Managing risk: A disputes perspective (2018)

Herbert Smith Freehills recently held its annual disputes client conference exploring some key legal and compliance risks facing major corporates. The event was attended by close to 100 clients. After opening remarks by Damien Byrne Hill, head of dispute resolution for the UK and US, there were presentations on GDPR, emerging technologies, cyber insurance, reputation management, arbitration, sanctions for third party enablers of tax evasion and avoidance, dealing with document requests, and historic investigations.

A summary of the conference is below – if reading the full version of this post, you can jump down to read more detail on any of the sessions by clicking on the relevant heading.

GDPR – is your organisation ready? Miriam Everett outlined the enhanced requirements under the EU General Data Protection Regulation (GDPR) and looked at what businesses should be doing to make sure they are compliant, as well as how the new rules could affect disputes.

Emerging technology risks – what may go wrong in the future? Andrew Moir considered the risks facing organisations from new technologies, focusing in particular on the examples of artificial intelligence, data analytics and block chain, and considered how businesses should respond to these risks.

Cyber insurance – how to protect your organisation: Greig Anderson considered practical steps organisations can take to understand what cover they need for cyber incidents, identify any cover they already have in their existing insurance programme, and address any gaps.

Reputation management in the online world: Joel Smith and Neil Blake looked at how to approach reputational issues in the online world, including practical tips for mitigating risk.

Options to arbitrate – addressing enforcement risk: Nick Peacock looked at the extent to which Brexit might affect the enforceability of English judgments around the EU, and looked at some issues relating to arbitration for businesses considering that option.

Tax evasion and avoidance – sanctions for third parties: Heather Gething outlined the new regimes imposing sanctions for third parties who assist others to evade or avoid tax, and considered how businesses can protect themselves.

Dealing with document requests – addressing the challenges: Julian Copeman looked at the challenges of dealing with the huge numbers of documents generated by any modern business, and considered the extent to which recent proposals to reform the court rules on disclosure are likely to reduce the burden.

Investigations into historic allegations: Brian Spiro looked at some of the challenges that arise in investigating historic allegations, including when and how to report to authorities, and how to protect whistle-blowers. Continue reading

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Commercial Court clarifies scope of standard undertaking not to enforce worldwide freezing order abroad without court’s permission

The Commercial Court has recently considered the scope of the standard undertaking provided in connection with worldwide freezing orders, which requires the applicant to seek the court’s permission before seeking to enforce the order outside England and Wales, or seeking an order of a “similar nature”: Akcine Bendrove Bankas Snoras v Antonov [2018] EWHC 887 (Comm).

The court held that the claimant bank was not in breach of its undertaking by obtaining orders in Lithuania and Switzerland seizing certain of the respondent’s assets, as the foreign courts had independent jurisdiction to make the orders which did not derive from the making of the worldwide freezing order in England.

This decision provides welcome clarification as to the scope of the standard undertaking, and should provide some comfort to those seeking to secure assets abroad based on a separate and independent right or jurisdiction, where they have also obtained an English freezing order.

The decision also suggests that, where there has been a breach of the undertaking, the court may be inclined to grant retrospective permission and continue the freezing order unless the respondent can present clear evidence that the foreign order has had an oppressive or prejudicial impact.

Gareth Keillor and Rosanna Pinker in our disputes team consider the decision further below. Continue reading

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Court of Appeal decision suggests courts will be slow to find contract terms void for uncertainty

The Court of Appeal has held that a provision in a franchise contract that allowed for the clawback of commission in certain circumstances was sufficiently certain to be enforceable even though it did not specify exactly how the amount of the clawback was to be calculated. The judge had been correct to find that the parties’ intention was for the clawback to be calculated on a straight-line basis over the relevant period: Openwork Limited v Forte [2018] EWCA Civ 783

The decision emphasises that the court will strive to give meaning to a contract term if at all possible. Parties should not accept the inclusion of vague or uncertain terms on the assumption that they will not be capable of enforcement in practice. If the terms are not clear, the court may try to determine their meaning, as it would be understood by a reasonable third party. This may have unintended consequences.

Further guidance on how the courts approach contract issues including contract formation and interpretation can be found in our contract disputes practical guides, available here.

Gary Horlock, an associate in our dispute resolution team, considers the decision further below. Continue reading

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Dispute resolution clauses: Putting yourself in the best position

All too often, dispute resolution clauses may be treated as part of the boilerplate: the usual wording thrown in, with perhaps little thought for the particular circumstances.

But the question of how a dispute will be resolved – whether by litigation or arbitration, where and under what law – may make all the difference to whether or not you will be able to enforce your rights under the contract. So it is important to think about these matters at the outset. Once a dispute has arisen, it will generally be too late.

In this tenth of our series of contract disputes practical guides, Adam Johnson QC, Alexander Oddy and Nick Peacock consider choice of law and jurisdiction/arbitration clauses, as well as clauses providing for mediation or other forms of ADR, and provide some practical tips on their use. You can click here to download the PDF guide.

Clients and contacts of the firm can also register to access the archived version of our hour-long webinar exploring these issues by contacting Jane Webber. Or if you would prefer a shorter version focusing on key practical tips, Nick has also presented this 15 minute podcast. Continue reading

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Filed under ADR, Choice of law, Contract, Jurisdiction

Supreme Court decision clarifies basis for the award of Wrotham Park damages

In a recent decision, the Supreme Court overturned a Court of Appeal judgment which potentially expanded the availability of “Wrotham Park” or negotiating damages, and signalled a return to more orthodox reasoning in relation to the award of damages for breach of contract and the quantification of economic loss: Morris-Garner and another v One Step (Support) Ltd [2018] UKSC 20.

The key issue before the Supreme Court was: where a party is in breach of contract, in what circumstances, if any, will the counterparty be entitled to an award of damages assessed by reference to a hypothetical negotiation between the parties, for such amount as the claimant might reasonably have demanded to release the defendant from its obligations?

The Supreme Court rejected the idea that negotiating damages would be available whenever the court considers them to be the “just” response. It held that such an award would not be justified by any of: the deliberate nature of the breach of contract; the difficulty of establishing precisely the resulting loss; or the claimant’s interest in preventing the defendants profiting from the activities that had put them in breach. The Supreme Court stressed that damages for breach of contract are not a matter of discretion; they are claimed as of right, and they are awarded or refused on the basis of legal principle.

The court held that negotiating damages can be awarded for breach of contract where it would be appropriate to measure the claimant’s loss by reference to the economic value of the contractual right that has been breached. The question is whether a breach of the contractual right results in an identifiable loss equivalent to the economic value of the right. That may be the position where the breach results in the loss of a valuable asset created or protected by the relevant right (for example, in relation to the breach of a restrictive covenant over land). However, it is not an approach that is applicable to most contractual disputes, even if it is difficult precisely to quantify the loss incurred.

James Baily, a partner, and Ramyaa Veerabathran, an associate in our dispute resolution team, consider the decision further below. Continue reading

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Two recent decisions consider application of principle of limited waiver of privilege

In two recent decisions, the High Court has considered the extent to which a party can provide privileged documents to a third party for a particular purpose without resulting in a wider waiver of privilege. The decisions illustrate the importance, in these circumstances, of making clear any intended limits on the use of the privileged material.

In FM Capital Partners Ltd v Marino & ors [2017] EWHC 3700 (Comm) the court found that a company had waived litigation privilege in an investigation report because, before the proceedings had commenced, it had provided a copy of the report to one of the defendants (its former CEO) for the purposes of a disciplinary hearing against him. The company had not imposed an express restriction on the use of the report. In the absence of such a restriction, and given that the report was prepared for the purposes of potential litigation including litigation against the defendant, the natural inference was that the defendant would be free to use the report for that litigation.

In Belhaj v Director of Public Prosecutions [2018] EWHC 513 (Admin), in contrast, the government had shared its privileged advice with the police, the Crown Prosecution Service (CPS) and Director for Public Prosecutions (DPP) subject to a clear express limitation on its use. In those circumstances, the court found privilege had not been waived for the purposes of a subsequent judicial review application. It rejected the claimants’ argument that the judicial review was so closely linked to the review for which the advice had been shared that there was an inferred waiver for the purposes of the judicial review. The contrary conclusion would mean that, in almost any case where one government department waived privilege to assist another, privilege might be lost for the purpose of a subsequent judicial review, and this would be strongly against the public interest.

The FM Capital decision also contains interesting comments on the dominant purpose test for litigation privilege where a company is facing serious potential claims against it as well as dealing with disciplinary proceedings against an employee. Although each case will turn on its facts, the decision suggests that a court might readily accept that the company’s greater concern will be preparing for the litigation, rather than disciplining its own employee, potentially making it easier to establish a claim for litigation privilege in these circumstances.  Continue reading

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Upcoming webinar – Litigation update

On Wednesday 18 April (12.30 – 1.30pm BST), Anna Pertoldi, Maura McIntosh and Jan O’Neill will deliver a webinar for Herbert Smith Freehills clients and contacts looking at developments in commercial litigation since our last update webinar in October last year. The webinar will focus on lessons learned from decisions in areas such as privilege, disclosure, relief from sanctions, and costs and funding.

The webinar is part of our series of HSF webinars, which are designed to update clients and contacts on the latest developments without having to leave their desks. The webinars can be accessed “live”, with a facility to send in questions by e-mail, or can be downloaded as podcasts after the event. If you would like to register for a webinar, or to obtain a link to the archived version, please contact Jane Webber.

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A reminder that inadvertent disclosure of privileged material will not engage the cherry picking rule

The Administrative Court has held that a defendant did not lose privilege in unredacted passages of documents that had been provided for inspection, as it was obvious that the passages had been inadvertently disclosed, and that there was no question of a wider waiver of privilege as the material had not been deliberately deployed: Belhaj v Director of Public Prosecutions [2018] EWHC 514 (Admin).

Where a party to litigation deploys privileged material to support its case on the merits, the “cherry picking” rule (or the principle of collateral waiver) may result in a wider waiver than intended; the court may require disclosure of further privileged material to avoid unfairness or misunderstanding of the material disclosed.

The present decision is a reminder that the “cherry picking” rule has no part to play outside the context of a deliberate deployment of privileged material. Where privileged material is inadvertently provided for inspection, and the mistake is not obvious, this is likely to result in a loss of privilege in respect of that material. However, the loss of privilege will be limited to the material disclosed and will not extend to other privileged material which has not been provided. Continue reading

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Notable increase in interim privacy injunctions sought and obtained in the second half of 2017

In March 2018, the Ministry of Justice published quarterly provisional civil justice statistics for England and Wales.

These statistics include interesting details regarding the increase in court applications for privacy injunctions in 2017. The guidance to the Civil Justice Statistics Quarterly bulletin published in December 2017 notes that the statistics provided in respect of privacy injunctions relate to “applications concerned with data protection and rights to respect for private and family life protected by Article 8 of the European Convention on Human Rights (ECHR), whether the injunction is sought by an individual, a public authority, or a company.” It is important to note that the statistics only relate to civil proceedings in the High Court at the Royal Courts of Justice and the Court of Appeal.

According to the statistics, over the course of 2017, 14 applications were made for new interim privacy injunctions, over double the number that were made in 2016. Of the 8 new interim privacy injunction applications made in the last six months of 2017, all 8 were granted (a significantly higher success rate than in the first six months of the year).

The figures also show a steady increase in the number of applications for privacy injunctions made from 2015 onwards after the number of such applications being brought fell dramatically in 2014. While the previous decline may be attributed to a number of factors (including the growth of social media platforms over this period and the use of those platforms to circumvent such injunctions), the increasing number of applications made for privacy injunctions in 2017 together with the significant success rate that parties achieved pursuing such applications in the last six months of 2017, suggest that the privacy injunction constitutes a valuable and viable option available to parties in their attempts to protect their Article 8 rights.

For more information contact Neil Blake or Christopher Cox in our disputes team. Continue reading

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Filed under Confidentiality, Injunctions

Supreme Court finds contempt of court constitutes unlawful means for the tort of conspiracy

The Supreme Court has held that contempt of court can constitute unlawful means for the purpose of the tort of conspiracy: JSC BTA Bank v Khrapunov [2018] UKSC 19.

The decision is significant as it confirms that third parties may find themselves exposed to litigation and subject to damages if they conspire in the commission of a contempt of court. The Supreme Court made a number of interesting observations on the scope of the economic torts more generally and, on a matter of wider interest, also hinted that the law might develop to allow litigants to recover damages for contempt of court in the absence of a conspiracy.

The latter point could have potentially far-reaching practical consequences. Until now, contempt of court has generally been regarded as a matter between the wrongdoer and the court, rather than a wrong actionable by private parties who have suffered loss as a result. This decision leaves the door open for a litigant to argue that civil damages are recoverable for an opponent’s contempt of court.

Gary Milner-Moore and Kate Emanuel from our disputes team consider the conspiracy aspect of the decision further below.  The decision is also of interest for its consideration of the issue of jurisdiction, which is considered in a separate blog post here. Continue reading

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