Relief from sanctions: how far has the pendulum swung back?

In recent months we have seen a number of decisions which show a greater willingness to grant relief from sanctions for breaches of rules and court orders, compared to the more draconian judgments of the immediate post-Mitchell era, and which illustrate the risks for those who seek to hold their opponents to strict compliance – though there clearly remain risks for those who flout the rules as well. It seems there is also a continuing lack of certainty as to when relief from sanctions is in fact required.

In Michael Wilson & Partners Limited v Sinclair and others [2015] EWCA Civ 774 the Court of Appeal set aside its previous order refusing to lift a stay imposed for failure to provide security for costs and striking out the appeal. The court concluded that in making the previous order, the single lord justice had taken an overly draconian approach, based on his understanding of the principles laid down in Mitchell. It was not until the Court of Appeal’s restatement of the Mitchell guidance in Denton (see post) that it became clear that approach was mistaken.

In Viridor Waste Management v Veolia Environmental Services [2015] EWHC 2321 (Comm), following Denton, the Commercial Court not only granted relief from sanctions to a claimant who had served particulars of claim late as a result of an administrative error, in circumstances where a new claim would have been time barred, but penalised the defendant in indemnity costs for contesting the point. This contrasts sharply with a previous Commercial Court decision to strike out a claim for late service of particulars following the guidance in Mitchell (in Associated Electrical Industries Limited v Alstom UK [2014] EWHC 430 (Comm) – see post).

In Solland International Limited v Clifford Harris & Co [2015] EWHC 2018 (Ch) a Chancery Master held that relief from sanction was not required where claimants were 31 months late in filing their allocation questionnaire (now a directions questionnaire). There was no automatic sanction for the failure – the rules gave the court a complete discretion as to what, if any, sanction to apply – nor was there an implied sanction (as, for example, where a party fails to file a notice of appeal in time and therefore cannot pursue the appeal absent an extension). However, the claim was struck out as an abuse of process.

Each of these decisions is considered further below.

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CJEU decision demonstrates high hurdle for resisting recognition or enforcement of EU member state judgment on grounds of public policy

The difficulties of trying to resist recognition of a judgment from another EU member state court on the basis that it is manifestly contrary to public policy have been demonstrated in a recent decision of the Court of Justice of the EU: Diageo Brands BV v Simiramida Case C–681/13.

It is not enough to show that the decision is wrong, whether as a matter of national or EU law. There needs to have been a manifest breach of a rule of law regarded as essential, or a right recognised as fundamental, in the legal order in which enforcement is sought. Whilst the CJEU will not define the content of public policy of a member state, it will review the limits within which EU courts have recourse to the concept, so in effect will police its application where references are made to the CJEU.

On the facts of the case, an alleged error of the Bulgarian court in applying a trademark Directive did not meet this test.

The decision also makes clear that, save in exceptional circumstances, a party should exhaust all appeal avenues in the country giving judgment before seeking to rely on a breach of public policy to prevent enforcement. Continue reading

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Court of Appeal considers incorporation of terms from framework agreements

Framework agreements are commonly used to facilitate similar transactions on consistent terms. In a recent decision, the Court of Appeal considered the principles that apply where terms from a framework agreement are incorporated into a subsequent agreement. While all will depend on the specific provisions, even very wide terms of incorporation will not bring in terms of a framework agreement which are “flatly inconsistent” with the terms of the subsequent agreement: Northrop Grumman Mission Systems Europe Limited v BAE Systems (Al Diriyah C4I) Limited [2015] EWCA Civ 844.

On the facts of this case, the Court of Appeal found there was nothing inconsistent in incorporating a termination provision from a framework agreement into a subsequent agreement, which meant that BAE had been entitled to terminate early for convenience. The decision provides useful comments on the incorporation of terms from framework agreements, and highlights the need for care when incorporating terms from one document into another.

Tim Parkes and Meriel Buxton, a partner and senior associate in our dispute resolution team who acted in the case for BAE Systems, consider the decision further below. Continue reading

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Privy Council confirms availability of backward tracing

“Happy is he who can trace effects to their causes”, Virgil observed. Well, victims of fraud will certainly be happy with the Privy Council’s decision in The Federal Republic of Brazil v Durant International Corporation (Jersey) [2015] UKPC 35. In an appeal from the Court of Appeal of Jersey, the Board confirmed the availability of “backward tracing”. This enables claimant beneficiaries under a trust (including victims of a fraud relying on a constructive trust) to avoid the strict rules of equitable tracing by pointing to the substance of the overall transaction rather than its form.

While the Privy Council’s decision is not binding as a matter of English law, it is persuasive and provides an indication of how the Supreme Court may decide the issue in the future.  

Tom Wood, an associate in our corporate fraud and asset recovery team, considers the decision further below. Continue reading

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High Court provides guidance on “serious harm” requirement under Defamation Act 2013 and on procedural management of defamation claims

The Defamation Act 2013 introduced a statutory seriousness threshold that must be crossed before a statement can give rise to a claim: “[a] statement is not defamatory unless its publication has caused or is likely to cause serious harm to the reputation of the claimant” (section 1(1)). There has been uncertainty as to the proper construction and effect of the “serious harm” requirement since it came into force at the beginning of 2014. The High Court has recently clarified the position, in a judgment handed down on 30 July 2015: Lachaux v Independent Print Limited & Ors [2015] EWHC 2242 (QB).

The court held that section 1(1) requires a claimant to prove, on the balance of probabilities, that the statement he/she complains of has caused or will probably cause serious harm to his/her reputation. The common law presumption of damage to reputation will therefore no longer play any significant role. Further, if serious harm must be proven, the common law rule that the cause of action for libel and defamation is actionable per se on publication can no longer be regarded as good law. A cause of action may remain incomplete until serious harm is caused or becomes probable.

The court also gave guidance on a number of procedural issues in the management of defamation claims. In particular, where the “serious harm” requirement is contested, it should usually be tried as a preliminary issue alongside any issue as to the meaning of the words complained of. It will generally be unnecessary and undesirable for a defence to be pleaded before those preliminary issues are determined.

Neil Blake and Thomas Turner, a partner and associate in our media disputes team, consider the decision further below. Continue reading

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New “gateways” for serving proceedings on defendants out of the jurisdiction at common law

The circumstances in which English proceedings can be served on non-EU domiciled defendants who have no presence in England and Wales will be expanded significantly from 1 October, with the introduction of new “gateways” for service out of the jurisdiction at common law.

Probably the most important is the new general gateway which will enable claims against a defendant to be tried together in this jurisdiction where they are arise out of the same or closely connected facts, even if the further claim would not by itself fall within any gateway. There is also a new gateway for claims for breach of confidence or misuse of private information, where the relevant acts are committed and/or detriment is suffered within the jurisdiction. Various other gateways are expanded.

It is worth noting, however, that even where a claim falls within a relevant gateway the court will not grant permission to serve out unless it is satisfied that in all the circumstances England is clearly or distinctly the appropriate forum for resolution of the claim, and it is appropriate to exercise the court’s discretion to permit service out. Continue reading

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New specialist Financial List and pilot of Financial Markets Test Case Scheme

A new specialist Financial List is to be introduced in the High Court from 1 October. It will deal with financial markets claims for more than £50 million, or which require particular expertise in the financial markets, or which raise issues of general importance in the financial markets. Nominated Financial List judges will receive ongoing training relating to developments in the financial markets.

Each case will be assigned to a docketed judge, who will manage the case from cradle to grave. Parties will be able to commence proceedings in the Financial List in either the Commercial Court or the Chancery Division, but in either case it is broadly Commercial Court procedures that will apply.

There is also a new test case scheme, which will be piloted from 1 October for a period of two years. The scheme is intended to deal with claims that raise issues of general importance to the financial markets in relation to which immediately relevant authoritative English law guidance is needed. Claims can be brought, by mutual agreement, between market participants with opposing interests in relation to the relevant issue, but without requiring a present cause of action. The court must be satisfied that the arguments of all those with opposing interests will be properly put before the court, and for that purpose may allow relevant trade, professional or regulatory bodies, or affected third parties, to be joined as a party or otherwise represented. The general rule will be that each party bears its own costs.

The changes follow on from a consultation in May this year, but the relevant rules and practice directions have only recently been published.

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New pilots of streamlined procedures for claims in the main business courts

Two pilot schemes, the Shorter Trials Scheme and the Flexible Trials Scheme, will be introduced for claims commenced from 1 October and will run for a period of two years. The schemes allow for shorter and more flexible procedures for claims brought in the Rolls Building courts (including the Commercial Court, the Chancery Division and the Technology and Construction Court). The new Practice Direction governing the pilots (PD 51N) was published yesterday, following on from a consultation in May this year.

Shorter Trials Scheme

The Shorter Trials Scheme is intended to offer “dispute resolution on a commercial timescale”, with judgment obtained within about a year of issuing proceedings. It is aimed at cases which do not require extensive disclosure or extensive witness/expert evidence. Cases will be case managed by docketed judges and the maximum trial length will be four days.

The scheme sets out an abbreviated procedure, with disclosure limited to documents relied on plus particular documents or classes of documents requested by the parties, and applications generally dealt with on paper (save for the case management conference and pre-trial review). Costs budgeting will not apply to cases in the scheme, unless the parties agree that it should.

Claims can be issued in the Shorter Trials Scheme from the outset, or an application can be made to transfer a case into the scheme. Defendants who object to the use of the scheme can apply to transfer the case out of the scheme.

Flexible Trials Scheme

The Flexible Trials Scheme allows parties, by agreement, to adapt trial procedure (including disclosure, witness and expert evidence, and submissions at trial) to suit their particular case. Unlike the Shorter Trials Scheme, it appears that the Flexible Trials Scheme is wholly voluntary.

The scheme sets out a standard procedure which can be adopted in full or varied by agreement. Under the scheme, parties are encouraged to limit disclosure and oral evidence to the minimum necessary for the fair resolution of their disputes, with the aim of reducing costs, reducing the time required for trial and enabling earlier trial dates to be obtained.

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Court of Appeal grants anti-suit injunction restraining US proceedings brought against employee by US parent company under exclusive US jurisdiction agreement

The Court of Appeal has given a wide interpretation to the meaning of ’employer’ in the recast Brussels Regulation (No 1215/2012), holding that a company which provides benefits to employees of associated group companies may be regarded as an employer if it provides the benefits to reward and encourage the employees for the benefit of their employer and the group as a whole: James Petter v EMC Europe Limited and EMC Corporation [2015] EWCA Civ 828.

A US parent company providing stock options could therefore be sued as an ’employer’ in England by a former employee of its English subsidiary, and it could not rely on an exclusive jurisdiction agreement in favour of the Massachusetts courts. An anti-suit injunction was also granted, prohibiting the parent company continuing US proceedings brought against the employee.

The facts of the case are similar to those in Samengo-Turner v J & H Marsh and McLennan (Services) Ltd [2007 EWCA Civ 723 which has attracted substantial academic debate and criticism over the years. The Court of Appeal in the present case considered itself bound by Samengo-Turner to grant the anti-suit injunction.  Given a free hand, Lord Justices Moore-Bick and Sales would have reached the same conclusion as the court in Samengo-Turner. Lord Justice Vos, however, clearly had doubts over whether the case was correctly decided, so the controversy over that decision continues.

The Petter case is a reminder that the court will look at substance rather than form in deciding who is an employer under the Regulation and that a jurisdiction agreement, whether in favour of an EU or non-EU court, is unlikely to be effective from an employer’s perspective. The case also shows that, in order to protect an employee’s rights, an anti-suit injunction will ordinarily be granted restraining an employer from bringing or continuing proceedings outside the EU. That injunction may even extend to ordering the employer to withdraw motions filed in the overseas proceedings, at least where there is evidence that it is seeking to pre-empt the English proceedings (as confirmed in the supplementary judgment of the Court of Appeal in this case). Continue reading

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Contractual damages: Supreme Court confirms overriding compensatory principle in case of one-off sale

In a recent judgment, the Supreme Court has confirmed that the overriding compensatory principle applies in the case of an anticipatory breach of a contract for a one-off sale. This means that events occurring after the date of breach can be taken into account in considering whether the claimant has suffered any loss. In the present case, the court concluded that the buyer had suffered no loss because it was clear the seller would have been entitled to cancel the contract without penalty before the contractual date of performance: Bunge SA v Nidera BV [2015] UKSC 43.

The principle that events occurring after the date of breach are relevant to the assessment of loss, even if those events were not seen as inevitable or even likely at the date of breach, was established by the majority decision of the House of Lords in The Golden Victory [2007] 2 AC 535. The decision has sometimes been criticised as offending against the so-called “breach-date rule” (that, where there is an available market, contractual damages are assessed as at the date of breach) and leading to uncertainty. There has also been some doubt as to whether the principle would apply in the case of a one-off sale, as opposed to a contract requiring performance over a period of time.

The present decision gives strong support for the principle, describing it as “neither new nor heterodox”, and confirms that it applies equally where there is an anticipatory breach of a contract for a one-off sale.  Continue reading

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