In the current environment any financial director worth their salt will have risk and reputation management high on the list of concerns for the underlying business. Litigation falls squarely under that rubric: litigation at worst can give rise to a reputation and capital hit and at best unwanted, unplanned and irrecoverable costs, which are a drain on free cash flow.
A business can never be sure that it will not become embroiled in a legal case in the near future, whether over a contractual dispute or something more sinister. It is therefore important for senior decision-makers in a company (including FDs) to be familiar with the litigation landscape.
Judges and lawyers alike are all too aware that litigation, like any other sector, is subject to competitive pressures. International courts around the globe are circling with a view to challenging London’s position as the pre-eminent dispute resolution jurisdiction.
Reform is, therefore, in the air with a view to streamlining procedures and thereby reducing cost in what some describe as a “Rolls-Royce” system. The process for the disclosure of documents in litigation is already subject to a pilot of new rules. Witness statements are now also in the spotlight.
What are witness statements?
In short, a witness statement is a formal document provided by a witness in a legal case that contains their personal account of the facts relating to the dispute. In England and Wales, it takes the form of a written statement signed by the person, which contains the evidence which that person would otherwise be allowed to give through oral testimony at trial.
Witness statements were introduced to remove or minimise the need for witnesses to tell their side of the story in the form of oral evidence at trial, thereby reducing the length of trials and their attendant costs. Many feel that they achieve that purpose and more.
The positive aspects of witness statements
Many businesses consider that witness statements have two collateral benefits:
- First, witness statements help commercial clients better to understand the risk profile of cases ahead of trial and help the board to undertake the cost/benefit analysis accordingly. This can help facilitate commercial resolution of the dispute at an earlier stage before the case goes to trial.
- Crucially, witness statements are a safe harbour for lay witnesses to crystallise their thinking and to acclimatise themselves to the challenges of giving evidence. Court trials are extremely high-pressure, particularly for those who have not had prior exposure to a court environment. Written witness statements help manage this issue by giving witnesses room to breathe, collect their thoughts and accurately recount the facts ahead of trial and before cross-examination.
The need for reform
Many, however, feel that these benefits come at a price that is not worth paying. Witness statements are expensive to produce. Critics argue that in practice the process has moved away from what was originally intended. Specifically:
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- In many cases, witness statements often include irrelevant material or, worse, create argument. Tempted by bringing documents to the attention of the judge, just in case they are missed, witness statements can often resemble a chronology of documents to which the witness is not qualified to speak. This of course helps no one other than the cross-examiner.
- Judges tend to give little weight to statements that are obviously crafted by lawyers, even if they may still contain a useful encapsulation of the case that a litigant intends to make at trial.
- The most reliable evidence to come out in a witness statement is likely to be the first account of the facts. As witness statements are taken and honed over time, facts can become innocently distorted through an ultimately unreliable process of reconstruction.
In light of all this, it is generally accepted that some reform is needed and there should be greater transparency around the process by which witness statements are produced.
The working group responsible for lobbying the reforms certainly has a lot to consider. The prevailing sense is that they are considering a very wide range of options, from more forceful use of the current judicial toolbox to reintroducing evidence-in-chief, as well as other options in the pre-trial process – including US-style depositions standing in as evidence-in-chief.
It seems clear, however, that despite media speculation, the chances of witness statements being scrapped altogether is low. In the event that witness statements in their current form were done away with, they would need to be replaced and practitioners are acutely aware of the risk of reform leading to greater, rather than less, cost.
It remains to be seen where the reform debate will land, but, in light of the range of views being weighed, it is encouraging for all parties that the topic is being given proper attention. In this era of disruption, even lawyers are mindful of the need to embrace change for the better.