The changing face of the Commercial Court

Update

This post was published on 30 June 2019. On 16 July 2019, the appointment of five new judges to the Court of Appeal was announced. This includes three Commercial Court judges: Carr, Phillips and Popplewell JJ.

The Commercial Court recently published its first annual report for some years. Given the pressure on court staff due to the chronic underfunding of the English and Welsh court system – from which the Commercial Court is not immune[1] – it seems likely that the decision to recommence publication of annual reports now is part of the ongoing drive to attract business to the Commercial Court in an increasingly competitive international market.

The Commercial Court Report 2017-2018 reveals changes in the Court’s constitution and its business. Here are a few interesting snippets:

The constitution of the Commercial Court

At the time of publication,[2] the judges of the Commercial Court were Teare J (Judge in Charge of the Commercial Court), Andrew Baker, Bryan, Butcher, Carr, Cockerill, Jacobs, Robin Knowles, Males,[3] Moulder, Phillips, Picken,[4] Popplewell, Waksman and Walker JJ.[5] This means – although the Report does not comment on this – that there are now, for the first time ever, three female Commercial Court judges, and one Commercial Court judge who is a former solicitor.

Recently retired judges who are still authorised to sit in the Court include Sir William Blair, Sir Ross Cranston, Sir Michael Burton and Sir Andrew Smith. The London Circuit Commercial Court Judge (from 1 July 2019, this will be HHJ Pelling QC[6]) and a number of specialist commercial Queen’s Counsel are also authorised to sit as deputy judges in the Court. Deputies are used only when the parties agree, or when the Judge in Charge of the Commercial Court consider that this is appropriate.

Commercial Court judges, as judges of the Queen’s Bench Division, sit on circuit hearing criminal trials for part of the year.[7] They may also hear cases in the general Queen’s Bench list, the Administrative Court and the Court of Criminal Appeal.

Commercial Court business

The balance of work has changed since the last report was published: international insurance and reinsurance disputes, together with shipping disputes, previously dominated the Court’s time. These remain among the larger categories of business, but now alongside commercial fraud, actions arising out of commercial sale and purchase agreements, and claims relating to banking, financial services and securities transactions. ‘Now the Court sees many more banking and financial services disputes than it used to, and disputes (based either in contract or tort) between high net worth individuals from around the world now provide a considerable share of the Court’s business.[8]

Seventy per cent of cases were international.[9] About a quarter of the claim issued related to arbitration: challenges to awards, applications for injunctions or for enforcement of awards, and other applications including for the appointment of an arbitrator.

Eight hundred and sixty-four claim forms were issued in the Commercial Court[10] in 2017-2018 (slightly down on 2016-2017, when 888 claim forms were issued). There were 57 trials (up from 51 in 2016-2017). The settlement rate was 60%. About half of the trials were under a week in length, 30% were one to two weeks, 16% were three to four weeks, and 5% were over four weeks. The largest claim was for US$3bn and there were over a dozen claims worth over £100m. In addition, many arbitration claims concerned awards for extremely substantial sums, sometimes into the billions of pounds.

The workload of the Financial List, established in 2015, remains at about 15 cases a year – apparently in line with predictions.

Alison Padfield QC

  1. The impact of this on the Court features obliquely in the Report’s introduction. This thanks the Court staff for their ‘very hard work and unfailing help’, which ‘has always been given unstintingly and without complaint, despite the pressure and difficult circumstances under which the Court staff have had to work’ (Report, page 5).
  2. On 27 February 2019.
  3. Males J has since moved to the Court of Appeal.
  4. Since January 2018, Picken J has also been the Presiding Judge of the Wales Circuit.
  5. Report, page 6.
  6. See https://www.judiciary.uk/announcements/specialist-circuit-judge-judge-in-charge-of-the-london-commercial-court-pelling-qc/ (accessed 30 June 2019).
  7. An interesting point of distinction between the Commercial Court, as part of the Queen’s Bench Division (of the High Court) and the Chancery Division (of the High Court), whose 15 judges do not go out on circuit to sit in criminal trials.
  8. Report, page 7.
  9. Report, page 9: ‘A domestic case is one in which the subject matter of the disputes between the parties’ concern property or events situated in the United Kingdom and the parties are UK based relative to the dispute. For these purposes a party is “UK based relative to the dispute” if the part of its business which is relevant to the dispute is carried on in the UK, irrespective of whether it is incorporated, resident or registered overseas. All other cases are “international cases.”
  10. This excludes the Admiralty Court, for which separate figures are kept (see the Report at page 12 for details).

The Third Parties (Rights Against Insurers) Acts (again)

Regulations have just been passed to plug the latest legislative gap inadvertently opened up by the Third Parties (Rights Against Insurers) Act 2010. I have previously written about the need to plug earlier gaps, and the resulting delay in the 2010 Act coming into effect (here, and here).

The Regulations are the Third Parties (Rights Against Insurers) Act 2010 (Consequential Amendment of Companies Act 2006) Regulations 2018.

One of the problems with the Third Parties (Rights Against Insurers) Act 1930, and one of the reasons for reform, was that where the insured defendant is a company which has been struck off the register, a claimant has to restore it to the register for the purpose of obtaining judgment against it. This is because, without judgment against the insured company on liability and quantum, no claim can be made against the company’s liability insurers under the 1930 Act.[1] For cases to which the 1930 Act still applies[2], which include many long-tail disease cases, the company must still be restored to the register; but for cases to which the 2010 Act applies, it is no longer necessary to do this.

In removing a procedural hurdle for claimants, the 2010 Act created a problem for liability insurers. Now, under the 2010 Act, a liability insurer may have to pay an indemnity on behalf of an insured company without the claimant having restored that company to the register. And if a company has not been restored to the register, its insurers cannot exercise their right of subrogation – by bringing a claim in the name of the defunct company – to recover from a third party damages they have paid to the claimant.

It is open to the insurers themselves to apply to court[3] to restore the company to the register – but unlike an application by a claimant in a personal injury claim, to which no time limit applies[4], insurers may apply to restore a company to the register only if it has been dissolved in the previous six years[5].

The 2018 Regulations address this by amending s 1030(1) of the Companies Act 2006. The effect of the amendment is to allow 2010 Act insurers to apply ‘at any time’ to restore a company to the register in order to bring a subrogated claim in respect of the company’s liability for damages for personal injury.[6]

The regulations were made on 2 November 2018. They come into force later this month.[7]

Alison Padfield QC

  1. See Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363, CA; Bradley v Eagle Star Insurance Co Ltd [1989] AC 957, HL.
  2. See Redman v Zurich Insurance plc [2017] EWHC 1919 (QB), [2018] 1 WLR 280.
  3. See s 1029 of the Companies Act 2006.
  4. There was a time limit, but this was removed in 1989 following the decision in Bradley v Eagle Star Insurance Co Ltd in the House of Lords: see ss 651 and 653 of the Companies Act 1985, as originally enacted and as amended.
  5. See s 1030(4) of the Companies Act 2006.
  6. The 2018 Regulations are made under s 19(8)(a) and (9) of the 2010 Act.
  7. On the 21st day after the day on which they were made: see reg 1.

No limits? Non-party costs against insurers

The jurisdiction to make a costs order against a non-party was first recognised in 1986.[1] There is now a wealth of guidance on non-party costs, including well-developed principles in relation to insurers, although the appellate courts continue to emphasise that this is an exercise of discretion, and that these are guidelines, ‘not… a rule-book[2]. This means that, as new factual scenarios arise such as the PIP breast implant litigation[3], the boundaries of non-party costs orders against insurers continue to be tested.

Basic ingredients

The basic ingredients for a non-party costs application are that:

  • An insurer has funded litigation
  • The litigation has been lost and an adverse costs order has been made against the insured
  • The insured is unable to pay the costs

Jurisdiction

The jurisdiction to make an order for costs against a non-party costs arises under s 51of the Senior Courts Act 1981. This provides that costs in civil proceedings are ‘in the discretion of the court’, and that the court shall have full power to determine by whom and to what extent the costs are to be paid.[4]

‘Exceptional’

Balcombe LJ said in Symphony Group plc v Hodgson[5] that an order for payment of costs by a non-party will always be ‘exceptional’, but this is liable to mislead in the context of applications for non-party costs orders against insurers. As Phillips LJ said in T G A Chapman Ltd v Christopher[6] in relation to liability insurers, it must be rare for litigation to be funded, controlled and directed by a third party motivated entirely by its own interests, and although this is not extraordinary in the context of the insurance industry, that is not the test. The test is whether these features are extraordinary in the context of the entire range of litigation which come before the courts – and Phillips LJ said that he had no doubt that they were.

Solely or predominantly

Phillips LJ referred in Chapman v Christopher to a third party motivated ‘entirely’ by its own interests, reflecting the facts of that case. But in most cases, a liability insurer can credibly say that it is acting at least partly in the interests of its insured, and in Cormack v Excess Insurance Co Ltd[7], the Court of Appeal made clear that that is not sufficient to prevent a non-party costs order being made. In Cormack v Excess, Auld LJ referred[8] to what Sir Wilfrid Greene MR said in Groom v Crocker[9] about insurers being entitled to decide how to conduct the litigation provided that they did so in what they bona fide – in good faith – considered to be the common interest of themselves and their insured, and said that it might be sufficient for a finding of exceptionality that an insurer’s self-interest, though not its exclusive motivation (or effect) in its conduct of litigation, predominated over that of the insured to such an extent and in such circumstances that it strayed beyond this.

Auld LJ said that it was relevant to ask whether the insurer, when its insured was approaching or at risk of exceeding the limit of his indemnity cover, behaved solely in its own interest as if it were the defendant to the proceedings. It is important to recognise that, as Auld LJ said, this issue is distinct from the question of the reasonableness or justification of a tactical decision in litigation, such as whether to pursue or maintain a defence to an action. Once the defence has failed and an application for non-party costs is being considered, those are irrelevant considerations.

‘The’ real party or ‘a’ real party

The non-party need not be ‘the’ real party to the litigation; it is enough that they be ‘a’ real party. In Dymocks Franchise Systems (NSW) Pty Ltd v Todd[10], Lord Brown said[11]:

Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party’s costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is “the real party” to the litigation… Consistently with this approach, Phillips LJ described the non-party underwriters in T G A Chapman Ltd v Christopher… as “the defendants in all but name”. Nor, indeed, is it necessary that the non-party be “the only real party” to the litigation…, provided that he is “a real party in … very important and critical respects”’.

Liability insurance

Liability insurers invariably fund and take over the defence of the proceedings, and benefit from them, but something more than this is required for a finding on an application for non-party costs that the non-party liability insurer has not merely funded the proceedings, but substantially also controlled or at any rate was to benefit from them so that it is appropriate for an order to be made.

(1) Controlling the litigation

In Citibank NA v Excess Insurance Co Ltd[12], Thomas J said[13] that there were two aspects to the conduct of litigation:

  • First, obtaining information to draft the defence, instructing an expert, considering the statements of case, disclosure of documents, preparing witness statements, providing information to counsel, etc.
  • Secondly, the giving and receiving of advice and the taking of the decisions as to whether to defend the case through to trial or to attempt to settle the litigation.

Thomas J said that although the involvement of the actual defendant in the first of these activities was a factor, ‘the decisive factor as to who has the conduct of litigation must be the control and direction exercised through the giving and receiving of advice and the taking of the decisions’.

(2) Benefitting from the litigation

Where a defence is run sensibly and reasonably for the benefit of both the insured and insurers, and the court is unlikely to view the insurer as benefiting from the litigation to the extent required for a non-party costs order, and is unlikely to exercise its discretion to make an order in that situation. Simply benefiting from the litigation is not enough: this is why the issue of whether insurers have allowed their interests to predominate over that of the insured is so important in this context. Consider for example the facts of two of the cases referred to above:

  • Chapman v Christopher: The defendant, Mr Christopher, lived at home with his mother and had no assets. He did though have liability insurance with a limit of indemnity of £1m under his mother’s household insurance policy. The claimants’ warehouse and factory were extensively damaged in a fire which was caused by Mr Christopher’s negligence: he had thrown a lighted match which landed in an open tin of beeswax which immediately caught fire. The insurers were the defendants in all but name: by reason of the Third Parties Rights Against Insurers Act 1930, they were contingently liable to the claimants up to the policy limit of £1m. They took the decision to contest the litigation and subsequently conducted the defence, in an attempt to avoid or reduce their liability to the claimants. Phillips LJ described this as a ‘paradigm case for the exercise of the court’s discretion under s 51 to make a costs order against a non-party’.
  • Cormack v Excess: The insured were civil engineers with a reputation to protect, and the Court of Appeal accepted that the decision to defend was not taken entirely by the insurer, and that, until liability was determined, the proceedings were not defended solely for the benefit of the insurer. However, once liability was determined, and the judgment exceeded the limit of indemnity, the proceedings in relation to quantum were defended entirely for the benefit of the insurer. The insurer was ordered to pay the claimant’s costs of the quantum stage of the action.

(3) Conflict of interest

Where solicitors are on the record for the insured in proceedings, and are acting under a joint or dual retainer for the insured and for the liability insurer, it seems that a failure to recognise or deal appropriately with a conflict of interest, and as a result to allow the interests of the insurer to predominate over those of the insured, will strongly incline a court to exercise its discretion in favour of making a non-party costs order.

XYZ v Travelers

In XYZ v Travelers, the PIP breast implant litigation, the insured went into insolvent administration. A mixture of insured and uninsured claims were being pursued in group litigation, and the effect of the Group Litigation Order (‘GLO’) was that the more uninsured claims which were pursued, the lower the proportion which the insurer would have to contribute to the insured’s liability for common costs. The insured wanted to disclose to the claimants whose claims were uninsured that that was the case, but were advised by the legal team appointed by insurers not to do so. There was a conflict of interest, which no one recognised at the time. The Court of Appeal said that this was not decisive, but they did agree with the judge that a non-party costs order should be made.

(1) ‘Asymmetry’

One particular feature which made the case ‘exceptional’ was the ‘obvious asymmetry’ in insurers’ position: if the insured had succeeded on the preliminary issues then all claimants (whether insured or uninsured) would have been liable equally to contribute towards the insured’s costs which, ultimately, would have been to the insurer’s advantage; but failure on those very same issues meant that, unless a non-party costs order was made, insurers were ultimately liable for only approximately 32 per cent of the claimants’ costs. This asymmetry arose because of the terms of the GLO.

(2) Non-disclosure of the insurance position

In Cormack v Excess, Auld LJ said[14] that as there was no obligation in litigation to disclose the limit of indemnity, it was difficult to see why an insurer should be penalised in costs for not doing so, and that a court should be cautious before regarding a failure to disclose the extent of cover as sufficiently exceptional to justify the making of a non-party costs order. In Travelers v XYZ, while they based their decision on the asymmetry they identified between the position of the claimants and the insurers referred to above, the Court of Appeal identified a number of reasons why Auld LJ’s observation did not apply:[15]

  • It was not alleged in Cormack v Excess that the failure to disclose the cover limit had any causative effect on costs. In Travelers v XYZ, by contrast, the judge was satisfied that, if the lack of insurance had been disclosed, costs would not have been incurred.
  • The non-disclosure in Cormack v Excess was the cover limit. The non-disclosure in Travelers v XYZ was the non-existence of any insurance at all.
  • The policy itself and the pre-action protocols in Travelers v XYZ required any response to a letter of claim to include details of the insurance policy.

Underlying and linking all these points seems to be a single factor, which is that the claims, both insured and uninsured, were subject to a GLO:

  • The GLO gave rise to the asymmetry in relation to the recoverability of costs
  • The GLO gave rise to the conflict of interest between insurers and the insured about the desirability of disclosing the fact that some of the claims were uninsured, and in turn to the flawed advice given to the insured by the legal team not to disclose that fact
  • The GLO formed the basis for Thirlwall J’s case management decision[16] that the insured should provide her with information about its insurance position
  • The GLO resulted in the common issues of both insured and uninsured claims being tried together, so that the insurers were funding the costs of defending all the claims, including the uninsured claims

Against this background, although the information about the insurance position provided to the judge was not disclosed to the parties, the Court of Appeal said that it must have been obvious to the insured and to insurers that the perception of the uninsured claimants was that all of the underlying claims were insured.[17] In these circumstances, it is unsurprising that the Court of Appeal decided that ‘on balance’ the flawed advice given by the legal team appointed by insurers in relation to the disclosure of the insurance position was relevant to the insurers’ liability for costs, although not decisive, and that it was not unjust for the insurers to bear some responsibility for the advice given under the joint retainer[18].

BTE insurance

The same principles apply in relation to before the event (‘BTE’) legal expenses insurers as to liability insurers. Unlike liability insurers, BTE insurers will not usually control the proceedings, or have an interest in the result of the litigation save insofar as it affects their liability to pay costs. They are therefore not generally balancing their interests with those of the insured, and will not usually be exposed to a risk of a non-party costs order.[19]

ATE insurance

After the event (‘ATE’) legal expenses insurance has features which are distinct from BTE insurance: ATE insurers decide which cases to insure after the cause of action has arisen, and the recoverability of the policy premium may depend on the outcome of the litigation.

In Herridge v Parker[20], Mr Recorder James Thom QC, sitting as a judge of the County Court, held[21] that ATE insurance was in the public interest as it facilitated access to justice and that, by analogy with the case-law in relation to solicitors acting under conditional fee agreements, an ATE insurer would not be ordered to pay costs as a non-party simply by virtue of issuing a policy which was insufficient, either because the policy was avoided, or because the limit of indemnity was exceeded.

The judge also observed that an ATE insurer who chose to prolong the proceedings for the purposes of seeking to negotiate a favourable exit might well be acting in a sufficiently self-interested way to become a ‘real party’. In those circumstances, a non-party costs order might be made against the insurer in respect of the additional costs. The same logic would apply if a BTE insurer acted in this way.

Subrogated claims

Where insurers have funded a subrogated recovery, they will usually pay the costs if the action is unsuccessful. But if they do not, an application for a non-party costs order may be made against them, and the same principles applied as on an application against liability insurers. ‘What has been sauce for the goose would have been sauce for the gander’, as Phillips LJ said in Chapman v Christopher, in which although the focus was on the position of the liability insurers who had funded the unsuccessful defence, both parties were ‘litigants in name only’, as the claim itself was brought by underwriters exercising subrogated rights.

Alison Padfield QC

  1. In Aiden Shipping Co Ltd v Interbulk [1986] AC 965, HL.
  2. Petromec Inc v Petroleo Brasileiro SA Petrobras [2006] EWCA Civ 1038, para 10 (Laws LJ); Travelers Insurance Co Ltd v XYZ [2018] EWCA Civ 1099, para 30 (Lewison LJ; Patten LJ agreeing).
  3. Travelers Insurance Co Ltd v XYZ [2018] EWCA Civ 1099.
  4. Section 51(1) and (3).
  5. Symphony Group plc v Hodgson [1994] QB 179, CA.
  6. [1998] 1 WLR 12, CA.
  7. [2002] Lloyd’s Rep IR 398, CA.
  8. At 406, cols 1 to 2.
  9. [1939] 1 KB 194, CA.
  10. [2004] UKPC 39, [2004] 1 WLR 2807.
  11. At para 25.
  12. [1999] Lloyd’s Rep IR 122.
  13. At 133, col 1.
  14. At 406, col 2.
  15. At para 44 (Lewison LJ; Patten LJ agreeing).
  16. XYZ v Various [2013] EWHC 3643 (QB).
  17. At para 42 (Lewison LJ; Patten LJ agreeing).
  18. At para 45 (Lewison LJ; Patten LJ agreeing).
  19. See Murphy v Young & Co’s Brewery [1997] 1 WLR 1591, CA.
  20. [2014] Lloyd’s Rep IR 177.
  21. At paras 89-96.

BILA lecture – No limits? Non-party costs orders against insurers

On 20 July 2018, I will be giving a lecture to the British Insurance Law Association on non-party costs orders against insurers. These orders can be made under s 51(3) of the Senior Courts Act 1981.

In the lecture, I will be explaining and discussing:

  • The courts’ jurisdiction to make costs orders against non-parties under s 51(3)
  • Situations where liability or legal expenses insurers may be at risk of non-party costs
  • The impact of policy limits
  • Non-party costs and the Third Parties (Rights Against Insurers) Acts 1930 and 2010
  • The insurer’s conduct and the incurring of costs
  • Recent case-law including:
    • Travelers v XYZ [2018] EWCA Civ 1099 (liability insurers)
    • Herridge v Parker & Allianz [2014] Lloyd’s Rep IR 177 (legal expenses insurers)

Do come along if you can. After I’ve given the lecture, I’ll write a blog post on this topic.

[***Update: the blog is now here.***]

Alison Padfield QC

What’s the latest in the Commercial Court? Oral evidence in chief (possibly) and more

The report of the March 2018 meeting of the Commercial Court Users’ Group has just been published.[1]

In short:

Preparations for the disclosure pilot continue, with a likely start date of the end of 2018 or start of 2019. A new working party will consider the use of witness statements in the Commercial Court and whether, for example, there should be provision for some (limited) examination in chief on key issues. Practitioners should be aware of the Court’s Practice Direction on Electronic filing of applications to be dealt with without a hearing issued on 1 February 2018. Statistics suggest the number of cases issued is fairly stable. In arbitration claims, appeals on a point of law under s 69 of the Arbitration Act 1996 and challenges to the award on grounds of serious irregularity under s 68 rarely succeed.

In more detail:

(1) Practice and procedure

Key points of interest to Commercial Court practitioners:

Disclosure review:

The consultation has been completed and the Rules Committee will consider the results in April/May 2018.

The proposal is for a two-year pilot in the Business and Property Courts in London and on Circuit. There will be an opportunity for feedback and ongoing monitoring and development: the aim is that the proposals will be shaped and fine-tuned during a ‘living’ pilot.

The start date for the pilot is the end of 2018 or start of 2019.

Witness statements vs oral examination in chief:

A new working party is to be put together, with representatives from different interest groups, to consider the use of witness statements in the Commercial Court and possible improvements, such as whether there should be provision for some limited examination in chief, and whether this should be addressed at the Case Management Conference, or would require consideration at the Pre-Trial Review. The proposal is not for not blanket oral examination in chief.

Popplewell J told the meeting that this issue was being raised because there was a fairly widespread feeling that in this area witness statements were not saving costs, let alone representing ‘best evidence’, in contrast with good evidence in chief which is compelling and often best evidence. It was also felt to be unfair on good witnesses that they put in a statement and then faced cross-examination without any opportunity to tell their story live.

Knowles J reminded the meeting that the parties could put forward imaginative solutions at the CMC, such as live examination in chief about a key meeting, and that this would provide a way of seeing what the system was already capable of and evaluating possible routes to reform.[2]

Other points of interest:

  • Electronic filing of applications to be dealt with without a hearing: Applications on CE file which do not comply with the Practice Direction on Electronic filing of applications to be dealt with without a hearing issued on 1 February 2018 will be rejected. Both the content of the Practice Direction, and its tone, make clear that judicial patience has run out: it concludes (the last sentence is in bold in the original): ‘The Judges and staff will no longer root around in the event log trying to find the relevant material, as they do at present. Non-compliant applications will simply be rejected.
  • Commercial Court Guide: A new hard copy is likely to be available in early summer.
  • Shorter and Flexible Trials Schemes: These are currently being reviewed with a view to making them permanent once the current pilot scheme expires in October.

(2) Statistics

The latest statistics suggest that the level of claims issued is fairly stable, at least by reference to recent years.

In arbitration claims, the statistics suggest that permission to appeal on a point of law under s 69 of the Arbitration Act 1996 is granted in a reasonable proportion of cases, but that appeals rarely succeed. Similarly, successful challenges to the award on grounds of serious irregularity under s 68 are rare (statistics for successful applications for permission under s 68 do not appear in the report).

Claims issued:

  • Arbitration:
    • Claims under s 69 of the Arbitration Act 1996 (appeal on point of law):
      • 2017 (to date): applications for permission: 10 of 56 granted; appeals: one successful
      • 2016: applications for permission: nil[3] of 46 granted; appeals: nil successful
      • 2015: applications for permission: 20 of 60 granted; appeals: four successful
    • Claims under s 68 of the Arbitration Act 1996 (challenging the award: serious irregularity):
      • 2017 (to date): 47 challenges; nil successful
      • 2016: 31 challenges; nil successful
      • 2015: 34 challenges; one successful
  • Commercial and Admiralty Court:
    • 2017: 987 cases issued[4]
    • 2016: 1003 cases issued
    • 2015 1090 cases issued[5]
  • London Circuit Commercial/Mercantile Court:
    • 2017: 203 cases issued
    • 2016: 180 cases issued
    • 2015: 209 cases issued[6]

Trials: 168 Admiralty and Commercial trials were listed in 2017. Fifty-eight of those took place, which represents a settlement/adjournment rate of 65%.

Applications:

  • 509 applications were listed for hearing in the Admiralty and Commercial Court in 2017, and 420 of those stood up.
  • 4,878 applications were dealt with by a judge on documents:
    • 4,646 Commercial
    • 124 Financial List
    • 108 Admiralty

Lead times:

Updated lead times are published on the Commercial Court website.

As at 13 March 2018, the date of the meeting:

  • Applications: half a day: April 2018; a day: June 2018
  • Trials: 1-2 days: September 2018; 2-3 days to a week: October 2018; longer hearings from January 2019 onwards.

Alison Padfield QC

  1. The meeting was on 13 March 2018.
  2. The current practice is set out at paragraph H1.6(b) of the Commercial Court Guide (10th Edition, 2017): ‘In an appropriate case the trial Judge may direct that the whole or any part of a witness’s evidence in chief is to be given orally. This course may be taken on the Judge’s own initiative or on application by a party. Notice of an application for such an order should be given as early as is reasonably convenient. It is usually reasonable for any such application to be made at a pre-trial review if one is held.’
  3. This is the figure stated in the report, although it seems low compared to both 2015 and 2017 to date.
  4. By way of comparison, in 2010, 1,100 claims were issued in the Commercial Court and 190 in the Admiralty Court; these figures were a decrease of 16% on 2009: see Judicial and Court Statistics 2010, pp 129-130.
  5. The report says that this figure reflects the spike that occurred before the April 2015 filing fee increase: in March 2015, there were three times the usual number of cases filed.
  6. See the previous footnote.

Expedition in the Commercial Court

There are words which have a meaning in the law which is different, and usually more prosaic, than their ordinary meaning. Expedition is one such word. An order granting expedition of a trial is of course nothing more than an order that it should take place sooner than it would if it were listed to come on for trial in the ordinary way.

The Commercial Court Guide[1] provides that the Commercial Court is able to provide an expedited trial in cases of sufficient urgency and importance,[2] and that a party seeking an expedited trial should apply to the Judge in Charge of the Commercial Court on notice to all parties at the earliest possible opportunity.[3] The application should normally be made after issue and service of the claim form but before service of particulars of claim.[4]

No further guidance is given. A summary of the relevant principles in a judgment of the Commercial Court is therefore welcome. In Apache Beryl I Ltd v Marathon Oil UK LCC[5], Males J heard an application in mid-August 2017 for an expedited trial to take place at the beginning of the next term, which was then in two months’ time or less, with a view to judgment being given, or at least a decision being given if possible, before 21 October 2017. The claimant’s position was that without a decision by 21 October 2017 as to its rights and obligations under an agreement with the defendant, it was likely to lose the benefit of a put and call option in which that was the longstop date.

Males J said that it was agreed between the parties that the decision whether to order expedition was discretionary, and that there were four factors to be taken into account:[6]

  • A threshold question of whether objectively there was urgency
  • The state of the Commercial Court list
  • The procedural history including delay by the applicant
  • Whether there would be any irremediable prejudice to the respondent

Of these, he said, the fourth factor – which might also be referred to as the good administration of justice or whether a fair trial was possible – was the most important.[7] Males J referred to the decision of the Court of Appeal in W L Gore & Associates GmbH v Geox SpA[8] for the principle that the Commercial Court seeks to assist commercial people in resolving their disputes, but does so in a way which is consistent with the interests of others and with justice and fairness, so that a critical matter in deciding to order expedition is whether a fair trial is possible.[9] If a fair trial is not possible, it necessarily follows that an unfair trial should not be ordered. On the other hand, if a fair trial is possible and there is a prospect that the court can accommodate it, the approach set out in Gore v Geox would strongly encourage the court to do so.[10]

Males J decided that a fair trial was possible and ordered an expedited trial starting on 16 October 2017, ie two months later. His assessment of the four factors inevitably depended on the facts of the case, but certain of his observations have wider relevance:

(1) The judge was willing to approach the application on the basis that it might but would not necessarily be necessary to stand out from the list another case which had been fixed for a considerable time. He recognised that if one of those trials was to be vacated, this would be at considerable expense to the parties in whatever case was selected, and that would no doubt leave them with a real and justified sense of having been unfairly treated.[11]

(2) The claimant had known about the longstop date of 21 October 2017 since December 2016, but sought expedition only in August 2017. Proceedings were started in mid-May but expedition was not sought at that stage as it could have been and should have been in accordance with the Commercial Court Guide. To some extent, the judge found, this was a deliberate, tactical decision by the claimant not to apply for expedition, although he also accepted that there was a hope that matters could be resolved by agreement and that it was only after a lengthy meeting on 31 July 2017 that it became apparent that this hope was to be disappointed.[12] The procedural history was therefore a factor against expedition, but not a decisive factor; it would be ‘disproportionately penal’ to refuse the application on this ground if it was otherwise appropriate to order expedition.[13]

(3) Particulars of Claim, a Defence and a Reply had been served together with various requests for information, and the defendants proposed to serve a Rejoinder. The judge said that the pleadings tended to make the dispute appear more complex than it really was, and that what was needed was a succinct and clear statement of each party’s position on the key issues.[14]

(4) Disclosure had not taken place, and the judge observed that this was case in which disclosure was likely to be limited – possibly to documents which each party relied on with scope for specific requests where necessary and possibly some disclosure on one particular issue which he identified.[15] There would be some factual and expert witness evidence, but this was likely to be limited.[16

(5) Urgent directions needed to be given, and the judge said that he would hold a case management conference the following day.[17]

Alison Padfield

  1. Admiralty and Commercial Courts Guide (10th Edition, last updated September 2017).
  2. Para J1.1.
  3. Para J1.2.
  4. Para J1.2.
  5. [2017] EWHC 2258 (Comm).
  6. Para 11.
  7. See paras 11-12 and 23.
  8. [2008] EWCA Civ 622.
  9. See paras 12-13.
  10. Para 23.
  11. Paras 19-20.
  12. Para 21.
  13. Para 22.
  14. Paras 26-27.
  15. Para 28.
  16. Para 28.
  17. Para 31.

A tale of two solicitors – a new twist on inadvertent disclosure of privileged documents

A recent decision of the Court of Appeal makes a good subject for a short, end-of-term post about the equitable discretion – now codified in CPR 31.20 – to restrain the use of a privileged document which has been disclosed in error.

In Atlantisrealm Ltd v Intelligent Land Investments (Renewable Energy) Ltd,[1] the Court of Appeal added a ‘modest gloss[2] to the principles it had formulated in Al Fayed v The Commissioner of Police for the Metropolis[3] and applied in Rawlinson & Hunter Trustees SA v Director of the Serious Fraud Office (No 2)[4] in relation to CPR 31.20. The gloss extended the principle from the solicitor who first reviewed disclosure, and who did not appreciate that a document had been disclosed in error, to his ‘more percipient’ colleague, who did. The Court of Appeal also rejected the suggestion that where the mistake as to disclosure is made by a very junior lawyer, that lawyer has to give evidence in order for the principle to apply.

CPR 31.20 provides: ‘Where a party inadvertently allows a privileged document to be inspected, the party who has inspected the document may use it or its contents only with the permission of the court’. In Atlantisrealm, a junior lawyer made a mistake in categorising an email, labelling it disclosable rather than either privileged or requiring review by Mr Cook, a more senior lawyer. The email was disclosed and subsequently inspected. Mr Fallon, a solicitor for the opposing party, Intelligent Land, reviewed the disclosure but did not spot the mistake. He then had a meeting with another solicitor for Intelligent Land, a Mr Newton.

The email was then sent to witnesses for comment, before Mr Newton sent an email to Mr Cook about arrangements for a settlement meeting, which concluded: ‘I don’t know if you have started your consideration of disclosure yet? The email below will be of interest to you.’ The email, while not fatal to the disclosing party’s case, provided useful ammunition in relation to the issue of contractual construction, and in particular the parties’ shared subjective understanding.

Mr Cook responded immediately, saying that the email was privileged and had been disclosed inadvertently, and requesting its deletion. Mr Newton refused, and Atlantisrealm applied under CPR 31.20 for an injunction prohibiting Intelligent Land from making use of the email.

Mr Cook explained in a witness statement how the disclosure exercise had been carried out. Jackson LJ said that the account of how disclosure had been carried out was in line with what one would expect in any case where people, rather than machines, were carrying out the disclosure exercise: a small team of trainees and junior lawyers carried out a preliminary sift. They identified documents which were obviously disclosable or obviously privileged and referred up to the Mr Cook any documents about which they were unsure. One of the young lawyers made a mistake, putting the email into the ‘disclosable’ category, when he or she ought to have classified it as privileged or referred it to Mr Cook

In Jackson LJ’s view, and in disagreement with the judge below, the fact that the junior lawyer who made the mistake did not give evidence was irrelevant, because it was ‘perfectly clear’ what had happened: ‘Neither [the responsible solicitor], nor the relevant partner, nor the client ever took a considered decision to waive privilege’ in respect of the email, which appeared in the list of documents ‘purely as the consequence of a mistake made by a junior lawyer’.[5] This was therefore a case of inadvertent disclosure within the meaning of CPR 31.20.

The Court of Appeal accepted that the evidence showed that Mr Fallon, the first solicitor to review the documents, had thought that the email had been disclosed deliberately, because it was one of a number of emails between the opposing party and its solicitors which had been disclosed. Jackson LJ held however that the terms of the email from Mr Newton to Mr Cook showed that Mr Newton had appreciated that the email had been disclosed in error: ‘Mr Newton was drawing the email to Mr Cook’s attention in the belief that Mr Cook was unaware of it. If there had been a deliberate decision to disclose privilege in respect of such an important document, it is hardly likely that Mr Cook would have been unaware of it’.[6]

The ‘modest gloss’ which the Court of Appeal added to the principles established in Rawlinson was to allow Moore-Bick LJ’s reference to ‘the understanding of the person who inspected the document[7] to apply in a ‘two solicitor’ situation, so that ‘If the inspecting solicitor does not spot the mistake, but refers the document to a more percipient colleague who does spot the mistake before use is made of the document, then the court may grant relief. That becomes a case of obvious mistake.[8]

All that remained was for the Court of Appeal to consider how the discretion should be exercised: whether to permit the receiving party to make use of the document, or to prohibit its use. This is an equitable jurisdiction, long pre-dating CPR 31.20, and there are no rigid rules.

Atlantisrealm argued that they had made extensive use of the email and their witnesses were well aware of it, and that they would suffer and perceive an injustice if they were not permitted to use it at trial. Jackson LJ observed that the ‘use’ relied on had all taken place after a meeting between Mr Newton and Mr Fallon at which Mr Fallon had drawn Mr Newton’s attention to the email. He concluded that it was not therefore unjust to grant an injunction prohibiting its use; and the judge at first instance had indicated that this was how he would have exercised his discretion. The injunction was therefore granted.

In closing, Jackson LJ made three general observations. First, in the electronic age, even with the help of sophisticated software, disclosure of documents can be a massive and expensive operation. Mistakes will occur from time to time. Secondly, when privileged documents are inadvertently disclosed (as is bound to happen occasionally), if the mistake is obvious, the lawyers on both sides should co-operate to put matters right as soon as possible. And thirdly, the disclosure or discovery procedure in any common law jurisdiction depends upon the parties and their lawyers acting honestly, even when that is against a party’s interest. The duty of honesty rests upon the party inspecting documents as well as the party disclosing documents.[9]

Jackson LJ’s final comment? That it should not be necessary for either the parties or the courts to devote their resources to resolving disputes of this nature between solicitors.[10]

Alison Padfield

  1. [2017] EWCA Civ 1029.
  2. Para 48 (Jackson LJ).
  3. [2002] EWCA Civ 780.
  4. [2014] EWCA Civ 1129, [2015] 1 WLR 797.
  5. Para 37.
  6. Para 43.
  7. At para 15.
  8. Jackson LJ at para 48.
  9. Para 55.
  10. Para 56.

The Business and Property Courts of England and Wales – launch on 4 July 2017

Sir Geoffrey Vos, the Chancellor of the High Court and a former Chairman of the Bar Council, came to the Bar Council meeting on 20 May 2017 to talk to us about the newly-styled Business and Property Courts. This followed the announcement on 13 March 2017 that, from June, the specialist civil courts including those in the Rolls Building in London (the Commercial Court, the Technology and Construction Court, and the Chancery Division of the High Court) were to be known as the ‘Business and Property Courts of England and Wales’. The 13 March 2017 press release said that this was to be the new name for the ‘international dispute resolution jurisdictions’ of England and Wales, and to ‘act as a single umbrella for business specialist courts across England and Wales’. The rebranding therefore has international and domestic implications.

Originally planned for June but delayed due to the General Election, the launch date for the new Business and Property Courts is now 4 July 2017.

One of the aims of the new name is to modernise the image of the Chancery Division. Sir Geoffrey said that the name ‘Chancery Division’ evoked Dickens and Bleak House.[1] The opening chapter of Bleak House is ‘In Chancery’, and Dickens mercilessly satirises the court:

This is the Court of Chancery, which has its decaying houses and its blighted lands in every shire, which has its worn-out lunatic in every madhouse and its dead in every churchyard, which has its ruined suitor with his slipshod heels and threadbare dress borrowing and begging through the round of every man’s acquaintance, which gives to monied might the means abundantly of wearying out the right, which so exhausts finances, patience, courage, hope, so overthrows the brain and breaks the heart, that there is not an honourable man among its practitioners who would not give—who does not often give—the warning, “Suffer any wrong that can be done you rather than come here!”

It is little wonder, then, that the new name is intended not only to be more readily understood both at home and abroad, but also to signal that the bad old days of Jarndyce and Jarndyce[2] really are gone.

By contrast, the Commercial Court has always prided itself on being a modern court responsive to the needs of business:

The Commercial Court was set up in 1895 following demands from the City of London and the business community for a tribunal or court manned by judges with knowledge and experience of commercial disputes which could determine such disputes expeditiously and economically, thereby avoiding tediously long and expensive trials with verdicts given by judges or juries unfamiliar with business practices.[3]

Of course, even the Commercial Court is not immune to increased competition from overseas – as its judges and those of us who practise in it are keenly aware. The Commercial Court in London has an international reputation, and it is hard to see what the Commercial Court has to gain – and easy to see what it has to lose – from being bracketed together with the Chancery Division under a new and unfamiliar name. The City UK, which has worked hard to promote London as a major centre for the resolution of international commercial disputes, has however welcomed the rebranding as a ‘forward-looking decision, indicative of the judiciary’s determination to ensure that Britain’s legal system remains world-leading and at the forefront of dispute resolution globally’ and as giving ‘greater clarity to users about the focus and coverage of legal services available at the Courts’.

On the domestic front, the press release referred to ‘the Commercial Court, (including the Admiralty Court and Mercantile Court)’. This formulation – suggesting that there is a single Mercantile Court which is somehow part of the Commercial Court – is also new. Until now, the Mercantile Courts have formally been separate from the Commercial Court, with their own Mercantile Court Guide (not updated since 2012 and as a result now unusable in some respects), although in London there has been a considerable overlap. The London Mercantile Court is administered by the Commercial Court listing office, and there is considerable fluidity between the judges of the two courts, with Commercial Court judges frequently hearing applications in the London Mercantile Court, and the Mercantile Court judge in London, HHJ David Waksman QC, frequently sitting in the Commercial Court.

It is intended, too, that following the launch on 4 July 2017, the Rolls Building courts in London will co-operate more closely with the Mercantile Courts in the regions. Sir Geoffrey said that in principle no case would be too large to be heard outside London, and that in time, the ‘judicial fire-power’ in specialist centres would increase. Although the press release said that the Mercantile Courts in Birmingham, Manchester, Leeds, Bristol and in Cardiff would be renamed Business and Property Courts, with expansions to Newcastle and Liverpool likely in the future, Sir Geoffrey said that the Mercantile Courts would become Commercial Circuit Courts, and their judges would be Commercial Circuit Judges. In addition, the financial limits in the county court have not been increased for some years, and Sir Geoffrey expressed hope that this would happen, in order to allow them to take on more business.

Sir Geoffrey emphasised that the specialist procedures in the Commercial Court, Technology and Construction Court and Chancery Division will remain: he said that procedures in these courts are an internal matter, and the changes are outward-facing. He added that the question which he is asked most often by barristers is what we should put in the heading of statements of case once the new courts have been formally launched. This perhaps sheds light on the personality traits of some barristers (well known to their families but perhaps less clearly perceived by the barristers themselves), and suggests that they may be less willing than Sir Geoffrey to leave behind the era of Jarndyce and Jarndyce. They will no doubt be relieved to hear that the launch of the Business and Property Courts on 4 July 2017 will bring with it a new Practice Note in which the answer to this[4] and similar procedural puzzles can be found.

Alison Padfield QC

  1. He said, too, that ‘Mercantile Court’ brought to mind an Edwardian gentleman. The name belies the recent origin of these courts: they are in fact a modern creation, and what is now the London Mercantile Court was originally named the Central London County Court Business List.
  2. The case at the heart of Bleak House: ‘Jarndyce and Jarndyce drones on. This scarecrow of a suit has, in course of time, become so complicated that no man alive knows what it means. The parties to it understand it least, but it has been observed that no two Chancery lawyers can talk about it for five minutes without coming to a total disagreement as to all the premises.’ (Chapter 1, ‘In Chancery’).
  3. See https://www.judiciary.gov.uk/you-and-the-judiciary/going-to-court/high-court/queens-bench-division/courts-of-the-queens-bench-division/commercial-court/about-us/.
  4. Sir Geoffrey did in fact provide the answer at the Bar Council meeting. If I noted it down correctly, the format will (for example) be: ‘IN THE HIGH COURT OF JUSTICE’, below that ‘BUSINESS AND PROPERTY COURTS’, and then the name of the court – eg ‘COMMERCIAL COURT’.

Be prepared? – the perils of witness training

In two recent cases, one in the Commercial Court and one in the Technology and Construction Court, judges have deprecated the use of witness preparation even where the training falls short of witness coaching.

Witness coaching is prohibited by the Bar Code of Conduct[1], which states that ‘Your duty to act with honesty and integrity under CD3 includes the following requirements… you must not rehearse, practise with or coach a witness in respect of their evidence[2]. CD3, one of the Core Duties imposed on barristers by the Code of Conduct, is that: ‘You must act with honesty and integrity’.

Coaching’ is not defined in the Code of Conduct, but the Bar Council practice note on Witness Preparation[3] says:

In any discussions with witnesses regarding the process of giving evidence, great care must be taken not to do or say anything which could be interpreted as suggesting what the witness should say, or how he or she should express himself or herself in the witness box: that would be coaching.[4]

This Bar Council practice note draws heavily on the 2005 decision of the Court of Appeal in R v Momodou[5] and states[6] that there is currently no authority on these matters in relation to civil proceedings, and that until such authority emerges, it would be prudent to proceed on the basis that the general principles set out in R v Momodou also apply to civil proceedings.

In R v Momodou, the Court of Appeal made clear that discussion with a witness of his or her proposed or intended evidence in a criminal case was not permitted:

Training or coaching for witnesses in criminal proceedings (whether for prosecution or defence) is not permitted. This is the logical consequence of [the] well-known principle that discussions between witnesses should not take place, and that the statements and proofs of one witness should not be disclosed to any other witness. … The witness should give his or her own evidence, so far as practicable uninfluenced by what anyone else has said, whether in formal discussions or informal conversations. The rule reduces, indeed hopefully avoids any possibility, that one witness may tailor his evidence in the light of what anyone else said, and equally, avoids any unfounded perception that he may have done so. These risks are inherent in witness training.[7]

The Court of Appeal said that there was a ‘dramatic distinction’ between witness training or coaching, and witness familiarisation.[8] Witness familiarisation is:

pre-trial arrangements to familiarise witness with the layout of the court, the likely sequence of events when the witness is giving evidence, and a balanced appraisal of the different responsibilities of the various participants’,[9]

and the Court of Appeal added that such arrangements would usually be in the form of a pre-trial visit to the court, and were generally to be welcomed, but that out of court familiarisation techniques were also permissible. It emphasised, however that ‘None of this … involves discussions about proposed or intended evidence’.[10]

The Court of Appeal also addressed specifically the position of expert witnesses, saying that training of such witnesses in ‘the technique of giving comprehensive evidence of a specialist kind to a jury, both during evidence-in-chief and in cross-examination, and, another example, developing the ability to resist the inevitable pressure of going further in evidence than matters covered by the witnesses’ specific expertise’. As with witnesses of fact, ‘The critical feature of training of this kind is that it should not be arranged in the context of nor related to any forthcoming trial, and it can therefore have no impact whatever on it.’[11]

Guidance in the Bar Code of Conduct in a related but different context (the duty not to mislead the court) refers to the preparation of witness statements, and states that:

you are entitled and it may often be appropriate to draw to the witness’s attention other evidence which appears to conflict with what the witness is saying and you are entitled to indicate that a court may find a particular piece of evidence difficult to accept. But if the witness maintains that the evidence is true, it should be recorded in the witness statement and you will not be misleading the court if you call the witness to confirm their witness statement.’[12]

The reference to witness statements makes clear that this guidance relates to civil rather than criminal proceedings. It is not addressed in the Bar Council practice note, which as we have seen indicates that, in the absence of authority, it would be prudent to proceed on the basis that the general principles set out in R v Momodou also apply to civil proceedings. There is therefore an inconsistency between the Code of Conduct guidance and the clear statement in R v Momidou that ‘the statements and proofs of one witness should not be disclosed to any other witness’. This inconsistency is not explicable by the difference in procedure, as witness statements in civil proceedings simply take the place of oral evidence in chief: the process of taking the statement is merely the mechanism by which the evidence is put before the court, and there is no difference of principle. The extent to which the practice referred to in the Code of Conduct guidance will be regarded by the civil courts as permissible has yet to be determined, but there is no doubt that, given the clear statement in the guidance, it is acceptable from a regulatory perspective as far as barristers are concerned.

This is the legal and regulatory background against which judges in two recent commercial cases have deprecated the use of witness preparation even where such training falls short of witness coaching. Flaux J said in the Commercial Court in Republic of Djibouti v Boreh:[13]

The second reason for approaching the evidence of the Djibouti witnesses with considerable caution is that it was quite obvious that they had had witness training and been carefully prepared for giving evidence. Mr Douale admitted as much.[14]

And:

Whilst I am not suggesting that witness training in itself is improper, (provided that it does not amount to coaching of a witness as to what to say, which would be improper) it is to be discouraged, since, as this case demonstrates, it tends to reflect badly on the witness who, perhaps through no fault of his or her own, may appear evasive because he or she has been “trained” to give evidence in a particular way.’[15]

Last month, in Harlequin Property (SVG) Ltd v Wilkins Kennedy[16] in the Technology and Construction Court, Coulson J referred to Flaux J’s remarks with approval:

I was unsurprised to learn that Mr MacDonald had had witness training. For the same reasons outlined by Flaux J (as he then was) in Republic of Djibouti v Boreh … I consider it to be a practice “to be discouraged since…it tends to reflect badly on the witnesses who…may appear evasive.” In my view, the training he received exacerbated Mr MacDonald’s natural tendency to avoid answering any difficult question.’[17]

We can expect commercial judges to continue to criticise attempts to refine the evidence which is to be given by witnesses in court. Judges want, so far as possible, to hear a witness’s evidence in his or her own words. The 2007 Report of the Commercial Court Long Trials Working Party, in which two Commercial Court judges[18] were heavily involved, said:

Inevitably, in nearly all cases the witness statements are drafted by the lawyers, although based on interviews with the witness. But this process often leads to the statements being in lawyers’ language rather than the words of the witness. Also, all too frequently the statements spend far too long summarising documents that a party wishes to have in evidence and arguing the case. Not enough time is spent recording the witness’s actual memories of relevant events.[19]

The Admiralty and Commercial Courts guide[20] similarly emphasises that the function of a witness statement is to set out in writing the evidence in chief of the witness and that as far as possible, therefore, the statement should be in the witness’s own words; that it should not contain lengthy quotations from documents; and that it should not engage in argument.[21]

Alison Padfield

  1. The Code of Conduct is in Part 2 of the BSB Handbook (2nd Edition, April 2015, updated December 2016).
  2. Rule rC9.4. There is no specific prohibition in the solicitors’ Code of Conduct (Version 18, published 1 November 2016): see Chapter 5, ‘Your client and the court’, including IB(5.9) to IB(5.11); and see this interesting article by Professor Richard Moorhead in the Guardian in relation to David Cameron’s preparation for his appearance before the Leveson inquiry in 2012.
  3. Issued October 2005; last reviewed May 2016. Practice notes issued by the Bar Council do not constitute ‘guidance’ for the purposes of the Code of Conduct: see further paragraph I6.4 of the Handbook (pages 11-12 of the pdf version).
  4. At para 17.2.
  5. [2005] EWCA Crim 177.
  6. At para 16.
  7. At para 61.
  8. At para 61.
  9. At para 62.
  10. At para 62.
  11. At para 62.
  12. Code of Conduct, para gC7.
  13. [2016] EWHC 405 (Comm).
  14. At para 65.
  15. At para 67.
  16. [2016] EWHC 3188 (TCC).
  17. At para 18.
  18. Aikens and Gloster JJ; Aikens J chaired the working party which prepared the report; I was its secretary.
  19. At para 69.
  20. Last updated 18 March 2016.
  21. See paras H1.1(i), (iii) and (v)),

Won’t you stay? – prejudice arising from concurrent civil and criminal proceedings

Civil courts are sometimes asked to stay their proceedings in order to avoid prejudice to a party who is facing concurrent criminal proceedings, for example where there is a factual overlap concerning allegations of dishonesty or fraud. The courts are slow to grant a stay, and will always try to resolve the issue by case management measures short of a stay; but they will stay proceedings, in the exercise of their discretion, in an appropriate case.

The starting point is s 49(3) of the Senior Courts Act 1981, which provides:

Nothing in this Act shall affect the power of the Court of Appeal or the High Court to stay any proceedings before it, where it thinks fit to do so, either of its own motion or on the application of any person, whether or not a party to the proceedings.

CPR 3.1(2)(f) provides that the court may, unless the rules provide otherwise, ‘stay the whole or part of any proceedings or judgment either generally or until a specified date or event’.

The party seeking to stay civil proceedings where there are concurrent criminal proceedings is typically the defendant in both sets of proceedings, although as two recent decisions illustrate, this is not always the case.

In Bittar v The Financial Conduct Authority[1], the Financial Conduct Authority, supported by the Serious Fraud Office (‘SFO’), which was the prosecutor in concurrent criminal proceedings, sought a stay of its reference to the Upper Tax Tribunal (Tax and Chancery Chambers – Financial Services) pending resolution of the SFO’s criminal proceedings in respect of a charge of conspiracy to defraud. The SFO’s objections included that the defendant might seek to introduce evidence given or findings made by the Tribunal into the criminal proceedings, and said that it, too, was entitled to a fair trial.

The Tribunal said that there was a strong presumption against a stay and that it was a power which had to be exercised with great care and ‘only where there is a test of real risk of serious prejudice which may lead to injustice[2]. It declined to order a stay, partly on the grounds that any prejudice could be mitigated by case management measures including, if necessary, deferring the hearing of the reference itself until after the criminal proceedings had concluded.[3] In the meantime, the Tribunal gave directions for the parties to prepare for the hearing, and said that the matter should be kept under review.[4]

In Polonskiy v Alexander Dobrovinsky & Partners LLP,[5] the claimant asked the High Court to stay civil proceedings which he himself had brought, and to stay a counterclaim brought by a defendant, pending the resolution of criminal proceedings against him in Russia. He relied on an alleged risk of injustice to him not in the criminal proceedings, but in the civil proceedings. This was an unpromising start and, although the court considered the matter in detail (in a judgment which was 153 paragraphs long), it ultimately declined to grant a stay. The defendant in the civil proceedings tried unsuccessfully to persuade the court that the test to be applied was that a stay should be granted only in ‘rare and compelling circumstances’,[6] which is the test usually applied where the court is being asked to stay civil proceedings in favour of other civil (court or arbitral) proceedings.[7] The court rejected this submission and instead applied the principle, derived from earlier decisions of the Court of Appeal, that the court has a discretion to stay civil proceedings until related criminal proceedings have been determined, but that this is ‘a power which has to be exercised with great care and only where there is a real risk of serious prejudice which may lead to injustice’.[8]

Alison Padfield

  1. [2016] UKUT 265 (TCC).
  2. At para 16.
  3. See para 17.
  4. See para 17.
  5. [2016] EWHC 1114 (Ch) (Mr G Moss QC, sitting as a deputy judge of the High Court).
  6. See paras 135-139.
  7. See eg Reichhold Norway ASA v Goldman Sachs International (a firm) [2000] 1 WLR 173, CA, 186 (Bingham LJ).
  8. See paras 133 and 139; the quotation is from R v Panel on Takeovers and Mergers, ex p Fayed [1992] BCC 524, CA, 531 (Neill LJ); approved: Attorney-General of Zambia v Meer Care & Desai (a firm) [2006] EWCA Civ 390, para 36 (Sir Anthony Clarke MR).