The Importance of Litigation Management Systems

A recent case has highlighted the importance of having in place an effective management system to deal with litigation in a timely manner and in accordance with court rules.

The consequence of failing to properly manage court proceedings by not dealing appropriately with a Writ or Summons when served, normally results in the Pursuer seeking and obtaining a decree in absence against the Defender.

Should a decree in absence be awarded the Defender can ask the court to repone (recall) the decree but the matter is entirely at the Sheriff’s discretion.

In A & B Taxis v The Co-operative Insurance [2017] SC ER 10 an action was served on the Defenders on 8th October 2016. No Notice of Intention to Defend was lodged with the court and the Pursuers sought and obtained an extract decree in absence on 22 November 2016.

The Pursuers thereafter sought to enforce the Decree with a Charge (formal demand for payment) being served on the Defenders on 23 November 2016.

Following some discussion between the Pursuers’ agents and the Defenders’ English agents, the Defenders instructed their Scottish solicitors and a Reponing Note was lodged with the court on 22 December 2016. Such a Note must contain a proposed defence to the action and also provide an explanation for the failure to lodge the initial Notice. The explanation for the failure need not be reasonable but must be one which is satisfactory to the Sheriff.

The Pursuers opposed the recalling of the decree. They submitted the court proceedings were properly served and that it appeared the Defenders had no proper system in place for dealing with litigation.

The Defenders submitted that they had a stateable proposed defence (having raised the issue of possible fraud), that according to guidance, systematic failures would not necessarily be held against a party with the courts adopting a benevolent attitude to an explanation for failing to enter appearance, ie. failing to lodge the initial Notice. In any event the delay had not been material.

Having heard arguments for both Parties, the Sheriff found on any reasonable view of the circumstances of the case, it appeared the Defenders did not have a proper system in place to deal with litigation or the diligence (enforcement action) that may flow from such litigation.

The Sheriff was not satisfied with the reason given for the failure to appear. There had been no explanation for the apparent systemic failures within the Defenders’ own organisation or for the delay in instructing Scottish Solicitors. The Sheriff also considered the proposed defence was lacking in detail.

Accordingly the Sheriff refused to recall the Decree. It was the obligation of the Defenders to have in place a system whereby litigation raised against them could be properly managed. As this did not appear to be the case the failure could be described as a “reckless indifference” to litigation in general.

Moreover, the Pursuers were awarded expenses on the more favourable solicitor/client, third party paying scale to mark the Defenders’ persistent systemic failures.

This case serves as a warning to those who regularly face litigation, such as Insurers, that it is important to have in a place a system to effectively deal with court proceedings in a timely manner. To do so otherwise can be costly.

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