Separate commercial proceedings reinstated
The Act amending the Civil Procedure Code and certain other acts of 4 July 2019 (Dz.U.2019.1469, further “Amending Act”) introduces a number of significant changes to civil procedure aimed at streamlining, facilitation and speeding up the hearing of cases by civil divisions of courts. One of the key changes for business operators is the reinstatement of a separate procedure in commercial cases which comes into force on 7 November 2019.
The bill substantiation provides that strictness of rules to be followed by business operators is justified by the fact that entities engaged in professional business activities should apply increased diligence in their affairs, including court cases. Consequently, higher requirements may be imposed on business operators in that respect. However, the main driver behind the new legislation is substantial increase in the number of cases filed with commercial court divisions as well as the need to streamline the process (average duration of a commercial case is 16 months in regional courts and 14 months in district courts).
What is a commercial case?
The legislator introduced an exhaustive list of commercial cases to which new regulations will apply. This include cases which, in principle, were heard by commercial divisions of common courts. The definition of a commercial case now also includes:
- cases relating to construction works contracts and other contracts in the construction process auxiliary to construction works contracts;
- cases relating to leasing agreements;
- cases against persons liable for debts of a business operator, also auxiliarily (e.g. surety) or jointly (e.g. partner of a partnership), by operation of law (e.g. in the case of carriage performed by several carriers) or by act in law (a contract).
The legislator explicitly excluded from definition of a commercial case, a division of property and cases relating to a claim acquired from a person other than business operator unless the claim results from legal relationship relating to business activity conducted by all parties thereto. If the commercial court finds that the matter does not fall within definition of commercial case, court may refer the case to a competent court within one month of the date of entering a defence on the merits of the case by defendant.
Where a commercial case has been filed with a division other than commercial division, a non-competent division may refer a commercial matter to a commercial division within one month of the date of entering a defence on the merits of the case by defendant. If the case is not referred, the civil division should continue hearing the case without reference to the provisions on commercial proceedings. Such possibility may however contribute to the commercial cases being heard while applying various other provisions only because the court failed to meet the deadline to refer the case. This solution also deviates from the general principle of civil procedure i.e. the application of the rules of relevant type of proceeding to the given category of case. If, however, civil division (validly) refers the case to commercial division, and the latter finds that the case is of civil nature, in such an event the commercial division should hear the case without references to the provisions on commercial proceedings.
Non-business operators and natural persons acting as business operators (such as sole traders or partners of partnerships) may be released from the obligation to hear the case in accordance with the provisions on commercial proceedings. To this end, they may file an application binding the court to hear the case without applying the provisions on commercial proceedings.
Requirements as to pleadings
The Amending Act introduces additional requirements as to pleadings submitted in a commercial case. Statement of claim in commercial case should specify e-mail address of the claimant or declaration of claimant of absence of e-mail address and the first pleading of the defendant submitted upon the service of statement of claim should also specify e-mail address or include declaration of defendant of absence of e-mail address of which defendant is instructed together with the service of the statement of claim. Failure to submit e-mail address or declaration of absence of e-mail address is considered a formal defect of a pleading resulting in its inability to be properly followed up – court will summons the party to remove formal defects.
Separated commercial proceedings
In order to speed up the procedure and limit the possibility to prolong the process, the legislator introduced a number of procedural solutions described below. A novelty is an introduction of a court-binding time limit to resolve the case in the given instance within six months of filing the defence to the statement of claim. The obligation formulated that way does not bind to meet the 6-month time limit without reservation but points out to the preference to hear the cases fast while allowing to take into consideration any facts affecting the hearing of the case, i.e. current workload of judges and court, number of cases pending the resolution, the need to examine more time-consuming evidence, etc.
Furthermore, the legislator introduced a number of exclusions to general legal concepts provided for in a code of laws. In the new commercial case, it will be inadmissible to:
- bring new claims instead of or in addition to the original claims during proceedings – except for extending the claim for another recurring claim or replacement of the original subject-matter of the claim for another or equal, if circumstances change;
- personal changes provided for in Articles 194-196 Civil Procedure Code;
- referral to regional court of a case relating to the case being heard by that court;
- a stay of proceedings due to the parties’ failure to appear.
The Amending Act sets out new time limits for reporting allegations and evidence which constitute specific rules. In the new commercial case a claimant will have to report all allegations and evidence in a statement of claim, and defendant – in a defence to the statement of claim. If a party is not represented by a professional attorney, the presiding judge, when serving the first pleading on a party, orders that party to report all allegations and evidence within the set time limit of no less than one week. Depending on the circumstances, however, the presiding judge may set a different time limit. Failure to comply with the above rules results in disregarding the allegations and evidence unless the party makes it plausible it was impossible to present them earlier or the necessity to present those allegations or evidence arose later – in such a case, further allegations and evidence in support should be presented within two weeks from the date it was found justified to present them.
A complete novelty is the introduction of sanction for avoiding an out-of-court resolution of the case. Court, regardless of the outcome of the case, may award the costs of proceedings, in whole or in part, against a party which before bringing the claim did not take an attempt to settle the dispute amicably, avoided to participate in such attempt or participated in bad faith thereby contributing to unnecessary institution of legal proceedings or defective determination of its subject matter.
The judgement of the first instance awarding monetary consideration or consideration in fungible items becomes an interim measure (like an order for payment in an order-for-payment procedure), which means that:
- judgement, upon being issued, constitutes an interim measure, enforceable without enforcement order;
- the awarded amount with due interest when deposited by the debtor on escrow account of the Minister of Finance is sufficient for securing of claims (as regards fungible items, it is sufficient to deposit the sum equivalent to the amount in dispute);
- when petitioning for an interim measure, the claimant shall specify the method of providing this. The court may, at the request of the defendant, limit the interim measure as the court may deem fit.
Differences in the hearing of evidence
The fundamental principle of the hearing of evidence in a commercial proceedings is the priority of documentary evidence. The court may admit evidence by witness testimony only once other means of evidence have been exhausted or do not exist and there are unexplained facts material for the resolution of the case.
Furthermore, the legislator introduced significant limitation as to evidence imposing on business operator an obligation to document all acts related to the conducted business activity in order to use them in the course of a potential court dispute. This obligation extends to all acts of a party (in particular declarations of intent or knowledge) such as acquisition, loss or change of a party’s rights as regards the given legal relation. The evidence other than document may be admitted once a party cannot present a document due to independent reasons for which that party is not liable.
Another novelty introduced by the legislator is the introduction of yet another agreement – agreement as to evidence – apart from agreements on the choice of court and on jurisdiction. The party may agree to exclude from hearing certain evidence arising from a given contractual relation (each evidence may be excluded). The court will exclude an evidence excluded in the agreement on its own initiative, however, the court may make finding of facts that were to be proved by evidence excluded by the agreement, on the basis of the parties’ statements while taking into account all circumstances of the case. What is important is that including in the agreement the evidence already heard by court does not deprive it of evidentiary effect.
Instructions and new consequences of failure to provide them
The legislator also introduced an advanced system of instructions, burdened with consequences. A party not represented by advocate, attorney-at-law, patent attorney or the State Attorney to the Republic of Poland must be advised by the court on provisions governing:
- an obligation to present all allegations and evidence in the statement of claim (by claimant) or defence to the statement of claim (by defendant);
- evidence preclusion;
- right to file a petition to hear the case without reference to the provisions on commercial proceedings;
- priority of documentary evidence.
The court will be obliged to provide instructions twice – for the first time, immediately upon filing the first pleading by a business operator (or upon removal of defects in the pleading), and for the second time, in the first session of the court where the business operator makes an appearance.
Failure to provide the first instruction by the court will be considered a depravation of a party’s right to defend, unless it was without effect on the parties conduct in the course of proceedings. The proceedings will be void from the time a party should have been advised on their rights. It also means that when a party loses the case, it will be able to challenge unfavourable judgement adducing a plea of no instruction. In such a situation, an appellate court will have to reverse the appealed judgement and remand the case back to the court of first instance.
To the cases pending before the entry into force of the amending act, the provisions of the Civil Procedure Code shall apply in the wording after amendment, however, the actions already taken in accordance with the previous wording remain in force. The amendment does not concern the hearing of appellate measures submitted and unheard before the entry into force of the amending act to which the provisions of the Civil Procedure Code in the current wording should apply.
An important exemption is the hearing of cases pending and unfinished before the entry into force of the Amending Act without reference to the provisions on commercial proceedings. Therefore, it is worth considering to lodge any potential claims the enforcement of which was planned for distant future – if they are not entirely proved by documentary evidence in the party’s possession – before 7 November 2019 due to substantial increase of procedural rigour so they are heard according to the previously applicable rules.
TGC Corporate Lawyers
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