Striking the Right Note

I have had several experiences recently of appearing on applications to strike out the whole or parts of a claim or counterclaim against a professional, with alternative relief being sought for an order compelling amendment of the relevant statement of case. My own personal view is that those acting for professionals and their insurers should think very carefully before seeking strike out as an interim remedy – for tactical, rather than legal reasons.

Most applications of this nature arise in the context of inadequate pleadings. Sometimes the inadequacy is fundamental; for example, a failure to plead out a case on causation. On other occasions the failure is in the nature of a want of particulars; for example, of a breach or of a head of loss claimed. Either sort of deficiency represents a genuine problem that must be addressed in order that we, the advisers, can perform a thorough analysis of liability, of quantum and of the future organisation of a claim.

My recent experience has been in two contexts: firstly, in claims where we – the team acting for the professional – believed that the claim being presented was of little merit; and secondly, in the context of hurried or spurious counterclaims made in response to straightforward professional fee claims. In either case, the desire is usually to knock out the weak claim/counterclaim with minimal expense. Thus, strike out (or summary judgment) represents an attractive option on paper.

But in reality? The truth is that it is not easy to strike out any claim or counterclaim that is capable of being cured by repleading. The overriding objective – particularly the need for proportionality of remedy – usually dictates that the less draconian sanction of amendment will be given, but the underlying defence/counterclaim allowed to proceed. The position may be stronger where there has already been an order for amendment, or where the Part 18 procedure has been invoked by the party seeking relief but with little engagement by the respondent – see for example Pantelli Associates Ltd v Corporate City Developments Number Two Ltd [2010] EWHC 3189 (TCC). However, in the majority of cases it will be difficult to secure a strike out at the first attempt.

My central point is therefore to consider the messages that are carried back to the (often lay) claimant / counterclaimant by his solicitor after an application of this nature has been heard.

If an application for strike out or summary judgment is made, but fails, and instead a party is ordered to amend, amplify or re-draft part of their case (which I will call “a re-pleading order”), the key message the solicitor will present to his client is that the claim is being allowed to proceed: “The other side tried to strike us out, but failed.” Albeit that there will usually be an adverse costs order if a re-pleading order has been secured, the fundamental message to the client is: we are still in the game.

Contrast this position. An application is made simply that a party’s statement of case is deficient, and requires amendment or re-drafting in some way. The evidence in support lambasts the drafting by the claimant/counter-claimant’s advisers (for which they have already billed their client). Strike out is not sought. The Court orders that the pleading is deficient and should be rectified. The message then is fundamentally negative: “The other side said our drafting wasn’t good enough. They were right.” Provided there has been a reasonable attempt in correspondence to highlight the issues and offer a chance to rectify them voluntarily, there be usually be an adverse costs order against the respondent. But moreover, the fundamental message to the client here is: we, your advisers, messed up the drafting of your case – and now you’ve got to pay our costs and the other side’s in putting it right.

In my view, the psychological impact of these respective outcomes is not to be underestimated.The last thing any liability lawyer (or PI insurer) wants is for a claimant with a weak claimed to be buoyed by a perceived interim success – or even an interim reprieve. There is a danger of entrenchment – the claim is not struck out, and the message carried back is that “the claim has a real prospect of success”. This can be seriously misconstrued by a litigant as an endorsement the claim, which it certainly is not. Such confidence boosts can make cases far, far harder to settle at an early stage, which is usually the objective that drove the application in the first place.

The converse psychological impact on a successful application for (as I have termed it) a re-pleading order, is readily apparent. There is far less focus on overall prospects of success (although I accept this terminology may still feature), and far more concentration on whether the lawyers for the claimant/counter-claimant have done an adequate job. If they have not, this creates an obvious tension between client and adviser, involves the client paying over significant sums which he will regard as a complete waste, and is in my view more likely dishearten a party with a weak claim (or counterclaim) from pursuing expensive litigation further.

So my message is: consider whether you really believe you will get a claim struck out, or attain summary judgment. Of course, there will still be cases where it is right to pursue these remedies. But do pause to contemplate the alternative course of simply seeking an order for re-pleading. If that order has the sort of impact I have discussed here, then it might ultimately be the more effective route to an early settlement of the litigation.

Simon Hale