Managing risk: a disputes perspective

This recent Herbert Smith Freehills conference, which was attended by over 90 clients, explored some key legal and compliance risks facing major corporates. After opening remarks by head of dispute resolution for London and New York Mark Shillito, there were presentations on class actions, preserving corporate reputation, top risks to avoid in agreeing dispute resolution clauses, document risk and cyber security.

A summary of the conference is below. You can jump down to read more detail on any of the sessions by clicking on the relevant heading.

Class actions – an increasing risk for corporatesDamien Byrne Hill and Kim Dietzel outlined some of the risks posed by class actions, particularly in the securities and competition areas, and how these risks can be managed.

Preserving corporate reputationAlan Watts and Neil Blake spoke about some of the key threats to corporate reputation and how businesses can protect themselves.

How not to increase your risk – top points to avoid in agreeing dispute resolution clausesAdam Johnson, Chris Parker and Dominic Roughton explored some common pitfalls in agreeing dispute resolution clauses and how parties can best protect their interests in case a dispute arises.

Dealing with document riskJames Farrell and Kirsten Massey spoke about risk management issues in dealing with the huge volumes of documents businesses create and considered how businesses can preserve, collate and disclose relevant documents efficiently and cost-effectively when a dispute arises.

Crisis management and cyber security: Andrew Moir and Andrew Procter outlined how organisations should respond to the cyber threat, what to do when attacked and how best to limit the financial and regulatory impact of an attack.

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Our new global cross-border M&A report: litigation risk likely to increase

Litigation risk is a mounting problem for businesses pursuing cross-border M&A, with almost three-quarters of companies questioned for Herbert Smith Freehills’ new cross-border M&A report Beyond Borders warning that risk is set to increase.

Carried out in association with FT Remark, the research division of the FT, the report canvasses the opinions of 700 senior executives at major businesses around the globe on their experiences of cross-border M&A and their views on the outlook for M&A activity over the next three years. The original survey was conducted at the end of 2015 but, in order to capture any change in sentiment due to the market downturn in early 2016, the report also includes a second study of a significant cross section of the same respondents, providing a comprehensive review of the current M&A landscape.  

Some highlights from the report relating to legal and regulatory challenges include:

  • Almost three quarters (73%) of respondents expect overall litigation risk to increase in the years ahead. Seventeen percent of respondents said they were significantly less likely to pursue deals because of litigation risk.
  • Legal/regulatory factors have been the most challenging aspects of deals done by respondents in the past two years.
  • Anti-trust and labour and employment regulations were the most common causes of deal failure. Almost half of those surveyed are most concerned by anti-trust regulations when doing deals in North America. 
  • Environmental issues are also seen as a key regulatory deal-breaker.
  • Legal challenges are region specific. In EMEA, labour and employment regulation was the biggest issue for acquirers. In Asia-Pacific, almost a quarter stated that environmental regulations caused deal failure.

To download the full report please visit www.hsfbeyondborders.com.

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Court of Appeal finds Part 36 precludes split costs order unless full costs recovery would be unjust

The Court of Appeal has overturned an order depriving a claimant of part of her costs where she had beaten her own Part 36 offer: Webb v Liverpool Women's NHS Foundation Trust [2016] EWCA Civ 365.

Where a claimant obtains a judgment that is more advantageous than its own Part 36 offer, the court must (unless it considers it unjust to do so) award the claimant costs on an indemnity basis from the date on which the relevant offer period expired, together with certain other favourable consequences.

The present decision establishes, contrary to previous authority, that in such circumstances the claimant must be awarded all of its costs from that point onward, unless to do so would be unjust. In other words, an effective Part 36 offer curtails the court's discretion to deprive the successful claimant of part of its costs to reflect a lack of success on one or more issues.

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Article published: the private enforcement of competition law in the EU

Competition law private enforcement has been on the rise in the UK in recent years, with a significant increase in the number of antitrust claims being brought and the introduction of legislative measures at UK and EU level to encourage such litigation.

Stephen Wisking, Kim Dietzel and Molly Herron in our Competition Disputes team have published an overview of the competition private enforcement landscape in the EU as part of Law Business Research Ltd's multi-jurisdictional Private Competition Enforcement Review. Click here to access the EU article and here to download the entire publication.

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Court of Appeal confirms exclusion clauses should be construed narrowly if necessary to resolve ambiguity

In a recent decision on contractual interpretation relating to an exclusion clause, the Court of Appeal confirmed that, if necessary to resolve ambiguity, exclusion clauses should be narrowly construed: Nobahar-Cookson & Ors v The Hut Group Ltd [2016] EWCA Civ 128.

The court reached this conclusion on the basis that parties are not lightly to be taken to have intended to cut down the remedies the law provides for breach of contract, unless the contract contains clear words to that effect. This principle is of similar effect to the traditional rule that exclusion clauses should be construed "contra proferentem". However, the Court of Appeal in this case rejected that underlying rationale for the principle that exclusion clauses should be construed narrowly, saying it has nothing to do with the identification of the party putting forward the clause or seeking to rely upon it.

Joanne Keillor, a senior associate in our dispute team, outlines the decision below. For more information on how the courts interpret contracts, see our guide What does your contract mean? How the courts interpret contracts, which forms part of our series of contract disputes practical guides.

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Class actions are going global: Is your business ready?

Companies across the globe are increasingly facing the risk of class action litigation, with some finding themselves unprepared when a claim is lodged.

We have today launched a new Globalisation of Class Actions hub to keep Herbert Smith Freehills clients and contacts up-to-date on recent developments in class actions across the globe. The hub contains a facility to subscribe to receive further updates in relation to class actions.

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Singapore takes steps toward ratifying Hague Convention on Choice of Court Agreements

On 4 April 2016, Singapore tabled the Choice of Court Agreements Bill paving the way for ratification of the Hague Convention on Choice of Court Agreements.

At the moment the Convention, which aims to uphold jurisdiction clauses and make judgments obtained under those clauses easier to enforce, applies only as between Mexico and the EU member states (other than Denmark). Its ratification by Singapore would add greatly to its significance. Click here to read more about this development on our arbitration notes blog.

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Recent decisions highlight potential disadvantages of making offers outside Part 36

In two recent decisions, the courts have refused to treat offers which fell outside the Part 36 regime as favourably as a Part 36 offer. In Patience v Tanner [2016] EWCA Civ 158 the defendant's offer was not a Part 36 offer because it did not offer to pay the claimant's costs if the offer was accepted within the relevant offer period, as a Part 36 offer must do. In Burrell v Clifford [2016] EWHC 578 (Ch) the offer fell outside Part 36 because the amount offered in respect of costs was fixed at a specified sum, which is not permitted under Part 36. In both cases, the courts declined to award the costs consequences that almost certainly would have followed if the offers had been made under Part 36.

There may in some cases be good reasons for a defendant to make a "without prejudice save as to costs" or Calderbank offer, rather than an offer under Part 36 – perhaps because the defendant wants to make a costs-inclusive offer or to set a limit on the amount offered in respect of costs. And in some cases the courts may be prepared to give effect to such offers; in Walker Construction v Quayside Homes [2014] EWCA Civ 93, for example, the Court of Appeal gave effect to an offer which put forward a reasonable costs-inclusive figure (see post). In that case the Court of Appeal was critical of the first instance judge because he did not give appropriate consideration to the fact that the losing party could not realistically have made a Part 36 offer, in circumstances where the claim was exaggerated, because it would have been liable for the claimant's costs on acceptance.

However, as the recent cases demonstrate, each case will turn on its facts and the only sure way to obtain the costs advantages of Part 36 is to make an offer in strict compliance with its provisions and to leave the offer on the table until judgment is given.

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Oral discussions resulted in non-binding heads of terms, not legally binding agreement

The High Court has found that no legally binding agreement was entered into in the course of oral discussions relating to the supply of certain specialist services by the claimant to the defendant broker in the financial services industry: JAS Financial Products LLP v ICAP Plc [2016] EWHC 591 (Comm).

Although the decision is necessarily very fact-specific, it gives an interesting example of how the court looks at the question of whether a binding agreement has been reached. It underlines the importance of making clear when negotiating a contract, whether in writing or orally, whether there is an intention to create a binding agreement or whether the negotiations are subject to contract.

Chris Bushell and Maura McIntosh outline the decision in more detail below. For more information on how the courts determine whether a binding agreement has been reached, see our guide When do you have a binding contract? It may be more (or less) often than you think, which forms part of our series of contract disputes practical guides.

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Court of Appeal confirms claimants entitled to only £250 damages having successfully mitigated own loss

The Court of Appeal has upheld an award of only £250 in damages for the defendant solicitors' failure to identify a relevant planning restriction affecting a residential property purchased by the claimants, where that was the cost of the claimants' successful application to remove the restriction: Bacciottini & Anor v Gotelee and Goldsmith (A Firm) [2016] EWCA Civ 170.

The decision emphasises that the so-called "breach date rule" is just a starting point, and the assessment of damages in any given case is to be conducted realistically and not mechanistically. Where a claimant has successfully taken steps to mitigate its loss after the date of breach, so that no loss has in fact been suffered, that will be highly relevant.

Herbert Smith Freehills acted for the defendant, who was successful both at first instance and on appeal. Graeme Robertson, a senior associate in our disputes team who acted in the case, gives further details below.

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Filed under Remedies