Standing still may not form a barrier

The Commercial Court has held that a standstill agreement did not preclude a defendant (D1) from pursuing an additional claim against another defendant, D2, under CPR 20.6.

The claimants (Cs) two insurance companies brought negligence claims against brokers in relation to the placing of reinsurance which turned out to be invalid. D1 and D2 entered into a standstill agreement under which they agreed not to commence any claims against each other pending the conclusion of the main claim. "Claim" was defined as:

"any alleged claims, rights or causes of action existing at the date of this Agreement that either party has or may have against the other in the Dispute either now existing or accruing before and including the date of termination of the Standstill Period."

D1 applied for permission under CPR 20.6 to make an additional claim against D2 on the grounds that D2 had falsified documents, taken larger commissions than those to which it had been entitled and made fraudulent misrepresentations on the basis of which D1 had agreed to enter the standstill agreement.

In relation to the question of whether the standstill agreement, properly construed, applied to unknown fraud claims, Cooke J held that:

  • the Court must approach such agreements with caution; and
  • whilst the wording of the terms Claim and Dispute was undoubtedly very wide, in the absence of clear express wording, it could not be taken to encompass unknown claims for fraud, particularly where that fraud was alleged to have resulted in the ignorance of D1 at the time of concluding the standstill agreement.
Comment

This reinforces established authority: fraud is considered "a thing apart" when construing contracts and clear and specific language is required to exclude fraud-based claims from any agreement.

Hyundai Marine and Fire Insurance and another v Houlder Insurance Services Ltd and another [2015] EWHC 378 (Comm), 27 January 2015 (transcript only recently available and unreported)

Author: Susanna Hayward

New life for claim cut short

The Court of Appeal has allowed an appeal against a limitation order (providing for the restoration to the register of a dissolved company, C, and the suspension of the limitation period during dissolution) and provided guidance on how judicial discretion should be exercised when making such an order.

Shortly before being placed into administration C entered into a sale and leaseback arrangement. C later went into liquidation; however, the purchase price in respect of the sale was not received before the company was dissolved, over four years later.

Just before the expiry of the primary limitation period for the claim for the purchase price the company's sole director/shareholder applied for the company to be restored to the register and for an assignment of the claim. It was not disputed that the claim had real prospects of success.

The company was restored to the register and a new liquidator assigned the claim to the company's sole director/shareholder. Primary limitation had expired around two years before the assignment and one year before the restoration order was made.
The Court of Appeal unanimously set aside the limitation direction and the appeal was allowed. The Court held that the Court's discretion to make a limitation order under section 1032 of the Companies Act 2006 should only be exercised in exceptional circumstances and the burden of proof in demonstrating that this was an exceptional circumstance was not satisfied.

Comment

There is helpful guidance here about how judges should exercise their discretion in deciding whether to grant a limitation order/limitation directions. They should consider:

  • whether proceedings would have been commenced in time had the company not been dissolved; and
  • whether it is just for the company to avoid the consequences of the Limitation Act 1980.

In this case, the Court of Appeal found that putting the company and all interested parties in the position which they would have been in if there had been no dissolution would probably not have led to the claims being pursued in time.

County Leasing Asset Management Limited and others v Hawkes [2015] EWCA Civ 1251

Author: Susanna Hayward

Depressing claim value to pay lower court fee was an abuse of process

The High Court has held that it was disproportionate to strike out claims for abuse of process solely on the basis that the claimants (Cs) had deliberately understated the value of their claims to reduce the court fees payable. However, where C had failed to pay the correct court fee within the limitation period, judgment was granted in favour of the defendant, D.

D applied for 31 negligence claims against it to be struck out on the basis that Cs had not paid the correct court fees on issue. D alternatively applied for judgment to be entered against C summarily (without a trial) on the grounds that although the original, lower, fee was paid within the limitation period for several of the claims, the correct fee was paid after it had expired.

Cs' correspondence with D had indicated claims amounting to hundreds of thousands of pounds; on issue, however, some were valued at only a few hundred. The claim forms were later amended, before being served, to claim for the original, much larger, sums and the balance of the issue fees were paid. D argued that C had made a deliberate attempt to understate the value of its claims in order to issue quickly to prevent its claims from being time barred.

The court granted D's application in part: although the court was under no doubt that the conduct amounted to procedural abuse, it would be disproportionate to strike out the claims for that alone. Doing so would cause greater prejudice to Cs than to D, given that the claims were arguable. Also, there was no suggestion that Cs' conduct had been fraudulent or dishonest.

However, a claim will only be brought within the relevant time limit if the claim form is delivered to the court with the appropriate fee before the limitation period expires. The appropriate fee had not been paid with the original claim forms. Unfortunately for Cs the correct fee had been paid outside the limitation period for some of the claims, so they were time-barred and judgment was given for D.

Comment

The decision shows the importance of paying the correct court fee on issue and the perils of issuing towards the end of the limitation period.

Lewis and others v Ward Hadaway [2015] EWHC 3503 (Ch),

Author: Lee Malam

 

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Kate Menin

Kate Menin

Principal Knowledge Lawyer, Dispute Resolution
London

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