Mercantile courts play a pivotal role in the economy and are in the vanguard of new ways of working. Grania Langdon-down reports.
As the ‘natural forum’ for business disputes in England and Wales, the mercantile courts are keen to play a role in testing out new civil justice initiatives.
The London Mercantile Court is among the courts in the Rolls Building to pilot the new shorter and flexible trial procedures. It is also part of the year-long e-working pilot scheme, which enables parties to issue proceedings and file documents online 24/7, while judges across the mercantile courts are keen to encourage initiatives such as early neutral evaluation.
Set up in the 1990s, the 10 specialist mercantile courts play a ‘vital role’ in the civil justice system, according to HM Courts & Tribunals Service. It is the HMCTS that describes them as the ‘natural forum’ for resolving all business disputes that require specialist judges but fall outside the scope of the Commercial Court in London, or the jurisdiction of the Chancery Division.
In providing a regional commercial court service, particularly to small and medium-sized enterprises but also to large, national and international businesses, the courts also have a ‘pivotal role to play in the smooth running of the economy’.
That is a big billing to live up to. So what is it like to be a mercantile judge and how are the courts viewed by practitioners?
Matt Taylor is a partner in the commercial and dispute resolution team at Eversheds’ Manchester office. While 60% of the team’s litigation is run in the High Court in London, 40% is run in Manchester.
‘If I am acting on the claimant side in those cases,’ he explains, ‘I will generally issue them in the Manchester Mercantile Court because of the flexibility it offers and the proactiveness of the local judiciary – one of the big advantages is having the same judge all the way through the case.
‘I have nothing but praise for the court. It’s well run in terms of its administration, and the ease and speed of bringing matters on for a hearing. We find it is the best of the registries to move our clients’ cases forward. That is largely down to the judges, who are very keen to engage with local practitioners and are always seeking feedback and encouraging innovation.’
While you might have a different approach to case management when on the defendant side, he notes, ‘you know with the Manchester court that the case will be dealt with effectively and promptly’.
Mercantile courts deal with commercial disputes and professional negligence matters. The courts have given lead decisions on payment protection insurance mis-selling and dealt with dozens of interest-rate swap cases. There are no maximum or minimum financial limits on claims, which can run into several million pounds.
Taylor’s client base is largely ‘weighty-sized corporates, AIM-listed north-west companies’. Contractual disputes are ‘our bread and butter’, he says.
Over the last two years, he has not had a case that has gone through to a complete trial. ‘Part of that,’ he notes, ‘is down to the court’s proactive case management, part to general encouragement to consider sensible alternative dispute resolution, and part to commercial reality.’
However, he has seen a marked increase over the last six to 12 months in cases going further beyond the case management conference stage than before: ‘It’s an indication that we are coming out of recession, with parties now having the appetite to go through the disclosure process even though the number actually getting to trial is still only about 5%.’
Judge David Waksman QC took over as the mercantile judge in London earlier this year after eight years as one of the two mercantile judges in Manchester, which is grouped with Liverpool to form the north-west area.
In London, there is no demarcation line between the Mercantile Court and the Commercial Court in terms of value of a claim, he says. ‘We can have cases worth £5m-plus but generally it is those with less value and complexity – it is a “lite” version of the Commercial Court.’
After a spike in claims issued during the recession, the number has dropped. In London, there will have been about 225 claims issued this year, compared with 288 in 2013.
In the Bristol Mercantile Court, which covers the south-west, Judge Mark Havelock-Allan QC says the number of new claims went up from about 45 when he arrived in 2001 to about 85 in 2009. The number peaked at 175 in 2012/13 and is now back to about 80/85 annually.
For Tony Guise, chair of the Commercial Litigation Association, the mercantile courts are working ‘because they are staffed by very able judges and have very good staff, but they are hidebound by the lack of technology. The start, middle and end of every reform is IT’.
That message appears to have got through to the government, with chancellor George Osborne’s spending review commitment to meet the long-requested £700m investment in technology and IT upgrades (see Rozenberg, p8).
In the meantime, the regional courts will be watching to see if the new shorter trial option – which offers ‘dispute resolution on a commercial timescale’ for cases that can be fairly tried on the basis of limited disclosure and oral evidence – proves attractive to parties.
The flexible trial option is for those cases where parties might not want to be quite so restrictive on factual evidence or the amount of disclosure, or where they need experts but do not want to go down the full-blown range of directions available in the Civil Procedure Rules.
Both procedures are aimed at business and commercial cases that do not involve allegations of fraud or dishonesty, which would typically require extensive disclosure and witness evidence. They would also not be suitable for cases with multiple issues, multiple parties or for intellectual property or procurement cases.
Ed Crosse, disputes partner at Simmons & Simmons and committee member of the London Solicitors Litigation Association, was the solicitor representative on the Shorter and Flexible Trials Committee.
He says the procedures could be particularly helpful in the mercantile courts where cases may be of a lower value, with an increased focus on costs and proportionality.
Feedback from the consultation was positive, he says: ‘One or two questioned whether the schemes were needed, as there is already scope within the existing rules for the courts to make similar directions. But people endorsed the idea of docketed judges, limited disclosure, summary assessment of costs and having cases heard within just a year.’
Waksman says mercantile court trials already tend to be shorter than commercial court trials, while training in case management techniques will have prepared judges in assessing whether cases are suitable for the pilot.
‘My approach would certainly be that, if I thought a case was a suitable candidate for either of the new procedures, I would raise it with the parties at an early stage,’ he says.
Eversheds’ Taylor believes the pilot schemes will be a ‘really attractive proposition because litigants will see it as a clear road map through to a fairly speedy trial. I think some of my clients will be interested in it.’
Ironically, however, it could result in more cases actually going through to trial, he says. ‘There are cases where a party feels compelled to settle at a level they aren’t 100% comfortable with because the process is too time- and cost-intensive. If they see the option of a more expedited route at a more reasonable cost, they may be willing to go through to the end to see if they get a better form of justice.’
Another potential development is some form of fixed fees or cost-capping – an issue raised at the Law Society’s last commercial litigation conference by Mr Justice Flaux, the judge in charge of the Commercial Court. While he stressed he was not advocating fixed costs, he suspected a tariff of recoverable costs would be introduced in the commercial arena.
Taking the mercantile courts as an example, Taylor says it is difficult to envisage how it would work. ‘There are certain stages of litigation where it may be possible, for pleadings for example,’ he says. ‘But there are other stages where I think the uncertainty of the scope of the work and the potential for it to increase for reasons outside parties’ control – such as a disclosure exercise or witness statements – would make it difficult.
‘If you fix recoverable costs at the outset, it could inhibit the ability of both parties to move forward properly.’
However, Kerry Underwood, of Underwoods Solicitors, is more gung-ho: ‘It would be surprising if fixed costs are not with us in commercial work within the life of this parliament.’
He argues the work is ‘no more difficult than the work lawyers do in areas where costs don’t follow the event, such as employment and swathes of personal injury – it just has more noughts on the end of it. The alternative will be a US system where you have to get what you can from your client’.
In the meantime, both the courts and practitioners will be watching to see what impact the rise in court fees will have; particularly if the latest consultation results in the maximum fee for claims worth £200,000 or more going up from £10,000 to £20,000.
Taylor says the increase has focused clients’ minds on whether litigation is the appropriate route, but it has not reduced the number of claims being issued. But if it went up again it may be a tipping point for the bigger disputes.
It is now more than two years since cost budgeting was introduced and Waksman says practitioners have become much better at it, after some initial scepticism. One critical point which is often overlooked, he says, is that courts are starting to summarily assess costs at or around the approved budget figure, so there is no need for a detailed assessment.
‘I certainly do it and I know some others [do] too,’ he says, pointing out that the burden would be on the paying party to give good reasons why a court should depart from the amount in an approved budget. ‘Perhaps naturally, people focused on what they saw as the cost of doing the cost-budgeting exercise at the beginning without always appreciating the advantage it could bring at the end.’
Waksman is also keen to encourage parties to consider early neutral evaluation (where a judge gives a non-binding indication of the merits of the case at an early stage) which has recently been given greater prominence in the CPR. ‘It is much underused,’ he says. ‘As with mediation, if the parties don’t raise it, the courts should, though it has resource and listing issues, as the judge who gives the evaluation can’t then hear the case if it doesn’t settle.’
Another innovation that is increasingly being seen as a real option, he says, is hot-tubbing (putting experts together in the witness box). ‘I have done it when sitting in the TCC and it has now gone into the rules as a separate paragraph,’ he says.
‘I think it works, but it requires a lot of preparation by the judge, the experts and the advocates. The judge has to be wholly on top of all the expert reports and completely familiar with the five or six key issues. But, like cost budgeting, once you have invested the time in the beginning of the process the rewards come later on in time saved.’
With so much focus on the cost of litigation and its impact on access to justice, the mercantile courts are working hard to maintain their elevated status.
Grania Langdon-Down is a freelance journalist
Mark Havelock-Allan QC is the ‘only sheriff in town’ for mercantile disputes in the south-west, writes Grania Langdon-Down
The south-west court sits in Bristol but the circuit runs from Hampshire to Cornwall and back up to Gloucestershire. Havelock-Allan, mercantile judge since 2001, is also the TCC judge and runs the two lists – with about 130 claims issued a year between the two – in tandem.
‘At times I have thought if everything stood up or the settlement rate dropped by 50%, I would have to go and shoot myself,’ he says colourfully. ‘It just wouldn’t be doable with all the case management and directions. But every time it has looked like that, and we have had some hairy moments by and large, the diary has opened up because a case settles.’
He generally hears about six to seven trials a year. While he is not surprised that new issues have dropped back as the economy recovers, he is surprised how many cases do not settle until after the pre-trial hearing, despite all the encouragement to negotiate or go to ADR.
‘Why have the parties incurred all these costs then cracked it when they are more or less tooled up for the trial?’ he queries. ‘The short answer is it was always thus. Sometimes it is the thought of actually going into the witness box that focuses minds.’
Havelock-Allan is very keen to see the new shorter and flexible trial procedures in action. He has been advocating a more streamlined procedure which he would like to see combined with a fixed-costs or ‘costs-capped’ regime. This could provide a maximum allowable figure in each Precedent H category, with jurisdiction to go beyond that figure only in exceptional circumstances.
‘It is a pity that the pilot is going to run for two years before the procedures, if they are a success, are rolled out elsewhere,’ he says. ‘I would like to think that at least the shorter trial procedure pilot may be extended to the regional mercantile courts from October 2016.’
The ‘secret’ to the mercantile court list is that the same judge handles the case from start to finish, he says. He regards his most important function as case management, given the vast majority of claims settle, and is proactive in trying to ‘head off’ potential interim disputes.
One of the ‘beauties’ of having ticketed cases and a dedicated listing office is close relations with solicitors and barristers’ chambers, he notes: ‘In the mercantile courts, even if you get a raspberry from the judge at least you have made direct contact pretty quickly.’
When it comes to settlements, his statistics suggest mediation is not the prime driver. More often than not, settlement is still being achieved through conventional, without-prejudice negotiation.
What has not won favour is early neutral evaluation (ENE). ‘I agreed a protocol with the Cardiff Mercantile Court so whoever did the ENE, the other court would hear the trial if it didn’t settle because the same judge can’t do both,’ he explains. ‘We publicised it but not a single case has been presented to me for ENE. I don’t know why but it may be the parties feel that if you go to a judge for an early view and it goes against you, you are stuffed if you want to carry on.’
When it comes to costs budgeting, he is an ‘unashamed apologist’ for it and says practitioners are getting better. He has a shared standard direction with Birmingham Mercantile Court which requires parties to exchange budgets 14 days before the case management conference so, when they file to the court seven days before the hearing, they include either a statement of agreement or the points of dispute.
‘I can then review it and take it at a pretty good canter when we get into court,’ he says. However, he adds: ‘For the first time recently I had a costs lawyer come with counsel to argue against the criticisms of their client’s budget and, before I knew it, we had spent over an hour going through it in minute detail.’
Where budgets are agreed, they are, on the whole, sensible, he says: ‘There is no sign that solicitors are agreeing budgets in a cosy, “I’ll scratch your back”-type arrangement where unreasonable fees are bunged in and agreed so the judge doesn’t have jurisdiction to disapprove.’
Where he has to use the process to get excessive costs down, ‘it works, as solicitors realise they have to cut their cloth’. He also believes it will do away with the need for detailed assessment – if a budget is approved, it should only be departed from with good reason.
One issue he would like to see resolved is the guideline rates for solicitors, which remain at the 2010 level. ‘It is not a good tool to try to drive down costs,’ he says. ‘We have to live in the real world. If it costs solicitors £250/£300 an hour to make a decent return in Bristol, suddenly artificially saying you can’t have more than £240 is not the way to go about it.’
Being so close to London, Havelock-Allan says he sees London counsel in at least 60% of cases. However, he praises local civil sets – including Guildhall and St John’s and the Bristol office of 3 Paper Buildings.
‘There are some very big law firms in Bristol like Burges Salmon, Clarke Willmott, Osborne Clarke and a few like CMS Cameron McKenna and RPC which have really big Bristol offices,’ he says. ‘A lot of local firms are also big enough to have specialist commercial departments.’
The mercantile court itself comes under the responsibility of the judge in charge of the Commercial Court. ‘There is no supervision as such but there is liaison, so if a really big case is listed here that I feel is suitable for trial by a High Court judge, the Commercial Court will send someone to try it,’ he says.
He has done that twice in the TCC but not in a mercantile case. ‘If there was a case with “mega issues” I would refer it, but I have heard some cases involving £10m to £20m claims and I was quite happy to try them myself. You have great freedom, which is one of the attractions of being a judge here.’
What he is in no doubt about is that change is coming, otherwise the headline figures will mean going to court is ‘just a rich man’s game’. He also expects ‘quite radical’ proposals from Lord Justice Briggs’ review of the civil courts. ‘The proposals are likely to say the divisions should be abolished altogether and, within a unified civil court, there will be, like little stars in the firmament, the specialist courts,’ he predicts. ‘But it will be one court – no county court no High Court – with three to four levels of judge within it. The question will be how you carve up the work.’