www.mayerbrown.com

Welcome to Mayer Brown’s Litigation & Dispute Resolution Legal Update April 2008. In this publication you will find summaries of key cases, information about recent legislation, consultation papers and other relevant news. A full table of contents appears on the inside of the front cover.

April 2008 Litigation & Dispute Resolution Legal Update

Contents Page

PRACTICE AND PROCEDURE

Costs

Lobster Group Ltd v Heidelberg Graphic 1 Equipment Ltd & Another

James Carleton Seventh Earl of Malmesbury 2 & Others v Strutt and Parker (a partnership)

Reynolds v Stone Rowe Brewer 2

Service

Olafsson v Gissurarson 3

CPR 71 – orders to obtain information from judgment debtors

Vitol SA v Capri Marine Ltd 4

New allocation questionnaire 6

ARBITRATION

Michael Wilson & Partners Ltd v Emmott 6

DAMAGES

Westbrook Resources Ltd v Globe Metallurgical Inc 8

TORTS

Total Networks SL v Customs & Excise Commissioners 9

PROFESSIONAL NEGLIGENCE

Drake v Harbour & Another 10

Pritchard Joyce & Hinds v Batcup & Another 11

CONFLICT OF LAWS/JURISDICTION

Scottish & Newcastle International Ltd v Othon 12 Ghalanos Ltd (a company incorporated in Cyprus)

Curtis & Another v Lockheed Martin UK Holdings Ltd 13

n

n

n

n

n

n

n

n

n

n

n

n

GREEN PAPER

Effective enforcement of judgments in the EU 15

CONSULTATIONS

Regulation of Enforcements Agents: post-consultation report 15

LEGISLATION

Tribunals, Courts and Enforcement Act 2007 16 (Commencement No 3) Order 2008

NEWS

First president of the Supreme Court 16

�

PRACTICE AND PROCEDURE

Costs

Pre-action costs

Lobster Group Ltd v Heidelberg Graphic Equipment Ltd & Another, QBD (TCC) (Coulson J) 6.3.08

The defendants applied for security for costs against the claimant. The claimant accepted that it was appropriate to provide security but the parties disputed the amount. One issue that was raised was whether the security should include pre-action costs (including the costs of a pre-action mediation). Coulson J said that in certain circumstances pre-action costs can be recovered and that costs incurred in complying with a pre-action protocol were capable of being costs “incidental to” proceedings which were subsequently commenced. That meant that such costs were covered by s 5� Supreme Court Act �98�� and, in principle, could be the subject of an application for security. However, a court should be slow to exercise its discretion in favour of the applicant in such circumstances because of the risk that, if the pre-action period was lengthy, the costs might be extensive and any subsequent attempt to obtain security in respect of such costs might become penal in nature. An additional factor to be considered was the delay between the incurring of the costs and the commencement of proceedings. In this case, the pre-action period stretched over approximately 2.5 years and Coulson J was reluctant to decide that the claimant should have provided security for the costs incurred during that period.

As regards pre-action mediation costs, there had been a mediation in January 2005 and the parties had agreed that they would each bear their own costs of the mediation. Coulson J did not consider that those costs were likely to be recoverable in the subsequent proceedings because, unlike the costs incurred in a pre-action protocol, the costs of a separate pre-action mediation could not ordinarily be described as “costs of and incidental to the proceedings”. Both the course of the mediation itself and the reasons for its unsuccessful outcome were privileged matters, known only to the parties and as a matter of general principle they were not recoverable under s 51 of the Act. Further, in this case the parties had agreed to bear their own costs of the mediation and it would have been a breach of that agreement if, three years after the mediation, the defendants sought to recover those costs by way of an order for security. Accordingly, the costs of the mediation were not recoverable.

Coulson J noted that there were two authorities where it was either decided or agreed that the costs of a post-action mediation were recoverable2. Both were concerned with mediations after the proceedings had commenced when it was much easier to see why they fell under s 51 and/or why, pursuant to the Costs Practice Direction 4.6(8), the costs were found to be analogous to “work done in connection with a view to settlement”. The same would not be true of a mediation which failed to prevent the commencement of proceedings over two years later.

� In re Gibson’s Settlement Trusts [�98�] � Ch �79 and McGlinn v Waltham Contractors [2005] 3 All ER 1126 applied. S 51 of the Act provides that the court has the power to award “the costs of and incidental to the proceedings”.

2 The cases were Chantrey Vellacott v The Convergence Group [2007] EWHC 1774 (Ch) and National Westminster Bank v Feeney [2006] EWHC 90066 (costs). In Chantrey the parties agreed to lift the without prejudice veil over the mediation and the judge was able to look at the surrounding circumstances, concluding that it was just to include the mediation costs.

n

2

Taking an unreasonable position in a mediation is not dissimilar in effect to an unreasonable refusal to engage in mediation

James Carleton Seventh Earl of Malmesbury & Others v Strutt and Parker (a partnership), QBD (Jack J) 18.3.08

The claimants brought proceedings against the defendants, alleging negligence in connection with leases that the defendants negotiated on their behalf. Judgment was entered in the claimants’ favour although they were unsuccessful on some of the discrete issues. No mediation took place before the trial. The parties then instructed experts to deal with the basis for assessment of damages. At a mediation which took place before the trial of the issues on quantum, the defendants offered £1m inclusive of interest with each side to bear their own costs. The claimants offered to accept £9m plus 80% of their costs. This assumed there would be considerable success at the damages hearing together with a strong chance of success on an appeal. It also assumed that any appeal by the defendants would be unsuccessful. The offer was rejected and the mediation went no further. The claimants submitted that they stood in the position of winners and should, therefore, have had the costs of the action subject, possibly, to an order to reflect their having lost on various discrete issues. The defendants submitted that the claimants should not have been treated as winners because they were awarded damages which were a small proportion of their claim; that the claim was hugely exaggerated and that the claimants’ approach to mediation should have been reflected in any costs orders. Jack J had to consider whether what happened in relation to mediation should have played a part in his order as to costs.

Jack J was of the view that mediation failed because of the stance and attitude of both parties. Where the failure to mediate was due to the attitudes of both sides, it was not open to either side to claim that the failure should be taken into account in the order as to costs. He also said that where a party had agreed to mediate but had then taken an unreasonable position in the mediation it was not dissimilar in effect to an unreasonable refusal to engage in mediation. “For a party who agrees to mediation but then causes the mediation to fail by reason of his unreasonable position in the mediation is in reality in the same position as a party who unreasonably refuses to mediate.” This was something he said the court can and should take account of in the costs order in accordance with the principles considered in Halsey�. Orders accordingly.

Costs estimates

Reynolds v Stone Rowe Brewer, QBD (Tugendhat J) 18.3.08

In Mastercigars v Withers LLP� Morgan J overturned the decision of Costs Judge Master Rogers and held that a solicitor would not automatically be held to a costs estimate. The instant case is another appeal against a decision of Master Rogers. Again, the Costs Judge had ordered that solicitors should be bound by a costs estimate. This time the appeal was dismissed. The figures in this case are substantially lower than in Mastercigars – initial costs estimate of £18,000 and a final bill in the region of £90,000 as opposed to an initial estimate of £356,000 and costs of £1,050,050.

� Halsey v Milton Keynes General NHS Trust [200�] � WLR �002� [2007] EWHC 2733 (CH). See the summary in the Litigation & Dispute Resolution

Legal Update December 2007.

n

n

April 2008 Litigation & Dispute Resolution Legal Update

�

Revised estimates were provided to the client as the case progressed but according to the Costs Judge, they were not provided early enough. He considered that the client should have been warned much earlier that costs were escalating. The “whole point of estimates” is “keeping the client informed”. The solicitors pointed out that at the time they submitted each revised estimate, their costs had not exceeded the previous estimate, but this did not help them.

Tugendhat J did not expressly disagree with or cast doubt on the decision in Mastercigars. He seems to be suggesting that, although Master Rogers did not give written reasons for his decision, he had applied the decision. He noted that the Costs Judge had been “entitled to have regard to” the estimates and that he had not “treated the estimate of £18,000 as a fixed quotation…he treated it as a yardstick”. (Having regard to costs estimates and use of an estimate as a yardstick were key terms from Mastercigars.)

As the Costs Judge had failed to give written reasons for his decision, Tugendhat J expressed his own views on the merits. He and the assessors who sat with him found that the explanations that were given to the client and then to the Costs Judge for the discrepancies between the original costs estimates and the bills “went very little way” to explain the differences between the original and later estimates and the ultimate bill. They could find no significantly unusual developments and therefore no real explanation for the very large discrepancies. They concluded that the original estimate had just been too low and the Judge actually said that the early estimates “were unreasonably low”. This case, which was decided on its particular facts, emphasises the importance of getting initial costs estimates right first time. The good news is that Morgan J’s decision in Mastercigars survives for now.

Service

Dispensing with service of a claim form

Olafsson v Gissurarson, CA (Sir Anthony Clarke MR, Dyson LJ, Jacob LJ) 3.3.08

The CA has held that in a truly exceptional case, and both from a national and international perspective, the English court can exercise its discretion to dispense with service of the claim form.

CPR rule 6.9 provides that “(1) The court may dispense with service of a document. (2) An application for an order to dispense with service may be made without notice.” In this case, immediately after the claim form was issued, the claimant’s solicitors took steps to have it served on the defendant who was resident in Iceland. Proceedings were purportedly served personally on him, at an address in Reykjavik, by an official at the British Embassy in Iceland. He gave the defendant the claim form and all the other relevant documents, including the response pack. The defendant opened the envelope and read the contents. He was not asked to and did not sign any written receipt nor did he file an acknowledgement of service. The claimant obtained judgment in default on the basis that the claim form had been served and the defendant applied to set aside the judgment. The application was dismissed and the judge exercised his discretion under rule 3.10 (general power of the court to rectify matters where there has been an error of procedure) and/or 6.9 “to correct

n

�

any error in respect of service”. The defendant appealed and the appeal was allowed on the basis that �.�0 could not be used in a case where there had been no service under the relevant rules for service. In response the claimant sought an order under rule 6.9 dispensing with service. Mackay J held that the court had jurisdiction to make that order, that it should only do so in an exceptional case, and that this was an exceptional case. The defendant appealed.

The CA held that there was no reason to interfere with Mackay J’s decision. Sir Anthony Clarke MR reviewed the relevant authorities and concluded that this case was truly exceptional. The defendant had not shown that the judge erred in principle or that the exercise of his discretion was outside the parameters laid down by the authorities5. The claimant did not need to serve the claim form in order to bring it to the defendant’s attention and there was no point in requiring him to go through the motions of a second attempt to complete in law what he had already achieved in fact. “…on the particular facts of this case, where the claim form was issued in time and delivered to the defendant within the period for service by a method of service which the claimant and his solicitors could reasonably have thought was a reasonable method of service, and where the defendant knew precisely what the claim was from the claim form, it would be unjust and contrary to the principle of the overriding objective that cases should be determined justly to refuse the relief.” This position was not altered by the fact that the claimant had failed to serve the defendant in Iceland according to Icelandic law. The relevant national law was the law of England and that included rule 6.9. Granting relief under 6.9 would not have involved “turning the flank of ” or “subverting” the provisions of the Lugano Convention�.

CPR 71 – orders to obtain information from judgment debtors

Vitol SA v Capri Marine Ltd, QBD (Comm) (Tomlinson J) 29.2.08

CPR 71 deals with orders to obtain information from judgment debtors. Rule 71.2 provides that “(1) A judgment creditor may apply for an order requiring – (a) a judgment debtor; or (b) if a judgment debtor is a company or other corporation, an officer of that body, to attend court to provide information about – (i) the judgment debtor’s means; or (ii) any other matter about which information is needed to enforce a judgment or order.” The question which arose in this case was whether, pursuant to Part 71, the court could permit service out of the jurisdiction of an order requiring an officer of a corporate judgment debtor to attend court to provide information about the judgment debtor’s assets or any other matter about which information was needed to assist in the enforcement of a judgment.

5 In Kuenyehia v International Hospitals Group Ltd [2006] EWCA Civ 21 Neuberger LJ, giving the court’s judgment, said that in the context of the exercise of a discretion under 6.9, the issue on an appeal must be whether the exercise of discretion by the judge was within the parameters laid down by this court and, if it was, unless the judge failed to take a relevant factor into account or took an irrelevant factor into account, this court should not interfere with the conclusion reached by the judge.

� Sir Anthony Clarke MR cited the case of Nussberger & Anor v Phillips & Anor [200�] EWCA Civ 654 and said that the correct approach to adopt was that adopted by the H of L in Nussberger. The same would be true if, like Nussberger, this had been a Hague Convention case. The approach would also have applied even if the Lugano Convention had provided for a specific and exclusive method of service.

n

April 2008 Litigation & Dispute Resolution Legal Update

5

The claimant (V) obtained judgment against the defendant (C), a Maltese company, in the sum of $6,793,518. Only $1m was recovered. C probably only ever owned one asset, a tanker, whose lack of seaworthiness caused V the loss and damage in respect of which the instant action was brought. The tanker was allegedly sold to a company (A) and on the evidence available it seemed likely that A was managed from Greece by S, who also managed C. The proceeds of sale were apparently paid to S as C’s agent. In an effort to find out more about what became of those proceeds and more generally about C’s assets, V applied for two orders pursuant to rule 71.2, directed to a father and son (GK, IK) both of whom were, until shortly before judgment was given, directors of C. IK resigned immediately before judgment was given but GK remained a director. Orders were made for them to attend court and produce documents and permission was given for service out of the jurisdiction (in Greece). GK and IK submitted that the court lacked jurisdiction either to make the order or to permit service out of the jurisdiction. IK also submitted that the court lacked jurisdiction to make an order against him because he was not a director of C when it was made.

Tomlinson J held that an order made under 71.2 against an officer of a corporate judgment debtor is not an order made against the judgment debtor itself. It was not, therefore, an order made against C which was amenable to the jurisdiction. “This is inherent in the wording of the order, but is particularly spelled out by CPR 71.2(6), with its reference to ‘a person served with an order’. The person served with an order in a case such as this is a natural person, the officer, not a corporate person, the judgment debtor.” He also did not consider that rule 6.30(2)7 provided the court with machinery pursuant to which it could permit service out of the jurisdiction of an order made under rule 71.2(1)(b). That rule is “concerned with documents which require to be served on parties to the proceedings. Furthermore…CPR 6.30(2) itself requires the identification of a ground within CPR 6.20 which gives the court power to grant permission to serve [the relevant document] out of the jurisdiction…[there is no] head of CPR 6.20 under which permission could be granted to serve either an order or an application for an order under CPR 71.2(1)(b).” The closest analogy to an order under 71.2(1)(b) was a witness summons issued under rule 34.2 which, in the language of that rule, was a “document issued by the court requiring a witness to (a) attend court to give evidence or (b) produce documents to the court.” A party cannot compel a witness in a foreign country to attend a trial in England & Wales. The fact that the court had jurisdiction to permit service on GK and IK out of the jurisdiction of an application seeking their joinder to the action for the purpose of being required to pay costs did not mean that the court had jurisdiction to permit service on them of an order requiring their attendance before the English court on pain of imprisonment. The order permitting service out of the jurisdiction was set aside. The judge also agreed that the substantive order against IK should be set aside in any event on the ground that it was not made when he was an officer of C. That was how he interpreted the relevant rule and practice direction8.

7 6.30(2) provides that “Unless paragraph (3) applies, where the permission of the court is required for a claim form to be served out of the jurisdiction the permission of the court must also be obtained for service out of the jurisdiction of any other document to be served in the proceedings.”

8 Tomlinson J said that the note at 71.2.6 at p 1867 of the White Book, dealing with the words “an officer” says that “In interpreting identical words in a previous rule it was held that ‘an officer’ included former officers (Societe Generale v J M Farin & Co [1904] 1 KB 794).” If that was so, PD 71PD.1, Form N316A use of which it mandates in making an application and Form N39, which is the standard form order, all require reconsideration.

�

Although there was no authority that supported the claimant’s application, the court could assist a judgment creditor by issuing a letter of request to the judicial authorities of the country in which the officer who they wanted to examine was resident, either under rule 34.13 (where a person to be examined is out of the jurisdiction – letter of request) or in the European Union context rule 34.23 (where a person to be examined is in another Regulation State).

New allocation questionnaire

n New versions of the allocation questionnaire (forms N150 and N151) were published on 1 April. The biggest change in each case is an expanded section on settlement. The old version asked whether the party wished there to be a one month stay to attempt to settle the claim, either by informal discussion or by ADR. The new version states that “Under the Civil Procedure Rules parties should make every effort to settle their cases before the hearing. This could be by discussion or negotiation (such as a roundtable meeting or settlement conference) or by a more formal process such as mediation. The court will want to know what steps have been taken. Settling the case early can save costs, including court hearing fees.” It also asks the legal representative to confirm they have explained to their client the need to try to settle, the options available and the possibility of costs sanctions if they refuse to try to settle. It asks for answers to questions regarding whether the party wants to attempt to settle, if so whether they want a one month stay and whether they would like the court to arrange a mediation appointment. If the party does not want to attempt to settle they are asked to state their reasons why. There are other minor amendments, including a new section H which asks whether the party has attached the fee for filing the allocation questionnaire.

These amendments were not mentioned in the ��th Update to the CPR but it is understood that they will be addressed retrospectively in the �7th Update. The new version of the form is available on the Ministry of Justice website.

ARBITRATIONConfidentiality in national and international arbitration

Michael Wilson & Partners Ltd v Emmott, CA (Carnwath LJ, Thomas, LJ, Collins LJ) 12.3.08

This was an appeal from orders of Flaux J in which he authorised the disclosure, for the purposes of proceedings in New South Wales (NSW) and the British Virgin Islands (BVI), of documents generated in an English arbitration. It raised questions relating to confidentiality in national and international arbitration. The litigation arose out of a dispute between the claimant solicitors (MWP) and the defendant (E) who joined MWP from another firm. MWP was incorporated in the BVI and it was established to provide legal services in Kazakhstan. The agreement under which E joined provided for arbitration in England under English law. E left MWP together with two other former MWP employees (N and S) and they went to practise at TIL and TSL. N and S were Australian citizens. MWP claimed that this was part of a

n

April 2008 Litigation & Dispute Resolution Legal Update

7

scheme by E to divert MWP’s business in breach of contract and breach of trust. That led to arbitration in London and court proceedings in England, NSW, the BVI, and other jurisdictions. MWP alleged that E had been guilty of a substantial fraud, dishonest conduct or a serious fraud. The claim was subsequently amended to omit these allegations. In the proceedings in NSW the defendants were N and S. MWP claimed that the contentions in the London arbitration were based substantially on the same facts as those raised in the NSW proceedings and applied to amend the NSW proceedings to allege fraud and fraudulent conspiracy in order to “bring a level of parity” to the proceedings being conducted in NSW, BVI and England. The proceedings that MWP commenced in the BVI were against TIL and TSL and included allegations that these companies dishonestly assisted E, N and S in breaches of fiduciary duty.

The original points of claim in the London arbitration had been shown to the BVI court pursuant to the court’s permission, but the amended points of claim, which omitted the allegations of fraud against E, had not been disclosed to the NSW or BVI courts. E applied for permission to disclose the documents in the London arbitration to the BVI and NSW courts and their lawyers (including MWP’s amended points of claim, skeleton argument, defence and counterclaim omitting the allegations of fraud). Flaux J ordered disclosure but with part of the defence and the whole of the counterclaim redacted. “[He] considered it to be in the interests of justice so the foreign courts would not be misled or potentially misled where the cases that were being advanced in the various proceedings were essentially raising the same or similar allegations.” MWP submitted that Flaux J had no jurisdiction to order disclosure of the documents and that his decision constituted “an unwarranted intrusion into the confidentiality of arbitrations”.

The appeal was dismissed. Collins LJ said that the conduct of arbitrations is private – that is implicit in the agreement to arbitrate. But that does not mean that the arbitration is private for all purposes. The authorities have established that there is an obligation, implied by law, on both parties not to disclose or use for any other purpose any documents prepared for and used in the arbitration, or disclosed or produced in the course of the arbitration, or transcripts or notes of the evidence in the arbitration or the award, and not to disclose in any other way what evidence has been given by any witness in the arbitration9. The obligation is not limited to commercially confidential information in the traditional sense. “…the content of the obligation may depend on the context in which it arises and on the nature of the information or documents at issue. The limits of that obligation are still in the process of development on a case by case basis.” On the authorities as they currently stand, the principal circumstances in which disclosure will be permissible are: where there is consent, express or implied; where there is an order or leave of the court (but that does not mean the court has a general discretion to lift the obligation of confidentiality); where it is reasonably necessary for the protection of the legitimate interests of an arbitrating party; where the interests of justice and perhaps the public interest require disclosure. In the instant case, the judge had jurisdiction to determine the question of confidentiality and to make the order; in the circumstances the interests of justice required disclosure. “The interests of justice are not confined to the interests of justice in England. The international

9 Ali Shipping Corp v Shipyard Trogir [1999] 1 WLR 314 CA (Civ Div)

8

dimension of the present case demands a broader view.” Collins LJ added that the concentration in this appeal on the limits of confidentiality in arbitration should not obscure the fact that the overwhelming majority of arbitrations in England are conducted in private and with complete confidentiality.

DAMAGESMeasure of damages

Westbrook Resources Ltd v Globe Metallurgical Inc, QBD (Comm) (Tomlinson J) 19.2.08

The judgment in this case deals with the quantification of the measure of damages to which the claimant was entitled. The court had found that the defendant had repudiated a contract for the supply of manganese ore by the claimant by failing to pay for the first delivery of the ore. Damages then had to be assessed. Having found that there was, on termination of the contract, an available market for the sale of the ore, the quantification of the measure of damages was governed by ss50(2) and 50(3) Sale of Goods Act 1979 which provide that “(2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer’s breach of contract. (3) Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted or (if no time was fixed for acceptance) at the time of the refusal to accept.”

Tomlinson J held that in carrying out this exercise one is not concerned with the acquisition cost of the goods sold. The court is concerned with compensating the seller for the loss of the contract, which can be measured by the difference between the contract price and the price obtainable in the market at the date of breach. The underlying assumption is that “with this additional amount of money the seller could, by selling in the market at the current price, put himself into the financial position he would have been in had the contract been performed according to its terms”�0. That financial position might amount to a loss on the contract viewed in terms of the price realised as compared with the costs of acquisition but that is irrelevant. “The purpose of the exercise is simply to ensure that the seller is put into the same financial position as if the contract had been performed.” If the seller would have had to have gone into the market to acquire goods in order to fulfil his contract of sale, that cost would be disregarded. If it were taken into account its effect would be either to increase or diminish the buyer’s liability in a wholly arbitrary manner which had nothing whatever to do with the contract which he had broken. Therefore, the price at which the claimant acquired or could have acquired the ore was wholly irrelevant to the court’s assessment of the damages.

�0 See Benjamin’s Sale of Goods, 7th edition, paragraph 16-062

n

April 2008 Litigation & Dispute Resolution Legal Update

9

TORTSCan criminal conduct amount to unlawful means?

Total Networks SL v Customs & Excise Commissioners, HL (Lord Hope, Lord Scott, Lord Walker, Lord Mance, Lord Neuberger) 12.3.08

One of the issues that the HL considered in this case was whether the Commissioners could maintain a civil claim for damages under the tort of unlawful means conspiracy against a participant in a VAT carousel fraud. The first question the HL had to address was whether it was open to the Commissioners to maintain a cause of action in damages at common law as a means of recovering VAT from a person who had not been made accountable or otherwise liable for that tax by Parliament. The second was whether, if so, it was an essential requirement of the tort of unlawful means conspiracy that the conduct which was said to amount to the unlawful means should give rise to a separate action in tort against at least one of the conspirators.

As regards the first question, the HL held by a majority that there was nothing in the statutory scheme to preclude the Commissioners’ pursuit of a common law claim for conspiracy against Total. The claims were claims for damages and the terms of the applicable VAT legislation did not preclude the Commissioner from advancing a claim in tort.

As regards the second question, the CA had held that in order to establish the tort of unlawful means conspiracy, the claimant had to show that the unlawful means constituted or included a civil wrong which had been committed by at least one of the conspirators, and was actionable at the suit of the claimant himself��. The HL disagreed. Lord Walker said that the authorities gave rise to a general assumption “that criminal conduct engaged in by conspirators as a means of inflicting harm on the claimant is actionable as the tort of conspiracy, whether or not that conduct, on the part of a single individual, would be actionable as some other tort…your Lordships should clarify the law by holding that criminal conduct (at common law or by statute) can constitute unlawful means, provided that it is indeed the means…of intentionally inflicting harm.” He accepted that the sort of considerations relevant to determining whether a breach of statutory duty was actionable in a civil suit might overlap or even occasionally coincide with the issue of unlawful means in the tort of conspiracy. But the range of possible breaches of statutory duty and the range of possible conspiracies, were both so wide and varied that it would have been unwise to have attempted to lay down any general rule. “What is important…is that in the phrase ‘unlawful means’ each word has an important part to play. It is not enough that there is an element of unlawfulness somewhere in the story.” The HL held (unanimously) that in the context of the tort of conspiracy, the unlawful means did not have to be independently actionable and criminal conduct could, therefore, amount to unlawful means for these purposes. However, the unlawful conduct must be the means by which the injury is caused. Incidental criminal conduct will not be sufficient.

�� The CA said that it felt bound by the decision of the CA in Powell v Boladz [�998] Lloyd’s Rep Med ���.

n

�0

PROFESSIONAL NEGLIGENCEApproach to causation

Drake v Harbour & Another, CA (Waller LJ V-P, Longmore LJ, Toulson LJ) 31.1.08

The claimant hired the defendant to undertake electrical work at her home. She was away while the work was being done. In order to have some light to work by in the loft, the defendant put up a festoon lighting cable. A fire broke out and damaged a large part of the roof and some of the house and the claimant brought proceedings. The judge found that the fire was initially caused by the fact that some of the festoon lights had been left plugged in. As that in itself was not unsafe, something else, together with that, must have caused the fire. He found that the defendant had not properly examined the cable before attaching the light sockets to it. He held that the maxim “res ipsa loquitor” (the thing speaks for itself ) applied since the defendants were in sole control of the house and its roof space when the fire broke out. This maxim is applied in situations where it is so improbable that an event would have occurred without the negligence of the defendant that a court would find, without further evidence, that it was so caused and the defendant has the evidential burden to discharge. The position on the evidence was that no causation inconsistent with the defendants’ negligence had been established as showing an operative cause which was “…at least as likely as that the defendants failed to check that the insulation was not unacceptably damaged, or that any existing damage was not exacerbated by their activity in assembling the light fittings onto the cable.” Judgment was given for the claimant against the first defendant�2. The defendant submitted that res ipsa loquitor did not apply since the court had heard evidence of fact and conflicting expert evidence; the judge had not dealt adequately with causation in that, even if negligence was found, the claimant had not proved that the negligence caused the loss. There were other candidates for the cause of loss.

The appeal was dismissed. The CA said that in a case where negligence had been found and the damage which had occurred was the sort of damage which one might have expected to have occurred from the nature of the work which the defendants had been carrying out, a court should take a reasonably robust approach to causation��. On any realistic view of this case, if the defendants were going to suggest that their negligence did not cause the fire it was for them to suggest what might have been the cause. There was no evidence from which any of the defendant’s suggested causes could have been inferred. The appeal was dismissed on the basis that the judge correctly held that, on the balance of probabilities, the defendant’s negligence caused the fire.

As regards res ipsa loquitor, it was a guide on the question of whether the claimant had raised a case to answer or whether the case should fail regardless of any evidence called by the defendant. On the present facts there was undoubtedly a case to answer. “The more difficult question is whether if, on a proper analysis of the facts…there are competing causes of the loss one of which is consistent with negligence and the

�2 Although both defendants were complicit in the re-wiring operation, the contract was only made with Mr Harbour and it was appropriate to enter judgment only against him.

�� Roadrunner v Dean [200�] EWCA Civ �8�� applied.

n

April 2008 Litigation & Dispute Resolution Legal Update

��

other (or others) of which can be shown to be inconsistent with negligence, it is the claimant or the defendant who fails because they cannot discharge the burden of proof.” He preferred to resolve that in a case where it truly arose.

Legal adviser’s duty to advise about a potential claim

Pritchard Joyce & Hinds v Batcup & Another, QBD (Underhill J) 17.1.08

In May 2004 the claimants (a firm of solicitors) settled a claim for negligence brought against them by clients (F). The defendants in the instant case, were the counsel instructed by F in the same matter. The claimant submitted that the defendants had also been negligent and were responsible for the same loss and they sought a contribution from them pursuant to s 1 Civil Liability (Contribution) Act 1978 (which applies to liability in tort, breach of contract, breach of trust or otherwise). The negligence which was alleged by F against the claimant and by the claimant against the defendants consisted in a failure to advise them of the time limit applicable to a potential claim against their previous solicitors (W). The lost claim would have been a claim in negligence against W for failing to advise F of the time limit applicable to a claim against another firm of solicitors LL. The lost claim against LL would have been for negligent advice given to F which resulted in loss of opportunity of the favourable settlement of a dispute regarding a property development in Spain. The defendants had been instructed to advise F on various aspects of the litigation and, in particular, on the lost settlement claim.

Section 1 of the Act provides that “(1) Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise)…(4) A person who has made or agreed to make any payment in bona fide settlement or compromise of any claim made against him in respect of any damage (including a payment into court which has been accepted) shall be entitled to recover contribution in accordance with this section without regard to whether or not he himself is or ever was liable in respect of the damage, provided, however, that he would have been liable assuming that the factual basis of the claim against him could be established.” Section 2 provides that the court may apportion liability between two defendants who are each liable to a claimant in respect of the same loss and damage.

Underhill J held that the lost settlement claim had substantial value and F, therefore, suffered a loss by not being able to pursue it. The defendants knew that at the time the limitation period for bringing the lost settlement claim expired, W were instructed. It was, therefore, their duty to have raised with F the question whether W might have been at fault in having failed to take steps to preserve the lost settlement claim. “No doubt as a general proposition a lawyer may not be under a duty to advise his client about a potential claim which falls outside the scope of the matters on which he is instructed; but a claim against a previous adviser who has allowed a time limit to pass is so closely related to proceedings in which that limit is in issue that it will necessarily, even if only by implication, fall within the scope of the instructions of an adviser instructed in those proceedings to bring the possibility of such a claim, and any relevant time limits, to his client’s attention.” The matters which the defendants failed to advise on should have been equally apparent to the claimant and they too were liable to F on the facts alleged in the proceedings against them.

n

�2

By s 2 of the Act, the relevant contributions of the parties had to be apportioned justly and equitably. Here the crucial question was the extent of the parties’ relative responsibility. Underhill J found that counsel had to bear the greater share of the blame for failing to advise F of the potential claim against W and the effect of the time bar. The claimants looked to the defendants for authoritative guidance on major strategic questions concerning the conduct of the litigation and associated issues. The just apportionment was therefore 75:25 between the defendants and the claimants.

CONFLICT OF LAWS/JURISDICTIONRules on jurisdiction in disputes involving the sale and delivery of goods

Scottish & Newcastle International Ltd v Othon Ghalanos Ltd (a company incorporated in Cyprus), HL (Lord Bringham, Lord Rodger, Lord Brown, Lord Mance, Lord Neuberger) 20.2.08

This case involved the sale of cider to a company that was based in Cyprus. The seller (S&N) sought to recover the price of goods sold from the buyer (OG). The contract related to 11 consignments of the cider which had been shipped from Liverpool to Limassol. OG took delivery of the cider but had not paid. S&N sued for the price of the goods. The question before the House was whether the English court had jurisdiction to entertain the action. The answer turned, by virtue of Article 5(1)(b) of Council Regulation (EC) No 44/2001 on whether, as a matter of English law applied to the particular contract between the parties, the goods were or should have been delivered by S&N to OG in England. Both the Commercial Court and the CA held in favour of S&N that the English court did have jurisdiction but OG challenged that conclusion.

The general rule (Article 2(1) of the Regulation) is that persons domiciled in a Member State must, irrespective of their nationality, be sued in the courts of their home state. That is qualified, however, by a special rule in Article 5(1) of the Regulation which provides that “A Person domiciled in a Member State may, in another Member State, be sued: (1)(a) in matters relating to a contract, in the courts for the place of performance of the obligation in question; (b) for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be: - in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered,…”

As a matter of English law, “delivery” for the purpose of sale of goods, is governed by the Sale of Goods Act 1979. S 61(1) of the Act provides that, in the Act, unless the context or subject matter otherwise requires, “delivery” means “voluntary transfer of possession from one person to another”. S 32(1) provides that “Where in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier (whether named by the buyer or not) for the purpose of transmission to the buyer is prima facie deemed to be a delivery of

n

April 2008 Litigation & Dispute Resolution Legal Update

��

the goods to the buyer.” This rule can be displaced if the seller retains a right of possession over the goods, notwithstanding their physical delivery to a carrier.

In this case, the contract provided for S&N to send the cider to OG and to pay the freight but OG designated which carrier was to be used. The contract was expressed to be “delivery cost and freight Limassol” and the invoices referred to Limassol as the place of delivery. OG argued that the place of delivery for the purpose of Article 5(1) Brussels Regulation was Limassol, not Liverpool and it, therefore, challenged the jurisdiction of the English court to hear the claim. The court at first instance and the CA held that the place of delivery was Liverpool and that, therefore, the English court had jurisdiction to hear the claim. OG submitted that the stipulation in the contract for delivery “CFR Limassol” amounted to an agreement that Limassol was the contractually agreed place of delivery or alternatively that, applying Article 5(1)(b) to a CFR contract under English law should as a general rule mean the goods were delivered when they arrived at their destination and that the general rule on s 32 Sale of Goods Act (goods are delivered when delivered to the carrier) is displaced. The judgment sets out the differences between FOB (free on board) and C&F contracts (cost and freight) .

The HL held that the place of delivery under the sale contract was Liverpool and accordingly dismissed the appeal. They found that the stipulation “CFR Limassol” did not amount to a contractual agreement as to place of delivery but merely reflected the detailed transport arrangements; although the contract referred to delivery “CFR” it was and should have been regarded as being in all essential respects an FOB contract which meant that possession, property and risk in the goods passed on shipment. Therefore, for the purposes of s 32 of the Act, the prima facie inference that delivery occurred on delivery to the carrier had not been displaced.

Risk of inconsistent decisions

Curtis & Another v Lockheed Martin UK Holdings Ltd, QBD (Comm) (Teare J) 20.2.08

The defendant applied to stay the determination of some of the issues in this action pending the completion of certain proceedings in Italy. The stay was not sought on the basis of the Judgments Regulation but on case management grounds. There was no dispute that a stay could be exercised on such grounds��. Guidance as to how this discretion to stay should be exercised is found in Reichold v Goldman Sachs�5 where it was held that the court had an interest in deciding the order in which related proceedings should be tried “not only because the existence of concurrent proceedings may give rise to undesirable consequences in the form of inconsistent decisions, but also because the outcome of one set of proceedings may have an important effect on the conduct of the other” (per Moore-Bick J). For that reason the court may manage the order in which the proceedings are heard. Such case management is appropriate even where the proceedings are taking place between different parties in different jurisdictions. The defendant must, however, show “very strong reasons for doing so and [that] the benefits which are likely to result from doing so clearly outweigh any disadvantage to the plaintiff ”. The burden is no greater than that which would arise on an application on the grounds of forum

�� The defendant could have considered applying for a stay under the court’s discretion under Article 28 Brussels Regulation which covers stays involving related proceedings in different Member States.

�5 [�999] 2 Lloyd’s Rep 5�7

n

��

non conveniens. Further, “the grant of stays such as this would be a rarity, account always being taken of the legitimate interests of plaintiffs and the requirement that there should be no prejudice to plaintiffs beyond that which the interest of justice were thought to satisfy” (per Moore-Bick J).

The claimants sold shares in a company (S) to the defendant, a UK company, under the terms of a share sale agreement. The claim was for £2m which was the final tranche of the sale price. The defendant resisted the claim on the basis that it had given notice of a general warranty claim which entitled it to withhold the final tranche and it counterclaimed for damages for breach of warranties. The defendant alleged that the claimants failed to disclose the existence and terms of all contracts relating to a particular project that had been entered into by S and/or failed to make fair disclosure of allegations of breach of obligation relating to the project and/or failed to disclose threats of legal proceedings against S in respect of the project. The project involved at least two contracts, one an exploitation agreement and one a development agreement. The claimant admitted that they did not disclose the exploitation agreement or the annexes to the development agreement to the defendant because they were not “material contracts” as defined in the share sale agreement. Before the proceedings in London were commenced, proceedings had been commenced in Turin against S and others by a Mr P in relation to the same project. The basis of Mr P’s claim was not clear (at least to English lawyers) but it appeared to involve breaches of the development and exploitation agreements. The defendant applied for a stay of the issue concerning the material contracts warranty in the London proceedings. The key point was that the issue was common to both the London and Turin actions (namely whether the development and exploitation agreements had been performed by S) and there was, therefore, a risk of inconsistent decision between the two courts which would be unjust.

Teare J held that the risk of inconsistent decisions between the London and Turin courts was a matter which was capable of amounting to a “very strong reason” for granting the stay which was sought. However, he did not consider that granting the stay would avoid that risk. The stay would not have been final (it would only have lasted until the Turin proceedings had been completed). The claimants would not have been bound by the decision of the Turin court, it would not have created an estoppel and it would not have been an abuse of process to have sought a finding inconsistent with it. The stay, thus, would not have removed the risk of inconsistent decisions��. The court also had to consider the risk of significant delay to the resolution of the London claim and resulting injustice to the claimant if the stay was granted. Weighing up the factors, Teare J could not hold that there were very strong reasons for granting a stay or that the benefits which were likely to result from a stay clearly outweighed any disadvantage to the claimants. “In circumstances where there is a risk of inconsistent decisions whether a stay is granted or not, albeit a reduced risk if a stay is granted, I consider that the prejudice of significant delay in the resolution of the Claimants’ claim is more than the interests of justice justify.” Accordingly, the application was refused.

�� Teare J did accept that the risk of inconsistent decisions would have been reduced had a stay been granted because of the impact that the decision of the Turin court might have had on the course of the London action.

April 2008 Litigation & Dispute Resolution Legal Update

�5

GREEN PAPEREffective enforcement of judgments in the EU

n The European Commission has produced a Green Paper entitled Effective Enforcement of Judgments in the European Union: the Transparency of Debtors’ Assets. The purpose of the paper is to launch a broad consultation among interested parties on how to improve the transparency of debtors’ assets in the EU. The paper describes the problems of the current situation and possible solutions. At present, transparency of debtors’ assets is generally achieved at national level through different sources of information, in particular through registers and the debtor’s declaration. Although the basic structures of the national systems appear similar, there are considerable differences in the conditions of access, the procedures for obtaining information, the content and the overall efficiency of the systems. The proposal is that a bundle of measures could help ensure that the creditor obtains reliable information within a reasonable period of time. Suggestions include drawing up a manual of national enforcement laws and practices; increasing the information available in/improving access to the individual national registers; exchange of information between enforcement authorities; measures relating to debtor’s declaration. Comments should be submitted by �0 September 2008. The paper is accessible on: http://ec.europa.eu/civiljustice/news/com_2008_0128/com_2008_0128_en.pdf

CONSULTATIONSRegulation of Enforcements Agents: post-consultation report

n The Mo J has published a post-consultation report for the consultation paper, Regulation of Enforcement Agents. The paper, which was published on 30 January 2007, invited comments on three options for regulation of enforcement agents and the evidence on all the options. The three options were no change, the creation of a new regulator, the Enforcement Services Commission and regulation by the Security Industry Authority (SIA). In response to the question on the options there was overwhelming agreement across the range of responses that there was still a need for statutory regulation. Regulation by the SIA was the most popular option although it did not receive overwhelming support. In the absence of a viable alternative the government proposes to proceed with regulation by the SIA which is its preferred option. For further information see www.justice.gov.uk.

��

LEGISLATIONTribunals, Courts and Enforcement Act 2007 (Commencement No 3) Order 2008

n On 6 April, The Tribunals, Courts and Enforcement Act 2007 (Commencement No 3) Order 2008 brought into force s 141 of the Tribunals, Courts and Enforcement Act 2007. This section relates to judicial review. It substitutes the existing s 31(5) Supreme Court Act 1981 and extends the power of the High Court in respect of quashing orders. In certain circumstances the High Court will have the power to substitute its own decision for the decision of a court or tribunal. Those circumstances are where the decision maker is a court or tribunal, the decision is quashed on the ground that there has been an error of law and if the High Court is satisfied that it is the only decision the court or tribunal could have reached.

NEWSFirst president of the Supreme Court

n The Lord Chief Justice, Lord Phillips of Worth Matravers, will be the first president of the UK Supreme Court when it opens in October 2009. He will also succeed Lord Bingham, who is due to retire in September 2008, as the most senior Law Lord.

Sherry Begner

Kate Elsmore

April 2008 Litigation & Dispute Resolution Legal Update

�� Pilgrim Street London EC�V �RW T +44 (0)20 7248 4282

31st Floor, 30 St Mary Axe London EC�A 8EP T +44 (0)20 7398 4600

mayerbrown.com E london@mayerbrown.com

Copyright © 2008 Mayer Brown International LLP . This Mayer Brown publication provides information and comments on legal issues and developments of interest to our clients and contacts. It is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed in this publication.

If you would prefer not to receive future publications or mailings from Mayer Brown International LLP , or if your details are incorrect, please contact us by post or by email to businessdevelopment@mayerbrown.com.

Mayer Brown is a global legal services organisation comprising legal practices that are separate entities (“Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

02��ldrApril 2008

Mayer Brown offices

Bangkok Beijing Berlin Brussels Charlotte Chicago

Cologne Frankfurt Guangzhou Hanoi Ho Chi Minh City

Hong Kong Houston London Los Angeles New York

Palo Alto Paris São Paulo Shanghai Washington DC