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Dispute Resolution round-up - January 2022

Dispute Resolution round-up - January 2022

Overview

Welcome to the sixth edition of our quarterly disputes newsletter, which covers key developments in the dispute resolution world over the last three months or so.

The development which stands out from this period is the foundering of representative actions in both the data protection sphere (see our summary below of the Supreme Court's decision in Lloyd v Google) and the sphere of parent company liability for the actions of overseas subsidiaries (see our summary of the Court of Appeal's decision in Jalla v Shell).  On the evidence of those decisions, it would appear that there is some way to go before this jurisdiction embraces a true US-style "class action" regime.  However, large groups of claimants nevertheless continue to test the boundaries of how to obtain collective redress from the English courts, with news recently hitting the press that, notwithstanding the failure of the claims above, Facebook will shortly face a new collective proceeding based on its use of the personal data of its users - albeit using a different legal "hook", and following the route contained in the Competition Act 1998.

Beyond those developments, we have seen an important Privy Council decision handed down which restates - and likely broadens - the test for obtaining a freezing injunction, alongside the usual steady trickle of interesting cases on the perennial topics of contractual interpretation and privilege.  And we have also seen some fairly radical proposals emerge from the Civil Justice Council which seek to reform the pre-action process that parties must follow in this jurisdiction before they can enlist the help of the courts.  Should those proposals proceed, they will very likely result in a significant frontloading of costs at a very early stage in the life of a dispute, prior to court proceedings being issued.

We hope that you continue to enjoy reading this round-up, whether a litigator by trade or a generalist, and whether in-house or in private practice, and that you will share it with any of your colleagues who may also find it useful.  We also hope that you are keeping well as a new year, and a new return to the workplace, begins.

Now Reading

News
Reform of pre-action protocols

The Civil Justice Council has launched a consultation on proposed reforms to the Pre-Action Protocols in the Civil Procedure Rules, having produced a detailed report on the same topic.  The Pre-Action Protocols presently contain a series of steps which parties should take, or at least consider taking, prior to commencing court proceedings, on pain of costs or case management consequences should they fail to do so.  The reforms to that process which are being considered include:

  • (i) strengthening the existing requirements under the Protocols to detail the basis of claims/defences and provide supporting disclosure via pre-action correspondence within set timeframes, and possibly even requiring that correspondence to be supported by a Statement of Truth (albeit that it is acknowledged that this may be a step too far);

  • (ii) formally recognising that compliance with the Protocols is mandatory, save in cases where urgent court intervention is required;

  • (iii) imposing more stringent penalties for non-compliance with the Protocols, including in certain circumstances strike out of the relevant claim/defence;

  • (iv) imposing a new good faith requirement on parties to try to resolve or narrow their dispute at the pre-action stage;

  • (v) imposing new requirements on parties to complete a joint "stocktake" report or list of issues prior as a final step before commencing proceedings; and

  • (vi) introducing a new summary costs procedure to deal with the costs of disputes resolved at the pre-action stage.

The legal community's response to the reforms will be interesting to watch, as while the proposals could conceivably result in more disputes settling before they reach court, they could also result in a very significant front loading of costs before court proceedings have even been issued (and potentially an overall increase in costs over the life of a dispute as well).  The new reforms, and in particular suggestions like the new overarching duty of good faith, also have the potential to give rise to satellite litigation.

Changes to Disclosure Pilot Scheme take effect

Changes to the Disclosure Pilot Scheme which were published in July 2021 in draft have taken effect as from 1 November 2021, in the form of amendments to Practice Direction 51U of the Civil Procedure Rules.  The changes include a new streamlined disclosure regime for "less complex claims" (very broadly speaking claims worth less than £500,000), the introduction of new flexibility when giving disclosure in multi-party cases and various smaller tweaks to the general process for disclosure set out in the scheme.

The changes are intended to address concerns from practitioners that the Disclosure Pilot Scheme has failed to meet its stated aim of reducing the costs of disclosure, and has in fact in some circumstances led those costs to increase.  It is to be hoped that the changes will have an impact on the costs of disclosure in lower value claims in particular, and will help to ensure that those costs remain proportionate to the sums in dispute.

Witness statement reforms start to bite

In April 2021, major reforms were introduced to the preparation of witness statements in the Business and Property Courts, following sustained judicial criticism of the efficacy of witness statements in achieving "best evidence" at a proportionate cost. The new Practice Direction, PD 57AC, aims to reduce both the "over-lawyering" of witness statements and the inclusion of narrative, comment and argument in evidence. The impact of the reforms is starting to be felt in cases proceedings through the courts, with three recent decisions demonstrating the hazards of failing to comply with the requirements of the Practice Direction:

  • In Mansion Place Ltd v Fox Industrial Services Ltd [2021] EWHC (TCC), the first case to consider the requirements of PD57AC, the judge ordered both parties to the dispute to redact their respective statements in various places where they failed to comply with the requirements of the Practice Direction. The court also gave some practical guidance on the requirement in paragraph 3.2 of PD57AC to list the documents that a witness has "referred to or been referred to for the purpose of providing the evidence set out in the statement".

  • In Blue Manchester Ltd v Bug-Alu Technic GMBG [2021] EWHC 3095 (TCC), the judge ordered that the non-compliant paragraphs of witness statements be redrafted, setting out the various deficiencies of the statement in a detailed appendix to the judgment. The judge was particularly critical in this case that several of the witness statements contained identical language in respect of particular issues, indicating that the statements were not in the witnesses' own words.

  • Most recently, in Prime London Holdings 11 Ltd v Thurloe Lodge Ltd [2022] EWHC 79 (Ch), the judge ordered a number of paragraphs to be removed from a witness statement and made an award of indemnity costs against the defendant which had failed to comply with the Practice Direction. The judge also criticised the claimant's conduct in respect of raising its concerns with the defendant in respect of the non-compliant statement.

All three cases show that the courts are empowered by the new Practice Direction to take a harder line against witness evidence that fails to achieve its core purpose.  For more details on the changes introduced by PD 57AC, please read our in-depth briefing.

New Law Commission guidance on smart contracts

On 25 November 2021, the Law Commission published its advice to the Government on the extent to which the existing law in England and Wales could accommodate smart legal contracts (see full paper and summary). In summary, it concluded that the current legal framework in England and Wales is clearly able to facilitate and support the use of smart legal contracts, without the need for statutory law reform.

The Law Commission defined a "smart legal contract" as a legally binding contract in which some or all of the contractual terms are defined in and/or performed automatically by a computer code/programme, with the key emphasis on automaticity.  Although smart legal contracts need not be deployed on blockchain/distributed ledger technology, such emergent technologies have vastly expanded the potential scope of both use cases and users of smart legal contracts, as well as giving rise to novel issues arising out of the application of existing law.

The Law Commission concluded that current legal principles can apply to smart legal contracts in much the same way as they do to traditional contracts, albeit with an incremental and principled development of the common law in specific contexts. Although some types of smart legal contract may give rise to novel legal issues and factual scenarios, existing legal principles can accommodate them.  It said that the flexibility of the common law ensures that the jurisdiction of England and Wales provides an ideal platform for business and innovation in this area.

Despite the Law Commission's broad conclusions, it remains to be seen exactly how the English courts will resolve those novel issues, particularly where smart legal contracts are deployed on fully-distributed blockchains in which the respective parties' true identities and location may not be known and there remains considerable debate as to the true nature, status and characterisation of the "on-chain" digital assets that are exchanged.

Cases

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