The Scottish Commercial Court is in decline. Some straightforward reforms can reverse that and revitalise a valuable part of Scotland’s legal landscape.
In Scotland most construction disputes, including matters relating to adjudication enforcement, are typically dealt with in the Commercial Court within the Court of Session in Edinburgh.
Last month, increasing concerns about the lack of business in this court were aired in a symposium chaired by the principal commercial judge, Lord Reed. More than 100 regular users of the court attended, many of them construction lawyers. Why has there been such a drop in use? How might the court address the decline? What might be the implications for construction disputes?
Everyone is aware that the main reason for decline in use of the court for construction disputes is the continuing and effective use of adjudication. There is also the increasing use of mediation and other forms of alternative dispute resolution.
The buoyancy of the construction industry also means that parties don’t wish to litigate because there is little attraction in locking up time and cost when it is more easily earned elsewhere.
As far as the Commercial Court is concerned, however, the question is whether it can or should make itself more attractive as a forum for significant construction disputes, both legal and factual.
Leaving aside adjudication, companies operating in the UK have a choice of forum for dispute resolution. This will usually be covered in the jurisdiction clause in their contract. If the Scottish courts are not deemed effective, such a clause will provide, even in Scottish contracts, that disputes be dealt with elsewhere.
There are commercial procedures within certain of the sheriff courts through Scotland but these courts seldom appear within jurisdiction or choice of law clauses, often because at least one of the parties operates outside Scotland.
Two factors that make the Commercial Court unattractive to potential users for a construction dispute are the time it takes and the low level of recoverable costs in the event of success.
In the TCC it may be a matter of days before a judgment is handed down; in the Commercial Court it can be months
At present, parties can wait up to a year or more for a trial date. Judges are deployed elsewhere and cannot be released. There is also little splitting of the issues so blocks of weeks on end may be identified to try issues, particularly in construction disputes. There can then be lengthy delays in awaiting judgments. In the TCC this may be a matter of days; in the Commercial Court it can be months. This does not allow parties to move on from a dispute – quite the opposite.
On recoverable costs, those who have litigated in Scotland know how inadequate are the current provisions. The inadequacy of the costs provisions is highlighted by:
- Recoverable hourly rates – the rate is £125 an hour regardless of the experience of the lawyer involved
- Only one lawyer’s time is recoverable regardless of the complexity of the case
- The amount of time recoverable is theoretical – no allowance is made for how much time the lawyer has actually spent with his clients. In the case of complex disputes, this is obviously significant
- If parties cannot agree as to the level of costs a taxing master fixes them. This takes time. Although there is provision for an uplift on these fees for complex and high-value cases, we are talking about a percentage increase from a very low base. There is no summary fixing of such costs by the judge.
In the case of construction disputes, separation of issues and limiting oral evidence are essential to speed up progress. Loss and expense and delay claims seldom go to court but those that do are the multi-issue, high-value ones. The court must be seen to deal with them effectively.
The Commercial Court has played a significant part in the development of construction law in Scotland and beyond since it was formally established in 1994.
As well as seminal adjudication cases such as Homer Burgess vs Chirex, SL Timber vs Carillion and Ritchie Brothers vs Philps, there have been significant cases on interpretation of contracts, including Britannia Life vs Balfour Beatty and others; City Inn vs Shepherd Construction and Beechwood Development vs Mitchell.
The Lord President of the Court of Session has declared his support for the Commercial Court. Although it has to change the way it handles disputes, the development of construction law in Scotland and beyond would be much the poorer without it.
Lindy Patterson is a partner in Dundas and Wilson