Points for Potential Defendants

The greatest potential benefit in defending a claim is of course if you are successful at trial or achieve a satisfactory settlement.

However, although as a Defendant you may feel that you have little choice about whether or not to become involved in Court proceedings, and if you do not take the necessary steps to defend the proceedings you are likely to have judgment entered against you, there are various factors that you should consider carefully. This guide is intended to set out the most important of these, in order to allow you to make an informed decision on how to proceed. Obviously, we hope that you will find it of assistance.

However, you will appreciate that litigation is a complex area and no guide can ever set out all of the factors relating to a particular case. THIS GUIDE IS NOT THEREFORE A SUBSTITUTE FOR DETAILED ADVICE ON YOUR CASE.

If you would like further explanation of any points in this Guide, please do not hesitate to contact us.  For further information on the Commercial Litigation Team, please click here.

This Guide is not a substitute for and does not replace the Client Care letter that you will, if you are a client, already have been sent, or will be sent, which will set out such matters as how our fees are calculated.

This Guide relates only to proceedings in the English and Welsh Courts, and not to Scottish Court or Courts abroad or indeed to arbitration proceedings.

The Basic Court Process

If you have been or are served with a Claim form, you must take the necessary action within 14 days. If you do nothing, you risk having a judgment entered against you by the Claimant.

When you are served with a claim you should receive:

• a two sided Claim Form (setting out the amount and type of the claim);
• particulars of Claim (explaining the background to the Claim; the relevant facts; the basis of the Claim and the amount that is claimed or the remedy that is sought), although this may follow later; and
  
• Court forms for acknowledging, admitting or defending the Claim, and guidance from the Court about what you need to do next.

The options for a Defendant to a Claim are:

• to admit the Claim in whole or in part;
• to defend the Claim; and
• to Counterclaim against the person bringing the claim (the Claimant).

Admitting the Claim

If you wish to admit the whole or part of the Claim, this must be done on the form provided by the Court, within 14 days of receipt of the Claim form. The Court will then contact the Claimant to see whether they accept the amount admitted. If they do, they will request that the Court enter judgment against you for the amount of the Claim admitted.

You should think carefully and take legal advice before admitting a claim.

Defending the Claim

If you do not admit the whole, or any, of the Claim, or if you wish to make a Counterclaim against the Claimant, you will need to take the following action:

• lodge with the Court an Acknowledgement of Service form saying that you intend to defend the Claim (this must in general be received by the Court within 14 days of the service of the Particulars of Claim on you but for example in the Commercial Court needs to be done within 14 days of service of the Claim Form. You should therefore carefully read the Guidance Note, that you should receive with the Claim Form); and then
• serve a Defence (or a Defence and Counterclaim) setting out the grounds on which you intend to resist the claim and the basis for any Counterclaim you wish to make (this must in general be received by the Court within 28 days of the service of the Particulars of Claim on you)

Also, depending on the exact type of claim, the above time periods may differ and you should therefore send all Court pleadings and orders to us immediately that you receive them, so that we can advise you of the applicable time limits.

Challenging the Jurisdiction of the Court

When you complete the Acknowledgment of Service Form you have the option of challenging the jurisdiction of the Court. This will be particularly relevant if there is a foreign element to the Claim or if you and the Claimant have entered into an agreement that contains an arbitration agreement.

If you think that you may want to challenge the jurisdiction of the Court (and would like the matter to be dealt with by a foreign (or Scottish) Court or by an arbitrator) take legal advice before you lodge the Acknowledgment of Service Form, as otherwise you may find it very difficult to challenge the Court's jurisdiction at a later stage.

IT IS IMPORTANT THAT YOU COMPLY WITH ALL APPLICABLE DEADLINES. IF YOU DO NOT, THE CLAIMANT MAY BE ABLE TO ENTER JUDGMENT AGAINST YOU.

The Process En Route to Trial

In brief, once the Claim and Defence have been served, there are a number of steps that need to be taken before the matter gets to trial.

Once a Defence has been lodged the Court sends Allocation Questionnaires to both sides and sets a deadline for them to be returned to the Court. Upon receiving the Questionnaires (or after the time limit for returning the questionnaire has expired), the Court will allocate the case to:

• the Multi-Track (usually for cases worth more than £25,000 or of complexity);
• the Fast Track (usually for cases worth between £5,000 and £25,000); or
• the Small Claims Track (usually for cases worth of up to £5,000).

The financial value of the claim is the main factor in deciding which Track a case is allocated to, but the Court will also consider factors such as the complexity of the issues, the value of any Counterclaim (see below) and the amount and nature of witness and expert evidence that may be required.

Although the exact steps will depend on the Track selected by the Court, the type and value of the claim and the approach taken by the Court, the following are common features in most litigation (although they are unlikely all to apply if the case is allocated to the Small Claims track):

• disclosure (where each party tells the other side what documents they have - whether helpful or not - that relate to the points in dispute, and allows the other side the opportunity to see those documents);
• exchange of Witness Statements (where each side has to serve on the other written statements of the factual evidence to be given by its witnesses); and
  
• service of Expert Evidence (if the Court needs expert evidence to decide the case). This may be by way of each side appointing its own expert, or by the appointment of a joint expert.

Various additional steps may also be necessary before trial, and it is common for there to be applications made to the Court by the parties before trial to deal with procedural matters (these are known as interlocutory applications or hearings).

The Trial or Hearing

The exact structure of the trial or final hearing will depend on the particular case and the Track that the case is allocated to.

In the Fast and Multi-track the process is more formal and barristers are often used. Witnesses will give evidence and be cross-examined and each side has the opportunity to make its case to the Court. Fast Track trials should last no more than five hours, although this can be spread over two days, whereas Multi-track trials might last considerably longer than this.

In the Small Claims track, there will be a relatively informal and quick hearing before a District Judge (usually lasting no more than a couple of hours). The process is designed to allow parties to represent themselves if they wish. Witnesses will need to attend and each side will have the opportunity to explain their case to the Court, show the Court the relevant documents, ask their witnesses the questions they want and ask questions of the other side and their witnesses.

Publicity

If a case reaches trial in open court it may conceivably be reported in the press or receive press attention.

Appeals

The losing party can in certain circumstances appeal against decisions of the Court. If this happens it can result in significant additional expense and delay for both sides.

Limitation and Time Limits

Limitation

In English law there are various time limits for starting Court proceedings or taking steps to enforce a judgment. If these limits are missed it may make it impossible to pursue the claim or difficult to enforce the judgment. There are numerous different limitation periods. The limitation period for some claims may be as little as three months, but the general period is six years from the date that the claim arose. In a negligence claim, this will be six years from the date of the negligent act; in a breach of contract claim, it will be six years from the date of the breach of contract. In the case of enforcing a judgment, it will be six years from the date of the judgment.

Therefore, if you consider that you have a claim or counterclaim and there is any possibility that you may be approaching the end of the limitation period, you should inform us immediately.

As mentioned above, we are only able to advise on English law and therefore, if foreign law may apply to this matter, you should check what the limitation period is under that foreign law. Certain foreign law limitation periods are considerably shorter than their English law equivalents. We have contacts with a number of foreign law firms, and therefore if you would like us to make enquiries on your behalf, please let us know.

Time Limits

If you are already a party to legal proceedings, strict time limits will apply for you to take steps in the proceedings. You should therefore send all Court papers and orders to us immediately.

The Likely Time-Scale of Court Proceedings

Court proceedings can be a time consuming and drawn-out process. If you defend the claim fully, the proceedings may, depending on the Track that is selected and the approach of the Court and the other side, last many months or even a number of years.

The likely time-scale depends on the Track to which the case is allocated, which affects how (and the speed at which) the case progresses:

• in The Multi-Track, there is more flexibility in the time-scale and the Court will consider the nature of the case (usually at a preliminary hearing called a Case Management Conference); decide how best to deal with it, and issue Directions accordingly. The trial can take place within as little as 40 weeks of filing of the Allocation Questionnaire, but the timetable can vary significantly according to the nature and complexity of the issues and the decisions of the Court handling the case and may not be until more than a year after the proceedings began. You may also find that the Court orders extra hearings, for example a Listing Hearing to assess the position before a trial date is fixed and possibly even a Pre Trial Review to check the position and readiness of the parties before the date of the trial; 
• in The Fast Track, the Court will fix a strict timetable for progress to trial and the trial will usually take place approximately 30 weeks after the filing of the Allocation Questionnaire. A typical Fast Track timetable, from the date of filing of the Allocation Questionnaire, is:

•  in The Small Claims Track, cases are generally heard within six to 10 weeks of the Allocation Questionnaire being file.

Prospects and Success and Risk

Whilst we will advise you as to our views as to your prospects of success, you must appreciate that the outcome of any litigation is uncertain; there can therefore be no guarantee of success, and that there is therefore always an element of risk involved in engaging in litigation. Also, cases almost invariably evolve as they progress, and the prospects of success can also vary significantly as the case progresses (and at trial) depending on such factors as what documents emerge; what the witnesses of fact and expert witnesses say, how they perform at trial and which witnesses the Court chooses to believe.

Documents and Witnesses

Documents

Please make sure that you keep safely any documentation (and computer records) that may be relevant to the proceedings. As mentioned above, during the Disclosure stage of the litigation you will have to disclose not only the documents that we will be relying on, but also any relevant documents that adversely affect your case. We will need to see all documents that may be relevant (whether helpful or not)

You should also keep safe any physical items that may in any way be relevant to the dispute.

Witnesses

It is also important to keep details of any potential witnesses, including details of where they can be contacted if there is any risk that you may lose contact with them.

You may have to pay for the services of an expert witness, if evidence on a technical matter is needed.

Costs

Introduction

Costs are obviously an important factor. Some of the important points of which you should be aware in relation to the likely level of your legal fees are:

• whilst the likely level of costs will depend on the nature of the case, litigation is in general a time-intensive (and hence expensive) process. The more complex the claim (and hence the greater the amount of documentation, witnesses and the need for expert opinion) the more expensive it is;
• if you decide to bring a Counterclaim against the Claimant you will need to pay a court fee. The amount of the fee varies between approximately £30 and £1,530 and depends on the size and nature of the claim. We will advise you on the exact amount;
• court fees (for example for interlocutory applications) are likely to be payable as the case progresses;
• it is always very difficult to give meaningful estimates of the likely overall costs of litigation, because so much depends on how the case progresses (and hence the approach taken by the Court and the other side), and it is almost impossible to predict at the outset what approach they will take;
• if you win at trial (although it is always at the Court's discretion; there are a number of factors that the Court can take into account (including settlement offers made by the parties) and there can therefore never be any guarantee that the Court will make such an order) the loser is usually ordered to pay the winner's costs;
• however, you are always primarily liable for our costs and even if you are awarded your costs, you will almost certainly not recover all of your costs from the other side. The amount of any costs payable by the other side is (if they cannot be agreed) decided by the Court either at a separate assessment hearing or immediately following the trial and, as a very rough guide, even if you are awarded your costs, you can expect to recoup only a maximum of approximately 75% of your actual costs of defending the claim (although this percentage can be higher or lower than this figure), and you will have to bear the shortfall yourself. Also, if costs are assessed at a separate hearing, you will incur further costs in preparing a formal bill of costs (which we need to pay a costs draftsman to do), and preparing for and attending at the assessment hearing. Again, only a proportion of those costs will be payable by the other side;
• the amount of your costs that you are able to recover is restricted further if your claim is allocated to the Small Claims or Fast Track, in that:
• in the Fast Track, there are specific restrictions that apply to the amount of costs that are recoverable from the other side; and
  
• in the Small Claims Track, you will in general, even if you win, not be awarded more than any Court fee you pay; witness expenses and fixed costs (between £50 and £260 depending on the size of the claim), and will have to pay the rest of your legal fees yourself. You should therefore always consider the commerciality of pursuing a small claim using lawyers, as even if you win, the legal costs will effectively have to be deducted from any winnings (and indeed may well exceed those winnings).

Disbursements

Expenses are likely to be incurred on such matters as barrister's fees and expert witness fees (if these are used).

If the Other Side Should Qualify for Legal Aid

If the Claimant is at any stage entitled to receive Legal Aid, you are unlikely to recover any of your costs from them even if you win.

If You Should Lose

If you lose your claim, you will almost certainly have to pay the winner's (assessed) costs as well as your own.

Costs of Interlocutory Hearings or Applications

If there are any interlocutory hearings or applications, the Court is likely to order the loser of each application to pay the winner's costs of the application. These are usually assessed there and then and the loser will usually have to pay these costs within 14 days of the hearing in question. Again, however, if you are the winner, you are unlikely to recover all of your costs incurred in connection with that application and will have to bear the shortfall.

Your Time and the Time of Your Employees

Defending Court proceedings may take up a lot of your time, time which could obviously otherwise be spent on other things. You are unlikely to receive compensation for this time or the time spent by employees or management of your business in connection with the litigation.

Security for Costs

In certain circumstances you can ask the Court to require the Claimant to provide Security for Costs, particularly if the Claimant is abroad, insolvent or of limited means. The Court can then order the Claimant to pay funds into Court or into a deposit account to cover your likely costs of defending the claim. Similarly, if you counterclaim, the Claimant may apply for an order that you provide Security for Costs of the Counterclaim.

Insurance

You should check your existing insurance policies and check with your brokers to see whether you have litigation cover. Such cover can be attached to other policies such as business and household insurance. If you have (or may have) such cover, you should make sure that you get your insurer's approval to your intended course of action (although you should protect your position to avoid a default judgment in the meantime) or you may find that your policy is invalidated.

It is also possible to take out 'After the Event' legal expenses insurance, which can, depending on its terms, cover our costs and the other side's costs if the litigation is unsuccessful. The premium depends on the likelihood of you being successful at trial, and is in some cases not payable until the conclusion of your case (and not payable at all if you lose). It may also be possible to recover the premium from the other side, should you be successful. Please let us know if you would like to explore this possibility.

Conditional Fee Agreements

Solicitors are free to act on the basis of a formal Conditional Fee or "No Win, No Fee" type of agreement, although this is in general more suited to simpler, debt recovery type actions or actions where the amount of compensation, rather than the question of liability itself, is in issue, and whether or not we are prepared to act for you on a Conditional Fee basis will depend on various factors. Please contact us if you would like to discuss this issue further

Enforcing a Judgment or Costs Order

A judgment on a Counterclaim or a favourable costs award may in some circumstances only be worth the paper that it is written on, as it may be necessary to enforce that award, which may be impossible if the Claimant has insufficient assets. Also, you may incur further costs and time trying to enforce a judgment or favourable costs award, and are unlikely to be able to recover more than a small proportion of those costs from the other side.

Freezing Order

If you have a Counterclaim and consider that the Claimant may, or is likely to, hide or dissipate their assets, please tell us a matter of urgency, as it is in certain circumstances possible to get a Court Order preventing them from doing so. Also, regardless of whether or not you have a Counterclaim, this may be relevant to a potential Security for Costs application against the Claimant.

Settlement

Whilst there is no guarantee that a case will settle, the majority of cases do settle before they reach trial.

You can make the Claimant an offer to settle at any stage up to the trial itself, and please let us know at any stage if you would like to do this. Any offer would be made on a "Without Prejudice" basis and would not therefore be seen by the Court at trial until it came to decide the question of costs.

Part 36 Offers

An offer can be formulated as a "Part 36 Offer", which can put the Claimant at risk as to costs and interest if they continue with the proceedings and fail to beat the offer that you have made. It is well worthwhile giving serious thought at the outset to what would represent a satisfactory outcome for you, and for this to be formulated into a formal Part 36 Offer to the other side, and please let us know if you would like us to do this. Any Part 36 Offer needs to be considered carefully before it is made. If your Defendant's Part 36 Offer is accepted by the Claimant, the normal rule is that you will also have to pay the other side's costs (to be assessed by the Court if not agreed)

Similarly, the Claimant can also make a Part 36 Offer at any stage. If this happens, you would have 21 days to decide whether to accept the offer. We will obviously discuss such an offer with you in detail if it is made, but in brief there would be significant costs and interest consequences if you do not accept a Part 36 Offer and fail to beat it at trial.

Mediation and Alternative Dispute Resolution

Mediation is a way of attempting to achieve a settlement, and is encouraged by the Courts. Mediation is without prejudice (and therefore the judge would not know about it until after deciding the outcome of the trial, although he or she might be told about the mediation before deciding on the costs of the proceedings) and both parties essentially meet with a mediator to see whether a resolution can be found. Again, please let us know at any stage if you would like to explore this possibility.

Pulling Out

Once you have decided to defend Court proceedings, you cannot simply withdraw from or stop them, as you would then, unless a settlement could be agreed with the other side, almost certainly have judgment entered against you and would also have to pay the Claimant's costs of pursuing the matter and defending any Counterclaim. Therefore, it is important to ensure that, before entering into a protracted defence of proceedings, you are prepared if necessary to defend the matter all the way to trial.

However, that said, if you do not defend Court proceedings (or negotiate a settlement of them that brings the proceedings to an end) the Claimant will normally be able to enter judgment against you for the full amount claimed, together with Court fees and costs to that date.

Conclusions

The intention of this guide is not to tell you whether or not to defend a claim. However, it is obviously important that you are aware of the basic process and the potential pitfalls of litigation, in order to allow you to consider the commerciality of Court proceedings; to balance the potential risks and advantages accordingly, and to make and informed decision.

Ashfords LLP is regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances. Links to other sites and resources provided by third parties are included for your information only. We have no control over the content and accept no responsibility for them.