ABA Section of Business Law
ABA Section of Business Law
Business Law Today
March / April 2000
It’s changing, over there
The civil justice system in the UK isn’t what it used to
be
By EDWARD HOOD
You’ve just arrived in England and you’re late for a court appearance: A bad start, but even worse if you don’t know how the system has changed.
You need a briefing. So what I’ve put together here is a brief, informal and practical overview of the new Civil Procedure Rules in England and Wales. I also wish to offer some basic guidance to overseas lawyers and businesses who may become involved in disputes or litigation over here.
Rip it up and start again: It’s a new regime. "My Lord, I appear for the plaintiff in this action" said the eminent Queen’s Counsel as he rose to his feet to address the judge on the morning following the introduction of the long-awaited new Civil Procedure Rules (CPR) in England and Wales. "No you don’t," interrupted the judge, "you appear for the claimant."
At first sight, this exchange would seem to be of no consequence whatsoever, other than perhaps to reinforce the occasionally expressed view that lawyers are pedantic and cannot resist picking an argument, especially when they are being paid for it. However, it heralded the first reported embarrassment of a practicing lawyer facing the wholesale change, in terms of terminology, language, rules, protocols, forms and behavior toward dispute resolution in England. The new regime was introduced by the new rules, which came into force on April 26, 1999. In one fell swoop, that introduction, which encompasses principles drawn from many jurisdictions, consigned several thousand pages of previous rules to oblivion.
Curiously, CPR No. 1 is entitled "The Overriding Objective," which states, "These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly." One might wonder why this very sensible principle had not been enshrined in our rules somewhat earlier. Intended to be a radical overhaul of the rules, principles and archaic language (very few clients knew off hand the meaning of "res ipsa loquitur, inter alia, ex parte, or de minimis lex non curat") that had underpinned the conduct of English litigation for hundreds of years, the primary purpose of the new rules is to improve access to justice and to make the civil justice system more user friendly — although barristers and judges are still "bewigged" in court.
Litigation was also supposed to be less costly and uncertain. Although the system remains adversarial, there is much emphasis on co-operation between the parties both at the early stages of a dispute and during any ensuing litigation. Litigants are actively encouraged to use the courts only as a last resort after all other means of dispute resolution have failed.
In the months preceding the implementation of the new regime, legal journals flowed with dire warnings to lawyers of the consequences of being unprepared for the changes and likely sanctions that would be imposed by the new "hands-on" judge; greater active judicial intervention being another major feature of the rules. However, almost a year later (subject to the inevitable wrinkles that should be ironed out by judicial decision), the general consensus appears to be that the reforms are working reasonably well, although opinion is divided as to whether they are achieving their aim of simplifying litigation and reducing costs.
In the event that the parties fail to settle before proceedings begin, litigation cases are now allocated by the court to different "tracks" according to their financial value and complexity — the small-claims track for disputes involving claims of less than £5,000, the "fast track" for claims of a value between £5-15,000 and the "multi-track" for everything else.
From the perspective of overseas businesses or lawyers dealing with disputes that may end up before the English courts, the importance of the reforms lies not so much in the changes to the detail of existing rules but in the new procedures, mechanisms and sanctions that have been introduced. Set out below are a few key points that should be borne in mind by overseas lawyers and businesses alike.
• Conduct — costs penalties. In particular, the pre-action conduct of the parties will be taken into account when the English court is considering costs and interest awards and penalties. Before the new rules, the court’s usual approach had been a form of "winner takes all" in the sense that the winner at trial would be awarded (most of) their litigation costs against their opponent.
Under the new rules, while the likelihood is that the winner will still be awarded costs in the majority of cases, the relevant rule apparently stipulates that the first consideration for the court when deciding what costs order to make is "the conduct of all the parties," as opposed to who actually won the case. Notably, conduct includes, among other factors, "conduct before, as well as during, the proceedings." Furthermore, conduct also includes "the manner in which a party has pursued or defended his case or a particular allegation or issue" and "whether a claimant who has succeeded in his claim … exaggerated his claim." In other words, pursuing all points regardless or inflating claims can lead to a costs penalty despite victory in the case. Cynics have suggested that this aspect of the new rules was conceived following consultation with the California judiciary.
• Front loading — no more hit and hope. The spirit behind the reforms requires parties to work much harder than before in the early stages of a dispute. The days of issuing a writ (now a "claim form") containing little information and leaving the gearing up of the case until later are firmly over. Litigants should now carry out a thorough investigation and evaluation of their claim from the outset and present their opponent with a detailed letter before action setting out the basis of the claim, its quantum (amount), the reasoning behind it and so on. Evidence to be relied on should also accompany the letter making the claim. The other party is then given a reasonable opportunity to respond.
• Protocols. In cases involving personal injury or clinical negligence, there are "pre-action protocols" in place that specify certain steps the parties are required to take before issuing proceedings in these types of cases. In all other cases, notwithstanding the absence of specific protocols at this stage (their imminent introduction is anticipated), parties are expected to co-operate with each other in the exchange of information and key documents at the pre-action stage.
• Pre-action disclosure — cards on the table earlier than usual. One of the most significant reforms is the ability of prospective claimants to obtain disclosure of documentation relevant to the intended claim before proceedings are afoot. This concept is not entirely new under the English jurisdiction as it had existed for some time in relation to personal injury claims. The new rules have now extended its application to any type of claim.
The aim of the new procedure, in keeping with the spirit of the reforms, is a speedier resolution of disputes, if possible without recourse to litigation. Previously, a prospective claimant would have had little option but to start proceedings without really knowing, until the "discovery" (now "disclosure") stage of the action, what their opponent had up their sleeve by way of adverse evidence that might blow the claim out of the water.
Under the new rules, prospective claimants may be granted pre-action disclosure in cases where such disclosure is desirable to dispose fairly of the anticipated proceedings, avoid the need for litigation or save costs. Obviously, these criteria are very wide and should include all but the most simple cases. However, proceedings between the parties must be "likely" and it is expected that the court will clamp down on speculative "fishing expeditions."
• Pre-action offers to settle — it’s all over before it’s begun. It has always been possible for a defendant to protect their position and make an offer to settle a claim by tendering the sum claimed, paying a sum of money into court or — subject to certain conditions — making a written offer. This would put the claimant at risk of incurring a costs penalty if they rejected the offer and did not go on to recover an amount in excess of the offer at trial.
Under the new rules, it is open to both parties to make a formal offer to settle the claim (commonly known as a "Part 36 offer") and a new mechanism has been introduced to enable a prospective claimant to make such an offer before proceedings have even started. The offer may be in respect of the whole or part of the claim (for example, the amount but not liability). Provided it contains a number of criteria specified in the rules and remains open for 21 days, it is a powerful tool in the hands of a prospective claimant who seeks to achieve a realistic compromise of a claim without litigation.
If the proposed defendant refuses to accept the offer and the claimant goes on to issue proceedings and recover, at trial, an amount in excess of the amount he or she offered to accept (or achieves a more advantageous result in a nonmonetary claim), the court has the power to order the defendant to pay penalty interest on the amount awarded of up to 10 percent over base rate (currently this totals approximately 16 percent as opposed to the usual statutory rate of 8 percent) from the last date the defendant could have accepted the Part 36 offer. The defendant may also be ordered to pay the claimant’s costs, from the last date for acceptance of the offer, on an indemnity (essentially, full) basis rather than the usual standard (partial) basis, together with penalty interest on those costs.
• Summary assessment — pay as you sue. Another entirely new feature of the rules is the very strong probability of the court summarily assessing, and ordering payment of, costs at the end of an interlocutory hearing. In any hearing listed for less than a day, any party who intends to ask the court to order that the costs of the application be paid by another party "in any event" (that is, irrespective of which party ultimately succeeds at trial) must produce to his or her opponent and to the court a schedule detailing the costs being claimed in respect to the work undertaken for that hearing.
Judges are expected to then assess the amount that should be paid in respect to that application at the conclusion of the hearing. The usual order, following assessment, is that those costs must be paid by the paying party within 14 days. This can be problematic in cases in which the paying party’s costs exposure is covered by insurance. Insurance companies can be very slow in processing requests for payment and, since under the majority of policy terms and conditions the insured is primarily liable for any costs incurred but able to claim reimbursement in due course, it may come as a shock to the insured that they must pay up within 14 days but may have to wait some considerable time for reimbursement.
The positive side of the equation is the aim to focus parties’ minds on the costs of litigation, particularly in cases lasting years and involving numerous interlocutory skirmishes. This concept is likely to thwart a previously favored defendant’s tactic of trying to spend a financially weaker opponent into bankruptcy before the case ever reaches trial by endless frivolous interlocutory hearings.
In view of the key changes outlined above and the general shift in culture brought about by the reforms, overseas lawyers and businesses who may become involved in a dispute that may end up in the English courts should ensure that they:
• Take full instructions and prepare full details on the claim at the outset and ensure that a thorough review of the problem is undertaken before any threatening letters are dispatched. As soon as one starts the game in England under the new rules, the detail of the case will be required, parties’ conduct will count in the end result and any litigation is likely to move far more quickly now than it has before.
• Do not issue proceedings, absent emergencies, before a carefully worded letter before action is sent. The letter before action should set out the claim and compensation sought clearly and the other party should be allowed a reasonable opportunity to respond.
• At the early stages of the dispute, consider seeking an application for pre-action disclosure in order to obtain further evidence for the claim and ascertain what ammunition the other party may not have disclosed already, in any reply to the letter before action concerning their defense position.
Do not issue such an application without first requesting the opponent to disclose the evidence on a voluntary basis, specifying the classes of documentation requested, the reasons why the documents are required and stipulating a reasonable deadline for compliance with the request. Otherwise, an adverse costs order may be made against the applicant for failing to give the other party a reasonable opportunity to comply with the request without recourse to the courts.
Those who are potential litigation targets should now be even more careful to ensure that appropriate document-management/retention systems are in place in order to minimize the damage that could be caused if one is suddenly on the receiving end of an application for pre-action disclosure.
Remember, a few fishing expeditions are bound to get through the system allowing the litigious of mind the opportunity to hunt for claims they would not otherwise have dared risked bringing "blind" under the old regime when disclosure was a long way down the track.
• Consider whether a pre-action Part 36 offer is appropriate. The prospective claimant may be prepared to discount the claim to take into account the costs of litigation (in every case there is an irrecoverable element of costs, even where a party has been entirely successful and has conducted itself beyond reproach), as well as the inherent risks in litigation, the drain on management time and general "hassle factor." The financial consequences attaching to rejection of a well-pitched Part 36 offer mean that there will inevitably be more scope than before for resolving a dispute at the pre-action stage.
• If all else fails and the dispute elevates into formal proceedings, bear in mind the new culture of co-operation with one’s opponent in the exchange of information and documentation and getting the case to trial as quickly and cheaply as possible. Although this may appear to be the antithesis of litigation, it is nevertheless the "spirit" behind the reforms and steps taken by a party for purely tactical reasons (as opposed to properly progressing the litigation) will not be looked on favorably by the courts.
• Finally, Part 36 offers should always be very carefully scrutinized and never rejected out of hand without careful consideration and a well-reasoned reply. As well as the financial consequences of wrongful rejection (that is, the very probable costs burden of failing to recover at trial more than the amount offered if a claimant, and for losing at trial for a higher figure than the claimant offered to settle at if a defendant), one of the first questions to be asked by the judge at the case-management conference that is now a feature of all multi-track cases will be whether the parties have attempted to settle the dispute and, if not, why not.
While the court cannot force parties to settle, it can make the litigation experience so uncomfortable for uncooperative participants that the issue of settlement should be kept constantly under review as the action progresses.
Hood is a partner at Berwin Leighton Solicitors in London.
