In this edition we review recent significant procedural developments in the English Courts, including: the Courts’ approach to procedural breaches; the use of injunctions; cross-border issues; disclosure; and privilege. We welcome feedback on our briefings. Please do not hesitate to contact the team members listed below should you have any comments or questions.
In the previous edition of the London Litigation Review, we reviewed the widely publicised case of Denton v White , which clarified the guidance given in Mitchell v News Group Newspapers Ltd , to provide a flexible three stage test to determine when relief from sanctions should be refused for non-compliance with the Civil Procedure Rules (“CPR”) or Court orders.
Since Mitchell and Denton, the Courts have continued to acknowledge and adopt a more tempered approach to non-compliance. For example, in Altomart Limited v Salford Estates (No. 2) Limited  Moore-Bick LJ noted that in recent cases the Courts have recognised that enforcing compliance with the CPR is not an end in itself and that it is not part of the Courts’ function to impose sanctions merely for punitive purposes.
In Altomart, the Court of Appeal considered whether CPR 3.9 is relevant to an application for an extension of time for filing a respondent’s notice to an appellant’s appeal. The Court of Appeal held that this extension of time application is analogous to an application for relief against automatic sanctions imposed by the CPR. As such the same principles should apply. Applying these principles, the Court of Appeal concluded that the 36 day delay in filing the respondent’s notice was not a serious or significant breach of the CPR as it was likely to have had little effect on the course of the proceedings. Therefore the application was granted.
In Devon & Cornwall Autistic Community Trust v Cornwall Council , the applicant applied for permission to serve witness statements late and vacate the imminent trial date. The applicant was in breach of previous court orders requiring the service of witness statements in December 2014. At the date of the hearing of the application, the trial was due to commence in just over 4 weeks. In this case the Court concluded that the failure to serve witness statements on time was a serious breach of the CPR and no good reason was provided to explain away the failure. However, the Court considered that refusal to grant the relief would affect the applicant’s ability to advance a serious case at trial and, when looking at all the surrounding circumstances of the case, this would not strike a proper or proportionate balance. The requested relief to serve witness statements was granted, but the Court refused to vacate the trial date.
Whilst non-lawyers may find it odd that the English Courts are preoccupied with its procedural rules, it is a reflection of a healthy attitude of balancing fairness with procedural certainty. The problems arise when trying to adopt a uniform test as each case inevitably has its own specific facts. These cases provide a valuable reminder that despite the leniency of the Courts in recent months, there remains a continued focus to ensure the efficient conduct of litigation at a proportionate cost.
Interim injunctions are granted in the course of proceedings to preserve the status quo of the parties pending the full trial of the case. Before granting an interim injunction, the Court will typically require the applicant to provide an undertaking in damages to the Court. This is also known as a “cross-undertaking”, which compensates the respondent if it is subsequently determined that the applicant was not entitled to the injunctive relief granted by the Court. In some instances, the Court may also require the applicant to “fortify” the cross-undertaking in damages by providing a bank guarantee or some other form of security/bond. A cross-undertaking can be an onerous obligation and in some cases may provide a significant impediment to a less wealthy potential claimant.
In Energy Venture Partners Limited (“EVP”) v Malabu Oil & Gas Limited (“Malabu”) , the Court of Appeal considered the appropriate test to determine whether fortification should be ordered in respect of a cross- undertaking in damages. EVP obtained a worldwide freezing order over Malabu’s assets up to the value of US $215 million. EVP provided a cross-undertaking in damages, which was fortified by a written guarantee in favour of Malabu for US $150,000. In accordance with the order Malabu paid US $215 million into Court. Subsequently Malabu made an application to Court for further fortification of EVP’s cross-undertaking for the losses Malabu claimed it was suffering as a result of being unable to use the US $215 million. EVP was ordered to provide further fortification assessed by reference to the cost to Malabu to borrow US $215 million using the US Prime Rate. EVP appealed to the Court of Appeal.
In dismissing EVP’s appeal, the Court of Appeal affirmed the approach taken in Harley Street Capital v Tchigirinski , which identified three requirements that a defendant seeking fortification must satisfy:
- the Court has made an intelligent estimate of the likely amount of loss which might result to a defendant by reason of the injunction;
- a sufficient level of risk of loss to require fortification has been shown by the applicant for fortification; and
- the contemplated loss would be caused by the grant of the injunction.
While not representing a radical change in the law, this case serves as a useful reminder for applicants when applying for interim injunctions to consider the loss the respondent may suffer and whether it would be able to pay those damages if required to do so by the Court.
The Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005, enables foreign authorities to seek assistance from UK enforcement authorities to secure the recovery of assets located in England and Wales to implement their foreign forfeiture or confiscation or other orders made in foreign proceedings in relation to the recovery of proceeds of crime. In addition, section 25 of the Civil Jurisdiction and Judgments Act 1982 enables the English Court to grant interim relief to preserve assets against which any judgment in the foreign proceeding might ultimately be enforced.
In Blue Holding Pte Ltd and another v United States of America , the Court of Appeal discharged an interim freezing injunction, which had been granted to the USA under section 25 in support of forfeiture proceedings in the US against certain assets located in England and Wales. The Court of Appeal held that it was inexpedient to grant an injunction under section 25 considering any judgment in the US forfeiture proceedings would be unenforceable in England and Wales because it would be a judgment in rem relating to property situated outside the territorial jurisdiction of the US courts; and the UK enforcement authorities had expressly declined to make an application for a prohibition order under the 2005 Order.
Under Article 27 of the Brussels I Regulation, if proceedings involving the same cause of action and the same parties are brought in the courts of different EU Member States and the jurisdiction of the court first seised has been established, any other court must stay the action and decline jurisdiction. Article 28 of the Brussels I Regulation makes the same provision for related actions (i.e. actions related to that in the court first seised, but which are not based on the same cause of action). Since their introduction, there is evidence that these provisions have been used by parties who purposefully bring proceedings in countries whose legal systems are relatively slow and then claim that any further proceedings in other EU Member States must be stayed. This tactic has become known as the “Italian Torpedo”.
The circumstances in which parties may take advantage of Articles 27 and 28 were examined in the matter of The Alexandros T .
The proceedings originally arose out of the loss of the vessel ‘Alexandros T’ in 2006. The ship-owners commenced proceedings in the Commercial Court for an indemnity under the vessel and fleet policies from their insurers. These proceedings were settled and stayed pursuant to Tomlin Orders. The insurance policies and the settlement agreements contained exclusive jurisdiction clauses in favour of the High Court in London.
More than three years later, in April 2011, the ship-owners (among others) commenced proceedings in Greece against not only the insurers, but also their employees,
legal representatives and others, alleging tortious claims akin to malicious falsehood and defamation regarding the circumstances in which the Alexandros T had been lost (among other claims).
In July 2011, the insurers applied to the English Commercial Court to enforce the terms of the settlement agreements and sought declarations, damages and indemnities in respect of the ship-owners’ proceedings in Greece. In December 2011, the Commercial Court granted summary relief to the insurers and refused to grant the ship-owners a stay under Article 28.
The ship-owners appealed to the Court of Appeal arguing the Greek Court was first seised and a stay of the English proceedings should be granted pursuant to Article 27. In December 2012, the Court of Appeal granted the stay under Article 27. The Court of Appeal did not determine the appeal on the merits of the summary judgment.
The insurers appealed to the Supreme Court, which overturned the Court of Appeal’s decision. In November 2013, the Supreme Court lifted the stay and determined that Article 27 did not apply as the two sets of proceedings did not involve “the same cause of action” in terms of the identity of the cause of action and of the object. Although the proceedings were related, the proceedings would not be stayed as a matter of discretion.
The issue as to whether the Commercial Court was right to grant summary judgment on the insurers’ claims was remitted to the Court of Appeal. In July 2014 it determined that the Greek claims fell within the scope of the settlement and indemnity provision of the settlement agreements and the exclusive jurisdiction clauses in the settlement agreements and insurance policies. The insurers were also entitled to summary judgment for declarations, damages and the indemnities sought in respect of the Greek proceedings.
Disclosure & Privilege
Before proceedings have started, an application can be made to the Courts for an order for pre-action disclosure of documents where (i) the applicant and respondent are likely to be party to the subsequent proceedings; (ii) if proceedings had started the respondent’s duty by way of standard disclosure would extend to the documents or classes of documents which the applicant seeks disclosure; and (iii) disclosure before proceedings have started is desirable in order to dispose fairly of the proceedings, assist the dispute to be resolved without proceedings, or savecosts.
In a recent case, a warehouse owned by the applicant was destroyed by fire. Expert investigations into the cause led to the conclusion it had started in a vehicle that was leased from and maintained by the respondent. The applicant applied for pre-action disclosure of various documents relating to the maintenance of the vehicles created during the two years prior to the fire. At first instance, the Court exercised its discretion to order pre-action disclosure as the applicant had shown a prima facie case that was more than “a merely speculative punt”. In dismissing the appeal, the Court of Appeal held there was no arguability threshold on the Court’s jurisdiction to order pre-action disclosure and there were no grounds on which it could interfere with the first instance judge’s exercise of discretion to make an order for pre-action disclosure or in the scope of the order made.
As outlined in the previous edition of the London Litigation Review, English law distinguishes between two types of legal professional privilege: legal advice privilege designed to protect all confidential communications between a lawyer and his client created for the purpose of seeking or providing legal advice; and litigation privilege covering all confidential communications between any of a client, its lawyer and a third party that are for the sole or dominant purpose of preparing for or dealing with reasonably contemplated litigation. However, the Courts will allow disclosure of confidential communications seemingly, at first blush, protected by legal professional privilege if those communications came into being to further a criminal or fraudulent design. This is commonly known as the iniquity principle, or the fraud exception.
In London Borough of Brent v Estate of Mr Owen Kane, Mr Michael Kane, Mr Robert Kane , the claimant sought disclosure of documents held by the defendants’ solicitors, including legal advice, in connection with various transactions the claimant alleged were made at an undervalue to prevent payment to it of residential care services. To ascertain whether there was evidence of iniquitous conduct, the Court looked at the whole chronology of events and held that “Taken as a whole, the various transactions have … the hallmarks of at the least something underhand” and ordered disclosure of the communications sought.