Partial action: A strategy too often overlooked

The Swiss Supreme Court has recently issued various rulings on this subject.

Alleviation of formal requirements

In particular, the formal requirements for an action for partial recovery of several separate claims have been reduced. Up to now, the creditor claiming partial recovery of its debt had to specify (1) the scope of its various claims and (2) their order of priority. The Federal Supreme Court has now waived these requirements (ATF 144 III 452, para. 2.4). From now on, the creditor will only have to allege with sufficient precision the existence of a higher claim. For example, a commercial agent has a total claim of CHF 40,000 against the principal, of which CHF 25,000 is for unpaid fees and CHF 15,000 for expenses advanced on behalf of the principal. By reducing the total claim to CHF 30,000, the agent can benefit from the simplified procedure without having to specify exactly which part of this CHF 30,000 relates to his unpaid fees or expenses, nor the order of priority of the claims relating thereto. It will suffice for him to specify that his total claim is greater than CHF 30,000.

This simplification, with the cost and time savings it implies, is an undeniable advantage of partial action, in addition to the other - often forgotten benefits.

Simplified procedure

As indicated above, partial action offers the creditor reducing his claims to CHF 30,000 or less the possibility of benefiting from the simplified procedure. In contrast to the ordinary procedure (applicable when the value in dispute exceeds CHF 30,000), which is generally long and costly, the simplified procedure tends to have the dispute decided by the judge in a simple and rapid manner. Furthermore, the creditor may reduce its claims for the sole purpose of benefiting from the simplified procedure without this being considered an abuse of rights (Federal Supreme Court decision 4A_111/2016 of 24 June 2016, point 4.6).

Limited possibilities for counterclaims

A creditor who reduces the amount of its claims in order to benefit from the simplified procedure shall, in so doing, limit the possibility for the debtor to file counterclaims against it. Counterclaims allows a defendant to make (counter)claims against the plaintiff in pending civil proceedings. The filing of counterclaims is only possible if the claim asserted by the defendant against the principal claimant is subject to the same type of procedure. Thus, let us assume that in our example above, the principal has a liability claim of CHF 50,000 against the agent. The principal may only assert his counterclaim against the representative in the same proceedings if he limits it to CHF 30,000. Otherwise, he will have to file a new claim for payment in a separate, ordinary procedure, which will be costly (drafting a new claim, payment of an advance on costs in proportion to the CHF 50,000, etc.) and time-consuming (filing of a request for conciliation, followed by a claim on the merits, etc.).

This above does not apply where the counterclaim is for a negative declaratory judgement, i.e. a finding by a judge that a debt/claim or legal relationship does not exist. Indeed, the defendant has an interest in having its dispute with the plaintiff fully settled in the pending proceedings for various reasons (internal accounting, liquidity, willingness to move forward, etc.). The defendant may therefore ask the court to reject the (partial) claims of the plaintiff, on the one hand, and request the court to declare that the unclaimed balance of the debtor's potential claims is not due, on the other hand.

In two recent rulings (ATF 143 III 506 and ruling 2A_29/2019 of 10 July 2019), the Federal Supreme Court held that in the event of a partial action by the plaintiff (subject to the simplified procedure), the defendant could make a counterclaim for negative declaratory judgement even if the value of said counterclaim exceeded CHF 30,000 (ordinary procedure).

Using our example above, this means that the principal can defend himself against the agent's action by requesting, on the one hand, that the agent's claims for payment be rejected (CHF 30,000) and on the other hand, for a declaration that nothing else is owed (CHF 10'000).

Possibility of joint claims

In some cases, partial action allows creditors with separate claims against the same debtor to act jointly against that debtor as single consorts. For example, a creditor may reduce his claims to CHF 30,000 in order to act jointly with another creditor with claims of less than CHF 30,000 (simplified procedure). The advantages of a joint action are, in particular, the reduction of costs for the parties (distribution of lawyers' fees for the drafting of briefs, preparation and participation in hearings) and the acceleration of the procedure (joint hearing of the parties and relevant witnesses for each). It also avoids contradictory judgments in similar cases.

Other Advantages

Where a creditor invokes claims which are difficult to quantify and/or prove in terms of damage and is therefore uncertain whether it will obtain the full amount of his claim, it will prefer, depending on the case, to limit the scope of action to those claims for which it is more likely to be successful.

Finally, partial action makes it possible, depending on the amount required in court, to limit the possibility of the parties to challenge the relevant decision in a higher court (appeal or objection). Decisions involving amounts of less than CHF 10,000 can only be contested by means of an objection (recours, Beschwerde), which is a limited legal remedy where the facts are in principle not reviewed. Decisions involving an amount between CHF 10,000 and CHF 29,999 may be appealed (appel, Berufung), which is a full legal remedy in which the higher authority reviews the facts. In both cases, an appeal in civil matters to the Federal Court will not be possible (limited to claims over CHF 30,000). Only the subsidiary constitutional appeal will be open, whose admissibility conditions are very strict and whose claims are limited to a violation of constitutional rights, which is difficult to establish.

However…

There are, however, five nuances to the benefits of partial action.

• The statute of limitations is interrupted only for the partial amount claimed. Thus, the limitation period for the balance of the debt unclaimed in court will continue to run.

• The favorable decision does not affect the unclaimed balance of the creditor's claim in the partial action. Therefore, using our example, the agent who wins his claim of CHF 30,000 cannot, in principle, rely on this first decision to claim the remaining CHF 10,000 from the principal (lack of res judicata). If necessary, he will have to bring a new claim, within the limits of the abuse of rights. However, a favorable decision will allow him to promote settlement negotiations with the principal regarding the balance of the claim.

• Conversely, where the creditor's partial claims are rejected, the question whether the creditor can still sue for the unclaimed balance of those claims is debated in the doctrine, and the case law is not entirely clear on this point (for a summary of the case law and doctrine, cf. Curchod Nicolas, Gonczy Guillaume, L'action partielle, published in PJA 2019 803, pp. 812 et seq.).

• As illustrated above, the debtor may bring an action for a negative declaratory judgment in a counterclaim, without being limited in the amounts of its claims for declaratory relief. It will therefore be free to ask the Court to declare that the balance of the claim not claimed by the creditor is not due.

• The choice of partial action must not constitute an abuse of rights. The existence of an abuse of rights will depend on the circumstances of the case and the conduct of the parties.

Partial Actions will become more frequent

In conclusion, because of its many advantages and since the recent relaxation of its formal requirements, the instrument of partial action has become more attractive and will probably be used more often in practice. This will be the case in particular for creditors whose claims are uncertain beyond a certain amount or in situations where the parties' claims do not significantly exceed CHF 30,000. In addition, and in view of the case law strengthening the defendant's defense (in particular with regard to the counterclaim for a negative declaratory judgement), the creditor will in principle be able to bring a partial action without his conduct constituting an abuse of rights. However, in certain situations, especially if the alleged claims are high, present complex legal issues or require various evidentiary measures (e.g. a judicial expert opinion), the partial action will strategically be less attractive for the creditor. In any event, the appropriateness of partial action will depend on the case at hand and, above all, on the expected results.