The Brief Case - Spring 2020

DSM SFG GROUP HOLDINGS AND OTHERS V KELLY [2019] EWCA CIV 2256

HEADLINE SUMMARY

Where there is a dispute regarding the alleged confidentiality of covertly recorded material which one party wishes to deploy in civil proceedings, that dispute must be resolved before the material is deployed, not at the same time as, or following, deployment.

FACTUAL BACKGROUND

The respondent ("JK") had covertly recorded confidential conversations of the appellants ("DSM"), many of which were privileged. DSM had brought proceedings for harassment and breach of confidence. JK signed undertakings agreeing not to use the recordings other than for the purpose of defending DSM's claim. 

Following the appointment of independent counsel to review the recordings, JK was successful in an application to be released from the undertakings so that he could use the material in cross-claims and claims against third parties. 

DSM appealed that decision, contending that by permitting JK to use the information before his right to do so had been established, the judge had effectively granted summary judgment in his favour. DSM also contended that the appointment of independent counsel was not a sufficient change of circumstances to justify releasing JK from the undertakings, and that having released him from his undertakings it would not be possible to achieve fairness through case management.

The Court of Appeal agreed with DSM and ordered that the undertakings by JK be restored.

KEY LEGAL POINTS

• The issue of confidentiality of documents should be resolved before the documents are deployed, and not at the same time or afterwards.
• The appointment of independent counsel was foreseeable and so did not constitute a material change in circumstances.
• Case management decisions were not an appropriate way to deal with the confidentiality issues which the undertakings had been designed to manage.

COMMENTARY

The decision shows that the courts favour establishing the right to deploy information prior to permitting the use of that information in court. In the meantime, confidentiality undertakings, rather than case management orders, are the most secure and cost-efficient way of maintaining confidentiality. Otherwise, there is a serious risk that the confidential information may be released improperly.  

Author

Will Jepson

COWLEY V LW CARLISLE & COMPANY LTD [2020] EWCA CIV 227

HEADLINE SUMMARY

The Court of Appeal held that the High Court was right to strike out proceedings brought against a dissolved company that was later restored.  

FACTUAL BACKGROUND 

The Claimant's (C) solicitors served proceedings on the Defendant (D) despite knowing that D had been dissolved. In a letter to D, they argued that under Peaktone Ltd v Joddrell, proceedings could be validated if D is subsequently restored to the Register of Companies. 

The solicitors for D's former insurers' acknowledged service of proceedings on D's behalf. On the basis that C made no attempt to apply for the restoration of the dissolved company, they subsequently filed an application to strike out the claim. Despite C's application for a stay of proceedings so that the restoration could take place, the District Judge elected to strike out the claim. He concluded that the proceedings were an abuse of the court's process and/or failed to comply with a rule, practice direction or court order under CPR 3.4(2).

Following an order to restore D to the Register of Companies, C appealed the decision. 

THE APPEAL

The Court of Appeal considered the restoration of the company following the strike out to be irrelevant. Unlike in Peaktone, D did not exist during proceedings and C had taken no steps to procure D's restoration to the Register. The court held that the power conferred under CPR 3.4 outweighed the fact that the strike out application was flawed (having been made by a dissolved company at the time of issue). In line with the overriding objective of dealing with cases justly and at proportionate cost, the strike out was upheld and the appeal dismissed. The court penalised C's solicitors by requiring them to pay D's costs.

The court gave guidance to insurers faced by similar claims. The appropriate action would be to notify C of the company’s dissolution and invite C to restore it, applying to stay pending restoration. In the absence of restoration, insurers could in due course apply for an order to strike out the proceedings.

KEY LEGAL POINTS

• Whether the restoration of a dissolved company can guarantee that proceedings against it will be validated.
• The factors the court will consider when dealing with an application to strike out proceedings against a dissolved company.

COMMENTARY

The Court of Appeal has now affirmed that courts can use their Case Management Powers under CPR 3.4 to strike out a claim in claims against dissolved companies. Courts will consider factors including proportionality, the absence of evidence in relation to the claimant's attempts to restore the defendant, delay and the effect a stay would have on other defendants within the claim. While the decision in Peaktone undoubtedly assists claimants in bringing claims against dissolved defendants, this case demonstrates the onus on claimants to assist the overriding objective by taking prompt steps to restore a dissolved defendant. 

Author

George Nicolaides

MCPARLAND AND FAIRSTONE V WHITEHEAD

In January last year, the Business and Property Courts in England and Wales launched a two-year Disclosure Pilot scheme, with the stated aim of encouraging parties to agree a proportionate and efficient approach to disclosure in litigation. The Chancellor has provided guidance to supplement the Pilot, in order to correct "misunderstandings".

FACTUAL BACKGROUND

In March 2020, the Chancellor of the High Court, Sir Geoffrey Vos provided some important clarification around certain parts of the Disclosure Pilot in a Disclosure Guidance Hearing. McParland and Fairstone v Whitehead involved the alleged breach of non-compete and confidentiality clauses, where the parties were unable to reach agreement on key matters of disclosure. 

KEY LEGAL POINTS & COMMENTARY

The guidance focused on three ‘misunderstandings’:

The identification of Issues for Disclosure 

The Chancellor noted that the starting point for the identification of the Issues for Disclosure will in each case be determined by the documentation that is likely to be in each party’s possession. The identification of the Issues for Disclosure should be driven by the relevance of the categories of documents in the parties’ possession to the contested issues before the court. Accordingly, Issues for Disclosure are not the same as issues for trial. 

As the Chancellor noted, Issues for Disclosure are issues to which undisclosed documentation in the possession of one or more of the parties is likely to be of relevance and importance for the fair resolution of the claim. Issues for Disclosure will therefore rarely be legal issues, and will not include factual issues already capable of resolution from the documents available on initial disclosure. 

The approach to choosing between models of extended disclosure

The Chancellor noted that the choice of Disclosure Models is intended to simplify the process. He noted that the parties had chosen a variety of models for some of their breach issues, which served to over-complicate the process.  The Disclosure Pilot does not require compliance to be time-consuming or costly, rather, parties are required to consider what documents they are likely to hold and what relevance those documents have to the issues. 

Cooperation between the parties

Vos J also struck a note of warning to legal advisers who may seek to use the Disclosure Pilot as an opportunity to gain litigation advantage. Where parties are deemed to have attempted to gain a litigation advantage, they will face immediately payable adverse costs orders.

This is helpful new guidance which any lawyer or party embarking on preparing to give disclosure under the Pilot should bear in mind.

Author

Joshua Knowles

A V B [2019] 10 WLUK 65 (4 OCTOBER 2019)

In the first available decision on pre-action disclosure in a case subject to the Disclosure Pilot for the Business and Property Courts, the court declined to exercise its jurisdiction under CPR 31.16 and refused the application for pre-action disclosure. The dispute had a four and a half year history; a request for communications over an 18 month period showing the seller's state of mind was too speculative and onerous and should not be granted. 

FACTUAL BACKGROUND

The applicant sought to purchase an interest in a hotel and, having been unsuccessful in negotiations, pursued a claim to recover significant wasted expenditure. The applicant questioned whether its counterparts were in fact in a position to sell or ever intended to sell. It sought pre-action disclosure of board minutes and communications which were said to go to the state of mind of the respondents, in particular their ability and intention to sell. 

KEY LEGAL POINTS

There were five reasons advanced in support of the decision to refuse the application. 

Over the history of the dispute there had already been some disclosure and certain facts had been set out and accepted or clarified in the course of correspondence. The application (particularly the second category relating to communications other than board minutes) was speculative, to such extent that it could be considered too onerous to order pre-action disclosure. The history of correspondence with the respondent in any event put the applicant, at the time of application, in a better position than at the beginning of the dispute. Further, it was clear that the disclosure sought would not be determinative in the decision to bring proceedings. Finally, the burden in dealing with any future amendment of statements of case would pale in comparison with the burden of complying with the wide-ranging disclosure sought under the application.

COMMENTARY

Practice Direction 51U under which the Disclosure Pilot Scheme operates expressly preserves the application of CPR 31.16, setting out its text in full and thereby allowing its continued application alongside the operation of the Pilot. Further decisions relating to pre-action disclosure under the Pilot will provide an interesting insight as to how CPR 31.16 will continue to operate, in practice.

The decision in A v B shows the court taking a strict approach to an application for disclosure in a claim that, if issued, would proceed under the Disclosure Pilot. The judge, who is a member of the Disclosure Working Group which was responsible for drafting the Pilot, was clearly influenced by the lengthy history of the dispute. But future pre-action disclosure applicants under the Pilot may wish to note the approach taken, whilst also bearing in mind that the facts will have been pivotal to the decision made.

Author

Bethany Roberts

ALAFCO IRISH AIRCRAFT LEASING SIXTEEN LTD V HONG KONG AIRLINES LTD [2019] EWHC 3668 (COMM)

If there is a contract entitling a party to "all reasonable costs and expenses" of litigation, then the party is entitled to costs on an indemnity basis. This means that costs only have to be reasonably incurred, without having to be proportionate.   

FACTUAL BACKGROUND

This case involved a dispute relating to a lease. The lease contained a clause stating the Defendant (D) had to pay the Claimant's (C's) "reasonable costs and expenses incurred in preserving its rights, including legal costs".

C started proceedings and D filed an acknowledgement of service but then requested numerous extensions to file its defence. C subsequently filed for summary judgement and just two days before the hearing D said they would attend the hearing. C argued that D failed to properly specify what its defences would be and that D's conduct was unacceptable. 

C sought indemnity costs on the basis (1) that the conduct of the defendant led to considerable costs; and (2) their contract contained a provision which specified that C was entitled to all "reasonable costs and expenses" of litigation, including its legal costs. This meant that C was entitled to costs on an indemnity basis. 

The first factor in relation to D's conduct was dismissed by the Court as the conduct was not deemed to be 'outside the norm'. Although there was nothing material in the defence, D had not been acting tactically. The second point however was accepted. Parties are only entitled to reasonably incurred costs, whether on the standard or indemnity basis. As C was contractually entitled to "all reasonable costs and expenses", it was therefore entitled to indemnity costs. The fact that the clause stated "all reasonable costs" did not prevent costs from being ordered on the indemnity basis. 

KEY LEGAL POINTS

The word 'reasonable' in a contract for payment of costs does not mean indemnity costs are excluded, regardless of whether the clause states the party is entitled to "all costs" or "all reasonable costs".

The indemnity basis for costs in litigation only requires costs to be reasonable. There is no requirement for costs to be proportionate and the onus is on the paying party to show that the costs claimed are unreasonable. Indemnity costs are therefore more favourable to the receiving party.

COMMENTARY

This decision strengthens clauses which give contractual rights to recover legal costs and reinforces the position of receiving parties.

Author

Lauren Owens

Amendments, which came into force on the 6 April, have made significant changes to Practice Directions 22 and 32 pursuant to the 113th Update of the Civil Procedure Rules. 

The changes to PD 22 have updated the standard form of the statement of truth and PD 32 now requires witness statements to state the process by which they are prepared.

AMENDMENTS TO THE STATEMENT OF TRUTH

The new form of the statement of truth, to verify a statement of case, a response, an application notice or a notice of objections is now as follows:

1. "[I believe] [The (Claimant or may as be) believes] that the facts stated in this [name of the document being verified] are true. I understand that proceedings for contempt of court may be brought against anyone who makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest believe in its truth."

The form of the statement of truth verifying a witness statement must be set out as follows

2. "I believe that the facts stated in this witness statement are true. I understand that proceedings for contempt of court may be brought against anyone who makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth."

There are also two additional new requirements in relation to the statement of truth (PD 22.2). 

1. The statement of truth must be in the witnesses' own language. 
2. The statement of truth must be dated with the date on which it was signed. 

WITNESS STATEMENTS

With effect from 6 April 2020, a witness statement must (1) state the process by which it has been prepared, for example, face to face, over the telephone and/or through an interpreter and (2) be in the witness' own language (as must the statement of truth) and (3) give the date of any translation. Additionally a translation must be filed with the court with the original statement in the witness' own language.

COMMENTARY

The changes to the form of the statement of truth and the new requirements for witness statements are a significant addition to PD 22 and 32 and aim to ensure that a witness only considers matters which are within their own knowledge. Most notably, the statement of truth must now include a warning that contempt proceedings may be brought against individuals who provide a statement of truth without having an honest belief in its truth. The new requirements are also aimed at reducing the possibility of non-primary English speaking individuals signing statements dishonestly (inadvertently or not) and claiming later that they did not understand the significance of the statement of truth.  

Peter Tibbits