County Court Remedies Regulations 2014

Lord Beecham Excerpts

Monday 7th April 2014 Grand Committee

[The Minister of State, Ministry of Justice (Lord Faulks) (Con)]

My Lords, this statutory instrument revokes and replaces the County Court Remedies Regulations 1991—the 1991 regulations. A draft was laid before Parliament on 10 March 2014 and is also being debated in the other place today. Subject to your Lordships’ consideration, the real change that will be made by this instrument concerns the county court’s jurisdiction in respect of applications for freezing orders. A freezing order is an interlocutory injunction that restrains a party in civil proceedings from disposing of or dealing with their own assets before judgment can be obtained or enforced. They are usually sought before proceedings are issued when the claimant fears that the defendant is likely to dispose of assets before proceedings are issued. However, a freezing order may be sought at any time during the course of proceedings and after judgment has been obtained.

The purpose of this instrument is to remove the current limitations that restrict the county court from issuing freezing orders. It will enable the county court to make freezing orders in all cases and enable claimants to make their applications for a freezing order in the court where their substantive cases are being heard. This may be at the High Court or, from 22 April, a county court hearing centre. The Committee will note, however, that the draft regulations do not lift the restrictions that prohibit the county court from granting a search order, which is an order—often known as an Anton Piller—requiring a party to admit another party to premises for the purpose of preserving evidence. The draft regulations therefore retain the current prohibition placed on search orders. The aim of the reform is to rebalance jurisdiction between the High Court and the county court and to make optimum use of judicial resources by widening, where appropriate, the jurisdiction of the county court, while enabling High Court judges to focus on cases that require a greater level of expertise.

Before setting out further details about this instrument and why the Government are taking this action, I will briefly explain some background to the reform. In March 2011, we set out our policy to reform the structure of the civil courts in a series of proposals in the public consultation document, Solving Disputes in the County Courts: Creating a Simpler, Quicker and More Proportionate System. Those proposals were based on some of the recommendations made by Sir Henry Brooke, a retired Lord Justice of Appeal, in his report Should the Civil Courts be Unified?, published in August 2008. The recommendations, which included permitting the county court to grant pre-judgment freezing orders, were aimed at improving the administration of civil justice and providing a more efficient use of judicial resources. In endorsing that recommendation, the Judicial Executive Board, which was chaired by the then Lord Chief Justice, Lord Judge, commented that it would introduce flexibility and obviate the need for technical transfers between the High Court and the county courts. The instrument under consideration today accordingly reflects Sir Henry’s recommendation in this regard.

I will now set out the problem with the current jurisdiction of the courts in relation to freezing orders and why the Government are taking this action. Currently, under the 1991 regulations, the county court’s jurisdiction to make freezing orders is limited to making orders for the purpose of preserving property that forms or may form the subject matter of proceedings, or to preserve assets following judgment, but prior to execution of that judgment.

Those limitations do not apply if the order is made by a Court of Appeal judge or a judge of the High Court sitting in the county court or a mercantile judge in respect of proceedings in the Central London County Court mercantile list. Save in those circumstances, the county court is prohibited from making pre-judgment freezing orders. In all other cases, if a freezing order is required in county court proceedings, the application must be made to the High Court, even though the substantive case is being heard in the county court.

The result is that in county court proceedings where a claimant wants to apply for a freezing order to prevent the defendant from moving or disposing of his assets, the claimant will have to apply to the Chancery Division of the High Court at the Royal Courts of Justice in London, the London Mercantile Court or the nearest local district registry. In doing so, the county court would have to transfer the case to the relevant court to consider the freezing-order application. Once the application is determined, the court will transfer the case back to the county court.

The implication of the current procedure is that claimants—for example, estate agents suing for small amounts of unpaid commission—have either to inundate the mercantile courts with applications for pre-judgment freezing orders or to apply to the Chancery Division of the High Court or a local district registry. That increases the workload of the High Court, which is unnecessary, particularly as the High Court should not be the point of entry for comparatively low-value claims for what could be a simple and straightforward case. Also, those transfers often result in delays not only in dealing with a particular freezing-order application, but in dealing with all cases promptly.

The Government are committed to providing an effective and efficient civil justice system with a flexible judiciary that is deployed in the most appropriate way. In view of the time and costs associated with issuing and allocating freezing-order applications in the High Court and the time taken to transfer the substantive cases, consider them and then transfer them back to the county court and the potential costs to parties, the Government considered that the jurisdiction of the county court to grant freezing orders ought to be extended. It was on that basis that the Government consulted on the proposal in its 2011 Solving Disputes consultation paper. Ninety per cent of respondents, who included legal practitioners, members of the judiciary, judicial bodies and regulatory bodies, were in support, on the basis that only suitably experienced and qualified circuit judges of the county courts should be given the jurisdiction.

In view of that overwhelming support, the Government announced their intention to enable the county court to grant freezing orders in all cases under its jurisdiction. The jurisdiction will be extended to circuit judges who have been nominated by the Lord Chief Justice. Consequently, the statutory instrument before us today gives effect to that commitment by revoking the 1991 regulations and, in doing so, removing the current limitations, to enable the county court to make freezing orders in all cases.

The changes brought by this statutory instrument support the Government’s commitment to an effective and efficient civil justice and courts system. We consider that the current position is disproportionate and that unnecessary costs are incurred. It follows that the current restriction on the county court’s jurisdiction to grant freezing orders constitutes a restriction on access to justice for court users. Consequently, it is our intention to lift those restrictions to broaden the county court’s jurisdiction in this regard to improve access to justice while optimising the use of judicial resources. That would mean that court users can have their freezing-order applications considered in the court where their substantive cases are being heard.

Invariably, this should contribute to a reduction in the volume of transfers from the county court to the High Court and the number of applications considered in the High Court. It would thereby provide efficiency benefits for the courts, since less time and fewer administrative and judicial resources would be needed to allocate these applications and transfer the substantive cases to the High Court. For the same reasons, court users could experience a more streamlined service and a reduction in transfers. As one respondent pointed out:

“Any power to help enforcement is a good move. Having to apply to the High Court often many miles away or in London can be wasteful in costs and time. There is no reason for a Circuit Judge not to deal with these applications”.

I therefore commend these draft regulations to the Committee. I beg to move.

[Lord Beecham (Lab)]

My Lords, I had anticipated that the noble and learned Lord, Lord Scott, would speak, which would have made me even more the lowest-ranked member of the legal profession to have spoken today, but I defer in any event to the Minister’s legal knowledge and expertise. As already indicated, I have no particular problem with this instrument.

However, it is ironic that the title of the response to the public consultation, which is not in itself a very brief title, is Solving Disputes in the County Courts: Creating a Simpler, Quicker and More Proportionate System. It is ironic because the original report on which the regulations are based was, as the Minister pointed out, published in 2008. It has taken three years from the publication of the response to bring forward the proposals before us today. This seems to be an example of the Bleak House style of legislation: you take an eternity to produce a response. That is not the fault of this particular Government; it seems to me characteristic of the way, perhaps in particular in legal affairs, matters take an inordinate time to be resolved. One thinks of the length of time it takes for any Law Commission report to come forward in the form of legislation. It is something perhaps that the Government could look at.

On the substance of the order, there is no particular problem, but I have just one question to ask about it. To begin with, it struck me that, even if there was an argument about the decision that might be taken by one of the newly appointed circuit judges as opposed to a High Court judge, there is of course in any event a right of appeal, so that those decisions can be challenged. However, I notice that, just four days ago, it was announced that the Supreme Court, following a hearing in the Court of Appeal, will now hear the case of Ablyazov, where the assets frozen amounted to some £40 million—this is not freezing a vehicle or goods; it is a very substantial sum of money. I wonder whether any consideration has been given to a threshold above which it might be expected that a case will still go to the High Court. I am not saying that circuit judges would be incapable of dealing with cases involving £40 million or more, but there might be some questions to be asked about that. Of course, even if people were dissatisfied with an order made by such a judge, there would still be the right of appeal, but I wonder whether consideration was given to some threshold above which a higher court judge might in the first instance be asked to make a determination. That is an aspect that might be kept under review. Subject to that, we would not quibble with the instrument before us.

[Lord Faulks]

My Lords, I am grateful for the observations from the noble Lord, Lord Beecham, who, as ever, is far too modest about his skill and expertise. On consultation, there was quite a hiatus following the original publication of the Brooke report. The consultation was deep and wide, involving all the appropriate parties—judicial and legal bodies, regulatory bodies, representative bodies, such as civil court users, local authorities, mediation and mediation advocates, academics, citizens advice bureaux, financial organisations, government departments and members of the public. It took a little time for the Government to produce their response, which was published in 2012, but since that time they have taken forward the Brooke recommendations to implement the single county court in the Crime and Courts Act 2013. In the light of the changes being made to the county court as a result of that legislation, we considered that it was appropriate for this and other Brooke recommendations to come into force on the implementation of the single county court.

On the second point made by the noble Lord, Lord Beecham, I think that he may have somewhat misunderstood the purport of this instrument. Of course, it extends the jurisdiction of the county court, but if it is attached to a money claim, the ceiling is £100,000, so that his scenario of £40 million would not come within the county court’s jurisdiction. It is always alarming to freeze a sum of that nature but, if there is a freezing order, as he will know, it may be ex parte originally, but there is always the possibility of the respondent coming back to court to modify, discharge or vary it or to apply exceptions to the order. Therefore, it is not as draconian a remedy as it seems, but it is an essential remedy sometimes to stop the dissipation of assets. The purpose of this extension of jurisdiction is to make sure that that valuable remedy exists whether the claim is £40 million or a much more modest sum. It allows there to be convenience for court users and it gives judges, who will have the necessary training, as wide a jurisdiction as required to enable those who seek to ensure that their assets, which they have a reasonable and proper expectation of recovering, are not frittered away and dissipated without justification. I hope that that satisfies the noble Lord.