number of these developments have since failed, leaving purchasers without a property and unable to recover their funds due to the impecuniosity of the developer, which is often a Special Purpose Vehicle (SPV) with no trading history and limited assets.

At Elysium Law, we have significant experience in representing purchasers who have lost money in failed off-plan developments. We specialise in professional negligence and breach of contract claims and have recovered many millions of pounds for purchaser groups against conveyancing solicitors who failed in their duties. We continue to act in multiple claims arising from similar patterns of negligence and misconduct.

This article explains how these failings arise, the legal duties that were likely breached and the steps available to affected purchasers.

Solicitors’ Duties in Off-Plan Transactions

The Solicitors Regulation Authority (SRA) issued the 2020 Warning Notice Investment Schemes Including Conveyancing, which sets out clear expectations for solicitors involved in these transactions. Many of the risk factors and failures highlighted by the SRA are common features in these failed developments.

A solicitor instructed in an off-plan conveyancing transaction must do more than simply process documents. Under the SRA Principles, they are required to:

Principle 2 – Uphold public trust and confidence;
Principle 5 – Act with integrity;
Principle 7 – Act in the client’s best interests;
Code of Conduct 8.6 – Ensure that the client is able to make informed decisions.

A Solicitor who fails to investigate the true nature of the transaction, or who does not warn of serious financial risks, may fall below the standard expected of a reasonably competent conveyancer. In such cases, a professional negligence claim may arise.

That duty includes investigating beyond the representations made by the developer, analysing the financial structure of the scheme and advising the purchaser clearly on the likelihood of deposit loss or construction failure.

Typical Failures in the Legal Reports we have reviewed

From our analysis of multiple solicitor reports issued to clients purchasing in various failed schemes, the common patterns set out below emerge.

Failure to advise on the risks of losing the deposit

The legal report will often fail to warn the purchaser that there is a real risk that the Developer could fail and that some or all of the deposit could be lost.

Where a warning is included, it is often buried mid report and not restated in the introduction or summary, which could be construed as not satisfying the duty to present critical risks prominently.

The SRA expects important warnings to be flagged early, especially in off-plan schemes where consumers are at significant financial risk.

Where a development carries risks, the report should highlight this clearly in unequivocal terms at the beginning of the report, with wording such as ‘You should consider not proceeding’ or ‘This structure carries unusually high risks and is not suitable for many purchasers’.

Failure to advise as to how the deposit is held

Often, we find that the report does not adequately explain how the deposit is held.

For example, in many off-plan developments that have failed, the contract states that the deposit will be released to the seller’s solicitor as agent, not stakeholder.

This means funds could be accessed and used by the developer immediately upon exchange, with very limited protection.

Often the legal report will fail to highlight this at all or will simply confirm that the deposit would be released to the developer’s solicitor acting as agent, not stakeholder, but fail to provide any clear warning of what this actually means or the practical consequences.

A lay purchaser cannot be expected to understand the level of risk without comprehending the powers that this gives.

The report should warn that the deposit could be spent immediately, with little to no recourse if the development failed.

Incorrect or misleading statements about Standard Conditions of Sale

In residential conveyancing transactions, there are what are known as Standard Conditions of Sale (5th Edition), which normally provide vital protections such as stakeholder treatment of deposits, remedies in default and a requirement for the seller to insure the properties.

Often in schemes that fail, these Standard Conditions have been excluded from the contract. If the report fails to recognise or advise on the absence of these protections, this is a serious breach of duty and gives clients a false sense of security.

Overreliance on assurances from the developer

An example of this can be seen in a legal report that we recently reviewed as part of an ongoing action.

In this case, in the legal report, the solicitor simply repeated the developer’s claim that ‘the site value will not fall below the combined debt and deposit contributions’, without challenge or warning.

This placed an unjustified reliance on speculative valuations and failed to advise the client on the real possibility of insolvency and loss.

Such statements should have been accompanied by an independent risk assessment and caution.

Minimisation of Risk Warnings through unclear language

It is not uncommon to see reports state that ‘you may lose your deposit’ but immediately followed with reassurances about insurance warranties or second ranking debentures, without explaining their limitations or enforceability.

This undermines the strength of the warning and may leave purchasers under the impression that the risk was mitigated, when it was not.

Failure to advise on Special Purpose Vehicle risk

The developer is often a special purpose vehicle (SPV) with little to no assets and no trading history.

Many solicitors fail to explain that this means the purchaser is contracting with an entity that would have no capacity to refund deposits in the event of collapse.

Purchasers are often not warned that the SPV could be wound up with no assets to claim against, leaving them as unsecured creditors.

Failure to advise on restrictions to protecting the purchaser’s interest

In multiple examples seen in ongoing cases, the contract expressly prohibits the registration of a notice or restriction on title after exchange.

In these cases, the Solicitors failed to advise that this removed a key method of protecting the purchaser’s interest and further increased the purchaser’s exposure to risk.

This is a significant omission, as such notices are standard safeguards in off-plan transactions.

Are the above examples adequate advice?

These are not minor oversights. They reflect a failure to identify and explain serious risks in transactions that were, in substance, speculative investments rather than ordinary property purchases.

A reasonably competent solicitor would be expected to highlight these dangers clearly, document appropriate advice and, where necessary, decline to act.

The SRA’s Warning Notice makes clear that solicitors must not participate in schemes that are high-risk or improper. They must not simply rely on representations made by the developer or seller. Instead, they must carry out a robust risk assessment, advise fully and candidly and decline to act where a scheme is unfair or potentially fraudulent.

In terms of sufficiency of advice, a solicitor must provide the advice that a reasonably competent practitioner would have provided. That includes explaining the risks of agent-held deposits, the implications of security such as second ranking debentures and the dangers of contracting with an SPV with little to no assets.

Where those explanations are missing or misleading and the purchaser suffers loss, there is potentially a viable cause of action.

Can you bring a claim

If you paid a deposit for an off-plan property and lost this deposit as a consequence of inadequate advice, you may be eligible to bring a professional negligence claim against the solicitor who acted in the transaction.

In many cases, even if the firm no longer exists, a claim can be brought against its professional indemnity insurer, as firms are required to hold Professional Indemnity Cover on a run-off basis for 6 years.

You may be entitled to recover:

Your deposit;
Legal fees;
Other financial losses caused by the solicitor’s breach of duty.

Limitation periods apply, so early advice is essential. Professional Negligence claims are subject to a six-year primary limitation period from the date of the negligent act, or a secondary limitation period of three years from the date of knowledge, whichever is later.

Group Action Litigation

Many purchasers affected by the same failed scheme or solicitor can pursue claims together through group litigation.

We often find there is strength in numbers for these claims in terms of evidence, the benefit of splitting disbursements and legal costs, efficient case management and a stronger negotiating position.

We are currently coordinating group actions on behalf of purchasers affected by multiple failed schemes. We have seen strikingly similar failings across these transactions.

Our Approach

At Elysium Law, we take a structured and strategic approach to pursuing professional negligence claims against conveyancing solicitors.

The process begins with a preliminary assessment, where we obtain and review your full client file, including any previous solicitor correspondence, and identify the full scope of potential claims. We then advise on the legal merits, the supporting evidence required, and the likely quantum of damages. You’ll receive a clear summary of that advice, our proposed next steps and guidance on important procedural issues such as limitation and litigation funding.

If the case is viable, we proceed to the pre-action stage, following the Pre-Action Protocol for Professional Negligence. This involves issuing a detailed Letter of Claim setting out the grounds of your complaint and the compensation sought and responding to any replies from the Defendant Solicitor or Third Parties.

We will always explore early settlement through a method of Alternative Dispute Resolution (ADR), in accordance with our duty under the Civil Procedure Rules. We are however fully prepared to escalate matters if needed.

Should the matter not resolve at the pre-issue stage, we move to the litigation stage, issuing formal court proceedings and instructing experienced counsel to act on your behalf. We manage all aspects of disclosure, pleadings, and preparation for trial, while continuing to pursue resolution via settlement where possible.

Throughout, we ensure you receive clear, strategic advice at every step of the process, with the focus always on recovering your losses.

Our team is equipped to advise both domestic and overseas clients and can work with parties in tandem with multilingual support where needed.

Our Experience

Due to our experience in these types of claims and our use of technology platforms for efficiency, we can offer extremely competitive rates and recover more of the lost funds for our clients.

Next Steps

If you believe you were poorly advised in connection with a failed off-plan purchase, please contact us for a free initial assessment.

We will review your documentation, explain your options and confirm whether your case may be suitable for a group claim.

We will likely ask you to provide the following:

A copy of your Purchase Agreement;
Any correspondence with the developer, agent, or solicitor;
Any legal advice you received;
Evidence of payments made and whether any have been recovered.

Why Contemporaneous Notes Are Your Best Defence

Posted on 29 Apr 2025 by Ruby Keeler-Williams

Introduction

In the current climate of professional negligence claims, the phrase ‘if it isn’t written down, it didn’t happen’ has never been a better mantra to live by.

Whether you are an accountant or tax advisor advising on complex planning, a solicitor giving verbal advice during a negotiation or a trustee managing an asset on behalf of beneficiaries, the ability to evidence your actions and the rationale behind them could be the key difference between resolving a potential dispute and a costly judgment.

Contemporaneous notes (which are a written record made at the time of an event) can be extremely persuasive evidence if you are facing a potential professional negligence dispute.

A core element of our practice is Professional Negligence and we have obtained many multi-million pound awards for claimants and successfully defended many claims. I have seen the importance of this issue in practice.

In this article, I will explore why contemporaneous notes are so important, the risks of relying on memory alone, real life case law where note taking or lack thereof made a difference and set out some practical steps professionals can take to protect themselves.

Why Are Contemporaneous Notes Important?

Memory is Limited and Fallible

Human memory has its limitations, particularly in fast paced and high-pressure environments. Over time, memories degrade or become distorted.

Even traumatic events that people may think are deeply embedded into memory are subject to distortion. A good exploration of this topic can be seen in the 2013 Paper ‘The neuroscience of memory: implications for the courtroom’ published by Lacy JW, Stark CEL. Of particular relevance to this article is the section regarding distortion in an original memory after being exposed to misleading information related to that memory. In this context, in the absence of written notes setting out the events and rationale behind them recorded at the time, the language used when being questioned (for example by the insurer defending your claim) about events that have previously occurred can have a significant impact on the accuracy of the recall.

If your memory is distorted, you can appear an unreliable witness, however earnest your intentions. If you make contemporaneous notes, you can refer back to these if a dispute arises and ensure that your recollection is accurate.

Courts Prefer Objective Evidence

If a dispute arises, it often involves both parties recalling events in a conflicting manner. In the absence of a written record, it is up to the court to determine whose recollection is more accurate.

Contemporaneous notes serve as a more objective account, in that they were typically recorded before a dispute was contemplated, meaning that the recollection is not tinged by bias.

Taking Notes Can Help With Detail in Memories

Making a contemporaneous note, especially when giving verbal advice, can also help in ensuring that your memories of events are detailed rather than vague.

An example of this in the context of recalling a verbal discussion can be seen in the study ‘How Contemporaneous Note-Taking Shapes Memory for Conversation’ published by Brown-Schmidt S, Jaeger CB, Evans MJ, Benjamin AS. This study involved 2 parties having a verbal discussion, with one party making contemporaneous notes following the conversation. One week later, both parties were asked to recall the conversation and the study showed that the party that made notes recalled more details of the conversation that the party that did not.

Professionalism and Compliance

Maintaining records is not just best practice; it is often a regulatory requirement. Most professional bodies expect members to maintain adequate records to justify their decisions, advice given and communication with clients.

Examples include:

ICAEW: Requires members to keep sufficient records to demonstrate compliance with standards and obligations.
SRA Code of Conduct: Mandates that solicitors keep records to justify actions and maintain transparency.
FCA: Emphasises record-keeping as part of senior management and conduct responsibilities.

Case Law

Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm)

This is one of the leading cases on the reliability of witness evidence in the context of litigation. You can read the full judgment here.

Here, the now Lord Legatt (then Leggatt J) was asked to evaluate witness accounts of events that had occurred years earlier. In his judgment, he drew on psychological research to caution against placing too much weight on a witnesses confidence in their recollection.

At paragraph 20 of the judgment, Leggatt J observed that recollections may become entangled with subsequent narratives and documentation, making them less reliable than they may appear. Even when a witness appears sincere and confident, that confidence is no guarantee of accuracy, especially where they are attempting to recall what they believed or felt at the time.

His guidance at Paragraph 22 was of particular relevance to this article, as he stated that:

“… the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts … Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”

This approach has been cited in many subsequent judgements and codified via Practice Direction 57AC of the Civil Procedure Rules, which applies to cases in the Business and Property Courts. The appendix to PD57AC sets out that witness evidence should be based on actual recollection rather than retrospectively constructed from documentation. This witness evidence can then be contrasted at trial with any contemporaneous documentary evidence.

Professionals should take from this case that the courts may distrust your recollection, however strong your belief as to its accuracy, if it contradicts your own written records (or worse so if no written record exists).

Simetra Global Assets Ltd v Ikon Finance Ltd [2019] 4 WLR 112

This case was a successful appeal to order a retrial of a matter before a different judge in the commercial courts. The matter involved dishonest assistance in a fraudulent Ponzi scheme. You can read the full judgment here.

Of particular relevance to this article are the comments at Paragraph 48 of the Judgment:

“In this regard I would say something about the importance of contemporary documents as a means of getting at the truth, not only of what was going on, but also as to the motivation and state of mind of those concerned. That applies to documents passing between the parties, but with even greater force to a party’s internal documents including e-mails and instant messaging. Those tend to be the documents where a witness’s guard is down and their true thoughts are plain to see. Indeed, it has become a commonplace of judgments in commercial cases where there is often extensive disclosure to emphasise the importance of the contemporary documents. Although this cannot be regarded as a rule of law, those documents are generally regarded as far more reliable than the oral evidence of witnesses, still less their demeanour while giving evidence….”

Jaffe & another v Greybull Capital LLP & others [2024] EWHC 2534 (Comm)

This recent case involved a clash of recollections between the parties, specifically as to whether the representative of Greybull Capital LLP made fraudulent misrepresentations in a meeting in October 2026. You can read the full judgment here.

The Judge deemed both witnesses to be ‘patently honest and truthful’ and as such had to determine which of their recollections to prefer. The Judge cited both Gestmin and Simetra in their judgement.

Ultimately, the Judge found that there had been no fraudulent misrepresentation and a key reason for this decision was that one party’s contemporaneous note was in fact a reinterpretation of incomplete handwritten notes taking during the lengthy meeting and had the potential to have been tainted by post meeting discussions.

Mehjoo v Harben Barker [2014] EWCA Civ 358

This case was an appeal following the first instance judgment which found a duty of care that was breached by the accountancy firm failing to advise a non-domiciled client about the availability of a tax shelter.

This was appealed on the basis that this fell outside the documented agreed scope of work. You can read the full judgment here.

In this matter, the Court found in favour of the Accountants partly because the engagement letter and contemporaneous file notes demonstrated that a limited scope had been agreed.

Professionals can take from this that contemporaneous records not only help prove what work was completed, but also what was not included in your remit.

Practical Tips for Professionals

1. Make Note-Taking a Habit

After every client call or meeting, make a short, written record. This should include the date, time, attendees, the issues discussed, the advice given and rationale behind it, decisions made and next steps. This can be done via a formal file note, email summary sent to all parties, or internal system log.

2. Follow Up Verbal Advice in Writing

Send a short confirmation email setting out the advice discussed. This not only protects you but reinforces client understanding.

3. Use Templates and Checklists

Standard templates for client meetings, risk warnings, and conflict checks make consistency easier. They also serve as prompts to ensure nothing critical is overlooked.

4. Record Your Scope of Work and Limitations

Make it clear what you have and haven’t been asked to do. Record whenever you advise a client to seek other expert input (for example legal advice).

5. Store Notes Securely

Store contemporaneous records in a secure, backed-up system that can be accessed by your colleagues. Avoid post-it notes, loose paper, or undocumented phone calls.

6. Train Your Staff

Ensure that you and your team understand that note-taking is a defensive tool, not just an administrative burden.

Conclusion

For professionals working in high-risk environments, the ability to demonstrate what was done, why it was done, and when, is vital. Contemporaneous notes are not just a matter of good practice, they act as a safeguard in future disputes. As the courts have made clear, where recollection fails or is contested, a contemporaneous written record often provides the most persuasive evidence.

Yet, note-taking is just one piece of the wider picture. Maintaining robust compliance, managing risk effectively and responding quickly to potential claims all form part of a sound defence strategy.

This is where we can help. Our focus is to give professionals the confidence that legal and regulatory risks are being actively managed — so that you can focus on your clients and your core work.

We provide:

On-demand legal guidance for your team as issues arise, including conflicts of interest, confidentiality breaches, AML concerns and exposure to potential negligence.
Advice on data breaches, including recording, internal investigation, and assessing reporting obligations to the ICO or other regulators.
Money laundering compliance support, including drafting Policies, Controls and Procedures and offering independent oversight in line with regulatory requirements.
Complaint handling support, including recording and monitoring of all complaints to ensure they are resolved and providing draft responses.
Staff training, focused on practical, scenario-based learning around risk awareness, compliance obligations and documentation.

FS Capital v Adams: Disposals of Trust Assets for an Improper Purpose

Posted on 11 Feb 202514 Jan 2026 by Ruby Keeler-Williams

The recent case of FS Capital Limited Ors v Alan Adams Ors EWCA Civ 53 sends a clear message to beneficiaries of trusts – you have recourse when trustees act improperly.

This judgment, concerning Jersey trusts, considers whether a disposal of trust assets constitutes a breach of trust due to an improper purpose.

Understanding the High Court Judgment in Adams v FS Capital

The initial case in the High Court involved a complex series of transactions related to three Jersey trusts (the 2011 Trust, the 2012 Trust, and the 2014 Trust).

These trusts were part of Employer-Financed Retirement Benefit Schemes (EFRBS), which were utilised to facilitate loan schemes. Participants in these schemes received remuneration from their employer via loans, structured to avoid income tax.

Many of these loans were later affected by the Loan Charge, a tax levied on outstanding loan balances.

FS Capital Limited (“FS Capital”) purchased loan assets from these trusts. The book value of the loan assets was initially £410 million, later reduced to £279 million. The basic consideration was paid, with deferred contingent consideration capped at £1,176,033.93, allegedly the sum owed to the Trusts’ creditors.

The Respondent Beneficiaries in the FS Capital Appeal numbered around 700 individuals.

The High Court Judgment

The key findings following the judgment of Mr Justice Edwin Johnson in the first instance are as follows.

Improper Purpose

The High Court considered the actions of the decision makers surrounding the disposal of the Loan Assets, focusing on the subjective purposes of the disposal.

The court determined that the structuring the disposal of loan assets to ensure no surplus remained for the beneficiaries was inconsistent with the proper exercise of a trustee’s power of sale.

The court emphasised that the circumstances at the time of the disposal did not justify disregarding or excluding the beneficiaries’ interests. This was in contravention of Grand View Private Trust Co Ltd v Wong UKPC 47.

The court found the trustee determined the consideration based solely on the sums owed to creditors, which improperly allowed creditor rights to take priority over those of the beneficiaries. Evidence showed an attempt to retrospectively justify this structure, aligning the consideration with debts to the Second Defendant and Hatstone Jersey.

In relation to the valuation of the Loan Assets, the judge rejected that the Defendant could apply a ‘next to zero’ valuation of the loan assets. The inclusion of a cap in the sale agreements indicated an awareness of the potential for higher value, contradicting the claim that the assets were worthless. This showed the cap was intended to limit the deferred consideration to what had been calculated as due to the Second Defendant and Hatstone Jersey and was intended to guard against the possibility of the Loan Assets turning out to have a higher value.

The court therefore determined that the disposal was made for an improper purpose.

Bona Fide Purchaser

A central aspect of the case was whether FS Capital could claim protection as a bona fide purchaser for value without notice. The court rejected this claim, finding that FS Capital had actual notice of the breach of trust and specifically Mr Reid and Mr Emblin (who collaborated with Mr O’Shea of the Second Defendant in designing the disposal) were aware of key facts.

Void or Voidable

Significantly, the High Court declared the disposal void in equity. This means the disposal was deemed invalid from its start. The High Court considered the Court of Appeal case of Cloutte v Storey in relation to this point.

Liability for Breach of Trust

The Second Defendant was found to have committed a breach of trust by reason of the fact the disposal was made for an improper purpose (Paragraph 401)

The Court of Appeal Judgment

The appeals in this case concern several complex issues related to Jersey trust law.

The first is whether the judge was incorrect in determining that, to be considered as having actual notice per Article 55 of the Trusts (Jersey) Law 1984, it was enough to have actual knowledge of the facts that made the Disposal improper, rather than also knowing that those facts constituted a breach of Jersey law.

The second point, related to the first, is whether the judge was wrong to decide that FS Capital had not met its burden to prove it did not have actual notice of the Disposal and whether the judge should have used the burden of proof to make that determination.

The third issue is whether a transaction that arises from a fiduciary power being used for an improper purpose is void or voidable under Jersey law. This includes whether Jersey law is the same as English law on this point, or whether it only considers English law when making its decision.

The final issue in the FS Capital Appeal is whether the judge should have decided that the Disposal was voidable and, if so, whether he should have declined to set it aside.

The Court of Appeal upheld the High Court’s decision in FS Capital v Adams.

Fiduciary Duty

The Court of Appeal explicitly reinforced the fundamental fiduciary duty of trustees. Trustees must act solely in the best interests of the beneficiaries.

In this case, the Court of Appeal found that the power of sale was exercised to terminate the Trusts, benefit FS Capital, benefit Pinotage and Hatstone Jersey and ensure no surplus for the Beneficiaries. This indicates a conflict of interest and a failure to prioritise the beneficiaries’ interests

Further to this, the court noted that the value of the Loan Assets was unknown but could be substantial, and the purpose of the Disposal was to pay creditors without leaving any surplus for the Beneficiaries, effectively excluding them. This was deemed unjustifiable because there was a possibility of substantial value in the Loan Assets

Additionally, the Court of Appeal highlighted that the breach of trust was constituted by the Disposal and the whole purpose of putting Pinotage PTC in place as new trustee was to allow the sale of the Loan Assets, on terms which excluded the interests of the Beneficiaries, to proceed to completion. The court confirmed that a trustee cannot resign to enable a breach of trust by a successor.

The Court of Appeal highlighted the following extract from Bird Charitable Trust [2008] JRC 013, which states that the Donee:

“…must act with good faith and sincerity, and with an entire and single view to the real purpose and object of the power and not for the purpose of accomplishing or carrying into effect any bye or sinister object (sinister in the sense of being beyond the purpose and intent of the power).”

Knowledge of the Breach

A point of contention was the extent of knowledge required for FS Capital to be fixed with actual notice of a breach of trust.

Specifically, the question was whether FS Capital needed to know that the improper purpose of the disposal constituted a breach of Jersey law. FS Capital argued that the judge erred in determining that actual knowledge of the facts constituting the impropriety of the Disposal was enough to be fixed with actual notice and contended that they needed to know the impropriety was also a breach of Jersey law.

The court equated actual notice with actual knowledge of the breach of trust or wilfully avoiding such knowledge. It was also accepted that actual knowledge arises where the defendant appreciates that the transaction in question is probably improper or there has probably been a breach of trust.

The Court of Appeal referenced Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347 [2012] Ch 453 in relation to whether and, if so, when it is appropriate to impute the legal consequences of facts to a party who is aware of the relevant facts. The judge noted that such knowledge is not automatically imputed.

The Court decided that FS Capital could not claim to have no knowledge of the breach of trust because Mr Emblin and Mr Reid (whose knowledge was attributed to FS Capital) collaborated in designing the Disposal that resulted in it being made for an improper purpose.

The judge emphasised that FS Capital had the burden of proving it did not have actual notice of the breach of trust. Following the hearing, the court concluded that FS Capital failed to discharge the burden of demonstrating that it had no actual notice that the Disposal was made in breach of trust.

Burden of Proof

The Court of Appeal supported the High Court’s allocation of the burden of proof.

To use the bona fide purchaser for value without notice defence, FS Capital had to prove they gave valuable consideration and had no notice of the breach of trust. The court stated it was FS Capital’s responsibility to demonstrate that they did not have actual notice of the breach of trust.

The judge found that FS Capital had not provided sufficient evidence to demonstrate that they were unaware the facts constituted a breach of trust. FS Capital did not present their evidence to suggest that they were unaware that the facts of the Disposal amounted to a breach of trust as a matter of Jersey law.

Instead, the court found that FS Capital collaborated in designing the Disposal, particularly the components that resulted in it being made for an improper purpose. The court also noted that Mr Emblin and Mr Reid knew the deferred consideration was capped despite knowing the trust assets could have substantial value. Despite looking for ways to justify the design of the Disposal, the court determined that Mr Emblin and Mr Reid were not satisfied it was legitimate to disregard the interests of the beneficiaries.

Ultimately, the judge concluded that FS Capital failed to discharge the burden of demonstrating that it had no actual notice that the Disposal was made in breach of trust. Further, there was no evidence that the Appellants sought legal advice, or if they did, that they followed it. There was also no evidence to suggest that the protagonists believed that what they were doing was in accordance with Jersey law, or that they did not believe that it was contrary to that law.

The Court of Appeal emphasised that claiming a lack of knowledge of impropriety requires pleading and proving relevant facts. FS Capital’s failure to adequately demonstrate their lack of knowledge about the breach of trust led to the rejection of their appeal.

Jersey and English Law

The Court of Appeal confirmed the close relationship between Jersey and English trust law. Jersey trust law generally follows English law unless there are conflicts with Jersey customary law or statutes.

Implications for Beneficiaries and Trustees

FS Capital v Adams has significant implications for beneficiaries and trustees of Jersey trusts, as well as those in similar jurisdictions:

Key Takeaways for Beneficiaries

Trustees have a fiduciary duty to act solely in your best interests.
Disposals of trust assets, especially those that appear to benefit parties other than the beneficiaries, will be closely scrutinised for improper purposes.
If trustees act improperly, you have legal recourse to challenge their actions and seek remedies, including setting aside the disposal and recovering assets.

Advice for Trustees

Your primary duty is to the Beneficiaries. All decisions must be made with their best interests in mind.
Seek Independent Advice when making significant decisions, especially those involving potential conflicts of interest.
Document Everything – Maintain thorough and accurate records of all decisions and the reasons behind them.

What to Do If You Suspect a Breach of Trust

If you are a beneficiary of a trust and believe that the trustees have acted improperly, it is essential to take prompt action to protect your interests.

Gather Information: Collect all relevant documents relating to the trust, including the trust deed, financial statements, and communications with the trustees.
Seek Legal Advice: Consult with a qualified lawyer experienced in Jersey trust law. Elysium Law has a team of experienced professionals who can assess your situation, advise you on your options and represent you.
Consider a Formal Challenge: Based on the evidence, we can advise on the best course of action, whether that is:
- Demanding an accounting from the trustees; or
- Seeking an injunction to prevent further improper actions; or
- Applying to the court to have the disposal set aside and the assets returned to the trust; or
- Pursuing claims against the trustees for breach of trust.

Conclusion

The FS Capital v Adams case provides a strong precedent for beneficiaries of Jersey trusts who believe their rights have been violated. This case will also be of particular interest to similar jurisdictions that adopt similar principles.

The Court of Appeal’s decision underscores the importance of trustees’ fiduciary duties and the courts’ willingness to intervene when those duties are breached. Don’t stand by while trustees act improperly. By understanding your rights and taking proactive steps, you can fight to protect your interests and ensure the trust is managed as intended.

If you have been affected by a similar matter and are the subject of threats to call in loans, contact Elysium Law for a free, confidential consultation.

Keeping your business running in the face of a winding up petition: Validation Orders in Compulsory Liquidation

Posted on 24 Oct 202414 Jan 2026 by Ruby Keeler-Williams

Introduction

A validation order is a court order that approves transactions made by a company after a winding-up petition has been filed against it.

In this article, we discuss the purpose of these orders, why they are necessary, the application process, and the potential risks for businesses and directors if they fail to obtain validation orders where necessary.

This article draws upon our recent experience attending upon a client at the Rolls Building to obtain a validation order to allow the payment of a debt to the creditor following company bank accounts being frozen.

What is Compulsory Liquidation?

Compulsory liquidation is a court-ordered process that results in the winding up of a company, meaning business must cease and the company assets are distributed to its creditors. This process is governed by the Insolvency Act 1986.

Various parties, including creditors, shareholders, and even the company itself, can petition the court for a compulsory winding-up order.

Once the winding-up petition is presented to the court, the company’s assets are frozen, and either the Official Receiver (an officer of the court) or an insolvency practitioner appointed by the court as liquidator takes control of the company’s affairs.

The company effectively loses the ability to conduct business, any transactions undertaken require scrutiny and, in most cases, court approval.

The Role of Validation Orders in Compulsory Liquidation

Section 127 of the Insolvency Act 1986 sets out that:

(1) In a winding up by the court, any disposition of the company’s property, and any transfer of shares, or alteration in the status of the company’s members, made after the commencement of the winding up is, unless the court otherwise orders, void

This section effectively creates a freeze on the company’s ability to freely dispose of its assets or enter into certain transactions.

A transaction will not be void under section 127(1) of the Insolvency Act 1986 if the court makes an order validating the transaction. Validation orders are therefore the process by which court approval is obtained for necessary transactions that a company enters into after a winding-up petition has been filed against it.

Without a validation order, transactions conducted after the filing of a winding-up are void unless the court orders otherwise, meaning they are unenforceable and the parties involved may need to reverse the transaction.

The main reason behind the requirement to obtain court approval is to protect the interests of all creditors by preventing the dissipation or unfair distribution of company assets once a winding-up petition is on the table.

A validation order may either validate a disposition as part of a specific transaction such as the sale of a particular asset or payment of a particular debt, or alternatively permit a particular type of disposition, such as all dispositions by the company in the ordinary course of its business.

When Are Validation Orders Required?

It is vital to understand that once a winding-up petition is filed, virtually all transactions the company wishes to undertake require validation by the court – even if the transaction was initiated or agreed upon before the petition was filed but completed afterward.

In theory, it is not necessary for a liquidator to apply to court for a declaration that a transaction has been made void by the operation of section 127 of the Insolvency Act 1986. A transaction within the scope of section 127 of the Insolvency Act 1986 will be automatically void unless the court orders otherwise – making obtaining a validation order a vital step.

Some examples of circumstances that typically necessitate a validation order are:

Selling major assets – including property, significant stock holdings, or any asset that represents a substantial portion of the company’s value.
Paying debts – as keeping the company operational may require paying wages, utility bills, rent, or other essential expenses. Any payment to a creditor, even if it was due before the petition, needs court approval to ensure equitable treatment of all creditors.
Continuing essential business operations – a validation order may be required to authorise limited ongoing operations that are necessary for the winding-up process or beneficial to maximize the value of the company’s assets.

The Application Process

The procedure on an application for a validation order is set out in the Practice Direction on Insolvency Proceedings at Paragraph 9.11.

First, you must gather the necessary information and evidence to support the application. This should demonstrate the need for the transaction, information as to the company’s financial position in order to assess solvency, the benefit the transaction provides to the company (and potentially creditors) and its compliance with the overall objectives of the winding-up process.

Paragraph 9.11.2 of the Practice Direction sets out that:

Save in exceptional circumstances, notice of the making of the application should be given to: (a) the petitioning creditor; (b) any person entitled to receive a copy of the petition pursuant to rule 7.9; (c) any creditor who has given notice to the petitioner of their intention to appear on the hearing of the petition pursuant to rule 7.14; and (d) any creditor who has been substituted as petitioner pursuant to rule 7.17. Failure to do so is likely to lead to an adjournment of the application or dismissal.

The Court Hearing

The application for a validation order is typically heard at the Court dealing with the winding up petition. At the hearing, the applicant (via their legal representative) must present their case and justify the need for the validation order.

The court will consider the evidence presented and may:

Grant the order: approving the transaction and allowing it to proceed;
Refuse the order: denying the transaction; or
Modify the order: such as approving the transaction with specific conditions.

What factors the Court considers when granting a Validation Order

When deciding whether to grant a validation order, the court considers the following factors:

Benefit to creditors: The court must protect creditors’ interests. The court will assess whether the proposed transaction will benefit creditors or, at the very least, not cause them prejudice.
Company solvency: The court considers the company’s financial position, whether it is able to pay its debts as they fall due or alternatively whether the transaction will further deteriorate its solvency.
Nature of the transaction: The court will look at whether the transaction is part of the company’s ordinary business operations or a special deal that may benefit certain parties over others.
Prejudice to creditors: The court must ensure that the transaction does not unfairly prefer one creditor over another, upholding the principle of pari passu distribution of assets.
Case law: The court will consider existing case law on validation orders to ensure consistency and fairness in its decision-making process.

Risks if you do not obtain a Validation Order

When a company has gone into compulsory liquidation, the liquidator may seek to recover any property that was the subject of a void disposition under section 127(1) of the Insolvency Act 1986

Conducting transactions without obtaining a necessary validation order is therefore risky and can lead to the following:

Transactions voided: the transaction is automatically void, requiring the unwinding of the transaction. A third party may therefore insist on a validation order to prevent the receipt of property subsequently being void.
Challenges by creditors: Creditors can challenge unauthorised transactions, leading to further disputes and delays in the liquidation process.
Personal liability for directors: Directors who authorise or participate in transactions without securing a validation order may face personal liability for breaching their fiduciary duties to the company and its creditors.

Why seek representation?

Given the complexity and potential risk associated with validation orders, seeking professional legal advice is strongly recommended.

Elysium Law can assist you with the following:

Preparing evidence that supports the need for the validation order and demonstrates that the transaction is in the best interests of the company and its creditors.
Advising on procedure and ensuring compliance with all relevant rules and regulations.
Representing the company in court hearings and addressing any challenges from creditors or other stakeholders.
Liaising with liquidators and negotiating on behalf of the company.

Conclusion

Validation orders play a critical role in the administration of companies facing compulsory liquidation as they provide a mechanism for companies to conduct necessary transactions while protecting the interests of creditors and ensuring the orderly winding up of the company’s affairs.

It is vital that companies and their directors understand the significance of validation orders and seek professional legal advice when facing a winding-up petition.

Failure to obtain necessary validation orders can lead to severe legal and financial consequences, including rendering transactions void and potential personal liability for directors.

If your business is facing a winding-up petition or you require guidance on validation orders, CONTACT our team today for a free consultation to discuss your specific circumstances and see how we may assist.

Churchill v Merthyr Tydfil: the Court’s Power to Order ADR

Posted on 27 Sep 202414 Jan 2026 by Ruby Keeler-Williams

The recent Court of Appeal decision in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 has had a profound impact on litigators, given the Court now has the power to compel parties to engage in Alternative Dispute Resolution (ADR).

In this article Ruby Keeler-Williams looks at the background of the matter, considers the decision and looks at the implications going forward.

Background

The case involved a property dispute between Mr Churchill, the Claimant, and Merthyr Tydfil County Borough Council, the Defendant. Mr. Churchill alleged that Japanese knotweed had spread from the Council’s land onto his property, causing damage and diminishing its value. He initiated a nuisance claim against the Council.

However, the Council countered that Mr. Churchill was obligated to make use of their internal complaints procedure before pursuing litigation. They sought a stay of proceedings, aiming to enforce use of this process.

Initial Decision and Appeal

In the first instance, the judge dismissed the Council’s stay application, citing Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, in which it was suggested that the court compelling ADR could obstruct a party’s right to access the court system. However, this decision was successfully appealed by the Council.

The Court clarified that the relevant passage from Halsey which stated that compelling ADR would impose ‘an unacceptable obstruction on their right of access to the court’ was, according to the Court of Appeal, not a ‘necessary step’ in Lord Justice Dyson’s conclusion and therefore was ‘obiter’ and not binding. This was because the issue of whether or not the court had the power to compel ADR was only raised in Halsey during oral argument.

The court went on to clarify that Dyson LJ, in Halsey, was primarily focused on providing guidance on how to assess whether a party acted unreasonably in refusing ADR in the context of a costs order, rather than definitively ruling on the court’s power to mandate ADR

Court can Direct Parties

It was subsequently decided that the Court possesses the power to order parties to engage in ADR, including issuing a stay of proceedings to facilitate such processes.

This authority stemmed from CPR Part 1 and in particular:

CPR 1.4(1) – which sets out the Court’s duty to “further the overriding objective by actively managing cases”
CPR 1.4(2)(3) – which set out that the Court’s active case management included encouraging parties to use ADR if the court considers that ‘appropriate’

The Court’s decision is in keeping with the broader objectives of the Civil Procedure Rules (CPR) and the overriding objective to ensure cases are dealt with justly and at proportionate cost.

In encouraging ADR, the Court is achieving these aims by offering litigants a potentially faster and less expensive alternative to traditional court proceedings.

The Right to a Fair Trial

It is important to note that the Court’s power to compel ADR is not an absolute power. Any order for ADR must respect a party’s right to a fair trial under Article 6 of the European Convention on Human Rights (ECHR).

The precedents considered in coming to this decision included: Ashingdane v United Kingdom, Tolstoy Miloslavsky v United Kingdom and Momcilovic and others v Croatia.

The Court stressed that any limitation on the right to trial must:

Not impair the essence of the right to a fair trial, meaning the ADR process should not unfairly disadvantage or prejudice any party.
Pursue a legitimate aim, meaning the decision to order ADR must be driven by a valid objective, such as promoting a fair, efficient, and cost-effective resolution.
Be proportionate, meaning the benefits of ordering ADR, such as the potential for settlement, must outweigh any potential drawbacks, such as delays or costs.

This approach demonstrates that the Court is under a duty to exercise its authority judiciously.

Broader Implications

Despite Churchill being focussed on the Council’s internal complaints procedure, the decision has much broader implications.

The judgment suggests that courts could order stays for various forms of ADR, such as mediation, early neutral evaluation, or even informal negotiation, as long as the chosen process holds the potential to resolve the dispute.

This reflects the Courts’ growing recognition of the benefits of a move away from a rigid, adversarial approach to litigation towards a more flexible and solution-oriented system.

Practical Guidance for Litigators

Following this decision, litigators need to adopt a more strategic approach to ADR at a pre-action stage.

My recommendations are as follows:

Consider ADR Early – Litigators should advise their clients to explore ADR options before filing proceedings. This should include a consideration of the different ADR methods possible, including any relevant internal complaints procedures where applicable.
Have a robust explanation if you choose to refuse ADR – If your client chooses to refuse ADR, you must be prepared to provide the court with compelling reasons, as such decisions will be scrutinised, especially when parties are legally represented or there is a discrepancy in the parties respective resources.
Understand that the Court does have a discretion – The application of this decision will be fact dependant. The Court will consider factors such as the nature of the dispute, the stage of the litigation, the parties’ conduct, and the specific method of ADR proposed.

Conclusion

Churchill v Merthyr Tydfil County Borough Council signifies a potential turning point, as the Court of Appeal’s decision signals a clear shift toward the Court’s promoting ADR.

If you would like more information regarding ADR, have a dispute you’d like advice upon, or wish to book Richard Gray, our qualified mediator, please contact us.