Date 27 February 2009
Welcome to the February issue of Stay Alert.
In this edition, we bring you up to date on recent developments in Commercial Litigation and cover the following articles:
- Update: EC Regulation No 864/2007
Following our article on the above in our last edition of Stay Alert! the Ministry of Justice has now published guidance with the purpose of providing “a brief summary of the most important provisions”.
- Validity of service by fax
In the recent case of Michael Rebbel Thorne v Lass Salt Garvin (a firm) [2009] EWHC 100 (QB) the importance of serving proceedings to the letter of the Civil Procedure Rules (“CPR”) came to light. In particular, when serving by an electronic method, such as fax, the written agreement of the other party accepting service by that method must be obtained. If a solicitor is acting on behalf of a party, this agreement will be inferred if his headed paper shows a fax number.
- Update: A hike in court fees?
Our December issue of Stay Alert! highlighted the proposed increase in court fees on which the Ministry of Justice is currently consulting. Those proposals have come under fire from members of the legal profession.
- Case gives guidance on undertakings
There is a difference between giving an undertaking to the court and offering an undertaking to the court. Lord Neuberger of Abbotsbury gave guidance on undertakings to the court in Zipher Limited v Markem Systems Limited and another [2009] EWCA Civ 44.
- An unsigned contract may be effective
The High Court held in Graeme Grant (Claimant) v Russell Bragg (Defendant): (1) Russell Bragg (Part 20 Claimant) (2) Premier Resorts Limited (Part 20 Claimant) v Graeme Grant (Part 20 Defendant) [2009] EWHC 74 (Ch) that the parties entered into a contract, despite the contract not being signed.
- Guidance on list of issues
Andrew Smith J, the judge in charge of the Commercial Court has produced a note containing guidance on the use and status of the list of issues (in a letter to Ali Malek QC).
- Copies of documents on court file given to a non party
In R (on the application of Taranissi) v Human Fertilisation and Embryology Authority [2009] EWHC 130 (Admin), The BBC’s application for copies of documents on the court file for a judicial review of a decision by the Human Fertilisation and Embryology Authority (HFEA), under CPR 5.4C(2), was successful. The BBC was not a party to the judicial review proceedings but was the defendant in completely separate libel proceedings brought by Mr Taranissi, who was also the applicant of the judicial review proceedings.
- The new practice direction on pre-action conduct
In our January edition of Stay Alert! we updated you on a new practice direction on pre-action conduct which comes into force on 6 April 2009. In this article we list some of the key changes.
We hope that you find this edition of Stay Alert! useful and interesting. We value your opinions and always welcome any comments you may have. If you have any feedback on this edition or any suggestions on what you would like us to cover in future, please email Clare Mackay – clare.mackay@salaw.com. We look forward to hearing from you.
1. Update: EC Regulation No 864/2007
In our last edition of Stay Alert! we explained that EC Regulation No 864/2007 on the Law Applicable to Non-Contractual Obligations (Rome II) united the courts of all EU member states (except Denmark) on 11 January 2009. The Ministry of Justice has now published brief guidance (“the guidance”) on Rome II with the purpose of providing “a brief summary of the most important provisions”.
The guidance states that “the effect of the Rome II Regulation will be to generally supersede the current statutory choice of law rules within the United Kingdom”.
Readers should not heavily rely on this guidance as Rome II “is a substantial and complex instrument in a technical area of the law” and the guidance is “not comprehensive in nature”.
2. Validity of service by fax
In the recent case of Michael Rebbel Thorne v Lass Salt Garvin (a firm) [2009] EWHC 100 (QB) the importance of serving proceedings to the letter of the Civil Procedure Rules (“CPR”) came to light. In particular, when serving by an electronic method, such as fax, the written agreement of the other party accepting service by that method must be obtained.
Background
In late 2000 Mr Thorne instructed Lass Salt Garvin (“LSG”) to represent him in a dispute with his sister regarding the interpretation of their mother's will. This litigation completed in 2002 and Mr Thorne, believing that LSG were negligent in that litigation, issued proceedings against LSG on 31 January 2008.
Once a claim is issued, the CPR provides for a time limit by which the defendant must be served (CPR 7.5). The defendant will not normally be aware of the proceedings until these are served on him. Further, a claimant may apply for an extension of time for serving the claim form on the defendant. Mr Thorne made such an application and obtained an extension of time to 6 June 2008.
The claim form was faxed to LSG on 6 June 2008 at 3.15pm and also sent by post. LSG asserted that the service by fax did not comply with the CPR and that the subsequent purported postal service was out of time.
The Law
Part 6 of the Civil Procedure Rules (“CPR”) deals with the service of documents. Although this case was decided on the old provisions of the CPR (CPR 6.2), rather than the new provisions (CPR 6.3) which came into force on 1 October 2008, the provisions are materially identical.
CPR 6.3(1)(d) states that a “document may be served by (…) fax or other means of electronic communication in accordance with Practice Direction A”
Paragraph 4.1 of Practice Direction A states the following:
“where a document is to be served by fax or other electronic means (…)
(1) the party who is to be served or the solicitor acting for that party must previously have indicated in writing to the party serving –
(a) that the party to be served or the solicitor is willing to accept service by fax or other electronic means; and
(b) the fax number, e-mail address or other electronic identification to which it must be sent; and (…)
(2) the following are to be taken as sufficient written indications for the purposes of paragraph 4.1(1) –
(a) a fax number set out on the writing paper of the solicitor acting for the party to be served;
The Case
Mr Thorne then applied for an order that the service by fax on 6 June 2008 was effective service or in the alternative an order dispensing with service. Master Rose refused the application on 12 August 2008 ordering that the purported service of the Claim Form by fax on 6 June 2008 was invalid and ineffective. He also refused to make an order dispensing with service.
Mr Thorne then appealed against Master Rose’s order. He submitted that because LSG were a firm of solicitors, it would certainly have consented to service by fax had he sought their consent in advance.
Wyn Williams J said that “it is common ground that before [LSG] could be served by electronic means it must previously have expressly indicated in writing its willingness to accept such service. There is no suggestion that it had done so in this case”
Further, he referred, and agreed with, the following extract of Master Rose’s judgment:
“I hold that this Defendant was not acting as a legal representative at the time when the fax was sent at 3.15 on the afternoon of 6 June 2008. I find it quite impossible to reach the conclusion that the Defendant could be regarded as acting as a legal representative, not least because the definition of legal representative in the interpretation contained in CPR 2.3 is this:
'legal representative is a barrister or solicitor, solicitor 's employee or other authorised litigator (as defined in the Courts and Legal Services Act 1990) who has been instructed to act for a party in relation to a claim.’
It is not, in practical terms, possible to regard Lass Salt Garvin as being their own legal representative in circumstances where they were unaware of the issue of this Claim Form and unaware that it was about to be served on them on the afternoon of 6 June 2008.”
Wyn Williams J also said that he agrees “without reservation, with the reasoning of Master Rose” and “cannot improve upon it” and concluded that “the Claim Form was not validly served when it was sent by fax in the afternoon of 6 June 2008”.
In relation to dispensing with service Wyn Williams J said that “no prior notification of a claim had been made albeit that the events giving rise to the claim had taken place more than six years previously”. Mr Thorne “lived no more than a comparatively short tube or bus ride from the Respondent's office. Even on 6 June 2008 it would have been possible to serve the Claim Form at the Respondent's office [by hand]. The offices of Hodge Jones and Allen [Mr Thorne’s solicitors] and the offices of the Respondent are sufficiently close that a person could have set off from the offices of Hodge Jones and Allen at 3.00pm and effected service that afternoon in time. I am satisfied, completely, to repeat, that it would be unjust to dispense with service in this case.”
Conclusion
It is important not to leave service to the last minute and to follow the CPR service provisions to the letter. If you do want to serve by fax (or another electronic method), it is essential to first obtain the written agreement of the recipient accepting service by this method.
3. Update: A hike in court fees?
Our December issue of Stay Alert! highlighted the proposed increase in court fees on which the Ministry of Justice is currently consulting. Those proposals are under fire from members of the legal profession, including the Law Society.
In relation to the proposals to substantially increase the court fees for child care proceedings, the Law Society’s website contains the following statement “The Law Society is very concerned about the potential impact of the increases on the welfare of children and access to justice for children and their families.”
Justice minister Bridget Prentice is quoted as defending the plans: “When they can afford it, it is right that those who choose to use the civil courts should pay - not the taxpayer.”
To access the consultation paper please click here. The consultation will end on 4 March 2009.
4. Case gives guidance on undertakings
There is a difference between giving an undertaking to the court and offering an undertaking to the court, as Mr Justice Floyd explained in Zipher Limited v Markem Systems Limited and anor [2008] EWHC 1379 (Pat) :
“161. There is obviously a difference between giving an undertaking and offering one. Every party who applies for an interim injunction impliedly offers a cross-undertaking in damages. He does not give it if the court declines to grant the injunction. It is then no longer material to the court's decision. If, on the other hand, an order for an injunction is to be made, the court accepts the offer. If the successful party were to make it plain that he refuses or is unable to give the cross undertaking, the court may – and probably will - refuse to grant the injunction.
162. In other circumstances an undertaking is both offered and given at the same time. If counsel says to the court "You have my undertaking to do X within 7 days" that undertaking takes effect immediately. It means "This is what I will do". It bites unless it is discharged. It does not have to be recorded in an order, although it is preferable that it should. If a party does not comply with an undertaking it is the undertaking which is enforced, not the order: see Hussain v Hussain [1986] 1 Fam 134. Every practitioner knows that the giving of an undertaking to the court is a most serious step. It is only ever done on clear instructions.”
In this case, the parties were litigating in relation to the entitlement of certain patents. Mr Justice Floyd held that Zipher was prevented from pursuing a particular claim as it was bound by an undertaking it gave to the court in earlier proceedings.
The Court of Appeal, in Zipher Limited v Markem Systems Limited and another [2009] EWCA Civ 44, overturned Mr Justice Floyd’s decision and found that Zipher merely offered to give an undertaking and did not give an undertaking. Lord Neuberger of Abbotsbury said that:
“An undertaking is a very serious matter with potentially very serious consequences. It is a solemn promise to the court, breach of which can lead to imprisonment or a heavy fine. Accordingly, there should never be room for argument as to whether or not an undertaking has been given. Further, while there is inevitably sometimes room for argument as to the interpretation of an undertaking, the circumstances in which such arguments can be raised should be kept to a minimum. Accordingly, any undertaking should be expressed in full and clear terms and should also be recorded in writing.”
Where an undertaking has been given and the existence of it, or the terms of it, has not been recorded in writing, it “militates against an undertaking having been given”. Lord Neuberger of Abbotsbury set out four principles to bear in mind: Firstly, passages of the transcript must be read “in their overall context”. Secondly, “one should be wary of indulging in a detailed semantic analysis”. Thirdly, if there is doubt as to the meaning or effect of what was said it should be “resolved in favour of the person who would be bound”. Fourthly, “it is permissible to have regard to what was said and done after the undertaking is said to have been given, in order to assist in resolving whether it was, and, if so, what its terms were”.
It is clear from the above that the court does not necessarily have to conclude that no undertakings have been given due to the undertaking not being formally recorded in writing, in clear terms, as there “is no rule that an undertaking given to the court must be recorded in writing before it can be effective”. Ultimately, it will be a question of fact in each case.
5. An unsigned contract may be effective
The High Court held in Graeme Grant (Claimant) v Russell Bragg (Defendant): (1) Russell Bragg (Part 20 Claimant) (2) Premier Resorts Limited (Part 20 Claimant) v Graeme Grant (Part 20 Defendant) [2009] EWHC 74 (Ch) that the parties entered into a contract, despite the contract not being signed. Edward Barley Jones QC handed down judgment on 22 January 2009.
The claimant and defendant each held 50% of the shares in a company. The shareholders agreement provided that, if either of them were unable to work for more than 6 months due to long-term sickness, he would sell his shares to the other. The claimant fell ill for more than 6 months. An agreement for the defendant to buy the claimant’s shares was drafted but was never signed. During the negotiations the defendant excluded the claimant from the running of the company and eventually the defendant ran the business to the complete exclusion of the claimant.
On 30 January 2007 the defendant’s agent sent the claimant an email stating that the defendant was willing to proceed with the purchase of the shares on the terms of the draft agreement. On 2 February 2007 the claimant confirmed by email to the defendant’s agent that he was prepared to accept the terms of the draft agreement.
Following this email correspondence, the defendant said that he was not bound to buy the claimant’s shares as the draft agreement was never signed. The claimant argued that a binding contract was formed and issued proceedings to enforce the sale of the shares.
Edward Barley Jones QC said that the 30 January 2007 “e-mail constitutes an offer by Mr Bragg (written through Mr Jenkins as his agent) to purchase Mr Grant's shares (so long as Mr Grant accepted the terms set out in the Dixon Ward Draft) an offer which was not withdrawn before its acceptance by Mr Grant by e-mail of 2 February 2007 sent to Mr Jenkins (with copy to Mr Bragg) (…..) The parties were now at one. The terms of the sale and purchase were agreed (as set out in the Dixon Ward Draft)”.
Therefore a binding contract was formed in February 2007, on the terms of the draft agreement. In relation to the draft agreement being unsigned, it was said that where “parties are proceeding in anticipation of execution of a formal document then the normal inference will be that the parties will not be bound unless and until both of them sign that document. However, that inference will change if the facts change so that it can be objectively ascertained, on a balance of probabilities, that the continuing intention of the parties is, now, to be contractually bound immediately and not following formal execution of the document”.
It is therefore sensible for parties to a contract to be clear what they intend. If they do not want to enter into a binding agreement until a written agreement is signed then they should ensure that the agreement is “subject to contract” which will mean that until the agreement is executed no contract is concluded.
6. Guidance on list of issues
The Commercial Litigators Forum (CLF), COMBAR and the London Solicitors Litigation Association (LSLA) presented a symposium to discuss feedback on commercial court reforms. In particular, the nature and function of the list of issues was debated. Andrew Smith J, the judge in charge of the Commercial Court has now produced a note containing guidance on the use and status of the list of issues (in a letter to Ali Malek QC). He has asked that this note be circulated as widely as possible and it appears below:
“Pilot of Long Trials Working Party: List of Issues
At the meeting of the CLF and the solicitors on Monday, there was discussion about lists of issues and I made some comments. There were three main points.
1. First, I think that some difficulty has arisen from attempts to produce too detailed a list of issues at the start of the proceedings and before the first CMC. Typically the list of issues can be quite general at that stage, provided that it is logically and clearly structured. During the course of the case the list will often be developed, and a general issue might well be broken down into more specific issues if this is useful to manage and conduct the case. For example, this might be required in order to define what expert evidence will be permitted or in order to specify what disclosure should be made. What matters in the first draft is that the key issues, and so the structure of the case, are identified: the sub-division of issues can properly be left for consideration in exchanges at the first and subsequent case management hearings.
2. Secondly, although the Report of the Working Party emphasises the importance of the list of issues as a case management tool, it is not intended to replace the pleadings. Their standing is, of course, established by the CPR. As paragraph 53 of the Report said, if there is doubt about the accuracy of the list, it will be necessary to go to the pleadings. That said, the Commercial Court has never encouraged arid pleadings points.
3. The purpose of the List of Issues will be lost unless it is a neutral document. No attempt should be made by anyone drafting a list to couch it in terms designed to advance the case of one party over another.
As you know, we intend to amend the Guide to include the recommendations of the Report and the lessons from the pilot that we decide to adopt. But you suggested that I should drop you this note without waiting for the new Guide and I am happy to do so.”
7. Copies of documents on court file given to a non party
CPR 5.4C(2) states that a “non-party may, if the court gives permission, obtain from the records of the court a copy of any other document filed by a party, or communication between the court and a party or another person.”
In R (on the application of Taranissi) v Human Fertilisation and Embryology Authority [2009] EWHC 130 (Admin), The BBC made an application for copies of documents on the court file for a judicial review of a decision by the Human Fertilisation and Embryology Authority (HFEA). The BBC was not a party to the judicial review proceedings but was the defendant in completely separate libel proceedings brought by Mr Taranissi, who was also the applicant of the judicial review proceedings.
Saunders J said that the “BBC believe, it seems to me for good reason, that it is likely that the court file of the judicial review proceedings contains documents relevant to the issue of justification in the libel action” and that it “seems to me to be clearly in the interests of justice that both parties to the libel action should have access to them” and Mr Taranissi has had access to these documents.
He said that it was clearly not a “fishing expedition” to look through the entire court file and find documents of relevance, as the BBC identified the class of documents it wanted to see.
This decision provides useful guidance on applications under CPR 5.4C(2) - to view this please click here.
8. The new practice direction on pre-action conduct
In our January edition of Stay Alert! we updated you on a new practice direction on pre-action conduct which comes into force on 6 April 2009. We now list some of the key changes below:
Section II – The approach of the courts
Section II deals with the court’s approach in exercising its powers in relation to pre-action conduct. “It applies in relation to all types of proceedings including those governed by the pre-action protocols.” (paragraph 2.3). The provisions of it reflect the provisions of the current practice direction.
The court can “take into account the extent of the parties’ compliance” with the practice direction and pre-action protocols “when giving directions for the management of claims (…) and when making orders about who should pay costs” (paragraph 4.1). The court “may ask the parties to explain what steps were taken to comply prior to the start of the claim” and if there has been a failure of compliance by a party “the court may ask that party to provide an explanation.” (paragraph 4.2)
The court will consider whether the principles were complied with “in substance” and is “not likely to be concerned with minor or technical shortcomings”. (paragraph 4.3)
Paragraph 4.4 lists examples of non-compliance which includes where a party has
“not provided sufficient information to enable the other party to understand the issues”, “unreasonably refused to consider ADR” and “without good reason, not disclosed documents requested to be disclosed”.
The court will look at the overall effect of non-compliance on the other party when deciding whether to impose sanctions. Such sanctions may include: staying the proceedings, an order that the party at fault pays the costs of the other parties and an order that costs are paid on an indemnity basis (paragraph 4.6).
Section III – Conduct of parties in cases not subject to a pre-action protocol
Parties should exchange information and attempt to settle the matter before starting proceedings (paragraph 6.1) and should “act in a reasonable and proportionate manner in all dealings with one another” (paragraph 6.2).
The practice direction should not be used “as a tactical device to secure an unfair advantage for one party or to generate unnecessary costs” (paragraph 6.2).
Annex A sets out a guide to the procedure that is likely to satisfy the court, in most circumstances, where no pre-action protocol applies.
Annex B sets out specific requirements which apply to debt claims where the claimant is a business and the defendant is an individual including providing details of how the money can be paid, stating that the defendant can contact the claimant to discuss repayment options (with contact details) and inform the defendant that free independent advice can be obtained from organisations.
Section IV – Requirements that apply in all cases
Section IV apply in all cases except where a relevant pre-action protocol contains its own provisions about the topic and includes Annex C which gives guidance on instructing experts. (paragraph 9.1).
In relation to disclosure, paragraph 9.2 states that “documents provided by one party to another in the course of complying with this Practice Direction or any relevant pre-action protocol must not be used for any purpose other than resolving the matter, unless the disclosing party agrees in writing”.
If proceedings are issued, paragraph 9.7 states that the claimant must “state in the claim form or the particulars of claim whether they have complied with Sections III and IV (…) or any relevant protocol.”
If you have any questions or require further information please contact Clare MacKay by email at clare.mackay@salaw.com or on 01727 798000.
© SA Law 2009
Every care is taken in the preparation of our articles. However, no responsibility is accepted as being owed to any person or organisation who acts on the basis of information contained in them. You should obtain specific advice in respect of individual cases.