Commercial Litigation Round-Up – Sep 2024
We have collated a brief round-up of important recent cases, procedural developments and hot topics for businesses to help in-house counsel stay up to date, particularly those who are involved in managing disputes. You can access more detailed briefings using the links; and if you would like further information on a topic then please contact us.
Part 3 – Hot topics for businesses (impact of UK general election; investigations and dawn raids)
1. Contract/tort law
Our pick of the recent contract and tort law cases for commercial lawyers:
RTI Ltd v MUR Shipping BV [2024] UKSC 18
The Supreme Court held that ‘reasonable endeavours’ to overcome a force majeure event do not include accepting an offer of non-contractual performance. Sanctions were imposed on the parent of the claimant company preventing the claimant from receiving payment in US dollars without undue delay. The claimant invoked a contractual force majeure clause. Although the agreement expressly provided for payment in US dollars, the defendant offered to pay in Euros instead of dollars and argued that acceptance of Euros by the claimant would be ‘reasonable endeavours’ that would ‘overcome’ the force majeure, as provided for in the contract. The Supreme Court, unanimously overruling the Court of Appeal, held that the claimant was not obliged to accept this offer of non-contractual performance. The Supreme Court held that, “the relevant question is whether reasonable endeavours could have secured the continuation or resumption of contractual performance. It is reasonable steps towards that end with which the reasonable endeavours proviso is concerned… It is not concerned with the steps that could or should have been taken to secure some different, non-contractual, performance. The object of the reasonable endeavours proviso is to maintain contractual performance, not to substitute a different performance.” Parties should take this into account when negotiating force majeure clauses. If they wish to allow for non-contractual performance, they should do so expressly and clearly. See here for further details.
Drax Smart Generation Holdco Ltd v Scottish Power Retail Holdings Ltd [2024] EWCA Civ 477
The Court of Appeal has given guidance on the interpretation of notice of claims provisions as commonly included in SPAs to govern the procedure around warranty and indemnity claims. The Court emphasised that these provisions should be interpreted in light of their commercial purpose, which includes enabling the recipient to make factual enquiries and gather evidence, and to assess the merits of the claim. The Court warned against them becoming, “a technical minefield to be navigated” – a commercial approach that will be welcomed by buyers looking to bring claims against sellers.
In its notice of claim for breach of warranties in an SPA for the sale and purchase of the Company, the claimant buyer had quantified its losses based on the losses sustained by the Company. However, in its Particulars of Claim, it pleaded a case that the loss was suffered by the claimant at completion and consisted of the difference in the value of the shares in the Company. The Court held that despite this difference, the 'the nature of the claim’ and the ‘amount claimed' had been sufficiently notified in accordance with the notice clause. There was nothing in the language of the clause or in its commercial purpose which required the claimant to spell out that the damages claimed would be based on the difference in value of the shares in the Company. Similarly, to satisfy ‘the amount claimed’ all that was required was a statement of amount claimed with the buyer’s calculation of the loss suffered; there was nothing in the clause to set in stone the calculation of the loss which was stated in the notice of claim. See further detail here.
King Crude Carriers SA & Ors v Ridgebury November LLC & Ors [2024] EWCA Civ 719
The Court of Appeal held that there is a principle of English law that where the accrual of an obligation to pay was subject to a condition precedent and the putative debtor wrongfully prevented that condition from being fulfilled, the condition would be treated as having been dispensed with or fulfilled. The debt would therefore accrue, and the amount promised could be recovered as a claim in debt. The principle reflects the maxim that a person should not be permitted to take advantage of their own wrong. In this case, the buyer of a ship was required to pay a 10% deposit. It was a condition precedent to the deposit becoming due that an account would be opened by the escrow account holder. In breach of contract, the buyer failed to provide the documentation necessary to open the account. Applying the principle, the buyer was liable for the full amount of the deposit in debt; the seller was not restricted to a remedy in damages which would have been significantly lower as the market had risen by the time of the breach. The buyer was not able to rely on its own breach to avoid incurring liability for the deposit by preventing fulfilment of a condition precedent to the accrual of that debt. The parties can contract out of the principle either expressly or implicitly as the legal basis for the principle is that it represents the presumed contractual intention of the parties.
Lifestyle Equities CV & Anor v Ahmed & Anor [2024] UKSC 17
The Supreme Court considered whether the directors of a company could be liable as accessories for a tort committed by the company. The claimants brought proceedings against a wholesale clothing business for trademark infringement (a tort of strict liability). They also sued the directors of the business on the basis that they had authorised or procured the companies to do the acts complained of and therefore they were jointly and severally liable for the trademark infringement. At first instance, the directors were found jointly and severally liable with the company for the acts of infringement and it was held that their motives or intentions were not relevant to their liability. The Court of Appeal dismissed their appeal but the Supreme Court allowed the directors’ appeal and held that the ordinary principles of tort liability apply to directors. A person who causes another person to do a wrongful act will only be jointly liable as an accessory for the wrong done if they have “knowledge of the essential facts which make the act done wrongful”. This is the position even where, as in the case of infringement of intellectual property rights, the tort does not itself require such knowledge and is one of strict liability.
2. Procedural updates
Case law - privilege
Gorbachev v Guriev [2024] EWHC 622 (Comm) is a reminder that the voluntary waiver of privilege over certain documents for strategic use can result in the collateral waiver of privilege over other connected documents to ensure that the waiver does not give an incomplete or unfair picture. The claimant waived privilege over the first of two chronologies prepared by his barrister in 2012 in order to demonstrate consistency between his earlier instructions in 2012 and his case as pleaded. On the defendant’s application, the Court ordered the claimant also to disclose a later version of the chronology as well as any documents that contained or evidenced his instructions at that time. The Court ruled that to disclose an early draft of the chronology without disclosing the later version or documents evidencing the claimant’s instructions risked creating a misleading impression and would deprive the defendant of the opportunity to satisfy themselves that what the claimant had chosen to release represented the whole material relevant to the issue. However, any privileged material contained in the documents that was not relevant to the issue in question could be redacted before copies were provided. See further here.
Case law – starting proceedings
In Morris & Ors v Williams & Co Solicitors (A Firm) [2024] EWCA Civ 376 the Court of Appeal gave guidance on when multiple claimants may bring claims in one claim form and one set of proceedings, disapproving the tests outlined in Abbott v Ministry of Defence [2023] EWHC 1475 (KB). There are logistical and financial implications if claimants are required to issue separate claim forms and pay separate issue fees.
134 claimants brought professional negligence claims against a firm of solicitors. The claims were issued using a single claim form. The defendants sought to strike out the claims on various grounds including that they did not comply with CPR 19.1 and 7.3 (which provides that "a claimant may use a single claim form to start all claims which can be conveniently disposed of in the same proceedings"). The Court of Appeal held that Abbott wrongly suggested that CPR 7.3 required the court to apply a "real progress" test, i.e. to consider if there are likely to be common issues of sufficient significance that their determination would constitute real progress towards the final determination of each claim in a set of claims. The Court of Appeal held that CPR 19.1 and 7.3 mean what they say – there is no test beyond the words of CPR 7.3. Any number of claimants or defendants may be joined as parties to proceedings, and claimants may use a single claim form to start all claims which can be conveniently disposed of in the same proceedings. The court will determine what is convenient according to the facts of every case. On the facts of this case, given the judge's finding that common questions of law or fact arose in all the claimants’ claims, the Court of Appeal agreed that the claims brought in one claim form could be conveniently disposed of in the proceedings. See further here.
Case law – non-party access to copies of court documents
Under the Civil Procedure Rules (CPR), the general rule is that a non-party may obtain a copy of a statement of case (such as particulars of claim or defence) but not any documents filed with it. This rule is an expression of the open justice principle – the aim is to facilitate the public’s understanding and scrutiny of the justice system by permitting open access to statements of case. However, it can raise concern with litigants where statements of case contain, for example, confidential information. In WH Holding Ltd v E20 Stadium LLP [2024] EWHC 817 (Comm) the High Court gave guidance on what basis a court might make an order under CPR 5.4C(4) restricting the supply of court documents to non-parties. The Judge emphasised that departing from the default rule of open access would require clear justification. The default rule was likely to be departed from only if and to the extent it was shown to be necessary to do so to secure the proper administration of justice and/or to protect the interests of the party whose application was being considered. Further, any such departure must be no more than was proportionate (i.e. the minimum interference with the general rule necessary to protect the interests of the applicant).
The claimant had argued that the statements of case contained confidential information and copies should not be provided to non-parties. The judge found that only certain monetary sums referred to in the statements of case were sufficiently confidential. The proportionate approach was to order that the sums be redacted before a copy of the document was supplied from the court records to a non-party. See further here.
Case law - injunctions
Decisions about the availability of injunctive relief are becoming more important and more common in the context of Russian sanctions and claims being brought in the Russian courts in breach of jurisdiction agreements. In Barclays Bank PLC v PJSC Sovcombank & Anor [2024] EWHC 1338 (Comm) the High Court granted a final anti-suit injunction (ASI) and a final anti-enforcement injunction (AEI) in respect of proceedings brought by the defendant in Russia in breach of the exclusive element of an asymmetric jurisdiction clause. The Judge made some interesting and helpful observations regarding the granting of final AEIs. While AEIs may be viewed as an exceptional measure, the Judge noted that earlier cases confirmed that there is no separate jurisdictional requirement of "exceptionality" over and above the reasons for granting anti-suit injunctive relief. He also drew a distinction between applications made before, and after, judgment in the foreign proceedings, with the former being less intrusive. This suggests that applications made when the foreign proceedings are at an early stage will have greater chance of success. See further details here.
In Magomedov & Ors v PJSC Transneft & Ors [2024] EWHC 1176 (Comm) the High Court ordered the continuation of an anti-anti-suit injunction (AASI) and also granted the claimants an anti-enforcement injunction. The AASI prevented the defendants in the English proceedings from enforcing anti-suit injunctions (ASI) made earlier by the Moscow Commercial Court against the claimants, and was intended to enable the English court to determine the defendants' jurisdictional challenge in the English proceedings. The case is of particular interest because it concerned the unusual circumstances where an AASI was granted in a non-contractual case (i.e. it was not a case where the AASI was granted to enforce an exclusive jurisdiction clause in favour of the English courts) where the claimant was not resident or domiciled in England. Usually, in a non-contractual case, the court will only grant an AASI where it is persuaded that: (i) England is the natural forum and (ii) further pursuit of the foreign proceedings would be vexatious and oppressive or unconscionable. However, this decision illustrates that an AASI may, in some circumstances, be granted on an interim basis without the court necessarily deciding that England is the natural forum. This may be appropriate where there is a pending jurisdiction challenge which will decide the question of natural forum and the grant of a foreign ASI may frustrate the English court’s ability to determine that challenge.
Procedural rules
Enforcement of English judgments - UK ratifies Hague Judgments Convention
In June 2024, the UK ratified the Hague Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (2019 Convention). The 2019 Convention provides a framework for the enforcement of judgments between contracting states and will further facilitate the enforcement of English judgments abroad following Brexit (when other enforcement regimes ceased to apply). The 2019 Convention will enter into force in the UK on 1 July 2025 and will apply only to judgments given in proceedings commenced after that date.
The UK is already a party to the 2005 Hague Convention on Choice of Court Agreements which also provides for the enforcement of judgments. However, the 2019 Convention will apply in a wider range of circumstances. For example, it will apply to judgments given pursuant to asymmetric and non-exclusive jurisdiction agreements, which will be of particular interest for the financial and other sectors which favour such clauses in agreements. Other states which have ratified the 2019 Convention include the EU states (excluding Denmark), Uruguay and the Ukraine, and the list will continue to expand. See further detail here.
3. Hot topics for businesses
Impact of the UK election on draft legislation relating to dispute resolution
Prior to the UK general election being called, draft legislation relating to amendments to the Arbitration Act 1996 and to the enforceability of certain litigation funding arrangements was making its way through Parliament. However, neither set of legislation made it through the Parliamentary wash-up process (where some legislation is passed on an accelerated basis before Parliament is prorogued). It was widely expected that the Arbitration Bill would be reintroduced by the new Labour government. The background briefing notes to the King’s Speech delivered on 17 July 2024 confirmed that the Arbitration Bill to amend the Arbitration Act 1996 would be re-introduced in this Parliament, and it has since passed its second reading in the House of Lords. The Arbitration Bill 2024 implements the recommendations made in a 2022 Law Commission review of Arbitration Law. These include several new sections, including to (i) expressly provide for the summary disposal of cases, and (ii) provide that an arbitration agreement is governed by the law of the seat, unless the parties expressly agree otherwise, and that a choice of governing law for the main contract does not, of itself, constitute an express choice of governing law for the arbitration agreement. The re-introduced Bill now includes an exclusion for investment treaty arbitration provisions from this new section on the law applicable to arbitration agreements.
However, there was no mention in the King’s Speech of the bill to reverse the impact of the Supreme Court’s judgment in PACCAR where a majority of the Court ruled that litigation funding agreements (LFAs) that remunerate the litigation funder by reference to a proportion of the damages ultimately recovered constitute damages-based agreements. The effect of this decision was that many LFAs currently in existence were likely to be unenforceable unless they satisfied additional stringent conditions in subsidiary legislation (see further detail in our April 2024 edition here). The aim of the draft legislation was to reverse the impact of the decision. The government has recently confirmed that it "will take a more comprehensive view of any legislation to address issues in the round" once the Civil Justice Council concludes its review and report on third party civil litigation funding (anticipated in summer 2025). The uncertainty around LFAs will continue for some time yet.
Investigations and dawn raids
Regulators across jurisdictions are becoming increasingly active. There is an increased focus on enforcement, and enhanced scrutiny on how investigations are conducted. To help clients deal with these issues, our global investigations team have launched a new podcast series: “Inside Investigations”. The first episode discusses the early stages of an investigation; best practice in structuring investigations and crisis management; and the importance of scoping your investigation from the start. The second episode considers the increase in dawn raids across the EU, UK and US and what organisations can do to prepare. Access the podcasts here.