“Opening shot” protected by without prejudice privilege

The High Court has held that a draft Complaint in New York proceedings sent to the other party marked as a “preliminary draft” and “for settlement purposes only” was protected by without prejudice privilege in proceedings before the English court seeking an anti-suit injunction: Rochester Resources Limited v Lebedev [2014] EWHC 2185 (Comm).

Difficulties arise in practice in deciding whether an opening shot in proposed negotiations will be protected by without prejudice privilege. While it will always depend on the substance of the communication and the facts of the case, a letter before action with a general expression of willingness to negotiate is unlikely to be protected; more is required. Here the court held that sending the draft Complaint fell within the scope of the privilege as it was part of negotiations genuinely aimed at settlement.

Given the uncertainties, parties should seek to agree that communications will be on a without prejudice basis before sharing any substantive materials such as a draft claim. While this does not prevent a court from considering the status of the documents, it is unlikely to look behind the parties’ agreement. If this is not possible, then clear labelling of material, whilst still not determinative, may assist. Continue reading

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Court of Appeal confirms contractual rules apply by analogy to assessment of compensation under cross-undertaking in damages

A recent Court of Appeal decision has confirmed that the usual contractual rules, including as to remoteness of damage, apply by analogy to the assessment of compensation under a cross-undertaking in damages in a freezing order. However, there is also room for exceptions, given that there is in fact no contract: Hone and others v Abbey Forwarding Ltd and another [2014] EWCA Civ 711.

The judgment provides helpful clarification in the light of a number of recent first instance decisions which had cast doubt on the application of contractual principles to the assessment of compensation in cases of this sort.

Adam Johnson and Sophie Jones from our Advocacy Group consider the decision below. Continue reading

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High Court finds agreement to engage in time limited “friendly discussions” is enforceable

The Commercial Court has held that a dispute resolution clause requiring the parties to seek to resolve a dispute by friendly discussions constituted an enforceable condition precedent to arbitration: Emirates Trading Agency LLC v Prime Mineral Exports Private Limited [2014] EWHC 2104 (Comm).

Although decided in the context of an arbitration clause, it appears from the judgment that the same conclusion would have been reached if the agreement had required such discussions before issuing court proceedings. If this approach is followed in other cases, it will represent a stark change in the English courts’ position on the enforceability of agreements to negotiate in dispute resolution clauses. Parties entering into such agreements should be aware that they may be held to them if a dispute arises.

The decision is also of interest for the court’s conclusion that the obligation to seek to resolve disputes by friendly discussions “must import an obligation to seek to do so in good faith”, referring to Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB) in which the court implied a duty of good faith into a distribution agreement (see our post on that decision).

For more on the Emirates decision see this post on our arbitration notes blog.

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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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