Commercial litigation podcast series – Episode 20: General update

27 July, 2023

In this 20th episode of our series of commercial litigation update podcasts, we look at the High Court’s decision dismissing ClientEarth’s attempt to bring a derivative action against Shell’s directors, the Supreme Court’s rather dramatic recent decision on litigation funding agreements, a brief update on a development relating to representative actions, some interesting recent contract law cases, and a Supreme Court judgment which clarifies the extent of a bank’s duties in paying out from customer accounts.

This episode is hosted by Maura McIntosh, a professional support consultant in our litigation team, who is joined by Sarah McNally, an insurance disputes partner, and Ceri Morgan, a professional support consultant in our banking litigation team.

 

Our podcast is available on iTunes, Spotify and SoundCloud and can be accessed on all devices. A new episode is released every couple of months. You can subscribe and be notified of all future episodes.

Below you can find links to our blog posts on the developments and cases covered in this podcast.

Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608
Sarah McNally
Sarah McNally
Partner
+44 20 7466 2872
Ceri Morgan
Ceri Morgan
Professional support consultant
+44 20 7466 2948

Supreme Court decision today means most existing UK litigation funding agreements likely to be unenforceable

26 July, 2023

In a judgment handed down this morning, the Supreme Court has held that litigation funding agreements with third parties who play no part in the conduct of litigation, but who are to be paid a share of any damages recovered by the claimant, are “damages-based agreements” (or DBAs) within the meaning of the relevant legislation which regulates such agreements. Such agreements must therefore comply with the relevant regulatory regime and, if they do not, they are unenforceable: Paccar Inc v Road Haulage Association Ltd [2023] UKSC 28.

The issue arose in the context of the “Trucks” litigation in the Competition Appeal Tribunal (CAT). Since it was common ground that the litigation funding agreements entered into by the applicants for collective proceedings orders (CPOs) in that case did not comply with the regime governing DBAs, the effect of the Supreme Court’s decision is that the agreements are unenforceable. That means that there are no effective funding arrangements for the claims, which is a pre-requisite for a claim to be certified as collective proceedings in the CAT.

But the consequences go much further than this case. As the Supreme Court recognised, the likely effect of the decision in practice is that most third party litigation funding agreements currently in place for litigation in the English courts will be unenforceable as the law currently stands, since participants in the litigation funding market have generally assumed that their agreements are not DBAs and therefore do not have to comply with the relevant regulatory regime.

And specifically in the context of competition cases, the decision would appear to prohibit litigation funding agreements where they are entered into in respect of opt-out collective proceedings in the CAT, at least where the funder’s remuneration is calculated by reference to a share of the damages ultimately recovered, since the statutory regime governing such cases provides that a DBA is unenforceable if it relates to opt-out collective proceedings. This is the case for a number of funding agreements in CPO cases currently – which so far have progressed past certification with this appeal pending in parallel. There is now a question of how any such existing, potentially non-compliant, funding arrangements can be amended (if at all) and how the CAT will case manage that, especially for the claims well advanced past the certification stage.

The implications of the decision are therefore potentially dramatic, both for collective proceedings in the CAT – which almost invariably rely on funding from third party litigation funders – and for other cases supported by litigation funders. While funders may be able to amend their models so that they comply with the regulatory regime governing DBAs, and potentially renegotiate existing agreements so that they comply, it remains to be seen how that will be done, and whether there will ultimately be amendments to the statutory regime to permit the use of (at least some) DBAs in the context of opt-out collective proceedings. One immediate question is whether a funding arrangement which provides for a return based on a multiple of the funding, rather than a share of damages, will solve the problem in opt-out collective proceedings.

Continue reading →

Supreme Court clarifies so-called Quincecare duty on financial institutions executing customer payments

14 July, 2023

The Supreme Court last week handed down its seminal judgment in Philipp v Barclays Bank UK plc [2023] UKSC 25, considering the application of the so-called Quincecare duty to the victim of an “authorised push payment” fraud (in which the victim is induced to authorise their bank to send a payment to a bank account controlled by the fraudster).

The decision establishes that a bank’s duty to act with reasonable skill and care when processing customer payments is limited and applies only to “interpreting, ascertaining, and acting in accordance with the instructions” of the customer. The so-called Quincecare duty is simply an application of this general duty above and arises specifically where an agent of the customer purports to give a payment instruction and the bank has reasonable grounds for believing that it is an attempt to defraud the customer. It therefore does not arise in the authorised push payment context, where the mandate is validly made by the victim of the fraud.

For more information on the decision and its implications for financial institutions see this post on our Banking Litigation Notes blog.

Supreme Court finds no continuing nuisance simply because polluting substance remains on claimants’ land

18 May, 2023

A recent Supreme Court decision has confirmed the orthodox position in relation to how the law of limitation applies to claims in private nuisance, in particular as to when there will be a “continuing nuisance” such that the limitation period starts afresh from day to day. This has significant implications for environmental claims which are framed in private nuisance and based on a one-off escape of a polluting substance: Jalla v Shell International Trading and Shipping Co Ltd [2023] UKSC 16.

The bottom line is that the court will not find there is a continuing nuisance simply because the relevant substance (such as, on the assumed facts in this case, the presence of oil from an oil spill) continues to be present on the claimants’ land. There must be some repeated activity or ongoing state of affairs for which the defendant is responsible, which is outside the claimants’ land, and which causes continuing interference with the use and enjoyment of that land.

Many environmental claims may involve a continuing nuisance of this sort, for example where the alleged nuisance is comprised of smoke, chemicals or odours from an industrial site that continues to operate. However, as the Supreme Court’s decision shows, claims based on a single one-off event will not comprise a continuing nuisance, even if the impact of that event on the claimants’ land has not been rectified.

It should also be noted that the questions of whether the tort of private nuisance can be committed by a single one-off event, and/or where the nuisance emanates from the sea, were assumed but not decided in the appeal. Continue reading →

Supreme Court decision gives further clarity on claims by distressed companies against directors

2 March, 2023

Although not directly concerned with directors’ liabilities, the recent Supreme Court judgment in Stanford International Bank Ltd v HSBC Bank PLC [2022] UKSC 34 (previously considered here) provides further clarity on the circumstances in which a distressed or insolvent company may seek to make claims against its directors.

The key aspects affecting directors’ liabilities are that:

  1. at least where unlawful preference rules are not engaged, loss to the company is a necessary element of the company’s claims against its directors for misappropriation of the company’s assets; and
  2. building on the principles considered in the landmark BTI v Sequana decision (considered here), a company’s losses for these purposes are not one and the same as those suffered by its creditors.

This means that, where other remedies are not available to recover sums paid out to third parties in breach of duty, insolvency practitioners and creditors alike should not assume that recourse will lie against defaulting directors to increase the amounts distributable upon liquidation.

For more information see this opinion piece from our Restructuring, Turnaround and Insolvency team.

Supreme Court finds no entitlement to payment in circumstances not addressed by express contractual terms   

14 February, 2023

The Supreme Court has, by a majority, allowed an appeal against a Court of Appeal judgment (considered here) that granted an award for unjust enrichment where a property was sold for less than the value required to entitle the claimant to a fee under the express terms of the contract: Barton and others v Morris and another in place of Gwyn Jones (deceased) [2023] UKSC 3.

By providing that payment would be made if the property was sold for a particular value and remaining silent as to what would happen if the property was sold for less than that value, the contract had excluded any obligation to pay the claimant in such a scenario.

There was no basis on which a term could be implied in fact or by law requiring the claimant to receive reasonable remuneration for his service if the property sold for a lower price. The claimant had agreed to receive a fee that was significantly higher than reasonable if the property was sold for a particular value, but had also taken on the contractual risk of receiving nothing should the property be sold for less than that value.

A claim for unjust enrichment could not step in to mend the bargain that the claimant had made. In any event, the Supreme Court rejected the claimant’s argument that there had been a “failure of basis” as a result of the property not being sold for the stated value, so as to found a claim in unjust enrichment. The fact that the contract provided for payment to be made if the property was sold for a particular value did not necessarily mean that the contract was based on the property being sold for that value.

The judgment raises a number of interesting points regarding the extent to which the courts will assist parties whose contract does not include comprehensive terms for payment. The parties’ dispute probably would have been avoided if the contract between them had fully addressed, in express terms, the different scenarios in which a fee should or should not be paid to the claimant. This underlines the importance of drafting contracts as clearly as possible, with a view to minimising uncertainty. Continue reading →

Commercial litigation podcast series – Episode 16: General update

1 December, 2022

In this 16th episode of our series of commercial litigation update podcasts, we look at a couple of recent decisions relating to privilege, two interesting Court of Appeal decisions on good faith and force majeure respectively, and finally we discuss the recent Supreme Court decision in the BTI v Sequana case, which clarifies when directors owe obligations to consider the interests of creditors.

This episode is hosted by Anna Pertoldi, a partner in our litigation team, who is joined by Maura McIntosh, a professional support consultant, and Richard Mendoza, a senior associate.

Our podcast is available on iTunes, Spotify and SoundCloud and can be accessed on all devices. A new episode is released every couple of months. You can subscribe and be notified of all future episodes.

Below you can find links to our blog posts on the developments and cases covered in this podcast.

Anna Pertoldi
Anna Pertoldi
Partner
+44 20 7466 2399
Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608
Richard Mendoza
Richard Mendoza
Senior associate
+44 20 7466 2024

Supreme Court finds Civil Liability (Contribution) Act 1978 applies only where contribution claim governed by English law

22 November, 2022

The Supreme Court has held that the Civil Liability (Contribution) Act 1978 does not have overriding effect and therefore applies only where domestic conflict of laws rules indicate that the contribution claim in question is governed by English law: The Soldiers, Sailors, Airmen and Families Association – Forces Help v Allgemeines Krankenhaus Viersen GmbH [2022] UKSC 29.

In doing so, the Supreme Court disagreed with the conclusion reached by the Court of Appeal and the High Court. The effect in the current case was that, since the underlying contribution claim was governed by German law, and under German law the relevant limitation period had expired, the contribution claim could not be pursued.

The decision is significant in establishing that a contribution claim brought in the English courts will be determined according to the law which governs it applying the usual domestic conflict of laws rules (which will ordinarily, but not necessarily, be the law governing the underlying claims). Only if that law is English law will the 1978 Act apply. Parties wishing to bring contribution claims should therefore keep a close eye on the applicable limitation period under any relevant foreign law, as that law will also govern questions of limitation as a result of the Foreign Limitation Periods Act 1984. Continue reading →

Key Supreme Court insolvency ruling clarifies stance on creditor duties

18 October, 2022

A much-anticipated Supreme Court judgment has confirmed the position as to when directors owe obligations to consider the interests of creditors, dismissing an appeal against the Court of Appeal decision in this case: BTI v Sequana [2022] UKSC 25.

In its decision, a majority of the Supreme Court has:

  • affirmed the existence of the duty to consider the interests of creditors;
  • clarified that it is engaged where the directors know, or ought to know, that the company is insolvent or bordering on insolvency or that an insolvent liquidation or administration is probable;
  • explained that where interests of creditors are engaged and diverge from those of shareholders: if liquidation is inevitable, creditors’ interests are paramount; and
  • prior to that, there will be a fact sensitive balancing exercise to weigh up the competing interests by reference to the degree of distress.

For more information on the decision and its practical implications, see this briefing prepared by our Restructuring, Turnaround and Insolvency team.

Supreme Court clarifies test for re-opening judgment before order is sealed

23 June, 2022

It has long been established that a judge has the power to re-open their judgment or order at any time until the order has been sealed. In a recent decision, the Supreme Court has clarified the approach a judge should adopt if asked to exercise this power, finding that the  essential task is to do justice in accordance with the overriding objective of the CPR: AIC Ltd v Federal Airports Authority of Nigeria [2022] UKSC 16.

The Supreme Court rejected the notion that the discretion is constrained by a need to show “exceptional circumstances” before a judgment can be revisited, as stated in the pre-CPR authorities. It also rejected the Court of Appeal’s decision that a two-stage process is needed, with the judge first considering whether the application should even be entertained before going on to consider the application on its merits. That would be inconsistent with the flexible nature of the judge’s task in weighing the relevant factors.

However, the Supreme Court emphasised that a judge considering such an application should not start from a position of neutrality. Sufficient weight must be given to the principle of finality in litigation, which is inherent in the overriding objective, and is particularly important where the order in question is a final order. The question for the judge will be whether the factors in favour of re-opening the judgment are sufficient to outweigh the finality principle, together with any other factors supporting the original order. Continue reading →