Business Dispute Resolution Commercial Litigation

· Overview
· Detailed procedure
· Funding

Overview

Commercial Litigation is the processing of a contested claim through the courts, usually the County Court, and less frequently the High Court. The process is governed by the Civil Procedure Rules 1997, which include regulations affecting the timetable of the action. Back to menu.

Detailed procedure

The key stages are summaried in the section below. Select the links below for a description of key stages of a contested claim as it proceeds through the courts.

Pre-action stage
Claim
Acknowledgement
Defence
Alocation to track
Disclosure of evidence
Witness statements
Experts reports
Listing questionnaires
Trials
Costs

Pre-Action Stage

Before the issue of proceedings the prospects for avoiding court action should be explored. This involves attempting to communicate with the other party to the dispute, establishing precisely the reasons for the dispute and, if possible, getting them to divulge evidence that they have in support of their position. Assuming that the dispute is not resolved by good credit control practice or by negotiation, your lawyer will tell you that account should be taken of any relevant pre-action protocol before issuing proceedings. Some areas such as defamation or personal injury have a specific protocol governing the pre-action process, involving setting out the case, providing some evidence and allowing time for discussion. In debt recovery and many other commercial cases there is no specific protocol yet in place, but still the spirit of this 'cards on the table' approach, introduced by the Woolf Reforms, pervades the civil court process and parties can be penalised in costs if they have behaved unreasonably at this stage.

Claim

The claim consists of a claim form incorporating the 'statement of claim' and a breakdown of the sums claimed. This is filled out and sent to the court together with the appropriate fee, see table of fees to find out more. The claim is said to be 'issued' and a claim number is stamped on a copy of the form. The claim form is then served on the defendant, together with a response pack. Usually the claim form is served by the court on the defendant by first class post. It is treated as arriving on the second day after posting. It is also possible to serve the claim by hand or by sending it to the solicitors representing the defendant, if any.

Acknowledgment

The response pack contains a form which the defendant should use to indicate whether they intend to dispute the claim, in whole or in part. If the court receives this form within 14 days of service the defendant is automatically allowed a further 14 days to serve a defence. If the defendant fails to lodge this form at court within the time allowed the claimant is free to enter judgment in default. Judgment will be for the original claim, for the court fee, interest to the date of judgment and a sum for legal costs taken from the Lord Chancellor's scale of costs. The way is then open for the claimant to seek to enforce the judgment (see the options as set out under debt recovery).

Defence

In a disputed case the defendant will serve a defence, often using the admission, defence & counterclaim form found in the response pack. The defence should tell the full story, and should not just be a bare denial. It should also incorporate any technical and legal defence which may be available to the defendant. It is usually sensible to seek legal advice on the content of the defence, even in apparently simple matters. Once the defence is filed at court the claimant will be unable enter default judgment. In some cases the claimant may consider the defence to be so weak that it may be worth considering applying to the court for a summary judgment - a mini-trial without evidence. Apart from this exception, the next opportunity the claimant has for obtaining judgment is likely to be the trial itself.

If the defendant has any claims of their own to make against the claimant, these are included in a counterclaim, otherwise known as a Part 20 Claim. A court fee will be payable as if it were a claim in its own right.

Full regard needs to be had to the principals of law in the case and the need to prove the case to the standard required by those principals. In a claim for breach of contract, for instance, the claim needs to establish that a contract existed, that it was breached and that the loss sustained was reasonably foreseeable and therefore recoverable. If you are only going to seek legal advice once during the course of the transaction, this is the time to do it.

Alocation To Track

Following the Woolf reforms to the civil process which took effect in April 1999 the court takes a very hands-on approach to case management. When exercising this role it has regard to the overriding objective set out in Rule 1 of the new rules. It states that the court's function is to ensure that cases are dealt with justly by ensuring the parties are on an equal footing, that expense is saved where possible and that any preparation should be proportionate having regard to the size and importance of the claim, the complexity of the matter and the relative financial position of the parties. In applying its powers the courts will have regard to opportunities for pushing the parties together - possibly even insisting on staying the case whilst they attempt Alternative Dispute Resolution. Allocation is the first opportunity the court has of exercising these powers.

If the civil process is about achieving justice, it is also an information handling system. Each of the stages is at least partly about determining what information needs to be presented to the trial judge and in what form.

Once the defence is filed the court sends a copy to the claimant along with an allocation questionnaire. Each party should complete an allocation questionnaire within the time allowed by the court. The purpose of the questionnaire is to allow the court to begin planning the timetable which it wants the case to follow on the way to trial. The questionnaire helps to identify the factors which are relevant to allocation to track. The court can allocate the case to one of three tracks, generally on the basis of the value of the claim and the anticipated length of trial and whether any expert evidence is likely to be required. The tracks are the Small Claims Track (claims under £5,000) the Fast Track (£5,000 to £15,000) and the Multi Track (£15,000+). The rules relating to the conduct of the matter vary according to the track to which the matter is allocated. The key factors relate to the treatment of costs and the length of time permitted for the hearing of the case at trial. Of particular significance is the fact that in Small Claims the successful party is unlikely to recover costs. In such a case if seeking legal advice it is important to ensure that the adviser is willing to work for a fixed fee, or in a limited way so that the claimant has access to legal advice which is cost-effective.

Once the court has decided how to allocate the matter, the parties are notified of its decision and a list of directions is sent to them. These directions set out the steps which the court requires the parties to follow between then and the trial. Direction will address the issue of disclosure, witness statements and expert evidence, as well as dealing with the trial timetable itself.

Disclosure Of Evidence

The basic rule governing disclosure is that each party should disclose all relevant documentation, whether helpful or harmful to their case. It's the 'cards on the table' approach again. Failure to disclose documentation is a serious contempt of court with potentially dire penalties. For this reason the list of documents which the parties complete has a standard declaration, which the parties' solicitors will ask them to sign personally, certifying the extent to which they have searched for documents and confirming that there are no documents other than those which have been disclosed of which the party is aware.

Disclosure is a two stage process, consisting first of the exchange of lists of documents and then disclosure of the documents on those lists sometime later. 'Documents' is a term used in the widest possible sense, and will include electronic documents, photographs or recordings. It is one of the most time consuming, and expensive, stages in the litigation process. It is also the most important. A certain degree of tolerance will be needed towards the solicitor who begs more of your time than you are willing to give. Thought needs to be given to the documents disclosed by the other party. Is there anything missing? What documents would you like to see disclosed which have been overlooked?

Witness Statements

The next stage is the exchange of witness statements. The parties will already have considered whom they wish to call as witnesses, and will probably have taken their statements as part of the process of investigating the merits of the claim. Now those statements need to be polished off and signed by the witnesses preparatory to exchange. The parties themselves are witnesses for these purposes. These days the statement is likely to stand as the evidence of that witness in court. The witness will often only be required in court for the purpose of being cross-examined. This way a great deal of time can be saved. It does mean however that the statements need to be thorough since evidence which is not referred to in the statement may not be permitted to be used in court.

Experts Reports

It is up to the court whether to allow expert evidence. Given the expense, it will be allowed sparingly. It should be reasonably required to resolve the action. Any request to be allowed to use expert evidence will usually be dealt with in the allocation questionnaire. The identity of the actual expert of the field of practice will be required. The court will then decide how many experts are allowed, whether they should give oral evidence or a written report only, what process should be followed regarding the questioning of the expert and how their fees should be borne. The court has the power to direct the appointment of a single joint expert and will use this power where the issues are straight forward.

Listing Questionnaire

The final key stage before the trial is the listing questionnaire (though in the multi track there may be a case management conference later). It is the final opportunity for the court to consider progress made to trial. The questionnaire allows the court to review directions relating to expert witnesses, other witnesses, availability and time estimates. The directions on listing which follow are likely to direct how the paperwork should be organised, usually in the form of a single bundle containing the documents from both sides.

Trials

The characteristics of the trial vary widely according the nature of the case and the track to which it is allocated. In the small claims track it is even possible to avoid attendance altogether if you follow the correct procedure. The trial is usually a lot quicker if you are legally represented because care will have been taken to ensure that only relevant material is brought to trial and in the most convenient presentation.

The basic structure is for the claimant to commence the trial with its witnesses whose evidence may be given orally or, as the Judge likes, on the basis of the witness statements. They will then be cross-examined by the defendant. The defendant''s case follows in the same manner. After witness evidence is finished, each party has a chance through their representative to make closing submissions to the Judge. The Judge may give judgment there and then or may adjourn to a later date to consider his/her judgment at greater length. A small claims track case is liable to take three hours or less; a fast track case is supposed to take no more than a day; a multi track case is of indefinite length.

Costs

Costs are always in the discretion of the court. After the Judgment is delivered, the Judge then hears what the parties have to say about costs. Costs will usually be awarded to the winning party, to be paid by the loser. As we have mentioned, in the small claims track, very little is recoverable by way of costs. This is limited to the court fee, solicitors scale costs and a token amount to cover the expense of witnesses attending trial. In the fast track the costs of preparation are awarded on a normal basis (reasonable costs are recoverable) but the trial costs are limited. The costs are likely to be assessed summarily (there and then) and will be payable generally within 14 days. In the multi track costs will have to be referred to detailed assessment.

The winner is unlikely to get all their costs back. This is because most costs will be assessed on the standard basis. On the standard basis any benefit of the doubt as to whether costs were reasonably incurred or reasonable in amount is given to the paying party. Furthermore, costs may be reduced still further by the Judge applying the proportionality rule and after taking into account other factors such as the conduct of the parties, the complexity of the matter and the value of the claim.

Funding

"Naturally we aim to be as flexible as possible on the issue of fees, so long as this is consistent with sound business and commercial considerations."

Funding of legal expenses is a complex issue, and in some areas the law is unclear. The area is very highly regulated. We will guide you through the possibilities and find a solution you are 'happy' with.

It is important to realise that funding should be in place in relation not only to your own legal costs, but also those of your opponent in the event that you lose the action or withdraw the case for any reason. Back to menu.

There are various potential sources of funding and all need to be considered:

· Insurance
· Conditional Fee Agreements
· Legal Aid

Insurance

· Before the event insurance (BEI): legal fees insurance which may be taken specifically or as part of car or household insurance - you should thoroughly investigate this possibility. BEI premiums are not recoverable.

· After the event insurance (AEI): taken out specifically to cover the risk of losing a particular case in court. It may be limited to paying your opponents costs, or extended to include yours as well. The premium may be as much as 20% of the cover you seek. Reasonable AEI premiums will be recoverable in the event of a win. Naturally AEI insurers will only back a very good case. Back to menu.

Conditional Fee Agreements (CFA)

A formal agreement between client and solicitor dealing with the way in which the solicitor will get paid. The usual arrangement is that the solicitor will receive normal fees plus a success fee if successful, and no fees, or reduced fees, if unsuccessful. No satisfactory arrangements are yet in place which would guarantee that the opponent would have to pay the success fee element if you win. Moreover, parties to a CFA will still normally have to fund disbursements (expenses like court fees or barristers and experts fees) out of their own resources as the fees are incurred. Insurance premiums are also required to cover against the possibility that the client is found liable to pay their opponent's legal costs.

Collective conditional fee agreements: as for CFAs but they cover a number of cases as would be appropriate where the solicitor is undertaking large numbers of cases for the same client.

The big drawback with CFAs is finding a solicitor who is both able and willing to fund the conduct of the litigation up until trial without any interim payments. The impact on their cash flow may be prohibitive. Moreover, litigation can be unpredictable and the skill and commitment of the solicitor is only one factor determining the outcome of the case. The solicitor may not feel able to take on the burden of the risk in certain cases. Back to menu.

Legal Aid

We do not deal with legal aid at present. The limits on what types of claim are funded, and the means testing of the benefit almost certainly rule out a successful application for state assistance for the type of work that we do. Back to menu.

Third Party Assistance

For instance an employer or trades union, a friend or family member are all potential sources of funding. They may run the risk of having to pay your opponent's costs, so once again insurance may become important.

Fixed Fee Arbitration Schemes

Some organisations provide free or reduced cost arbitrations to members or in specific types of dispute, usually where standard contractual terms apply.

Why not call for a quote on 01273 403935 or e-mail details to: jastbury@astburys-law.co.uk