Expediting commercial resolutions

The introduction in March of optional new procedural rules for commercial disputes at Glasgow Sheriff Court, partly designed as a response to criticisms from the business community that the litigation process was unwieldy, has offered practitioners a platform to engineer a more pliant approach to resolving commercial disputes.

While commercial procedures began informally at Glasgow Sheriff Court in October 1999 when Sheriff Principal Bowen established a separate roll for commercial actions, since the adoption of The Act of Sederunt in March, the essence of the new procedure has been to enable parties to attend as soon as defences are lodged with a view to identifying what the issues are and finding an efficient procedure to resolve them. The new rules provide the flexibility to allow that, giving the sheriff and the parties virtually a free rein to do whatever is expeditious to achieve resolution.

“The timescale of bringing a case to conclusion can be reduced if parties concerned take a sensible approach, but we shouldn’t always equate speed with efficiency,” said Sheriff James Taylor, who along with colleagues Sheriffs Convery, Peebles and Scott, devotes a substantial amount of his time to hearing commercial actions.

“Some cases do require time to be properly prepared – if it was a complicated building contract dispute, parties wouldn’t want a proof eight weeks after the action was raised - but because of the flexibility, if speed is important and parties need an early decision, we can work to obtain that.”

Thus in one action brought at the end of June, where both parties wanted speedy resolution, Sheriff Taylor was able to have evidence heard on September 3rd and 4th. But in general, have firms wholeheartedly embraced the new procedures?

“Some firms are making a great deal of use of the new procedures, but others prefer a more traditional approach. No one has yet provided a good reason for not using the new procedures.

“At the outset there were some comments that new procedures might prove to be expensive. It was thought there would be more hearings than under the Ordinary rules.

“We didn’t accept there would be more hearings, but in response to comments we started making use of conference call facilities.

“Solicitors based outwith the city centre welcome the chance to make use of conference calls, saving on the need to incur travelling time, and even for city centre practitioners there is a considerable time saving in reducing the number of trips to court.”

Informal procedures adopted also include case management by e-mail and the use of spreadsheets instead of traditional pleadings. Hearings in chambers and dispensing with wigs and gowns has helped create a culture of openness in discussions not always evident in the courtroom.

While Glasgow Sheriff Court, through Sheriff Principal Edward Bowen, has led the way in facilitating specialisation of the judiciary, other courts have been reluctant to follow their example. As the profession in the major cities becomes increasingly specialised, the generalist sheriff could begin to look archaic.

“It’s hard to come up with argument against specialisation of judiciary. When I was in private practice it was quite apparent that clients wanted solicitors to be specialised in a subject matter of litigation.

“Solicitors were frustrated if the sheriff wasn’t familiar with the concepts being discussed. One client who, because of the nature of his business, frequently had disputes requiring resolution, chose to litigate in England because he told me he didn’t want to have to educate the judge.”

Initially the new procedures were intended to achieve speedier resolution of complicated disputes but the commercial sheriffs have found straightforward cases have also benefited.

“Because parties have to discuss the issues at an early stage, they get to understand where the other side is coming from, and many cases settle with very little procedure as a result of that.”

In a recent case the parties were able to agree settlement except for one issue and asked Sheriff Taylor if he would be prepared to give an informal view on that issue. He was told about settlement discussions, and agreed to provide an informal opinion on the basis that if settlement wasn’t achieved one of the other commercial sheriffs would have to deal with case thereafter. Under Ordinary rules, the case couldn’t have come before him sooner than 13 weeks after the action was raised.

Parties can also benefit from obtaining a preliminary view as to what the sheriff is likely to decide at the end of the day. In one action, an issue arose which was almost identical to a case earlier in the year. The sheriff gave his previous judgment to the parties, enabling them to know that one would have an uphill struggle or at least know that to succeed he should be prepared to go to appeal.

For Macdonalds litigation department, whose principal source of business is debt recovery, the new commercial procedures are a “godsend”  says partner Tony Deutsch.

“In commercial debt recovery, it was always open to the defender to drag things out, sometimes for up to two years. Now in Glasgow, cases are often finished in under six months.

“With the new commercial court procedures, sheriffs acquire a familiarity with cases. In fairness this did begin to happen in some sheriff courts following the introduction of Options Hearings in 1993; for example in Kilmarnock one sheriff sees the case through the whole process. In most sheriff courts there is not the same continuity and, more over, the sheriff is coming to the case too late to influence the way it is pled.”

For Deutsch, the Glasgow example should act as the spur to a wider process of sheriffs specialising.

“All too often I have appeared in front of sheriffs who have come to the bench with no commercial litigation experience.

“Now under the new rules, Glasgow’s commercial sheriffs can look at the written pleadings at the outset and pick and identify the salient issues at a very early stage. Often one single feature of a case is central to the dispute. In a case concerning a building contract it may be appropriate to establish whether there has been a breach of contract before putting the parties to the trouble and expense of pleading a case on quantum. Often preliminary issues in relation to such matters as jurisdiction which previously could have delayed substantive progress for many months can be got out of the way in a few conference calls.

“The new procedures work best if both parties are prepared to make the necessary effort to focus on the pivotal issues and then proceed to proof as quickly as possible. If you’re a defender’s solicitor engaged in delaying tactics that may be hard.

“While there will always be the need for a general sheriff, in major centres the way forward will be for specialisation and proper case management which allows for sensible time tabling and the use of modern methods of communication. It’s amazing how much can be done on phone or by e-mail, and with the sheriff steering the case, we can save on the all too common scenario of four or five hours out of the office for 10 minutes in court.”

Deutsch criticises what he perceives to be “inertia” in the law, saying the conservatism which inhibits trying anything new comes from three sources: sheriffs, sheriff clerks and law agents.

“The less than wholehearted take up of the new procedures in Glasgow suggests an antipathy to them from amongst the legal profession.  In my view anybody who is a pursuer in a commercial debt action who can make use of Glasgow Sheriff Court’s jurisdiction may be negligent if they don’t raise the action under the new procedures. The curse of commercial litigation has always been the defender whose whole interest and intention has been never to arrive at an outcome. Glasgow’s commercial court is not a very comfortable place for such a person to find themselves.”

Other sceptics voiced fears that the new procedures could prove expensive. Deutsch dismisses that.

These procedures save the client money as the case is done and dusted in far less time.

“Commercial litigation isn’t won or lost by lawyers arguing the toss in court, but by analysing and pleading a case in a way that persuades an opponent, as much as the judge, of the relative strength of you position; that way early negotiated settlements are achieved.

“Most actions in the commercial court now settle before expenses become the major issue, particularly debts in the range of £1,500 to £5,000 which it is vital are resolved very quickly.

“Unfortunately the attitude of many law agents is better the devil you know, they don’t want or are frightened of change. Most court actions are effectively actioned by secretaries who are equally conservative as a group. Commercial actions require a new, slightly different format. One reason for the initial slow uptake may have been that litigation secretaries were not shown what to do.

“I think another aspect of the problem may be that a lot of people don’t think they measure up to the requirements of the new procedures, and lack confidence to face the possibility of a searching examination by a sheriff who may be more knowledgeable about their case than they are themselves.

“Too many are happy when the sheriff is on a treadmill getting through business,with a succession of very junior agents waiting for their two minute slot and then if it goes wrong, the principal can always blame the junior.

“Commercial clients are incredibly forgiving, generally solicitors are dealing with middle management. As long as we remove the problem from their desk, they may be happy to accept relatively slow progress. Clients with no experience of the pace of the commercial court have no reason to expect other than the pace they are used to.”

Karen Buchanan of Kirkintilloch firm Nolan MacLeod agrees that the “new procedures focus the mind of solicitors at an early stage”.

She has been impressed by the commercial sheriffs’ willingness to make use of e-mail to speed up procedures, part of a process which has made them “more approachable”.

“The commercial sheriffs are very pragmatic, they are anxious to resolve issues by becoming familiar with the case and help achieve resolution for clients.”

The issue of expenses remains to be sorted; she suggests a separate regulation is required to clarify fees for hearings held informally.

Like Macdonalds, her clients tend to be pursuers. So is it the case that the rules have been less warmly welcomed by those acting for defenders?

“While it is mainly pursuers that have adopted the new procedures, if defenders have a good defence it should make no difference.

“It can be very frustrating when defenders adopt dilatory defences, for example in a builders’ suppliers case which ends up going all the way to proof. If the sheriff is more pro-active, time wasting can be prevented.”

While they still tend to generally opt for jurisdiction according to domicile, Karen Buchanan would prefer to have a case heard at Glasgow given the choice.

“There is no doubt solicitors appearing in the commercial court need to be well versed in the issues of the case and in commercial law in general.”

From the defenders’ perspective David Doig, partner in Glasgow firm Kidstons, said the introduction of the Chapter 40 procedures has given the pursuer “a huge ability to prepare the case in all the time they want”, while often leaving the defence with a “very much shorter period of time”.

“In the rush to judgment the defender doesn’t have the same chance to hit the ground running. The defender can be faced with an intimidatory hearing in what might be complex commercial matters. They then have a limited period to fully instruct their solicitor. The procedures don’t seem to strike the perfect balance.

“The commercial sheriffs at Glasgow demonstrate a pro-active, modern thinking approach, but they can be persuaded to become narrowly focused on what is relevant. They may compel parties to almost engage in a debate at a case management conference, very shortly after an action is raised. I can see why it is to be done, and there is a huge appeal in sheriffs being bullish in determining specific points, but not at the expense of defenders being able to prepare their case adequately. This can lead to a defender seeking a continuation of a CMC.

“The other difficulty which presents itself relates to determination of the issue of expenses. It is yet to be seen how the Auditor of Court will necessarily determine accounts of expenses under the Chapter 40 rules. For instance, it remains to be seen whether the Auditor will view the case management conferences as options hearings or debates. Even in commercial actions the issue of expenses can have quite a bearing on how matters may be resolved.”