When Should Courts Grant Summary Judgments Under CPC: Insights from Law and Economics

Parv Tyagi

In India, Rule 3 of Order XIIIA CPC empowers the Court to give a summary judgment. The court is to grant a summary judgement on a claim only if it considers that the plaintiff or the defendant, as the case may be, has no real prospect of succeeding on the claim. However, there does not exist any theoretical or conceptual foundation, leave alone a judicial test, to guide when there is a realistic prospect of success and when there is not. Studying summary judgements from a Law and Economics perspective, the author attempts to answer when the courts should grant summary judgements and when they should not.

I. Introduction

Law and Economics offer tools and insights that are relevant to designing optimal procedural systems. Most literature on economic analysis of litigation assumes that cases either settle out of court or go to trial. However, a lot of cases are actually resolved by summary judgements. There has been remarkably little economic analysis of summary judgements. Posner said almost nothing about summary trial except that it is one of “many procedure devices [that] appear to be designed, in part at least, to reduce the expense of litigation.”[1] This essay attempts to fill that gap. It studies summary judgements in India from an economic point of view. A court is to grant a summary judgement on a claim if it considers that the plaintiff or the defendant, as the case may be, has no real prospect of succeeding on the claim. This essay attempts to answer how should courts determine the probability of success of competing claims.

II. Law and Economics of Summary Judgements

Summary judgement is an outcome of a case decided summarily, i.e., based on the documentary evidence produced by the parties, without recording the oral evidence. A judge is to give a summary judgement only if there is no genuine issue as to any material fact. A genuine issue implies that certain facts are disputed. Logically then, the facts in dispute must be central to the case; irrelevant or minor factual disputes will not defeat a motion for summary judgement. Thus, except where a trial is necessary to settle an issue of fact, the entire judicial process is, by this procedure, made to function more quickly.

Viewed economically, the objective of any procedural system is to minimize the sum of two costs: error costs and direct costs. Error costs refer to the cost of erroneous judicial decisions. Direct costs refer to the cost of operating the procedural system. To better understand, consider a perfect procedural system. This system does not cost a penny and implements substantive law with a hundred per cent accuracy. Now we know that all legal systems consume real resources: the time of skilled workers like lawyers and judges. Those costs, often called litigation costs, are direct costs. Likewise, no legal system is perfectly accurate. It does not always apply substantive law correctly. If the court fails to impose liability when a party is at fault, it will reduce deterrence. Similarly, if the court imposes liability when a party is in fact, not at fault, it will cause over-deterrence (or chilling effect). These deterrence inefficiencies are error costs.

Summary judgements present a good example of the trade-off between direct costs and error costs. By terminating cases early, they reduce direct costs, such as the cost of discovery and trial. But they may end up increasing error costs; however, this depends on the judicial test used to grant summary motions. If motions are granted only when the probability that the moving party will win at trial is one, then motions may not increase error costs by much.

III. Summary Judgement Standard in India

In India, Rule 3 of Order XIIIA CPC empowers courts to give a summary judgement.[2] Per that rule, the court is to grant a summary judgement on a claim if it considers that the plaintiff or the defendant, as the case may be, has no real prospect of succeeding on the claim. The expression ‘real prospect’ is of importance here. The courts understand it to mean that there is a realistic and not a fanciful or remote prospect of success. A summary judgement could be refused if there is a compelling reason to conduct a trial. However, this by itself provides little guidance as to what constitutes a real prospect of success. A survey of three recent judicial decisions [Syrma Technology Private Limited v. Power wave Technologies Sweden AD, Su-Kam Power Systems Ltd. v. Kunwer Sachdev, andBright Enterprises Private Limited v. MJ Bizcraft LLP] confirms that, in India, there does not exist any theoretical or conceptual foundation, leave alone a judicial test, to guide when there is a realistic prospect of success and when there is not. It may, at this point, be noted that I do not disagree (or agree) with the final outcomes in the above three cases. The essay is only concerned with the failure of Indian courts at large, to articulate an intelligible standard determining when summary judgements are warranted.

English law claims to provide some guidance here. In England, there are two judicial tests to determine when a summary judgement should be given. The first of these asks the question “is the claim bound to fail?”; the second asks, “does the claim have a reasonable prospect of success?”[3] The difference lies in the different probability thresholds each of the test demands. In the first test, the court has to be satisfied that the non-moving party’s claim is too remote to succeed; in other words, the moving party will, in all probability, win in trial. Only then is the motion granted. In the reasonable prospect test, the court grants a motion if the claim of the non-moving party has no reasonable chance of success; in other words, the moving party stands a reasonably good chance of succeeding at trial. Quite clearly, under the second test courts will be more receptive to granting summary judgment than under the first. The first test requires from the moving party a more rigorous demonstration of the “genuineness” of his claim. Critics may rightly argue that this heightened standard of inquiry hinders the rule’s purpose of eliminating needless trials.

However, this still does not answer the fundamental question: how exactly courts should determine the “realistic prospect of success”? How should courts determine the probability of success of competing claims? Assuming that the goal of an ideal system of procedure is to minimize the sum of error costs and direct costs, I now proceed to consider this question. I provide an inexhaustive list of factors that the courts can consider while determining whether to grant summary judgments.

IV. What Factors to Consider While Granting a Summary Judgement

A. Facts Necessary to Infer a Violation of the Law

For all legal claims, there are facts that must be found to determine whether a violation has taken place. If a plaintiff fails to plead these facts, the court has no basis on which to assess the likelihood that he will satisfy the summary judgement threshold. Therefore, pleading facts important to infer a violation of the law should be the bare minimum requirement to determine if the claim will satisfy the summary judgement threshold. Take a case of intentional tort. If the plaintiff fails to plead facts indicating deliberate or intentional conduct by the defendant, the claim should be dismissed at the pleading stage.

B. Relative Probabilities of Direct and Circumstantial Evidence

The level of merit, in any case, is a function of two types of evidence: circumstantial and direct. Circumstantial evidence is evidence that relies on another evidence or inference to conclude a fact. For example, footprints of the same size as that of the defendant is circumstantial evidence that the defendant was at the site of the accident. Direct evidence, by contrast, supports the truth or otherwise of an assertion directly, i.e., without the need for a piece of intervening evidence or inference. For example, a videotape showing the defendant at the site of the accident.

The court’s decision to grant a summary judgement should vary with the relative probabilities of direct and circumstantial evidence in the case. Suppose the plaintiff is likely to obtain a document or oral testimony that conclusively links the defendant to the accident. Here, since the probability of obtaining direct evidence is high, the court should be willing to allow the claim to proceed to trial, that is, dismiss the motion for summary judgement. On the other hand, if the likelihood of obtaining direct evidence is low, and the level of merit likely to result even if the circumstantial evidence is obtained is just below the level needed to meet the summary judgement threshold, the court should dismiss at the pleading stage.

Though not reasoned in economic terms, this understanding is implicit in the English case ICI Chemicals & Polymers Ltd. v. TTE Training Ltd. In that case, the court held:

“If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgement because there would be a real, as opposed to a fanciful, prospect of success.”

Additionally, the courts may consider the parties’ resources while determining the likelihood of obtaining evidence, direct or circumstantial. Institutional defendants such as banks, insurance companies, etc. take advantage of economies of scale to create strong summary motions. An enhanced standard for such defendants should operate, given relative probabilities are skewed in their favour. Indeed, in the United States, Rule 26 (b) (2) of the Federal Rules of Civil Procedure directs courts to limit discovery if, among other things, “the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount of controversy, the parties’ resources, the importance of issues at stake in the action, and the importance of the discovery resolving the issues.”

C. Amount Involved

Summary judgements should occur more often for more costly claims. For example, if the non-moving party’s claim imposes high costs on the moving party, say by severely damaging his business or by imposing very high discovery costs, the threshold level of merit required to grant summary judgement should be brought down. In addition, in such cases, the quantum of evidence required in support of the moving party should be less. The courts should be more receptive to granting summary judgements. The idea is that in a pending decision, the moving party incurs such big and wasteful expenditures in litigation, that it becomes pertinent to terminate the case early.

Take, for example, a permanent injunction suit instituted by plaintiff X to restrain defendant Y from using a trademark Z. More often than not, in passing off or trademark infringement claims, the plaintiff comes to the court having already obtained a temporary injunction. The cost imposed on defendant Y, thus, is significant enough for courts to grant a summary motion if moved by the defendant.

Admittedly, this standard may result in the dismissal of some meritorious cases. In other words, error costs may go up. However, the dismissal of some meritorious suits is justified by the avoidance of high discovery costs in cases in which the non-moving party is unlikely to prevail. In other words, tightening the pleading standard is justified because direct costs would go down by more than error costs would go up.

V. Should Regular Trials be the Default Procedure?

The summary judgement procedure has become an important feature of most civil practice systems as an effective remedy for judicial delays, including in India. However, courts still understand summary trials as exceptions to regular trials, which continue to be the default procedure.

In Robert Hryniak v. Fred Mauldin, the Supreme Court of Canada marked a decisive break from this jurisprudence on summary judgements. It outlined a new test for summary judgement motions. The Court defined the test as asking not whether there is “a genuine issue for trial” but whether “there is a genuine issue requiring trial”. Thus, trials were no longer the default procedure for resolving civil disputes, but one of the many options. The Court held that there will be no genuine issue requiring a trial when a motions judge can reach “a fair and just determination”. It is to be noted that the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the Court the confidence that it can find the necessary facts and apply the relevant law so as to resolve the dispute.

According to the Court, the problem with the traditional paradigm of viewing trials as the default was that it held up as an ideal form of civil procedure not available to most Canadians. Thus, failing to recognize the extent of the access to justice problem in the country. This approach is distinctively economic. It understands that the purpose of summary trials is not to achieve the benefits of the trial procedure, but to achieve a just outcome through a more cost-effective procedure, standalone and different from a trial.

Summary judgements should not be understood narrowly as a procedural option available in a limited number of cases. Instead, it should become a procedural toolkit for judges to use in the resolution of a myriad of disputes. This would help the Indian courts to move away from a restrictive, cautionary stance and towards summary judgement.

IV. Conclusion

Procedure reduces error costs by enabling the discovery of facts and evidence. An accuracy-enhancing procedure, however, adds to direct costs. Adding a new procedure is efficient, therefore, only if it reduces error costs by more than the marginal direct costs it creates. This is the standard economic objective of any procedure. In light of that objective, the essay outlined what factors the courts must account for while granting summary motions. It also advanced a different jurisprudential outlook towards summary judgements. On this view, the courts ought not to hold up regular trials as the default mode of dispute resolution, against which summary judgements are assessed. Instead, summary judgements ought to be understood as one of the many procedural tools for dispute resolution different from a trial. This would enable the courts to shed a restrictive approach towards summary judgments.

The author is an undergraduate student at NLSIU, Bangalore and Managing Editor, LSPR.

[1] Posner, Richard A. “An Economic Approach To Legal Procedure And Judicial Administration”. The Journal Of Legal Studies, vol 2, no. 2, 1973, at 435.

[2] Summary judgements are provided for also under Order XXXVII of CPC. The summary procedure under this order is largely similar to the summary procedure under Order XIII-A. All ‘commercial disputes’ (as defined under the Commercial Courts Act of 2015) are covered under the provision of Order XIIIA with one exception, i.e., the cases originally instituted under the summary procedure under Order XXXVII of the Code of Civil Procedure. In that sense, technically Order XXXVII is an independent and standalone provision. But since these operate much similarly in practice, I make mention of only Order XIIIA throughout the paper even though the analysis holds good for summary procedure under Order XXXVII as well.

[3] Su-Kam Power Systems Ltd. v. Kunwer Sachdev, 2019 SCC OnLine Del 10764 at para 44.