Upcoming webinar – The recast Brussels Regulation: what it means for commercial parties

The EU rules governing jurisdiction and enforcement of judgments will change significantly from 10 January 2015, when the recast Brussels Regulation (No 1215/2012) will apply in place of the current regime. 

On Wednesday 19 November, at 12.45 – 1.45pm GMT, Adam Johnson, Nick Peacock and Anna Pertoldi will deliver a webinar for Herbert Smith Freehills clients and contacts which will consider the key changes and their impact on commercial parties in practice, including a look at the problems addressed by the new rules and a discussion of where uncertainties remain. In broad outline, the main areas of reform are:

  • extending the rules relating to jurisdiction agreements and defusing “torpedo” actions
  • clarifying the extent and effect of the exclusion of arbitration from the ambit of the Regulation
  • new rules on stays in favour of proceedings in a non-member state 
  • extending the rules relating to consumers and employees to apply to non-EU domiciled traders and employers
  • making Member State judgments immediately enforceable across the EU

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Filed under Announcements, Jurisdiction

Mitchell decision considers court’s approach to admitting evidence of “similar facts”

Parties to litigation sometimes wish to rely on evidence of similar but unconnected past incidents, arguing that what happened then is a good indicator of what happened in the case in question. Such evidence of “similar facts” is tightly controlled in criminal cases, but the test for its admission in civil cases is less stringent.

A recent decision in the high profile Mitchell “plebgate” case illustrates the court’s approach. Here the court agreed to admit evidence of Mr Mitchell’s past encounters with police which, if true, might throw light on his attitude and reaction when impediments were placed in his way by police officers and therefore support the defendant’s case: Mitchell v News Group Newspapers Ltd [2014] EWHC 3590 (QB).

That is not to say that similar fact evidence will always be admitted in civil cases. The court must balance the probative value of the evidence against any potential unfairness it might cause, as well as the additional burdens in case management terms. Where the balance lies will depend on the circumstances in each case.

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Government rules out “hybrid” Damages-Based Agreements (DBAs)

The Ministry of Justice has asked the Civil Justice Council (CJC) to review the regulations governing DBAs to consider possible improvements, but has ruled out the introduction of “hybrid” arrangements where a lawyer could combine a DBA with some other form of retainer such as hourly rates. According to the CJC’s press release issued today, the government has ruled out such arrangements as it considers they “could encourage litigation behaviour based on a low risk/high returns approach”.

The exclusion of hybrid DBAs came as a surprise to the profession when the draft regulations were published in January 2013 (see post), as there was no advance warning of the restriction and it went against the recommendations of the working party set up to consider such issues. The restriction has been widely criticised, including by Lord Justice Jackson in his keynote speech at a recent Law Society conference. Lord Dyson, Master of the Rolls and Chairman of the CJC, has expressed disappointment at the government’s decision not to permit hybrid DBAs.

The CJC working group will be chaired by Professor Rachael Mulheron of Queen Mary University London and its membership and terms of reference will be published shortly. The issues the group will consider are said to include changing the regulations so that defendants will be able to use DBAs; currently they are available only to claimants (or counterclaimants) and not defendants to an action.

To date there has been very little take-up of DBAs in commercial cases. This has been attributed, in large part, to the inability of firms to offer hybrid arrangements, though other problems with the drafting of the regulations may have contributed to their lack of use. If that is indeed the key factor, then whatever improvements are made to the regulations as a result of the current review may do little to increase the popularity of DBAs.

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Article published on effect of settlement offers in non-money claims

A recent Court of Appeal decision provides useful guidance on how the court will determine the effect of a “without prejudice save as to costs” (or Calderbank) offer in a non-money claim: Coward v Phaestos Limited and others [2014] EWCA Civ 1256.

In such a claim, the court cannot simply compare the total amount offered with the total amount recovered, as it can in a money claim, to determine whether a party has beaten its opponent’s offer. Instead the court must assess the comparative significance of the different elements of the offer, taking into account the various respects in which the offer provided for a better or worse outcome than the result at trial. Although each case will turn on its facts, the decision suggests that, where an injunction is sought, a Calderbank offer that does not offer an injunction or equivalent undertakings may be unlikely to provide costs protection if the injunction is ultimately granted at trial.

Alan Watts, Andrew Moir and Heather Newton (who acted for the successful respondent to the appeal) have published an article in the November edition of PLC Magazine which looks at the decision. You can download a PDF here: Recovering costs: Calderbank offers in non-money claims.

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Filed under Announcements, Injunctions, Settlement

Article published on recent themes in e-disclosure

Gregg Rowan, Celina McGregor, Johan Botha and Lyn Harris have published an article in the November edition of PLC Magazine which looks at the impact of the Jackson reforms on e-disclosure and how parties can seek to control the costs of the process. The article considers advances in review techniques, including predictive coding, as well as alternative ways of structuring the document review exercise. You can download a PDF of the article here: E-disclosure: The state of the art.

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Filed under Announcements, Disclosure

Compliance with court rules and orders post-Denton: where are we now?

In its high-profile Mitchell decision last November, the Court of Appeal introduced tough new guidance on the court’s approach to granting relief from sanctions for breach of a court rule or order under the new CPR 3.9 brought in by the Jackson reforms. The decision led to a flood of satellite litigation in which parties sought to take their opponents to task for procedural failings and, in many cases, harsh sanctions were imposed for relatively minor breaches. In an effort to address these difficulties, the Court of Appeal “clarified” the Mitchell guidance in its Denton decision in July this year, replacing it with a new, more flexible three-stage test and warning of heavy costs sanctions for those who try to take unreasonable tactical advantage of an opponent’s breach (see post).

Since Denton, the number of reported decisions dealing with contested applications for relief from sanctions has reduced dramatically. Although some of that drop may be explained by the long summer court vacation, it does seem that the messages delivered in Denton are having the desired effect, at least in making parties think twice before adopting an uncooperative stance. This post looks at some of the trends emerging from the decisions we have seen to date. Continue reading

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Filed under Interim applications

Litigation funders ordered to pay indemnity costs

A High Court decision handed down yesterday (23 October) has significant implications both for third parties who fund litigation on commercial terms and for defendants who face claims brought with the benefit of such funding: Excalibur Ventures LLC v Texas Keystone Inc and others [2014] EWHC 3436 (Comm).

The judgment suggests that, where a claim is unsuccessful, the funder will normally be liable for the defendant’s costs on the same basis as the funded party. In particular, where the claimant has been ordered to pay indemnity costs, for example because a claim was found to be speculative, the funder will normally be liable on the same basis – regardless of whether the funder bears any personal responsibility for the factors which led to the order for indemnity costs. This is good news for defendants.

The decision also illustrates that the court is entitled to look to the economic realities in exercising its discretion to make a non-party costs order. Accordingly, in appropriate circumstances, a costs order may be made not only against the funder named in the funding agreement but a third party that provided the funds and stood to benefit (here, the funder’s parent company).

There are however two bits of good news for funders.

  • First, the court applied the so-called Arkin cap to limit each funder’s costs liability to the amount it had contributed. In determining each funder’s contribution for these purposes, however, the court took into account amounts provided toward security for costs as well as payment of the claimant’s costs.
  • Secondly, it held that each funder should be liable only to the extent the defendants’ costs were incurred after the date of that funder’s contribution. If this approach is adopted in other cases, it may act as an important limit on a funder’s potential liability, particularly where funding is provided at a late stage.   

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Court of Appeal considers relevance of merits to application for pre-action disclosure

The Court of Appeal has confirmed that the court’s jurisdiction to order pre-action disclosure is not subject to an “arguability threshold”. The strength of the applicant’s case on the merits, and in particular whether the applicant is able to show that it has “some sort of prima facie case which is more than a merely speculative punt”, may however be an important factor when the court considers its discretion to make such an order: Jet Airways (India) Limited and Others v Barloworld Handling Limited [2014] EWCA Civ 1311.

In this case the Court of Appeal upheld an order for pre-action disclosure of documents relating to the maintenance of certain forklift trucks, where it was accepted that the fire which destroyed the applicant’s warehouse had started in those trucks. Whilst the decision does not alter the law, it provides a useful guide to the circumstances in which the court may order pre-action disclosure. Rachel Lidgate and James Leadill consider the decision further below. Continue reading

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Filed under Disclosure, Pre-action

Commercial Court orders appointment of receivers over foreign assets to assist enforcement

The Commercial Court has made an order for the appointment of receivers over the foreign assets of two foreign defendants, as well as ancillary orders it considered necessary to render that order effective, to aid enforcement of a London LCIA arbitration award: Cruz City 1 Mauritius Holdings v Unitech Limited & Ors [2014] EWHC 3131 (Comm). Under section 37 of the Senior Courts Act 1981, the High Court has the power to grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so.

Although the decision was made in the context of enforcing an arbitration award, it is clear that the same approach may in appropriate circumstances be taken to enforce an English court judgment. The court noted that, although there needs to be a sufficient connection with the English jurisdiction to justify the making of such an order and to satisfy the requirements of comity, the fact that the order is made with a view to the enforcement of an English judgment or award provides that connection. Click here to read more about the decision on our Arbitration Notes blog.

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Court of Appeal confirms test for fortification of cross-undertaking in damages

The Court of Appeal has upheld an order requiring the claimant to fortify its cross-undertaking in damages after it obtained a worldwide freezing order against the defendant: Energy Ventures Partners Ltd v Malabu Oil & Gas Ltd [2014] EWCA Civ 1295.

This is the first time that the appropriate test to be applied by the court when deciding whether to order fortification has been considered at appellate level. The Court of Appeal identified three requirements which a defendant must satisfy to be granted an order of fortification:

  1. the court must be able to make an intelligent estimate of the likely amount of any loss which might result from the injunction;
  2. the applicant must show a sufficient level of risk of loss to require fortification; and
  3. the court must be satisfied that the loss has been or is likely to be caused by the grant of the injunction.

The relevant standard is to show a good arguable case; the court will not require proof on the balance of probabilities.

Although this decision does not change the law, it provides helpful confirmation of the applicable test. A party thinking of applying for an interim order which will deprive the opponent of the use of significant sums of money should think carefully about the level of damage the opponent might suffer as a result, whether the applicant can show it would be able to pay that amount if called upon to do so, and accordingly whether fortification is likely to be required. Frances Furnivall considers the decision further below. Continue reading

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Filed under Injunctions