Court of Appeal confirms importance of frankly disclosing factors that could affect expert’s independence

The Court of Appeal has dismissed an appeal against a finding of clinical negligence based, in part, on the trial judge's approach to evaluating expert evidence where a close connection between the defendant and his expert witness had not been disclosed: EXP v Dr Charles Simon Barker [2017] EWCA Civ 63.

The Court of Appeal held that the trial judge had been fully entitled to take the view that the expert had so compromised his approach that the weight to be accorded to his views must be considerably diminished. It went so far as to say that, had the trial judge taken the decision to exclude the expert's evidence entirely, the Court of Appeal would have supported that decision.  

The decision reaffirms the importance of parties and their expert witnesses frankly disclosing any connection which might affect an expert's independence.

Rachel Lidgate, a senior associate in our disputes team in London, considers the decision further below.

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Court of Appeal finds third party who conspired with defendant to breach freezing order could be liable for tort of conspiracy to injure by unlawful means

In a claim by JSC BTA Bank against the son-in-law of its former Chairman alleging conspiracy to injure by unlawful means, the Court of Appeal held that breach of the terms of a freezing order could qualify as the requisite unlawful means: Khrapunov v JSC BTA Bank [2017] EWCA Civ 40.

The decision serves as a reminder that those who are not themselves parties to litigation or subject to court orders may remain exposed to claims in conspiracy where they assist in the breach of a court order.

Gary Milner-Moore and Kate Emanuel from our disputes team consider the decision further below.

The judgment is also of interest for its consideration of jurisdictional issues in economic tort claims and, in particular, where the event giving rise to damage takes place in a claim for conspiracy to injure by unlawful means. That part of the decision is considered in a separate blog post here.

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Court of Appeal gives further guidance on how jurisdiction rules apply in economic tort claim

The Court of Appeal has held that the place of the event giving rise to damage in a claim alleging conspiracy to injure by unlawful means is where the conspiracy was hatched. As the claimant bank had far the better of the argument that this was England, the English courts had jurisdiction: Khrapunov v JSC BTA Bank [2017] EWCA Civ 40.

More generally, the decision suggests that when looking for the place of the event giving rise to damage, the court should focus on the events which set the tort in motion, and it is irrelevant for jurisdiction purposes that damage is required before a cause of action is complete.

The test for jurisdiction in tort cases isn't always easy to apply, particularly in cases concerning economic loss. This is the latest case in which the Court of Appeal has considered the applicable principles. For our posts on the earlier Court of Appeal decisions see here and here.

The decision is also of interest for its consideration of what amounts to unlawful means for the purposes of the tort of conspiracy to injure by unlawful means. That part of the decision will be considered in a separate blog post, to be published shortly.

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Commercial Court finds “torpedo” action ineffective where parties agreed asymmetric jurisdiction clause

The Commercial Court has held that an asymmetric jurisdiction clause is an exclusive jurisdiction clause for the purposes of the recast Brussels Regulation. The English court was therefore entitled to continue with its proceedings where it was the chosen court but proceedings had been commenced earlier in Greece: Commerzbank Aktiengesellshcaft v Liquimar Tankers Management and another [2017] EWHC 161 (Comm).

The recast Brussels Regulation, which applies to proceedings commenced since 10 January 2015, contains a number of improvements over the previous version. These include provisions aimed at defusing so-called "torpedo" actions by which a party could seek to delay proceedings in the court the parties had chosen in their jurisdiction clause by commencing proceedings in breach of the clause elsewhere in the EU.

There has been doubt however as to whether these new "anti-torpedo" provisions would be effective where the parties had agreed an asymmetric jurisdiction clause rather than an exclusive jurisdiction clause binding on all parties. An asymmetric clause (also known as a unilateral or one-way clause) provides that one party, typically a borrower, can only sue in one jurisdiction whereas the other party, typically a finance party, can sue in any available jurisdiction.

The Commercial Court in Perella Weinberg Partners UK LLP v Coder SA [2016] EWHC 1182 (Comm) considered the "anti-torpedo" provisions should apply equally to an asymmetric clause (see blog post here) but the comments were obiter. The present decision is significant in reaching the same conclusion after a detailed analysis of the arguments. In the court's view, however, whether a jurisdiction clause is exclusive for the purposes of these provisions is a question of autonomous interpretation of the Regulation, rather than English law, so until there is CJEU authority on the point there remains a risk of a torpedo action being effective.

The case is also of interest in once again rejecting the approach of the French courts which have held that asymmetric clauses are invalid, at least in some circumstances (see our blog posts on the decisions in Mme X v Societe Banque Prive Edmond de Rothschild 13, First Civil Chamber, 26 September 2012, Case no 11-26022 here, Societe v Apple, First Civil Chamber, 7 October 2015, Case No.  14-16898) here and Mauritius Commercial Bank Limited v Hestia Holdings Ltd and Another [2013] EWHC 1328 (Comm) here).

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Iniquity exception to privilege requires prima facie case of fraud or crime – breach of a fundamental human right is not sufficient

In a recent decision, the High Court declined to disapply legal professional privilege over documents alleged to reveal a breach of fundamental human rights, in the form of the claimant's right to privacy: Holyoake v Candy and anor [2017] EWHC 52 (QB).

It is an established principle that legal professional privilege may be disapplied where it is intended to act as a cloak for crime or fraud – this is known as the iniquity principle. In the present case, the court considered a novel argument that the principle should extend to documents evidencing a breach of fundamental human rights. The court rejected this argument, saying it would involve a "quite radical" extension of the iniquity principle. At least a prima facie case of fraudulent or criminal conduct is required to displace privilege where it would otherwise apply.

This decision serves as a reminder of the narrow scope of the iniquity principle and the robust standard that must be met before it is applied. It illustrates the unwillingness of the courts to encroach radically upon the protections conferred by legal professional privilege, which is itself a fundamental human right.

Angela Liu, an associate in our disputes team, considers the decision further below.

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Insurance and Reinsurance Disputes Annual Review 2016 published

Our Insurance and Reinsurance Disputes team has today published its Annual Review of 2016, which provides an overview and analysis of the key cases and developments affecting those engaged in or with contentious matters in the insurance and reinsurance market.

If you would like to access the 2016 Review please click here.

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Contrasting High Court decisions on whether successful party should be compensated for exchange rate loss on legal costs

The High Court (Mr Justice Coulson) has declined to order that a successful defendant should recover additional sums to reflect any currency loss caused by the decline in the exchange rate between sterling and the euro since the defendant had made payments to his solicitors: MacInnes v Gross [2017] EWHC 127 (QB).

This is in contrast to the recent decision of Mr Justice Arnold in Elkamet Kunststofftechnik GmbH v Saint-Gobain Glass France S.A., considered here. Pending any higher authority on the point, therefore, it is unclear whether a foreign party who is successful in the English courts will be compensated for exchange rate losses in converting funds to sterling to pay legal costs.

The present decision is also of interest in relation to the impact of an approved costs budget on the amount the successful party will be awarded in costs. In calculating the interim payment to be awarded to the defendant, Mr Justice Coulson started with the approved budget reduced by 10%, which he said he regarded as the maximum deduction that is appropriate in a case where there is an approved costs budget.

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Court of Appeal confirms subsequent communications can be relevant to determining whether a contract has been concluded

The Court of Appeal has held that the High Court was wrong to find that a contract had arguably been concluded during a telephone call following a "subject to contract" offer letter, when this was inconsistent with the parties' subsequent communications: Global Asset Capital, Inc and another v Aabar Block S.A.R.L and others [2017] EWCA Civ 37.

The Court of Appeal reiterated that when deciding whether a contract has been concluded the court should look at the whole course of the negotiations to avoid forming a misleading impression. Once there is a completed contract, subsequent events will not be considered in determining the proper interpretation of that contract, but that is a different point. Here the judge had been wrong to exclude consideration of subsequent communications in considering whether a contract had been concluded during the telephone call in question.  

The decision is a useful reminder of how parties should approach contractual negotiations in order to avoid uncertainty and disputes. For example:

  • All correspondence and drafts should be marked "subject to contract" to avoid entering into a contract prematurely – but remember this is not a panacea, as in some circumstances the court may find the "subject to contract" status has been waived.
  • Ideally the parties should agree all the terms and document them by signing a written contract (although there is no general requirement for a contract to be in writing in order for it to be binding). If the parties do not agree all the terms there is a risk that the agreement will be too uncertain to be enforced.

The first in our series of contract disputes practical guides, When do you have a binding contract?, provides further guidance on these issues.

Chris Bushell, partner, and Gary Horlock, associate, in our disputes team consider the decision further below.

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Costs judge finds information from mediation is admissible when considering costs consequences of settlement

A costs judge has held that information about a party's costs provided for the purposes of a mediation could be used as evidence when considering the cost consequences of a subsequent settlement: Savings Advice Limited v EDF Energy Customers Ltd [2017] EWHC B1 (Costs).

Documents produced for the purposes of mediation are generally covered by without prejudice privilege and, subject to limited exceptions, cannot subsequently be used as evidence. In the present case the costs information was provided in emails headed "without prejudice save as to costs", so it is perhaps not surprising that the costs judge concluded it could be used as evidence in subsequent cost proceedings.

However, other aspects of the reasoning for the decision are more surprising and arguably not supported by existing authorities regarding the without prejudice rule. In particular, the costs judge held that the costs information was not in any event covered by the privilege because it was a statement of pure fact rather than an admission or concession. Such distinction has been rejected in previous cases on the basis that requiring parties to a negotiation to constantly analyse whether they are making admissions or factual statements would undermine the privilege's purpose of enabling parties to speak freely in settlement negotiations (see for example the decision of the House of Lords in Ofulue v Bossert [2009] UKHL16, considered here).

While the decision will not necessarily be followed in future cases,  it serves as a reminder that parties should be aware of the limitations of without prejudice privilege and the circumstances in which information provided during mediation may be used in subsequent litigation. As a practice point, parties should ensure that they are clear as to what is intended when they provide or receive information  'without prejudice save as to costs' in the context of a mediation.

Click here to read more about the decision on our ADR Notes blog.

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No appeal against controversial decision in RBS case applying narrow interpretation of “client” for purposes of legal advice privilege

In a widely publicised decision last December arising out of the RBS Rights Issue Litigation (reported here), the High Court found that interviews conducted by a bank's solicitors with its employees were not covered by legal advice privilege as the employees in question did not form part of the "client" for privilege purposes. The judge took the view that he was bound to reach this conclusion, applying the narrow interpretation of "client" from the notorious Court of Appeal decision in Three Rivers No 5.

It was anticipated that RBS would appeal the decision directly to the Supreme Court, the judge having granted a "leapfrog" certificate to allow that to happen (subject to the Supreme Court granting permission). However, we can now confirm that the appeal will not take place, as recent amendments to the claimants' case mean the disputed documents are no longer relevant to the issues in the action.

It is regrettable that the Supreme Court will not be considering this issue, as the current position causes significant practical problems for corporates wishing to take legal advice with the benefit of privilege. As Three Rivers No 5 has been interpreted in the RBS decision, legal advice privilege is restricted to communications between a lawyer and those individuals who are authorised to seek and obtain legal advice on behalf of the organisation. Importantly, it does not extend to those who are authorised only to provide information to the lawyers, even if the lawyers need that information to be able to advise the organisation.

If this approach is followed in other cases, it may significantly restrict the number of communications that are likely to benefit from legal advice privilege in the corporate context. In some cases, the group of individuals authorised to instruct the lawyers and obtain their advice, as opposed to providing factual information to the lawyers, may be quite small. And the problem will become even more stark if other judges take the view that a further implication of Three Rivers No 5 is to restrict this group to those who are the "directing mind and will" of the organisation; the judge in the RBS case did not think it was necessary to determine this point, but suggested that he inclined to that view.

The current position will be seen as unhelpful and unworkable by many corporates, and arguably risks undermining the policy rationale underlying legal advice privilege – to allow clients (including corporate clients) to take legal advice based on complete and accurate information, without fear that they will prejudice their position by creating material that can be used against them in subsequent legal proceedings.

Had the appeal proceeded, it is likely that two principal arguments would have been put forward against the position taken in the judgment:

  • Legal advice privilege should apply to all communications between a lawyer and those who are authorised to communicate with the lawyer on behalf of the client organisation. It should not matter whether that authority is to communicate factual information or instructions, which should not be distinguished for these purposes. This conclusion is arguably not inconsistent with Three Rivers No 5 or, if it is, that decision should be confined to its particular facts or alternatively overruled.
  • In any event, there are compelling reasons for adopting a "dominant purpose test" in the context of legal advice privilege (similar to that recently approved in some other jurisdictions, including Hong Kong), so that it is no longer limited to lawyer-client communications, but instead covers all documents created for the dominant purpose of obtaining legal advice. This would avoid arbitrary distinctions, provide greater certainty, and better enable the underlying purpose of the privilege to be fulfilled.

Given the difficulties highlighted by the RBS decision, which as a first instance decision is not binding on other High Court judges, contested applications relating to privilege may become increasingly common, and it may not be long before these issues arrive at the door of the Supreme Court via some other route. Corporate clients will no doubt hope that, when that day comes, a clearer and more workable test for legal advice privilege will emerge.

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