Data breach class actions – new webinar and “handy client guide”

Herbert Smith Freehills has today released the second in our series of webinars on class actions in England and Wales, this time looking at data protection and privacy issues. In the presentation, Julian Copeman, Harry Edwards, Miriam Everett and Lucy McAlister explain why this area is ripe for class actions, what we have seen so far, and  the impact that this could have on organisations. Clients and contacts of the firm can register to access the archived version by contacting Prudence Heidemans.

The webinar is accompanied by the third in our series of short guides to class actions in England and Wales, Data breach class actions, which has been published here (together with our first two editions: (i) Overview of class actions in the English courts and (ii) Group Litigation Orders).

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Civil Justice Council report on ADR calls for review of Halsey guidelines but stops short of recommending mandatory mediation

The Civil Justice Council’s ADR working group has released its final report on ADR and Civil Justice, following consultation on its interim report released last year. The broad mandate of the review was “to maintain the search for the right relationship between civil justice and ADR” and to promote debate over possible reforms.

The report includes recommendations aimed at further encouraging ADR, including a review of the Halsey guidelines to narrow the circumstances in which a refusal to mediate is regarded as reasonable, but does not recommend mandatory mediation. For more information see this post on our ADR Notes blog.

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High Court finds liquidated damages clause for delay in construction contract was not unlawful penalty

The High Court has found that clauses in engineering, procurement and construction (EPC) contracts relating to solar power plants, which provided for a delay damages rate of £500 per day per MWp, were enforceable liquidated damages clauses: GPP Big Field LLP v Solar EPC Solutions SL [2018] EWHC 2866 (Comm).

Applying the Supreme Court’s recast penalties test from Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67 (considered here), the court rejected the contractor’s argument that the clauses were unenforceable as penalties. It found that the provisions did not exceed a genuine pre-estimate of loss, and that the sums were not in any way extravagant or unconscionable in comparison with the legitimate interest of the employer in ensuring timely performance of the contracts.

The court reached that conclusion despite the provisions being described as a “penalty” in the relevant clauses. It said this was nothing more than an equivocal indication, requiring an enquiry into the substance of the matter.

The court reached its conclusion for a number of reasons including because the parties were experienced and sophisticated commercial parties of equal bargaining power, who were capable of assessing the commercial implications of the liquidated damages provisions. The sum provided for in each liquidated damages clause was payable only on a single type of breach. The fact that the loss resulting from that breach might vary in amount depending on the circumstances did not of itself give rise to any inference that the sum was a penalty, provided that it was not extravagant and unconscionable in comparison with the greatest loss that might have been expected as likely to flow from the breach when the contract was made.

For more information please see our construction e-bulletin on the decision.

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Court of Appeal finds litigation privilege is restricted to the purpose of obtaining advice or information, not the conduct of litigation more broadly

The Court of Appeal has held that emails between a company’s Board members which had been prepared to discuss a commercial proposal for the settlement of a dispute were not covered by litigation privilege: WH Holding Ltd v E20 Stadium LLP [2018] EWCA Civ 2652.

The court found that, to fall within litigation privilege, a communication must be prepared for the dominant purpose of obtaining advice or evidence in relation to the conduct of litigation. It is not sufficient that it is for the dominant purpose of conducting litigation, in a broader sense. This is a point that had previously been unclear in the case law.

The court did not consider that the recent high profile decision in SFO v ENRC [2018] EWCA Civ 2006 (considered here) extended the scope of litigation privilege beyond the recognised categories of advice or evidence, though the decision confirmed that the conduct of litigation includes its avoidance or compromise. The court in the present case added (perhaps tellingly):

“We do not consider that there is any justification for extending the scope of litigation privilege in that respect. It has always been recognised that privilege is an inroad into the principle that a court should be able to decide disputes with the aid of all relevant material.”

The decision is likely to lead to difficulties in the application of litigation privilege in practice, as there may be many communications or documents which are for the purpose of conducting litigation (including avoiding or settling litigation) but which do not fall within the category of obtaining advice or evidence. The court did accept, however, that litigation privilege will apply if advice or information obtained for the conduct of litigation cannot be disentangled from a document, or it would otherwise reveal the nature of such advice or information.

The decision may also suggest that litigation privilege is restricted to communications between parties or their lawyers and third parties, rather than applying to internal communications within a party. This part of the decision is not however clear, and it is difficult to see why litigation privilege should be restricted in this regard, so long as a communication or document is prepared for the required purpose. It may be that the Court of Appeal is merely dismissing an argument that litigation privilege applies to all internal corporate communications relating to litigation even if they fall outside the required purpose.

Finally, the decision also suggests that the courts may adopt a more liberal approach to the question of when they should inspect documents to ascertain whether they are privileged, when a claim to privilege is challenged. Continue reading

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Documents of dissolved company remained privileged unless no prospect of company being restored to the register

A High Court Master has found that the court must maintain privilege in the documents of a dissolved company unless and until there is no prospect of the company being restored to the register: Addlesee v Dentons Europe LLP: [2018] EWHC 3010 (Ch).

The decision contrasts with Garvin Trustees Ltd v The Pensions Regulator [2014] UKUT B8 (TCC), in which the Upper Tribunal held that documents of a dissolved company incorporated in Northern Ireland, which had been passed by its liquidators to a director, did not remain subject to privilege and so were disclosable. In the Master’s view, it was key to the judge’s reasoning in Garvin that (as the judge believed) the company could no longer be restored to the register as the applicable time limit had expired.

This is a decision of a Master and therefore not binding on a future court. However, if the same approach is taken in other cases, it suggests that the documents of a dissolved company will continue to be subject to privilege unless and until the company can no longer be restored to the register. In the case of a UK company, that could mean indefinitely, since under section 1030(1) of the Companies Act 2006 an application for restoration can be made at any time for the purpose of bringing proceedings against the company for damages for personal injury. Continue reading

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Litigation privilege: High Court decision shows continued need to beware of dual purpose

The High Court has found that correspondence with experts was not subject to litigation privilege as it was prepared for two purposes, only one of which was for contemplated litigation, and the claimant had not established that the litigation purpose was dominant: Sotheby’s v Mark Weiss Ltd [2018] EWHC 3179 (Comm).

The other purpose, the court found, was to take a commercial decision as to whether to rescind the sale of a painting. Although a decision to rescind would likely, perhaps inevitably, lead to litigation, the court found that the two purposes could not be regarded as one and the same. This would appear to contrast with cases such as Highgrade Traders [1984] BCLC 151, in which the Court of Appeal accepted that the purpose of considering whether an insurance claim could be resisted (in a case of suspected arson) was a litigation purpose, and what might appear to be a separate purpose (namely, to ascertain the cause of the fire) was part and parcel of that purpose.

However, the court in the present case rejected the attempt to draw an analogy with Highgrade, or with the recent Court of Appeal decision in SFO v ENRC Ltd [2018] EWCA Civ 2006, considered here, which had appeared to return to a more benevolent approach to the question of whether there is a dual purpose, in the context of litigation privilege, following the very strict approach taken at first instance in that case.

The present decision emphasises the fact-sensitive nature of the assessment of dominant purpose, and that the court’s analysis in one case cannot necessarily be applied in different circumstances. This underlines the difficulty for commercial parties in assessing, in any case where a document or communication may be seen as having a dual purpose, whether or not it will be protected by litigation privilege. Continue reading

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Brexit, deal or no deal: a litigator’s perspective

Over the past couple of weeks, the government has published the final text of the draft Withdrawal Agreement setting out the arrangements for the UK’s withdrawal from the EU on 29 March 2019 and the draft Political Declaration on the future relationship between the EU and the UK. This is therefore a good opportunity to consider the impact of Brexit from a litigator’s perspective, whether or not a withdrawal deal is reached. (Although the deal has now been approved by EU leaders, it still faces highly uncertain votes in the UK Parliament.) So, what are the implications for English civil litigation?

With a deal

The draft Political Declaration does not contain anything of particular relevance so far as English civil litigation is concerned, focusing instead on matters such as trade and economic cooperation, law enforcement and criminal justice, foreign policy, and security and defence. This may not be seen as surprising, as the issue of civil judicial cooperation is usually dealt with outside of free trade agreements and we understand that the EU and UK did not discuss its inclusion, but it is nonetheless disappointing not to at least reference a shared objective to maintain cooperation in this area.

The draft Withdrawal Agreement is more significant, from a litigation perspective. It preserves various provisions relating to civil cooperation for the duration of a transition period to be established by the agreement, through to 31 December 2020. In particular:

  • By article 66, current rules on applicable law in contractual and non-contractual matters under the Rome I and Rome II Regulations (Regulations 593/2008 and 864/2007) will apply to contracts concluded, or events giving rise to damage, before the end of the transition period.
  • By article 67, current rules on both jurisdiction and enforcement of judgments under the recast Brussels Regulation (Regulation 1215/2012) will apply where proceedings are commenced before the end of the transition period.
  • By article 68, current provisions relating to service and the taking of evidence (under Regulations 1393/2007 and 1206/20011) will apply where the relevant document for service or request for the taking of evidence was received before the end of the transition period.

After the end of the transition period, how these matters are to be dealt with will depend on what arrangements (if any) are agreed during the transition period. It is to be hoped that, in relation to jurisdiction and enforcement at least, something can be agreed which broadly mirrors the current arrangements under the recast Brussels Regulation or, at a minimum, an agreement can be reached for the UK to participate in the Lugano Convention. The UK government has previously indicated that this is its intention (see here).

Without a deal

If, however, the UK leaves the EU on 29 March without a deal, there clearly will not be time to put in place any such arrangements before the UK’s exit. In those circumstances, the position will be as summarised below. Continue reading

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A stark reminder of the restrictions on collateral use of disclosed documents, including information derived from them

The High Court has delivered a strong message as to the need for litigants to appreciate the rules relating to collateral use of disclosed documents, under CPR 31.22: The Ecu Group Plc v HSBC Bank Plc [2018] EWHC 3045 (Comm). Some key points to note from the decision are:

  • The restrictions on collateral use apply to information derived from disclosed documents, just as they apply to the documents themselves. A party who is in receipt of disclosed documents may therefore be prevented from using a document it has itself created, where that document reveals the contents of the disclosed documents or draws conclusions from them. So for example, in this case, it was a breach of CPR 31.22 for the claimant to disclose to a third party its own witness statement prepared for a further pre-action disclosure application, where it included a detailed description of of some of the contents of the disclosed documents.
  • The restrictions will prevent a party using disclosed documents (or information derived from them) in briefing its own lawyers, if that is for some purpose other than the proceedings in which the documents were disclosed. So, if the purpose is to obtain advice about other potential proceedings to which the documents may be relevant, that will be a breach of CPR 31.22 (unless the court’s permission is obtained). If however the purpose is to obtain advice about the proceedings in which disclosure was given then there is no breach. This is similar to the court’s approach in Tchenguiz v Grant Thornton UK LLP [2017] EWHC 310 (Comm), considered here.
  • The court may grant permission retrospectively, but may impose conditions to ensure that the party who was in breach does not obtain any advantage from using the documents for the improper purpose. In the present case, for example, the court granted retrospective permission to a party who used disclosed documents to obtain advice on potential US claims, but on the condition that the US lawyers’ retainers were terminated and their advice was not provided to anyone else (including any other US lawyers that might be instructed) without the court’s permission.
  • The restrictions apply to documents provided by way of pre-action disclosure under CPR 31.16 just as they apply to documents provided by way of disclosure in the action.

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The perils of withdrawing Part 36 offers after trial (or any time)

The High Court has found that defendants who made a Part 36 offer, which the claimant failed to beat, should not be awarded any of their costs where the offer was withdrawn after trial and before judgment: Britned Development Ltd v ABB AB [2018] EWHC 3142 (Ch).

Had the offer remained on the table until judgment, the court would have been obliged under Part 36 to award the defendants their costs from the end of the relevant offer period, unless satisfied that such an order would be unjust. Because the offer was withdrawn, however, the Part 36 costs consequences did not apply. This decision illustrates the dangers of withdrawing a Part 36 offer, as the costs protection associated with Part 36 will be lost once the offer is withdrawn. Although the offer can still be taken into account, the result will be far less predictable given the court’s broad discretion on costs.

A party who is considering withdrawing an offer during or after trial should think twice. If the opponent wishes to accept the offer at that stage, it will require the court’s permission to do so. Depending on the circumstances, it may be better to keep the offer on the table but resist any application for permission to accept.

Before trial, of course, the opponent will not require permission to accept a Part 36 offer, even after the relevant offer period has expired. However, where a party wishes to rethink its offer on the basis that it has begun to seem too generous, the better course will normally be to vary the offer rather than withdraw it (as in those circumstances the Part 36 costs consequences should still apply unless the opponent beats the varied offer).

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High Court finds entire agreement clause did not exclude liability for misrepresentation

The High Court has held that an entire agreement clause in a commercial contract did not exclude liability for misrepresentation under section 2(1) of the Misrepresentation Act 1967: Al-Hawasi v Nottingham Forest Football Club [2018] EWHC 2884 (Ch). The court overturned the master’s decision to the contrary, considered here.

The decision re-emphasises the generally accepted position that clear words are needed to exclude liability for misrepresentation. In general, the effect of an entire agreement statement (of itself) will be to avoid representations becoming contractual terms, rather than excluding liability for misrepresentation. Where a party wishes to avoid liability for misrepresentation, more will be needed, such as non-reliance wording or an express exclusion of liability. Continue reading

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