The Court of Session in Scotland (the Scottish civil high court) has successfully run a busy commercial court since 1994. The Commercial Court was introduced to give businesses a faster, cheaper, and more specialised alternative to the Ordinary Court, and was designed to meet many of the concerns expressed by businesses regarding the lack of speed and increasing expense of litigating in Scotland. Ten years on, the Commercial Court is arguably a victim of its own success, and increasing demands on the Commercial Court timetable now threaten the commercial advantages of this "fast track" option. Practice Note (No 6 of 2004) has therefore been released by the Lord President. It restates the procedure in some respects, and significantly overhauls other areas. The new rules take effect at the start of the new court term (6 January 2005), and one cannot help but suspect that the purpose of the changes is to protect the core aims and objectives of the Commercial Court from being lost in the heavy caseload that Commercial judges are now expected to manage.
The most significant innovation lies in the requirement for pre-action communications (previously unnecessary in Scottish civil court procedure) and the knock on effect that this has on the conduct of the case once raised. Businesses with disputes they intend litigating in the Commercial Court must now make every effort to focus the issues in dispute before raising proceedings, and the Court gives a clear message to the profession that the Commercial Cause procedure is intended only for those matters where a judicial decision is truly necessary as the only way to resolve the disputed issues.
Issues requiring a judicial decision must be "investigated and ventilated" prior to the raising of an action: but what does this mean? The Practice Note gives more guidance. Parties will now be required to prove a chain of correspondence that fully sets out the claim on both factual and legal grounds. Both sides must supply to each other copies of any documents relied upon, not just the expert reports (NB: this is a significant departure: there is no concept of disclosure in Scotland and while this falls short of that, the concept is now introduced, and with cost implications). Solicitors for both sides are expected to give "considered and reasoned" replies, and "may wish to consider" ADR methods. Only cases involving an element of urgency should be raised prior to these careful discussions.
Failure to properly comply with the new rules will hit where it hurts: the pocket. Failure to comply could result in an award of expenses on a "solicitor/client basis" being made against either party for any continued preliminary hearing (the preliminary hearing being the first time when parties appear at court to fully discuss the case). The choice of "solicitor/ client" demonstrates the seriousness with which the Court wishes to make its point. This leaves the offending party liable for the actual costs incurred, rather than the more restrictive "party and party" or "solicitor/ client, third party paying" costs. This could potentially be a hefty penalty if the pleadings require substantial adjustment on both sides.
A new obligatory pre-proof by order hearing (the rough equivalent to a pre-trial review) has also been created by the practice rules. By orders (hearings at the request of the court, rather than by one of the parties) were previously competent in the Commercial Court, but the introduction of a compulsory hearing after the fixing of a proof (a full hearing on fact) or a proof-before-answer (a full hearing with a mix of factual evidence and legal argument being led) is a new innovation. The purpose of the hearing is to determine the parties' state of readiness and the estimated duration of the full hearing. To focus parties' minds, and presumably curtail unnecessary argument, parties are required to lodge a note of all undisputed and agreed facts, any productions and/or updated expert reports and provide a statement of legal arguments (together with a list of authorities) in advance of the pre-proof by order hearing. Implied is the suggestion that any such items lodged after this hearing but before the start of the full hearing may require an explanation to the court, as to why these items were not available earlier.
What does this mean for your business? There have been increasing concerns within the legal profession and Scottish business that the Commercial Court's core aims were being sidelined as a result of the number of cases being squeezed into the Court. Estimated case durations have been soaring, and the current diary is virtually booked solid for the next 10 months, meaning that any new actions cannot realistically hope to be heard in full until late 2005. By introducing the requirement to prove pre-action communications, and using the spectre of a financial penalty, one hopes that this new Practice Note will revitalise this specialist court, forcing some more unwilling solicitors to change their ingrained notions of how to run a dispute.
For further information on the recent changes, including the impact on your business, contact Rob Wilson at [email protected] or on +44 (0) 131 220 7676 or Suzie Lyons at [email protected] or on +44 (0) 131 220 7676 or Alex Green at [email protected] or on+44 (0) 1224 62200.