Commercial Litigation Round-Up – August 2023
Catch up on important legal developments in the past 6 months
We have collated a brief round-up of important recent cases, procedural developments and hot topics for businesses to help busy in-house counsel keep up to date, particularly those who are involved in managing disputes. If you would like further information on a topic, you can access more detailed briefings using the links.
Part 3 – Hot topics for businesses
1. Contract law
The Courts have been busy considering various issues relating to contractual interpretation. Our pick of the top 3 cases are:
Sara & Hossein v Blacks [2023] UKSC 2
This decision of the Supreme Court may suggest an interesting development in contractual interpretation. The majority agreed with the Court of Appeal's view that the ‘natural and ordinary meaning’ of a clause corresponded to one party’s interpretation. They went on to consider and evaluate different possible constructions and favoured an interpretation that had not occurred to the parties or to the lower courts. It will be interesting to see if this approach has an impact in future cases. A shift in approach to assessing the words in context may be welcomed by litigators seeking to argue for a commercial interpretation of a contract, but may be of concern to contract drafters if drafting becomes more prescriptive to prevent such outcomes. (See further here.)
The Supreme Court gave guidance on the boundary between a contractual based claim and a claim for unjust enrichment. The case concerned a unilateral contract which provided for payment of a commission if a property was sold for a specified sum or more, but was silent as to what happened if the sale value was lower. The property was sold for less than the specified sum. The majority refused to imply a payment term into the contract and held there was no claim in unjust enrichment: by stipulating the circumstances that must occur to impose an obligation to pay, the parties had excluded an obligation to pay in the absence of those circumstances. Unjust enrichment will only apply outside the scope of ‘the subject matter of the contract’ or ‘the circumstances’ described by the contract. Drafters should consider making the full position clear in their contracts to avoid this type of dispute which went all the way to the Supreme Court. (See further here.)
Quantum v Quantum [2023] EWCA Civ 12
In this dispute dealing with the construction of a long-term services agreement, the Court of Appeal has clarified that there are no special principles of contractual interpretation that apply to a relational agreement, whether or not it contains a good faith implied term.
2. Procedural updates
For those involved in managing litigation, there have been some important cases and new developments in procedure.
Case law – disclosure and privilege
There have been two interesting decisions relating to privileged documents coming into an opponent’s hands. Where privileged documents have been inadvertently disclosed during the disclosure process, the court may intervene to prevent their use where there has been an ‘obvious mistake’. In Flowcrete UK Ltd v Vebro Polymers UK Ltd [2023] EWHC 22 (Comm) the Court emphasised (i) that the burden is on the disclosing party to establish inadvertent disclosure, and when making an application for an injunction they must provide evidence that a mistake was made, and (ii) the court may still refuse to grant an injunction where the disputed documents suggest some sort of wrongdoing on the part of the disclosing party (see here for details). In other scenarios where privileged documents come into the hands of an opponent, the court in Taylor & Ors v Evans (As Representative of the Labour Party) [2023] EWHC 935 (KB) held that the key question is whether, on the facts, the recipient should have understood that the privileged information was communicated in confidence. During an internal investigation, an employer found a privileged email from an employee to her solicitor on her work laptop. The court held that, as a result of the circumstances, the employer should have realised the email was confidential and there was no loss of privilege (see here for details). It can be difficult to draw clear lines in these types of cases.
Soriano v Forensic news LLC [2023] EWCA Civ 223 is a helpful reminder that parties to English litigation may be able to use foreign court procedures to gather evidence to support their case in the English courts. The English courts will be slow to restrain such foreign proceedings on the grounds that the party is behaving in a manner which is unconscionable. This remains the case even if a foreign court may order disclosure on a wider basis that an English court. This may provide a useful tool for evidence gathering in cross border litigation. (See here for details.)
Finally, in Loreley Financing v Credit Suisse [2022] EWCA Civ 1484 the Court of Appeal confirmed that the identity of those instructing lawyers on behalf of a corporate client is not generally protected by litigation privilege. (See here for details.)
Procedural rules
Service of documents by email
Following a judgment in October 2022 in which the judge held that an agreement to accept service of a claim form by email was valid only if the recipient nominated a single email address rather than multiple addresses, the Civil Procedure Rule Committee has clarified the position on service. The Committee introduced an amendment to CPR PD 6A.4.1 which came into effect on 6 April 2023. It makes clear that multiple email addresses can be provided without invalidating service of documents by email. However, parties should note that where multiple email addresses are provided by the receiving party, service will be effective when the document is sent to any two of the email addresses. (See here for details.)
Extension of fixed recoverable costs regime
Many companies face a number of lower value claims. From 1 October 2023, amendments to the Civil Procedure Rules will come into effect to implement the extension of the fixed recoverable costs (FRC) regime in civil cases, and establish an intermediate track for claims above £25,000 but not more than £100,000. The aim is to ensure that legal costs are more certain and proportionate across a wider range of civil claims. The amendments were recently laid before Parliament (Civil Procedure (Amendment No 2) Rules 2023 (SI 2023/572)) and the SI is accompanied by an explanatory memorandum to help solicitors become familiar with the new regime. The FRC will apply to all fast track and intermediate track cases with limited exceptions. The amount of costs recoverable from the unsuccessful party will depend on a number of factors, including whether the case is fast track or intermediate track, which complexity band the claim is assigned to and when the claim is resolved (as set out in the tables in a new PD 45). The FRC regime also provides for a percentage of the damages won (or successfully defended against), with the percentage increasing as the case nears trial. The changes will also impact on the effect of Part 36 offers in such cases (see 7.12-7.13 of the explanatory memorandum).
The Singapore Convention
In May 2023, the UK signed the United Nations Convention on International Settlement Agreements Resulting from Mediation, known as the Singapore Convention. This provides an international framework for the enforcement of settlement agreements resulting from mediation. The Convention is likely to come into force in the UK at some point in 2024. You can read about the key details here.
3. Hot topics for businesses
Climate litigation
In recent years, there has been a continued increase in climate related litigation in the English courts which has mirrored the trend in many other jurisdictions. Claims were first brought against governments and then against corporates in high carbon-emitting industries, and the trend continues to expand across jurisdictions and market sectors. Claimants continue to examine how existing legal frameworks may be used to determine liability for companies and directors. In ClientEarth v Shell Plc & Ors (Re Prima Facie Case) [2023] EWHC 1137 (Ch) the NGO sought to bring a novel action against the directors of Shell Plc. ClientEarth used its minority shareholding to bring a derivative claim under the Companies Act 2006. This allows shareholders to bring a claim on behalf of a company against its directors in relation to actual or proposed unlawful acts or omissions, such as breaches of their statutory directors’ duties. ClientEarth essentially alleged that Shell’s strategy to manage its climate change risk was insufficient. The court refused permission to continue with the action both at the initial application on paper and at an oral hearing. A detailed discussion of the claim and the judge’s reasoning is here. The judge’s reasoning suggests such claims are unlikely to be successful as the court emphasised that it is for the management of large complex organisations to weigh up competing considerations. Further, the Companies Act procedure should not be used to bring actions for what appeared to be collateral reasons to further a policy agenda. ClientEarth has stated that it intends to appeal against the decision.
However, while many of these claims have not been successful in the courts, the fact of them being brought, the cost and time of defending and the reputational impact of such claims can be enough to push public authorities and corporates into action. Climate risk has remained a key topic at some of the recent AGMs of major corporates, and shareholders continue to put pressure on companies to address their response to climate change.
Data class actions – Prismall v Google
Data class actions are of interest and concern to organisations that hold and process personal data, including those that use technology to develop new products and rely on such data to build and test the product. If a representative group action for breach of data protection and privacy requirements can be brought successfully, the risk of a large damages award increases significantly. Following the high profile Supreme Court decision in Lloyd v Google LLC [2021] UKSC 50 an “opt-out” representative action for damages for breach of the Data Protection Act 1998 will not succeed. In this latest case, Prismall v Google UK Ltd & Anor [2023] EWHC 1169 (KB), the claimant sought to avoid one of the key difficulties faced by the claimant in Lloyd by framing the representative action as a claim in tort for the misuse of private information. However, the claim was struck out and the judgment shows the challenges that will likely apply to other attempts to bring an “opt-out” representative action for misuse of private information. (See here for details of the case and further analysis.) These decisions reduce the risk of data class actions against companies.