1. Delay in publication of changes to CPR to implement Jackson reforms

Publication of the Statutory Instrument making amendments to the CPR in order to implement the Jackson reforms has been delayed.  It was expected to be published in December 2012, but publication will now not take place until mid-January 2013 at the earliest.  This will leave practitioners around 11 weeks to absorb the changes before the new costs management and funding regimes come into force on 1 April 2013.

The Law Society President has written to Chris Grayling, the Justice Secretary and Lord Chancellor, expressing concern that the rushed implementation of Part 2 of the Legal Aid, Sentence and Punishment of Offenders Act 2012 (which brings into effect many of the Jackson reforms) risks increasing costs and clogging up the civil courts: see here.

  1. Indemnity principle will apply to apply to damages-based agreements

The Ministry of Justice has clarified the position on inter partes costs recovery under damages-based agreements (DBAs), which are due to come into force in April 2013.  The indemnity principle will apply, which means that a receiving party who is funding the case with a DBA will not be able to recover from the paying party more than the total amount payable by the receiving party under the DBA.  See the announcement on the Ministry of Justice website here.

  1. Abolition of recoverability of success fees and insurance premiums postponed in defamation and privacy claims

In his review of civil costs and funding, Lord Justice Jackson recommended that it should no longer be possible for a successful party to recover all or part of a success fee or the premium for after the event (ATE) insurance from the losing party.  These recommendations are due to be brought into effect by ss. 44 and 46 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which come into force on 1 April 2013.  Under s. 44, a party who enters into a conditional fee agreement (CFA) with a success fee on or after 1 April 2013 will not be able to recover his success fee from the other side if he is successful, but will instead have to bear it himself.  The same will apply to premiums for ATE insurance policies taken out on or after 1 April 2013.

On 12 December 2012, the Parliamentary Under-Secretary of State for Justice published a ministerial statement (click here) announcing that the Government have accepted a recommendation from Lord Justice Leveson that costs protection should be extended to defamation and privacy claims.  The aim is to prevent individuals of modest means having to bring or defend actions without some form of protection against having to pay the other side's costs if they lose.

The effect of this will be that ss. 44 and 46 of the 2012 Act will not come into force on 1 April 2013 for defamation and privacy claims, but will be postponed until costs protection has been introduced for such claims.  This means that insurance premiums (and presumably success fees, although the ministerial statement does not make this clear) will continue to be recoverable in defamation and privacy claims until a new regime of costs protection can be implemented through changes to the CPR.

  1. EU adopts new jurisdiction Regulation to replace Brussels Regulation

The Council of the EU has adopted a new Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.  The Regulation will apply in all EU Member States, including to Denmark under its 2005 Agreement with the EU on jurisdiction and the recognition and enforcement of judgments.  The new Regulation, which will repeal the Brussels Regulation (Regulation 44/2001), will be published in the Official Journal in the coming weeks, enter into force 20 days after that and then start to apply two years after its entry into force - which is likely to be in early 2015. 

The new Regulation will make a number of significant changes to the regime under the Brussels Regulation:

  • It will abolish the exequatur procedure, under which it is currently necessary to obtain a declaration of enforceability of a judgment of the court of one Member State before that judgment is enforceable in another Member State.  Instead, a judgment will be recognised in the other Member States without any specific procedure and, provided it is enforceable in the Member State of origin, will be enforceable in the other Member States without any declaration of enforceability.
  • Member States will no longer be able to apply their national rules of jurisdiction in relation to consumers and employees domiciled outside the EU.
  • There will be uniform rules of jurisdiction in respect of parties domiciled outside the EU in situations where the courts of a Member State have exclusive jurisdiction under the Regulation or have had jurisdiction conferred on them by an agreement between the parties.
  • There will be a rule on international lis pendens, which will give the courts of a Member State the discretion to stay, and eventually to dismiss, proceedings where, at the time the Member State court is seised, the court of a third state is already seised either of proceedings between the same parties or of a related action.

The new Regulation will retain the arbitration exception currently found in article 1(2)(d) of the Brussels Regulation, although the extent of the exception will be clarified by a new recital 12.  In addition, a new article 84(1)(a) will expressly state that the Regulation will not affect the application of the New York Convention.

See the European Council's press release here.

  1. Changes to financial limits for court tracks from 1 April 2013

The Ministry of Justice has indicated that the financial limits for the various court tracks are to change on 1 April 2013.  The limits will then be as follows:

  • claims up to the value of £10,000: small claims;
  • claims from £10,000 to £25,000: fast track;
  • claims valued at £25,000 and upwards: multi-track.
  1. Enforceability of dispute escalation clauses

The recent case of in Wah (Aka Alan Tang) and another v Grant Thornton International Ltd and others [2012] EWHC 3198 (Ch) looked again at the enforceability of "dispute escalation" clauses.  Such clauses oblige the parties to participate in alternative dispute resolution ("ADR") processes such as conciliation or mediation before they can issue court proceedings or proceed to arbitration.  It was established in Cable & Wireless plc v IBM United Kingdom Ltd [2002] EWHC 2059 (Comm) and Holloway v Chancery Mead Ltd[ 2007] EWHC 2495 (TCC) that agreements to participate in a dispute escalation process are legally binding, provided that the obligation and the process in question are sufficiently certain.

Wah concerned an agreement governing the terms of membership of an accountancy firm's international network.  The agreement referred disputes to LCIA arbitration, but also set out a dispute escalation process.  This required the CEO of the network to facilitate a conciliation process, which if unsuccessful would be followed by a reference to a panel of three board members for another round of conciliation.  Only after this could a party begin arbitration.  A dispute arose under the agreement, and the High Court had to consider whether the dispute escalation procedure in the agreement was sufficiently certain to be legally binding. 

The judge held that the procedure did not have sufficient definition or certainty for it to be legally enforceable.  He rejected an argument that the effect of Cable & Wireless was that where a contract just included a bare commitment to attempt to resolve a dispute, the court only needed to be able to identify the minimum the parties had to do to make that attempt, without necessarily being able to define what else was required for the attempt to be regarded as genuine.  Although the agreement here set out some of the steps in the conciliation process, it did not set out the actual content of the process, and only expressed in a very general and equivocal manner the degree of commitment which the parties were required to have to the process.

Wah is a good illustration of the fact that parties need to be careful in drafting dispute escalation clauses if they are to be legally enforceable.  Such clauses need to set in detail each step of the process, explaining the form that step will take and what the parties need to do to complete it. 

For more details, see the article by Ned Beale here.  The judgment is here.

  1. Balancing factors on Norwich Pharmacal application

In Rugby Football Union v Consolidated Information Services (formerly Viagogo Ltd) [2012] UKSC 55, the RFU sought a Norwich Pharmacal order requiring Viagogo to provide identifying information about individuals who had sold and purchased tickets for rugby matches using the Viagogo website so that it could take action against those individuals.  The court made the order on the basis that the RFU had a good arguable case that the individuals were guilty of breach of contract and/or conversion, the information was necessary for the RFU to obtain redress against them and it was appropriate to grant the relief sought. 

On appeal to the Supreme Court, the issue was whether the grant of a Norwich Pharmacal order would constitute an unnecessary and disproportionate interference with the rights of the alleged wrongdoers in breach of Article 8 of the Charter of Fundamental Rights of the European Union, which guarantees the protection of personal data.

The Supreme Court held that the main purpose of a Norwich Pharmacal order was to do justice in the case, and this involved a careful weighing of all the relevant factors.  Those factors included the strength of the applicant's possible cause of action, whether the alleged wrongdoers knew or ought to have known that what they were doing was unlawful and the privacy rights under Article 8 of the individuals whose identities were to be revealed.

In conducting the balancing exercise, the court had to weigh up the potential value to the RFU of the information sought against the likely impact disclosure of that information would have on the individual concerned.  The court rejected Viagogo's argument that the court had to carry out the exercise solely by reference to the particular benefit that obtaining information in relation to an individual might bring without taking into account the wider considerations, such as the deterrent effect that such an order might have on others.  The court was satisfied that, taking into account all the circumstances, the RFU's interest in obtaining the information outweighed the rights of the individuals.  It upheld the earlier decisions granting the Norwich Pharmacal order and dismissed Viagogo's appeal.

For more details, see Louise Lambert's article on the UKSC Blog: click here.  The judgment is here.

  1. Court has retrospective power to lift administration moratorium

When a company enters into administration, a statutory moratorium is imposed under paragraph 43 of Schedule B1 to the Insolvency Act 1986.  This moratorium prevents various types of legal process, including the issue of proceedings, being taken against the company or its property without the consent of the administrator or the permission of the court.

The question for the High Court in Bank of Ireland (UK) plc v Colliers International UK plc [2012] EWHC 2942 (Ch) was whether it had power retrospectively to grant permission for  the issue of proceedings against the defendant company, which was in administration.  The claimant had issued the proceedings without obtaining either the administrator's consent or the court's permission, which meant that the proceedings were in breach of the moratorium.   The court considered a number of conflicting decisions on whether it had jurisdiction to grant retrospective permission, but decided to follow the approach taken in respect of other legislation which created similar types of statutory moratorium.  In particular, it followed the view of the House of Lords in Seal v Chief Constable of South Wales Police [2007] UKHL 31 that it needed to consider the Parliamentary intention behind the moratorium.

The fact that the requirement to obtain permission to commence proceedings only applied in the context of insolvency proceedings which were under the control of the court (i.e. bankruptcy, winding-up by the court and administration) shed some light on the purpose  of the moratorium.  It was not intended so much to protect creditors, but to protect the statutory insolvency regime by ensuring that all proceedings relating to the collection and distribution of a company's assets remained under the supervision and control of the court.  Given that purpose, it was hard to see why the court should not be permitted to grant retrospective permission if it was appropriate in the circumstances.  The administrator also had the power to grant such permission.  On the facts, the court granted retrospective permission for the claimant's proceedings.

The the judgment is here.

  1. No fixed costs consequences on offers to settle costs proceedings

Rangos v Secretary of State for Business Innovation & Skills [2012] EWHC 3186 (Ch) is an interesting decision on offers to settle costs proceedings.  It points out that, unlike offers to settle under Part 36, there are no fixed costs consequences which have to apply where the receiving party beats an offer by the paying party.  Here, although the receiving party's costs were assessed at £1,176 more than the paying party's settlement offer made a year earlier, the High Court upheld the costs judge's order that the receiving party could have his costs up to 21 days after the date for acceptance of the offer, and the paying party could have his costs of the assessment thereafter.

The costs judge made his decision by reference to the Court of Appeal's much-criticised decision in Carver v BAA plc [2008] EWCA Civ 412, where it held that it could take into account factors other than financial ones in deciding whether a claimant had obtained a judgment which was "more advantageous" to her than her Part 36 offer.  Part 36 was subsequently amended to overturn the effect of Carver (it now states that "more advantageous" means better in money terms alone).

The High Court found that the costs judge had a wide discretion under Rules 47.18 and 47.19 in deciding the parties' entitlement to costs, and this was wider than the discretion available in making a costs order where a party had rejected the other side's Part 36 offer and then failed to beat it.  Although Rule 47.19 required the costs judge to take into account the paying party's offer, it was up to him to decide what weight to give the offer and the effect it would have on the costs order he chose to make. 

The costs judge's consideration of Carver could not be criticised: he had referred to the case by analogy when he was addressing the possible impact of a party turning down a reasonable settlement offer and then only just beating it, as the receiving party had here.  He had been well aware that his discretion under Part 47 was different from the Part 36 regime and he had not treated Carver as some kind of precedent which required him to come to a particular conclusion or make a specific order as to costs.

The judgment is here.  Although the decision is from April 2012, the judgment was only made available in November.

  1. No property in the content of emails

The question for the High Court in Fairstar Heavy Transport N.V. v Adkins and another [2012] EWHC 2952 (TCC) was whether the content of an email can be regarded as property.  The defendant, Mr Adkins, was the CEO of the claimant, Fairstar, but he was employed by a third company, Cadenza.  Emails sent to Mr Adkins as CEO were automatically forwarded to his private email address and deleted from Fairstar's server, and he sent emails direct from his own personal computer.  This meant that Mr Adkins' incoming and outgoing emails were not held on Fairstar's server.

Fairstar required access to Mr Adkins' emails because of a dispute over a contract he had concluded.  By this time, however, Mr Adkins had been removed from office and refused to co-operate.  Fairstar sought an order that the emails be preserved and that an independent IT expert be permitted to inspect the documents, on the basis that the content of any emails created by or coming into Mr Adkins' possession while he was acting as agent for Fairstar was the property of Fairstar.  This depended on the content of the emails being properly regarded as property.

The court held that, although the law was not settled, it pointed strongly against there being any proprietary right in the content of information.  It agreed with the conclusion reached in Force India Formula One Team v 1 Malaysian Racing Team [2012] EWHC 616 (Ch) that "confidential information is not property".  The court then considered whether logic and the circumstances of the modern world should lead it to conclude that the content of an email was a form of property.  It found that practical considerations militated against there being any property in the content of an email.  In addition, there was no need for a proprietary right, as the laws of confidence and copyright already provided protection against the misuse of information.  Fairstar's application therefore failed.

The judgment is here.

  1. French Supreme Court finds "one-way" jurisdiction clause invalid

In Ms X v Banque Privée Edmond de Rothschild (French Supreme Court, First Civil Chamber, No. 11-26.022), the French Supreme Court ruled on the validity of a "one-way" or unilateral jurisdiction clause in an agreement between a bank and its client which required disputes to be submitted to the exclusive jurisdiction of the Luxembourg courts, but permitted the bank to sue the client in her country of domicile or "any other competent court".  The client brought proceedings against the bank in France, and the bank disputed jurisdiction.

The French Supreme Court held that the jurisdiction clause was invalid.  It held that the clause was "potestative" for the bank so that it violated the purpose of article 23 of the Brussels Regulation.  (Article 23 gives effect to jurisdiction agreements between the parties, and provides that such jurisdiction will be exclusive unless the parties have agreed otherwise.)  Under French law, a term is potestative if its performance is dependent on an event which only one of the contracting parties has the power to make happen or to prevent.  Such a term will be void for lack of mutuality of obligation.  The French Court therefore found the clause to be invalid because of its lack of reciprocity in terms of the jurisdiction(s) in which the bank and its client could bring proceedings.

The decision is surprising because, until now, article 23 has been understood to permit one-way jurisdiction clauses, and the French courts have previously held such clauses to be valid (there is no system of case law precedent in France).  If the matter were taken to the ECJ, it is possible it could find that the French decision misinterprets article 23 or is incompatible with the principle that national law may not supplement or override the requirements of article 23.  For the time being, however, where a contract has a nexus with France, the use of one-way jurisdiction clauses should be very carefully considered or even avoided.  This is of particular relevance to banks and other financial institutions, which commonly use such clauses in their documentation.

The judgment, which is only available in French, is here.

  1. Is a "take or pay" clause a penalty?

In E-Nik Ltd v Department for Communities and Local Government [2012] EWHC 3027 (Comm), Burton J revisited the question of whether a "take or pay" clause is a penalty and therefore unenforceable.  He had previously held in M&J Polymers Ltd v Imerys Minerals Ltd [2008] EWHC 344 (Comm) that such a provision could, in principle, be a penalty.  This was the case even though it was a debt claim (the rule against penalties does not normally apply to debt claims: see Jervis v Harris [1996] Ch 195.   

The defendant government department agreed to purchase a minimum of 500 days each year of consultancy services from the claimant information technology services company.  The defendant failed to use all of the days, and when the claimant issued invoices in respect of the full number of days, it challenged the claimant's invoices.  The claimant sued the defendant in debt for payment in respect of the unused days.  The question for Burton J was whether a "use or pay" clause in the agreement, under which the defendant had to either use or pay for the 500 days, amounted to a penalty or was commercially viable.

Relying on his decision in M&J Polymers, Burton J held that where the claimant had to, and did, keep available sufficient resources in order to provide consultancy services throughout the contractual term, at rates which were at or below the rates it usually charged, the "use or pay" clause was commercially justifiable and did not amount to a penalty.  The clause was not oppressive or threatening and was negotiated and freely entered into between parties of comparable bargaining power.  It is not clear whether Burton J considered the claimant's claim in E-Nik to be in damages or a debt claim, or whether there were parallel claims.

The judgment is here.

  1. Agent's breach of reg. 3 Commercial Agents Regulations is not automatically repudiatory

Is an agent's breach of his duty to look after the interests of his principal and act dutifully and in good faith under reg. 3 of the Commercial Agents (Council Directive) Regulations 1993 automatically a repudiatory breach of the agency contract?  This was the issue for the Court of Appeal in Crocs Europe BV v Anderson and another (t/a Spectrum Agencies) [2012] EWCA Civ 1400.

The claimant was the commercial agent for the defendant, Crocs Europe (maker of the popular brightly-coloured plastic shoes).  One of the claimant's employees posted some humorous mock film credits on the internet which made disparaging remarks about the defendant, and sent links to a number of the defendant's UK customers and overseas distributors.  The defendant claimed that the employee's behaviour amounted to a breach by the claimant of its duty of good faith and a repudiatory breach of the agency contract which entitled the defendant to terminate it. 

At first instance, the judge held that the breach was not serious enough to amount to a repudiatory breach, so the defendant had not been entitled to treat the contract as at an end.  The Court of Appeal agreed with this assessment.  It rejected the claimant's argument that the agent's duties in reg. 3 were implied conditions of the agency contract, so that any breach of those duties would always amount to a repudiatory breach.  It also disagreed with the alternative argument that a breach of the agent's statutory duty under reg. 3 would always be repudiatory.  The Court of Appeal pointed to reg. 5(2), which applied the governing law of the contract to the consequences of a breach of reg. 3.  Here, that was English law, which meant that all the principles of English contract law applied, including those on repudiatory breach.

On the facts, the court held that although the internet posting amounted to a breach of contract, it was not sufficiently serious to be regarded as repudiatory.  It was clear to the recipients that it was intended to be humorous and light-hearted, it was only sent to a limited number of people and was not kept in place for very long. 

The judgment is here.

  1. When is it unreasonable to refuse mediation?

In ADS Aerospace Ltd v EMS Global Tracking Ltd [2012] EWHC 2904 (TCC), the question for the High Court was whether the defendant had unreasonably refused to enter into mediation and should as a result be penalised in costs. 

The claimant had lost on all its arguments at trial, so the defendant had effectively "won" the case.  Under Rule 44.3(2), the starting position on costs was that the claimant would be ordered to pay the defendant's costs.  However, in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, the Court of Appeal held that the court could deprive a successful party of some or all of its costs if it considered that the party had unreasonably refused to enter into mediation.  As this amounted to a departure from the normal rule on costs, it was for the unsuccessful party to show why that refusal was unreasonable.  The Court of Appeal in Halsey then set out a non-exhaustive list of factors for the court to consider in deciding whether a party had acted unreasonably.  These included the nature and merits of the case, whether the party had made other attempts to settle, whether holding a mediation would have delayed the trial and the likely prospects of success of any mediation.  

The judge in ADS Aerospace, bearing in mind the non-exhaustive list of factors in Halsey, held that the defendant had not acted unreasonably in refusing mediation for the following reasons:

  • up to the point where the claimant suggested mediation, it had not been willing to engage even in without prejudice discussions, and yet the defendant had at all time been willing to enter into such discussions;
  • the claimant considered it was entitled to substantial compensation and was unlikely to have settled for a lower amount;
  • the claimant only suggested mediation 20 working days before the trial.  At that stage, without prejudice discussions would have been quicker, cheaper and less intrusive into trial preparation than a mediation, and they would probably have achieved the same result; and
  • the defendant was not unreasonable in its belief that it had a very strong case on liability, causation and quantum.  The court reiterated the observation of Dyson LJ in Halsey that:

"The fact that a party unreasonably believes that his case is watertight is no justification for refusing mediation.  But the fact that a party reasonably believes that he has a watertight case may well be sufficient justification for a refusal to mediate".

Notwithstanding decisions such as this (and another from earlier in the year, Swain Mason and others v Mills & Reeve (a firm) [2012] EWCA Civ 498, where the Court of Appeal reached a similar conclusion), it is still important to consider carefully any offer to mediate.  Such an offer should only be refused where there are clear reasons to do so, otherwise the party is likely to be penalised on costs if it goes on to win at trial.

The judgment in ADS Aerospace is here and the judgment in Swain Mason is here.

  1. Proposals to update EC Insolvency Regulation

On 12 December 2012, the European Commission announced proposals to update the EC Insolvency Regulation (Regulation (EC) 1346/2000 on Insolvency Proceedings).  These are set out in a formal Proposal for an amending Regulation (click here). 

The Commission also announced a project to identify the areas where differences between the domestic insolvency laws of EU Member States have the greatest potential to hamper the establishment of an efficient legal framework across the EU for insolvency matters.  It has published a Policy Communication (click here) which identifies a number of initial problem areas in domestic insolvency laws.  The Commission, together with the European Parliament and Council, will be holding a public consultation on the project.

  1. Lord Chief Justice to retire in September 2013

The Lord Chief Justice, Lord Judge, has announced that he will retire at the end of September 2013.  He will continue in office until that date.  According to a Judicial Office statement (click here), the process to appoint his successor will begin in early 2013.  The Judicial Appointments Commission panel is expected to put a name forward by Easter 2013.  The Times has named Lady Justice Hallett as favourite to replace Lord Judge, and suggested as other possibilities Sir John Thomas (President of the Queen's Bench Division) and Lord Justice Leveson.

  1. Supreme Court seeking three new justices

The UK Supreme Court is also looking to appoint three new justices in 2013, to replace Lord Dyson, who left the court earlier in the year to become Master of the Rolls, and Lords Walker and Hope, who have announced that they will retire in March and June 2013 respectively.  The selection commission has decided that the most efficient process will be to appoint the three new justices simultaneously.  The Guardian has suggested Lady Justice Hallett and Lady Justice Black as contenders for the appointments: see the post on the UK Supreme Court blog here.

  1. Lord Justice Gross appointed as Senior Presiding Judge

Lord Justice Gross has been appointed as Senior Presiding Judge for England and Wales with effect from 1 January 2013 (see the press release here).  He will have overall responsibility for the deployment of work in the courts and will liaise between the judiciary, courts and Government departments.

  1. Supreme Court hears Prudential appeal on legal professional privilege

On 6-8 November 2012, seven Supreme Court justices heard Prudential's appeal against the Court of Appeal's decision in R (on the application of Prudential PLC and another) v Special Commissioner of Income Tax and another (see Olswang's summary here), which concerns whether communications between a client and its non-legal advisors are protected from disclosure by legal professional privilege where those advisors are providing legal advice.  A number of professional bodies were given permission to intervene in the appeal, including the Law Society, the Bar Council and the Institute of Chartered Accountants.  The judgment is expected in the new year.

  1. Court of Appeal considers costs management pilot scheme in defamation cases

On 4 December 2012, the Court of Appeal heard the appeal in Henry v News Group Newspapers Ltd, which had been brought forward from February 2013.  The case concerns the costs management pilot scheme in defamation cases: the appeal is against Senior Costs Judge Master Hurst's ruling that the claimant was not entitled to claim any more costs than those set out in her court-approved budget.  Judgment has been reserved.  The Court of Appeal's decision is likely to have a significant bearing on the application of the new general costs management regime being rolled out in April 2013.