UK: Shorter Trials Scheme - Does It Work In Practice?

Last Updated: 22 December 2016
Article by Ashley R. Pigott

Last year, we reviewed two new pilot schemes in the Rolls Building Courts in London which aim to provide alternative processes for dispute resolution within the court system, with the aim of reducing costs and delay. In this alert, we consider the first reported decision arising out of a dispute where the Shorter Trials Scheme (STS) under the Civil Procedure Rules Practice Direction 51N has been used: National Bank of Abu Dhabi v BP Oil [2016].

The claim

  • The dispute centred on the claim of the National Bank of Abu Dhabi (NBAD) alleging breach of warranty and representation by BP Oil International Limited (BP). NBAD claimed compensation in the sum of US$ 68,881,854.62 plus interest.
  • The allegations of breach of warranty and representation related to statements in the purchase letter for a receivable debt (RD) owed by the Société Anonyme Marocaine de L'Industrie de Raffinage (SAMIR) to BP which NBAD had purchased before SAMIR became insolvent.
  • In the purchase letter, BP agreed to reimburse NBAD for any breach of representation or warranty. BP stated that it was:
"..not prohibited by any security, loan, or other "..not prohibited by any security, loan, or other agreement...from disposing of the [RD].... and such sale [to NBAD] does not conflict with any agreement binding on [BP]."
  • In fact, it later became apparent that the sale and purchase agreement between BP and SAMIR contained a prohibition on assignments.
  • The issue to be resolved therefore by Mrs Justice Carr in the Commercial Court was whether or not this prohibition meant that the representation in the purchase letter set out above was incorrect.

The proceedings

The claim for US$ 68,881,854.62 plus interest was issued by NBAD in March 2016. By an agreement between the parties which was approved by the court, the action proceeded under the STS.

In her judgment, Mrs Justice Carr found for the NBAD which established breach of warranty and misrepresentation and was awarded the amount claimed of US$ 68,881,854.62 plus interest; costs were held over.

How did the use of the STS affect procedure?

The quantum claimed in these proceedings was significant - we set out below the key differences in the procedure used in this case, as compared to standard directions.

  • Disclosure was very limited
  • No witness statements
  • No oral evidence
  • Trial of one day only on 7 November 2016
  • Judgment was handed down on 18 November 2016, within 2 weeks of the trial

Costs

The total costs incurred by each party were estimated to be approximately £350,000.

Analysis - how effective is the STS?

How successful then has the STS proved to be in practice and should you be giving this option serious consideration?

Undoubtedly, the use of the STS in this case resulted in a more swift and streamlined process. As stated by Mrs Justice Carr:

"The parties and their lawyers are to be congratulated for the co-operative spirit in which the litigation has been conducted which has resulted in an effective and speedy process, all as envisaged by the Shorter Trials Scheme."

There is little doubt that the usual procedure in a dispute of this size would have included significant amounts of disclosure and numerous witness statements (plus oral evidence), culminating in a trial of several days length. The costs of this process would have been more in the region of around £750,000 per party.

This particular dispute was ideally suited to the STS in that:

  1. (as noted by the Court) there was only one "single issue of interpretation to be resolved".

As set out above, that issue was whether or not the stated prohibition meant that the representation in the purchase letter was incorrect. As a result, in essence, this dispute did not require witness evidence but rather a close consideration of the key documents and related law.

  1. Quantum had been agreed between the parties in the event of NBAD's claim succeeding.

No quantum experts were therefore required.

Compare this dispute to another case, say one relating to building defects and delay. You can see that in that scenario, where all allegations and quantum are contested, the parties are likely to require several factual and expert witnesses plus more extensive disclosure - in such a case, the STS may not be appropriate, as always envisaged.

Practice Direction 51N states at paragraph 2.3:

"The Shorter Trials Scheme will not normally be suitable for...

  1. cases which are likely to require extensive disclosure and/or reliance upon extensive witness or expert evidence...
  2. cases involving multiple issues and multiple parties... "

Overall, the decision in National Bank of Abu Dhabi v BP Oil [2016] proves that the STS is extremely effective for certain cases but inevitably, those cases have to be carefully selected. Where appropriate, use of the STS will certainly reduce delay and costs and this option should always form part of a strategic review where relevant.

It is worth noting that participation in the STS is voluntary, so in some cases where the STS would seem to be appropriate, parties with entrenched positions may struggle to agree on a truncated process. It will be interesting to see whether any decisions follow relating to adverse costs orders against parties that allegedly unreasonably refuse such an agreement.

Following this judgment, we anticipate an increase in the use of the STS and we will continue to report on key developments. The pilot is currently due to continue until 30 September 2018.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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