www.mayerbrown.com

Welcome to Mayer Brown’s Litigation & Dispute Resolution Legal Update September 2007. In this

publication you will find summaries of key cases, information about recent legislation, consultation

papers and other relevant news. A full table of contents appears on the inside of the front cover.

September 2007 Litigation & Dispute Resolution Legal Update

Contents PagePRACTICE AND PROCEDURE

Costs

SES Contracting Ltd & Others v UK Coal plc & Others 2

National Westminster Bank plc v Rabobank Nederland 3

PR Records Ltd v Vinyl & Others 4

Case Management

Ixis Corporate & Investment Bank v WestLB AG & Others 4

Summary judgment

Ashworth v Newnote Ltd 5

ICI Chemicals & Polymers Ltd v TTE Training Ltd 6

NEGLIGENCEStone & Rolls Ltd (in liquidation) v Moore Stephens (a firm) & Another 7

ARBITRATIONLondon Underground Ltd v Citylink Telecommunications Ltd 8

AGENCYLonsdale (t/a Lonsdale Agencies) v Howard & Hallam Ltd 9

CONFLICTOFLAWS/EUTasarruff Mevduati Sigorta Fonu v Yahya Murat Demirel 10

Crucial Music Corporation & Another v Klondyke Management AG 11 & Others

Kolden Holdings Ltd v Rodette Commerce Ltd & Another 12

Rome II Regulation 13

Commission decision of 16 July 2007 13

n

n

n

n

n

n

n

n

n

n

n

n

n

n

�

LEGISLATIONThe Enterprise Act 2002 (Disclosure of Information 14 for Civil Proceedings etc) Order 2007

Regulation of Investigatory Powers (Investigation of 14 Protected Electronic Information: Code of Practice) Order 2007

Civil Proceedings Fees (Amendment) (No 2) Order 2007 14 (SI 2007/2176)

Tribunals, Courts and Enforcement Act 2007 c. 15 15

TREATIESTreaty between Great Britain and Northern Ireland 15 and the United Arab Emirates on Judicial Assistance in Civil and Commercial Matters

CONSULTATIONSCosts recovery in pro bono assisted cases 15

NEWS

OFT launches test case 16

HMCS annual report 16

n

n

n

n

n

n

n

n

2

PRACTICEANDPROCEDURE

Costs

Costs of an application for pre-action disclosure

SES Contracting Ltd & Others v UK Coal plc & Others, CA (Waller LJ (V-P), Moore-Bick LJ, Moses LJ) 26.7.07

This was an appeal against an order that UK Coal pay SES their costs of a successful

application for disclosure before the commencement of proceedings (under rule

31.16). The general rule is that the court will award the person against whom the

order is sought his costs of the application and of complying with any order made

on the application. It may, however, make a different order, having regard to all the

circumstances, including the extent to which it was reasonable for the person against

whom the order was sought to oppose the application (rule 48.1).

SES had tendered for a contract to provide services for UK Coal. The contract was

awarded to another company. SES suspected that this company had been given access

to details of the tender, enabling it to compete on an unfair basis. They later obtained

copies of emails which tended to confirm their suspicions but as the position was not

entirely clear, SES applied for pre-action disclosure of documents in the possession

of UK Coal and the application was successful, to a large extent. The judge ordered

UK Coal to pay the costs of the application, though not the costs of complying with

the order. He said that UK Coal deliberately confronted SES with a wall of witness

statements which looked impressive and intimidating and sought to fend off SES

without providing contemporaneous documents which might have allayed SES’s

concerns. UK Coal submitted that the judge had gone further than the circumstances

of the case could possibly have justified1.

The CA held that “By laying down a general rule that the respondent will be awarded

his costs…the Rules implicitly recognise that it will not usually be unreasonable for

him [the respondent] to require the applicant to satisfy the court that he ought to be

granted the relief which he seeks…the rule is clear in its terms and provides the point

of departure for a judge dealing with the costs of an application of this kind.” The

question in the instant case was whether it was unreasonable for UK Coal to have

opposed the application and, if not, whether its conduct was capable of justifying the

order the judge had made. The court held that it had not been unreasonable for UK

Coal to have opposed the application and that its conduct had not been capable of

justifying the order that was made - “there was ample material to justify a departure

from the general rule [that the respondent is normally entitled to his costs], but not

to the extent of ordering UK Coal to pay the whole of SES’s costs.” The order was set

aside and substituted with no order for costs.

1 See Bermuda International Securities Ltd v KPMG [2001] 1 Lloyd’s Rep

n

�

September 2007 Litigation & Dispute Resolution Legal Update

Indemnity costs

National Westminster Bank plc v Rabobank Nederland, QBD (Comm) (Sir Anthony Colman) 19.7.07

The National Westminster Bank (NWB) applied for an award of the costs of its claim and

Rabobank’s counterclaim on an indemnity basis. This judgment dealt with the costs

of the counterclaim. Central to Rabobank’s claims were allegations of a structure of

corporate fraud in which five senior officials of NWB were personally complicit. The

substance of NWB’s submission on costs was that having regard to the evidence that

was available to those advising Rabobank, it must have been clear that Rabobank’s

allegations of fraudulent misrepresentation would be exceptionally difficult to make

good and this must have been apparent before the start of the trial when Rabobank

withdrew some of its allegations of fraud against one of the senior officials of

NWB. NWB also relied on the manner in which Rabobank conducted its proceedings

(including that the case advanced was not consistent with its pleadings and was

confusing and the late abandoment of allegations of fraud against a NWB official

reflected the flimsy foundation of the claim generally). NWB said that these matters

took this case “out of the norm” and justified an order for indemnity costs.

The judge reviewed the jurisdiction to order costs on an indemnity basis. He held

that: “Where one is dealing with the losing party’s conduct, the minimum nature of

that conduct required to engage the court’s discretion would seem, except in very rare

cases, to be a significant level of unreasonableness or otherwise inappropriate conduct

in its widest sense in relation to that party’s pre-litigation dealings with the winning

party or in relation to the commencement or conduct of the litigation itself…the

conduct adversely criticised must be looked at in the context of the entire litigation

and a view taken as to whether the level of unreasonableness or inappropriateness

is in all the circumstances high enough to engage such an order.” He concluded that

this was a case in which Rabobank had “crossed the frontier [as regards

unreasonableness and inappropriateness] and where indemnity costs of the entire

counterclaim ought to be ordered.”

Sir Anthony Colman also said that NWB had invited the court to give assistance to the

Costs Judge relative to their costs of defending the counterclaim. However, it was

necessary to bear in mind that it is not the function of a trial judge to encroach on the

area of particular issues of costs expenditure. “The most that can be done is to give

an indication in the most general terms of whether it was reasonable to incur general

categories of expenditure in view of particular characteristics of this case.”

n

�

Application to join a non-party to proceedings (rule 48.2(1)2) with a view to obtaining an order for costs against him

PR Records Ltd v Vinyl & Others, ChD (Morgan J) 18.7.07

One of the issues raised on this appeal related to the nature of the inquiry which a court

should be asked to undertake on an application to join someone who was previously

not a party to proceedings to those proceedings for the purpose of seeking a non-

party costs order. “In particular, should the reaction of a court…be that such joinder

is normally appropriate (in the absence of material showing that the joinder would be

an abuse of process) or should the court be expected to examine the merits of the

substantive application for a non-party costs order, so that only sufficiently strong

claims for such an order should be allowed to proceed to the second stage?”

Morgan J held that: (1) an applicant for such an order would normally be expected

to explain the nature of the claim which he had against the intended party and the

purpose to be served by joining that party. If he was not able to do so, the court might

well dismiss the application; (2) if it was clear that joining the party was an abuse of

process, the court would be expected to dismiss the application; (3) if the intended

party denies that the applicant has any proper claim against him, the way for the

contention to be tested would be to add him as a party so that he can then defend

the claim; (4) even where it is clear at the time of adding the party that he intends

to apply for summary judgment, that would not generally be a reason for refusing to

add him as a party; (5) at the stage of joinder it was not appropriate for there to be a

preliminary hearing on the merits. This follows from the judgment in Dranez Anstalt

v Hayek3 where Etherton J stated that the idea of a preliminary assessment on the

merits was contrary to the philosophy of a summary process which underlies this

jurisdiction. He rejected the idea that the applicant had to show an “arguable” case

at the joinder stage. In the instant case the correct order was to permit the joinder

of the non-party under rule 48.2(1)(a) and to allow it to proceed to the second stage

under rule 48.2(1)(b).

CaseManagement

Consolidation of actions

Ixis Corporate & Investment Bank v WestLB AG & Others, QBD (Comm) (Aikens J) 18.7.07

CPR rules 3.1(2)(g) and (h) list amongst the court’s general powers of management,

the power to consolidate proceedings or try two or more claims on the same occasion.

This was introduced to avoid a multiplicity of proceedings and thus to reduce costs and

delays. Consolidation may be ordered on the application of any party. An application

should be made as soon as it becomes apparent that it is necessary or desirable to do

so4.

2 Rule 48.2(1) provides that “Where the court is considering whether to exercise its power under section 51 of the Supreme Court Act 1981 (costs are in the discretion of the court) to make a costs order in favour of or against a person who is not a party to proceedings – (a) that person must be added as a party to the proceedings for the purposes of costs only; and (b) he must be given a reasonable opportunity to attend a hearing at which the court will consider the matter further.”

3 [2005] EWHC 2435 (Ch)4 See Civil Procedure, The White Book Service 2007, v.1 p.95 for commentary on the rules regarding

consolidating proceedings.

n

n

�

September 2007 Litigation & Dispute Resolution Legal Update

In this case the first defendant applied to consolidate the existing proceedings with

two other sets of proceedings in which it brought claims against an interested party

(N). The judge concluded that in the circumstances, for reasons of case management

and fairness to N, although there was a significant degree of overlap in issues of

fact and law in the different sets of proceedings and therefore a significant overlap

in the evidence of witnesses of fact and likely to be an overlap of expert evidence,

it would not have been fair and just to have consolidated the proceedings. Reasons

given included that N would have had a very short period of time in which to prepare

for trial; pleadings were unlikely to have been finished in enough time prior to the

trial date because N would have had to have investigated various issues and to have

then considered its position; N might have wanted to see if there were other relevant

witnesses and to have taken statements from them; and they would have wanted to

have considered whether the expert reports that had been prepared were sufficient for

their purposes or whether they needed to instruct new experts. The judge felt that this

could not have been done by the trial date that had been set in the other action and it

was futile for N’s team even to have tried. Therefore, the risk of irreconcilable findings

as a result of there being two different trials, was outweighed by the other factors

which were against consolidation or hearing the two matters together. The judgment

gives a good analysis of the issues to be considered when there is an application for

consolidation.

Summaryjudgment

“Genuine triable issue” test under paragraph 12.4 Insolvency Proceedings Practice Direction for setting aside a statutory demand on the basis of cross-claims and “real prospect of succeeding on the claim” test for summary judgment

Ashworth v Newnote Ltd, CA (Buxton LJ, Collins LJ) 27.7.07

By paragraph 12.4 Insolvency Proceedings Practice Direction, where the debtor (a)

claims to have a counterclaim, set-off or cross-demand which equals or exceeds

the amount of the debt or debts specified in the statutory demand or (b) disputes

the debt, the court will normally set aside the statutory demand if, in its opinion, on

the evidence there is a genuine triable issue. One of the questions that the court

addressed was whether the “genuine triable issue” was the same threshold as, or

lower than, the “real prospect of succeeding on the claim/successfully defending

the claim” test for summary judgment under CPR rule 24.2(a). The CA held that any

debate as to whether there was a distinction between the tests involved “a sterile

and largely verbal question, and that there is no practical difference between ‘genuine

triable issue’ and ‘real prospect’ of success…” In each case it was open to the court to

n

�

reject evidence because of its inherent implausibility or because it was contradicted

by or not supported by the documents. “The cross-claim must…be one which can be

characterised as genuine and serious, or of substance…or as raising a ‘genuine triable

issue’”5, 6.

Applications for summary judgment involving points of construction

ICI Chemicals & Polymers Ltd v TTE Training Ltd, CA (Ward LJ, Buxton LJ, Moore-Bick LJ) 13.6.07

This was an appeal against an order dismissing the defendant’s application for

summary judgment against the claimant. The application was made under Part 24.

One of the arguments put forward raised a short point of construction which on the

face of it could have been conveniently decided. The judge invited the parties to agree

that he should decide it as a preliminary issue but they were unwilling for him to do

so.

The CA held that it was not uncommon for an application under Part 24 to give rise to

a short point of law or construction and, if the court was satisfied that it had before

it all the evidence necessary to determine the question and that the parties had an

adequate opportunity to address it in argument “it should grasp the nettle and decide

it”. Where it was possible to show that although material in the form of documents,

or oral evidence that would put the documents in another light, was not currently

before the court but that such material was likely to exist and could be expected to be

available at trial, it would be wrong to give summary judgment because there would

be a real, as opposed to a fanciful, prospect of success. However, it was not enough

“simply to argue that the case should be allowed to go to trial because something may

turn up which would have a bearing on the question of construction.” In the instant

case, all the relevant material had been before the judge, the parties had been ready to

argue their points fully and he could have determined a short question of construction.

As the claim had no real prospect of success at trial summary judgment should have

been granted.

5 Popely v Popely [2004] EWCA Civ 463 applied.6 See also Hanco ATM Systems Ltd v Cashbox ATM Systems Ltd & Others [2007] All ER (D) 139 (Jul) where

there was an appeal against a summary judgment that was based on claims including dishonestly assisting a breach of fiduciary duty. The court held that “In a clear case whatever the nature of the claim it is incumbent upon the Court if the matters raised by the Defendant have no real prospect of success and there is no other compelling reason for a trial to give a Claimant early judgment. That was one of the underlying premises of the civil procedure rules to speed up access to appropriate justice.” Summary judgment may be entered, therefore, even if the allegations are serious.

n

7

September 2007 Litigation & Dispute Resolution Legal Update

NEGLIGENCEEx turpi causa rule

Stone & Rolls Ltd (in liquidation) v Moore Stephens (a firm) & Another, QBD (Comm) (Langley J) 27.7.07

Moore Stephens, were auditors of the claimant company (S&R). S&R alleged that the

audits were conducted negligently. The damage claimed arose from a letter of credit

fraud committed against banks. The claim asserted that Moore Stephens should have

blown the whistle and brought the fraud to an end. S&R was owned, controlled and

managed by Mr S and he committed the fraud and with S&R was found liable for it in

relation to the major losing bank.

The instant application was to strike out the claim and/or for summary judgment

on the basis that the claim was ex turpi causa non oritur actio. The question was

whether and if so when a claim by a company against its auditors can infringe that

maxim (no action will arise out of an illegal or immoral act)7. The conclusion that

Langley J drew from the authorities was that the ex turpi maxim required a “reliance

test” to be satisfied. “The claim must be ‘founded on’ or ‘arise from’ an illegal act of

the claimant…or the illegal act must necessarily be pleaded or relied upon to sustain

the claim…or to put forward the case…or the facts which give rise to the claim are

‘inextricably linked with’ the illegality...The contrast is with a claim to which the

illegality is only ‘collateral’ or ‘insignificant’…or ‘incidental’… It is also acceptable that

only part of a claim or a loss is defeated by the maxim…” He held that (1) there was no

doubt that if the instant claim had been pursued by Mr S, it would have been defeated

by the ex turpi maxim; (2) there was no compelling reason why a corporation should

not be subject to the same considerations in circumstances in which the relevant

wrongdoing was to be attributed to the corporation following the normal principles of

law applicable to attribution; (3) in this case the law of attribution8 would attribute to

S&R the knowledge and the wrongdoing of Mr S as he was clearly the directing mind and

will of the company; (4) the conscience of the ordinary citizen would not find anything

repugnant in S&R pursuing the claim which would justify ruling it impermissible by

use of the maxim. “…the objective of the maxim can indeed properly be fulfilled by

precluding any recovery which would inure to the benefit of the individual perpetrator

or perpetrators of the impugned conduct (in this case Mr S)”; (5) there was no principled

basis on which the defrauded creditors of a company should be in a worse position

than those whose debts arose in the ordinary course of business. The applications

to strike out or dismiss the claim failed. This decision allows the company’s creditors

to benefit from a claim which they would not have been able to pursue directly – a

difficult decision for auditors.

7 This maxim is of very long standing. It was explained by Lord Mansfield CJ in Holman v Johnson (1775) 1 Cowp 341.

8 Langley J said this was subject to the Belmont rule, which was expressed in the case of Belmont Finance v Williams Furniture [1979] 1 Ch 250 as the principle that knowledge should not be attributed to the company where the company was the “victim” of the improper conduct of its officers.

n

�

ARBITRATIONSerious irregularity

London Underground Ltd v Citylink Telecommunications Ltd, QBD (TCC) (Ramsey J) 20.7.07

These proceedings concerned arbitration claims under ss 68 and 69 Arbitration Act

1996. Under s 68 of the Act, a party may challenge an award on the grounds of serious

irregularity, as that term is defined in s 68(2)(a)-(i), which has caused or will cause

substantial injustice to that party. The requirement of “serious irregularity” imposes

a high threshold and it must be established that the irregularity caused or would

cause substantial injustice to the applicant9 and it must fall within the closed list of

categories in s 68(2).

In this lengthy judgment, Ramsey J considered the requirements under s 68(2)(a)

(failure by the tribunal to comply with s 33 (general duty of tribunal), (c) (failure by

the tribunal to conduct the proceedings in accordance with the procedure agreed by

the parties) and (d) (failure by the tribunal to deal with all the issues that were put to

it). He found that the main propositions relevant to s 68(2)(a) are that the underlying

principle is that of fairness or natural justice; there must be a sensible balance between

the finality of an award and the residual power of a court to protect parties against

the unfair conduct of an arbitration; and it will generally be the duty of a tribunal to

determine an arbitration on the basis of the cases which have been advanced by each

party and of which each has notice. To decide a case on the basis of a point which

was not raised as an issue or argued, without giving the parties the opportunity to

deal with it, will be a procedural irregularity. In this particular case there had been no

serious irregularity leading to substantial injustice and even if there had been some

procedural irregularity, it would not have caused substantial injustice to the parties.

Therefore, the applications for leave to appeal against the arbitrator’s decision were

refused.

9 Per Lord Steyn in Lesotho Highlands v Impregilo SpA [2005] 3 WLR 129

n

�

September 2007 Litigation & Dispute Resolution Legal Update

AGENCYLonsdale (t/a Lonsdale Agencies) v Howard & Hallam Ltd, HL (Lord Bingham, Lord Hoffmann, Lord Rodger, Lord Carswell, Lord Neuberger) 4.7.07

This appeal to the HL dealt with what was the proper basis for assessment of the

compensation due on the termination of an agency agreement that was subject to

the Commercial Agents (Council Directive) Regulations 1993. The Regulations were

introduced into English law to give effect to the EC Directive relating to commercial

agents. Article 17 deals with termination of an agency contract. It allows Member

States to choose between two different rights, one or other of which must be accorded

to a commercial agent on the termination of the agency, namely a right to either an

indemnity in accordance with Article 17(2) or compensation in accordance with Article

17(3). The UK chose both systems in that it allowed parties to opt for an indemnity

under 17(2) but provided that in default of agreement the agent should be entitled to

compensation under 17(3). Neither the Directive nor the Regulations provide explicit

guidance as to the amount of compensation the agent is to receive.

The question on appeal was how the compensation in this case should have been

determined. It is common practice for the French courts to value agencies at twice the

average annual gross commission over the previous three years. The English practice

is that the agent was entitled to be compensated for being deprived of the benefit

of the agency relationship, that the value of the relationship lay in the prospect of

earning commission, the agent’s expectation that “proper performance of the agency

contract” would provide him with a future income stream and it was that which had to

be valued. There was no reason to make any other assumptions contrary to what was

the position in the “real world” at the date of termination. The appellant argued that

this method of calculation was likely to produce less than he would have been awarded

by a French court and that in stipulating that agents should receive compensation

under Article 17(3) the Directive was adopting the French practice as Community law

and that this was the appropriate interpretation of the Article.

The HL held that the courts in the UK were not bound by the approach of the French

courts. “It is clear that the agent is entitled to compensation for the ‘damage he suffers

as a result of the termination of his relations with the principal’ and that the method

by which that damage should be calculated is a discretionary matter for the domestic

laws of the Member States.” Accordingly, the appeal was dismissed; the appellant was

refused leave to appeal to the ECJ.

n

�0

CONFLICTOFLAWS/EUForeign judgment

Tasarruff Mevduati Sigorta Fonu v Yahya Murat Demirel, CA (Sir Anthony Clarke MR, Arden LJ, Hooper LJ) 26.7.07

This action was brought at common law to enforce three judgments given in favour

of the claimant (TMSF) against the defendant (D) in Turkey. This followed the collapse

of three banks, one of which had been owned by a group of companies controlled by

D. TMSF obtained an order for a worldwide freezing injunction relating to D’s assets

and an order granting permission to serve the proceedings out of the jurisdiction. The

judge set aside the order granting permission for service out of the jurisdiction in

relation to two of the judgments but refused in relation to the third. (He also set aside

the freezing injunction.) D appealed on the grounds that the court had no jurisdiction

to permit service out of the jurisdiction on the true construction of rule 6.20(9) and if

there was jurisdiction, permission should have been refused on the ground that the

proceedings would have served no useful purpose.

CPR rule 6.20(9) provides: “In any proceedings to which rule 6.19 [service out of the

jurisdiction where permission of the court is not required] does not apply, a claim form

may be served out of the jurisdiction with the permission of the court if - …(9) a claim

is made to enforce a judgment or arbitral award.” D submitted that jurisdiction to give

permission to serve a claim form out of the jurisdiction to enforce a foreign judgment

only exists where, at the time when the application is made, there are assets in

England and Wales against which the judgment can be enforced or at least where the

judgment is otherwise enforceable in England and Wales. Alternatively, there must be

a real prospect of assets within the jurisdiction against which the judgment could be

enforced within a reasonable time.

The appeal was dismissed. The CA held that there was no reason to imply a requirement

that there must be assets in the jurisdiction in order to permit service out of the

jurisdiction under the rule. There was no reason to give the rule other than its ordinary

and natural meaning. If the jurisdiction of the court was limited it would “prevent the

giving of permission to serve out in circumstances where there was a belief, hope or

expectation that assets belonging to the defendant existed or would or might arrive

within the jurisdiction but at the time of the application it was not possible to identify

any assets actually within the jurisdiction…there is no reason to give the rule an

unnatural construction or to imply restrictions into it.” The rule is discretionary so that

the court will only grant permission if it is just to do so in all the circumstances of the

case. The CA accepted that a court should not automatically exercise its discretion in

favour of permitting service out of the jurisdiction unless it was just to do so and that

it would ordinarily not be just to do so unless there was a real prospect of a legitimate

benefit to the claimant from the English proceedings. That benefit could be indirect

or prospective10. In this case, on the evidence, there was a reasonable possibility that

D would, one day, have assets in London. An action to enforce the judgment would be

time barred in England by late 2007 or early 2008. If the appeal was allowed D would

have been able to bring funds to London free of a risk of execution.

10 The CA said that such an approach would be consistent with the approach of the court to petitions to wind up unregistered companies. In that context it has been held that it is not necessary that the company should have assets within the jurisdiction but the court must be satisfied that there is a reasonable possibility that the winding up order will benefit the petitioner and the court must have jurisdiction over one or more of those interested in the distribution.

n

��

September 2007 Litigation & Dispute Resolution Legal Update

Place of performance

Crucial Music Corporation & Another v Klondyke Management AG & Others, ChD (Bernard Livesey QC) 25.7.07

The Lugano Convention governs service out of the jurisdiction of proceedings against

defendants domiciled in Norway, Switzerland and Iceland. The Brussels Regulation

governs service on all EU States. The terms of the two are identical. The basic rule

is that people are to be sued in the courts of the state in which they are domiciled.

However, in matters relating to contract, a person can be sued in the courts for the

“place of performance of the obligation in question” (Article 5(1)) and in matters

relating to tort, delict or quasi-delict, in the courts for the “place where the harmful

event occurred” (Article 5(3)).

In this case the defendants appealed against the master’s refusal to set aside service

on them in Germany and Switzerland of proceedings claiming damages for breach

of contract and misrepresentation. By an agreement, executed in London, the first

claimant agreed to acquire a catalogue of musical sound recordings, associated

intellectual property, various trade marks and licences and some debts from the

administrative receivers of a UK music company (P). Neither the administrative

receivers nor P gave any warranties in relation to the property sold under the

agreement. However, the defendants provided a number of warranties to the vendors

and the first claimant. Subsequently, the second claimant took an assignment of the

benefit of the agreement. It later alleged that it discovered agreements, licences and/

or sub-licences whose existence constituted a breach of the various warranties which

reduced the value of the catalogue. The claimants brought an action for damages for

breach of contract, alleged that the warranties were also misrepresentations which

induced the contract and were later incorporated into it and also claimed damages for

misrepresentation.

Service was effected on the defendants out of the jurisdiction. They then applied for

a declaration that the court had no jurisdiction over the claims and for proceedings

to be set aside or stayed. The master held that the obligation under the warranties

came into effect upon the making of the agreement in London and therefore London

was the “place of performance” of the warranties; and that the loss by reason of the

misrepresentation having been made occurred when the claimants paid money and

entered into the agreement, which they did in London.

As regards the contractual claim, the defendants submitted that the warranties were

statements and promises as to a state of affairs existing at the time when the parties

entered into the agreement which did not impose any contractual obligation capable

of performance. Accordingly, England was not “the place of performance of the

obligation in question”. As regards the claim in tort, they submitted that the harmful

event did not occur within the jurisdiction because the damage consisted of damage

to IP rights which subsisted worldwide and accordingly, England could not have been

“the place where the harmful event occurred”.

n

�2

The judge held that once a relevant “obligation” in contract was found to exist, the

place of performance was the place where: “(i) if it is executory, the obligation is to be

performed; (ii) if it is negative, the obligation is to be honoured; (iii) if it is a warranty as

to an existing condition or state of affairs, the condition or state of affairs is required

by the contract to exist.” If so, there was no conceptual difficulty about there being

a place of performance of a pure warranty as was the case here. The only question

was where the place of performance might be according to the law applicable to the

contract. One had to first look at the contract to see whether that place had been

specified, failing which one had to try and extract from it an indication which would

help to answer whether there was a place where compliance with the warranty was

required by the contract. Where the essence of the contract was the transfer of IP

rights owned by a company registered in London, lodged as security with an English

bank, and the essence of the warranty was that the rights being transferred were

characterised by a specified level of licensing but no more, there was a good arguable

case that compliance with the warranty was required at the time and place where the

transfer of assets was effected i.e. London.

To establish jurisdiction in the tort claim, it was necessary to prove that the “harmful

event” occurred within England and Wales. In this case the IP rights were not damaged

by the misrepresentation and the misrepresentation did not cause the impairment of,

damage to or diminution in the value of the transferred rights. The parties entered into

and completed the agreement in London. Therefore, it was correct to conclude that the

harmful event was the claimants’ entry into the agreement, which occurred in England.

The master had reached the correct conclusions and the appeal was dismissed.

Can two distinct legal entities be “the same party”?

Kolden Holdings Ltd v Rodette Commerce Ltd & Another, QBD (Comm) (Aikens J) 4.7.07

Article 27 of the Council Regulation on Jurisdiction and the Recognition and

Enforcement of Judgments in Civil and Commercial Matters (EC) No 44/2001 provides

that “1. Where proceedings involving the same cause of action and between the same

parties are brought in the courts of different Member States, any court other than

the court first seised shall of its own motion stay its proceedings until such time as

the jurisdiction of the court first seised is established. 2. Where the jurisdiction of

the court first seised is established, any court other than the court first seised shall

decline jurisdiction in favour of that court.”

The instant case, according to Aikens J, raised the following novel question: “What are

the principles of EC law for determining whether one legal entity is to be regarded as

‘the same party’ as another legal entity for the purposes of Article 27 of the Regulation?”

He said that the phrase “the same parties” was not defined in the Regulation or in the

Brussels Convention. An analysis of the relevant cases11 led to the conclusion that: (1)

the meaning of Article 27 was to be decided according to EC law, not national law; (2)

the question of whether the parties are the same does not depend on the procedural

position of each of them in the two relevant proceedings; (3) two legal entities can be

regarded as “the same party” for the purposes of Article 27 and whether that is so in

any particular case will be a matter for the national court to decide; (4) the national

11 The cases cited were The Tatry [1999] QB 515 and Druout Assurances SA v Consolidated Mettalurgical Industries [1999] QB 497

n

��

September 2007 Litigation & Dispute Resolution Legal Update

court must look at the facts of the case concerned and in particular “the subject matter

of the two disputes” in the relevant proceedings to see if the two legal entities are to

be regarded as “the same party”; (5) the test to be applied is: “are the interests of the

two legal entities involved in the two disputes identical to and indissociable from one

another in relation to the subject of the two disputes”; (6) one way of demonstrating

this is to ask whether a judgment against one legal entity in respect of the subject

matter of the two disputes would have the force of res judicata against the other legal

entity. This approach emphasises the importance of deciding an issue such as this as

a matter of substance, not form.

Rome II Regulation

The Rome II Regulation (Regulation (EC) No. 864/2007) on the law applicable to

non-contractual obligations has been published in the Official Journal of the EU.

The Regulation will apply from 11 January 2009 (except for Article 29 regarding the

notification by Member States of international conventions to which they are party

that lay down conflict of law rules relating to non-contractual obligations, which

applies from 11 July 2008). The purpose of the Regulation is to standardise the

Member States’ rules on conflict of laws regarding non-contractual obligations and

thus to extend the harmonisation of private international law in relation to civil and

commercial obligations. The Regulation can be found on http://eur-lex.europa.eu/

LexUriServ/site/en/oj/2007/l_199/l_19920070731en00400049.pdf.

Commission decision of 16 July 2007

The Commission decision of 16 July amends Decision 2001/781/EC adopting a

manual of receiving agencies and a glossary of documents that may be served under

Council Regulation (EC) No 1348/2000 on the service in the Member States of judicial

and extrajudicial documents in civil or commercial matter. This updates an existing

manual, amending some of the information in respect of service in France where the

receiving agencies are bailiffs who are empowered to serve document on all addresses

within the territory covered by the Tribunal d’instance to which they are attached. The

addresses, telephone and fax numbers, email addresses of bailiffs and the name and

postcode of the localities and bailiffs empowered to act in those localities are in the

manual of receiving agencies. The manual is accessible on the European Judicial Atlas

in Civil Matters website: http://ec.europa.eu/justice_home/judicialatlascivil/.

n

n

��

LEGISLATIONThe Enterprise Act 2002 (Disclosure of Information for Civil Proceedings etc) Order 2007

This Order comes into force on 1 October 2007 and relates to the Enterprise Act 2002.

Part 9 of the Act restricts the disclosure of specified information which relates to

the affairs of an individual or any business of an undertaking. Specified information

is defined by s 238. S 241A (inserted by s 1281 Companies Act 2006) provides that

specified information which is prescribed by order, may be disclosed for purposes of /

in connection with, civil proceedings, which are prescribed by order. Civil proceedings

include proceedings relating to / arising out of a legal right or obligation of a consumer,

the infringement of an intellectual property right, passing off or misuse of a trade

secret. S 241A(2) excludes from the information which may be specified by order

certain categories of information relating to competition matters. www.opsi.gov.uk/

si/si2007/20072193.htm.

Regulation of Investigatory Powers (Investigation of Protected Electronic Information: Code of Practice) Order 2007

This SI brings into force the code of practice prepared under s 71 Regulation of

Investigatory Powers Act 2000, relating to the investigation of protected electronic

information (under Part 3 of the Act). The code of practice will be published by the

Stationey Office Ltd and will appear on the Home Office website at www.homeoffice.

gov.uk/ripa/publication-search/ripa-cop/.

Civil Proceedings Fees (Amendment) (No 2) Order 2007 (SI 2007/2176)

This Order amends the Civil Proceedings Fees Order 2004. The fees for starting

proceedings in the High Court and county courts have been amalgamated under one

heading and reduced slightly, with new monetary bands being introduced in relation

to starting proceedings in the county court. Changes include a reduction in the listing

fee (down from £600 in the High Court to £100), introduction of a new hearing fee

with provision made for the refund of that fee or a percentage of it if the claim is

settled or discontinued before the date fixed for the hearing and notice is given to the

court within specified periods; that there is no longer provision for refund of the listing

questionnaire fee; and the introduction of a fee for a personal search in the bankruptcy

and companies record in a county court. It also adds a new schedule 1A which sets out

when a party is entitled to a remission or part remission of a fee. The order will come

into force on 1 October 2007. http://www.opsi.gov.uk/si/si2007/20072176.htm

n

n

n

��

Tribunals, Courts and Enforcement Act 2007 c. 15

The Tribunals, Courts and Enforcement Act 2007 received Royal Assent on 19 July

2007. The Act contains a wide range of provisions, including: establishment of an

Administrative Justice and Tribunals Council; amending the law relating to judicial

appointments, appointments to the Law Commission and the law relating to the

enforcement of judgments and debts; making further provision about the management

and relief of debt; making provision protecting cultural objects from seizure or forfeiture

in certain circumstances; amending the law relating to the taking of possession of

land affected by compulsory purchase; altering the powers of the High Court in judicial

review applications and for connected purposes. Explanatory notes, which have not

been endorsed by Parliament, have now been prepared by the Ministry of Justice in

order to assist those considering the Act. The Act and explanatory notes can be found

on http://www.opsi.gov.uk/acts/acts2007/pdf/ukpga_20070015_en.pdf, www.opsi.

gov.uk/acts/en2007/2007en15.htm.

TREATIESTreaty between Great Britain and Northern Ireland and the United Arab Emirates on Judicial Assistance in Civil and Commercial Matters

The purpose of this Treaty is to facilitate cooperation between the courts of the UK

and of the United Arab Emirates in civil and commercial matters. The Treaty contains

provisions about access to the courts, legal aid and exemption from court fees. These

provisions guarantee equal treatment for nationals of each of the parties when

bringing or defending proceedings in the courts of the other party. The Treaty also

contains provisions about service of judicial documents and the taking of evidence by

the courts of each party in support of proceedings in the courts of the other party. It

will not require the enactment or amendment of any primary or secondary legislation.

For further information see www.fco.gov.uk.

CONSULTATIONSCosts recovery in pro bono assisted cases

The Law Society has responded to a consultation by the Ministry of Justice on

proposals for secondary legislation regarding costs recovery in pro bono assisted

cases. The Society considers that it is important to ensure that the development of

costs recovery in pro bono cases is consistent with the development of the use of

protective costs orders in cases of public interest. Further, clause 194 (formerly clause

185 in the version of the Legal Services Bill as amended in committee and printed on

6 March 2007) provides the opportunity to the government to assist in pro bono cases

and to place the developing law in relation to protective costs orders on a statutory

footing, providing that in doing so the criteria are not unduly restrictive. The questions

and answers can be found on the Law Society website.

n

n

n

September 2007 Litigation & Dispute Resolution Legal Update

��

NEWSOFT launches test case

It has been announced that the OFT will commence proceedings in the High Court for a

declaration on the application of the law in respect of unauthorised overdraft charges.

Tens of thousands of complaints that these charges are unfair have been received by

the county courts and the Financial Ombudsman Service. The banks do not accept that

the unfairness rules of Unfair Terms in Consumer Contract Regulations apply. The OFT

believes that they do and is seeking to establish this legal principle clearly in court.

The OFT considers that a quick determination of this point will assist in securing a

resolution of the fairness of these charges. The test case complements an ongoing

market study into personal current accounts12. For further details see http://www.oft.

gov.uk/news/press/2007/106-07.

HMCS annual report

Her Majesty’s Courts Service has published its annual report 2006/7. The report

shows that during the year HMCS worked with partners to bring 1.3 million offences to

justice resulting in over 90,000 convictions and issued over 1 million claims for monies

owed. Trials have taken place sooner and offenders sentenced faster. HMCS Chief

Executive said that they have been working hard to provide justice “in other ways”

such as mediation, both in civil and family cases. 121 small claims mediations were

conducted in a pilot in Manchester over the course of a year, and 86% resulted in a

settlement on the day. There was also the launch of the Possession Claim Online,

which enables property owners to apply electronically for repossession when rent and

mortgages are not paid. A new customer charter has been established in all courts. It

sets out clear and consistent standards of service for all court users.

Sherry Begner

Kate Elsmore

12 See the summary in the Litigation & Dispute Resolution Legal Update July 2007 of Berwick v Lloyds TSB Bank plc; Haughton v Lloyds TSB Bank plc which was heard in Birmingham County Court and dealt with the legality of bank charges in respect of unauthorised overdrafts.

n

n

Mayer Brown is a combination of two limited liability partnerships: one named Mayer Brown International LLP, incorporated in England; and one named Mayer Brown LLP, established in Illinois, USA.

BERLINPotsdamer Platz 8 10117 Berlin Telephone: +49 (0)30 20 67 30 0

BRUSSELS Avenue des Arts 52 Brussels 1000 BelgiumTelephone: + 32 (0)2 502 5517

CHARLOTTE Bank of America Corporate Center 214 North Tryon Street Suite 3800 CharlotteNorth Carolina 28202-2137, USA Telephone: + 1 704 444 3500

CHICAGO Hyatt Center 71 South Wacker Drive Chicago Illinois 60603-3441, USA Telephone: + 1 312 782 0600

COLOGNE KölnTurm, Im Mediapark 8 50670 Cologne Germany Telephone: + 49 221 5771 100

FRANKFURT Bockenheimer Landstrasse 98-100 60323 Frankfurt/Main Germany Telephone: + 49 69 79410

HONG KONG7th Floor, Gloucester TowerThe Landmark15 Queen’s Road CentralHong KongTelephone: + 852 3763 7000

HOUSTON 700 Louisiana Street Suite 3400 HoustonTexas 77002-2730, USA Telephone: + 1 713 238 3000

LONDON 11 Pilgrim Street, London EC4V 6RW United Kingdom Telephone: + 44 (0)20 7248 4282

31st Floor30 St Mary AxeLondon EC3A 8EPUnited KingdomTelephone: +44 (0)20 7398 4600

LOS ANGELES 350 South Grand Avenue 25th Floor Los Angeles California 90071-1503, USA Telephone: + 1 213 229 9500

NEW YORK 1675 Broadway New York New York 10019-5820, USA Telephone: + 1 212 506 2500

PALO ALTO Two Palo Alto Square, Suite 300 3000 El Camino Real Palo Alto California 94306-2112, USA Telephone: + 1 650 331 2000

PARIS 20 Avenue Hoche 75008 Paris France Telephone: + 33 1 5353 4343

WASHINGTON DC 1909 K Street N.W. Washington D.C. 20006-1101, USA Telephone: + 1 202 263 3000

Representative office

BEIJINGMBP Consulting Limited LLCTower W3, Oriental PlazaSuite 1505, 15/F1 East Chang An AvenueDongcheng DistrictBeijing 100738ChinaTelephone: +86 10 8518 198

Independent alliance law firms

Jauregui, Navarrete y Nader S.C.

MEXICO CITY Jauregui, Navarrete y Nader S.C. Abogados Torre Arcos Paseo de los Tamarindos No. 400-B Col. Bosques de las Lomas 05120 Mexico D.F. Telephone: + 5255 5267 4500

Ramón & Cajal - principal offices

MADRIDRamón & CajalPaseo de la Castellana, 428046 MadridSpainTelephone: +34 91 576 19 00

BARCELONARamón & CajalAvda. Diagonal 613, 4a, 08034 BarcelonaSpainTelephone: +34 93 494 74 82

Tonucci & Partners - principal offices

ROME Tonucci & PartnersVia Principessa Clotilde, 7 00196, Roma Italy Telephone: +39 06 362 271

MILANTonucci & Partners20121 MilanVia dei Bossi, 4ItalyTelephone: +39 02 859 191

Additional offices: Padua, Florence, Bucharest, Tirana

0222ldrSeptember 2007