BANKING LITIGATION UPDATE
In the past 6 months we have noticed a decline in judgments relating to misselling/misrepresentation, although the High Court's decision in Marme is notable being the second civil court trial judgment considering IBOR manipulation (the first being PAG v RBS). Other significant decisions from the perspective of financial institutions include a High Court judgment on the calculation of Loss under the 1992 ISDA Master Agreement (once again arising out of the collapse of Lehman Brothers), and a Court of Appeal decision clarifying the "advice" vs "information" distinction when applying the SAAMCO principle, with the effect that losses flowing from market forces were outside the scope of the defendant professional adviser's duty.
It would be remiss to publish an update at this time without mentioning Brexit, although to date there has been only one significant Brexit-related judgment with potential relevance in the banking litigation sector. That is the decision in Canary Wharf v European Medicines Agency, illustrating the uphill struggle that is likely to face a party seeking to establish that its contracts are frustrated as a result of the UK's withdrawal from the EU. Amidst the ongoing uncertainties in relation to both the nature and timing of Brexit, we have published a new decision tree on enforcement of English judgments in the EU27 post-Brexit.
Looking to the future, in another area of uncertainty impacting financial institutions, we have been considering the fact that LIBOR (at least as we know it) will cease to exist from 2021. Given its prevalence as an interest rate benchmark in contracts across multiple markets and jurisdictions, its demise raises questions about the litigation risks which parties to such contracts may face. We have published a banking litigation e-bulletin on the types of litigation which may arise, and some of the legal arguments which might be deployed following LIBOR discontinuation, plus a more detailed article in the Journal of International Banking Law and Regulation: LIBOR is being overtaken: Will it be a car crash? (2019) 34 J.I.B.L.R.
To make it easier for our clients to keep on top of legal developments between e-bulletins, we have launched a banking litigation podcast. Each podcast is a bitesize (10-15 minutes) audio recording of key legal developments. It takes two main forms: (1) a monthly high level summary of key judgments, with a 'deep dive' into a particular case of interest (you can listen to our most recent monthly update on SoundCloud, iTunes and Spotify); and (2) special edition podcasts focusing on a particular topic of interest in the sector. We have recently released our first special edition of the podcast series, in which the focus is on the litigation risks arising from LIBOR discontinuation (see previous paragraph). The episode is available to download on SoundCloud, iTunes and Spotify.
We hope you find our update useful and, as ever, please feel free to contact one of us or your usual Herbert Smith Freehills contact if there are any topics which you would like to discuss further.
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Mis-selling and Misrepresentation
1. Commercial Court rejects EURIBOR implied representations 2. High Court finds entire agreement clause did not exclude liability for misrepresentation 3. High Court finds alleged failure to disclose contingent liability calculation did not extend limitation period 4. Court of Appeal emphasises the need to plead conspiracy claims in full
ISDA Master Agreement
5. Important High Court guidance on the limits of determining party's discretion when calculating Loss under the 1992 ISDA Master Agreement
Capital Markets Litigation
6. Court of Appeal refuses to imply term into Eurobond notes 7. High Court refuses declarations sought by trustee of unsecured notes as to amounts 8. Shareholder class actions new webinar and "handy client guide"
IBORS
9. LIBOR is being overtaken: Will it be a car crash? 10. Default rate of interest of one-month LIBOR plus 12% not a penalty 11. Banking Litigation Podcast special edition on LIBOR discontinuation litigation risks
Contractual Construction
12. High Court considers contractual construction of guarantees 13. Letters of Instruction: Banks' liability to third parties clarified by Court of Appeal 14. Commercial Court considers contractual construction of a letter of credit (UCP 600) 15. High Court applies contractual interpretation principles in collateralised loan obligation transaction
Loss
16. Court of Appeal decision in Manchester Building Society v Grant Thornton: Clarification of "advice" vs "information" distinction when applying the SAAMCO principle
Disclosure and Privilege
17. High Court finds SFO can compel production of documents held by foreign company outside the jurisdiction
18. Information gathering by in-house lawyer in order to obtain external advice may not be protected by legal advice privilege
19. A stark reminder of the restrictions on collateral use of disclosed documents, including information derived from them
20. Court of Appeal finds litigation privilege is restricted to the purpose of obtaining advice or information, not the conduct of litigation more broadly
21. High Court orders Tesco to disclose SFO documents in s.90A FSMA shareholder class action 22. High Court refuses permission for collateral use of disclosed documents and witness statements to
respond to US grand jury subpoena
Governing Law & Jurisdiction
23. Court of Appeal gives guidance on how to apply jurisdiction test laid down by Supreme Court
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Brexit
24. Draft Civil Procedure Rule changes in the event of a no deal Brexit 25. High Court finds European Medicines Agency lease not frustrated by Brexit 26. New decision tree on enforcement of English judgments in the EU27 post-Brexit
Other Significant Developments
27. Launch of the Banking Litigation Podcast 28. Court of Appeal considers extent of a creditor's obligation in relation to security 29. Court of Appeal confirms defendants not obliged to make enquiries of third parties before pleading non-
admissions 30. Court of Appeal gives guidance on scope of fiduciary duty in "secret commissions" case 31. Supreme Court considers loss of a chance in professional negligence claim 32. High Court provides guidance on relational contracts and implied duties of good faith 33. Supreme Court clarifies test for setting aside judgment for fraud
TOP
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Mis-selling and Misrepresentation
1. Commercial Court rejects EURIBOR implied representations
Marme Inversiones 2007 SL v NatWest Markets plc & Ors [2019] EWHC 366 (Comm)
The Commercial Court dismissed claims that a bank made implied representations as to EURIBOR ratesetting in the context of selling an interest rate swap.
This was the second civil court trial judgment considering IBOR manipulation, the first being Property Alliance Group Ltd v Royal Bank of Scotland [2018] 1 WLR 3529 in which the claim relating to LIBOR manipulation was also dismissed (see our banking litigation e-bulletin). Together, these decisions are a reminder of the difficulties of proving allegations that IBOR-setting banks made implied representations when selling IBORlinked products. The combined effect of these judgments suggests:
The requirement to identify specific conduct which led to the implied representation being made is important (and should not be underestimated). In the context of these transactions, a bank simply entering into an IBOR-linked swap is unlikely to justify the implication of any representation wider than the limited representation formulated by the Court of Appeal in PAG (see below).
Implied representations must be certain and obvious: if there is "elasticity of possible meaning", this will indicate the absence of an implication.
The broader and more complex the alleged representations, the more active and specific the conduct must be to give rise to the implication.
Proving reliance on any representations which are implied will be fact-specific and onerous.
Falsity must be specifically proven: it is not sufficient to draw inferences on the basis of conduct relating to other benchmarks (such as an IBOR in a different currency) or indeed findings of the regulator.
In PAG, the Court of Appeal held that the bank made the narrow implied representation (at the time of entering into the swaps) that it was not itself seeking to manipulate GBP LIBOR and did not intend to do so in the future (however the claimants could not prove that the representation was false). In this case, the court's view was that a similar narrow representation in relation to EURIBOR could theoretically have been implied, but this implied representation was not alleged, and was not shown to be false in any event.
See our banking litigation e-bulletin.
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2. High Court finds entire agreement clause did not exclude liability for misrepresentation
Al-Hawasi v Nottingham Forest Football Club [2018] EWHC 2884 (Ch)
The High Court held that an entire agreement clause in a commercial contract did not exclude liability for misrepresentation under section 2(1) of the Misrepresentation Act 1967. The court overturned the Master's decision to the contrary, considered here.
The decision re-emphasises the generally accepted position that clear words are needed to exclude liability for misrepresentation. In general, the effect of an entire agreement clause (of itself) will be to avoid representations becoming contractual terms, rather than excluding liability for misrepresentation. Where a party wishes to avoid liability for misrepresentation, more will be needed, such as non-reliance wording or an express exclusion of liability.
See our litigation blog post.
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3. High Court finds alleged failure to disclose contingent liability calculation did not extend limitation period
Munroe K Ltd & Anor v Bank of Scotland plc [2018] EWHC 3583 (Comm)
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The High Court granted summary judgment (in part) in favour of the bank on the basis that the claim against it was time-barred, giving some helpful guidance on s.14A of the Limitation Act 1980 (the "LA").
In the context of an interest rate hedging products ("IRHPs") mis-selling claim, the claimants alleged that the bank's failure to disclose the existence of its contingent liability calculation constituted a breach of the bank's duty to exercise reasonable care and skill in advising and providing information to the claimants. The bank applied for summary judgment/strike out on the basis that the claim was time-barred; the swaps having been sold in 2006-2008. The claimants did not learn of the fact of the contingent liability calculation until November 2015, and relied on s.14A of the LA to postpone commencement of the limitation period.
The court agreed with the bank that the claim was time-barred as the claimants' cause of action was based on the bank's failure to advise or inform them of their potential liability when the swaps were sold, noting in particular that: (a) s.14A of the LA does not extend the limitation period until every last particular of breach is identified; and (b) this was not a case where the duty was a continuing duty with breaches of that duty over time.
The Court of Appeal has refused permission to appeal.
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4. Court of Appeal emphasises the need to plead conspiracy claims in full
Elite Property Holdings Ltd & Anor v Barclays Bank plc [2019] EWCA Civ 204
In a decision arising out of long-running litigation relating to alleged mis-selling of IRHPs, the Court of Appeal upheld the High Court's refusal to allow the claimants to pursue claims in unlawful means conspiracy. We considered the High Court decision in an earlier banking litigation e-bulletin.
While this decision did not involve new law, it serves as a reminder of the difficulties of bringing a claim based on conspiracy and, in particular, that it is not sufficient simply to plead a claim and hope something turns up in disclosure. The claimant must be able to plead full particulars of all elements of the claim at the outset. Further, as the case makes clear, release clauses in settlements may be construed widely and it is important to be clear as to precisely what claims (if any) are intended to survive the settlement. Both elements of the decision are likely to be welcomed by financial institutions.
The effect of the present judgment is finally to dispose of these proceedings (subject to any attempted appeal to the Supreme Court). The majority of the claimants' claims relating to the sale of their IRHPs were previously struck out by the High Court (see our e-bulletin), in relation to which the Court of Appeal refused permission to appeal last year (see our e-bulletin). In its strike out judgment, the High Court had ordered the claimants to particularise properly their claims for conspiracy, giving the claim a potential lifeline, but the Court of Appeal has now refused permission to amend to include such claims, bringing this long-running dispute to an end.
See our banking litigation e-bulletin.
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ISDA Master Agreement
5. Important High Court guidance on the limits of determining party's discretion when calculating Loss under the 1992 ISDA Master Agreement
Lehman Brothers Finance AG (in liquidation) v (1) Klaus Tschira Stiftung GmbH & Anor [2019] EWHC 379 (Ch)
The High Court provided important guidance on the application of the standard to which a determining party's calculation of Loss under the 1992 ISDA Master Agreement will be held.
Upon an Event of Default under the 1992 ISDA, the standard to which the determining party is held in calculating Loss (if elected) under the 1992 ISDA has previously been confirmed in Fondazione Enasarco v Lehman Brothers Finance SA [2015] EWHC 1307 (read our summary here). The test is one of rationality, rather than objective reasonableness (in contrast to the position under the 2002 version of the ISDA Master Agreement). This gives the determining party greater latitude, with the result that the amounts can be
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determined quickly and with only limited basis for challenge. In the classical formulation of the test, the defaulting party can challenge the determination if it is irrational, capricious or arbitrary.
The Tschira decision provides additional clarification of the limitations on the determining party's discretion to determine Loss, illustrating that the width of the discretion does not mean that the determination can only be challenged if it can be shown that "no reasonable Non-defaulting Party acting in good faith could have come to the same result". In particular:
1. Whilst an administrative-law style assessment would consider whether the determining party took into account all relevant factors and ignored all irrelevant factors, that does not mean that the determining party has the freedom to determine what the definition of Loss in the 1992 ISDA actually means. In other words, the determining party cannot apply its own interpretation of Loss and the court will scrutinise whether the correct interpretation has been applied.
2. The definition of Loss in the 1992 ISDA did not provide a de facto indemnity against all losses suffered as a result of the Event of Default. Accordingly, common law principles of remoteness applied and it was necessary for the court therefore to consider whether all of the losses incorporated into the determination were in the reasonable contemplation of the parties.
3. Whilst the determining party is plainly able to use indicative quotations obtained from market participants for the purpose of its calculation of Loss, care must be taken:
Only in limited circumstances will it be appropriate to rely on indicative quotations as at a later date than the Event of Default.
Whilst Enasarco established that the replacement trade to which the quotation applies need not be identical to the trade being valued, where the differences would obviously produce a substantially different result, there is a real risk that use of such quotations to determine Loss would be deemed irrational.
It is clear that the determining party need not in fact enter into the replacement trade in order to be able to use the indicative quotation for the determination of Loss. However, in order for use of an indicative quotation to be rational, it may need to have been possible for the determining party to have been able to enter into it.
See our banking litigation e-bulletin.
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Capital Markets Litigation
6. Court of Appeal refuses to imply term into Eurobond notes
Ukraine v The Law Debenture Trust Corporation plc (Rev 1) [2018] EWCA Civ 2026
The Court of Appeal heard an appeal by Ukraine against an order for summary judgment for it to make payment on notes it had issued with a nominal value of US$3 billion.
One aspect to Ukraine's appeal was that the Trust Deed, which contained the notes' terms and conditions, contained an implied term to the effect that the holder of the notes shall not prevent or hinder Ukraine's performance of its payment obligations. It was alleged that the noteholder (Russia) had breached such an implied term through its foreign policy interventions in the region, in particular its military activities in Crimea. The Court of Appeal considered that the nature of the instruments as tradeable was a significant pointer against the implication of the terms alleged. The terms of the notes needed to be derived from the documentation which would be available to subsequent purchasers of the notes. Had the implied term contended for been necessary or obvious from the Trust Deed itself, that may have been a different matter. However, it was suggested by Ukraine that the terms could be implied from the general circumstances surrounding relations between Russia and Ukraine. Allowing implied terms which would be binding on subsequent purchasers on such a basis would be contrary to principle.
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7. High Court refuses declarations sought by trustee of unsecured notes as to amounts
The Bank of New York Mellon, London Branch v Essar Steel India Ltd [2018] EWHC 3177 (Ch)
In Part 8 proceedings brought by the trustee of certain unsecured notes, the High Court refused to exercise its discretion to grant declarations as to the amounts due and payable by the issuer of the notes. The court reached this conclusion notwithstanding the fact that the issuer was clearly in default under the notes, did not take any steps in the proceedings and was not represented before the court.
The decision offers some cautionary guidance as to the steps that those exercising corporate trustee functions might consider taking when applying for declaratory relief in relation to non-payment by the issuer of notes or other debt instruments. In particular, the court in this case found that:
In the absence of any evidence to confirm that other proceedings involving the issuer (an insolvency process in India) would not be affected by declarations made by the English court, the potential for those foreign proceedings to be affected was a factor that pointed clearly against the making of the declarations.
In circumstances where a third party who might be affected by the declarations (the insolvency professional in India) was not before the court and had been unable to make submissions, granting the declarations would amount to an "improper interference" in a foreign process being conducted by another party if the declarations were to affect the foreign process.
To the extent that the court appears to have taken a strict approach to the exercise of its discretion in this case, this may be explained by the court's decision to adopt a "conservative mindset" against granting the declaration because of the issuer's non-participation in the proceedings. It is noteworthy that the court adopted this approach even though the issuer's non-participation was not the fault of the claimant, and the claim was made under Part 8 and therefore did not turn on a factual dispute.
See our banking litigation e-bulletin.
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8. Shareholder class actions new webinar and "handy client guide"
Herbert Smith Freehills released the third in our series of webinars on class actions in England and Wales, looking at shareholder class actions. In the presentation Simon Clarke, Harry Edwards and Kirsten Massey discuss the outlook for shareholder group actions in England and Wales, the types of claims (e.g. under sections 90 and 90A FSMA) and remedies likely to be pursued by shareholder group claimants, and some challenges in bringing and defending these actions. Clients and contacts of the firm can register to access the archived version by contacting Prudence Heidemans.
The webinar is accompanied by the fourth in our series of short guides to class actions in England and Wales, Shareholder class actions, which has been published here (together with our first three editions: (i) Overview of class actions in the English courts; (ii) Group Litigation Orders; and (iii) Data breach class actions).
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IBORS
9. LIBOR is being overtaken: Will it be a car crash?
It is clear that, from 2021, LIBOR (at least as we know it) will cease to exist. Given its prevalence as an interest rate benchmark in contracts across multiple markets and jurisdictions, its demise raises questions about the litigation risks which parties to such contracts may face. Herbert Smith Freehills have published an article in the Journal of International Banking Law and Regulation on the types of litigation which may arise, and some of the legal arguments which might be deployed. The full article is available here: LIBOR is being overtaken: Will it be a car crash? (2019) 34 J.I.B.L.R.
In our article we explore the sorts of claims which may arise by reference to the four markets which are most affected by the transition from LIBOR: (A) the loan market; (B) the derivatives market; (C) the bond market; and (D) the securitisation market. We also look at the potential regulatory consequences (both to the financial
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institution and to the applicable senior manager) of failing to put in place appropriate transition plans, and to demonstrate delivery of that plan going forwards.
See our banking litigation e-bulletin.
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10. Default rate of interest of one-month LIBOR plus 12% not a penalty
Cargill International Trading Pte Ltd v Uttam Galva Steels Ltd [2019] EWHC 476 (Comm)
A contract term providing for a default rate of interest of one-month LIBOR plus 12% was valid and enforceable. The defendant had no real prospect of showing that it was a penalty, applying Cavendish Square Holding BV v Makdessi [2016] AC 1172.
The Court of Appeal has refused permission to appeal.
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11. Banking Litigation Podcast special edition on LIBOR discontinuation litigation risks
The first 'special edition' in our banking litigation podcast series, in which the focus is on the litigation risks arising from LIBOR discontinuation. The episode is available to download on SoundCloud, iTunes and Spotify, so it can be accessed on all devices.
Each podcast is a bitesize audio recording of key legal developments for in-house lawyers at banks, with the aim of making it easier for our clients to keep up-to-date. It takes two main forms: (1) a monthly high level summary of key judgments, with a 'deep dive' into a particular case of interest; and (2) special edition podcasts focusing on a particular topic of interest in the sector.
See update 27 below for links to our previous monthly updates.
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Contractual Construction
12. High Court considers contractual construction of guarantees
Barclays Bank plc v Price & Ors [2018] EWHC 2719 (Comm)
The High Court considered a number of questions of contractual construction in the context of guarantees.
Financial institutions should welcome the pragmatic and commercial approach adopted by the court to the question of whether a demand to claim under a guarantee was valid. In the context of an application by the guarantor for strike out/summary judgment, the court found that a minor error in the amount specified in the demand (overstating the maximum amount covered by the guarantee by 500) did not invalidate the demand. The court held that the reasonable recipient could not have been left in any doubt at all that the right reserved was being exercised, bearing in mind that no particular form of demand was stipulated in the guarantee in question.
The court also considered whether the bank was required to send a demand at all in order to claim under the guarantee, given that the guarantee contained a 'principal debtor' clause. The court emphasised that this will be a question of contractual construction, which will turn on the wording of the particular guarantee. In the instant case, the court was persuaded that the guarantee required a demand to be served because of the use of the word 'demand' twice in the guarantee, notwithstanding the principal debtor clause. Given the importance of guarantees in the security position of lending banks, this decision emphasises the need when drafting such instruments to determine at the outset how and when liability is intended to arise, and then to ensure that the drafting achieves this intention.
See our banking litigation e-bulletin.
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13. Letters of Instruction: Banks' liability to third parties clarified by Court of Appeal
Chudley & Ors v Clydesdale Bank plc [2019] EWCA Civ 344
The Court of Appeal held that a letter of instruction ("LOI") between a bank and its customer conferred a benefit on third party investors. The third party investors (who were not customers of the bank) were held to be part of a sufficiently identified class in the LOI for the purpose of s.1(3) of the Contracts (Rights of Third Parties) Act 1999 (the "1999 Act").
The key issue considered by the Court of Appeal was the level of identification required in order for a third party to establish that a contract conferred a benefit upon them which they could then enforce under the 1999 Act. Section 1(3) of the 1999 Act requires third parties to be "expressly identified in the contract by name, as a member of a class or as answering a particular description". The Court of Appeal held that it was not necessary for the LOI to mention a third party investor by name, finding that reference to "a client account" in the LOI together with the name of the investment scheme was express identification of the class, namely clients of the bank's customer who were investing in the scheme in question.
This decision suggests a broad interpretation of the 1999 Act, which is unlikely to be welcomed by financial institutions in the context of LOIs or otherwise. A practical solution may be to exclude the 1999 Act where possible and/or to define carefully and narrowly the class of potential beneficiaries.
See our banking litigation e-bulletin.
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14. Commercial Court considers contractual construction of a letter of credit (UCP 600)
Yuchai Dongte Special Purpose Automobile Company Ltd v Suisse Credit Capital (2009) Ltd [2018] EWHC 2580 (Comm)
The Commercial Court considered the contractual construction of a letter of credit (and the relevant terms of the Uniform Customs and Practice for Documentary Credits 600 (UCP 600)). The court commented that extrinsic evidence can be relevant to interpreting a letter of credit, although on the facts of this case, such evidence was not relevant to the issues. The court held that the defendant was the issuer of the letter of credit, that its liability was not excluded on the true construction of the letter of credit, and there was no estoppel by convention to the effect that the defendant was not the issuing bank.
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15. High Court applies contractual interpretation principles in collateralised loan obligation transaction
Deutsche Trustee Company Ltd v Duchess VI CLO B.V. & Ors [2019] EWHC 778 (Ch)
The High Court considered the contractual interpretation of documentation in a collateralised loan obligation ("CLO") transaction. Applying established principles of contractual interpretation, the court held that an incentive fee was not payable to the collateral manager of the CLO, following the exercise of a right of early redemption by the holders of the equity notes.
The court found that the documentation read as a whole was clear in the context of the transaction. It emphasised the "particular, even paramount" importance of the words used when the court is construing the terms of a traded instrument which will exist for a long time and pass through many hands (Re Sigma Finance Corp [2009] UKSC 2). Having considered the specific language used, the court concluded the parties to the notes were entitled and would expect to be bound by the language used.
In the latter context, the most interesting issue on rival commercial constructions was what the court described as the "supposedly perverse incentive" for the relevant noteholders to exercise their right of early redemption in order to avoid paying the incentive fee to the collateral manager. The court's pragmatic response to this argument was that, if the notes were performing sufficiently well that the incentive fee was triggered, it would be in the interests of the relevant noteholders to "stick with it" and pay the incentive fee from quarter to quarter, rather than redeeming the notes purely to deprive the collateral manager of the incentive fee.
It is understood that the High Court has granted permission to appeal.
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See our banking litigation e-bulletin.
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Loss
16. Court of Appeal decision in Manchester Building Society v Grant Thornton: Clarification of "advice" vs "information" distinction when applying the SAAMCO principle
Manchester Building Society v Grant Thornton UK LLP [2019] EWCA Civ 40
The Court of Appeal dismissed the claimant's appeal in an important decision on the application of the decision in South Australia Asset Management Corpn v York Montague Ltd [1997] AC 191 (SAAMCO) to cases involving an adviser's negligence. The decision will be of interest to financial institutions and professional advisers generally, including auditors (the subject of the instant decision).
As explained in our banking litigation e-bulletin on the first instance decision, the case concerned an auditor's liability for (admitted) negligent advice regarding the accounting treatment of interest rate swaps. When the auditor's error came to light, the client had to break the swaps early, incurring mark-to-market break costs of 32.7m. The Court of Appeal upheld the decision of the High Court, but did so on different grounds.
The judgment provides a number of helpful points of clarification on the approach to be taken in such cases involving the application of the SAAMCO principle as expanded upon in Hughes-Holland v BPE Solicitors [2017] UKSC 21:
1. In particular, the Court of Appeal clarified that the correct approach in such cases is to consider at the outset whether it is an "advice" or an "information" case. The court emphasised that although there may be a descriptive inadequacy to these labels (so that a dispute involving negligent advice can still fall within the "information" case category), this should not undermine the fact that there is a clear and important distinction between the two categories of case.
2. In determining whether a case falls within the "information" or "advice" category, what matters is the "purpose and effect" of the advice given. If that advice does not involve responsibility for "guiding the whole decision making process" or where the adviser's duty does not extend to "consider all relevant matters and not only specific matters" the case should fall within the "information" case category.
3. For "information" cases, the adviser will be responsible only for the foreseeable consequences of the advice being wrong. This will require the claimant (who has the burden of proof) to prove the counterfactual, namely that loss would not have been suffered if the advice had been correct. Applying the relevant counter-factual scenario so as to determine which, if any, losses are recoverable will remain a complex exercise in many cases.
In the instant case, the Court of Appeal held that the High Court had erred in approaching the issue of liability by asking in general terms whether the auditor had assumed a responsibility for the mark-to-market losses and found that the present case was an "information" case, and so the auditor was responsible only for the foreseeable consequences of the accounting advice being wrong. This required the claimant to prove the counter-factual, that the same loss would not have been suffered if the advice had been correct, i.e. if the claimant had not exercised the break clause early and continued to hold the swaps. Here, the client was unable to prove its loss on the counter-factual as the discovery of the negligent advice merely crystallised mark-to-market losses on swaps which would have been suffered anyway if the swaps had been held to term.
The fact that the Court of Appeal came to its conclusion by virtue of a completely different analysis highlights that this remains a difficult area of the law, particularly in its application to the facts. Professional advisers can seek to avoid the uncertainty, and the time and cost associated with complex disputes, by ensuring that the scope of their role is clear from the terms of their retainer and, where appropriate, by excluding liability for particular categories of loss.
See our banking litigation e-bulletin.
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Disclosure and Privilege
17. High Court finds SFO can compel production of documents held by foreign company outside the jurisdiction
R (On The Application Of KBR Inc) v The Director of the Serious Fraud Office [2018] EWHC 2368 (Admin)
In the context of a judicial review, the High Court held that the SFO was able to compel a foreign company to produce documents located outside the jurisdiction, pursuant to s.2(3) of the Criminal Justice Act 1987 ("CJA"), where there was "a sufficient connection between the company and the jurisdiction".
This was the first time that an English court had reasoned that compulsory disclosure powers exercisable by a UK criminal enforcement agency have extraterritorial application. The judgment is notable for its finding of the extraterritorial operation of a statute where no explicit wording in favour of extraterritoriality applied. In the civil context, the courts have also seemed increasingly willing, in recent years, to find that provisions enabling the enforcement of judgments and orders have extraterritorial effect, such as the court's powers of committal (see here).
From a civil litigation perspective, the increased reach of the SFO to obtain documents outside of this jurisdiction, in light of the KBR decision, may increase the scope of documents that are ultimately disclosable in civil proceedings. Indeed, since KBR, the High Court has ordered Tesco to disclose SFO documents (provided to Tesco by the SFO for the purpose of negotiating a DPA) in the s.90A FSMA class action brought against Tesco by its shareholders see case 21 below).
Disclosure in civil proceedings by the SFO itself (rather than a party to which the SFO has provided documents) may arise because the SFO is a party to the proceedings the CJA does not act as a bar against the SFO giving disclosure of documents obtained under its compulsory powers (see Tchenguiz v Rawlinson and Hunter Trustees SA [2013] EWHC 2128 (QB), considered here) although the circumstances in which this is likely to be the case will be rare. Or, if it was known that the SFO had obtained the documents, a litigant could make an application against the SFO for third party disclosure under CPR 31.17 such an application was granted against the police in Frankson v Home Office [2003] EWCA Civ 655, for example, the court having balanced the competing public interests. It is relevant to note that, where there is an ongoing criminal investigation or prosecution, those public interest factors would include not only the general public interest considerations pertaining to the investigation of crime but also considerations pertaining to possible prejudice to that investigation, and, if ordered, disclosure might be made subject to strict conditions, as it was in Frankson. Further, unless the material became public via a trial process in due course, or a party confirmed that they had disclosed documents to the SFO, a litigant would not be expected to have visibility of this fact.
Nonetheless, those who provide documents to the SFO in response to s.2 notices should be aware that such documents may be disclosable by the SFO in civil proceedings, if the SFO becomes a party or is required to provide third party disclosure.
See our global corporate crime and investigations e-bulletin.
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18. Information gathering by in-house lawyer in order to obtain external advice may not be protected by legal advice privilege
Glaxo Wellcome UK Ltd v Sandoz Ltd [2018] EWHC 2747 (Ch)
The High Court held that an in-house lawyer's communications with an employee of the business, who was accepted to be her in-house 'client' for some purposes, were not protected by legal advice privilege where those communications were to seek and obtain information to provide to external solicitors in order to obtain their legal advice. In doing so, Chief Master Marsh applied the narrow interpretation of 'client' established by the notorious Three Rivers No 5 decision as recently confirmed by the Court of Appeal (albeit with reluctance) in the ENRC case (considered here).
Significantly, the decision illustrates that an individual can be a lawyer's 'client', and therefore entitled to communicate information to the lawyer under protection of privilege, for one purpose but not others.
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The decision underlines the importance of considering, in any given context, who is likely to be considered the lawyer's 'client' for that particular purpose. Where an external lawyer is advising, and the in-house lawyer is the relevant 'client' for that purpose, the in-house lawyer's internal information gathering exercise may not be privileged (unless litigation privilege applies, as in that context a lawyer/client communication is not essential). The position may be different where the in-house lawyer's advice is sought in addition to that of the external lawyer.
The decision also contains important messages as to how evidence should be presented in supporting a claim to privilege.
See our litigation notes blog post.
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19. A stark reminder of the restrictions on collateral use of disclosed documents, including information derived from them
The ECU Group plc v HSBC Bank plc [2018] EWHC 3045 (Comm)
The High Court delivered a strong message as to the need for litigants to appreciate the rules relating to collateral use of disclosed documents, under CPR 31.22. Some key points to note from the decision are:
o The restrictions on collateral use apply to information derived from disclosed documents, just as they apply to the documents themselves. A party who is in receipt of disclosed documents may therefore be prevented from using a document it has itself created, where that document reveals the contents of the disclosed documents or draws conclusions from them. So for example, in this case, it was a breach of CPR 31.22 for the claimant to disclose to a third party its own witness statement prepared for a further pre-action disclosure application, where it included a detailed description of some of the contents of the disclosed documents.
o The restrictions will prevent a party using disclosed documents (or information derived from them) in briefing its own lawyers, if that is for some purpose other than the proceedings in which the documents were disclosed. So, if the purpose is to obtain advice about other potential proceedings to which the documents may be relevant, that will be a breach of CPR 31.22 (unless the court's permission is obtained). If however the purpose is to obtain advice about the proceedings in which disclosure was given then there is no breach. This is similar to the court's approach in Tchenguiz v Grant Thornton UK LLP [2017] EWHC 310 (Comm), considered here.
o The court may grant permission retrospectively, but may impose conditions to ensure that the party who was in breach does not obtain any advantage from using the documents for the improper purpose. In the present case, for example, the court granted retrospective permission to a party who used disclosed documents to obtain advice on potential US claims, but on the condition that the US lawyers' retainers were terminated and their advice was not provided to anyone else (including any other US lawyers that might be instructed) without the court's permission.
o The restrictions apply to documents provided by way of pre-action disclosure under CPR 31.16 just as they apply to documents provided by way of disclosure in the action.
See our litigation notes blog post.
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20. Court of Appeal finds litigation privilege is restricted to the purpose of obtaining advice or information, not the conduct of litigation more broadly
WH Holding Ltd v E20 Stadium LLP [2018] EWCA Civ 2652
The Court of Appeal held that emails between a company's Board members which had been prepared to discuss a commercial proposal for the settlement of a dispute were not covered by litigation privilege.
The court found that, to fall within litigation privilege, a communication must be prepared for the dominant purpose of obtaining advice or evidence in relation to the conduct of litigation. It is not sufficient that it is for the
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dominant purpose of conducting litigation, in a broader sense. This is a point that had previously been unclear in the case law.
The court did not consider that the recent high profile decision in SFO v ENRC [2018] EWCA Civ 2006 (considered here) extended the scope of litigation privilege beyond the recognised categories of advice or evidence, though the decision confirmed that the conduct of litigation includes its avoidance or compromise. The court in the present case added (perhaps tellingly):
"We do not consider that there is any justification for extending the scope of litigation privilege in that respect. It has always been recognised that privilege is an inroad into the principle that a court should be able to decide disputes with the aid of all relevant material."
The decision is likely to lead to difficulties in the application of litigation privilege in practice, as there may be many communications or documents which are for the purpose of conducting litigation (including avoiding or settling litigation) but which do not fall within the category of obtaining advice or evidence. The court did accept, however, that litigation privilege will apply if advice or information obtained for the conduct of litigation cannot be disentangled from a document, or it would otherwise reveal the nature of such advice or information.
The decision may also suggest that litigation privilege is restricted to communications between parties or their lawyers and third parties, rather than applying to internal communications within a party. This part of the decision is not however clear, and it is difficult to see why litigation privilege should be restricted in this regard, so long as a communication or document is prepared for the required purpose. It may be that the Court of Appeal is merely dismissing an argument that litigation privilege applies to all internal corporate communications relating to litigation even if they fall outside the required purpose.
Finally, the decision also suggests that the courts may adopt a more liberal approach to the question of when they should inspect documents to ascertain whether they are privileged, when a claim to privilege is challenged.
See our litigation notes blog post.
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21. High Court orders Tesco to disclose SFO documents in s.90A FSMA shareholder class action
Omers Administration Corporation & Ors v Tesco plc [2019] EWHC 109 (Ch)
The High Court ordered that documents provided to Tesco plc ("Tesco") by the SFO for the purpose of negotiating a DPA must be disclosed by Tesco in the separate civil action relating to the same subject matter, brought by its shareholders under s.90A FSMA. The court reached this conclusion notwithstanding the fact that these documents were obtained by the SFO from third parties using its powers to compel the production of information/documents under s.2 of the CJA, and provided to Tesco during the DPA process on the understanding between the SFO and Tesco that the information they contain would be kept confidential.
This decision will be of significance to listed companies. It highlights the possibility that documents provided by third parties to the SFO (for example in connection with a criminal/regulatory investigation into false/misleading financial information published by a listed company), will become disclosable in any subsequent civil shareholder action. One can readily see the likelihood of follow-on civil proceedings in such circumstances. There may also be read across value for documents produced to other regulatory or enforcement bodies in similar circumstances; although depending on the agency concerned there may be additional statutory restrictions on the disclosure or use of documents which come into play (for example s.348 FSMA in the context of an FCA investigation).
Where a live criminal investigation/prosecution is on foot, there may also be additional considerations relating to whether disclosure of documents could prejudice that investigation in Omers, the court considered that a confidentiality club order, protecting the documents from entering the public domain until after the conclusion of the civil proceedings was sufficient to address the risk of prejudice to the criminal proceedings, but this may not always be the case.
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Third parties who are compelled to provide documents to criminal/regulatory authorities should also take note of this decision and understand the potential for wider disclosure of such documents.
The judgment follows the recent decision in KBR in which the High Court held that the SFO was able to compel a foreign company to produce documents located outside the jurisdiction (see case 17 above). Taken together, these cases suggest that the scope of documents obtained in regulatory and criminal investigations which may be obtainable by claimants in civil litigation may be increasing.
One risk arising from this decision is that, conscious that their evidence may no longer be truly confidential, people being interviewed may be less willing to speak freely and openly to investigators. Of course, where an interview is compelled then there will be no choice but to answer questions, but there is the potential for a chilling effect on witnesses, on voluntary interviews and on the provision of witness statements. Preservation of confidentiality in regulatory investigations and criminal proceedings has long been viewed as being in the public interest and this decision calls those policy objectives into question.
See our banking litigation e-bulletin.
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22. High Court refuses permission for collateral use of disclosed documents and witness statements to respond to US grand jury subpoena
ACL Netherlands BV v Lynch [2019] EWHC 249 (Ch)
In a decision illustrating the court's strict approach to the rule prohibiting the use of disclosed documents and witness statements for a collateral purpose, the High Court refused a party permission to provide disclosed documents and witness statements to the US Federal Bureau of Investigation (FBI) for the purpose of complying with a US Grand Jury subpoena.
The court's permission was required because under CPR 31.22 (in relation to disclosed documents generally) and 32.12 (in relation to witness statements), a party may only use disclosed material for the purpose of the proceedings in which it is disclosed, subject to certain exceptions including where the court gives permission.
On the facts of the case, the court held that the applicant had not established cogent and persuasive reasons in favour of granting permission, as it was required to do. The court also considered that the grant of permission might have occasioned injustice, particularly given that the trial in the civil proceedings was imminent.
The decision highlights that the fact that a party may be facing legal compulsion to produce documents is not a 'trump card' leading necessarily to the grant of permission (although in any event the court was not satisfied here that compulsion had been established). Courts considering such applications will not apply a mechanistic approach and will consider all the circumstances in weighing the competing public interests involved. That is the case even if refusing permission may result in a party finding itself effectively stuck between a rock and a hard place, unable to comply with a legal demand from an enforcement or regulatory agency though that will be a relevant factor.
See our litigation notes blog post.
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Governing Law & Jurisdiction
23. Court of Appeal gives guidance on how to apply jurisdiction test laid down by Supreme Court
Kaefer Aislamientos SA de CV v AMS Mexico SA de CV [2019] EWCA Civ 10
The Court of Appeal considered how the test for establishing English jurisdiction should be applied where there is a dispute over the facts relevant to jurisdiction.
Where a claimant needs permission to serve proceedings out of the jurisdiction, the claimant has to establish that a relevant jurisdiction gateway applies, e.g. on the basis that the defendant has committed a breach of contract within the jurisdiction. The same is true where the claimant asserts an entitlement to serve out of the
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jurisdiction without the court's permission under an article of the recast Brussels Regulation, e.g. on the basis of a jurisdiction clause in favour of the English courts.
The test has in the past been expressed as the need to establish a "good arguable case" as to the application of the relevant gateway/article. This test was intended to be straightforward, but has become, in the Court of Appeal's words, "befuddled by `glosses', glosses upon glosses, `explications' and `reformulations'."
The Supreme Court, in two cases in 2018, sought to clarify the test. However, how it applies in practice has not been entirely clear. The Court of Appeal in the present case has sought to interpret each limb of the test. It has, in particular, given its view that the court must consider the relative merits of the parties' arguments, rather than merely requiring the claimant to surmount a set evidential threshold. There remains however plenty of scope for further debate on the Supreme Court's formulation and how it applies in any particular case.
See our litigation notes blog post.
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Brexit
24. Draft Civil Procedure Rule changes in the event of a no deal Brexit
Civil Procedure Rules 1998 (Amendment) (EU Exit) Regulations 2019
The government published a draft statutory instrument, which makes amendments to the CPR that are consequential on the various other civil justice measures that are to be implemented in the event of a no deal Brexit. These include, most importantly, the disapplication of the recast Brussels Regulation and the Lugano Convention in relation to questions of jurisdiction and enforcement of judgments (as outlined here), as well as the disapplication of the EU Service Regulation and Taking of Evidence Regulation in each case subject to transitional provisions.
The CPR amendments, which will only take effect if there is a no deal Brexit, include sweeping changes to CPR Part 6 in relation to service of documents and Part 74 in relation to enforcement of foreign judgments, as well as changes to other rules such as the provisions in Part 25 relating to security for costs.
See our litigation notes blog post.
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25. High Court finds European Medicines Agency lease not frustrated by Brexit
Canary Wharf (B4) T1 Ltd and others v European Medicines Agency [2019] EWHC 335 (Ch)
The High Court rejected an argument that the European Medicines Agency's (EMA) lease of premises at Canary Wharf would be frustrated as a result of the UK's withdrawal from the EU.
The EMA argued that, as a result of Brexit, and as a matter of EU law, it would lack capacity to make use of the premises or perform its obligations under the lease, and therefore the lease was frustrated under English law. The judge rejected the EMA's case that it would lack such capacity under EU law, and in any event found that an intervening lack of capacity under foreign law, after the contract had lawfully been entered into by the relevant foreign party, would not be relevant to questions of frustration under English law.
Overall, the decision illustrates the uphill struggle that is likely to face a party seeking to establish that its contracts are frustrated as a result of Brexit. The EMA is in a fairly unique position, as a European agency with good reasons to be located in an EU member state even if the judge rejected its case about a broader lack of capacity to make use of premises located elsewhere and it could not succeed in establishing its case on frustration. In principle, however, the decision leaves open the possibility of establishing frustration where a party is able to show that, as a result of Brexit, it will be deprived of all or substantially all of the benefit of a contract, or that it will simply not get what it bargained for, rather than performance merely becoming more onerous or inconvenient.
The EMA has been granted permission to appeal to the Court of Appeal.
See our litigation notes blog post.
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26. New decision tree on enforcement of English judgments in the EU27 post-Brexit
Amidst the ongoing uncertainties in relation to both the nature and timing of Brexit, we have published a new decision tree on enforcement of English judgments in the EU27 post-Brexit. It is intended to act as a quick reference guide to help determine which rules will apply to enforcement of a judgment post-Brexit whether the current rules in the recast Brussels Regulation, or the 2005 Hague Convention on Choice of Court Agreements, or the local rules in each EU27 country.
See our litigation notes blog post.
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Other Significant Developments
27. Launch of the Banking Litigation Podcast
We have launched a banking litigation podcast, with the aim of making it easier for our clients to keep up-todate on legal developments. Each podcast is a bitesize (10-15 minutes) audio recording of key legal developments for in-house lawyers at banks. It takes two main forms: (1) a monthly high level summary of key judgments, with a 'deep dive' into a particular case of interest; and (2) special edition podcasts focusing on a particular topic of interest in the sector.
You can listen to our most recent monthly update on SoundCloud, iTunes and Spotify.
And you can download our first special edition episode focusing on the litigation risks arising from LIBOR discontinuation (as mentioned in update 11 above) on SoundCloud, iTunes and Spotify,
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28. Court of Appeal considers extent of a creditor's obligation in relation to security
General Mediterranean Holding SA SPF v Qucomhaps Holdings Ltd & Ors [2018] EWCA Civ 2416
The Court of Appeal considered the extent of a creditor's obligation in relation to security. It noted that a creditor has an equitable obligation to perfect any security and that, if he fails to do so, a surety can be discharged (at least to some degree). However, the Court of Appeal held that a creditor does not have an absolute duty to ensure that a surety can have recourse to a security, and could not be obliged to incur any sizeable expenditure or run any significant risk to preserve or maintain a security. It also doubted whether a creditor could ever have an equitable duty to the principal debtor (as opposed to a surety) to take steps to preserve or maintain a security granted by a third party.
The context for this decision was a claim brought by a creditor to recover loan amounts against the principal debtor and the guarantor (the appellants in the appeal). The appellants maintained that the creditor had failed to take steps to protect the security (a charge granted by a third party company over its assets), with the result that neither the principal debtor nor the guarantor had any liability (relying upon Wulff v Jay (1872) LR 7 QB 756). In the light of the above reasoning, the Court of Appeal held that the appellants did not have any real prospect of successfully defending the creditor's claims on the basis of breach of equitable obligation.
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29. Court of Appeal confirms defendants not obliged to make enquiries of third parties before pleading non-admissions
SPI North Ltd v Swiss Post International (UK) Ltd and Asendia UK Ltd [2019] EWCA Civ 7
The Court of Appeal rejected an argument that a defendant must make reasonable enquiries of third parties before pleading in its defence that it is unable to either admit or deny an allegation and requires the claimant to prove it.
A defendant is under a positive duty to admit or deny an allegation where it is able to do so, and may only put the claimant to proof of a fact which it is unable to admit or deny. This decision confirms that a defendant may properly plead that it is unable to admit or deny an allegation where the truth or falsity of the allegation was neither within its actual knowledge (including attributed knowledge in the case of a corporation) nor capable of
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being easily ascertained from documents or other information at the defendant's ready disposal. It is not required to undertake investigations beyond that level, including consulting with any third parties.
This is not surprising but is nevertheless a welcome confirmation. A contrary conclusion could have given rise to significant practical difficulties, given the short period allowed by the rules for filing a defence.
See our litigation notes blog post.
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30. Court of Appeal gives guidance on scope of fiduciary duty in "secret commissions" case
Medsted Associates Ltd v Canaccord Genuity Wealth (International) Ltd [2019] EWCA Civ 83
The Court of Appeal found that there was no breach of fiduciary duty where an introducing broker failed to inform its client investors of the amount of commission it received from the financial institution to which it had introduced them.
This decision represents a novel application of the law in this area and it offers helpful guidance as to the scope of the fiduciary duty that may be owed by an agent to its principal to disclose commission payments. The Court of Appeal confirmed the following general principles of broader application:
A principal's knowledge of its agent's remuneration may limit the scope of the fiduciary duty that the agent owes to its principal to disclose that remuneration.
Generally speaking, where a principal knows that its agent is being paid by another party, it cannot complain that it did not know the precise particulars of the amount paid.
However, where there is no trade or customary usage, the principal's knowledge of the commission may need to be "more specific". Considering the specificity of knowledge required by a principal, the Court of Appeal noted two factors relevant in the present case: o Sophistication of the principal - in this case the investors were wealthy and experienced investors. o Degree of secrecy - the commission was less "secretive" because the investors knew that all the commission payable to the broker was payable by the financial institution (the investors did not pay any commission to the broker themselves, they only paid commission to the financial institution).
In the present case, the Court of Appeal concluded that there was no duty on the broker to disclose to the investors the actual amount of the commission it received from the financial institution. The broker's failure to disclose the amount of commission it received did not, therefore, represent a breach of the broker's fiduciary duty.
See our banking litigation e-bulletin.
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31. Supreme Court considers loss of a chance in professional negligence claim
Perry v Raleys Solicitors [2019] UKSC 5
This was a Supreme Court judgment on a loss of chance claim. Although the case was decided in the context of a solicitor's negligent advice (and the alleged lost opportunity to bring legal proceedings), the principles are also applicable to loss of chance claims arising out of other scenarios, such as entering into a particular transaction/product.
In summary, the Supreme Court emphatically restated the approach to causation which was set down in Allied Maples v Simmons & Simmons (a firm) [1995] 1 WLR 1602, namely that in cases where a claimant alleges that a breach of duty caused him/her to lose an opportunity: (1) the claimant must prove what he/she would have done on the balance of probabilities; (2) when looking at what a third party might have done, the court undertakes a loss of a chance analysis.
Whilst the decision does not represent a change in the law, it highlights some particular problems for defendants facing such claims. For example, where we are looking at type (2) cases, the position in relation to what action a third party would have taken remains to be resolved on the rather hazier loss of a chance
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analysis, and that presents some potential difficulty (and perhaps unfairness) for defendants in these cases. Also, there is clearly a degree uncertainty as to the approach the court will take - the Supreme Court disagreed with the Court of Appeal which had disagreed with the judge at first instance in this case.
See our insurance notes blog post.
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32. High Court provides guidance on relational contracts and implied duties of good faith
Bates v Post Office Ltd (No. 3) [2019] EWHC 606 (QB)
The High Court held that certain contracts between the Post Office and sub-postmasters, which are the subject of group litigation, are 'relational contracts' and therefore subject to an implied obligation on the parties to act in good faith.
The court recognised that an obligation of good faith is not implied in all commercial contracts. However, it held that, consistent with earlier decisions including Yam Seng Pte Ltd v International Trade Corpn [2013] EWHC 111 (considered here), English law recognises that there is a type of contract, a 'relational contract', in which such an obligation is to be implied. Whether a contract is a relational one depends on the "circumstances of the relationship, defined by the terms of the agreement, set in its commercial context".
The court identified a number of characteristics relevant to an assessment of whether a contract is relational, including, for example, whether the parties' relationship is long-term, and whether the parties repose trust and confidence in each other in performing the contract. No single one of these characteristics would be determinative, save that there must be no express terms in the contract which would prevent a duty of good faith being implied.
The court rejected the argument that a duty of good faith requires only that the parties act honestly. The duty includes honesty but, in the court's view, it goes beyond that, requiring that the parties refrain from conduct which in the relevant context would be regarded as commercially unacceptable by reasonable and honest people.
The decision is of interest in adding to the debate as to whether, or when, duties of good faith will be implied. It suggests that whilst courts will not imply a duty of good faith in all commercial contracts, courts may be prepared to do so in an appropriate case, provided that the implication of such a term is not inconsistent with the express terms.
See our litigation notes blog post. The Post Office has applied to the Court of Appeal for permission to appeal.
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33. Supreme Court clarifies test for setting aside judgment for fraud
Takhar v Gracefield Developments Ltd [2019] UKSC 13
The Supreme Court resolved uncertainty as to the test that must be met when seeking to set aside a judgment on the grounds that it was obtained by fraud. Overturning the Court of Appeal's decision, it confirmed that there is no need to demonstrate that the evidence of fraud could not have been obtained with reasonable diligence at the time of the earlier trial.
The question of whether there is a 'reasonable diligence' requirement in cases involving fraud had been the subject of conflicting authority in the lower courts in recent years. It reflected a tension between, on the one hand, the public policy in favour of the finality of litigation and, on the other, the desire to do justice in individual cases and not permit fraudsters to benefit from their misuse of the court system. The Supreme Court's decision comes down in favour of the latter in this context, and to that extent can be seen as an illustration of the principle that "fraud unravels all".
However, the court expressly left open the question of the approach to be adopted in a case where the fraud had been raised in the original trial, or where a deliberate decision had been taken not to investigate a suspected fraud or rely on a known fraud. While no final view was reached, the judgments indicate a tentative view that, in such situations, a court dealing with the application to set aside the judgment should have a discretion whether or not to grant the application.
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The judgments do suggest a narrow view as to when any such qualifications might be triggered. The claimant in this case had sought (and been refused) permission from the trial judge to adduce evidence from a handwriting expert, which might be thought to indicate that she had suspected, and indeed raised, the issue of fraud to that extent. Lord Kerr however observed that, while the claimant suspected there may have been fraud, it was clear she did not make a conscious decision not to investigate it; to the contrary, she sought to do so but her application to adduce expert evidence was refused. As a practical matter, however, litigants who suspect some element of fraud should not assume that they will necessarily be entitled to re-open the litigation at a later date simply by producing evidence of fraud. Certainly, the decision does not give carte blanche effectively to 'park' fraud allegations, either for tactical reasons or in the hope that stronger evidence of the fraud might come to light after judgment. In most cases, parties will still be well advised to investigate their suspicions and raise any allegations within the proceedings if they wish to pursue them. See our litigation notes blog post. ^ Back to top
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Banking Litigation Contacts
Rupert Lewis, Partner (Head of Banking Litigation) +44 20 7466 2517 [email protected] Damien Byrne Hill, Partner +44 20 7466 2114 [email protected]
Julian Copeman, Partner +44 20 7466 2168 [email protected]
Harry Edwards, Partner +44 20 7466 2221 [email protected]
Kirsten Massey, Partner +44 20 7466 2218 [email protected]
Ceri Morgan, Professional Support Lawyer +44 20 7466 2948 [email protected]
Chris Bushell, Partner +44 20 7466 2187 [email protected]
Simon Clarke, Partner +44 20 7466 2508 [email protected]
John Corrie, Partner +44 20 7466 2763 [email protected]
Natasha Johnson, Partner +44 20 7466 2981 [email protected]
Gary Milner-Moore, Partner +44 20 7466 2454 [email protected]
Donny Surtani, Partner +44 20 7466 2216 [email protected]
If you would like to receive more copies of this briefing, or would like to receive Herbert Smith Freehills briefings from other practice areas, or would like to be taken off the distribution lists for such briefings, please email [email protected]
Herbert Smith Freehills LLP 2019 The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on the information provided herein.
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