Supreme Court decision highlights importance of contract terms in protecting principal from agent’s insolvency

The Supreme Court has held that a principal was entitled to recover payments collected by its agent on its behalf following the agent's insolvency: Bailey and another (Respondents) v Angove's PTY Limited (Appellant) [2016] UKSC 47.

The Supreme Court dismissed the principal's argument that the payments were held on a constructive trust, but found that the principal was nevertheless entitled to receive such sums as the agent's authority to collect payments had been revoked.

The decision demonstrates that the courts will be slow to find a constructive trust in favour of a principal whose agent has become insolvent. Whilst this could result in potentially harsh consequences for a principal in this situation, the Supreme Court referred to the important public policy of achieving "a pro rata distribution of the company's estate between its creditors". The judgment appears to indicate that a restrictive approach to constructive trusts will be adopted more generally, rejecting any suggestion that constructive trusts can be used simply to achieve "fairness" in the way that a remedial constructive trust might be in other jurisdictions.

The case also demonstrates the importance of ensuring that agency agreements are carefully drafted so that a principal's right to receive payment is protected in the event of its agent's insolvency. In this case the principal was able to recover the disputed payments because the Supreme Court concluded that the agent's authority to collect payments from customers could be, and had been, revoked. The decision suggests that the courts will be slow to find that an agent's authority is irrevocable – in general, there will need to be not only an (express or implied) agreement that the authority is irrevocable, but the authority must also have been given to secure an interest of the agent. However, principals should be careful to avoid terms which might suggest these criteria are met.

Gareth Keillor and Jade Hu, a senior associate and associate in our dispute resolution team, consider the decision further below.

Continue reading

Leave a Comment

Filed under Contract, Miscellaneous, Remedies

New rules for appeals to the Court of Appeal to apply from 3 October

The procedural rules governing appeals to the Court of Appeal are to be amended and restructured with effect from 3 October 2016.  Key changes include:

  • Removing the automatic right to an oral hearing when renewing an unsuccessful application for permission to appeal. Renewed applications will be determined on the documents unless the judge exceptionally directs an oral hearing.
  • Re-wording the test for permission on second appeals, to require "a real prospect of success" (in addition to an important point of principle or practice).
  • An overall restructuring of Part 52 of the Civil Procedure Rules, including re-ordering of existing provisions.

The amendments do not include raising the general threshold test for appeals from a "real" to a "substantial" prospect of success, as had recently been proposed, although it appears this change is still being considered.

Continue reading

Leave a Comment

Filed under Appeals, Courts

Court of Appeal finds subsequent events should not be taken into account to reduce defrauded claimant’s damages

The Court of Appeal has held that a defrauded purchaser's damages should not be reduced on the basis that, as matters transpired, the purchaser was not as badly off as a result of the fraud as might have been expected as at the transaction date: OMV Petrom SA v Glencore International AG [2016] EWCA Civ 778.

The decision sheds light on when subsequent events will be taken into account in determining the extent of the defrauded party's loss, and the flexible approach that can be taken in favour of defrauded claimants. In particular, it suggests that the courts will be unwilling to take subsequent events into account where that would give the fraudster a windfall.

Gareth Keillor and Tom Brown, a senior associate and associate in our dispute resolution team, consider the decision below.

Continue reading

Leave a Comment

Filed under Fraud, Remedies

Judgment handed down in long-running class action regarding the Ocensa pipeline in Colombia

In a recent decision, the High Court has rejected claims by a group of Colombian Farmers in relation to the construction of the Ocensa pipeline in Colombia during the mid-1990s: Pedro Emiro Florez Arroyo and others v Equion Energia Limited (formerly known as BP Exploration Company (Colombia) Limited) [2016] EWHC 1699 (TCC).

The litigation was quite unique in a number of respects – with extensive witness and expert evidence, including evidence given by video link from Colombia, a trial lasting 62 days back in late 2014/early 2015 and a 648 page judgment following more than a year later. The case is worthy of note as it is one of a number of 'class action tourism' claims which are currently being pursued in the English courts against large mining and energy companies. There are also a number of practice points arising from the judgment.

John Ogilvie and Damian Grave, partners, Joanne Keillor, senior associate, and Mitchell Beebe, associate, in our disputes team consider the decision below.

Continue reading

Leave a Comment

Filed under Collective actions

Payments to witnesses contingent on outcome of litigation were contrary to public policy but did not result in strike-out

The High Court has found that agreements entered into by a successful claimant to make payments to witnesses contingent on the success of the litigation were contrary to public policy and should not have been made. However, in the circumstances of this case, it was not appropriate to strike out the claim or to order a retrial: Energysolutions EU Ltd v Nuclear Decommissioning Authority [2016] EWHC 1988 (TCC).

The issue arose in a most unusual way, with the claimant's solicitors asking the court to delay handing down a draft judgment in their client's favour, as they had (belatedly) been notified of the agreements. The defendant applied for the claims to be dismissed or struck out, or alternatively for a retrial to be ordered.

Although, in the particular circumstances of the case, the court concluded that the draft judgment should be handed down and the defendant's application dismissed, the decision should not in any way be taken to legitimise agreements of this nature. At the very least (as here) they will affect the weight given to the evidence of the relevant witnesses. In an extreme case, where the court finds that there is dishonest or fraudulent conduct, the claim may be struck out.

Michael Mendelblat, a professional support lawyer in our construction team, discusses the case further below.

Continue reading

Leave a Comment

Filed under Evidence

Final report in Lord Justice Briggs’s Civil Courts Structure Review

Lord Justice Briggs's final report in his review of the future of the civil courts structure was published last week. Key recommendations relevant to commercial parties include:

  • establishing an Online Court, initially for money claims up to £25,000
  • a substantial increase in the minimum claim value threshold for commencing claims in the High Court – initially to £250,000 and subsequently to £500,000
  • transferring some of judges' more routine and non-contentious work to case officers, under judicial training and supervision
  • there should not be a move to a unified civil court (ie combining the High Court and County Court) but the time has come for a debate about the future of the High Court Divisions (beyond the scope of this review)
  • the County Court should become the single default court for the enforcement of judgments and orders of all the civil courts, with enforcement procedures to be unified and digitised

Continue reading

Leave a Comment

Filed under Courts

Court of Appeal clarifies when court will allow inspection of documents mentioned in witness statement or statement of case

In a recent decision, the Court of Appeal has clarified the approach to be taken in determining whether the court should allow inspection of a document "mentioned" in a witness statement or statement of case: Blue Holdings (1) PTE Ltd & another v National Crime Agency [2016] EWCA Civ 760

The decision confirms that there is no unqualified right to inspect such a document; inspection may be resisted for example on grounds of proportionality or legal professional privilege, though the burden is on the party resisting inspection to displace the general rule that a "mentioned" document may be inspected. Confidentiality is also a relevant factor, though it will not be determinative.

In exercising its discretion, the court will need to find a just balance between the competing interests of the party seeking to inspect and the party seeking to maintain confidentiality. In striking that balance, the court may properly have regard to the question of whether inspection is necessary for the fair disposal of the action, but there is no standalone "necessity" test which needs to be satisfied before allowing inspection.

The practical message for parties who wish to maintain confidentiality in particular documents is, so far as possible, to avoid mentioning them in witness statements or statements of case. If confidential documents are mentioned, it will be for the court to balance the competing interests, and it may be difficult to predict where that balance will be struck.

Elizabeth Allsop, a senior associate in our disputes team, considers the decision further below.

Continue reading

Leave a Comment

Filed under Confidentiality, Disclosure, Evidence, Statements of case

Civil Justice Council report published today on concurrent expert evidence including “hot-tubbing”

The Civil Justice Council has today published a report on Concurrent Expert Evidence & ‘Hot-Tubbing’ in English Litigation since the ‘Jackson Reforms’. The report was produced by a working group chaired by Professor Rachael Mulheron of Queen Mary University of London, with Maura McIntosh of Herbert Smith Freehills as deputy chair.

The report puts forward various recommendations aimed at enhancing familiarity with techniques for concurrent expert evidence, including hot-tubbing, and encouraging its use in appropriate cases. The recommendations include proposed revisions to the relevant Practice Direction, a new guidance note for judges and practitioners, and an information note for expert witnesses.

Maura McIntosh has published a post on Practical Law’s Dispute Resolution blog which outlines some key aspects of the report and the recommendations. Click here to read the post (or here for the Practical Law Dispute Resolution blog homepage).

Leave a Comment

Filed under Announcements, Experts

Recent decision illustrates dangers of not complying with pre-action protocols

In a recent decision, the County Court ordered a defendant to pay the costs of a claimant who discontinued her claim, reversing the usual costs position. This was on the basis that the defendant had failed to comply with the pre-action protocol for personal injury claims and that, had it done so, the claim would not have proceeded further: Nicole Chapman v Tameside Hospital NHS Foundation Trust (unreported, 15 June 2016)

It may be a rare commercial case in which proceedings are discontinued because of documents coming to light after proceedings are commenced which should have been disclosed pre-action. Nonetheless, this judgment acts as a reminder that the courts may be prepared to penalise non-compliance with pre-action protocols with hefty costs consequences in an appropriate case. Kevin Kilgour outlines the decision below.

Continue reading

Leave a Comment

Filed under Costs, Pre-action

Better rights against insurers of ‘insolvent’ entities – finally here

The Third Parties (Rights against Insurers) Act 2010 will come into force on 1 August 2016, replacing the current legislation (which dates from 1930) and providing for a less complex procedure for a third party claimant to claim directly against the insurer of an insolvent individual or corporate defendant. The new law will improve the position of third parties with claims against insolvent assureds. For more information see our insurance and reinsurance disputes team's e-bulletin.

Leave a Comment

Filed under Miscellaneous