Litigation Update | December 2016

Written on 7 Dec 2016

Welcome to the latest edition of Osborne Clarke’s quarterly Litigation Update.

Legal aspects of Brexit continue to dominate the headlines. On 5 December 2016 the Supreme Court hearing commenced on whether approval of Parliament is needed before the UK government triggers Article 50.  Judgment is expected in January 2017.  See here for our comments on the High Court decision.  For the key legal implications that we see for business please visit our Brexit page, which you can access here.

In this Update we look at High Court decisions which:

  • confirm that third party funding costs may be recoverable in arbitration;
  • consider whether threats made in the course of settlement negotiations can attract without prejudice privilege; and
  • may make some parties look more carefully at claims to legal professional privilege.

With the recent cold weather hitting most parts of the UK we take a look at the application of freezing orders.

We also look at a recent decision in the Supreme Court about recovering sums paid under illegal contracts.

If you would like to discuss any of the content in this Update, please get in touch with your usual litigation contact or the author of the article.

Court confirms third party funding costs may be recoverable in arbitration

The English High Court has confirmed that an arbitrator was entitled to award the successful party the costs of obtaining litigation funding.  The decision did not go so far as to endorse awarding the costs of third party funding in all cases: this will be a matter of discretion for the arbitrator.  Nevertheless, this decision will be welcomed by those for whom third party funding offers the most (or only) way of pursuing a claim in arbitration.

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Freezing orders – recent developments impacting on international enforcement

English law provides claimants and judgment creditors with a range of weapons to ensure that justice can be done and to preserve assets for enforcement.  One of the most powerful and draconian of these is the freezing injunction.  It can bind assets and parties worldwide, under threat of imprisonment if the terms of the order are breached, although it does not give the claimant any proprietary or security interest in the frozen assets.

Over the past few months, a number of cases have clarified the limits and risks, for both sides, of invoking this power, along with alternatives to the “nuclear option”.

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Without prejudice privilege: are threats made in the course of settlement negotiations protected?

Without prejudice privilege protects discussions during settlement negotiations, whether made in writing or orally, from being used as evidence in court.

A recent case in the Court of Appeal explores one of the exceptions to this general rule, where the exclusion of such evidence would act as a cloak for perjury, blackmail or other unambiguous impropriety.

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A more rigorous approach for claiming legal professional privilege during disclosure?

In Astex Therapeutics Limited v AstraZeneca AB, Chief Master Marsh made a number of important decisions about parties claiming legal professional privilege (LPP).  Although the judge said the case was exceptional, the same principles may apply in cases where there is a real dispute about the claims to LPP.  Parties in such cases may need to be clearer about the reasons for their claims to LPP during disclosure exercises and be prepared to justify their LPP claims on a document by document basis.

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Supreme Court approves new test for recovering money under an illegal contract

In a landmark decision, the Supreme Court has moved the illegality defence away from a rigid test to a more flexible approach based on a “range of factors”.  Although uncertainty remains as to how the test will be applied in practice, in theory it should make it easier to recover sums paid under illegal contracts.

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If it’s broke, don’t use it: manufacturer not liable when user knew that product was defective

In Howmet Ltd v Economy Devices Ltd and others, the Court of Appeal held that a manufacturer of a defective product was not liable for £20 million of damage caused by a factory fire where the product was used. The claimant knew the product was defective, and that there was a risk of fire, but still continued to use the product together with a system the claimant had put in place to prevent further fire.

This case contains valuable lessons for manufacturers, corporate users of business critical products and insurers which could help mitigate risk moving forward.

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Public interest outweighs commercial sensitivity in financial information held by council

Suppliers to the public sector should take notice of the latest case in which the commercial sensitivity of information held by the public body has been overridden by public interest considerations.

This case, which related to a proposed wind turbine development, has added support to the view that it is becoming more and more difficult to rely on commercial sensitivity exemptions to the disclosure of information under the Environmental Information Regulations 2004 (and for the same reasons, the Freedom of Information Act 2000). Reliance on these exemptions will require specific and detailed reasons as to why it is not in the public interest to disclose the information.

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