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Dispute Resolution

Third Party Disclosure
Wednesday 17th August 2016

The Courts have a discretion to order a non-party to provide documents in a claim and in a recent case the High Court exercised that discretion in ordering auditors to disclose documents in an unfair prejudice dispute between company shareholders.

Parties to disputes should always consider whether there are relevant documents in the possession or control of parties outside of the claim.  If so, they may seek an order requiring disclosure of those documents pursuant to the following sections of the Civil Procedure Rules (CPR):-

  • Part 31.17 deals with applications for non-party disclosure; and
  • Part 34.2 deals with applications for a witness summons requiring the witness to produce documents to the Court.

Outside of these rules a party may also seek a disclosure order pursuant to the case of Norwich Pharmacal v Commissioners of Customs & Excise or as an ancillary order to a freezing injunction.

The case of Destiny Investments (1993) Ltd v TH Holdings Ltd [2016] EWHC 507 (Ch) was a shareholder dispute.  The 40% minority shareholder brought an ‘unfair prejudice’ petition under section 994 of the Companies Act 2006, arguing that the conduct of the 60% majority shareholder was prejudicial to the interests of the members generally.  The petition included allegations regarding the control of a subsidiary, renegotiation of borrowings and various costs that had been incurred.

The petitioner sought disclosure of the working files and other documents from the company’s auditors, KPMG.  The petitioner sought this disclosure on the basis that it would help them to understand certain disputed transactions and also for the purpose of valuing the company.

The respondent refused to consent to the auditors providing the disclosure, arguing that the documents were confidential and not relevant.

The petitioner made a third party disclosure application under Part 31.17 of the CPR.  The Court decided that the documents sought were relevant and material to the dispute, and that disclosure of them was necessary in the interests of a fair trial.  Confidentiality in itself is not a bar to disclosure and the documents requested were narrowly defined.  On that basis the Court granted the third party disclosure order.

Disclosure orders can be a useful tool for any party to a dispute and can be sought during proceedings or at the pre-action stage before proceedings have been issued.


Brexit and Part 36 Offers of Settlement
Tuesday 16th August 2016

A recent decision of the Commercial Court deals with the treatment of offers of settlement where judgment is awarded in a foreign currency, and shows the potential impact of the Brexit referendum on such cases.

The claim of Novus Aviation Ltd v Alubaf Arab International Bank BSC(c) [2016] EWHC 1937 (Comm) was a contractual dispute regarding whether the Defendant had agreed to provide equity funding for the purchase of an aircraft to be leased to Malaysian Airlines.  The damages claimed in the Particulars of Claim were claimed in US Dollars and amounted to over US$8 million.

In April 2014 the Claimant made an offer of settlement pursuant to Part 36 of the Civil Procedure Rules (CPR).  Part 36 is a provision in the CPR which aims to encourage the parties to litigation to try to settle their disputes.  There are costs consequences of accepting or rejecting a Part 36 offer of settlement.  The offer made by the Claimant was in pounds, it offered to accept approximately £3.7 million plus costs.

The Defendant did not accept this offer of settlement and the claim went to trial over six days in April and May this year.

Judgment was handed down on 30th June 2016 in favour of the Claimant.  The judgment sum was approximately US$5.4 million.

There then followed an argument over whether or not the Claimant had ‘beaten’ the terms of its Part 36 offer of settlement of £3.7 million.  Under Part 36 of the CPR the losing party is penalised in costs and in interest if it fails to achieve an outcome at trial that is more advantageous than a Part 36 offer of settlement made by the successful party.

The Defendant argued that the Claimant had not beaten its Part 36 offer because at the time that the offer was made the equivalent amount in US Dollars was 6.3 million, and therefore more than the judgment sum of US$5.4 million.

The Judge held that the relevant time for comparing a Part 36 offer and the judgment sum is the date on which judgment is made.  The Judge relied on the fact that the Part 36 offer was never withdrawn and therefore was capable of acceptance at any stage.

The Judge noted that sterling had fallen sharply following the referendum on 23rd June 2016.  At the time that judgment was handed down the equivalent dollar value amount of the Part 36 offer was lower than the judgment sum.  However, the Claimant would not have beaten its offer if judgment had been handed down a week earlier, before the outcome of the referendum.  Therefore the Judge decided that it would be unjust to award the Claimant the usual costs benefits of Part 36 in these circumstances.


Site manager convicted of gross negligence manslaughter following death of site worker
Wednesday 10th August 2016

A building site manager has been convicted of gross negligence manslaughter following the death of an on-site worker who fell through a first floor skylight.

The defendant was the manager of a building site in St Saviours Hill, Leicester who had asked a site worker to fit windows and doors on the first floor of the building. During the work, the deceased fell three metres through an open sky light on a first floor flat roof.

The day after the accident, HSE (Health & Safety Executive) inspectors issued a prohibition notice preventing any further work at height on the site. However, on subsequent visits, the HSE found evidence that work at height had continued on the site. The defendant was then arrested and charged with manslaughter by gross negligence. On the 15th July 2016, he stood trial for the offence at Birmingham Crown Court and after less than three hours of deliberation, the jury returned a guilty verdict.

The offence of manslaughter by gross negligence is not governed by statute; it is as a ‘common law offence’ having been developed by the courts by reference to previous case law.

The leading authority in respect of gross negligence manslaughter is the case of R v Adomako (1994) 3 All ER 79 in which a four stage test was developed by the House of Lords. In order to be convicted of gross negligence manslaughter, the following must be proved, beyond reasonable doubt:-

a)     there was an existence of a duty of care owed to the deceased from the accused;

b)    a breach of that duty of care has occurred,

c)     the breach causes (or significantly contributed) to the death of the victim and;

d)    the breach should be characterised as grossly negligent.

The necessary requirements to establish the existence of a duty of care, are foreseeability, proximity, fairness, justice and reasonableness. In this case, it was clear that as the site manager there existed a clear duty of care towards the deceased and responsibilities for maintaining the safety of the site.  

When considering if there has been a breach of duty owed, the ordinary law of negligence applies and those with an established duty must act ‘as a reasonable person would do in the same position’. In this case, the site manager’s actions would have been compared to the standard practice of another site manager in the same position. His behaviour was considered to have fallen far below the standard of a reasonable person in his position. Investigations into the work at the site found that the site manager’s actions had been grossly negligent in following respects:

-       No scaffolding had been provided in the area in which the windows were being fitted;

-       Ladders were not secured properly and one was found to propped up in a pile of sand;

-       There was no qualified first aider of site;

-       Openings in the ceilings on the first and second floors of the site were not guarded.

It is important to note in cases of gross negligence manslaughter, if the accused has any particular skills and/or knowledge of a danger, that the reasonable and ordinary member of the public would not have, then the accused’s actions will be judged in light if those skills and/or knowledge that they have, not just on what the reasonable person would have done or thought should have been done.


Independent Press Standards Organisation sets up pilot Media Claim Arbitration Scheme
Friday 5th August 2016

The Independent Press Standards Organisation (IPSO), the replacement body to the Press Complaints Commission (PCC), is to launch a pilot arbitration scheme.

The pilot scheme will be run on IPSO’s behalf by the Centre for Effective Dispute Resolution (CEDR), a conflict management mediator who also provides dispute resolution services for the Court of Appeal for England and Wales, the Football League and the NHS Litigation Authority.

Several national titles have agreed to take part, including The Times, Daily Telegraph, Daily Mail and The Sun together with one regional title, the Liverpool Echo.

The scheme will encompass a variety of potential claims including defamation, intrusion into privacy, misuse of private information, breach of confidence, harassment and data protection.

It is intended that the arbitration scheme will not replace the current free-to-use regulatory complaints handling service and that the two services shall run separately. It will not be possible to process an arbitration claim at the same time as a complaint on the same issue.

In order to utilise the scheme both parties must voluntarily agree to arbitrate. In order for an arbitrator to be appointed and provide a preliminary ruling there will be an administrative fee of £300 plus VAT. Should the matter continue to a final ruling there will be a further fee of £2,500 plus VAT. There is no requirement to use a lawyer but the arbitration scheme does require a complainant to advance a legal argument and pursue a claim within a legal framework. It is therefore recommended that legal advice or legal representation is sought.

In the event that a claim is successful, the administrative fee and final ruling fee will ordinarily be recoverable from the publisher but the majority of any legal costs incurred will not. If a claim is dismissed, then there will ordinarily be no order as to costs. If, however, the arbitrator strikes out a claim on the basis that it is without merit there will be a requirement to pay the publisher’s fees and also some of the publisher’s legal costs, if any have been incurred.

The arbitrator will generally be able to grant the same relief as a court. In particular, the arbitrator can require, amongst other things, the publisher to pay damages, the publisher to ‘cease and desist’ from the conduct complained of and, in defamation claims, the publisher to publish a summary of the arbitrator’s final ruling.

The arbitrator will aim to complete claims within 90 days of their appointment, although the scheme is not just about reducing costs and delays associated with litigation, it is about widening access to justice for members of the public. The scheme shall be reviewed in 12 months to examine its effectiveness before a decision is made on whether it shall become a permanent feature of IPSO.

It remains to be seen how effective the scheme will be in practice but it is another option of alternative dispute resolution for eligible parties involved in media, defamation and harassment claims.


High Court clarifies Costs protection from offers – Quit while you are ahead
Thursday 4th August 2016

Brabners litigation cost update 1

Offers made to settle claims during civil proceedings are guaranteed certain costs protections if made in a prescribed way.

If a Claimant makes an offer in the right format inclusive of interest but exclusive of costs then they can be certain to recover a 10% uplift on damages, and higher proportion of costs and interest if the Claimant achieves a more advantageous outcome at trial.  These offers are known as Part 36 offers after the relevant section of the Civil Procedure Rules.

In the case of Purrunsing v A’Court & Co (a firm) [2016] EWHC 1582 (Ch) an offer was made to settle the claim for £516,000.  That offer had to be accepted on or before 10 June 2015 before the implications of Part 36 of the Civil Procedure Rules began to apply.  The offer was not accepted.

At trial the Claimant obtained a judgment on 14 April 2016 for just under £519,000 – a higher amount than the offer.  The difference between the offer and the judgment sum was interest that had accrued on the claim since the expiry of the relevant offer period on 10 June 2015.

When the judgment in the case was handed down the Claimant argued that they were entitled to the benefits of having bettered their offer.  The Defendant disputed this because the approximately £3000 difference between the Claimant’s offer and the judgment was interest that had accrued on the claim since the expiry of the relevant offer period.

In considering this point and finding for the Defendant His Honour Judge Pelling QC confirmed

“It is in the highest degree unlikely that it was intended that the applicability of the enhanced costs regime would depend on an entirely random event such as when judgment would be given following a trial.”

The only reason the Claimant had beaten their own offer was because of the length of time taken to get the Claim to trial and the interest calculated on damages by the trial judge.

As the Claimant had argued at length for the benefits of beating their offer they were ordered to pay part of the Defendant’s cost of that argument.

This clarification of the interpretation of the Court rules is welcome and underlines the importance of carefully considering the levels of offers to settle proceedings.

Read our second update in this 3 part series of blogs where we discuss - "Court warning on proportionate legal costs"

Read our final update in this 3 part series of blogs where we discuss - "What if you only beat an offer on Appeal? Pawar v JSD Haulage [2016] EWCA Civ 551"


I’ve been served with a Claim, what should I do next?
Friday 29th July 2016

A recent High Court case highlights the importance of ensuring that a Defendant takes the appropriate steps when faced with a claim so as to ensure that its position is not prejudiced.  

In Le Guevel-Mouly & Others -v- AIG Europe Limited [2016] EWHC 1794 (QB) the Court dismissed a Defendant’s application to challenge jurisdiction in circumstances where the Defendant failed to respond to a claim form within the appropriate timeframe. Pursuant to Civil Procedure Rule 11 (5) the Defendant’s failure to respond had the effect of meaning that the Defendant accepted that the English Courts have jurisdiction, despite the Defendant’s insistence that the Scottish Courts are a ‘more convenient forum’.

The key steps a Defendant ought to consider when receiving a claim are set out below:

1)Check the Claim Form

In the first instance, a Defendant should review the Claim form to check that it includes all the information as required by the Civil Procedure Rules.

A claim form includes a box where the Claimant should particularise its claim (i.e. set out a detailed explanation of the claim with details as to what it is claiming) - this can also be set out in a separate document.

A Defendant is not obliged to respond to a claim form until it receives fully particularised particulars of claim.

2)Acknowledge Service

Following service of a claim (with particulars of claim), a Defendant has 14 days to file either an acknowledgment of service or a Defence at Court.

Filing an acknowledgement of service extends the deadline for the Defendant to serve the defence to 28 days after service of the particulars of claim, rather than 14 days.

In calculating these deadlines Defendants should note that these time-periods run from the ‘deemed date of service’, which may not be the same date on which the Claim Form was actually received.  The deemed date of service is the date on which the document is treated as having arrived under the Court rules.  It is always worth telephoning the Court to get details of the deemed date of service to ensure that these deadlines are not missed.

The time-periods above apply to Defendants within the jurisdiction of England and Wales.  Defendants outside of the jurisdiction are entitled to longer time-periods to respond, as set out in Practice Direction 6B to the Civil Procedure Rules.

If a Defendant misses these deadlines the Claimant will be able to file a request for default judgment for the full amount of its claim.

3)Consider Jurisdiction

Before filing the acknowledgement of service form a Defendant should also consider whether it wishes to challenge the jurisdiction of the English Courts, as if it does so it should tick the appropriate box in the acknowledgement of service form.  Failure to do so may make it difficult to challenge jurisdiction later.  

4)Consider an admission

Civil Procedure Rule 14 provides that a party may admit the truth of the whole or any part of another party's case and so a Defendant should, as soon as possible, identify whether there are any parts of the claim which need not be disputed.

In the event that a Defendant fails to do so they will waste court time and cause unnecessary costs and expense, which the Defendant may be ordered to bear.

5)File a Defence. Consider a counterclaim.

As set out above, if a Defendant is intending to defend a claim it must file a Defence within 14 days of service of the particulars of claim or (if an acknowledgment of service has been filed) within 28 days of the service of the particulars of claim.

If you need more time a Defendant can agree up to a further 28 days with the Claimant, or can make an Application to Court requesting an extension of time if the Claimant does not consent.

It may also be the case that a Defendant has a claim against the Claimant (known as a counterclaim). The best time to submit a counterclaim against the Claimant is with the defence as particulars of a counterclaim. There is a Court fee to make a counterclaim, the amount of which depends on its value.

6)If in doubt take legal advice.

In circumstances when proceedings have been commenced, it is always best practice for a Defendant to seek legal advice to consider the merits of any defence and to pursue the same in the strongest way possible.

If you have been served with a Claim and are unsure how to proceed, please contact the dispute resolution team on 0151 600 3000.


Are managed invested funds safe from economic turmoil? Know and trust your advisers.
Wednesday 20th July 2016

Recent proceedings in the High Court have considered the extent of the duties of solicitor trustees for administering trust funds.

Jack Daniel left £3.4 million to his 2 sons on trust with the investments to be administered by his solicitors.  Mr Daniel’s business was sold off after his death in 1999. 

The solicitor trustees did not have investment experience and took advice on investment.  The sale proceeds were invested by the trustees in shares in trading businesses that relied heavily on their internet presence. 

The trustees received in the region of £92,000 under the terms of the will for administering Mr Daniel’s estate and investing his funds.

As many will recall there was a financial crisis in 2001 when the bubble created by a boom in dot-com businesses burst.   As a consequence of holding shares in these types of companies the trust funds lost nearly £1.5 million.

Mr Daniel’s sons were understandably far from happy and issued proceedings against the trustees on the grounds that there was no considered investment strategy and that there had been a breach of trust by not investing in a diverse portfolio.  The claimed losses were put at around £1.4 million.

In defence of the claim the trustees argued that they had not breached their duties and, if the Court did not accept this, then they had acted honestly and reasonably.

Giving judgment in Daniel v Tee, 2016 EWHC 1538 Ch the judge agreed with Mr Daniel’s sons that the trustees had not met appropriate standards but concluded that the decisions made at the time were decisions which a hypothetical reasonable trustee could have made if acting prudently.  Fundamentally, the Court was not satisfied that the limited breaches of duty that had been established had caused the losses that were claimed.

The judgment also confirmed that even if the trustees had been shown to have caused the losses to the trust funds by acting in breach of duty then the trustees would have been absolved because they had acted honestly and reasonably.


Lender/Surveyor Professional Negligence Claims
Tuesday 19th July 2016

A recent landmark Court of Appeal Judgment provides good news for mortgage lenders pursuing negligent valuation claims against property surveyors.

The case involved a partially completed residential development in Sunningdale, near Ascot Racecourse, and two valuations provided by the firm De Villiers Surveyors Limited (“De Villiers”) to the lender Tiuta International Limited (now in Liquidation) (“Tiuta International”).

In February 2011 De Villiers provided a valuation of the property of £2,300,000 in its current condition, with a gross development value of £4,465,000 on completion of the development works (“the February valuation”).  Tiuta International advanced to the borrower the sum of £2,221,768 and obtained a charge over the property as security for the loan.

In November 2011 De Villiers provided a second valuation of the property, of £3,250,000 in its current condition, with a gross development value of £4,900,000 on completion (“the November valuation”).  Tiuta International granted the borrower a new facility.  The sum of £2,840,000 was drawn down and the original loan was repaid from funds lent in the new loan.  The original charge was released and a new charge was registered.

The new loan was not repaid and Tiuta International appointed receivers to sell the property.  The property was sold for £2,141,280 and Tiuta International sued the surveyors for professional negligence claiming that the November 2011 valuation was an over-valuation and was negligent.  No allegation was made that the February 2011 valuation was negligent.  The Claimant calculated its loss at £890,558, which included the cost of funding interest on the facility.

The Defendant valuers denied the claim and made an Application to Court for summary judgment.  A summary judgment Application is a procedure by which a party to a claim (or the Court itself) can dispose of all or part of a claim before trial.  The applicant must prove that the claim (or defence, a Claimant can make a summary judgment Application too) has no real prospect of success and that there is no other compelling reason for a trial.  The relevant rules are in Part 24 of the Civil Procedure Rules.

The basis for the summary judgment Application in this case was that at the time of the new facility the borrower was already indebted to the lender in the sum of £2,560,168.45.  Therefore the valuers argued that the lender was already exposed to that amount and that if the November valuation was negligent then the quantum of the claim should be limited to the “top up” advance which was calculated at £272,700.

The lender defended the Application and argued that its entire loss was attributable to the November valuation as the new facility was a completely new loan and the new advance fully discharged the existing indebtedness.

A High Court Judge considered the Application and granted summary judgment in favour of the valuer.

However that decision has now been reversed on appeal.  By a majority of two to one the Court of Appeal held that the valuer is liable for the adverse consequences flowing from the lender entering into the transaction in so far as they are attributable to a negligent valuation.  The Judgment noted that the valuation was in respect of the property as a whole and was given without any limitation on the valuer’s potential exposure.  On that basis it was held that if the November 2011 valuation is found to be negligent then the valuer would be liable for the entirety of the loss flowing from the loan based on that valuation.

This decision is a landmark win for lenders and a warning to surveyors to agree terms to limit their liability where their valuation will be used for a loan structured in this way.

The dispute resolution team at Brabners have wide experience of dealing with negligent valuation claims both through court proceedings and achieving settlement through alternative dispute resolution before court proceedings are commenced.


Negligent Wills: the Golden Rule.
Friday 15th July 2016

In the 2016 authority of Burns v Burns [2016] EWCA Civ 37 the Court of Appeal has considered the so-called Golden Rule.

If the person making a will has been ill or is very old it is best practice for a solicitor or other professional dealing with the making of a will to have the signature of the will witnessed or approved by a medical practitioner who should record their satisfaction with the mental capacity of the testator and confirm th testator’s understanding of the will’s terms.

In this particular case, the testator, Mrs Burns, had made 2 wills in 2003 and 2005 respectively.  Mrs Burns had 2 sons and the terms of the later will improved the position of one of her sons at the expense of the other. 

Mrs Burns died aged 89 in 2010.  Following her death a challenge was brought by her son who would stand to benefit if the later will was invalid.

At the time of the later will it was apparent that she suffered from dementia and there was clear evidence of the decline in her mental capacity.  She had undergone a mental examination approximately 2 years before making the later will and it was apparent from the test results that she could not recall the date or remember 3 objects mentioned to her by a nurse a few minutes later.

Mrs Burns’ later will was prepared by a solicitor who did not ask her questions to establish her mental capacity when taking her instructions on the terms of the new will.

Perhaps surprisingly, the trial judge determined that the later will was valid although he was critical of the solicitor who had prepared the later will.  It was a factor in the judge’s reasoning that the solicitor was experienced and he concluded that the solicitor would probably have noticed any signs of a lack of capacity. 

The judgment was appealed and upheld.  The judge had made findings that he was entitled to make and, as the later will appeared to be rational, on the balance of probabilities it was more likely that not that Mrs Burns had mental capacity to execute a new will even though she had been suffering from dementia for a number of years.

For anyone considering challenging a will on the grounds of mental capacity this decision illustrates just how difficult that can be even where there is evidence of a mental impairment and declining faculties.  The costs of that process and the risk of having to pay an opponent’s costs if the claim fails can be significant and it is important to get sound advice on the merits of a claim as soon as possible.

For anyone considering making a new will the case is reminder that all prudent steps should be taken to ensure that the will is unlikely to be challenged to save your intended beneficiaries from the costs and trauma of court proceedings at what will be a difficult time for them.


Civil Court Fees and Alternative Dispute Resolution
Wednesday 13th July 2016

Recent Surveys of members conducted by the New Law Journal and London Solicitors Litigation Association suggest that the recent increases to the civil courts issue fees are causing fewer claims to be issued.

From April 2015 the Civil Court issue fees increased dramatically to 5% of the value of the claim capped at a maximum of £10,000.  Understandably this is having a bearing on whether claims are issued or not.  Where the merits of a claim are less sure or where a claimant may struggle to fund the Court issue fee litigants are being deterred.

In addition to the Court fee increases parties are increasingly under pressure from the Courts to engage in disclosure of documents and to explore settlement before commencing proceedings to try to resolve the dispute or to narrow the issues in dispute.  The search for and disclosure of documents has the potential to be the most costly aspect of any dispute.

For individuals the Court fee increases may not be problematic as many people will qualify for fee remission of some or all of the fee dependent on their income and wealth and we routinely pursue remission applications for our individual clients. For limited companies and limited liability partnerships this is not available. 

It is likely that small to medium sized businesses will be hardest hit by the changes in the legal landscape. Nevertheless, there are a number of ways in which these trends can be combated. 

We adopt a holisitic approach to any dispute and the most appropriate solution tailored to the issues in a given matter should be pursued.  In many cases the viability of an ongoing business relationship with a customer or supplier can be at stake and the introduction of aggressive solicitors can be counterproductive to the wider commercial considerations.

There are alternative methods of dispute resolution other than litigation such as a binding arbitration of the dispute by an agreed third party based upon agreed levels of disclosure of documents or an early mediation of the issues in dispute with a neutral third party mediator.  A significant advantage of the latter approach is that any terms of settlement can reflect matters which a Court could not decide upon in the narrow context of a particular dispute. 

For many disputes an adversarial approach is counterproductive irrespective of the costs of proceedings.  Of course, alternative methods of dispute resolution are not always successful and in a small number of cases will not be appropriate.  If so the option of litigation is always there and can be pursued vigorously if necessary.