Court of Appeal confirms English Court lacks jurisdiction over claims against UK domiciled parent company in relation to acts of subsidiary abroad

The Court of Appeal has held that the English court does not have jurisdiction to hear claims against two companies in the Shell group (domiciled in the UK and Nigeria respectively) relating to alleged pollution in the Niger Delta in Nigeria. A majority in the Court of Appeal (Sales LJ dissenting) found that the claimants were unable to demonstrate a properly arguable case that Royal Dutch Shell, a UK listed company, owed a duty of care to those affected by leaks from pipelines and associated infrastructure operated by its Nigerian subsidiary: Okpabi and others v Royal Dutch Shell Plc and Shell Petroleum Development Company of Nigeria Ltd [2018] EWCA Civ 191.

This decision goes some way to providing clarity on when a parent company may be liable for the acts or omissions of its subsidiaries. The Court of Appeal confirmed that a distinction falls to be drawn between a parent company which controls, or shares control of, the material operations of a subsidiary, and a parent company which simply issues mandatory policies as group-wide operating guidelines for its subsidiaries. The issuing of mandatory policies by a parent company will not be sufficient to establish a duty of care in favour of any person or class of persons affected by those policies; it is necessary to establish that the parent company has taken control (or joint control) of the relevant operations in a much more direct and substantial way. The claimants have indicated that they intend to seek permission to appeal to the Supreme Court.

John Ogilvie and Damian Grave, partners, and James Allsop, a senior associate, in our disputes team consider the decision further below. Continue reading

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Filed under Collective actions, Jurisdiction, Tort

Drafting contracts: Key lessons from 2017

This annual contract law update from our corporate team considers a number of interesting contract law cases which have highlighted key points for those involved in drafting or managing contracts.

The cases that have been chosen deal with the formation of contracts, interpretation of contracts, endeavours obligations, limitation and exclusion clauses, penalties, notice provisions and termination. In each case there is a brief summary of the facts and the court’s decision together with some practical tips. The briefing also considers the impact that Brexit will have on contracts and what steps contracting parties can take when reviewing and drafting contracts.

The full briefing is available here.

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High Court decision supports orthodox view of litigation privilege

The High Court has found that documents prepared by the defendant in the course of an investigation into allegations by HMRC were protected by litigation privilege: Bilta (UK) Ltd (in liquidation) & ors v Royal Bank of Scotland Plc & anor [2017] EWHC 3535 (Ch).

The decision arguably departs from the reasoning in the controversial decision in SFO v ENRC [2017] EWHC 1017 (considered here), where the court took a very strict approach to the question of whether documents prepared in the course of an investigation were for the dominant purpose of litigation. The court in ENRC found that the primary purpose was to find out if there was any truth in allegations made by a whistleblower and (if there was) to decide what to do about it, and took the view that this was not sufficient to meet the dominant purpose test. It also drew a rather problematic distinction between documents prepared in order to take legal advice in relation to litigation, which would be privileged, and those aimed at trying to avoid contemplated litigation, which it said were not. The ENRC decision is subject to an appeal which is due to be heard by the Court of Appeal in July this year.

In the present case, Vos LJ expressed the view that there was “something of a tension” between ENRC and the Court of Appeal’s decision in Re Highgrade Traders [1984] BCLC 151 (CA), in which the court was prepared to find that discovering the truth and enabling advice to be given in relation to litigation both formed part of a single overarching purpose. Similarly, on the facts of the present case, Vos LJ found that the defendant’s subsidiary purpose of avoiding litigation if possible could be “subsumed into” the dominant purpose of preparing for litigation which it considered almost inevitable. He said it was necessary to take a “realistic, indeed commercial, view of the facts”, which supported the defendant’s case.

Vos LJ emphasised that determining the dominant purpose is a question of fact in each case, and so conclusions reached in one case cannot simply be applied across to another context. However, the present decision is encouraging in that it appears to return to what may be considered a more orthodox view of litigation privilege than that underlying the decision in ENRC. Until the Court of Appeal has considered these issues in ENRC, however, parties may wish to take a cautious view.

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Article published – Proposals for disclosure reform: Do they fit the bill?

Late last year, a disclosure working group chaired by Lady Justice Gloster published proposals for disclosure reform, including a completely new rule to govern the disclosure of documents in English litigation. The proposals are subject to consultation until the end of February, following which there is likely to be a two-year pilot in the Business and Property Courts.

Julian Copeman and Maura McIntosh have published an article in the January/February 2018 edition of PLC Magazine in which they discuss the proposals and consider how likely they are to result in real change. Click here to download a copy.

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Court of Appeal decision highlights dangers of trying to keep options open when notifying warranty claims

The Court of Appeal has upheld a High Court decision striking out claims for breach of warranty on the basis that they were not notified in accordance with the relevant mandatory contractual provisions: Teoco UK Ltd v Aircom Jersey 4 Ltd [2018] EWCA Civ 23.

Every notification clause will of course turn on its own wording. However, this decision suggests that a purchaser who is required to give notice setting out the grounds on which  a claim is based will generally be wise to identify the legal basis of the claim, including the particular warranty or other provision relied on. An attempt to frame such a notification widely, with a view to keeping the purchaser’s options open to make claims in the future, may well backfire.

Tom Henderson, a senior associate in our disputes team, outlines the decision below. Continue reading

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Supreme Court considers that there is no requirement of direct damage in England for permission to serve tort claim outside the jurisdiction at common law

The Supreme Court has found, by a majority and in obiter comments, that direct damage in the jurisdiction is not required to come within the tort jurisdictional gateway in the CPR, disagreeing with the Court of Appeal: Lady Christine Brownlie v Four Seasons Holdings Incorporated [2017] UKSC 80 (our post on the Court of Appeal decision can be accessed here).

According to the majority, the test under the common law is, therefore, different from the test under the recast Brussels Regulation, where direct damage in the jurisdiction is a requirement.

This is unlikely to be the last word on this issue. A strong dissenting opinion was given by Lord Sumption, with whom Lord Hughes agreed. Lady Hale, giving the lead judgment for the majority, stressed that her comments should be treated with “appropriate caution” as they were obiter and Lord Wilson, who agreed with her judgment, was clearly concerned that there may have been less full argument than the importance of the issue required.

The door therefore appears to be open (or at least ajar) for further argument before the Supreme Court in the future. Continue reading

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Filed under Jurisdiction, Service, Tort

Article published – Litigation funding: does the cap fit?

It is well established that, where a third party funds litigation in return for a share of the proceeds, the funder is potentially liable for adverse costs if the claim fails. That liability is generally thought to be subject to the “Arkin cap”, deriving from the Court of Appeal’s decision in Arkin v Borchard [2005] 1 WLR 3055, which limited the funder’s liability for adverse costs to the amount of the funding provided. A recent decision has, however, questioned the application of the Arkin cap, particularly where the funder is funding the whole of the costs of the litigation: Bailey v GlaxoSmithkline [2017] EWHC 3195 (QB).

Maura McIntosh has published a post on Practical Law’s Dispute Resolution blog which considers the scope and application of the Arkin cap in light of the recent case law. Click here to read the post (or here for the Practical Law Dispute Resolution blog homepage).

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Filed under Announcements, Costs, Funding

High Court clarifies approach to revising costs budgets where there are significant developments in the litigation

In a recent decision in the HBOS acquisition litigation, the High Court has clarified the proper approach in considering a party’s application to approve a revised costs budget in the light of significant developments in the litigation, under paragraph 7.6 of Practice Direction 3E (Costs management): Sharp v Blank [2017] EWHC 3390 (Ch).

The court held that, in approving a revised budget where there have been significant developments, the court can approve costs relating to those developments even though they have been incurred before the date on which the court’s approval is given. The base reference point for separating out incurred costs (which are not subject to the budgeting regime) and future costs (which are) is the date of the last approved or agreed budget, not the date of the revised budget, the application or the hearing date. This is a point on which there was some confusion so it is helpful to have clarification, albeit only at first instance.

The confusion arises principally from the wording of paragraph 7.4 of PD3E which states that, as part of the costs management process, “the court may not approve costs incurred before the date of any costs management hearing”. In the present case, the court held that this provision cannot be read literally, given that budgets will generally have been prepared at least three weeks before the hearing and so some of the estimated costs included in the budget will inevitably have been incurred by the time of the hearing.

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Second action allowed to proceed where earlier action struck out for breach of unless order

In a recent decision, the High Court has considered the proper approach to be taken in a second action where a previous action bringing the same claim has been struck out for failure to comply with an unless order: Davies v Carillion Energy Services Ltd [2017] EWHC 3206 (QB).

In summary, where the first action was struck out as an abuse of process, or the conduct of the first action was otherwise inexcusable, the second action will be struck out as an abuse save in “very unusual circumstances”. Where the first action was struck out for a single failure to comply with an unless order, the claimant will not necessarily be debarred from pursuing a second action, even if the claimant failed to apply for relief from sanctions in the first action – though that may be relevant in considering whether the conduct of the first action was inexcusable.

Each case will turn on its facts. In this case, the court’s decision appears to have been influenced by some doubt regarding the basis on which the first action was struck out and the fact that the claimant was a litigant in person. Although the court accepted that being a litigant in person did not excuse failures to comply with the CPR or court orders, it was appropriate to make some allowance for lack of familiarity with the detailed rules, in this case relating to pleading. Continue reading

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Filed under Interim applications, Judgments/Orders

Causation in valuers’ negligence cases: Reliance on earlier valuations

The Supreme Court has held that where a lender advanced money on the basis of an initial valuation, then refinanced the facility (effectively repaying and replacing the original loan) on the basis of a second negligent valuation, the liability of the negligent valuer was limited to the ‘top up’ element of any additional lending: Tiuta International Ltd (in liquidation) v De Villiers Surveyors Ltd [2017] UKSC 77.

The Supreme Court unanimously overturned the decision of the Court of Appeal, which had held that the valuer was liable for the whole loss attributable to the entire amount of the second loan. In assessing the loss caused by the valuer’s negligence, the relevant comparison was between what the lender’s position would have been if the defendant had fulfilled his duty of care and the lender’s actual position.

Applying that comparison, the Supreme Court held that even if the second valuation had not been negligent and the second loan had not been advanced, the lender would in any event have been exposed to a loss of £2.5million in respect of the sums advanced under the first loan. The lender did not intend to advance the second facility in addition to the original loan.

For more information on the decision, see this post on our Insurance Notes blog.

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Filed under Remedies