Part 36 offers to settle: some lessons from recent decisions

This post discusses practical points arising from four recent decisions relating to Part 36 offers – though of course each case will turn on its facts and so the points outlined will not necessarily be of universal application.

(1) A term as to costs which is (even slightly) inconsistent with the effect of Part 36 itself may invalidate the offer: James v James [2018] EWHC 242 (Ch).

(2) If making a second or subsequent Part 36 offer, there are ways to preserve (or lose) the costs protection of earlier offers: Ballard v Sussex Partnership NHS Foundation Trust [2018] EWHC 370 (QB).

(3) If making a payment on account of a claim, it will reduce the amount of any previous Part 36 offer unless stated otherwise: Gamal v Synergy Lifestyle Ltd [2018] EWCA Civ 210.

(4) A claimant’s Part 36 offer to accept 90% of the claim may well be effective if the claim succeeds in full: JMX v Norfolk and Norwich Hospitals NHS Foundation Trust [2018] EWHC 185 (QB). Continue reading

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Commercial Court finds non-party not entitled to assert litigation privilege

The Commercial Court has held that a non-party who controlled litigation was not entitled to assert litigation privilege against the party it was controlling and who was the party to the proceedings: Minera Las Bambas SA v Glencore Queensland Ltd [2018] EWHC 286 (Comm).

The decision is a reminder that litigation privilege belongs to the party to the litigation. A third party who controls litigation but is not itself party to the litigation may have other rights in respect of the material covered by litigation privilege in the hands of the litigating party, such as joint or common interest privilege. However, these rights will not allow the third party to assert privilege as against the litigating party.

The decision also contains a puzzling suggestion that the claim to privilege failed for the additional reason that the documents were prepared for use in other proceedings (in this case Peruvian proceedings) rather than the current proceedings in which the right to privilege was asserted. It is not clear, however, why that should be relevant: litigation privilege will ordinarily apply where documents have been prepared for the dominant purpose of any litigation that was in reasonable contemplation at the relevant time, whether or not such litigation ultimately ensued. As it’s put in Charles Hollander’s Documentary Evidence, litigation privilege “can be claimed in this jurisdiction in relation to litigation in foreign courts, even if the foreign court knows no such privilege”.

We understand that the Court of Appeal has refused permission to appeal against the decision. Continue reading

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High Court finds there is no power to stay in favour of prior proceedings in non-EU court where there is an English non-exclusive jurisdiction agreement

The High Court has held that where there was a non-exclusive jurisdiction clause in favour of an EU member state (England), and proceedings were commenced first in a non-member state (the Isle of Man), the English court had no power or discretion to decline jurisdiction: UCP Plc v Nectrus Limited [2018] EWHC 380 (Comm).

The recast Brussels Regulation contains new powers (under articles 33 and 34) to stay proceedings in favour of a non-member state where the non-member state proceedings are first in time. The court held that those provisions do not apply where jurisdiction is taken on the basis of a jurisdiction clause, even if the clause is non-exclusive.

Assuming the same approach is adopted in other cases, this will mean a party can insist on pursuing proceedings in a member state under a (non-exclusive) jurisdiction agreement, even where there are already proceedings in a non-member state which are not in breach of the jurisdiction clause.

The decision has potentially broader implications. If the judge is correct and the only power to stay in favour of a non-member state is where the facts come within article 33 or 34, this will mean there is no discretion to stay in other circumstances. So, where the proceedings in the non-member state were second in time, the English court could not defer to that court presumably even if there was an exclusive jurisdiction clause in favour of the non-member state or the proceedings concerned eg foreign land. Before the recast Brussels Regulation entered into force, the English courts held on a number of occasions that they had the power to stay in these circumstances – see for example the discussion in Plaza BV v The Law Debenture Trust Corporation [2015] EWHC 43 (Ch) (post) and Ferrexpo AG v Gilson Investments Ltd [2012] EWHC 721 (Comm)  (post). If UCP is correct and there is now no power to do so unless the non-member state proceedings are first in time, the only residual power the court will presumably have is to stay on case management grounds in “rare and compelling cases” (as in Reichold Norway SA v Goldman Sachs International [1999] 1 All ER (Comm) 40).

In the present case the court also considered, obiter, that even if the common law had applied, given the non-exclusive jurisdiction clause, strong, or possibly very strong, reasons would be required to displace the English proceedings. Continue reading

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Supreme Court decision makes it harder for directors to establish limitation defence where they have benefited from breach of fiduciary duty

For the purposes of limitation, directors of a company are treated as trustees, given that they owe fiduciary duties to the company. There is a six year limitation period for actions by a beneficiary to recover trust property or in respect of any breach of trust (section 21(3) of the Limitation Act 1980). However, there is no limitation period where the trustee was fraudulent, or where the action is to recover trust property or its proceeds in the possession of the trustee or previously received by the trustee and converted to his or her use (section 21(1)(b)).

In a recent case the Supreme Court held that, as directors are fiduciary stewards of the company’s property, they are treated as being in possession of that property from the outset. Accordingly, where directors have benefited from the misappropriation of company property, they will not be entitled to a limitation defence in claims by the company – regardless of whether the directors ever had legal or beneficial ownership of the property: Burnden Holdings (UK) Ltd v Fielding [2018] UKSC 14.

For more information see this post on our Private Wealth and Trust Disputes Notes blog.

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Court of Appeal finds that factual information received by solicitor in course of acting for client was not privileged

In a recent decision, the Court of Appeal held that a solicitor could not object on grounds of privilege to giving evidence, where the questions related to factual information received by the solicitor from third parties in the course of acting for his client: Kerman v Akhmedova [2018] EWCA Civ 307.

The decision is based, at least in part, on the well-established principle that communications with a third party are not covered by legal advice privilege, which is confined to lawyer / client communications for the purpose of giving or obtaining legal advice. Third party communications can only be privileged, if at all, under litigation privilege, which applies to documents or communications prepared for the dominant purpose of litigation which is in reasonable contemplation. Here, the information in question was obtained by the solicitor from third parties, and did not relate to contemplated litigation. Accordingly, there was no basis for a claim to privilege.

The Court of Appeal’s decision appears to go further, however, suggesting that a solicitor cannot refuse to answer questions on grounds of privilege where the client would not be able to do so. That statement is uncontroversial if it is limited to where, as in this case, the information is obtained from third parties in circumstances where litigation privilege is not available. If however it is intended to include situations where the solicitor has obtained the information solely by means of a privileged communication from the client, that is a much more contentious proposition, going beyond authorities to date, and would appear to risk undermining the privilege.  Continue reading

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Supreme Court refuses to validate service retrospectively where there was no prior agreement to email service

In a recent decision, the Supreme Court declined to order that steps taken by the claimant to draw the claim form to the attention of the defendant by email should amount to good service despite the claimant (a litigant in person) having failed to jump through the necessary procedural hoops for email service. The result was that the claim form expired unserved in circumstances where a fresh action by the claimant was likely to be time-barred: Barton v Wright Hassall LLP [2018] UKSC 12.

This case acts as a reminder that proceedings may be served by email only if the party to be served (or its solicitor) has previously indicated in writing that it is willing to accept service by email, which will include where the solicitor’s notepaper sets out an email address and states that it may be used for service. The Supreme Court in this case suggested that this provision may be ripe for reconsideration by the Civil Procedure Rules Committee, but in the meantime that remains the rule.

The decision also illustrates that litigants in person cannot generally expect greater indulgence than legally represented parties in terms of compliance with rules and court orders. As Lord Sumption put it, “unless the rules and practice directions are particularly inaccessible or obscure” (which he did not consider was the case here), it is reasonable to expect litigants in person to familiarise themselves with the applicable rules.  Continue reading

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PAG v RBS: Court of Appeal dismisses swaps mis-selling and libor manipulation claims

In its first substantive decision on allegations of LIBOR manipulation and interest rate hedging product mis-selling, the Court of Appeal has dismissed the claimant’s appeal with the result that all claims against the defendant bank have failed: Property Alliance Group v The Royal Bank of Scotland [2018] EWCA Civ 355.

The decision has clarified a number of points relating to claims for negligent misstatement and misrepresentation against financial institutions. In particular, the Court of Appeal held that, absent an advisory relationship or special circumstances in which a specific broader duty is established, a financial institution owes no duty to explain the nature or effect of a proposed arrangement to a prospective customer. The extent of the duty will typically be a duty not to misstate.

The decision is also of interest regarding the requirement to prove falsity of a LIBOR related representation. The Court of Appeal found that, in selling GBP LIBOR linked products, the defendant bank made the narrow implied representation that it was not itself seeking to manipulate GBP LIBOR and did not intend to do so in the future. However, on the facts, the claimant could not prove that the representation (concerning GBP LIBOR) was false. The Court of Appeal held that falsity will need to be specifically proven; it would not be sufficient to invite the court to draw inferences on the basis of conduct relating to other benchmarks (such as LIBOR in a different currency) or indeed findings of the regulator.

For more information on this case, see our Banking litigation e-briefing.

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Choice of law, jurisdiction and enforcement of judgments post-Brexit: No surprises in EU’s draft withdrawal agreement

So far as choice of law, jurisdiction and enforcement of judgments are concerned, the EU’s draft withdrawal agreement, published last week, is largely consistent with its previously declared negotiating position, as set out in its June 2017 position paper outlined here. (The relevant provisions of the draft withdrawal agreement are summarised at the end of this post.)

An important distinction, however, is that references to the date of the UK’s withdrawal from the EU have been replaced with references to the end of the transition period following the UK’s withdrawal. So, if arrangements for a transition period can be agreed more generally, the existing arrangements relating to choice of law, jurisdiction and enforcement of judgments will continue at least until the end of that period, and beyond in some respects as outlined below.

The draft withdrawal agreement does not reflect the more ambitious terms proposed in the UK’s August 2017 position paper (outlined here) regarding continuation of the current arrangements for enforcement of judgments. Under the EU’s proposals, current enforcement rules would apply only to judgments given before the relevant date (ie the UK’s withdrawal or the end of the transition period); under the UK’s proposals, those rules would apply so long as the proceedings were commenced before the relevant date or the jurisdiction agreement underlying the judgment was entered into before the relevant date. The UK’s proposals would therefore give a much longer tail to the current enforcement rules.

Nor does the draft withdrawal agreement address the question of the future relationship between the UK and the EU in these areas, and the EU’s position on this question remains opaque. Prime Minister Theresa May touched on this question briefly in her speech on Friday (2 March 2018) regarding the UK’s future economic partnership with the European Union, saying the UK would want the agreement to cover civil judicial cooperation, “where the EU has already shown that it can reach agreement with non-member states, such as through the Lugano Convention, although we would want a broader agreement that reflects our unique starting point”.

The UK government’s August 2017 position paper outlined its intentions for the future relationship in a bit more detail, indicating that, in addition to a bespoke agreement with the EU which “closely reflects” current principles, the UK would seek to join the Lugano Convention (which applies between EU member states, Norway, Iceland and Switzerland) and would also participate in the Hague Convention on Choice of Court Agreements 2005 (which currently applies between EU member states, Mexico and Singapore where there is an exclusive choice of court agreement). To join Lugano, the UK would require unanimous agreement of the other contracting states (including the EU), but it can accede to the Hague Convention without any need for consent. Continue reading

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TCC decision illustrates need to consider impact of contractual amendments on liquidated damages clauses

In a recent decision, the Technology and Construction Court (TCC) held that a contractor under a sub-contract (which incorporated standard LOGIC conditions) could not claim liquidated damages when a contractual milestone was not met, due to an amendment which had replaced the absolute obligation for the sub-contractor to achieve that milestone by a particular date with an obligation to use “fullest endeavours”: HSM Offshore SV v Aker Offshore Partner Ltd [2017] EWHC 2979 (TCC).

This case demonstrates the risks, where liquidated damages are available, of making amendments to absolute obligations, or otherwise using vague wording which makes it more difficult to establish a breach of contract. This may jeopardise the ability to claim liquidated damages.

The decision also considers when estoppel principles will (or will not) apply in relation to the interim payment of invoices. The sub-contractor was unsuccessful in arguing that the employer’s approval and payment of monthly invoices on a “without prejudice” basis prevented the employer seeking to claw back sums it subsequently argued were not properly payable. This is likely to provide some comfort to customers and employers that making interim or stage payments (which the judge noted are common to almost all building and manufacturing contracts) is unlikely to prevent subsequent attempts to claw back sums which it can be shown are not properly due and payable, where there are contractual rights to do so. Expressly making such payments “without prejudice” is likely to be of assistance in this regard.

Rachel Lidgate, a partner in our disputes team, and James Doe, a partner in our construction team, consider the decision further below. Continue reading

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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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