Dispute Resolution round-up - May 2021

This Court of Appeal decision provides clarity on the (very limited) circumstances in which without prejudice privilege can be lifted, confirming in particular that without prejudice materials may be admitted to show that an apparent agreement between parties should be set aside on grounds of misrepresentation, fraud or undue influence.

To read the judgment, please click here.

In this Court of Appeal decision the defendant's appeal against an order that a deed of indemnity from an after-the-event ("ATE") insurer was an acceptable form of security for costs was allowed, and the claimant was instead ordered to make a payment into court. ATE insurance premiums are not usually recoverable from litigation opponents, however, because of a statutory insolvency exception the £315,000 premium in this case, which would have to be paid to cover the proposed security, might have been recoverable from the defendant in the event that the claim succeeded.

At first instance the court had held that this additional potential liability for the defendant was irrelevant to the acceptability of the deed and that it was adequate security. This represented a less than satisfactory outcome for the defendant, who had, in seeking security for their costs, effectively just increased their potential liability for costs by the same amount. The Court of Appeal, however, found that the potential recoverability of the premium was, in fact, highly relevant in considering whether it was an adequate security and failing to consider it would lead to an overall unjust result. The Court of Appeal therefore re-exercised its discretion regarding the form of the security and ordered that a payment into court should be made in place of the deed of indemnity.

Whilst the facts of this case are unusual the principle established, that the court must take into account consequences for both parties when exercising its discretion over security for costs applications, has wider implications and will prove useful guidance for parties making or resisting an application for security for costs.

To read the judgment, please click here.

This long-awaited judgment of the Supreme Court is of particular interest to corporations which operate in emerging markets, or whose business pose particular operational hazards, and provides guidance as to the circumstances in which parent company liability may arise.

For further information, please read a detailed briefing by Doug Bryden, our Head of Operational Risk and Regulatory, and Heather Gagen, Barney Stannard and Anthony O'Driscoll of our Dispute Resolution team, here.

To read the judgment, please click here.

In this decision, the Supreme Court confirmed that if a cause of action accrues at midnight, the day which follows counts towards the calculation of the limitation period for the purposes of the Limitation Act 1980. 

To read the judgment, please click here.

In this decision, the Court of Appeal upheld a disclosure order requiring the defendants to request their senior executives to hand over personal devices so that they could be searched by independent IT consultants for documents relevant to the case.

The judgment illustrates how the courts will balance the need to ensure disclosure of relevant documents in court proceedings against individuals' rights to privacy (with the former consideration effectively winning out here). It also emphasises the considerable latitude that the courts have in crafting orders for disclosure.

For further information, please read a detailed briefing by Alyce Lynch and Hannah Hartley of our Dispute Resolution team, here.

To read the judgment, please click here. 

In this decision, the Court of Appeal confirmed that evidence which is relevant to a case, but which has been unlawfully obtained (in this case via the hacking of the defendant's emails), will not automatically be excluded from consideration by the court.  The courts retain a discretion as to how such evidence should be dealt with, and will balance the need to achieve justice in the particular case at hand (which will generally militate in favour of the evidence being included) against encouraging compliance with the law (which will militate in favour of it being excluded).

In this particular case, the hacked emails were not excluded, on the basis that: (i) they should have been included in the defendant's disclosure in any event (save to the extent that they were privileged); and (ii) to exclude them would effectively have enabled the defendant to benefit from his own fraud.  The Court of Appeal noted that there were other, less draconian, ways in which a court could express its disapproval of a party who has procured evidence by unlawful means, beyond simply excluding the relevant evidence, including imposing penalties in costs and/or refusing to grant interest on any damages awarded.

To read the judgment, please click here. 

In this decision, the court considered, albeit obiter, the evidential burden for a company attempting to take advantage of the moratorium against winding up petitions in paragraph 5 of Schedule 10 to the Corporate Insolvency and Governance Act 2020. The court dismissed the winding-up petition on the ground that the company was not liable to pay the relevant debt. However, with the benefit of full argument on the issue, the court went on to consider whether, if it was wrong, the evidential burden had been discharged by the company.

It has previously been established that the burden is on the company to establish a prima facie case that COVID-19 has had a financial effect on the company before presentation of the petition, which is a low threshold (see Re A Company [2020] EWHC 1551 (Ch)).  In the present case, the company's liability arose under a guarantee, which it said arose from the direct financial effect of COVID-19 on the principal debtor.  The court accepted that an indirect financial effect on a company could be sufficient to engage the moratorium.  However, the court would not, on the evidence provided, have held that the company had suffered a financial effect from COVID-19.  Unsupported assertions about various general matters, including reduced liquidity worldwide would not have been sufficient, and some evidence would need to have been produced showing the purported financial effect on the company.

To read the judgment, please click here.

In this decision, the court granted summary judgment on a commercial landlord's claim against a retail tenant for rent and service charge arrears relating to a period in which the tenant was unable to trade from the relevant premises as a result of the Covid-19 pandemic.  The court considered whether the relevant sums had fallen due under the parties' lease agreement, applying the usual rules on contractual construction and implication of terms in so doing.  The outcome of the case is therefore in many ways unsurprising.   It does, however, emphasise that the courts will continue to apply established contract law principles in the face of Covid-related claims, and refuse to be swayed by creative arguments which arguably allocate losses attributable to the pandemic more "fairly" as between contractual counterparties than the strict wording of the relevant contract allows.  It also demonstrates that the courts are prepared to "grasp the nettle" and deal with issues arising out of the pandemic on a summary basis where appropriate.

To read the full judgment, please click here.

This decision granting summary judgment to three commercial landlords in respect of unpaid rent considers similar issues to those considered by the judge in the Commerz case above, and reaches similar conclusions.  It is, however, of additional interest because, as well as considering matters of contractual construction and implication of terms, it also considers whether the commercial leases in question could be said to have been frustrated, whether temporarily or permanently, by the Covid-19 pandemic and resulting regulations. 

Frustration is a doctrine that provides that where a wholly unexpected event has occurred, which the parties have not provided for in their contract, and which negates or "frustrates" the contract's purpose, the contract will be discharged.  The court here accepted that the pandemic and resulting regulations could in principle constitute a frustrating event, but did not consider that to be the case on the particular facts.  In reaching its conclusion, it emphasised that these were long-term leases which all had relatively significant periods left to run, and that the periods during which the commercial tenants had been forced to close their businesses had been relatively short. The court also rejected the idea of a new doctrine of "temporary" frustration.

To read the judgment, please click here.

In this decision, the Supreme Court confirmed that "section 2 notices" issued by the Serious Fraud Office (i.e. notices requiring the production of documents relevant to a Serious Fraud Office investigation) do not have extra-territorial effect.  In particular, any notice which is issued to a non-UK company, with no business or presence in the UK, requiring it to produce documents which are held outside the UK, will be ineffective.

For further information, please read a detailed briefing by Michele Cheng and Victoria Green of our Dispute Resolution team, here.

To read the judgment, please click here.