UK: The New Rules Of Court ~ The Implications For Business

Last Updated: 26 March 2001
Article by Richard King


On 26 April 1999 substantial reforms of the rules by which litigation is conducted in the courts come into effect. They are known as the ‘Woolf’ reforms, after the name of the senior judge responsible for their introduction, the Master of the Rolls, Lord Woolf.

The reforms will change fundamentally the way in which litigation is conducted. Their main objective is to move away from the current confrontational approach to an alternative co-operative approach in which the early settlement of claims is encouraged and parties to litigation who act unreasonably are penalised. It is intended that the reforms will speed up and simplify the litigation process and will ensure that the costs incurred in litigation have a greater proportionality to the sums in dispute.

Undoubtedly the reforms will have a significant impact on every business and it is essential that businesses have a grasp of what the reforms will mean to them. This note is intended to provide a broad understanding of the main changes and to highlight the consequences of these changes for businesses.

The Main Changes

These can be summarised as follows:

  • The court’s overriding principle of dealing with cases ‘justly’
  • Different procedures for different value claims - the 3 tracks
  • Judicial case management
  • The encouragement of alternative dispute resolution (ADR)
  • Offers of settlement and costs

The Overriding Principle

In future all litigation will have to be conducted in accordance with the overriding principle, described in the new rules as "to deal with cases justly". ‘Justly’ includes ensuring parties are on an equal footing, minimising costs wherever possible, dealing with cases in a way which is proportionate to the sums in dispute and the parties’ financial means, ensuring that cases are dealt with promptly and allotting an appropriate share of the court’s resources.

It is to be expected that the courts will encourage the use of summary procedures and discourage the use of complex and expensive litigation procedures which might prejudice in particular parties with limited financial resources. It is also to be expected that judges will become more interventionist, through their new powers of case management, to ensure the overriding objective is achieved.

The 3 tracks

All cases will be allocated to one of 3 alternative tracks, generally according to their value. These tracks will be known as:

  • the small claims track
  • the fast track
  • the multi-track

The small claims track - the current County Court small claims limit (now £3,000) will be extended to £5,000. Rules of evidence and the usual litigation procedures and rules will not apply and the claim will be dealt with informally by arbitration, generally within a few weeks of the commencement of court proceedings. The costs of the winning party are not normally recoverable.

The fast track - claims for more than £5,000 but less than £15,000 will proceed in the County Court under the ‘fast track’ rules. The Court will generally fix a trial date shortly after the commencement of proceedings. That date will be limited to one day only and will be fixed to take place within 30 weeks. Usual litigation procedures, such as the disclosure of documents and use of expert witnesses, will be limited and key dates will be fixed for those procedural steps necessary to prepare the case for trial. The recovery of the trial costs from the losing opponent will be fixed in most cases at less than £1,000.

The multi-track - claims for more than £15,000 will be allocated to the multi-track, either in the County Court or (if the case is worth more than £50,000) in the High Court. The usual litigation procedures of disclosure of documents and the exchange of witness statements and experts’ reports will apply, with some modifications, and with a greater degree of control and management by an assigned judge.

Judicial Case Management

Under the new rules the judge’s powers will be wide, including the power to strike out the whole or part of a claim on a directions hearing and summary determinations of certain aspects of a party’s claim. It is to be expected that judges will increasingly make orders of their own volition which may have serious consequences.

Multi-track claims will also involve an early case management conference to enable the judge to review the claim and a later pre-trial review to enable the judge to assess the readiness of the case for trial. The judge will have the power to compel the attendance at these hearings of a client representative, as well as its legal adviser.

The Use Of ADR

In conjunction with its new case management powers, judges will discuss with the parties the prospect of using ADR to resolve the claim. A party will also have the ability at the commencement of proceedings to apply to suspend the proceedings for one month to attempt to settle the case and during that period a case may be referred to ADR.

Offers Of Settlement And Costs Penalties

The reforms introduce procedures to encourage parties to be pro-active in achieving the early settlement of disputes and to avoid leaving settlement discussions until shortly before trial. These procedures include:

pre-action offers - either a Claimant or Defendant can be penalised in costs if offers to settle are made before court proceedings are begun and the party fails to ‘beat’ that offer through litigation. Letters to settle must give the other party 21 days to consider the offer.

payments into court - where proceedings have begun, if a Defendant to a money claim wishes to make an offer to settle, it should pay a sum of money into a court deposit account. If the Claimant fails to beat that payment at trial, it will be penalised in costs.

non-money claims - the courts will now be encouraged to take account of written offers of settlement by either party in non-monetary claims when determining how costs should be awarded.

Claimants’ offers - Claimants can make written offers to Defendants (before and after the commencement of proceedings) as to what they will accept in satisfaction of their claims. If a Defendant ignores the offer and the Claimant’s award at trial exceeds its offer, the Court will award payment of its costs on the indemnity basis (ie a likely contribution of nearer 100% of actual costs rather than the usual 60-70%) from the time the offer was made. In addition the court will be able to award interest at up to 10% above base rate on the award including costs.

In addition to the encouragement of offers to settle, the court will also have new powers to make costs orders on procedural hearings payable immediately. In most cases under the present system, the costs of hearings on procedural matters that take place prior to the trial itself are bundled up and dealt with under a single order that the loser at trial pays the winner’s costs. The courts will in future not only award the costs of individual hearings to be paid by one party to the other, but also assess summarily the level of the costs at that hearing. Those costs will often be ordered to be paid within a fixed number of days and as a pre-condition to the action continuing.

What Do The Reforms Mean To You?

The reforms will have a significant impact on businesses and how they manage litigation. We recommend 4 steps to ensure that you cope with the reforms and use them to your maximum advantage:

  1. Preparation - it is essential that claims are prepared thoroughly before court proceedings are commenced. The tight timetables (particularly for fast track cases) will create problems for the unprepared party. Quick access to documentation will be required. The merits of claims will also have to be assessed to enable early offers of settlement to be made and to be considered. That assessment will only be possible with a well prepared claim.
  2. Allocation of a senior executive or executive team to manage litigation and liaise with your legal advisers - the new rules involve businesses more in the litigation process. Client representatives may be ordered to attend case management conferences and pre-trial reviews in multi-track cases. All Statements of Case (formerly pleadings) will have to be verified with a statement of truth from the client. Lists of Documents disclosed will have to be verified for accuracy by a client representative and will have to give details of searches carried out to locate documents. Client representatives, with authority to settle, will be needed to attend structured settlement meetings if a case is referred to ADR. A senior executive will need to ensure that the business can meet the court’s tight timetables.
  3. Use ‘reasonableness’ and offers to settle to your advantage - in view of the court’s overriding objective it will be essential to be ‘reasonable’ throughout the litigation process. The ‘unreasonable’ and aggressive party is likely to be penalised in costs and may attract judicial intervention in the form of strike out orders of part of a claim.
  4. Plan the management of small claims - costs will not be recoverable for claims under £5,000, even if successful. With limited assistance from your legal advisers, you should be able to conduct and defend small claims cost effectively largely by yourself. We would be happy to advise you generally how to conduct these types of claim as well as provide advice on specific issues, on a case by case basis.

The following additional legal information briefings relevant to the new rules are available on request:

  • ADR - what is it and what does it involve ?
  • Managing Small Claims

This information is necessarily brief and it is essential that professional advice is sought before any decision is taken

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