Upcoming webinar – Compliance with court rules and orders post-Mitchell: Guidance for in-house lawyers

On Wednesday 16 July 12.45 – 1.45pm BST Chris Bushell, Gregg Rowan and Maura McIntosh will deliver a webinar for Herbert Smith Freehills clients and contacts looking at the court’s approach to dealing with procedural deadlines in light of the Mitchell guidance, as very recently clarified by the Court of Appeal in the triple appeal in Denton v TH White Ltd, Decadent Vapours Ltd v Bevan, Utilise TDS Ltd v Davies [2014] EWCA Civ 906 (see post).

In the webinar we will look at the risks arising from the court’s tougher approach to compliance following the Jackson reforms and offer practical suggestions for in-house lawyers seeking to navigate the new landscape. The issues we will explore include:

  • what to do if you need more time
  • what to do if you miss a deadline
  • what to do if your opponent is in breach

Continue reading

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Court of Appeal softens Mitchell guidance but insists no return to old culture of non-compliance

The Court of Appeal has today allowed appeals against a trio of judgments which it said did not correctly apply the well-known Mitchell guidance on relief from sanctions: Denton v TH White Ltd, Decadent Vapours Ltd v Bevan, Utilise TDS Ltd v Davies [2014] EWCA Civ 906.

In doing so it has taken the opportunity to clarify and amplify the Mitchell guidance (outlined here), which the court said remained “substantially sound” but had been misunderstood and was being misapplied by some courts. In particular, some judges were approaching applications for relief on the basis that, unless a default could be characterised as trivial or there was good reason for it, they were bound to refuse relief. That, the court said, was not the correct approach and was not what was said in Mitchell.

The court replaced the Mitchell guidance with a three-stage test, expressing the hope that this new guidance would avoid the need in future to resort to the earlier authorities (which have been numerous). In summary: (i) the court must identify and assess the “seriousness and significance” of the breach; (ii) the court must consider why the breach occurred; and (iii) the court must always have regard to all the circumstances of the case, a point that was being overlooked in some cases following Mitchell.

Interestingly, however, Lord Justice Jackson disagreed with Lord Dyson MR and Lord Justice Vos on the detail of this third aspect of the test. The latter considered that the two factors set out in CPR 3.9(1) (namely (a) the need for litigation to be conducted efficiently and at proportionate cost; and (b) the need to enforce compliance with rules, practice directions and orders) were to be given particular weight, whereas Lord Justice Jackson thought they were amongst the matters to be considered, no more no less.

The present judgment represents a clear softening of the approach adopted in many decisions following Mitchell, in which judges had taken an unduly draconian approach. The extent to which the court’s approach has been relaxed should not however be overstated. The decision emphasises that there is to be no return to the “traditional approach of giving pre-eminence to the need to decide the claim on the merits”. That approach should have disappeared, the court said, following the Woolf reforms and there was certainly no room for it in the post-Jackson era. Compliance, it seems, is still king.

However, at the same time as emphasising the need for strict compliance, the decision makes it clear that the courts are ready to penalise those who try to hold their opponents to what the court sees as an overly strict approach. Heavy costs sanctions will be imposed on those who unreasonably refuse to agree extensions of time or who unreasonably oppose applications for relief from sanctions. In this way the court hopes to put an end to the satellite litigation and non-cooperative approach that Mitchell has generated.

As a practical matter, in light of this decision litigating parties should continue to make every effort to comply with rules and court orders, as it is clear that the court will not allow a return to the old culture of non-compliance and therefore relief from sanctions may not be easy to come by. But parties should also think carefully before trying to make mileage out of an opponent’s breach; such an attempt could backfire in the form of heavy costs sanctions. Continue reading

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High Court decision shows some flexibility in test of “good reason” for change of expert

The High Court has granted permission to change experts where the claimants’ original expert was unwilling to continue, in circumstances where refusing permission was likely to leave the claimants with no effective evidence on a crucial issue: Adams v Allen & Overy [2013] EWHC 4735 (Ch).

As various decisions in recent years have shown, the courts are keen to stamp out the practice of “expert shopping” - where a party moves from one expert to another until a favourable opinion is found. As a result, the courts have found that permission for a change of expert will only be granted where a party has “good reason” for the change (see post) and, where permission is granted, the court will normally require disclosure of the previous expert’s report (see post). These principles apply even where the change of expert takes place before proceedings are commenced.

The present decision illustrates that, although a change of expert must be supported by good reason, the strength of reason required may vary to some extent depending on the consequences of refusing permission. The decision also suggests that, although the principles are not limited to personal injury litigation (where a number of the authorities have been established), there are features of personal injury litigation that mean a change of expert may require greater justification. The principles always have to be applied in the context of the case in question.

Nonetheless, given the risks, parties to litigation should never assume that permission will be granted lightly for a change of expert. Accordingly, before identifying an expert witness to the opponent or obtaining a report, parties would be well advised to test the expert’s views robustly and discuss any reasons why he or she might not ultimately be able to assist. Continue reading

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US Supreme Court provides new avenue for defendants to challenge securities class certification

The US Supreme Court has issued a unanimous decision reaffirming the “fraud-on-the-market” doctrine that has been a cornerstone of modern securities class action litigation for the past 25 years: Halliburton v. Erica P. John Fund, Inc. The doctrine introduces a presumption of reliance for securities fraud claims, so that individual plaintiffs do not have to prove that they relied on the alleged misrepresentation or omission. In Halliburton, however, the Court held that defendants may defeat the presumption at the class certification stage through proof that any alleged misrepresentation did not impact the price of the relevant securities, a holding that will provide significant benefit to defendants in securities cases.  To read our New York e-bulletin on the decision, click here.

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ADR Practical Guides launched

We have launched the first in our series of Herbert Smith Freehills ADR Practical Guides, designed to provide practical insights into various processes falling under the banner of ADR, with a particular focus on mediation.

The first guide, entitled “Common ADR processes – an overview“, provides a snapshot of some of the more commonly used ADR processes, highlighting the main advantages and disadvantages of each.

To be informed when new guides in the series are published, you can subscribe to our ADR blog “ADR Notes” (at www.hsfnotes.com/adr or under the “Our blogs” tab in the top menu). Or visit the blog any time for the latest updates on ADR topics internationally.

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Court of Appeal finds deliberate non-payment did not justify termination

In a recent decision, the Court of Appeal held that the deliberate withholding of payments due under a contract, in circumstances where the counterparty could expect to receive payment eventually, did not amount to a repudiatory breach so as to entitle the counterparty to terminate the contract: Valilas v Januzaj [2014] EWCA Civ 436.

The court found that the time of payment was not a strict condition of the contract, so that any breach automatically entitled the other party to terminate, but rather an “innominate term” so that the right to terminate depended on the nature of the breach. Here, in the view of the majority, the breach was not sufficiently serious.

The case illustrates the difficulty of establishing that a breach of an innominate term is repudiatory where performance is still expected to happen, albeit later than agreed, and the parties have not made the time for performance of the essence of the contract. It follows the earlier, comparable decision of the Court of Appeal in Telford Homes (Creekside) Limited v Ampurius NU Homes Holdings Limited [2013] EWCA Civ 577 (see post) that a delay in carrying out works was not repudiatory on the facts of that case.

In light of these authorities, commercial parties may wish to seek an express right to terminate where there is a delay in performance of particular obligations. Where there is no express right, parties should always consider carefully before seeking to terminate on grounds of delay.

Gregg Rowan and Daniel Woods consider the decision. Continue reading

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Court of Appeal to look again at Mitchell guidance on relief from sanctions

Over the past two days the Court of Appeal has heard three appeals against judgments seeking to apply the Mitchell guidance on the new test for relief from sanctions introduced as part of the Jackson reforms (see post). The appeals are particularly significant given that they were heard by Lord Dyson MR, who gave the judgment of the court in Mitchell, and Lord Justice Jackson, the author of the reforms, as well as Lord Justice Vos. Submissions were invited from the Law Society and Bar Council, who expressed grave concerns over the impact of Mitchell as applied by the courts in subsequent cases.

Based on comments made in the course of the hearing, it seems very likely that the court will take the opportunity to clarify and perhaps expand on the Mitchell guidance, though obviously that cannot be certain until judgment is handed down. It does seem clear from discussion at the hearing that the court agrees with the approach taken in Chartwell Estate Agents Limited v Fergies Properties SA [2014] EWCA Civ 506 (see post), namely that the Mitchell guidance does not mean relief will always be refused in cases where a breach is non-trivial and there was no good reason for it; CPR 3.9 still requires that all the circumstances must be taken into account so as to deal with the application justly. The court appeared to accept that Mitchell has not always been applied in that way by the lower courts, which may have taken an overly mechanistic approach in some cases. It also recognised the difficulties caused by a decrease in cooperation between litigating parties, who may stand to gain a huge prize from holding their opponents to account for failures in compliance.

The court is, however, clearly concerned at how to promote greater flexibility and discourage parties taking opportunistic points, without a return to the problem the rule change was meant to address in the first place: a culture of non-compliance where parties felt they could breach rules and court orders with impunity. Issues debated at the hearing include:

  • whether “triviality” is the appropriate threshold for the first stage of the Mitchell guidance, i.e. to characterise the sort of breach where relief will normally be granted without having to consider reasons for the breach, or whether it would be more appropriate to look at whether a breach is “material” or some other test;
  • whether the characterisation of the breach (as trivial or material or whatever term is used) should be affected by other failures to comply, or whether other failures should only come into play at the later stage of considering all the circumstances of the case;
  • whether the court’s approach should be affected by whether a breach is deliberate and/or an unless order is breached;
  • the significance of a lack of promptness in applying for relief from sanctions;
  • whether a finding that there is “good reason” for a breach should be restricted to where it arises from matters outside a party’s control;
  • how best to discourage parties taking opportunistic points, and whether costs sanctions are sufficient for that purpose.

In each of the appeals, it is argued that the court below failed properly to apply the Mitchell guidance. In two cases, the complaint is that relief was refused when it should have been granted: (i) in Decadent Vapours Ltd v Bevan (unreported, 18 February 2014) the claim was struck out for failure to pay a £45 court fee by the date set out in an unless order, in circumstances where the solicitor posted the cheque to the court on the final day and it was then lost either, it seems, in the post or by the court; (ii) in Utilise TDS Ltd v Davies [2014] EWHC 834 (Ch) the claimant was treated as having filed a costs budget limited to court fees due to having filed its budget 41 minutes late, combined with a separate breach of the court’s order. In the third, Denton v TH White Ltd (unreported, 23 December 2013), it is complained that the judge was unduly lenient in granting relief where six witness statements were served shortly before trial and the trial had to be vacated as a result. The Court of Appeal’s judgment is awaited.

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Court of Appeal finds proceedings for contempt may be brought against foreign director of corporate party

The Court of Appeal has held that proceedings for civil contempt may be brought against a director of a foreign company which is party to proceedings in England and Wales but has not complied with a court order in those proceedings, regardless of whether the director is otherwise subject to the court’s jurisdiction: Dar Al Arkan Real Estate Development Co & another v Majid Al-Sayed Bader Hashim Al Refai & others [2014] EWCA Civ 715.

This decision means that the court’s power to make a committal order against a director or officer of a party to proceedings under CPR 81 has extra-territorial effect - in contrast to the court’s power to order a corporate officer of a judgment debtor to provide information to aid enforcement under CPR 71, which it has been established does not have extra-territorial effect. In appropriate circumstances, therefore, commercial parties may seek to enforce a judgment or order by way of committal proceedings against an opponent’s directors or officers, regardless of where those individuals are domiciled or resident.

The decision is also of interest for the Court of Appeal’s view that article 22 of the Brussels Regulation (which provides for certain member states’ courts to have exclusive jurisdiction over certain matters, including proceedings concerned with the enforcement of judgments) gives the court jurisdiction over persons who are not domiciled within the EU. That is contrary to the widely criticised Court of Appeal decision in Choudhary v Bhatter [2009] EWCA Civ 1176. The recast Brussels Regulation, which will apply to proceedings commenced from 10 January 2015 (see post), will in any event clarify that article 22 applies whether or not the defendant is EU domiciled. Continue reading

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Two upcoming webinars: updates on jurisdiction and commercial contracts

Next week we will be delivering two update webinars for Herbert Smith Freehills clients and contacts, covering developments in jurisdiction and commercial contracts respectively.

In the jurisdiction update, on Tuesday 3 June Adam Johnson, Anna Pertoldi and Maura McIntosh will look at developments over the past year relating to jurisdiction under both the Brussels Regulation and under the common law, including:

  • Interpretation and effectiveness of jurisdiction clauses
  • Where a company is domiciled for the purposes of the Brussels Regulation
  • Jurisdiction in contract and tort claims
  • Jurisdiction in claims against co-defendants
  • The appropriate forum for resolution of the dispute
  • A reminder of the changes to the Brussels Regulation that will take effect from January 2015

In the commercial contracts update, on Wednesday 4 June James Baily, Robert Moore and Julie Farley will give an overview of a selection of key cases over the last 12 months and the lessons to be learnt from them for those involved in drafting, reviewing, negotiating or managing contracts. The topics will include contract construction, exclusion clauses, good faith provisions and penalty clauses. Continue reading

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Commercial Court considers when contracting party may have duty to make disagreement known

The Commercial Court has recently considered when a party may have a duty to correct a mistake or assumption by its counterparty under the principle of “estoppel by acquiescence”. This principle applies where one party acts on an assumption that is acquiesced in by the other. If a reasonable person would expect the acquiescing party, acting honestly and responsibly, to speak up, that party can be estopped from denying the assumed state of facts or law if it would be unjust to allow him to challenge the assumption.

In obiter remarks in Starbev GP Limited v Interbrew Central European Holdings BV [2014] EWHC 1311 (Comm), Blair J considered the scope of this so-called “duty to speak” and held that:

  • “acting honestly” for these purposes does not necessarily imply that the party against whom the estoppel is raised must be guilty of actual dishonesty, but there must at least be some impropriety – acting irresponsibly is not sufficient; and
  • the estoppel can arise not only where the party raising it is mistaken as to the true position, but also where that party is proceeding on the assumption that something is agreed or certain and the other knows that this is not the case.

Given the fairly high threshold for establishing an estoppel, contracting parties may wish to agree a contractual duty to speak in certain circumstances, or seek express confirmation of their understanding on any important matters.

On a separate issue, Blair J held that the words “the purpose” in a contractual provision should ordinarily be interpreted as referring to the dominant purpose rather than the sole purpose or one of a number of purposes.

Gregg Rowan and Kasim Khorasanee consider the decision below. Continue reading

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