18 January, 2019

Conflicting first instance decisions on whether default judgment can be granted where acknowledgement of service filed late

In a recent judgment, the High Court rejected an application for default judgment on the basis that the defendant’s acknowledgement of service, though late, had been filed shortly before the application: Cunico Resources NV v Daskalakis [2018] EWHC 3382 (Comm).

The decision turned on the interpretation of CPR 12.3(1), which sets out the conditions to be satisfied before a claimant may obtain judgment in default of an acknowledgement of service. This provision has been the subject of conflicting first instance decisions and we understand it is under review by the Civil Procedure Rules Committee.

In the present case, the judge rejected the submission that default judgment may be granted where an acknowledgement was filed late, even though it was filed before judgment was entered or even before the application for default judgment was made. This contrasts with the most recent decision on the point, in McDonald & McDonald v D&F Contracts Ltd [2018] EWHC 1600 (TCC), which supports the opposite conclusion.

In the present case it was not necessary for the judge to decide whether default judgment could have been entered if the acknowledgement was filed after the application but before judgment. The judge said his own view was that it could not, but he would have decided otherwise in light of the preponderance of views in the prior case law.

In practice, given the unsettled state of the law in this area, and pending clarification by the Rules Committee or a Court of Appeal judgment, defendants should take care to file timely acknowledgements of service and claimants seeking default judgment should act quickly. Where default judgment is entered, a defendant can apply to have it set aside, but the burden of proof will be on the defendant to show that it has a real prospect of successfully defending the claim, or that there is some other good reason why the judgment should be set aside.

Francesca Ruddy, an associate in our dispute resolution team, considers the decision further below. Continue reading →

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15 January, 2019

Article published – Discussing settlement options: minding the gap between litigation privilege and the without prejudice rule

The recent Court of Appeal decision in WH Holding Ltd v E20 Stadium LLP [2018] EWCA Civ 2652 (outlined here) found that litigation privilege applies only to documents created for the dominant purpose of obtaining advice or information/evidence in relation to litigation, and not the conduct of litigation more broadly. As a result, the privilege did not apply to emails between a company’s Board members which had been prepared to discuss a commercial proposal for the settlement of a dispute.

The decision causes real practical difficulties for commercial parties, exposing an awkward gap in the protection afforded to documents prepared for the purpose of settling a dispute.

Maura McIntosh has published a post on Practical Law’s Dispute Resolution blog which considers the decision and its implications. Click here to read the post (or here for the Practical Law Dispute Resolution blog homepage).

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10 January, 2019

Court of Appeal confirms correct legal test for determining a principal’s liability for its agent’s fraudulent misrepresentation

The Court of Appeal has confirmed that, where a claimant has suffered loss in reliance on an agent’s fraud, the principal will be vicariously liable only if the fraudulent conduct was within the agent’s actual or ostensible authority: Winter v Hockley Mint Limited [2018] EWCA Civ 2480.

The court rejected the test applied by the High Court, which was whether it was just and fair for the principal to bear the loss and whether there was a sufficiently close connection between the agent’s wrongdoing and the class of acts he was employed to perform. The correct test is the objective one established by the House of Lords in Armagas Ltd v Mundogas SA [1986] AC 717, which requires a holding out or representation by the principal to the claimant that the agent had the necessary authority, including ostensible authority. This is likely to provide greater certainty as to when a principal will be liable for its agent’s fraud.

However, whilst the Court of Appeal’s decision states that there must be a holding out or representation by the principal, and not merely the agent, the facts which the court thought would (arguably) support a finding of ostensible authority in this case did not involve any direct statement from the principal to the claimant. Instead, they comprised acts such as the provision of an email address and notepaper which might lead the claimant to believe the agent had authority.

Although the Court of Appeal’s comments on the factual matters were obiter (as the case is to be remitted to the High Court for trial), they suggest principals or employers may have ostensible authority, and therefore vicarious liability for an agent’s fraud, even if they do not have direct contact with a potential claimant. To help reduce the risk of liability for a “rogue” agent’s fraudulent conduct, principals and employers should consider carefully what internal procedures may be required to ensure there is sufficient oversight or monitoring of communications or activities carried out by agents.

Jade Hu, an associate in our Dispute Resolution Division, considers the decision further below. Continue reading →

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9 January, 2019

Upcoming webinar – Disclosure pilot scheme in the Business and Property Courts

On Wednesday 16 January (12.30 – 1.30pm GMT), Julian Copeman and Rachel Lidgate will deliver a webinar for Herbert Smith Freehills clients and contacts entitled “The Disclosure Pilot Scheme in the Business and Property Courts – An overview of the major changes introduced by the Pilot and their implications for clients”.

Focusing on the disclosure pilot scheme that has been introduced from 1 January this year, the webinar will look at the significant changes introduced, consider the issues that are likely to arise, and provide practical advice on how clients can best address these.

The webinar is part of our series of HSF webinars, which are designed to update clients and contacts on the latest developments without having to leave their desks. The webinars can be accessed “live”, with a facility to send in questions by e-mail, or can be downloaded as podcasts after the event. If you would like to register for a webinar, or to obtain a link to the archived version, please contact Jane Webber.

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8 January, 2019

Capped costs pilot to start 14 January for claims up to £250,000

A voluntary capped costs pilot will run for two years from 14 January 2019 for cases valued at between £100,000 and £250,000 in the London Circuit Commercial Court (formerly the Mercantile Court) and the business and property courts in Manchester and Leeds.

Based on the capped costs regime in the Intellectual Property and Enterprise Court, the scheme was originally approved in principle by the Civil Procedure Rule Committee in May 2017 (see here) and formed part of the recommendations in Lord Justice Jackson’s report on fixed recoverable costs published in July 2017 (see here). The government has yet to respond to the key recommendations in that report, which would establish a new intermediate track with fixed costs for claims up to £100,000.

The new capped costs pilot will not be available for cases which require a trial of more than two days, involve allegations of fraud, are likely to require extensive disclosure or reliance upon extensive witness or expert evidence, or involve numerous issues and parties. Cases will be subject to a streamlined procedure and should come to trial within eight months of the case management conference.

Costs will generally be assessed summarily at the end of the case. The practice direction sets out a table of maximum amounts recoverable for each stage of the proceedings, subject to an overall cap of £80,000 (plus VAT, court fees, enforcement costs, wasted costs, and costs awarded in respect of interim applications where a party has behaved unreasonably).

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4 January, 2019

UK deposits instrument of accession to Hague Convention on Choice of Court Agreements

On 28 December 2018, the UK deposited its instrument of accession to the Hague Convention on Choice of Court Agreements 2005. The Convention will therefore come into force for the UK on 1 April 2019, in accordance with article 31 of the Convention which provides for it to enter into force on the first day of the month following the expiration of three months after the relevant instrument is deposited.

The government had previously declared its intention to sign up to the Convention with effect from 1 April, in case the draft withdrawal agreement that has been agreed between the UK and the EU is not ultimately entered into. The deposit of the instrument of accession now assures that this will take place.

If the withdrawal agreement is entered into, the UK will withdraw the instrument of accession. In that case, during the transition period provided for in the withdrawal agreement, until the end of December 2020, the UK will be treated as an EU member state for the purposes of the Convention.

For more information on the impact of the UK’s accession to the Hague Convention on jurisdiction and enforcement of judgments post-Brexit, see our post Brexit, deal or no deal: A litigator’s perspective.

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19 December, 2018

Court of Appeal holds SPA earn-out unenforceable as an agreement to agree

The Court of Appeal has rejected a seller’s claim that he was entitled under a sale and purchase agreement (“SPA”) to provide consultancy services to the target company for a further period after an initial four year earn-out. Applying settled principles, the court held that an agreement to provide consultancy services for “such further period as shall reasonably be agreed” was not enforceable because it was an agreement to agree: Morris v Swanton Care & Community Ltd [2018] EWCA Civ 2763.

Though each case will turn on the words used in the specific contract, the decision illustrates that where parties seek to account for future uncertainty by stipulating that the parties will ultimately have to reach further agreement, the courts will be slow to find that either party has an enforceable right in relation to the terms or even the existence of that further agreement. The same is true of a clause requiring parties “reasonably” to agree, or to use best or reasonable endeavours to agree. Such formulations cannot turn an unenforceable provision into an enforceable agreement.

As this case shows, there is a fundamental difference between parties postponing agreement (which, commercially, may be justified given uncertainties surrounding what may happen in the future) and parties actually reaching agreement in relation to future terms of their relationship, albeit with gaps to be resolved between them based on objective criteria capable of assessment by the court. The former does not give rise to any enforceable obligations; the latter may be enforceable, provided that the gaps do not give rise to such uncertainty as to call into question whether there has been a meeting of minds at all.

In the particular context of earn-out provisions in SPAs, parties should be careful to ensure that the relevant provisions preserve sufficient flexibility for the parties to react to future developments but without creating such uncertainty as to render the clause unenforceable. Since each SPA turns on its own terms, it is impossible to adopt a one size fits all approach; however, it is at least clear that if the SPA provision leaves open the possibility of parties agreeing or disagreeing (whether reasonably or not), the courts will be slow to give such a provision binding contractual effect. The Court of Appeal’s judgment also makes clear that if parties wish to create an enforceable agreement by reference to an objective framework which can fill in any gaps later, they are well advised to set out in detail how this objective framework should operate and what factors should, or should not, be taken into account, insofar as these are known at the time the SPA is signed.

John Ogilvie, Neil Blake and Andrew Cooke consider the decision further below. Continue reading →

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19 December, 2018

Permission for expert evidence of financial market practice refused in relation to allegations of dishonesty but granted for other purposes

In a recent decision, the High Court refused  the defendant financial advisers and agents permission to call expert evidence of financial market practices in relation to an allegation that they had acted dishonestly: Carr v Formation Group Plc [2018] EWHC 3116.

The court noted that the standard of honesty is an objective one, and it is the court, not the market, that determines what should be regarded as objectively dishonest. Accordingly, evidence of market practice was not admissible in relation to any argument as to the appropriate standard, nor as to whether the defendant has failed to comply with that standard.

The evidence was, however, admissible to defend an allegation of conspiracy to injure by unlawful means and also in relation to an argument based on deliberate concealment under the Limitation Act 1980.

Julia Bihary, an associate in our disputes team, considers the decision further below. Continue reading →

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18 December, 2018

A litigator’s yearbook: 2018 (England and Wales)

As the end of another year approaches, we look back at some key developments from 2018 from the perspective of the commercial litigator. This post covers a range of topics such as privilege, disclosure, contract law, jurisdiction and various aspects of court procedure. We hope you will find it a helpful reference. Continue reading →

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11 December, 2018

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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