Litigation strategy: options for the defendant

Last time we looked at the strategic challenges that face the claimant, and how these have become more acute in light of the novel legal and factual issues created by the current economic climate. This month we focus on the role of the defendant and the challenges and opportunities that it faces. Certain of those will be identical for both claimant and defendant: issues such as the approach to settlement discussions and the need to handle the public relations angle of being involved in a claim raise similar questions for both parties. In other areas, though, the defendant has a different perspective to that of the claimant.

We started, last time, by looking at an analogy with Carl von Clausewitz's seminal work on strategy in conflict. What advice does he give to the defending party?

"Although the concept of defence is parrying a blow and its characteristic feature is awaiting the blow, if we are really waging war, we must return the enemy's blows. ...Thus a defensive campaign can be fought with offensive battles. ...The defensive form of war is not a simple shield, but a shield made up of well- directed blows."

The message is a consistent one. The defendant needs to move to the front foot as soon as possible: to stop defending and start attacking at the earliest opportunity. What does this mean in practice?

Choose your fights

Litigation is every bit as attritional and expensive for a defendant as it is for a claimant. But litigation in the current climate can carry an additional risk that applies more to the defendant. In the first of these pieces we looked at the types of claims that seemed likely to (and have now started to) emerge from the downturn. We saw how there are likely to be recurring themes in the types of claims that are brought and the types of defendants against whom they are brought. Early court decisions will therefore have a precedential value, whether persuasive or binding, on subsequent courts and tribunals.

What should the defendant be doing about this?

Defendants should think carefully before fighting on weak facts. Hard facts, as they say, make bad law, and on issues where there may be limited case law, the risk of creating an adverse precedent by taking a novel point on difficult facts is considerable. Strategic concession is a valuable tool in the defendant's armoury; for a defendant facing multiple, similar claims, that concession may, in appropriate cases, go as far as the whole claim. That is not to say that a defendant simply has to wait for a weak claim to be brought before fighting its corner.

Forum becomes an issue. Most obviously, arbitration is confidential and awards do not create a binding precedent. But arbitration may not be available if it was not provided for in the parties' agreement. At that stage, issues of timing come to the fore. The combination of a strong defence and a jurisdiction that allows for swift resolution and limited appeals is a powerful one for the defendant seeking to create a favourable precedent.

Are you really the defendant?

There is a distinction to be drawn between the party resisting the claim and the party that is the defendant in the proceedings. It is broadly accepted, at least in England, that a party is entitled to seek a declaration of non-liability, essentially an order of the court that the potential claimant has no claim. We have already discussed the cost and demand on resources that result from litigation. Even so, there may be good reasons for a potential defendant to take the initiative and bring the claim:

It secures jurisdiction in a court of the defendant's choosing. We saw, last month, the factors that would drive the decision as to the appropriate forum; those are equally factors for the defendant as they are for the claimant.

As we have seen above, it may have the additional advantage, for the defendant, of allowing it to pick off a more straightforward claim in a jurisdiction that will result in a quicker decision, thereby producing a valuable precedent to use in future defences. You cannot guarantee that the party with the weakest facts will be the first to sue. On the contrary, they will probably want to wait until somebody of authority has built up in favour of their position. A defendant may well want to pick on a particular case where it thinks it has the best prospects of success and ensure that any precedent is determined on those grounds.

It forces a claimant to state its case at an early stage, potentially before the claimant would want to do so. That can be invaluable means of putting pressure on the claimant's position.

Choose your ground

An early issue for the defendant, as it was for the claimant, is determining where the dispute is to be resolved. The question is whether to move proactively, and bring a claim for a declaration, or wait for the claimant to bring proceedings and react to an unfavourable forum. We considered the proactive approach above. What is the reactive alternative? In English proceedings, there are two.

If the claimant has brought proceedings in England and the defendant feels they should be brought elsewhere, it may be able to seek dismissal of that claim on the grounds that the English court lacks jurisdiction or that another jurisdiction is clearly and distinctly more appropriate for the hearing of the claim. If the claimant has brought proceedings overseas, the defendant may be able to seek an injunction to restrain those proceedings.

As we have seen, the proactive strategy has costs implications. It also tends to result in a quicker resolution of the case which may or may not be in the interests of the defendant. It does, however, provide a greater degree of certainty than a reactive strategy. If the claimant is left to pick a forum, one of the issues it may well consider is its ability to keep the claim in that jurisdiction in the face of challenges from the defendant. To take a particular example, in the case of states covered by the Judgment Regulation, the concept of dismissing a claim in favour of another Regulation state on the ground that it is clearly and distinctly more appropriate simply does not exist. Jurisdiction challenges remain a valuable tool (not least for reasons of timing) but they should not be seen as the default option.

Frame the dispute

A defendant should not necessarily accept the claimant's characterisation of the dispute: it may well be advantageous for a defendant to change the focus, either factually or legally.

On a factual level, there may be points that you can easily concede, which will change the complexion of the dispute. Take the example of a claim for pre-contractual misrepresentation where the defendant wishes to have the claim dismissed on the grounds that England is not an appropriate forum. The claimant is English, the defendant is Texan. On the facts, the representations are a series of e-mails sent from the defendant's London based agent to the claimant. They concern the technical condition of an oil plant in west Africa. The contract is expressed to be governed by English law. On those facts, it is difficult to argue that England is not an appropriate forum. But if the defendant is able to concede that all of the representations are as stated by the claimant, the question then turns as to whether or not those representations are true. The evidence to establish that is no longer the witnesses who made and received the e-mails, who are now irrelevant for these purposes. It is the people who know whether those representations are true, that is, the defendant's employees who operate and maintain the oil facility. None of them may be in England. All of a sudden, for a simple concession, the prospects of dismissing the claim are greatly enhanced.

It is possible to reframe the legal basis of the dispute. As we saw last time, while the facts that result in the litigation are fixed, they may give rise to a variety of different legal consequences. That may be significant. There may, for example, be advantages and additional defences by arguing that the parties' relationship is exclusively governed by the law of contract, which tends to have a shorter limitation period, rather than giving rise to a concurrent liability in tort.

Control the clock

This is a vital strategic question, particularly for a defendant fighting several, similar claims and looking to accelerate the one that is most likely to produce a favourable result. By and large, the ability to control the speed of proceedings is more with the defendant than with the claimant. If the defendant wants the claim to move quickly it can apply for summary judgment of parts of the claimant's claim, it can make strategic concessions on peripheral but time-intensive points and it can pressure the claimant, who has brought the action in the first place, to agree an aggressive timetable. By contrast, if the defendant benefits from a longer timetable, it can raise issues as to jurisdiction, it can fight every point, it can argue for a longer timetable, on the basis that the claimant has had considerable time in advance of commencing its claim in which to prepare, and it can seek to join additional parties.

Who else is there?

In a world of complex relationships, it is rare that a dispute will necessarily only involve two parties. The defendant's goal is always to reduce or extinguish its exposure. While the primary route for achieving this will always be to defeat the claimant's claim, defendants should keep in mind that where another party is liable, in whole or in part, that may be an equally effective means of achieving the defendant's goal. Two particular groups need to be considered separately:

There may be additional defendants, in the form of other contractual counterparties or tortfeasors from whom contribution might be sought or agents who exceeded their authority. The critical strategic questions here are:

timing (the more defendants there are, the slower litigation tends to proceed); and

jurisdiction (certain defendants may only be amenable to certain jurisdictions).

There may be third parties with obligations to indemnify or guarantee a certain portion of the defendant's exposure. These parties are unlikely to be joined to the main action with the claimant, but they may have considerable rights to influence or even control how that litigation is run. At that point, the defendant may see itself considerably fettered in its discretion as to how the claim is to be run. In circumstances where the indemnity is lower (and sometimes much lower) than the maximum potential exposure, a defendant may find itself faced with some difficult decisions.

The key message for both parties is not simply to consider their own position but to consider what the other party will be looking to achieve. If the claimant expects the defendant to try to prolong the dispute, then it should narrow the focus of its claim to avoid raising peripheral issues that could be subject to extensive disclosure, witness evidence and delay. If the defendant sees that the claimant may be pushing for a quick resolution of its matter, there are jurisdictions within the EU in which it can bring a claim for declaratory relief which will greatly slow the process of resolution, the so called Italian Torpedo. The party that is able to see the strategic goals of the other side is put at a considerable advantage in achieving ultimate success in any proceedings.

Source: Practical Law

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.