On 6 April 2021 Practice Direction 57AC (PD57AC) came into force which radically affects the way in which trial witness statements must be prepared in the Business and Property Courts (BPC). The BPC is the forum for a wide range of disputes including commercial, competition, business, admiralty, technology, intellectual property, real property, probate, insolvency and company cases.
Typically, cases in the BPC are document heavy and as such the scope for witnesses to provide useful and relevant evidence of fact is arguably limited.
CPR 32 and Practice Direction 32 already provide that witness statements must be in the witness’s own words and should be used where it is necessary to prove a point of fact that is in dispute.
However, this has not prevented a practice of witness statements becoming increasingly lengthy and “over-lawyered” with copious exhibits and detailed explanations by the witness as to the relevance of the documents to the dispute. It was the failure to adhere to the requirements of CPR and PD 32 that led to the perceived need for reform.
So, what has changed?
PD57AC provides that a trial witness statement must:
- Contain only evidence as to matters of fact,
- of which the witness has personal knowledge,
- that are relevant to the case and
- need to be proved at trial.
- and which the witness would, absent the statement, be able to provide orally at trial.
This change will significantly reduce the size and content of witness statements. Documents should only be exhibited to a witness statement in very limited circumstances. Instead, the witness statement must identify by list what documents, if any, (s)he has referred to or been referred to for the purpose of providing the evidence set out in their trial witness statement and the statement should make it clear which of these documents (s)he would have seen contemporaneously with the matters in respect of which (s)he is giving evidence of fact. The purpose of this provision is to enable the court to identify how much of the statement is derived from the witness’s own contemporaneous recollection of events or from documents seen at the time and how much of the evidence derives from documents only seen at a later date, in order to assess the credibility the evidence. It is no longer going to be acceptable for a solicitor to show a potential witness documentation that (s)he did not see at the relevant time and then construct a witness statement on behalf of the witness explaining the relevance of the document and why it supports the party’s case.
The court has the power to strike out a witness statement that does not comply with PD57AC, to require it to be-drafted or to require the witness to attend the trial to give his/her evidence orally.
There are certain exemptions to the application of PD57AC and these include all proceedings under the Insolvency Act 1986 (“IA86”) (with the exception of a contributory’s just and equitable winding up petition). To understand the reason for this exemption it is important to understand the way in which insolvency proceedings are commenced and how this differs from other “standard” proceedings. Standard proceedings are commenced by the issue of a Claim Form and Particulars of Claim. The Claim Form names the parties and incudes details of the basis of the claim. The Particulars of Claim (which can be included in the Claim Form or be set out in a separate document) pleads the case which means they set out the relevant law, explain the manner it has been breached, include details of the losses sustained and the remedy sought. The Defendant responds to the Particulars of Claim in the Defence and thereafter the court gives directions for disclosure of all relevant documents and the exchange of witness statements of fact. The pleadings should never contain evidence and the witness statements should never make submissions as to the law or the documents.
Insolvency proceedings are different in that they are commenced by the issue of an Application Notice which is similar to a Claim Form in that it sets out details of the parties and the nature of the claim. However, rather than being supported by Particulars of Claim, the Application Notice is supported by a witness statement made by the Applicant which refers to and exhibits all the documents the Applicant intends to rely upon. The Applicant, who is typically the insolvency office holder, will rarely have any direct knowledge of the facts which have given rise to the claim because his knowledge will derive from his perusal of documents delivered up to him following his appointment and information gleaned during the course of his subsequent investigation. His witness statement, which will have been drafted by his solicitor, will therefore amount to a commentary on the documents he has exhibited and an explanation as to why they support his case: the antithesis of everything PD57AC seeks to achieve.
The court will list the case for a directions hearing at which the court will give directions for the service of any witness statements in reply to which the respondent or other witnesses will exhibit any additional documents upon which they seek to rely. Only in rare cases will the court give directions for disclosure of documents that are not exhibited to witness statements.
However, insolvency proceedings do not have to be conducted in this way. Occasionally the court will direct the service and exchange of pleadings and the disclosure and exchange of documents. The court also has an inherent power to apply PD57AC to existing insolvency proceedings. This could be useful to an insolvency office holder in circumstances where a Respondent is seeking to adduce spurious evidence from a string of witnesses with doubtful credibility.
The fact that insolvency proceedings are currently excluded from the ambit of PD57AC does not mean that they will continue to be excluded. PD57AC currently does not apply to certain Admiralty claims but on 18 February 2021 the Admiralty Judge, Mr Justice Andrew Baker, issued a statement saying that the Admiralty Court Users’ Committee had decided that PD57AC should apply to all Admiralty claims and as a consequence a proposal to this effect would be made to the Civil Procedure Rules Committee. At the time of writing, no similar statement has been made by the senior ICC Judge but this could change.
Frequently insolvency office holders will commence proceedings otherwise than under the IA86. An example of such proceedings is where an administrator wishes to commence proceedings for breach of duty against former company directors. Administrators are not listed amongst the parties entitled to commence proceedings under Section 212 IA86 so an administrator would be required to commence standard proceedings in the name of the Company under the Companies Act 2006 and PD57AC would apply to such proceedings. In these circumstances it may be difficult to identify anyone willing and able to provide a witness statement that complies with the new requirements. But does this matter? If a fact in dispute needs to be proved by witness testimony, then it might. If on the other hand the merits of the case fall to be determined by reference to inferences to be drawn from documents, then it might not.
Without doubt compliance with PD57AC will alter the anatomy of a trial. Counsel’s skeleton arguments are likely to be significantly longer as they are likely to contain submissions on the relevance of documents that have been disclosed and counsel’s opening and closing submissions are likely to occupy a greater proportion of the allocated time for the same reasons. By contrast, cross examination of witnesses is likely to take significantly less time.
The main reason for the insolvency exemption to continue is probably that it is cheaper to conduct litigation using the simplified procedure for insolvency claims. An office holder conducts litigation for the benefit of the general body of creditors and a cheaper more streamlined procedure is therefore advantageous. It is probably for this reason that court fees in insolvency proceedings are significantly less than court fees in standard proceedings. However, it seems unsatisfactory to have rules that apply to witness statements in some BPC proceedings but not in others.
Some commentators on PD57AC have suggested that the parties could agree, or at the directions hearing the court could direct, an exchange of narrative statements introducing the relevant documents and explaining their significance. Perhaps the way forward is therefore to extend the scope of PD57AC to insolvency proceedings and other exempt proceedings so that there is one coherent set of rules that apply to all witness statements in the BPC. In insolvency proceedings the submissions of the office holder as to the relevance of the documents could then be adduced in the form of a narrative statement leaving witness statements to be used in the limited circumstances where they are required.
It seems inevitable that we will see further reforms in this area.