The Court of Appeal has held that filing a further acknowledgement of service following an unsuccessful jurisdiction challenge amounts to submission to the English jurisdiction. This is so even if the defendant is appealing against the jurisdiction judgment: Deutsche Bank AG London Branch v Petromena ASA  EWCA Civ 226.
To avoid judgment in default being entered in these circumstances, a defendant should agree or apply for an extension of time for filing the acknowledgement until after the appeal has been determined.
If a further acknowledgement of service is inadvertently filed, an immediate application should be made, supported by evidence, for permission to withdraw it.
If the defendant has submitted to the jurisdiction, the present decision suggests that this may not prevent him from applying for a stay of the English proceedings on the basis that there are parallel proceedings pending in another EU or Lugano Convention country. There are however contradictory authorities on this point, so the safer course would be to apply for a stay without taking any step that amounts to submission to the jurisdiction and within the relevant procedural time limit for challenging jurisdiction.
Within the boardroom, the management of information is of crucial importance, particularly where directors are appointed by a single shareholder under the company’s articles of association or a relevant shareholders’ agreement. Recent English cases demonstrate that shareholders and companies are increasingly likely to bring cases arising out of the misuse of corporate information and the obligation of directors to disclose information to their companies, particularly in closely-held companies.
James Norris-Jones and Mark Bardell, partners in our dispute resolution and corporate teams respectively, and Andrew Cooke, an associate in our dispute resolution team, have published an article in the April – June 2015 edition of Corporate Disputes magazine which considers these issues. Click here to download a PDF of the article: “Directors and Corporate Information“.
The Consumer Rights Act received Royal Assent yesterday, 26 March, and is expected to come into force on 1 October 2015. The Act will make it easier for private parties, in particular SMEs and consumers, to bring damages actions for breach of competition law.
The Act introduces a new “opt-out” collective action in the Competition Appeal Tribunal (CAT), so that claims can be brought on behalf of a defined group without the need to identify all the individual claimants. The opt-out aspect will only apply to UK domiciled claimants, but non-UK claimants will be able to opt in to the claim if they wish to participate.
The regime incorporates a number of safeguards in order to avoid frivolous or unmeritorious litigation, including a preliminary merits test and a requirement for the CAT to consider whether the claim should proceed on an opt-in or opt-out basis. There will be no treble damages (as is the case in the US) and any unclaimed damages will have to be paid to the charity prescribed by order by the Lord Chancellor.
The Act also introduces a new opt-out collective settlement regime to allow businesses to settle cases quickly and easily, as well as voluntary redress schemes under which companies found to have infringed UK or EU competition rules voluntarily agree to pay compensation to those harmed by their infringement. For more information please see our competition, regulation and trade e-bulletin here.
The Commercial Court has held that a shareholders’ agreement did not contain an implied term which would have rendered the company’s controller personally liable for failing to ensure the company’s compliance with its obligations under that agreement: Liberty Investing Limited v Karl Gordon Sydow & Others  EWHC 608 (Comm).
This case illustrates the difficulty of seeking to go behind the allocation of responsibility agreed in a contract, in an attempt to make a company’s controller personally liable for obligations taken on by the company. While an individual may, in practice, control the activities of a corporate entity, the court will be reluctant to impose a personal obligation to procure the company’s compliance without an express term to that effect.
It is also a reminder of the court’s general reluctance to imply obligations into an agreement, particularly where the parties have expressed their bargain in a detailed written contract prepared with the assistance of highly skilled legal advisors. However, each case will turn on its facts and there are of course circumstances in which the courts have been willing to imply contract terms.
The decision is also of interest for the court’s comment that raising arguments as to the need to consider the factual matrix is not a “get out of jail free card” for a party that wants to defer consideration of a question of construction until trial; it is often the case, the court said, that questions of construction can properly and appropriately be decided on a summary basis.
Alex Sharples, an associate in our dispute resolution team, considers the decision further below. Continue reading
The High Court has ordered a party to litigation to allow the inspection of an attachment to a Deferred Prosecution Agreement entered into with the US Department of Justice in relation to the alleged manipulation of LIBOR rates, where the attachment was confidential and had been placed under seal by a US court: Property Alliance Group Ltd v Royal Bank of Scotland Plc  EWHC 321 (Ch).
The decision is a reminder that neither confidentiality nor the risk of prosecution under foreign law will, necessarily, prevent the court ordering disclosure or inspection of a document in English proceedings. However:
- The court will take into account the risk of prosecution in considering whether to make such an order. Here the court concluded that the risk was low and it was appropriate to make the order.
- Where a document is confidential, the court may make case management orders to protect that confidentiality. Here the court made a further special order that, until further order, neither party could refer to the document in open court without permission being obtained in advance.
- The court may defer its order from taking immediate effect. Here the court set a four-week period in order to give the bank the ability to take any further steps it wished to before the US courts.
Heather Rankin, an associate in our dispute resolution team, considers the decision further below. Continue reading
Very often, when seeking to obtain a freezing injunction, the true extent of the defendant’s assets is unclear. Complex and opaque offshore corporate or trust structures may mask the true ownership of assets. A mere connection between a defendant and assets held by third parties will not be sufficient to freeze those assets: the claimant will need to show a good reason to suppose those assets would be available to satisfy any judgment, which can be a difficult threshold to meet. The risk, however, is that by the time the position has been clarified, the assets may have been dissipated. What can the court do in such situations?
A recent Court of Appeal decision clarifies the court’s jurisdiction to make wide-ranging ancillary disclosure orders in support of freezing injunctions: JSC Mezhdunarodniy Promyshlenniy Bank & Anor v Pugachev  EWCA Civ 139. The appeal concerned a defendant’s interests in several discretionary trusts. The defendant’s interests in the trusts, but not the trust assets themselves, were subject to the freezing order. The Court of Appeal upheld the first instance decision ordering the defendant to provide detailed information about the trusts, including any trust documents within his control. The threshold for obtaining the disclosure order was lower than the threshold required to freeze the trust assets; all that was required was credible material showing that an application might in due course be made to freeze the trust assets.
The judgment provides welcome confirmation of the English court’s powers to enable the effective policing of freezing injunctions. Disclosure orders may enable claimants to clarify the status of assets which appear closely connected to a defendant and, if appropriate, consider taking further steps to safeguard those assets (e.g. by applying to extend the terms of a freezing order, or applying for Chabra relief against third parties, such as trustees). Tom Wood, an associate in our dispute resolution team, considers the decision below. Continue reading
The Commercial Court has granted a stay of proceedings against guarantors, despite the guarantees containing an exclusive jurisdiction clause in favour of the English court, pending the resolution of related arbitration proceedings regarding the debts underlying those guarantees: Stemcor UK Ltd v Global Steel Holdings Ltd and Pramod Mittal  EWHC 363 (Comm).
The decision is of interest as an example of the English court exercising its case management powers to stay proceedings despite an exclusive English jurisdiction clause. The judge was satisfied that the circumstances of this case were sufficiently “rare and compelling” to justify the grant of a stay on this ground, as required by Reichold Norway SA v Goldman Sachs International  1 All ER (Comm) 40.
A persuasive factor in the court’s decision was that the guarantors had agreed to be bound by the result of the arbitration, and that they would be liable to pay the claimant any amount for which the principal debtor was found liable.
Please click here to read more about the case on our Arbitration Notes blog.
In a recent decision, the High Court has implied a duty of “honesty and integrity” into a vehicle recovery contract: D&G Cars Ltd v Essex Police Authority  EWHC 226 (QB).
Whilst it remains clear that there is no general doctrine of good faith in English contract law, this case is a further instance of the implication of ethical standards into a commercial contract, following the decision of Yam Seng Pte Ltd v International Trade Corp Ltd  EWHC 111 (QB) (see post).
Yam Seng suggested that duties of good faith were more likely to be implied into so-called “relational” contracts – contracts which involve a longer-term relationship between the parties and which may require a high degree of communication, co-operation and predictable performance based on mutual trust and confidence. The examples given were joint venture agreements, franchise agreements and long term distributorship agreements.
In the subsequent decision of Bristol Groundschool Limited v Whittingham  EWHC 2145 (see post), it was found that a contract relating to the development of computer-based training materials (described by counsel for the defendant as a “hybrid” between two of these categories) was a “relational” contract containing an implied duty of good faith. The contract in the present case did not fall within any of the categories, but the court described it as a “relational contract par excellence” through the application of the general principles summarised in Yam Seng. These decisions may therefore be seen to indicate an incremental broadening of the circumstances in which a duty of good faith, or the equivalent, might be implied.
Given the ease with which many contracts could potentially be described as “relational”, commercial parties should exercise caution, not only when negotiating the terms of any agreement, when it may be advisable to consider addressing the matter expressly, but also when performing their obligations. Joanne Keillor, a senior associate in our dispute resolution team, considers the D&G decision further below. Continue reading
Two recent Court of Appeal decisions are a reminder that an exclusive English jurisdiction clause and choice of English law clause will not always ensure that any disputes are heard in England and that English law is applied.
In the first case, Swiss law applied to the critical issue of whether the signatory to the contract was authorised to bind the company, despite the express choice of English law in the contract: Integral Petroleum S.A. v SCU-Finanz AG  EWCA Civ 144. This illustrates the importance of ensuring contracts have been properly entered into in accordance with the law of a company’s place of incorporation and, where possible, obtaining a legal opinion confirming this.
In the second case, the English courts did not have jurisdiction over a claim for the tort of inducing a breach a contract, where the underlying contract contained an exclusive choice of English jurisdiction and English choice of law clause: Marzillier, Dr Meier & Dr Gunter Rechtanwaltsgesellschaft mbH v AMT Futures Limited  EWCA Civ 143. This shows that torts connected with a contract will not necessarily be heard by the court chosen in the contract. The Court of Appeal’s decision was not reached “with any great enthusiasm” as there was much to be said for the contrary view, but Article 5(3) the Brussels I Regulation, as interpreted by the European court, did not allow for any other conclusion. Continue reading
The court has criticised the claimant’s costs budget in a construction claim as “unreliable, disproportionate and unreasonable” and has set new budget figures indicating the maximum the claimant should recover in relation to each stage of the litigation, taking into account both past and future costs: CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd & Ors  EWHC 481 (TCC).
The decision is particularly interesting for the court’s approach to costs budgeting where it takes the view that the costs already incurred by a party are far too high. Costs budgeting is essentially a prospective exercise. Under the relevant practice direction, the court cannot approve costs incurred before the date of a budget but can record its comments on them and take them into account when considering the reasonableness and proportionality of the subsequent costs.
Here the court gets round this issue by setting what are, in effect, composite budget figures, made up of: (a) the figures which, in the court’s view, would be recoverable on assessment in respect of incurred costs for each phase of the litigation; and (b) the approved budget figures in respect of estimated costs for each phase. To the extent the claimant actually recovers more on assessment than the figures estimated in (a), the budgeted figures in (b) will fall to be reduced pound for pound.
A striking feature of this case is that the total budget figure set by the court is £4.28 million for both past and future expenditure, which is less than the costs the claimant has already incurred. The decision is also of interest in suggesting that:
- the complexity of a case may, in some cases, be more important than its value in determining whether costs are disproportionate; and
- a party may be criticised for seeking to include overly widespread assumptions and contingencies, if the court considers that this is an attempt to undermine the budgeting exercise and give the party room to manoeuvre at a later stage.