Litigation Update: May 2016

Written on 9 May 2016

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

Ending a contractual relationship can be a problematic thing to do – commercially and legally. In this update, we discuss some of the issues that frequently cause difficulty when contracts are terminated for breach.

When you are looking instead to obtain damages for a breach of contract, you may come up against different obstacles. The other party may look to rely on a contractual exclusion clause; or you may have trouble establishing your financial loss – the usual measure of damages for a breach of contract. We discuss recent cases on each of these issues, and what you can do to maximise your chances of recovering damages.

Internationally, we consider the quashing of the largest ever arbitration award – of US$50 billion against the Russian state – and two issues that frequently cause difficulty when dealing with foreign parties: service of court documents, and enforcement of any judgment.

Finally, we look at what is coming up in litigation over the coming months.

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

Breaking it off: getting contractual termination right

Terminating a contract can be difficult, and the consequences of getting it wrong can be serious. Two recent cases clarify that very clear wording is needed if the parties wish to exclude common law termination rights. In the absence of such wording, requirements to give notice or the opportunity to remedy before terminating under a contractual right will not extend to termination under common law rights. Those rights may even be invoked after the event to justify termination if the reasons given for termination at the time are found to be inadequate.

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Wrotham Park damages: widening the scope for breach of restrictive covenant claims

Policing restrictive covenants is a notoriously difficult task, whether in the context of corporate transactions, employment / service contracts or otherwise. Proving loss flowing from a breach of restrictive covenant is often a difficult and sometimes impossible task.

The recent Court of Appeal case of Morris-Garner v One Step clarifies when the court will award damages on an alternative “Wrotham Park” basis. That is, based on a hypothetical negotiation between the parties, for example to relax covenants.

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Don’t hold it against me: effective exclusion clauses

Contractual clauses that seek to limit or exclude one party’s liability towards another can produce harsh results. Two recent cases clarify that the court will be prepared to give a wide meaning to an exclusion clause when the natural meaning of the clause is clear. But when two or more meanings are equally plausible, a court will prefer the narrowest meaning, construing the exclusion or limitation against the party seeking to rely on it.

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US$50 billion award against Russia quashed: what does this mean for international arbitration?

On 20 April 2016 the Hague District Court quashed the largest ever international arbitration award – of US$50bn against the Russian state. The story is far from over, as this decision will almost certainly be appealed, and does not entirely prevent the original award from being enforced in other countries. Nevertheless, the court’s decision emphasises a fundamental feature of arbitration: it is a consensual process.

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When is personal service effected on a non-English speaking defendant?

In Tseitline v Mikhelson, the court considered whether proceedings had been personally served on the defendant, who did not speak English. It found that the court documents had been properly served, despite the fact that the process server had taken the documents back with them, and had explained what they were only in English.

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Corporate transparency: how can the new PSC register help litigants?

The new UK “People with  Significant Control” (PSC) register will be a valuable resource for litigants. Before commencing an action, it can help to establish whether a defendant is worth suing; and for those looking to enforce a judgment (either domestic or foreign), it can help to identify assets to enforce against.

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What’s coming up?

Briggs LJ will be delivering his final report on the civil court system in England and Wales in July 2016. It is expected to recommend a number of significant changes, including the establishment of an online court. In the meantime, following the latest increases in court fees in March and April 2016, no further increases are currently planned.

The Hague Convention on Choice of Court Agreements is starting to make headway in becoming a useful tool for international enforcement of court judgments, although it still has a long way to go. Singapore has signed and is expected to ratify the Convention soon, joining Mexico and the EU (except Denmark).

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Interested in other areas?

As well as our quarterly Litigation Update, we produce regular updates on a number of other topics, including Asset Tracing and Enforcement and IP, and will soon be sending out the first edition of a new update covering Business Crime. Please let one of us know if you would like to receive any of these update in the future.