Court of Appeal grants anti-suit injunction restraining US proceedings brought against employee by US parent company under exclusive US jurisdiction agreement

The Court of Appeal has given a wide interpretation to the meaning of ’employer’ in the recast Brussels Regulation (No 1215/2012), holding that a company which provides benefits to employees of associated group companies may be regarded as an employer if it provides the benefits to reward and encourage the employees for the benefit of their employer and the group as a whole: James Petter v EMC Europe Limited and EMC Corporation [2015] EWCA Civ 828.

A US parent company providing stock options could therefore be sued as an ’employer’ in England by a former employee of its English subsidiary, and it could not rely on an exclusive jurisdiction agreement in favour of the Massachusetts courts. An anti-suit injunction was also granted, prohibiting the parent company continuing US proceedings brought against the employee.

The facts of the case are similar to those in Samengo-Turner v J & H Marsh and McLennan (Services) Ltd [2007 EWCA Civ 723 which has attracted substantial academic debate and criticism over the years. The Court of Appeal in the present case considered itself bound by Samengo-Turner to grant the anti-suit injunction.  Given a free hand, Lord Justices Moore-Bick and Sales would have reached the same conclusion as the court in Samengo-Turner. Lord Justice Vos, however, clearly had doubts over whether the case was correctly decided, so the controversy over that decision continues.

The Petter case is a reminder that the court will look at substance rather than form in deciding who is an employer under the Regulation and that a jurisdiction agreement, whether in favour of an EU or non-EU court, is unlikely to be effective from an employer’s perspective. The case also shows that, in order to protect an employee’s rights, an anti-suit injunction will ordinarily be granted restraining an employer from bringing or continuing proceedings outside the EU. That injunction may even extend to ordering the employer to withdraw motions filed in the overseas proceedings, at least where there is evidence that it is seeking to pre-empt the English proceedings (as confirmed in the supplementary judgment of the Court of Appeal in this case). Continue reading

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Contractual damages: Supreme Court confirms overriding compensatory principle in case of one-off sale

In a recent judgment, the Supreme Court has confirmed that the overriding compensatory principle applies in the case of an anticipatory breach of a contract for a one-off sale. This means that events occurring after the date of breach can be taken into account in considering whether the claimant has suffered any loss. In the present case, the court concluded that the buyer had suffered no loss because it was clear the seller would have been entitled to cancel the contract without penalty before the contractual date of performance: Bunge SA v Nidera BV [2015] UKSC 43.

The principle that events occurring after the date of breach are relevant to the assessment of loss, even if those events were not seen as inevitable or even likely at the date of breach, was established by the majority decision of the House of Lords in The Golden Victory [2007] 2 AC 535. The decision has sometimes been criticised as offending against the so-called “breach-date rule” (that, where there is an available market, contractual damages are assessed as at the date of breach) and leading to uncertainty. There has also been some doubt as to whether the principle would apply in the case of a one-off sale, as opposed to a contract requiring performance over a period of time.

The present decision gives strong support for the principle, describing it as “neither new nor heterodox”, and confirms that it applies equally where there is an anticipatory breach of a contract for a one-off sale.  Continue reading

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Double derivative actions: challenging wrongs done to subsidiary companies

A recent High Court decision provides a useful reminder that the common law “double derivative” action remains available. This gives minority shareholders the option of challenging wrongs done to companies further down the chain, even if they are unable directly to take advantage of the statutory derivative mechanism under the Companies Act 2006: Bhullar v Bhullar [2015] EWHC 1943 (Ch).

The case is also of note as the court departed from the ordinary principle of making a pre-emptive order granting a costs indemnity to a claimant with permission to pursue a derivative action.  Instead, as the derivative proceedings were viewed as a stepping stone towards the negotiation of a formal split or for an unfair prejudice petition, the court held that all parties should be on risk as to costs.

Earlier this month Gary Milner-Moore and Tom Henderson, a partner and senior associate in our dispute resolution team, published an article in the July – September 2015 edition of Corporate Disputes magazine (see post) which looked at how judges have sought to limit derivative claims since the introduction of the statutory regime. The Bhullar decision is particularly interesting in the context of the courts having kept the statutory derivative claim within measured bounds. Gary and Tom consider the decision further below. Continue reading

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Court of Appeal clarifies approach to ordering rescission for misrepresentation

Where a party has entered into a contract as a result of a misrepresentation, the question often arises as to whether it can unwind, or “rescind”, the contract (eg in a sale of goods contract by returning the goods and getting back the money paid) or whether it is limited to claiming damages, which may not always be as advantageous (and may not be available at all if the misrepresentation was innocent). A recent Court of Appeal decision clarifies the court’s approach: Salt v Stratstone Specialist Limited T/A Stratstone Cadillac Newcastle [2015] EWCA Civ 745.

The court considered two traditional bars to rescission: (i) where the parties cannot be restored to their pre-contract positions; and (ii) delay. On each the court took a flexible approach, emphasising that the question is whether “practical justice” can be done, including by ordering rescission on terms which allow the defendant to be compensated for any unfairness that would otherwise result. The decision may signal a greater willingness to allow claimants to unwind contracts entered into in reliance on a misrepresentation, in order to achieve a just result.

James Norris-Jones and Rebecca Murtha, a partner and senior associate in our disputes team, consider the decision below. Continue reading

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Another round of massive court fee hikes proposed

Less than four months after the last round of fee increases for civil claims (see post), the government has today opened a consultation on further significant increases which, if implemented, would (at least) double the cost of issuing money claims above £400,000, ie from £10,000 to at least £20,000.

In March this year, in the face of strong objections from court users, the government introduced new percentage-based fees to issue money claims over £10,000. These new fees are calculated as 5% of the claim value, subject to a cap of £10,000. The fees are referred to by the government as “enhanced fees”, since they are not just aimed at recovering the costs of the services to which they relate, but in fact aim to recover more than the cost of those services, thereby subsidising other aspects of the civil court system.

The consultation issued today outlines a planned increase in the £10,000 cap to “at least £20,000″. The government defends the increase by pointing out that of 1.2 million money claims issued each year, only 5,000 (or 0.4%) will be affected. The consultation adds: “Many of the claims brought for higher values will involve large multi-national organisations or wealthy individuals, and we believe it is right to ask them to contribute more.”

The previous increases had been widely criticised, on the basis of their potential impact on access to justice as well as potential damage to London’s international standing as a centre for dispute resolution. At the time, we expressed concerns that the increases could be the thin end of the wedge. Today’s consultation proves those concerns well-founded.

The timing of the consultation also gives rise to questions, given that it will take place over the summer holiday period, closing on 15 September. Further, it comes just one day after the House of Commons Justice Committee announced an inquiry into the effects of court and tribunal fees, including the regime of enhanced fees for civil proceedings. The inquiry asks for views on various issues including how the increased court fees have affected access to justice, and how they have affected the competitiveness of the legal services market in England and Wales in an international context. The deadline for written submissions to the inquiry is 30 September.

 

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Supreme Court rules recoverable success fees / ATE premiums do not breach Article 6 rights

In a judgment handed down this morning, 22 July, the Supreme Court held (by a majority of five to two) that a claimant’s right to recover a conditional fee agreement (CFA) success fee and after-the-event (ATE) insurance premium from an unsuccessful defendant, under the pre-Jackson regime governing CFAs and ATE insurance, did not breach the defendant’s right to a fair trial under Article 6 of the European Convention on Human Rights: Coventry and others (Respondents) v Lawrence and another (Appellants) [2015] UKSC 50.

The ruling follows on from a judgment last July (see post) in which the Supreme Court had said the point should be reconsidered, in the context of a case where home owners brought a claim in private nuisance against a nearby motor sport stadium and track, with the benefit of a pre-Jackson CFA and ATE insurance policy. The claimants were ultimately awarded an injunction limiting the level of noise from the track, and damages of approximately £20,000. The defendants were ordered to pay 60% of the claimants’ costs at first instance, and would also be liable for the appeal costs. The “base costs” at first instance were approximately £185,000, but the effect of the CFA success fee and ATE premium was that the defendant could be liable for a further £312,000 (ignoring the costs of the appeals). The defendants argued that if they were liable for these additional sums, it would infringe their Article 6 rights.

The majority of the Supreme Court rejected that argument. It considered the decision of the European Court of Human Rights in MGN v UK (2011) 53 EHRR 5 (see post) which held that the requirement for MGN to pay CFA success fees due to Naomi Campbell’s lawyers was incompatible with MGN’s rights under Article 10 of the Convention (freedom of expression). However, the Supreme Court said, the right to freedom of expression is always given particular weight by the ECtHR, and there was no basis for concluding that the court would have held that the scheme violated MGN’s article 6 rights in that case. Accordingly, the ECtHR’s decision did not require the Supreme Court to hold that the pre-Jackson regime was incompatible with article 6 rights.

The Supreme Court accepted that the regime had flaws, as recognised in the MGN case, including a potential “blackmail” or “chilling” effect in that it imposed a costs burden on opposing parties which was excessive and in some cases may have interfered with a defendant’s right of access to justice. However, it concluded that the scheme, overall, was a proportionate way of achieving the legitimate aim of providing access to justice following the withdrawal of legal aid for most civil cases.

This judgment had been awaited with keen interest. A contrary decision could have had a dramatic impact, despite the abolition of recoverability from 1 April 2013 as a result of the Jackson reforms. The pre-Jackson regime still applies to CFAs and ATE policies entered into before that date, as well as certain types of claim which are excluded from the reforms, such as claims brought by insolvent companies. The decision will therefore come as a relief to many who have brought claims under the old regime.

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Privy Council decision on limitation in professional negligence cases

A recent Privy Council decision has considered the point at which damage is suffered where a claimant has entered into a flawed transaction as a result of a defendant’s professional negligence. This is a controversial issue of particular relevance where claims are brought long after the negligent acts were committed. The court’s conclusion will often be, as it was in this case, that measurable damage was suffered as soon as the flawed transaction was entered into, and therefore time begins to run at that point for limitation purposes. However, the Privy Council disagreed with observations of the Court of Appeal in previous cases which suggested that damage would always be suffered at that point. Each case will depend on its facts – in particular whether at that point the claimant was measurably worse off than if the transaction had not been flawed: Maharaj & Anor v Johnson & Ors (Trinidad and Tobago) [2015] UKPC 28.

Where a claimant can establish that, had it not been for the defendant’s negligence, it would not have entered into the transaction at all (a so-called “no transaction” case, as distinguished from a “flawed transaction” case), the starting point is different. In those circumstances, the question is when the transaction caused the claimant’s financial position to be measurably worse than if he had not entered into it – which may often be a later date, though again it will all depend on the facts.

Under English law there is an extension to the basic six-year limitation period for negligence claims where a claimant lacks relevant knowledge about the claim at the time the cause of action accrues. However, that is subject to an overall longstop of 15 years. It therefore does not assist where the cause of action accrued more than 15 years before proceedings were issued. Hattie Middleditch, an associate in our insurance and reinsurance disputes team, considers the Maharaj v Johnson decision further below. Continue reading

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Article published on legal advice privilege

A recent Hong Kong Court of Appeal judgment has rejected the narrow approach to legal advice privilege established by the English Court of Appeal in Three Rivers No 5 and adopted a broader “dominant purpose” test more akin to the test that applies to litigation privilege.

Maura McIntosh has published a post on Practical Law’s Dispute Resolution blog which considers the decision and its potential implications in England and Wales. Click here to download a copy of the post “Legal advice privilege: is there light after Three Rivers?” (or here for the Practical Law Dispute Resolution blog homepage).

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The dangers of time-limited Part 36 offers

A recent High Court decision suggests that a claimant’s Part 36 offer to settle may have little benefit unless it is kept on the table until the conclusion of the case: Gulati & ors v MGN Ltd [2015] EWHC 1805 (Ch).

In this case, the claimant made a Part 36 offer which was expressed to be automatically withdrawn after 21 days. Although the claimant beat the offer at trial, she was not awarded indemnity costs – as she almost certainly would have been (together with other costs benefits) if the offer had remained on the table.

We have previously highlighted the drawbacks for parties withdrawing Part 36 offers (both claimants’ offers and defendants’ offers). The present decision shows that those drawbacks apply equally regardless of whether an offer is withdrawn during the course of the action or (as is permitted under recent reforms to Part 36) made subject to a time limit from the outset. The drawbacks for a claimant are particularly stark, given that Part 36 introduced the concept of costs sanctions to incentivise claimants’ offers, and cases such as the present suggest that the court has no jurisdiction to award those sanctions simply by analogy to Part 36.  Continue reading

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A company can be sued in the claimant’s domicile where there is a direct claim also against the liability insurer

The Court of Appeal has held that a claimant could bring a claim in tort against a Spanish hotel company in England, the claimant’s domicile, where the claimant also had a direct claim here against the company’s insurer. There was no requirement that the claim against the company concern the underlying insurance policy: Mapfre Mutualidad Compania de Seguros Y Reaseguros SA v Hoteles Pinero Canarias SL and Godfrey Keefe [2015] EWCA Civ 598.

This decision demonstrates that an insured, and its insurer, may face claims in a number of different EU jurisdictions arising out of the same matter, even where the event and damage all occur in the insured’s home country. The same law should apply to most of the claims wherever they are heard, but where you have a multiplicity of proceedings, there is clearly scope for inconsistent judgments, as well as increased costs and management time in defending claims. Continue reading

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