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Welcome to Mayer Brown’s Litigation & Dispute Resolution Legal Update June 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.

June 2008 Litigation & Dispute Resolution Legal Update

Contents Page

PRACTICE AND PROCEDURE

Costs

Coyne & Another v DRC Distribution Ltd & Another 1

Newall & Another v Lewis & Others 2

Renewable Power & Light Plc v Renewal Power & Light Services Inc & Others 3

Koo Golden East Mongolia (A Body Corporate) v Bank of Nova Scotia & Others 4

Evidence

Smith v ADVFN Plc 4

Interdigital Technology Corporation v Nokia Corporation & Another 5

Mediation

Cumbria Waste Management Ltd & Another v Baines Wilson (a firm) 6

Case Management

Whitecap Leisure Ltd v John H Rundle Ltd 7

Commercial Court

Berezovsky v Abramovich 9

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TORT

4 Eng Ltd v Harper & Another 10

EU

Ingenieurburo Michael Weiss und Partner GbR v Industrie-und Handelskammer Berlin 11

ARBITRATION

Gater Assets Ltd v Nak Naftogaz Ukrainiy 13

LEGISLATION

Maximum Number of Judges Order 2008 14

NEWS

Transforming tribunals 14

Bank charges test case 14

Interventions in Akzo Nobel 15

Wi-Fi facilities in courts 15

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PRACTICE AND PROCEDURE

Costs

Costs orders when substantive proceedings have been resolved without going to trial

Coyne & Another v DRC Distribution Ltd & Another, CA (Ward LJ, Jacob LJ, Rimer LJ) 15.5.08 [2008] EWCA Civ 488

This case confirms that a court may make a costs order when the substantive proceedings have been resolved without a trial but the parties have not agreed costs. The claimants (C) appealed against an order that they pay personally the costs of the first defendant’s (DRC) application to have them removed as administrators of a company. By the time the application came before the judge, it was no longer necessary for DRC to press for the substantive relief which it had sought (because of intervening events). A considerable amount of evidence on paper had already been placed before the judge. He made a winding up order and terminated C’s appointment. The only thing that remained was the question of costs. DRC submitted that it had in substance achieved the result it had sought and that it would have succeeded had the application been pursued and on that basis it successfully applied for an order for costs against C and the second defendant (F) (the managing director of the company). C submitted that the judge had wrongly adopted a summary procedure - if the question of costs was to be argued it was only fair that the court should first have heard C’s oral evidence.

The CA accepted DRC’s submission that although the winding up application had the consequence of removing the substantive basis of the application, it was still entitled to ask the court to rule on its application for costs. This was shown by the Brawley� case which affirmed that where litigation had been settled save as to costs, there was no convention that there should be no order as to costs and that C had no right to insist that, before deciding the costs question, the judge should have heard oral evidence from/cross-examination of the witnesses. He was in principle entitled to embark on an assessment of the incidence of costs in a more summary way than might have been appropriate if he had been deciding the substantive issues. He had read the evidence and heard full argument from counsel and on that basis had decided what costs order to make.

Rimer LJ (who gave the leading judgment) added that it did not follow that in every case in which a judge embarked on a summary determination of a costs only issue that it would always be appropriate for him to conclude that he should make what might be called a hostile order. All cases fall somewhere within the spectrum identified by Scott Baker J in R (Boxall) v Waltham Forest London Borough Council2. “In some cases it will be obvious that a costs order of some nature ought fairly to be made against a party; or perhaps against more than one party. In other cases it may be clear that the fair order to make will be no order. In yet others it may be apparent that the unresolved factual disputes between the parties that would have

� Brawley v Marczynski & Another (Nos 1&2) [2002] EWCA Civ 756; [EWCA] Civ 1453; [2003] 1 WLR 813.

2 (unreported) 21 December 2000

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been the subject of investigation at the trial are such that it is impossible to make a safe summary assessment that either or any party should be ordered to pay costs to another. In such a case the court may consider that all it can fairly do will be to make no order.”

Costs of and incidental to proceedings

Newall & Another v Lewis & Others, ChD (Briggs J, Master Rogers, David Harrison) 30.4.08 [2008] EWHC 910 (Ch)

The defendants appealed against the decision of a master made in the course of a detailed assessment of costs pursuant to a consent order at the conclusion of Part 8 proceedings. The order stated that “1. The defendants do pay the claimants’ costs of these proceedings to be assessed on the standard basis if not agreed. 2. The issue as to whether the defendants also pay the claimants’ costs incidental to these proceedings to be reserved to be dealt with as follows: a. On the assessment of the claimants’ costs of these proceedings, the costs judge also identifies any costs which he would have allowed if the order for costs had been that the defendants do pay the claimants’ costs of and incidental to these proceedings, but which he is not allowing pursuant to paragraph 1 above (“the Incidental Costs”). b. The issue as to whether, and if so the extent to which, the Incidental Costs should be paid by the defendants be referred to a single Judge of the Chancery Division for determination.” The master held that the wording of paragraph 1 would usually pick up incidental costs and that, therefore, the consent order was ambiguous. After reviewing the parties’ correspondence he concluded that what was meant by incidental costs was the investigative costs which were incurred prior to issue of proceedings and that those would be subject to detailed assessment and referral to a judge. All costs claimed post-issue, including incidental costs, were potentially recoverable and did not need to be referred to a judge.

S51(1) Supreme Court Act 1981 provides that costs of and incidental to all proceedings in the High Court shall be in the discretion of the court. The claimants submitted that, as a result of this, a simple order that one party pay another party’s “costs of…proceedings to be assessed on the standard basis…” gave an entitlement to costs both of and incidental to those proceedings. There is not much reported authority on the question of whether preparation for proceedings of one type is properly to be regarded as giving rise to costs of and incidental to subsequent proceedings of a narrower scope but one of the principles that emerges from Re Gibson’s Settlement Trust3 is that the court should investigate whether the work product created by the relevant expenditure constitutes “material ultimately proving of use and service in the action”. In that judgment, Sir Robert Megarry also said that matters disputed before proceedings are issued and matters which are raised in statements of case may differ considerably from each other and that “antecedent disputes which bear no real relation to the subject of the litigation could [not] be regarded as being part of the costs of the proceedings.” If, however, the disputes were in some degree relevant to the proceedings as ultimately constituted, and the other party’s attitude made it reasonable to think that the litigation would include them, the costs judge should be able to include them among the costs which were reasonably incurred.

3 [1981] 1 Ch 179. This was a case about costs awarded on the common funds basis.

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Briggs J held that the correspondence to which the master had recourse consisted of negotiations between the parties about costs and they were prima facie inadmissible for the purpose of construing the eventual agreement. The correspondence failed to show either that the parties agreed a private definition of the phrase “incidental to” as meaning investigative costs incurred pre-issue or that they were negotiating on the agreed basis that such costs were either to be included or excluded en bloc from the costs order. Further, there was no common subjective understanding that was different from the true construction of the words used in the order which might have led to the contract being rectified. The true construction of the order required the costs judge to separate the costs of the Part 8 proceedings and the costs incidental to them into two categories. The detailed assessment would, therefore, have to be started again so that the distinction could be applied. This case emphasises how important it is that parties to a consent order clearly understand what they are agreeing to – they must have the same understanding of the terms.

Order for an interim payment on account of costs

Renewable Power & Light Plc v Renewal Power & Light Services Inc & Others, ChD (Lewison J) 7.4.08 [2008] All ER (D) 89 (Apr)

Following the refusal of the claimant’s application for summary judgment against the defendants, it was ordered to make an interim payment of £40,000 on account of costs. The claimant was refused permission to appeal and subsequently applied to stay the execution of the order pending an application to the CA for permission to appeal and, if permission was granted, pending the disposal of the appeal.

In Hammond Suddard v Agrichem International Holdings Ltd4 Clarke LJ said that “By CPR rule 52.7, unless the appeal court or the lower court orders otherwise, an appeal does not operate as a stay of execution of the orders of the lower court. It follows that the court has a discretion whether or not to grant a stay. Whether the court should exercise its discretion to grant a stay will depend upon all the circumstances of the case, but the essential question is whether there is a risk of injustice to one or other or both parties if it grants or refuses a stay. In particular, if a stay is refused what are the risks of the appeal being stifled?...” In Hammond Clarke LJ was contemplating an appeal whereas in the instant case permission to appeal had been refused and had not yet been granted by the CA. In addition, the order which Lewison J had made was an order for the payment of costs by the would-be appellant who was financially better off than the would-be respondent. Therefore, the question as to the risk of an appeal being stifled was not a suitable one in the circumstances. The claimant (who was in the financially superior position) submitted that if the application for a stay was refused and the appeal succeeded, there would be a risk that it would be unable to recover the £40,000. The defendants submitted that if the £40,000 was ring-fenced within a global sum of £2m (which had been frozen by an earlier court order) the claimants would be adequately protected in the event of the appeal succeeding.

Lewison J was not convinced that the claimants would be adequately protected unless the claimant’s claim, assuming it to be a good one, was worth less than the £2m which had been frozen. The freezing order itself was under attack and was to be dealt with shortly after the instant hearing. He held that there was a risk of

4 [2001] EWCA Civ 2065.

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injustice to the claimant if the order for an interim payment was made immediately effective and he stayed the order until the date of the application regarding the freezing order so as to preserve the ring-fence. If the freezing order continued in force it would then be for the judge at that time to decide whether to continue the stay until the outcome of the claimant’s application for permission to appeal. If the application for permission to appeal was ultimately successful, the CA had ample powers to continue or refuse a further stay.

Wasted costs orders

Koo Golden East Mongolia (A Body Corporate) v Bank of Nova Scotia & Others, QBD (Silber J) 20.5.08 [2008] EWHC 1120 (Admin)

This was an application for wasted costs against the solicitors who acted for a Mongolian mining company. The basis for the application was that their conduct was negligent and unreasonable. Silber J held that the application was doomed to failure because the solicitor’s conduct did not fall into the categories which enabled a court to award wasted costs5. Additional reasons for rejecting the claim were that the bank had not suffered any loss and that a wasted costs order was a remedy of last resort and was not to be used as a primary remedy (which is what the bank was attempting to do). In an appendix to the judgment, Silber J usefully sets out the agreed approach to wasted costs, as stated by Lightman J in Morris and Morris v Roberts6.

Evidence

Evidence supporting Norwich Pharmacal application

Smith v ADVFN Plc, CA (May LJ, Moore-Bick LJ) 15.4.08 [2008] All ER (D) 207 (Apr)

This case makes clear that material in support of a Norwich Pharmacal Order (NPO) must be carefully organised and well presented. The defendant (ADVFN) operated internet bulletin boards. Their system asked users for their names and addresses when they initially registered as users but the details were not necessarily given accurately. However, when a user registered and each time he accessed the bulletin board the system recorded the IP address or IP number of the user’s computer. It appeared that the true identities of the users were obtainable from their internet service providers if the relevant IP addresses were provided. The appellant (S) contended that defamatory statements had been published about him on a series of internet bulletin boards. He wanted to bring proceedings against the persons who made the statements but he did not know their identities; he only knew them by their online user names. S obtained a NPO against ADVFN for the disclosure of the individual account details and IP addresses. ADVFN complied with the order and supplied S with the information at the time of registration. S made a further

5 The court’s power to award costs is found in s51(6) Supreme Court Act 1981 which provides that “…the court may disallow, or (as the case may be) order the legal or other representative concerned to meet the whole of any wasted costs or such part of them as may be determined in accordance with the rules of the court.” This is supplemented by CPR rule 48.7 and the Practice Direction.

6 [2005] EWHC 1040 (Ch)

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application for disclosure of IP addresses at the time the comments were posted on the bulletin boards which related to 252 postings by 64 avatars (fabricated internet names). This would have required the court to examine each of the postings to decide if it was or was not arguably libellous and merited an order for disclosure. The judge granted a narrower order relating to fewer postings and S appealed. ADVFN submitted that S had provided the court with a surplus of information and it would have been impractical and unreasonable for the court to have carried out the necessary assessment of the evidence before granting the wider order. They said that although they were prepared to comply with a wider order, it would be unfair to be left out of pocket as a result of complying in light of the fact that S might not have been able to pay the costs.

The CA held that the judge had a discretion to decline to address item by item an indiscriminate and disorganised mass of material. S should have organised the material so that the court could readily have seen that a wrong had arguably been committed and should have discriminated by reducing substantially the number of postings which would have legitimately served his purpose. The appeal was dismissed without prejudice to a renewed application7.

Disclosure of commercially confidential documents

Interdigital Technology Corporation v Nokia Corporation & Another, ChD (Patents Ct) (Floyd J) 29.4.08 [2008] EWHC 969 (Pat)

The applicants applied for disclosure of certain documents that were said to be commercially confidential (in a patent related dispute). The issue on this disclosure application concerned the terms on which documentary disclosure, which had been given by the claimant in relation to a particular issue, could be disclosed to individuals on the defendants’ side. The documents which were ordered to be disclosed were likely to be commercially confidential and the sort of documents which should have been the subject of some confidentiality restrictions. The court had to consider the following issues: (1) whether, in respect of the documents disclosed to the defendants’ firm of solicitors (B), the individual solicitors, assistant solicitors and other individuals who received the documents should have been required to give personal undertakings as opposed to an undertaking being given by the firm as a firm; (2) whether two named individuals in a further firm of solicitors who had been instructed to protect the interests of the second defendant and keep an eye on the litigation as a whole should have been permitted to have access to the documents on their personal undertakings; (3) whether it was suitable for L, a former employee of the first defendant, who was a solicitor who had moved from the first defendant to B, to have documents disclosed to him; (4) whether two individual employees of the defendants should have been permitted access to the documents. The claimant submitted that there was not sufficient need at the particular stage of the litigation.

The court held as follows. (1) The appropriate course was for B to give the undertaking and for the undertaking to require that the documents remain in B’s premises in London, except to the extent that they were required either for the purposes of the applications to court or delivery to counsel. It was not necessary for counsel to

7 If S decided to pursue a further application then he would be liable to pay ADVFN’s costs and his inability to pay those costs would be a legitimate factor for the court to take into account.

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give personal undertakings – the firm’s undertakings and counsel’s obligations in relation to documents were adequate. (2) A sufficient case was not made out for disclosure to be extended to a further firm of solicitors. (3)As regards L, it was not appropriate for the court to pick and choose amongst the solicitors entitled to see the documents. L’s historical association with the defendant did not debar him from seeing the documents. However, it was reasonable to ask him to give a personal undertaking. (4) As regards disclosure to the two employees, the court had to balance the interests of the claimant in protecting the documents and the need to ensure that the defendants could properly prepare for the action. On balance, the court allowed the named individuals to have access to the documents against their personal undertakings but the documents were to remain at B’s offices.

Mediation

The without prejudice rule in mediations

Cumbria Waste Management Ltd & Another v Baines Wilson (a firm), QBD (Kirkham J) 16.4.08 [2008] EWHC 786 (QB)

The defendant solicitors acted for the claimants in connection with drafting and negotiating an agreement between the claimants and DEFRA for the provision of waste management services during the foot and mouth epidemic. A dispute arose between the parties as to the sums to be paid for the services, which was settled following a series of without prejudice communications between the claimants’ and DEFRA’s solicitors and two mediations. The mediation agreements each contained a confidentiality provision.

The claimants subsequently issued the current proceedings against the defendant. They alleged that the dispute with DEFRA occurred entirely as a result of the defendant’s negligence in relation to the negotiating, drafting and advising on the terms of the agreement between the claimants and DEFRA; that DEFRA’s case was based upon ambiguities and inconsistencies in the drafting of the contract for which the defendant was responsible; and that the settlement of the proceedings following the mediation was in their best interests and reflected a reasonable and sensible compromise of the claims given, in particular, the ambiguity and lack of clarity in the contract. The defendant submitted that it was for the claimants to prove that the settlement with DEFRA was reasonable. Pursuant to the guidance of the CA in Muller v Lindsay & Mortimer8 the claimants waived privilege in and disclosed without prejudice communications between themselves and DEFRA. They disclosed the existence of documents created in connection with the mediations but did not show these to the defendant. They asked the mediators and DEFRA whether the documents could be shown to the defendant, but DEFRA refused.

The issue before the court was whether the defendant was entitled to disclosure of the documents related to the mediation9. DEFRA’s evidence was that they were still

8 [1996] 1 PNLR 74. In this case the CA ordered without prejudice correspondence between two of the parties to be produced to a third party because it went to the issue of reasonableness of the settlement, not to the question of whether the statements made in the course of settling the matter were true.

9 As DEFRA were not a party to these proceedings, they were invited to make representations pursuant to CPR rule 31.19(6)(b) which provides for making a claim to withhold inspection or disclosure of documents.

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in dispute with other parties regarding foot and mouth and if the documents were disclosed and became public during the course of hearings within these proceedings, it could prejudice them in these other cases. The defendant submitted that there was no principle of English law by which documents were protected from disclosure on inspection by reason of confidentiality alone. Although the documents were prima facie protected from disclosure on the ground of privilege, the claimants had waived that privilege when they pleaded the reasonableness of the settlement with DEFRA. Further, in order to assess the reasonableness of the claimants’ conduct, it needed to know what that conduct was, including their conduct at the mediations (in accordance with Muller).

The judge was not persuaded that disclosure of documents within the mediations fell within the exception to the without prejudice rule set out in Muller. In that case it was the plaintiffs who sought to deny disclosure of without prejudice material. Here the question was whether a third party’s without prejudice material should be disclosed, thus the privilege belonged not only to the claimants but also to DEFRA. There were public policy reasons why DEFRA should have been entitled to assert that privilege and there was an express agreement between the claimants and DEFRA that the without prejudice rule applied. As the defendant could not bring itself within the Muller exception to the without prejudice rule, the application failed. The judge went on to say that had she not concluded that the defendant’s application failed because the documents did not fall within one of the exceptions to the without prejudice rule, she would have concluded that DEFRA was entitled to rely on an exception to the general rule that confidentiality was not a bar to disclosure. DEFRA was a party to the confidentiality agreement and wished its provisions to be honoured. Therefore, whether on the basis of the without prejudice rule or as an exception to the general rule that confidentiality was not a bar to disclosure, the judge said the court should support the mediation process by refusing, in normal circumstances, to order disclosure of documents and communications within a mediation.

Tony Allen, a solicitor and director of CEDR, stated in an article in the New Law Journal�0 that this is a bold decision which reinforces the security of what goes on at mediations. It suggests “that courts might indeed be prepared to find that there is a special mediation privilege worthy of judicial protection because the parties (and the mediator) formally contract in writing to keep the mediation process confidential.”

Case Management

Judge’s entitlement to suggest an alternative basis for a claim

Whitecap Leisure Ltd v John H Rundle Ltd, CA (Ward LJ, Wall LJ, Moore-Bick LJ) 28.4.08 [2008] EWCA Civ 429

The disputes between the parties in this case arose out of a contract to supply equipment to provide water-skiing facilities. The claimant alleged the equipment was defective, purported to reject the equipment on the grounds that it was not fit for its purpose or of satisfactory quality and eventually commenced proceedings against the defendant, claiming damages for failure to deliver the goods in accordance

�0 16 May 2008

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with the contract, based on its alleged rejection of the goods. No alternative claim for damages for breach of warranty was advanced. The defendant denied that the equipment was faulty and relied on the terms of the contract and the heads of agreement as excluding any liability for defects in the goods. The judge found that the equipment was not of satisfactory quality and was not fit for its purpose. However, he held that the claimant had accepted the goods and was not entitled to damages for non-delivery. He said that the proper basis of the claimant’s claim was for damages for breach of warranty (under s 53 Sale of Goods Act 1979) and the measure of damages that the claimant was entitled to recover was the cost of the replacement system. He directed that his judgment was to be treated as a judgment on liability only. At a further hearing, the judge held that the claimant was entitled to recover the whole of the cost of the replacement system together with the expenses it had incurred in attempting to rectify defects in the equipment supplied under the contract. Both parties appealed.

The ground of appeal relied upon by the defendant that is of most interest is that the judge acted outside his jurisdiction and was wrong to have suggested a new, unpleaded claim when giving judgment. Counsel submitted that the judge had acted improperly and unfairly in adjourning the trial of damages following the delivery of his first judgment in order to enable the claimant to advance a different case from that which it had been making up to that point. He submitted that the judge had no jurisdiction to entertain submissions from the claimant in support of a case on damages that had not been pleaded. The judge considered that to be at odds with the modern approach to case management.

The CA held that the judges have always had wide powers to control proceedings and had the jurisdiction to adjourn a trial and to advance new claims. The issue was whether the judge had exercised his jurisdiction wrongly in the circumstances of this case. Moore-Bick LJ said that it is important that judges should remain and be seen to remain scrupulously impartial. “Reaching a just decision according to law is the whole purpose of a trial and the judge should do what he reasonably can to achieve that end. The critical question…is whether the judge has acted fairly, and that usually means asking whether he has given both parties a proper opportunity to deal with the issues that actually arise in the proceedings.” It was unfortunate that here the judge simply announced in the course of delivering judgment that he had reached the conclusion that the claimant was entitled to recover damages on a basis different from that pleaded “because it was liable to give the impression that he was presenting it with a gift to which it was not entitled…A better course…might have been to limit his judgment to issues of liability and to invite the parties to address him on the directions that he should give for the trial of quantum, including the need for any further pleading”. That would have led to an application by the claimant to amend its particulars of claim to claim for breach of warranty. However, the defendant had not suffered any real injustice as a result of the way in which the matter was handled. Although the CA concluded that the claimant was not entitled to recover damages, Moore-Bick LJ said that in his view the judge’s handling of the trial did not provide sufficient grounds for setting aside his award in its favour if it had otherwise been sustainable.

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Commercial Court

Requests for further information

Berezovsky v Abramovich, QBD (Comm) (Judge Mackie QC) 22 May 2008 [2008] EWHC 1138 (Comm)

One of the applications before the court was the defendant’s application for further information (Part 18) about the particulars of claim. The defendant served a request for further information dealing with matters which it contended needed to be answered before the defence could be prepared. After an initial indication from the claimant that some information might be provided he agreed to answer only one of the 50 requests. The claimant submitted that the defendant’s approach was inconsistent with the procedural rules of the Commercial Court, particularly those adopted following the Report and Recommendations of the Commercial Court Long Trials Working Party, which were put into practice for a trial period which began on 1 February 2008.

The Practice Direction to Part 18 at paragraph 1.2 states that “A request should be concise and strictly confined to matters which are reasonably necessary and proportionate to enable the first party to prepare his own case or to understand the case he has to meet.” In a footnote to paragraph 50.b of the Commercial Court’s report it states that “…parties to Commercial Court litigation frequently forget the principle that further information can only be ordered if it is really necessary because the other party does not know the case it has to meet.” The defendant submitted that requests for further information, even before the defence, remained appropriate where what was sought was really necessary to enable the defendant to know what case it had to meet. He also submitted that since the report had in mind more frequent early and robust applications to strike out or for summary judgment, it was important for the claimant’s case to be clear so that the viability of such early applications could be considered.

Judge Mackie said that the court now manages cases in line with the proposals and recommendations in the report. “Statements of Case should only contain those facts that are needed to ensure that the other parties know what they have to meet. That means material facts, but not background facts.” This applied equally to requests for further information. He held that “If a Defendant considers that it needs more information to enable it to prepare a Defence of the kind the Commercial Court requires, it should…ask the Claimant, preferably by requesting the minimum and not making the sort of wide ranging request we have in this case which inevitably causes controversy. The Claimant should provide whatever information is reasonably necessary. Further, if other information is readily to hand it will save time and money for the parties to provide it even it they have a legal justification for refusing it. That exercise should be conducted by brief exchanges between solicitors in terms aimed at securing compromise not at scoring points. If problems remain they are best left to the first Case Management Conference.” He said that some of the defendant’s requests had some justification and that most of the answers had already been provided. He directed that the defendant reconsider what information he still needed to draft his defence and he asked the solicitors to deal with provision of outstanding information by exchange of short letters.

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TORTRecovery of damages for loss of a chance in deceit

4 Eng Ltd v Harper & Another, ChD (David Richards J) 29.4.08 [2008] All ER (D) 400 (Apr)

Summary judgment was entered against the defendants on a claim in deceit. This judgment dealt with the assessment of damages.

The defendant sold the entire issued share capital in a company to the claimant, which had been established by S and T as the vehicle for acquiring companies in the engineering sector. £550,000 of the £1.2m contract price was paid on completion. Following completion it became apparent to S and T that there were problems in the company and investigations revealed that the defendants had, over a long period, engaged in the systematic bribery of employees of its principal customer which had resulted in payments by the customer to the company on inflated or bogus invoices amounting to some £1.8m. The defendants had succeeded in defrauding first the customer and then the claimant and they were subsequently convicted of conspiracy to corrupt and conspiracy to defraud in relation to the customer and the company. On the application for summary judgment it was held that the claim in deceit was established against both defendants based on their knowledge of the falsity of a number of express representations contained in the share sale agreement on which the claimant had relied in agreeing to purchase the company. The losses arose under five heads: (1) the purchase price paid to the defendants; (2) costs and expenses of the acquisition; (3) liabilities incurred by the claimant after acquisition for salaries, pensions and national insurance contributions; (4) liability for cost of the investigation into the fraud; (5) loss of opportunity to purchase and profit from another company. As regards loss of opportunity, the claimant submitted that if it had not been induced by the defendants’ fraudulent misrepresentations to buy the company that it bought, it would have bought the shares in another company and its business would have performed well. It had therefore been deprived of very substantial income and capital profits. The defendants submitted that the claimant’s claim involved an impermissible attempt to rely on two distinct strands of authority: damages for loss directly caused to the claimant and damages for a loss of chance; and that damages for a loss of capital profits (i.e. the increase in the value of the alternative business between the date of assumed acquisition and the date of its presumed disposal, which would have been the date of trial or earlier) were too remote and not recoverable.

The court held that: (1) the claimant had suffered loss in relation to the purchase price paid for the company and it was entitled to recover that money; (2) the claimant had established the amount and payment of costs and expenses arising out of the acquisition of the company and was entitled to recover them as damages; (3) the defendants accepted that they were liable in respect of salaries provided that the claimant made no recovery in respect of the lost opportunity to purchase the second company. The claimant accepted that if it succeeded in respect of the claim for loss of opportunity to purchase the second company, the loss in respect of its liability for the salaries, national insurance etc was not recoverable; (4) the uncovering of the defendants’ fraudulent activity was a complex and time-consuming task undertaken by the claimant’s managers and the court decided on the appropriate hourly rate on

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which to award damages under that head. The judge said that this was an award to compensate the claimant for the liability incurred to S and T. It was not an award of damages for disruption to the business through loss of management time of the type recognised by the CA in Aerospace Publishing Ltd v Thames Water Utilities Ltd��. In such cases the claimant must prove significant disruption to its business but if it did so the court would generally infer that revenue would otherwise have been generated at least equal to the cost of employing the diverted staff for the relevant time; (5) in principle damages for the loss of an alternative purchase, if caused by the defendants’ fraudulent misrepresentation and the claimant’s reliance on it, were recoverable in an action for deceit�2. A combination of claims for loss directly caused to the claimant and damages for a loss of chance involved no error of principle. If the loss of the chance was damage directly caused by the defendants’ deceit, it was as much within the scope of damages for deceit as payments or liabilities in fact made or incurred by the claimant or as damages for the loss of profits in a hypothetical alternative business established on the balance of probabilities. The forseeability of a head of loss was irrelevant in the award of damages for deceit. A loss was too remote only if it was not in the eyes of the law directly caused by a defendant’s deceit. On the evidence, the claimant established on the balance of probabilities that it would have been able and willing to purchase the second company. The damages were assessed accordingly.

EUService of judicial and extra judicial documents

Ingenieurburo Michael Weiss und Partner GbR v Industrie-und Handelskammer Berlin (Case C-14.07), Court of Justice of the European Communities, 8.5.08 [2008] All ER D 93 (May)

This reference for a preliminary ruling concerned the interpretation of Article 8 of Council Regulation (EC) No 1348/2000 of 29 May 2000 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters. This article, entitled “Refusal to accept a document” provides that “1. The receiving agency shall inform the addressee that he or she may refuse to accept the document to be served if it is in a language other than either of the following languages: (a) the official language of the Member State addressed or, if there are several official languages in that Member State, the official language or one of the official languages of the place where service is to be effected; or (b) a language of the Member State of transmission which the addressee understands.”

In this case the applicant brought a claim for damages against the respondent for the defective design of a building on the basis of an architect’s contract. The contract stipulated that all correspondence was to be in German. The application, which formed part of the case file submitted to the court, referred to the various items of evidence relied on in support of its submission. The documentary evidence was annexed to the application. The respondent refused to accept the application

�� [2007] EWCA Civ 3�2 This was held by the CA in East v Maurer [1991] 1 WLR 461.

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on the ground that there was no English translation of the annexed document and it submitted that the application was not properly served. The proceedings in the national court were stayed and a reference was made to the Court of Justice for a preliminary ruling concerning the interpretation of Article 8.

The court ruled as follows. (1) Article 8(1) of the Regulation is to be interpreted as meaning that the addressee of a document instituting the proceedings which is to be served does not have the right to refuse to accept that document, provided that it enables the addressee to assert his rights in legal proceedings in the Member State of transmission, where annexes are attached to that document consisting of documentary evidence which is not in the language of the Member State addressed or in a language of the Member State of transmission which the addressee understands but which has a purely evidential function and is not necessary for understanding the subject matter of the claim and the cause of action. It would be necessary for the national court to take account of the extent to which an individual domiciled in the Member State of transmission would understand a judicial document written in the language of that State. Article 8 was to be interpreted in light of its objectives to improve and expedite the transmission of documents and the possibility of refusing service of documents was to be confined to exceptional circumstances. Those objectives could not be attained by undermining the rights of the defence. (2) Article 8(1)(b) of the Regulation was to be interpreted as meaning that the fact that the addressee of a document served had agreed in a contract concluded with the applicant in the course of his business that correspondence was to be conducted in the language of the Member State of transmission did not give rise to a presumption of knowledge of that language but it was evidence which the court could take into account in determining whether that addressee understood the language of the Member State of transmission. The degree of knowledge required was not the same as that required to defend an action but it was a matter of fact to be taken into account by the court. (3) Article 8(1) was to be interpreted as meaning that the addressee of a document served may not in any event rely on that provision in order to refuse acceptance of annexes to the document which were not in the language of the Member State addressed or in a language of the Member State of transmission which the addressee understood where the addressee concluded a contract in the course of his business in which he agreed that correspondence was to be conducted in the language of the Member State of transmission and the annexes concerned that correspondence and were written in the agreed language. “…it may be necessary to translate certain annexes to a document instituting proceedings which has been served if the content of that document which has been translated is insufficient to enable the subject matter of the claim and the cause of action to be identified, so that the defendant can assert his rights, on the ground that certain necessary information relating to the application is to be found in those annexes.” Such a translation is not needed where it is apparent from the circumstances that the addressee of the document instituting the proceedings was familiar with the content of the annexes.

June 2008 Litigation & Dispute Resolution Legal Update

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ARBITRATIONEntitlement to interest

Gater Assets Ltd v Nak Naftogaz Ukrainiy, QBD (Comm) (Beatson J) 21.5.08 [2008] All ER (D) 280 (May)

The issue in this case was whether interest under s17 of the Judgments Act 1838 was or should have been payable in respect of a judgment entered pursuant to s101(3) Arbitration Act 1996 in respect of an arbitration award made by the International Commercial Arbitration Court of Moscow where the award did not order that post award interest should be paid. That section governs the recognition and enforcement of New York Convention awards.

S17 of the Act provides that “(1) Every judgment debt shall carry interest at the rate of [8] percent per annum from such time as shall be prescribed by rules of court until the same shall be satisfied, and such interest may be levied under a writ of execution on such judgment.” CPR rule 40.8(1) provides that, where interest is payable pursuant to s17, the interest shall begin to run from the date that judgment is given unless inter alia the court orders otherwise. S49(4) of the Arbitration Act 1996 (which applies where the seat of the arbitration is England, Wales or Northern Ireland) empowers arbitrators to grant post-award interest. It provides that “The tribunal may award simple or compound interest from the date of the award (or any later date) until payment, at such rates and with such rests as it considers meets the justice of the case…”

The claimants applied to enforce a New York Convention award made in Russia which did not include an order requiring post-award interest to be paid. Judgment was entered in terms of the award. The claimant applied for a charging order and a debt order. It stated that the amount due was the judgment debt plus interest at 8% running from the date of the order pursuant to the Judgments Act.

Beatson J held that interest under the Judgments Act was payable on the judgment debt from the date of judgment at the specified rate of 8% from that date. “The natural interpretation of s101(3) is that, where leave is given and judgment is entered, there is a judgment of the courts of this country which has the same effect as other judgments. Section 17 of the 1838 Act applies to ‘every judgment debt’ and CPR 40.8 provides that, unless the court orders otherwise, interest begins to run from the date that judgment is given.” In the case of a foreign judgment, once it was registered in the country it took effect as an English judgment. In the case of both registered foreign judgments and New York Convention awards, where judgment had been entered pursuant to s101(3), once there was an English judgment, English procedural rules, including those relating to interest payable, applied13. There was no equivalent of s49 applicable to New York Convention awards, giving domestic arbitrators a statutory power to award post-award interest and, in this case, the award had been entered as a judgment. The court declined to exercise its discretion to disallow interest and declined to direct a different rate of interest to the 8% applicable under s17 of the 1838 Act.

13 The judge distinguished the case of Walker v Rowe [2000] 1 Lloyd’s Rep 116 where Aikens J held that, in respect of a domestic award, it was for the arbitral tribunal to award post-award interest.

n

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LEGISLATIONMaximum Number of Judges Order 2008

n This Order amends the Supreme Court Act 1981 so as to increase the number of ordinary judges of the Court of Appeal from 37 to 38 to enable the Chair of the Law Commission to be made a Judge of the CA on leaving the Law Commission.

NEWSTransforming tribunals

n The Ministry of Justice has announced that a new two tier tribunals system will go live from 3 November 2008. The aim is to simplify the judicial framework for tribunals, harmonise the appeals process and generally improve the tribunal service for users. There will be a First Tier and an Upper Tribunal. The Chambers in the First Tier are Social Entitlement, General Regulatory, Health, Education and Social Care, Taxation and Land, Property and Housing. The Upper Tribunal Chambers are Administrative Appeals, Lands, and Finance and Tax. The Upper Tribunal will be a Superior Court of Record that can deal with onward appeals and judicial reviews. A new Tribunal Procedure Committee has been given responsibility for harmonising and improving the various existing procedural rules for tribunals affected by the reforms. The Employment and Employment Appeal Tribunals will be separate and are unaffected by these proposals. The government is expected to consult on whether to bring the Asylum and Immigration Tribunal into the new unified structure. It has been reported that the Lord Chancellor intends to use his powers to prescribe that appeals from an Upper Tribunal to the Court of Appeal will only be permitted in cases of general importance or for other compelling reasons.

Bank charges test case

n The OFT has announced that, following a recent CMC, leave to appeal the High Court’s ruling that the unfairness rules of the Unfair Terms in Consumer Contract Regulations 1999 can be applied to assess unarranged overdraft charges in personal current accounts has been granted to the banks who are party to the case. Four of the banks have been refused leave to appeal the High Court’s findings that some of their terms are not in plain, intelligible language. A hearing has now been scheduled for early July to consider whether terms of the banks’ basic and historic personal current account contracts can also be assessed for fairness under the Regulations and whether they are capable of being penalties at common law. The OFT is continuing to investigate the fairness of the relevant terms in the banks’ current terms and conditions.

June 2008 Litigation & Dispute Resolution Legal Update

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Interventions in Akzo Nobel

n It was reported in the Gazette (29.5.08) that the Akzo Nobel appeal has attracted the largest number of interventions in the history of the ECJ. The appeal is seeking to overturn the European Court of First Instance’s ruling (September 2007) that in-house lawyers cannot claim the protection of legal professional privilege when under investigation by the European Commission. 12 interventions have been submitted in support of the appeal by, among others, the CCBE, the Law Society, the GC100 and the Dutch, International and American bar associations.

Wi-Fi facilities in courts

n The Courts Minister has announced that most Crown and combined courts across England and Wales will now have Wi-Fi facilities in place. The facility has been installed in 67 courts over the past three months and is meant to help barristers and solicitors to utilise time between cases more effectively by providing wireless access to email, legal reference material and other networks. This will also be useful for jurors, victims and witnesses. The Courts Minister said that this is an important step by HMCS to improve court facilities and the quality of service provided to court users.

Sherry Begner

Kate Elsmore

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