The Right Honourable Sir Martin James Moore-Bick PC QC,
Vice President of the Civil Division of the Court of Appeal of England and Wales
SHARING BEST PRACTICE
SOME FEATURES of the COMMERCIAL COURT in ENGLAND
6th September 2016
It is an honour and a great pleasure to have been invited here to Brunei Darussalam to discuss with your judiciary and others the characteristics of a successful commercial court. I understand that in February this year during his speech at the Opening of the Legal Year, the Honourable Chief Justice announced the establishment of a Commercial Court designed to improve the efficiency of the courts in disposing of commercial cases. At the same time two new procedures are to be introduced in the form of the Case Management Conference and an option (and perhaps encouragement) to refer disputes to mediation, both of which have played an important role in the development of Commercial Court procedure in England over the past 20 years.
The title of my talk is ‘Sharing Best Practice – Some Features of the Commercial Court in England’. It would be wrong of me, and of you, to think that we in England have all the answers. We do not, as is clear from the fact that our Commercial Court Guide, which contains a summary of the procedures and practices in the Commercial Court, is constantly reviewed and modified to ensure that the Court’s procedures are able to keep up with the changing demands of modern commercial life. I see this visit, therefore, not simply as an opportunity for me to tell you about how we in England do things, but as an opportunity to share experience and identify together, if we can, the factors that are likely to enable a commercial court to meet the needs of the business community it is intended to serve, while remaining firmly integrated into the civil justice system of which it is part.
It is important to bear in mind that the guiding purpose of any commercial court is to serve the needs of the business community. It must therefore be responsive to the needs of that community, which in many respects are no different from those of any other litigants: speed, fairness, efficiency, independent and well-qualified judges, and effective enforcement procedures. However, the demands of the business community, particularly the international business community, are in some respects different from those of domestic litigants, mainly due to the nature of the law which applies to their activities. Most business disputes are based on contracts of one kind or another, so the general law of contract is fundamental to the work of any commercial court. But much business, especially international business, is carried on under contracts of a specialised kind, which reflect the particular practices of the trade in question. When he announced the establishment of the Commercial Court earlier this year the Honourable Chief Justice said that the court would hear disputes relating to, among other things, the import and export of goods, insurance and re-insurance, banking and financial services and the purchase and sale of commodities. These are all specialised areas of commercial activity, which have their own customs and practices; and these mercantile customs and practices must be understood and taken into account by the judge when interpreting and giving effect to the contract and determining the dispute.
In 1895, following a trial that was widely regarded by businessmen in the City of London as having been highly unsatisfactory, partly on the grounds that the judge seemed to know little about marine insurance, which was the subject matter of the case, the Commercial List was established within the Queen’s Bench Division of the High Court. The Commercial List was intended to be reserved for cases arising out of the ordinary transactions of merchants and traders and was put under the supervision of a nominated judge who was familiar with commercial life and commercial law. In 1970 the Commercial List became the Commercial Court. These arrangements have proved very satisfactory, mainly because the judges nominated to sit in the Commercial Court have, on the whole, been men and women of the highest ability, both as lawyers and judges, and have commanded the respect of the commercial community in England and indeed worldwide.
This, I think, is the first factor I would identify as necessary for a successful commercial court: judges of high quality who understand the commercial world, including the customs and practices of specialised markets, and who are able to command the confidence and respect of the business community.
Able judges are not by themselves enough, however. If the court is to command the confidence of the business community it must ensure that its procedures enable it to deliver decisions of high quality, quickly and at reasonable cost. It is also important that its decisions can be enforced effectively. This, in my view, requires the adoption of procedures which are tailored to the particular requirements of commercial disputes, which may be different in some respects from those which apply to civil proceedings generally. It also requires some control over which cases are accepted into the court.
As you probably know, in 1998 the Rules of the Supreme Court, which in their various forms had governed the procedure relating to cases in the Commercial List and Commercial Court for over a hundred years, were replaced by the Civil Procedure Rules. A question arose whether the special practices and procedures developed by the Commercial Court should be allowed to continue. I am glad to say that we were able to persuade the Civil Procedure Rule Committee that they should, and as a result you will find that commercial proceedings are now specifically covered by Part 58 of the new Rules.
The point I wish to emphasise here is that, in our experience, it is important to give a commercial court dealing with foreign parties the ability to develop its procedures in ways that meet the reasonable needs of those who use it.
The Civil Procedure Rules were adopted as a new procedural code. They were intended to be simpler than the Rules of the Supreme Court which they replaced and easier to understand. They were designed to make litigation more efficient by putting the court in control of the proceedings and reducing the opportunity for parties to drag their feet and delay a decision. Opinions differ about the extent to which they have been successful in meeting these objectives, but in the Commercial Court the introduction of the new rules has been used as a springboard for bringing about a radical change in the culture of litigation. The Civil Procedure Rules were hailed as a fresh start and the court took advantage of that by making it clear that it would not tolerate continued tactical skirmishing in the conduct of proceedings. Parties were expected to exercise sensible co-operation in preparing cases for trial and those who made unnecessary or unreasonable interlocutory applications found that orders for costs were made against them;
In my view, however, the innovation which has had the most beneficial influence on the procedure of the Commercial Court has been the Case Management Conference (“CMC”), combined with the procedures for monitoring the parties’ progress in preparation for trial. And since it is proposed to introduce the CMC into your commercial court procedure, and since one of our aims is to consider each other’s experience in order to identify and share best practice, I think it is worthwhile spending a few moments describing how the CMC works in the Commercial Court in England.
The overriding purpose of the CMC is to enable the judge who hears it to understand the nature of the case, identify the real (as opposed to the formal) issues to which it gives rise, and having done so, to give appropriate directions for trial. There are great advantages in holding the CMC at an early stage in the proceedings, but because the issues in the case will not have been identified until the defence has been served, it would make no sense to hold it until that has occurred. In the Commercial Court the claimant must apply to fix a date for the CMC on the first available date 6 weeks after all defendants who intend to serve a defence have done so. (That will also normally allow time for the preparation and service of any reply.)
The judge who is to hear the CMC will normally know nothing about the case before the papers are sent to him for preparatory reading. In order to enable the judge to understand what the case is about, therefore, and what issues arise, the solicitors and counsel for each party are required to draft an agreed case memorandum describing the case in neutral terms and also to agree a list of the key issues. The case memorandum and list of issues are intended to be used as case management tools and play no part in the trial. They should therefore not be regarded as contentious documents, but regrettably our experience has been that parties spend too much time and money haggling over the details. They should in my view be firmly discouraged from doing so. The parties must also produce a case management bundle for use at the hearing containing the pleadings and any other basic documents.
The CMC is generally conducted as an oral hearing before one of the judges of the court. It is an invaluable opportunity for the judge to probe the parties’ positions, to ask questions about the case and how it is to be prepared, and to gain an understanding of the issues. It must be attended by a representative of the solicitors instructed by each party and also by their counsel, because it is important that those present have authority to take decisions on any matters that may arise. Although in a simple case it may be possible to dispense with an oral hearing if the parties have agreed sensible directions, my own experience, and I think that of other judges, is that an oral hearing attended by solicitors and counsel has very great advantages. It enables the judge to ask questions to ensure that he has fully understood the case, it enable him to establish a timetable to trial after hearing what the parties have to say, and it enables him to direct them towards mediation, if that seems to be a promising way forward. I shall have more to say about that particular aspect later.
Although the parties are encouraged to agree directions for the consideration of the court, the judge will always exercise his own judgment about what is appropriate. For example, he may not think it necessary to allow as much time for some steps as the parties think, or he may think that they are being unduly optimistic in their assessment of the speed at which some steps can be completed. He will also want to consider the pace of preparation in the context of a possible date for trial. The CMC also provides a suitable – indeed the preferred – opportunity for applications of a relatively simple nature – e.g. a straightforward application for security for costs. The introduction of the CMC and the opportunity it provides to deal with all the directions needed to take the case to trial has contributed to a marked decline in interlocutory applications.
One procedural innovation introduced by the Commercial Court, which is not to be found in the CPR itself, is Progress Monitoring. When the judge hearing the CMC gives directions for trial, which will usually cover matters such as disclosure of documents, exchange of witness statements, directions relating to expert evidence and so on, he will also set what is known as a ‘Progress Monitoring date’. Three days before the Progress Monitoring Date each party must file with the court and serve on the other party a Progress Monitoring Information Sheet designed to inform the court whether it has complied with the pre-trial timetable so far, and if not, the respects in which it has not done so; and whether it will be ready for a trial on the date fixed by the court, and if not, why not.
Progress monitoring has become an invaluable tool for ensuring that preparations are made in good time for trial. An experienced judge will set the Progress Monitoring Date a reasonable time after the date by which the last step in the preparations, or at any rate most of the essential steps, are due to be completed and well in advance of the date fixed for trial. If, when the Progress Monitoring Sheets are filed, the court can see that one or other party has fallen badly behind the timetable, it can make further orders of its own motion to get the case back on track and, if necessary, reconvene the CMC in order to hear the parties’ proposals and make adjustments to the timetable. Since, in our experience, parties are reluctant to lose the trial date, the court is in a strong position at that stage to make robust orders of a kind that call for rapid action from the parties. In nearly all cases a judicious use of the court’s case management powers ensures that the case is ready for trial on the date fixed.
As you may already have realised, fixing the trial date at, or very soon after the CMC, has proved to be a very effective way of ensuring that the court operates efficiently and in the interests of the parties. Typically, the judge hearing the CMC will discuss with the parties’ representatives (including, of course their counsel), how long they need to complete preparations for trial and how long the trial itself is likely to last. Allowing for the usual interruptions (vacations etc.) and the need in many cases to obtain evidence from witnesses abroad, a case which can be tried in less than two weeks can usually be ready for trial within about a year after the claim form has been issued.
Before he hears the CMC the judge will have formed a provisional view about how long trial is likely to last and will have discussed with the Listing Office when a case of that length can be put into the list for trial. At the CMC he will discuss the estimate with the parties and will direct that they attend the Listing Office within (say) the next two weeks to fix a date for trial which is far enough ahead to allow time to complete the necessary preparations, but no farther ahead than is reasonably necessary. After the CMC counsel’s clerks attend the Listing Office which fixes a date which, as far as possible, is consistent with counsel’s availability. This system is popular with litigants because it means that they can be confident that the counsel who have had the conduct of the preparation will be available to appear at the trial.
Fixing a trial date at or immediately after the CMC in this way also benefits the court in two ways. First, it enables the court to plan ahead and ensure that trials can be accommodated in an orderly way. Secondly, and perhaps even more importantly, fixing the trial date early on as an important element in the procedural timetable enables the court to keep control of the progress of the proceedings in a way that would not otherwise be possible. Once a trial date has been fixed taking into account the availability of their counsel, parties are very reluctant to lose it. The pressure on the lists of our Commercial Court means that if it becomes necessary to stand out a trial several months after the date has been fixed, it is likely that a new date will not be available for some months. If parties get behind in their preparations, therefore, the court is in a strong position to impose orders which require urgent action in order to enable the case to be ready for trial on the fixed date. This, in my experience, has done a great deal to ensure that the court and the parties can conduct litigation in an efficient and cost-effective manner. It goes without saying that the court must play its part by maintaining the date for trial once it has been fixed, unless to do so would cause serious injustice.
You will see from all this that the introduction of the CMC, at which the court establishes, with the assistance of the parties, a timetable running all the way through the procedural steps to a fixed date for trial, reinforced by the progress monitoring arrangements, has probably been the most significant development in our procedure in the last 20 years. It puts the court in control of the proceedings, thereby enabling it to ensure that they are conducted efficiently and in a cost-effective way, without undue delay and without the disruption and expense caused by interlocutory applications, which have to a significant extent disappeared.
One other important matter that is almost invariably raised at the CMC is mediation. I understand that the option of mediation is to be introduced here as part of your Commercial Court procedure, and it may therefore be of interest to hear something about how we have introduced it into our procedure in London. We tend to refer to ‘ADR’ (Alternative Dispute Resolution), which covers a number of different means of resolving disputes otherwise than by litigation, but in practice what we are talking about in nearly all cases is mediation.
Mediation came to the fore in England in the latter part of the 1990’s, soon after I was appointed to the Bench. It was quickly taken up by the Commercial Court and has since become very widespread. For some time now it has been routine for the judge to explore the possibility of mediation with the parties when they are before him at the CMC. In my experience it is very difficult for any party, when asked a direct question, to say that there is no reasonable prospect of successfully resolving the dispute by mediation, and even more difficult for counsel representing a party to look the judge in the eye and say that it is not willing to make a reasonable effort to do so.
Businessmen are natural negotiators, but sometimes personalities or an exaggerated view of the strength of the case make it difficult for them to settle the dispute by themselves. They need the help of a neutral third party in the form of a mediator. Mediation as a way of resolving commercial disputes has some well-recognised benefits. Perhaps the greatest is that, if it is successful, the parties resolve their dispute by agreement on terms which they both accept represent a fair reflection of their respective cases or are otherwise in their longer-term interests. In some cases the key to reaching agreement is an opportunity to do further business together. Mediation, in other words, is consensual and co-operative and in most cases less bruising and damaging to relationships that fighting the dispute out in court. It can reduce costs and help to relieve the pressure on overcrowded court lists. On the other hand a mediation which fails to produce a settlement adds to the overall cost of the proceedings.
In order to promote mediation without putting unreasonable pressure on the parties the Commercial Court has developed a standard form of order incorporating its own timetable within which the various steps for which it provides must be completed.
These key steps are:
(i) the exchange of lists of three neutral persons who are available to conduct a mediation promptly;
(ii) an attempt in good faith to agree to appoint as mediator one of the people on the two lists; and
(iii) a requirement that the parties take such serious steps as they may be advised to resolve their disputes by mediation within a limited period of time; and
(iv) if they are unable to settle the dispute, a requirement to write to the court explaining what steps towards mediation they have taken and (without prejudice to matters of privilege) why they have failed.
If the parties have failed to initiate mediation in accordance with the order the CMC is restored so that the judge can give further consideration to the case (and no doubt express his displeasure at the failure to comply with his order).
One of the difficult questions when building into the pre-trial timetable an opportunity for mediation is to identify the best stage at which it should be undertaken. There are arguments for doing it early, before significant costs have been incurred, and arguments for doing it later, when the strengths and weaknesses of the parties’ respective cases can be evaluated better. The former would suggest that an attempt at settling the dispute by mediation should take place before disclosure and the exchange of witness statements, each of which tends to be an expensive part of the preparations for trial. However, at that stage each party’s understanding of the strengths and weaknesses of the other’s case is based on little more than the pleadings and the documents they have in common. The view that any attempt at mediation should be postponed until after disclosure and the exchange of witness statements (and even experts’ reports) is often more attractive because that enables the parties and the mediator to have a much better understanding of the case on each side. However, it does mean that substantial costs may have been incurred which could otherwise have been avoided.
On the whole, I tended to be guided by the views of the parties, since they generally have a better ‘feel’ than the court for what is likely to lead to a successful outcome, but if they were not in agreement I usually preferred later mediation on the grounds that a greater ability to assess the strengths and weaknesses on each side was more likely to give the parties confidence and to result in agreement.
The experience of the Commercial Court over many years has been that a high proportion of claims settle and that more than half of those given a fixed date for trial do so. Whether that owes something to the practice of routinely making mediation orders is hard to say, but the court remains a staunch believer in the benefits of mediation and I have no doubt that it will continue to make mediation orders for the foreseeable future.
One of the respects in which our procedure has been transformed over the past 30 years relates to witness evidence. The practice of allowing lay witnesses to give their evidence-in-chief by formally adopting a written statement has its origins in arbitration proceedings. Arbitration has proved a useful test-bed for innovations in procedure, and since those who practise in the Commercial Court also frequently appear in arbitrations, it is not surprising that after a time the Commercial Court began informally to adopt the same practice, which it was thought would shorted trials and reduce costs. The practice has now been formally adopted under the Civil Procedure Rules in civil proceedings generally.
To some extent the benefits which it was hoped would flow from this development have indeed been obtained. Trials do proceed more quickly, because witnesses do not take time giving their evidence-in-chief orally. As a result, witnesses never fail to come up to proof and the art of examining in chief has largely been lost among commercial practitioners. The use of witness statements has, however, had its drawbacks, the main one being that the judge does not hear the witness’s evidence in his own words. Unfortunately, statements, although based on instructions taken form the witness, are drafted by the parties’ lawyers, who, of course, are alive to all the nuances of the case. As a result, many witness statements are excessively long and argumentative, whereas they should be succinct and confined to the facts. They have become very expensive to prepare are less helpful to the court than they should be. Judges have been lamenting these developments for many years, but have so far been unable to find a cure. Perhaps you can think of one; if you can, I should be delighted to hear about it!
We have also made some useful strides in our procedure relating to expert witnesses. At the CMC the judge will consider, in conjunction with the parties, whether expert evidence needs to be called, and if so, in what discipline. He will not accept uncritically the parties’ view about that, but will decide for himself after considering the issues in the case and hearing what they have to say.
If the judge is satisfied that the court is likely to benefit from the assistance of expert witnesses, he will usually give both parties permission to instruct one person in each discipline which has to be covered. (The Civil Procedure Rules allow the court to appoint a single joint expert, but, although this has been a valuable innovation in smaller civil cases, it has been found that this does not work as well for commercial litigation.) The judge will normally make an order for the exchange of experts’ reports and after that for the experts to meet to discuss any points on which they differ. Following the meeting they will be expected to prepare a joint memorandum identifying the points on which they agree and disagree and, in so far as they disagree, explaining the nature of their disagreement. This process helps the judge at trial to identify the points in dispute and ensure that the expert evidence is focused on them.
At the CMC the judge will consider whether it is necessary to hold a formal Pre-trial Review a month of six weeks before the trial. In many cases, however, that is not considered necessary and so, if all goes according to plan, the final stage in preparation for trial is the filing by each party of a Pre-trial Checklist. This takes place about three weeks before the date fixed for trial. The document itself has been formulated by the court and contains a series of questions designed to establish whether the parties are really ready for trial. It covers practical matters, such as whether the trial bundles have been prepared, which witnesses of fact will be called, whether an order has been made for any of them to give evidence by video-link, whether any of them will require an interpreter, and so on.
I have described these aspects of our procedure in some detail because they all make a valuable contribution to the efficient working of the court. The real point to emphasise, however, is that the court is in control of the proceedings from beginning to end and that, despite the adversarial nature of the proceedings, the legal representatives are expected to co-operate with each other and the court to ensure that the process of preparation and trial is conducted as efficiently and cost-effectively as possible. If there is any sign that things are going wrong, the court staff will draw it to the attention of the Judge in Charge, who can give directions necessary to bring the proceedings back on track and ensure that the trial date is not threatened.
One aspect of our practice which I have not fleshed out, however, is the extent to which the judges of the Commercial Court are directly involved in the procedural side of cases. It has always been a feature of our Commercial Court that the judges deal with all interlocutory applications, however minor. This may seem surprising, but over the years it has shown itself to be a remarkably effective and is very popular with the litigants. Except for very large cases we do not operate a formal docketing system, under which a case is assigned to a judge who deals with all aspects of it, but the Listing Office does its best to ensure that the judge who hears the CMC also hears any other interlocutory applications and if possible conducts the trial. Continuity of judicial involvement is valuable to the court and the parties, not only because the judge retains his familiarity with the case, but also because it makes best use of judicial resources.
When the case finally gets to trial the practice in the Commercial Court is very similar to that in our other civil courts, many of the court’s innovations having been adopted more widely. One aspect of our current practice, which did not originate in the Commercial Court, but was taken up by the practitioners there enthusiastically, is the requirement to file skeleton arguments in advance of the hearing. The use of skeleton arguments was pioneered by the Court of Appeal in the 1990’s. The intention was to provide the judge with a succinct outline of the arguments each party intended to advance and the reasons for them. That is why they were called ‘skeleton’ arguments and when well prepared they are very useful.
Unfortunately, however, over the course of time there has been a tendency for skeleton arguments to become longer and longer. In the Court of Appeal we have imposed certain limits on the length of skeleton arguments, and have even prescribed a minimum font size and line spacing! However, we forgot about footnotes, with predictable results. If you have any ideas on how to control the length of skeleton arguments while retaining their usefulness, I should be pleased to hear them.
One reason for the introduction of skeleton arguments was to alleviate the need for the judge to make a detailed note of the argument. In a trial of any length taking a manuscript note can be very laborious. Some years ago parties in commercial cases began to use real-time computerised transcripts, which in my view are excellent because they can be searched electronically. As a trial judge I found a transcript of the evidence and argument an enormous help. You have the benefit of a precise record of what was said and the ability to find the passage you really need to look at.
I said earlier that commercial courts exist to serve the needs of the commercial community, but those needs are constantly developing and changing. How is the court to keep abreast of change and ensure that its procedures and practices are best suited to the current needs and concerns of the business community? Many years ago we set up a Commercial Court Users’ Committee to provide a forum for discussion between the judges, solicitors and counsel who practise in the court, and representatives of the businessmen who are the principal users of the court. They include representatives of insurers, commodity traders, bankers, the shipping industry and so on. The Committee is chaired by the Judge in Charge and meets three times a year. It has provided a useful source of ideas for improving the court’s procedures, as well as a sensitive early warning system when problems arise. For example, if members of a particular market or industry are dissatisfied with the speed at which the court is dealing with a particular problem, the matter can be brought to the attention of the judges at a meeting of the committee and a solution found. It also seems to me that the very existence of the committee is a practical demonstration of the court’s determination to provide an efficient service to the business community.
Finally, I think it may be worth mentioning that it has been recognised for some time in England that the appellate system has an important part to play in supporting the Commercial Court. If the purpose of a commercial court is to provide an effective service to the commercial community by judges who are experienced in the relevant areas of the law, it is important that any appeals also be heard with as little delay as possible by a court which includes one or more judges who have similar experience of commercial law and practice. It is currently the practice in England for at least one, and sometimes two, appellate judges who were formerly judges of the Commercial Court to be included in the any constitution that hears an appeal from that court. This gives the commercial community confidence that the system as a whole is capable of understanding and dealing fairly with their particular disputes. And in commercial life, confidence is everything.
After that whirlwind tour of the current practice of the Commercial Court in London, I should like to return for a moment to where I began. This talk is entitled ‘Sharing Best Practice’ and I firmly believe we can learn from each other and so place ourselves in the best position to adopt practices and procedures which best suit the needs of the business community we seek to serve. That requires dialogue, discussion and an exchange of ideas. If you find some aspects of the way we do things interesting and perhaps worth adopting, I shall be very pleased. But I hope that there may also be an opportunity for you to tell me about how you do things here, so that I can take home with me some ideas that we might adopt to improve the working of our own Commercial Court.
