Commercial actions in the Court of Session

September 1994 saw the promulgation of new rules for the regulation of commercial actions in the Court of Session.  Those rules, the administrative arrangements which go with them and the spirit in which they have been operated, have led to major changes in the manner in which commercial litigation has been conducted in Parliament House.  The time may be ripe for reflection on what has so far been achieved.

The background

The genesis of the new rules was the 1993 Coulsfield Report in which, after wide consultation, it was reported that there was a reluctance on the part of the business community in Scotland to litigate in the Court of Session - a reluctance based on a perception that procedure there was slow and lacking in expertise.  This led at times to parties to a dispute resorting to another forum, such as arbitration or the English courts; at other times parties simply had to manage their dispute without any practical option of a judicial determination.  That state of affairs effectively denied to potential litigants a Scottish court-based solution to issues of importance affecting the economic life of Scotland.  It was also prejudicial to the development, or even survival, of Scots law.  What was required, the Report concluded, was a speedy and efficient regime for the disposal of business litigation in the Court of Session.

The judges

“Specialisation” is something of an “in” term in modern legal practice.  There may, it is true, be room for argument as to whether disadvantages as well as advantages attend narrow specialisation in particular fields of law.  However that may be, the confidence of modern lay clients in judicial decision-making in the commercial field is perceived to be increased by knowledge that the judges are well versed in that field.  The present arrangements for commercial actions are designed to meet that concern.  Three members of the Court have for some time been nominated as commercial judges; the nomination of a fourth has recently been announced.  All, as counsel, had significant experience of commercial business but, perhaps more importantly, their regular involvement, as judges, in the deciding of commercial issues assists in building up and confirming their expertise.  One of those judges has been nominated as a full-time commercial judge.  He is relieved of High Court trial work and deals with other business in the Court of Session or in the High Court of Justiciary only on those increasingly rare occasions when there is no pressing commercial work to be disposed of.  The other nominated commercial judges act as such on a part-time basis, though the amount of commercial business in the last year or two has resulted in them devoting much of their time to commercial actions.

The disposal

Another “in” expression is “pro-activism”.  It has been one of the more striking features of practice in commercial actions since 1994 that the nominated judges have adopted a pro-active management role in the progressing of cases in the Outer House.  The framework for such an approach is the provision under Rules 47.11 and 47.12 for preliminary and procedural hearings.  Under these rules a wide range of powers are provided, designed to secure that the essential issues in a case are promptly focused and efficiently resolved.  The judges have not construed those provisions narrowly but, in the spirit of them, have encouraged parties to adopt novel or less familiar techniques.  In some cases traditional forms of written pleadings have been largely dispensed with.  By way of example, where complex matters of detail require to be addressed (as in dilapidation disputes under commercial leases), it has been found useful to identify the opposing items of claim by short entries on a computer-generated spreadsheet; these can then be adjusted electronically, allowing the true nature and scope of the dispute to be appreciated at a glance.  Again, where the issue is one, say, of interpretation of a contract, it may be possible to proceed with minimal written pleadings (and little or no adjustment of them) to a very prompt substantive disposal.

More commonly it will be necessary to proceed via a number of preliminary hearings and sometimes, though less often, via a procedural hearing before the case is ready for substantive disposal.  Efficient progress through those preparatory stages demands supervision by a judge familiar with the cases that come before him.  To achieve this, it is the practice for each case to be allocated to a particular judge who will oversee its progress at least as far as the stage where it is ready for final disposal (in the Outer House) by debate or by proof.  Usually, the same judge will hear the debate or proof; on occasion, pressure of business may make it more efficient to transfer the case to another commercial judge.

As practitioners will appreciate, a commercial dispute, while potentially raising a number of issues on liability or quantum, will often include a core issue or issues.  If they are resolved, the rest will follow.  Under traditional procedure all issues, significant and less significant, tend to progress towards a composite resolution at a remote point in time, whether by judicial decision or, more commonly, by settlement at the door of the court.  A recognised advantage of the present commercial arrangements is that they allow the parties to extricate from the mass of issues the core issue or issues which the court can then focus on and resolve separately and relatively quickly.  A core issue may not be one which, according to traditional thinking, is logically prior; it may, for example, be the soundness in fact or in law of a particular head of damages or the applicability of a limitation or exclusion clause.  But, if the efficient disposal of the case is likely to be assisted by dealing with that issue first, the commercial judges will encourage that course.  Regularly they will themselves take the initiative in seeking, with the assistance of parties’ representatives, to identify and focus the core issues.  Experience suggests that after discussion parties will generally co-operate with the court and with each other.  The atmosphere of the court at the preparatory hearings assists in generating such co-operation.  At those stages neither the judge nor any legal representative wears formal court dress.  All sit round the clerk’s table.  The proceedings are conducted more in the nature of a chaired meeting than of a confrontational hearing before a court.  Sometimes clients attend.  On occasion technical experts have been present and participated in the discussion.  While legal representatives have, of course, responsibilities to protect the particular interests of their clients, they are expected actively to assist the progress of the case.  That calls for high standards, including a thorough familiarity with the case and a well-considered view of how it may best be advanced.  Parties’ representatives are also encouraged to have full discussion between themselves prior to any hearing so that areas of agreement and of disagreement can be focused in advance.

The commercial judges insist on frankness on the part of litigants before them.  Subject to the legal requirements of confidentiality or the like, they will insist on the early disclosure of documents which are relevant to the issues in dispute.  When that cannot be achieved voluntarily, the judges will readily exercise their powers to secure it.  On the other hand, they are sensitive to matters of confidentiality in the business sense and will take steps to guard against the undue disclosure of commercially sensitive material.  Nor will they stray into fields analogous to the English procedure of discovery under which, it is believed, commercial organisations may require to sacrifice much time and expense in producing voluminous documentation, much of which is in the end irrelevant to the issues in hand.

The business

The definition in Rule 47.1 of “commercial action” is in wide terms.  It means “an action arising out of, or concerned with, any transaction or dispute of a commercial or business nature” in which the appropriate procedure by election or transfer has occurred.  The related Practice Note gives some guidance on the range of relationships with which a commercial action may be concerned.  Although many of the actions are concerned with contractual relationships, such a relationship is not essential.  Actions may comprise or include claims founded on delict or on statutory obligation or on unjust enrichment.  What is crucial is the commercial character of the relationship - and “commercial” should not be understood in an unduly narrow sense.  While issues arising out of banking and insurance transactions or concerning commercial leases are regularly before the court, less obvious commercial issues have frequently been addressed.  For example, a number of cases have raised points on registration of title; in others, questions under agricultural leases have been considered.  Disputes over the commercial future of Scottish football were ventilated in commercial actions (though, happily, they were resolved without the need for a judicial crash course in the relative mysteries).  Partnership disputes (not least partnership disputes among solicitors!) are fairly regular fare.

Disposal of the business

A primary objective of the procedure is expeditious disposal, subject always to due consideration of the issues.  Some cases are more apt than others for speedy determination.  Best suited for such treatment are disputes where the issue is one of interpretation of a contract or of a statutory provision or where it is otherwise concerned only with an issue of law.  Minimal pleadings will normally suffice and a reasonably early diet of debate should usually be available.  A number of such cases have been raised and disposed of in the Outer House within three or four months.  Cases involving complex features will almost inevitably take longer - but not always.  For example, a case raised early in 1997, involving factual and legal issues of some complexity arising out of contracts for the sale of forward grain, was disposed of, after proof, by judgment in August of that year.

Complexity

Of course, such a timetable is not always possible.  By their very nature, some cases demand so much investigation by the parties and involve such complexity of fact and of law that more time will inevitably be required to focus the real issues and to put in place the arrangements for their resolution.  The preparatory stages are designed to assist parties in focusing the issues and, where there are factual disputes, to effect timely disclosure of documentary and oral material.  The summons and defences will have appended to them a schedule listing the documents founded on or adopted as incorporated in the pleadings (Rules 47.3(3) and 47.6(2)).  These core documents will be lodged at the outset and any other material documentation will usually be exchanged in early course.  Disclosure of non-documentary material is effected by the court ordering lists of witnesses and summaries of their evidence and the lodging of expert reports etc.

Where there are legal issues to be argued (either at debate or after proof) Notes of Argument, with lists of the principal authorities to be relied on, will commonly be ordered.

Those measures are designed to allow litigants to appreciate, at the earliest practicable stage, the strengths and weaknesses of their respective positions.  They should, therefore, enhance the prospects of early settlement (with consequential savings in management and other time).  Where a judicial determination is required, they should reduce the risk of inappropriate surprise.  Experience so far suggests that at least a measure of success has been achieved in this respect.  In 1998, of the cases appointed to debate before the commercial judges, 88% proceeded, the balance being settled or discharged.  The waste in time and expense arising from late amendment or late applications for leave to amend was almost entirely avoided.  Experience with proofs has, in statistical terms, been less satisfactory.  During the same period, of cases appointed to proof, evidence was led at the appointed diet in 42% of them, the balance being settled or discharged.  The percentage in which evidence was led is, however, significantly higher than in non-commercial business; moreover, there appears to be an appreciable trend towards earlier settlement.  Settlement as early as possible is encouraged.  It is to the advantage not only of the particular commercial litigants but also of other litigants seeking diets before the commercial judges.

Use of IT

A significant strength of recent commercial procedure has been the use of information technology.  The judicial diaries of the commercial judges are held on computer and may be accessed from the court rooms in which the preparatory hearings are held.  Accordingly, when, at the close of a hearing, a further hearing requires to be fixed, the clerk can immediately identify when the judge will be available.  After discussion between the judge and the parties’ representatives, the further diet is fixed there and then.  The computer is also used for preparing interlocutors and statistics.

It is difficult for an insider to gauge how satisfied the profession and the business community are with the new arrangements.  There have been at least some indications of satisfaction (not least from litigants): others, who perhaps favour a more traditional approach to litigation, may be less enthusiastic.  If the amount and the character of the business are a useful gauge, there are certainly some indications of success.  The number of defended cases continues to rise.  A wide range of points of law touching on commercial matters have been argued and decided.  There is, of course, always a risk that an arrangement which attracts new business will be a victim of its own success.  There are some indications that the intervals between the fixing and the hearing of substantive diets (of debate or of proof) have recently lengthened.  This will require to be kept under review.

The future

No reliable crystal ball is available.  My impression, however, is that there has been substantial progress towards realising the objectives of the Coulsfield Report.  The arrangements are innovative, both in technical and in management terms.  Innovation is likely to continue.  A further review of the nature and the use of written pleadings may be timely.  There has been some discussion that a proof might be conducted on digital material alone.  On the website shortly to be established by the Scottish Court Service, opinions issued in commercial actions (together with other opinions issued in the Court of Session) are to be published on the Internet.  The commercial opinions will include all those issued since the beginning of 1998.  Further information, including information about personnel, will also be available at the website.

There is much yet to be done; and a widening awareness of what is on offer may bring more cases with new challenges.  Yet, a life, even a judicial life, without challenge would be a dull affair.  

The Hon. Lord Hamilton is presently the full-time commercial judge in the Court of Session