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A B C D E F G H I J K L M N O P R S T V W Y

Dispute Resolution

Making a Claim when a Company goes into Administration
Monday 4th September 2017

Recently, the fashion label Rare London announced its administration on Facebook on 31st July stating that the administrators from Duff & Phelps Ltd ‘had to take the unfortunate decision to cease to trade the Company with immediate effect making all staff redundant’.

Following the announcement, many customers took to social media to complain that they had not received ordered items or refunds for returned goods. So what can you do if find yourself in this position?

As a customer, you will be what is known as an unsecured creditor as you do not have any security over the Company’s assets and your claim against the Company will rank relatively low as can be seen from the order of priority below.

1. Debts secured over the company’s assets by fixed charges;
2. Fees and expenses of the administrator
3. Preferential debts;
4. Floating charges;
5. Unsecured creditors; and
6. Shareholders

Therefore as an unsecured creditor the best option is to contact your bank/credit card holder or PayPal to ascertain whether they are willing to provide a refund. Unfortunately, if you paid on a debit card or a refund is unavailable then you will need to make a claim against the insolvent estate.

In order to make a claim against the insolvent estate, you must have a provable debt as defined within the Insolvency Rules 2016. In this scenario the most likely ground is that the Company must have been subject to the debt or liability when it entered the relevant insolvency process (rule 14.1(3)(b) IR 2016).

Once this is established you will need to complete a proof of debt form which can be obtained from the administrator and returned upon its completion. Insolvency proceedings can be a lengthy process and it may be some time before your claim is dealt with by the administrator.

Once all the claims have been considered by the administrator they will consider what assets are available (if any) to the unsecured creditors of the company. As stated above, unsecured creditors are low in priority in the order of distribution. It is therefore not unusual for unsecured creditors to be paid on a pro-rata basis and if there are very few assets, unsecured creditors may not be paid at all.

If you are a creditor concerned about the financial situation of a debtor company, you should first check Companies House to ascertain whether any insolvency proceedings have been commenced and if so the details of the administrator or liquidator appointed. Should you require assistance with pursuing a debt please do not hesitate to contact a member of our litigation team.


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Are non-compete restrictive covenants valid where employees cannot have any interest in competitors?
Wednesday 30th August 2017

It is established law that restrictive covenants in contracts of employment that try to prevent an outgoing employee from competing can be void if they are too broad.  The majority of the cases concerning these clauses concern the duration of the non-compete period, the geographical area where competition is restricted or the type of business that is considered to be competition.

In Tillman v Egon Zehnder Ltd [2017] EWCA Civ 1054, 21 July 2017 the Court considered a more unusual argument.

Ms Tillman was employed as a consultant with Egon Zehnder Ltd.  The employer trades in several jurisdictions primarily locating senior executives for recruitment by their customers.  Ms Tillman rose to become co-Global Head of the Financial Services Practice Group but did not sign new contracts of employment with each promotion.  Her contract of employment contained restrictions on competition with her employer for a period after termination of her employment. 

In particular, Ms Tilman’s contract provided that she could not hold or have any interest in any shares in any company which competes with her employer or any group company.  The only exception to this was for shareholdings of up to 5% of the issued shares in publicly quoted companies and for investment purposes only.  

When Ms Tillman resigned her employment she was not required to work her notice and she informed her former employer that she intended to work for a competitor.  Her former employer sought an injunction from the Court on the grounds that the employment contract restricted competition.

In addition to arguing that the geographical area of restriction was too broad Ms Tillman also raised an interesting argument in defence of the injunctive application that not being permitted to be "interested" in any competing business was too wide a restriction and the competition restriction should not be enforceable. 

The general rule is that restrictive covenants must protect a legitimate interest and they must be no more than is reasonable.  If a less onerous obligation can give the same level of protection to the employer then that should be adopted.

The High Court upheld the contract of employment but Ms Tillman appealed.  The Court of Appeal disagreed with the High Court and found that the restrictive covenant was not enforceable.  The argument centred on whether a shareholder is ‘interested in’ the company in which they hold shares.  The Court of Appeal concluded that the drafting of the contract meant that Ms Tillman could not have held any shares in competitors without breaching her contract.  Therefore, the restriction on competition was too broad to be enforceable. 

Due to the way the contract had been drafted the offending wording could not be severed from the clause leaving the remaining part enforceable against Ms Tillman.  The Courts are generally reluctant to delete parts of the wording of restrictive covenants to create a restriction that had not been intended by the parties.

This decision is a harsh decision for the employer.  It was never suggested that Ms Tillman had ever wanted to acquire a small interest in one of her employer’s competitors.  The fact that she could not do this meant that that the restrictions that her employer had tried to impose on her were too onerous for the Court to allow them to have effect.

The lesson to be learned from this is that careful consideration of the minimum required restrictions on employees to protect an employer’s business interests is essential.


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Disclosure of litigation funding when subject to a Freezing Order
Monday 21st August 2017

In the recent case of Mezhdunarodniy Promyshlenniy Bank and another v Pugachev and others [2017] EWHC 1847 (Ch) (13 July 2017) the Court has clarified where a party can be compelled to disclose the source of litigation funding in the context of a freezing injunction.

Usually, freezing orders are sought to prevent a defendant from dissipating their assets until a judgment can be obtained and enforced.

In this case the claimants has obtained a judgment against the defendants, including Pugachev, in Russia which they were trying to enforce in England.  The claimants had obtained a worldwide freezing order in England against Pugachev. 

Default judgment was obtained in England against Pugachev and an application to set this judgment aside was made on the grounds the English Courts did not have jurisdiction and that the Claimants had failed to get Court permission to serve proceedings outside the jurisdiction.

In response to the application to set aside their judgment the Claimants argued that Pugachev should have to disclose who was funding his application and where their money had come from before his application could be allowed to proceed. This was an unusual position for the Claimants to adopt as a standard form freezing orders make allowances for affected parties to spend set amounts on legal advice and representation. Pugachev had sought to use that allowance previously but was not doing so for his application, instead the proposal was to use funds held by French lawyers of unknown origin.

The real issue was whether the funds to be used on the application should be frozen under the existing worldwide freezing order or from some other source.  If they were frozen funds why had there not been disclosure of those funds by Pugachev as required shortly after the worldwide freezing order had been made?

The context of this case is important. Pugachev had not paid existing costs awards, failed to comply with earlier orders and was in contempt of the Court’s orders.  There had been failure to serve a 2 year prison sentence imposed for contempt of Court.  Given these unusual circumstances the Court exercised its general discretion to make an unusual order.  The Court imposed conditions that the application to challenge the jurisdiction of the Court be conditional on disclosure of the source of funding of legal costs and also a payment into Court.

In making the Order for payment into Court the Court considered whether there was a risk that doing so would prevent Pugachev from pursuing the challenge to the Court’s jurisdiction and considered that it would not.

It should be stressed that his is an exceptional case.  Nevertheless, there is now authority that a defendant who is subject to a worldwide freezing order may be required to reveal the source of his funding before continuing with litigation if the source of the funding is not a disclosed and frozen asset.

To find out more on freezing injunctions, please click here or alternatelively contact Simon Morris


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Newspaper Articles and Harassment
Tuesday 15th August 2017

A recent High Court judgment has left open the possibility of Claimants bringing a successful harassment claim against newspaper publishers even where the Claimant has already recovered damages in libel.

Claims for harassment have regularly been brought by celebrities against the media, and the Courts have granted injunctions to prevent intrusive coverage.

In this case the Claimant, Zipporah Lisle-Mainwaring, was the subject of press coverage after her local Council refused her application for planning permission after she had painted her multi-million pound luxury Kensington house in red and white candy stripes.  The Claimant alleges that the Mail made contact with her ten times, and published nine stories about her and her planning dispute (planning permission was later granted after judicial review proceedings).

Two of those articles were the subject of a successful defamation claim.  The Claimant was awarded damages of £54,000, reduced by 40% from £90,000 because of an offer of amends.

After the defamation claim had concluded Ms. Lisle-Mainwaring brought a claim for harassment.The publisher Associated Newspapers applied to Court to strike out the harassment claim.  The Judge confirmed that the correct approach is to consider whether “the conduct complained of is so oppressive as to pass the threshold of criminality”. The Judge struck out the harassment claim in respect of the contact from journalists, but not in respect of the newspaper articles.

It has been reported that Associated Newspapers is seeking permission to appeal, and the outcome of the proceedings is awaited with interest by media lawyers, Claimants and newspaper Defendants.

For more information on the topic, please contact Glyn Lancefield or a member of our Dispute Resolution team


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Cyber attacks and Civil Litigation
Monday 24th July 2017

Over recent years, there has been an increase in the number of cyber-attacks with an aim of obtaining sensitive data. Previously this data was obtained through hacking, as in the 2015 attacks on the website Ashley Madison and network provider Talk Talk. However in 2017, the preferred method appears to be through the use of ransomware with the purpose of causing significant disruption and eliciting funds.

In May, a ransomware attack on the NHS demanded payment of $300, in cryptocurrency Bitcoin, in order to receive a decryption code and regain access to their own encrypted files. This attack was part of a global ransomware attack using malware called “WannaCry”, which infected systems by utilising phishing techniques to trick recipients into opening email attachments and exploiting a flaw in Windows software. This vulnerability in certain versions of the software had been identified by the National Security Agency (NSA) and was exposed to distributors of the ransomware through stolen resources. One month later, there was another ransomware attack on some of the largest companies in the world, this time the malware used was similar to “Petya”. In many cases, the ransom amount increased every hour if a user refused to pay. However, cyber security firms advise victims not to pay the ransom due to fears it could encourage further attacks and that there is no guarantee that all files will be returned intact.

As a result of the attacks, several members of the American House and Senate introduced a bipartisan Bill titled “the Protecting Our Ability to Counter Hacking (PATCH) Act” in America. The PATCH Act would create an interagency review board that will assess the vulnerabilities discovered by government agencies to determine when the government will retain the information and when warnings should be provided about the potential vulnerability of the system. In an increasingly-connected world, the passing of the Bill would require the government to at least consider the exposing of flaws. This reporting of vulnerabilities may reduce opportunities for cyber-attacks in the future by reducing the weaknesses in the software.

There is the potential for victims of cyber-attacks to become exposed to litigation following an attack, especially with the EU’s General Data Protection Regulation (GDPR) introducing tougher penalties for businesses where there has been a breach of data privacy. The significant disruption caused by these global attacks serve as a reminder of the requirement to take appropriate measures to protect their systems and ensure continuity of business. Businesses should also ensure that they have adequate insurance cover to protect them in the event of a cyber-attack. 


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Defamation - The Importance of a Swift Apology
Tuesday 18th July 2017

Palin - v - The New York Times

Various news agencies have recently reported that the former republican vice-presidential candidate Sarah Palin has commenced legal proceedings in the United States of America against the New York Times for defamation, seeking in excess of $75,000.00 USD.

It is alleged by Ms Palin that the New York Times published a statement which appeared to connect Ms Palin to a 2011 shooting spree which resulted in the deaths of 6 individuals. Ms Palin asserts that the New York Times knew, or ought to have known, the statement to be false. The statement in question was headlined “America’s Lethal Politics” and was published earlier this year on the same day a gunman fired at a group of Republican Congresspersons who were playing baseball in Virginia.

The New York Times issued a correction a day later which stated that there was no connection between Ms Palin and the 2011 incident; however, the newspaper also asserted that the their article was not undercut or undermined by the lack of such a connection. Those acting for Ms Palin allege that the correction “…did not approach the degree of the retraction and apology necessary and warranted by the New York Times’ false assertion that Ms Palin incited murder…”.

In England and Wales, the term "defamation" covers libel and slander. Both concern the publication of defamatory material, that is, something that adversely affects a person's reputation. The distinction between the two is that libel concerns "lasting" forms of publication such as print, online or broadcasting. Slander concerns more transient forms such as spoken words or gestures.  Pursuant to Section 1 of the Defamation Act 2013 a statement is not defamatory unless its publication has caused or is likely to cause serious harm to the reputation of the defamed.  This means serious financial harm where the claimant is a body trading for profit.

Depending on the facts of the case, statements which might otherwise have been defamatory and likely to cause serious harm may effectively be neutralised by a swift apology.  In Cooke v MGN the Court considered that an apology published by the newspaper shortly after a complaint was received was relevant to the consideration of whether serious harm had arisen or was likely to arise in the future. In Cooke, the Court ruled that the apology was “…significant in eradicating or minimising the unfavourable impression a reader might have gained…”.

It remains to be seen whether the New York Times correction will go far enough to significantly eradicate or minimise the impression given of Ms Palin; however, this case serves as a reminder of the potential benefit of a swift apology.


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UK Supreme Court Revisits Contractual Interpretation Principles
Friday 14th July 2017

Back in February 2016, we wrote about the implications of Arnold v Britton [2015] UKSC 36 on contractual interpretation, after the UK Supreme Court (UKSC) heard three important cases relating to contract law in 2015.

The UKSC has now had further opportunity to clarify the law regarding the interpretation of contracts with the recent case of Wood v Capita Insurance Services Limited [2017] UKSC 24, in a decision which seeks to tie together the various principles of interpretation.

When interpreting the meaning of a clause within a contract, one must consider a number of factors including the natural meaning of the words used; the meaning of the clause (as a reasonable person would understand it) in light of the overall document; the purpose of the document (from a commercial point of view); and the relevant background facts or knowledge reasonably available to the parties at the time the contract was made.

The difficulty lies in knowing which of these factors should take priority in the event that consideration of each produces a different outcome and, over the years, the Courts have shifted back and forth between placing greater reliance on textualism (looking at the plain text and the natural meaning of the words themselves) and contextualism (looking at the purpose of the document as a whole, the background circumstances and factors such as commercial common sense).

Lord Hodge stated in Wood v Capita that “textualism and contextualism are not conflicting paradigms”. The correct, objective interpretation of a clause or contract must be achieved having regard to both principles; the question of which deserves priority over the other will depend on the circumstances of the case, and the nature of the document.

For example, the Court may consider that the “textualism” approach should be the primary consideration in the case of a sophisticated document, negotiated and drafted by skilled professionals; if any provisions in the document create an unfair outcome for one party, it is likely that this was intended as a result of negotiations. However, if such a document is ambiguous in its meaning, the Court will then look to the overall context in an attempt to ascertain the true intention of the parties at the time the contract was made.

Conversely, if a document is informal, or clearly drafted without professional assistance, the Court may be more likely to depart from the most plausible linguistic meaning of the words used and favour a construction that better fits the commercial purpose of the contract, taking into account the document as a whole and the relevant circumstances. Nevertheless, the Court will not re-draft a contract to save a party from a “bad deal” where the original words used are clear and unambiguous.


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Go to Court after a Little Help from Your Friends
Tuesday 11th July 2017

This summer marks 50 years since the release of The Beatles’ album Sgt. Pepper’s Lonely Hearts Club Band, and whilst one of the songs on the album talks about getting by with a little help from my friends, sometimes providing that help can end with a professional in court.

In the case of Lejonvarn v Burgess [2017] EWCA Civ 254 the parties were former neighbours who had become good friends.  The Burgesses wished to re-landscape their garden, Mrs. Lejonvarn was an American qualified architect so the Burgesses asked her to assist in the project, and she agreed to do so free of charge.  The project did not go well, costs escalated and the Burgesses claimed that Mrs. Lejonvarn was at fault.  They sued her for £265,000, claiming the cost of remedial works and the cost of completing the landscaping project.

In the Technology and Construction Court the High Court judge decided on the facts of the case that there was no contract between the parties (the judge could not identify offer and acceptance from the email correspondence) but decided that Mrs. Lejonvarn had assumed responsibility to the Burgesses for performing professional services and owed them a duty of care in tort, to exercise reasonable skill and care.

Mrs. Lejonvarn sought permission to appeal.

The Court of Appeal has recently handed down judgment, and upheld the decision at first instance.  The Court of Appeal Judge decided that even though there was no contract between the parties, the services were still provided in a professional context, and therefore to the extent that Mrs. Lejonvarn provided services she owed a duty to do so with reasonable skill and care.

The case is a reminder that a duty of care can arise in wide circumstances, even where you provide a little help to a friend.


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GDPR - What does it mean for civil litigation?
Tuesday 4th July 2017

As Brexit negotiations begin to get underway, and the country takes stock of the announcements made during the Queen’s Speech on 21 June, one topic that is at the forefront of discussion in many businesses is data protection.

The EU’s General Data Protection Regulation (GDPR), set to come into force on 25 May 2018, spells big change for businesses globally and introduces a new framework of rules that has received a mixed reception.

Whilst many companies are already taking steps to ensure that the ways in which they handle personal data will comply with the GDPR in time, there has been some uncertainty as to whether or not this is actually necessary in light of the outcome of last year’s Brexit referendum. The announcement of a new Data Protection Bill during the Queen’s Speech has provided some clarity in this respect, as the government’s ‘associated background briefing’ to the speech stated, in no uncertain terms, that the GDPR will indeed be implemented into national legislation.

This announcement does not, in fact, change the position of the UK in relation to the GDPR coming into effect. The UK will still be a member of the EU on 25 May 2018, which means that, in any event, we will be bound by the provisions of the GDPR on that date. However, we can now be certain that the rules imposed by the GDPR will, for the most part, remain in place once we leave the EU, as the government’s intention is to harmonise national legislation with the GDPR.

With less than a year to go, the realisation is now dawning on many organisations which deal with personal data that they may have to radically transform their processes, and entirely re-think their attitudes towards privacy, if they are to comply with the GDPR by next May. The challenges facing those businesses over the next 11 months are clear - but what impact will the new regulations have on the world of civil litigation?

Increased claims by individuals for data privacy breaches

The GDPR introduces new rights for individuals and tougher penalties for businesses when it comes to breaches of data privacy. Many expect that, at the end of May 2018, there will be a flood of requests to companies’ data controllers for rights of access or portability of data, or to exercise the right to be forgotten. Such requests will inevitably result in a large number of complaints to the Information Commissioner’s Office, and, in turn, a number of those complaints may ultimately end up before the courts.

Further, there is speculation surrounding the potential for large-scale ‘class action’ style claims where data security breaches affect a large number of individuals. There are mechanisms already in place for such actions; the courts can make Group Litigation Orders, allowing claims arising from common issues to be managed collectively. It is also possible that a collective action regime (similar to that which was recently adopted for competition law breaches) may be rolled out or extended to cover data protection, whereby all affected individuals are automatically part of the ‘class’ of people bringing the action unless they choose to opt out.

The GDPR represents a tipping of the balance of data protection law, favouring the protection of the individual over the commercial needs of businesses. However, it should be noted that, even in the absence of the GDPR, data protection in the UK seems to be heading in that direction. Recent years have seen a rise in the number of claims for data privacy breaches, as well as an increase in the compensation payable for such claims, and individuals may now claim compensation for damage caused purely by distress (without any financial loss) following the Court of Appeal’s decision in Google v Vidal-Hall [2015] EWCA Civ 311.

Detailed exploration of the legal grounds for processing data

Under the GDPR, the consent of a data subject subsists as a legal ground for the processing of personal data, but it will be much more difficult to show that consent has been obtained than under the existing law (based on the Data Protection Act 1998). It is therefore likely that the other lawful grounds for processing data, such as necessity for the performance of a contract or the compliance with a legal obligation, will need to be considered in more detail than ever before, as parties to litigation will not be able to rely on consent as readily as they have done in the past.

There are also concerns that the tightened regulations on processing personal data may impact on the process of disclosure in litigation. Litigating parties (and their lawyers) may need to consider whether consent is required (and correctly obtained) when undertaking disclosure during proceedings if the relevant documents in the case contain personal data. If a party to litigation is based outside the jurisdiction, it will also be necessary to consider the lawful grounds for the cross-border transfer of personal data.

There has been some discussion around Article 48 of the GDPR and its impact on disclosure. Article 48 provides that any judgment of the courts of a non-EU country, requiring a data controller to transfer or disclose personal data relating to EU data subjects, shall not be recognised or enforceable unless it is based upon an international agreement between the requesting state and the EU. In the absence of such agreements, parties may refuse to provide disclosure on the basis that doing so would conflict with their general obligations under the GDPR. It remains to be seen what scope there might be for parties to use this to their tactical advantage, by feigning caution over data privacy to delay or prevent the disclosure of certain information.

Uncertainty

The GDPR makes substantial changes to an area of law that affects a vast number of companies and individuals. As with any such reform, the big word on the tip of everyone’s tongue is “uncertainty”; until the new regulations come into force, and we begin to see the courts delve down into the details of the GDPR’s provisions, we cannot know for certain exactly how those provisions will be interpreted or what the practical implications might be.

What we can say for certain, however, is that the notion of data privacy is becoming more and more pervasive. Few businesses will escape the onerous requirements of the GDPR and other developments in data protection law. From a lawyer’s perspective, the impact is two-fold; not only will law firms have to ensure that their own processes are compliant with the new rules, but data privacy is also likely to become a primary consideration for lawyers in all practice areas – a far cry from what was once considered to be a niche area in commercial law.


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Increase in Financial Services Court Claims
Friday 23rd June 2017

The latest published statistics show a 14% increase in the number of disputes at the High Court involving FTSE100 banks, but a reduction in the number of defamation claims at Court.

The research of Thomson Reuters records that 179 cases involving FTSE100banks were in the High Court in the year 2015/2016, more than double the number from 2013/2014.  Many cases will involve the fall-out from the mis-selling of derivatives and interest rate hedging products (IRHP).  The Financial Conduct Authority (FCA) has reported that the banks have completed their reviews of IRHP claims and are now dealing with consequential loss parts of the claims.  Claimants not eligible for the review, or who have rejected the outcome of the review, have been able to pursue their claims through the Courts provided that they are within the time-limits to do so or have agreed a ‘standstill’ agreement with the bank.

Claims have also resulted from the manipulation of Libor rates during the financial crisis.

Today it has been reported that Barclays bank and four of its former executives have been charged with fraud over alleged actions during the financial crisis.  Barclays has said that it is considering its position and awaiting further details.

The other headline to come out of the statistics is the fall in defamation claims being brought at Court, to the lowest number since 2008/2009.  The ‘serious harm’ requirement at section 1 of the Defamation Act 2013 is likely to have put off a lot of potential claimants, as well as the increases in Court fees, with the availability of alternative means of dispute resolution (ADR) often proving an attractive alternative for potential claimants compared with pursuing their defamation claim at Court.


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