In a litigation lecture earlier this month, Lord Woolf was critical of the scale of many of the big cases we are now seeing. The judiciary, he said, was not being nearly tough enough in controlling the length of proceedings. The very scale of litigation was a process of injustice. Trial judges were, he suggested, being deterred from making robust decisions for fear of them being overturned in the appeal courts, a process that means, of course, further costs being added to the process. Slowly but surely, we are reintroducing the complexity that the Civil Procedure Rules (CPR) were supposed to get rid of. The end result, Lord Woolf said, was that we risk destroying the “valuable heritage” of the English justice system.
Lord Woolf was careful to avoid referring to specific cases, but it is surely not a step too far to link these comments with the way the summary judgment process appears to be working when it comes to weeding out potentially complex but weak claims.
A key objective identified by Lord Woolf in his ‘Access to Justice’ reports was “stopping weak cases from dragging on”. One way the CPR sought to achieve this was by the new summary judgment regime: for the first time permitting defendants (not just claimants) to seek summary judgment, and allowing the court to throw out cases with “no real prospect of success”. This has generally worked out well, but not (it seems) for large and complex cases, notably in the Commercial Court.
Take the collapse of the Bank of Credit and Commerce International (BCCI) trial. Both the High Court and the Court of Appeal struck out the liquidators’ misfeasance claims against the bank. However, in 2001, applying the then new summary judgment test, the House of Lords reversed those decisions by a majority of three to two, allowing the case to proceed to full trial. The essence of that ruling was that the more complex a case is, the more likely it is that it should be allowed to reach trial. Two of their Lordships, however, disagreed, deciding that the case should be thrown out and, crucially, stating that summary judgment could be the just result even in such a complex case. Lord Hobhouse put his view pithily: “Doing justice includes bringing to a conclusion highly expensive and long-drawn-out litigation procedures, which are inevitably complex and which have no real prospect of success.”
He had a point. More than four years later, after the parties had run up more than £100m in costs, the liquidators decided to discontinue nearly two years into the trial, at which point Mr Justice Tomlinson, the trial judge, commented that for the previous year it had been a “matter of surprise” to him that the action was being pursued.
The Equitable Life case followed a remarkably similar pattern. In 2003, Mr Justice Langley threw out most of Equitable Life’s £2.6bn audit negligence claim against Ernst & Young (E&Y), describing it as “fanciful in approach and amount”. This ruling was, however, reversed by the Court of Appeal, which decided, following the BCCI ruling, that the causation issues in question were too complex and fact-sensitive for summary determination – particularly because they arose in a developing area of law. Last September, however, more than two years later and after more than four months in court, the case collapsed when Equitable abandoned its claim against its former auditor and refunded some costs – again apparently vindicating the good sense of the original summary judgment decision.
A third example is MAN v Freightliner (2005), a breach of warranty action for around £350m, including a Part 20 claim against auditor E&Y. Again, in 2003 the High Court, following the Equitable and BCCI decisions, determined that the Part 20 claim should proceed to trial because of its fact-sensitivity in a developing area of law. Following full trial, however, E&Y was exonerated, essentially on the summary judgment point – that it did not owe a duty of care to the Part 20 claimant. Again, this raises the question of whether, given a more flexible steer from the higher courts, this issue could not have been determined two years earlier, with huge savings in time and costs.
Can summary judgment ever be appropriate in complex commercial cases? So far the appeal courts seem to have defined the process such that it rarely will. The courts rely, presumably, on the threat of costs sanctions to deter unmeritorious claims. But if that is right, it is an approach that can defeat the objective of streamlining those cases which arguably need it most. In attempting to find justice by allowing claimants to run cases to trial, it risks injustice to defendants, who may be put through many unnecessary years of litigation at enormous irrecoverable cost.
As Lord Woolf put it in Swain v Hillman (2001), one of the first summary judgment cases under the CPR: “[Summary judgment] saves expense; it achieves expedition; it avoids the court’s resources being used up on cases where this serves no purpose; and, I would add, that it is generally in the interests of justice.” If the process is to work properly and if the legacy of the Woolf reforms really is to be a more efficient – and fair – procedural system, then there is much to be said for not losing sight of these points on large commercial claims. Perhaps the excesses seen in the BCCI, Equitable and Freightliner claims are a timely reminder to look at redressing the balance.
Clare Canning and Andrew Howell are partners at Barlow Lyde & Gilbert