Supreme Court overturns decision finding contract incomplete and declining to imply term

The Supreme Court has unanimously held that a binding agreement was reached between a property seller and an estate agent, despite the parties not having specified the circumstances in which the agreed rate of commission would fall due: Wells v Devani [2019] UKSC 4.

In doing so it overturned the majority decision of the Court of Appeal (considered here) finding that the agreement was incomplete because of the failure to agree this essential term, and that the court could not imply a term in order to transform an incomplete bargain into a legally binding contract.

The Supreme Court found that the only sensible interpretation of the parties’ words and conduct was that the commission would be payable on completion of a purchase by a buyer introduced by the agent, so it was not necessary to imply a term. If it had been necessary, however, the court would have had no hesitation in doing so. It did not agree with the Court of Appeal that there is any general rule preventing the court implying a term where that will render the agreement sufficiently certain or complete to constitute a binding contract, and the conditions for implying a term are satisfied.

The decision emphasises the court’s reluctance to find that an agreement is too vague or uncertain to be enforced where the parties intended to be bound and have acted on their agreement. Of course, as a practical matter, to avoid the risk that the courts will find their bargain unenforceable – or, conversely, imply a term that is not in fact what they intended – parties should ensure that all essential terms are expressly agreed.

Chris Bushell and Maura McIntosh consider the decision further below. Continue reading

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High Court finds director can be served with all documents relating to proceedings at address registered at Companies House

The High Court has held that section 1140 of the Companies Act 2006 permits service on a director, of all documents relating to proceedings against that individual, at the address they have registered at Companies House: Brouwer v Anstey [2019] EWHC 144 (Ch).

The court applied the decision of Master Marsh in Key Homes Bradford Ltd v Patel [2015] 1 BCLC 402 which interpreted section 1140 very widely, so that the section applied regardless of whether the documents being served concerned the directorship or company and regardless of whether the director was resident in England (see post here). The Key Homes decision was not binding in the present case, but the court noted that it appeared in the White Book notes and had stood as the law for nearly five years without appeal. The decision applied, the court held, to the service of proceedings and documents generally.

Where there are difficulties in serving a defendant who is an individual, whether this concerns service of a claim form or documents in the course of the proceedings, it is worth checking whether there is an address registered for that person at Companies House so that you may be able to take advantage of section 1140. Bear in mind, however, particularly where limitation is in issue, that the Court of Appeal has yet to consider the section.

The decision is also of interest in finding that, where a party has ceased to be legally represented and has failed to provide a new address for service, as required under court rules, the default provisions for service of claims forms cannot be used to effect service of subsequent documents in the proceedings. Accordingly, if documents cannot be served personally or under the Companies Act, and the party to be served has not indicated that it will accept service by fax or email, it will be necessary to apply for an order for alternative service, or to dispense with service. Continue reading

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Drafting contracts: Key lessons from 2018

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 chosen deal with a variety of matters including implied terms, variation, penalties, notice provisions, entire agreement and non-reliance, and termination. In each case there is a brief summary of the facts and the court’s decision together with some practice points. The briefing also considers practical steps contracting parties can take when entering into or reviewing contracts with Brexit in mind.

The full briefing is available here.

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Court of Appeal clarifies “advice” vs “information” distinction when applying SAAMCO principle in advisers’ negligence cases

The Court of Appeal has confirmed that an auditor was not liable for break costs incurred as a result of its negligent advice in relation to the accounting treatment of interest rate swaps, as those costs fell outside the scope of the auditor’s duty of care – upholding the decision of the High Court (considered here), but on different grounds: Manchester Building Society v Grant Thornton UK LLP [2019] EWCA Civ 40.

The judgment helpfully clarifies the approach to be taken in cases involving the application of the principle established in South Australia Asset Management Corpn v York Montague Ltd [1997] AC 191 (SAAMCO) as expanded upon in Hughes-Holland v BPE Solicitors [2017] UKSC 21.

In particular, the court should consider at the outset whether it is an “advice” or an “information” case. It will be an advice case if the adviser is responsible for considering what matters should be taken into account in deciding whether to enter into the transaction, and for guiding the whole decision-making process. Otherwise, it will be an information case, and the adviser will be responsible only for the foreseeable consequences of the information being wrong. This will require the claimant (who has the burden of proof) to prove the counter-factual, namely that loss would not have been suffered if the advice had been correct. Applying the relevant counter-factual scenario so as to determine which, if any, losses are recoverable will remain a complex exercise in many cases.

For more information, please see our Banking litigation ebulletin on the decision.

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Government accepts need for greater clarity in regulations governing damages-based agreements

The government has today published the results of its post-implementation review of the key legislation that implemented the costs and funding aspects of the Jackson reforms in April 2013: Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2013 (LASPO). The review includes the introduction of damages-based agreements (or DBAs), as well as the removal of recoverability for conditional fee agreement (CFA) success fees and after-the-event (ATE) insurance premiums.

The government’s conclusion is that, on balance, the LASPO Part 2 reforms have been successful against their objectives, including reducing costs, reducing the number of unmeritorious cases, and promoting access to justice at proportionate cost.

However, in relating to DBAs, the government accepts that the DBA Regulations 2013 “would benefit from additional clarity and certainty”. The review notes that almost all respondents, across the spectrum, agreed that DBAs are rarely used, and that the regulations should be redrafted to ensure DBAs are a more viable funding method for a greater number of cases. Particular concerns said to be raised about the regulations include: the lack of payment of a reasonable sum for work done on termination; uncertainty around early termination and the indemnity principle; uncertainty around whether “sequential” hybrid DBAs are permitted (where a DBA and some other form of retainer are combined for different stages of the case, rather than concurrently); and the payment of counsel’s fees. Most respondents are said to have endorsed the conclusions and recommendations of the Civil Justice Council’s Working Group on DBAs, chaired by Professor Rachael Mulheron, which produced a detailed report on these issues in 2015 (see this post).

Encouragingly, the report states that an independent review of the drafting of the regulations is being undertaken by Professor Mulheron and Nicholas Bacon QC, and that the government will give careful consideration to the way forward in the light of their report, which is expected later in 2019.

What is not clear, however, is whether the government will give further consideration to issues of policy, as well as drafting, for example in relation to permitting hybrid DBAs – a reform which the review notes was strongly supported by many commercial litigators, as well as by Sir Rupert Jackson. However, it also notes that some commercial lawyers cautioned against allowing hybrids DBAs. The government’s current view on the issue is not expressed, though there is a general comment in relation to DBAs that the government “needs to exercise caution to avoid creating unintended consequences”.

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High Court makes non-party costs order against liability insurer

In a recent decision, the High Court has made a non-party costs order against a law firm’s professional indemnity insurer, in circumstances where the insurer had effectively relinquished control of the defence of the litigation: Various Claimants v Giambrone & Law [2019] EWHC 34 (QB).

The decision illustrates that the court’s discretion to order costs against non-parties under section 51 of the Senior Courts Act 1981 is a broad one and that each case ultimately turns on its own facts. The decision follows closely on the back of the Court of Appeal’s decision last year awarding costs against a non-party insurer in Travelers Insurance Company Ltd v XYZ [2018] EWCA Civ 1099. In that case, the fact that the insurer had some control over the proceedings was a factor in favour of the adverse costs order. The present decision shows, however, that control is not a precondition to an insurer being made liable for adverse costs. The key requirement appears to be that the insurer will benefit from its arrangement with the insured and has a stake in the successful outcome of the proceedings.

For more information on the decision, please see our Insurance and re-insurance disputes e-bulletin.

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High Court orders Tesco to disclose SFO documents in s.90A FSMA shareholder class action

The High Court has ordered Tesco to disclose, in civil proceedings brought by its shareholders under s.90A of the Financial Services and Markets Act 2000 (“FSMA”), documents that the SFO had provided in confidence to Tesco’s legal representatives in the course of negotiating a deferred prosecution agreement: Omers Administration Corporation & Ors v Tesco plc [2019] EWHC 109 (Ch).

The material in question comprised documents, interview transcripts and witness statements that the SFO had obtained from third parties using its powers to compel the production of information/documents under s.2 of the Criminal Justice Act 1987. Accordingly, the decision highlights the possibility that material provided to the SFO (and potentially other regulatory or enforcement bodies) may become disclosable in subsequent civil proceedings.

More generally, the decision provides an illustration of how the court will deal with a request that a party disclose documents which are subject to third party confidentiality obligations. Confidentiality is not, in itself, a bar to disclosure, but it is a factor the court will take into account in considering whether to order disclosure. The decision emphasises that the court must approach the matter by reference to all the circumstances of the case and without any presumptions one way or the other. In general, however, where the documents are relevant, the balance is very likely to favour production, unless the same information is available from another source without disproportionate difficulty – but the court will seek to impose appropriate measures to protect that confidentiality, insofar as compatible with the needs of justice.

For more information, please see our Banking litigation ebulletin on the decision.

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Court of Appeal gives guidance on how to apply jurisdiction test laid down by Supreme Court

The Court of Appeal has considered how the test for establishing English jurisdiction should be applied where there is a dispute over the facts relevant to jurisdiction: Kaefer Aislamientos SA de CV v AMS Mexico SA de CV [2019] EWCA Civ 10.

Where a claimant needs permission to serve proceedings out of the jurisdiction, the claimant has to establish that a relevant jurisdiction gateway applies, eg on the basis that the defendant has committed a breach of contract within the jurisdiction. The same is true where the claimant asserts an entitlement to serve out of the jurisdiction without the court’s permission under an article of the recast Brussels Regulation, eg on the basis of a jurisdiction clause in favour of the English courts.

The test has in the past been expressed as the need to establish a “good arguable case” as to the application of the relevant gateway/article. This test was intended to be straightforward, but has become, in the Court of Appeal’s words, “befuddled by ‘glosses’, glosses upon glosses, ‘explications’ and ‘reformulations’.”

The Supreme Court, in two cases in 2018, sought to clarify the test. However, how it applies in practice has not been entirely clear. The Court of Appeal in the present case has sought to interpret each limb of the test. It has, in particular, given its view that the court must consider the relative merits of the parties’ arguments, rather than merely requiring the claimant to surmount a set evidential threshold. There remains however plenty of scope for further debate on the Supreme Court’s formulation and how it applies in any particular case. Continue reading

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Court of Appeal confirms defendants not obliged to make enquiries of third parties before pleading non-admissions

The Court of Appeal has rejected an argument that a defendant must make reasonable enquiries of third parties before pleading in its defence that it is unable to either admit or deny an allegation and requires the claimant to prove it: SPI North Ltd v Swiss Post International (UK) Ltd and Asendia UK Ltd [2019] EWCA Civ 7.

A defendant is under a positive duty to admit or deny an allegation where it is able to do so, and may only put the claimant to proof of a fact which it is unable to admit or deny. This decision confirms that a defendant may properly plead that it is unable to admit or deny an allegation where the truth or falsity of the allegation was neither within its actual knowledge (including attributed knowledge in the case of a corporation) nor capable of being easily ascertained from documents or other information at the defendant’s ready disposal. It is not required to undertake investigations beyond that level, including consulting with any third parties.

This is not surprising but is nevertheless a welcome confirmation. A contrary conclusion could have given rise to significant practical difficulties, given the short period allowed by the rules for filing a defence. Continue reading

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High Court upholds claim to privilege in respect of underlying instructions to law firm relating to escrow monies

The High Court has rejected an application for disclosure of documents containing the underlying instructions to a law firm acting for a party funding a transaction, in circumstances where the law firm provided a confirmation to the seller as to the nature of its irrevocable instructions regarding escrow monies: Raiffeisen Bank International AG v Asia Coal Energy Ventures Ltd [2019] EWHC 3 (Comm).

The court rejected an argument that the instructions were not confidential, or that privilege had been waived, because the client had authorised the law firm to state what instructions it had been given. The judge emphasised that underlying instructions do not cease to be confidential just because the client authorises the solicitor to divulge information it has received in confidential communications from the client. The question is whether the client has given the solicitor authority to disclose the underlying communications.

Caution is needed however. It may be difficult to distinguish between cases where the client has given the solicitor authority to disclose the underlying communications and cases where it has merely authorised the solicitor to divulge information received from the client without disclosing the underlying communications. Particular care should also be taken where a party is considering referring to lawyer/client communications in the context of legal proceedings. If the court finds that the underlying privileged material is being deployed in the proceedings it may order those communications to be disclosed along with any other documents relevant to that issue, under the principle of collateral waiver or the “cherry picking rule”.

The decision also illustrates the broad protection which can be afforded to lawyer/client communications under the head of legal advice privilege. The privilege is not limited to requests for legal advice or the provision of advice, but will include the entire continuum of communications between solicitor and client relating to a transaction in which the solicitor has been instructed, provided that they are directly related to the solicitor’s performance of his professional duty as legal adviser. Here that principle meant that instructions regarding the holding and transfer of escrow monies were privileged, even if they did not contain advice on matters of law. Continue reading

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