Date 29 May 2009
Welcome to the May issue of Stay Alert.
In this edition, we bring you up to date on recent developments in Commercial litigation and cover the following articles :
- Civil Litigation Costs – Review
Lord Justice Jackson’s review of civil costs promises to be as wide ranging as the Woolf reforms were. We summarise his initial findings below.
- Non-party not allowed to see statement of case
In the first case under CPR 5.4C, the Court refused to allow a non-party to obtain copy statements of case on the grounds that the information contained in those documents was confidential.
- High Court holds that exclusion clause does not apply to deliberate personal repudiatory breach of contract
The Court refused to allow a defaulting party to rely on an exclusion clause which purported to exclude liability for various heads of loss where such loss had been caused by its own deliberate personal repudiatory breach of contract.
We hope that you find this edition of Stay Alert useful and interesting. We value your opinions and always welcome any comments you may have. If you have any feedback on this edition or any suggestions on what you would like us to cover in future, please email Clare Mackay – clare.mackay@salaw.com. We look forward to hearing from you.
1. Civil Litigation Costs – Review
It is just over ten years since the last major overhaul of civil procedure. The Civil Procedure Rules (CPR) were introduced in April 1999 following a wholesale review of the practice and procedure of the civil courts by Lord Woolf. The main driver behind the Woolf reforms was the perceived benefit of encouraging parties to settle at an early stage. However, the civil litigation system remains expensive and has the potential to deny access to justice for a large proportion of people.
Lord Justice Jackson has recently published the findings of his year-long review of civil litigation costs. The purpose of the Jackson review is to make recommendations promoting access to justice at a proportionate cost. A final report is due out at the end of 2009. His preliminary report and final report will, ultimately, be a matter for the Ministry of Justice to accept or reject. However, the report deals with fundamental issues concerning commercial litigation and, if some of the more sweeping ideas are implemented, may have a profound impact on the future of commercial litigation in this country.
The report
Key points arising from the consultation include the following:
- Court fees: Lord Justice Jackson suggests that it is wrong in principle that the entire cost or most of the cost of the civil justice system should be shifted from taxpayers to litigants.
- Commercial Court: Lord Justice Jackson states that recommendations in his final report must encompass all civil courts, including the Commercial Court, but recognises that "one size does not fit all".
- Cost shifting: Lord Justice Jackson invites views as to whether there are any specific areas where cost shifting (or recovery of costs) should be abolished, though he expresses the " tentative conclusion" that it must remain in some form for the generality of litigation.
- Non-recovery of costs by defendants: He invites views as to whether there should be a presumption of "one way" cost shifting, whereby the claimant could recover its costs but the defendant could not, in any types of claim. He expresses the view that this should be seriously considered in personal injury litigation.
- Alternatives to "loser pays": The report proposes consideration of alternative forms of cost shifting, which are more directly based on encouraging early resolution of claims. For example, there might be no presumption that costs would be ordered, but the court would have jurisdiction to award costs based on the conduct of the parties, in particular whether reasonable attempts have been made to settle the proceedings.
- Costs protection for individual litigants: Lord Justice Jackson invites views as to whether the rules should introduce some form of cost protection in favour of individual (as opposed to corporate) litigants. Costs orders against individual claimants (and perhaps also defendants) would be strictly regulated, for example according to the individual's means or the size and nature of the claim.
- Conditional fee agreements (CFAs): Currently, a successful party can recover from its opponent the success fee, or uplift on the solicitor's basic costs (which cannot be more than 100%), payable under a CFA and also the premium taken out to cover potential liability for an opponent's costs (known as "after the event" or ATE insurance). Lord Justice Jackson invites views as to the appropriateness of the levels of success fees and ATE premiums currently set in different types of litigation, and whether these should continue to be recoverable.
- Contingency fees: He also invites views as to whether contingency fees (whereby a lawyer is remunerated by way of a share in the client's damages) should be permitted and, if so, whether the losing party should pay costs on a conventional basis or should also be liable for the contingent element of the fees.
- Costs management: Lord Justice Jackson puts forward various proposals for enhanced "costs management" by the courts, for example requiring parties to file detailed costs estimates or budgets at regular intervals and providing for the court to make various types of cost management orders. He states however that from all the indications he has received to date, it seems that costs management would have no place in the general run of cases in the Commercial Court.
- Summary assessment of costs (whereby costs are assessed at the end of an application by the District Judge or Master and ordered to be paid to the receiving party within 14 days): The report sets out various options, including replacing summary assessment with provisions encouraging judges to order an interim payment on account of costs, or alternatively provisional assessment of costs which would then become final unless either party applied for detailed assessment.
- Part 36 offers: Lord Justice Jackson suggests that serious consideration be given to a rule change to reverse the Court of Appeal's decision in BAA v Carver [2008] EWCA Civ 412 (which allowed a wider interpretation of whether a judgment in favour of a claimant is "more advantageous" than a defendant's Part 36 offer) as it introduces an unwelcome degree of uncertainty into the Part 36 process and puts unreasonable pressure on claimants to accept offers which are not quite high enough.
- Electronic disclosure: Lord Justice Jackson identifies some methods by which the costs of e-disclosure might be controlled, for example by parties paying greater heed to the current provisions for early discussion of issues that might arise and agreement in respect of keyword searches to be used. He asks for feedback on whether any particular approach to e-disclosure has saved (or conversely, wasted) costs in particular cases.
- Disclosure generally: He puts forward wide-ranging options for reform including: making no change to the current disclosure rules; limiting disclosure to the documents on which a party relies (with the ability to seek specific disclosure of further documents); and reverting to the old "train of enquiry" test.
- Witness statements: The report identifies various potential options to reduce the costs associated with witness statements, including imposing costs sanctions for irrelevant evidence, making witness summaries the norm rather than detailed witness statements, confining witness statements to matters that are not within the documents, and stipulating a maximum length for statements.
- Expert reports: The report makes a number of proposals, including for sequential exchange of expert evidence on liability as standard and a presumption that quantum experts be instructed on a "single joint" basis.
- Pre-action protocols: Lord Justice Jackson says that there is a need for a "radical re-think" due to a concern that some of the protocols generate more costs than they save. He sets out a number of points for consideration, including whether the protocols should be made simpler or less onerous, whether some steps can be deferred until post-issue and whether there should be more effective sanctions for non-compliance.
- Docket system for judges: Lord Justice Jackson recommends that a docketing system should be introduced for civil litigation, whereby cases would be assigned to a single judge (or a team of judge and specified master / district judge).
- Trial: The report sets out various options for addressing the costs associated with the trial, including increased judicial control of the evidence and/or timetable, and submission of written openings in advance of trial with no duplication in oral openings, or alternatively a cap on the length of written openings.
The Jackson review is wide reaching and all encompassing and could lead to changes in litigation more profound than the Woolf reforms. In an ideal world, those with sound claims should not be denied access to the courts because of the expense involved. Justice should be inexpensive, but it must also be fair. Lord Justice Jackson's task in finding the right balance between these conflicting objectives is likely to be a long and arduous one.
For a link to the review please click here.
2. Non-party not allowed to see statement of case
In National Policing Improvement Agency v Total Downstream UK PLC and others [2009] EWHC 943 (TCC), an application was heard under CPR 5.4(C)(4)(a) for an order that a non-party should not be allowed to obtain a copy of a statement of case under CPR 5.4C(1).
Background
CPR 5.4C came into force on 2 October 2006. and provides that an individual who is not a party to the proceedings is entitled to access all statements of case filed at court after 2 October 2006 (including the particulars of claim, the defence, any reply and any further information provided by the parties) without obtaining the court's permission to do so and without notice being given to any of the parties.
Grounds for the application
CPR 5.4C does not provide any guidance as to the grounds on which an order preventing or restricting access to court documents may be sought. However, the most likely grounds for making an application of this nature will be that the party believes or anticipates that specific documents, or alternatively, all documents on the court file, contain or may contain confidential or commercially sensitive information. In the above case, the court was prepared to make an order on the grounds of the confidentiality of matters concerning the National Policing Improvement Agency.
Comment
The court has a discretion to grant an order preventing or restricting access to filed statements of case. However, no guidance has been given on how this discretion will be exercised. Given the purpose of the amendment is to further the pursuit of open justice it seems unlikely that orders preventing access will be granted as a matter of course. It is more likely that the applicant will have to show some good reason why the usual position of free access should be overridden.
3. High Court holds that exclusion clause does not apply to deliberate personal repudiatory breach of contract
The High Court has held that there is a rebuttable presumption that an exclusion clause should not apply to a deliberate personal repudiatory breach of contract. In Internet Broadcasting Corporation Ltd (t/a NETTV) and Hedge Funds Ltd ( formerly MARHedge TV Ltd v MAR LLC (t/a MARHedge) [2009] EWHC 844 the Judge held that very clear and strong drafting would be required to persuade a court that the parties intended an exclusion clause to cover a deliberate personal repudiatory breach of contract: pointing to the literal meaning of the words of the clause (for instance, "neither party shall be liable…") was not enough.
Background
In NetTV, the defendant (MARHedge) had wrongfully repudiated its agreement with the claimant (NetTV) and sought to rely on an exclusion clause in the agreement to protect it from liability. The exclusion clause provided that neither party would be liable for a number of different heads of loss, including loss of profit (NetTV's main head of loss). The contract had been individually negotiated and so it was common ground that the Unfair Contract Terms Act 1977 did not apply. Applying the presumption, the Judge found that the clause was ineffective in relation to the defendant's breach because it did not expressly state in very clear language that it was intended to exempt the parties from liability for deliberate wrongdoing, let alone deliberate personal repudiatory wrongdoing.
Deliberate Personal Repudiatory Breach
A repudiatory breach is essentially a breach of contract that is so serious that it entitles the innocent party to terminate the contract – in other words, a breach of a condition or a fundamental which goes right to the root of the contract. MARHedge's decision to walk away from its contract with NetTV with no good reason for doing so was undoubtedly a repudiatory breach in the second sense. Where the defaulting party is a corporate entity, a deliberate personal repudiatory breach of contract will occur where the decision is taken by the relevant controlling mind. In this case, the decision to walk away from the contract was taken by the president of MARHedge, making it a deliberate personal repudiatory breach. This is to be distinguished from the case where an employee of the defaulting party negligently does something which puts the defaulting party in repudiatory breach – there would be no deliberate or personal element in such a breach.
Comment
Over the last 10 years for the Courts have showed a reluctance to interfere in individually negotiated commercial contracts, particularly where the parties are of equal bargaining power. The trend in such contracts has therefore been for the Court to hold parties to the terms that they agreed and signed up to, especially in relation to clauses which seek to exclude or restrict liability for breaches of contract – for example, if goods are delivered late or are not of satisfactory quality. However, as this case illustrates, the Court will strive to hold exclusion clauses to be unenforceable if they leave the non-defaulting innocent party without a substantive remedy and/or if the innocent party cannot insure against the risk. This case therefore serves as a useful reminder that businesses should take a mindful approach to drafting exclusion clauses and be cautious of including widely worded exclusion clauses which purport to exclude all heads of loss in the event of a deliberate personal repudiatory breach. If they wish to do so, extremely clear and unambiguous language must be used.
If you have any questions or require further information please contact Clare MacKay by email at clare.mackay@salaw.com or on 01727 798000.
© SA Law 2009
Every care is taken in the preparation of our articles. However, no responsibility is accepted as being owed to any person or organisation who acts on the basis of information contained in them. You should obtain specific advice in respect of individual cases.