The Court of Appeal has held that, to obtain a freezing injunction, an applicant must establish either a “good arguable case” or “grounds for belief” that assets exist. It rejected the higher threshold of a “likelihood” that assets exist, but held that it is not enough for the applicant to assert that the respondent is apparently wealthy and must have assets somewhere: Ras Al Khaimah Investment Authority & Ors v Bestfort Development LLP & Ors  EWCA Civ 1014.
This decision provides greater clarity as to the test for the existence of assets, though it is not helpful that the Court of Appeal referred to either a “good arguable case” or “grounds for belief”. Although Longmore LJ indicated a preference for “grounds for belief”, and commented that “there is, no doubt, not much difference between the two”, introducing two potentially different thresholds risks creating uncertainty.
The decision also suggests that the courts may be willing to be more lenient than had previously been thought in relation to delays in applying for a freezing injunction. However, an applicant would be wise to treat this with extreme caution and always to apply as soon as possible. Not only does delay risk allowing the respondent actually to dissipate the assets before an injunction has been obtained, but (notwithstanding the comments in this case) on different facts a lengthy delay may well be a basis for refusing an injunction.
Gareth Keillor and Tom Brown consider the decision further below. Continue reading
In a recent decision, a majority in the Court of Appeal held, obiter, that the courts should consider the merits of a claim against an “anchor defendant” when exercising their ancillary jurisdiction under Article 6(1) of the Brussels Regulation 44/2001 (now Article 8(1) of the Brussels I (Recast) Regulation (1215/2012)). If there was no serious issue to be tried against the anchor defendant, then it could be inferred that the claim had been brought to remove the co-defendants from the courts of their domicile, which was not permitted: Sabbagh v Khoury  EWCA Civ 1120.
The relevance of the merits of the claim against the anchor defendant for the purposes of Article 6(1) of the Brussels Regulation has proved to be a difficult and controversial question. There has been academic debate on the issue and there are a number of relevant English and CJEU decisions. None, however, address the question squarely. The fact that the Court of Appeal was split on this issue highlights the difficulties parties face regarding the correct approach to the application of Article 6(1); a difficulty that is likely to remain until this issue is considered by the CJEU.
John Ogilvie, partner, James Allsop, senior associate, and Gabriella Polledri, associate, in our disputes team, consider the decision further below. Continue reading
In two recent decisions, the Court of Appeal has clarified that Article 3(3) of the Rome Convention does not apply to override the chosen law where there is an international element to the contract. In both cases, defendants seeking to set aside interest rate swaps entered into under ISDA master agreements subject to English law were therefore unable to rely on mandatory rules in their home jurisdictions: Banco Santander Totta SA v Companhia de Carris de Ferro De Lisboa SA  EWCA Civ 1267 and Dexia Crediop SPA v Comune di Prato  EWCA Civ 428.
Article 3(3) provides that, where a law is chosen to govern a contract but all the other elements relevant to the situation are connected with another country, the choice of law will not prejudice the application of the mandatory rules of that other country. The Court of Appeal held that it was legitimate, when considering whether all elements were connected with another country, to look to elements pointing to the contract having an international aspect, rather than a purely domestic one.
The decisions provide some comfort for commercial parties regarding the risk of a foreign country’s mandatory laws being applied to contracts governed by English law (whether pursuant to Article 3(3) of the Rome Convention or the equivalent provision of the Rome I Regulation, which is in similar terms).
It remains to be seen what will amount to an “international element” in any given case. These decisions suggest this may include the use of international forms of documentation, the international nature of the market and the existence of related contracts entered into in another jurisdiction. Continue reading
On Tuesday 22 August, the UK Government published a paper which outlines its position on the extent to which current EU rules on choice of law, jurisdiction and enforcement of judgments should continue to apply as between the UK and the EU27 post-Brexit. The paper, Providing a cross-border civil judicial cooperation framework, responds to the Position Paper on Judicial Cooperation in Civil and Commercial Matters published by the European Commission on 29 June (see our post).
Broadly, other than seeking wider enforcement of judgments, the Government agrees with the Commission’s proposals on the terms of separation, if no agreement on a future relationship can be reached. More interesting, however, are the comments on what that future relationship might look like.
Commercial parties will be pleased to see the Government has taken on board the importance of agreeing reciprocal rules, closely mirroring the current EU system, which will support cross-border trade after Brexit.
Read more of this post on our Brexit notes blog.
Herbert Smith Freehills has published a new edition of its well-regarded Guide on dispute resolution and governing law clauses in India-related commercial contracts. The Guide is intended to assist in-house counsel who handle India-related commercial contracts on behalf of non-Indian companies and who need to have a practical understanding of the nuances of drafting dispute resolution and governing law clauses in the Indian context.
The full digital edition can be downloaded in PDF by clicking on this link. If you would like to request a hard copy please email email@example.com.
We hope that you enjoy reading this sixth edition of the Guide. We would welcome your feedback.
In a recent decision, the High Court found that a claimant’s letter purporting to terminate a contract for the defendant’s repudiatory breach could not take effect as a notice of termination under the relevant contractual provisions. As the court found that the defendant was not in repudiatory breach as alleged, the claimant’s letter itself amounted to a repudiation of the contract: Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd  EWHC 1763 (TCC).
The decision highlights the important distinctions between contractual termination provisions and the common law doctrine of repudiation. Where a party purports to terminate for repudiatory breach and gets it wrong, it cannot necessarily rely on a contractual right of termination to save it from itself being in repudiatory breach.
Where a party wishes to be able to rely on a contractual right to terminate, it is best to say so expressly and ensure any contractual machinery is followed.
James Farrell, a partner, and Michael Barron, an associate in our dispute resolution team, consider the decision further below. Continue reading
Where a share option agreement provided that the option could be exercised only with board consent, the High Court has ordered specific performance of the agreement despite the lack of board consent. The court held that the veto was discretionary, rather than an unconditional right, and such discretion could not be exercised capriciously, arbitrarily or unreasonably: Watson v Watchfinder.co.uk Ltd  EWHC 1275 (Comm).
The decision illustrates the court’s willingness to find that a contractual discretion is limited by reading into the relevant clause a duty not to exercise the discretion capriciously, arbitrarily or unreasonably. While such a limit will not apply in every case, it did here due to the potential conflict of interest arising from the board’s ability to grant or withhold consent.
Where parties are required to exercise a contractual discretion, they should be alert to the potential scrutiny of their decisions and ensure that any discussions at board meetings or otherwise are meaningful and are properly minuted so as to evidence that a proper decision-making process has been followed.
Contractual discretions are also considered in the fourth edition in our contract disputes practical guides series: How far can you act in your own self-interest?: The role of good faith in commercial contracts.
Gregg Rowan and Anthea Brookes, a partner and associate in our disputes team, consider the decision further below. Continue reading
A recent Court of Appeal decision has clarified that financial institutions do not owe duties of care in tort in connection with their conduct of the past business review of interest rate hedging product sales announced by the FCA (then FSA) in 2012: CGL Group Limited & Ors v Royal Bank of Scotland plc & Ors  EWCA Civ 1073. This is a point on which there had been conflicting first instance decisions. The Court of Appeal’s decision was based a number of factors, including that such a duty would undermine the relevant statutory and regulatory regime.
The decision is also of interest more generally in illustrating the courts’ current approach to determining the existence (or otherwise) of a tortious duty of care to protect against economic loss in particular circumstances. Rather than applying a single test, the courts will tend to consider three approaches which, the court said, usually lead to the same answer and can be used as cross-checks on each other. These are: (1) whether the defendant assumed responsibility to the claimant; (2) the threefold test from Caparo Industries plc v Dickman  2 AC 605 (ie foreseeability, proximity and whether it is “fair, just and reasonable” to impose a duty); and (3) whether the addition to existing categories of duty would be incremental rather than indefinable.
For more information see our Banking litigation e-bulletin on the decision.
Lord Justice Jackson’s report on fixed recoverable costs has been published today. The key recommendation is to introduce a new intermediate track for claims between £25,000 and £100,000, which are of no more than modest complexity and could be tried in three days or less. The new track would have streamlined procedures and be subject to a grid of fixed recoverable costs (“FRC”). How this would operate is summarized below, but in broad terms the costs recoverable under the scheme would range from around £19,000 for a straightforward £30,000 claim to around £68,000 for a £100,000 claim at the upper end of the scale of complexity.
The report also recommends extending the current FRC regime to all fast track cases (not just personal injury, as currently) and introducing a voluntary pilot of a capped costs scheme in High Court claims valued at up to £250,000 (as previously announced – see outline here).
As Lord Justice Jackson notes, the next step will be for the government to consider the report and, no doubt, subject any proposals for reform to public consultation. Continue reading
Filed under Costs, Courts
The Court of Appeal has added what it has termed “a modest gloss” to the principles on when the court will restrain use of a privileged document disclosed in error, on the basis that there has been an obvious mistake. The court may grant relief where the solicitor inspecting the document does not spot the mistake, but refers the document to a colleague who appreciates the error before use is made of the document: Atlantisrealm Limited v Intelligent Land Investments (Renewable Energy) Limited  EWCA Civ 1029.
The question before the court is therefore not only what the first reviewer of a document appreciated, but also what other (including more senior) members of the team later appreciated (or presumably should have appreciated) when the document was shown to them. Continue reading