Tuesday, 30 November 2010

C v D & D2 [2010] EWHC 2940 (Ch): an offer you can't accept

So you’re a defendant in a case.  You get a letter.  It’s headed “Offer To Settle Under Part 36”.  The letter refers to Part 36 throughout.  The final paragraph is a lengthy explanation of the consequences that Part 36 sets out if you do not accept a Part 36 offer.  You would think the offer had something to do with Part 36, wouldn’t you?

Apparently not.  A judge has decided that you can ignore the multitudinous references to Part 36.  Because the letter said the offer was open for 21 days.

Which is also a requirement of the mysterious Part 36.

Yet the judge said that this particular reference to Part 36 meant the letter was not a Part 36 offer.

OK.  Time for a step back.  The English legal system is based on trying to get people to agree before trial.  Hence the almost grotesque amounts of disclosure before a trial.  It allows the parties to assess the strength of their case.  If they’re on to a loser, fine, you now know, you can now get out.  So there are extensive provisions for settlement; discussion, mediation, whole reams of “without prejudice” correspondence where the parties can be pragmatic (or even honest) about their case without telling the judge their secret fears. 

The Civil Procedure Rules are divided into separate parts, dealing with evidence, applications, special procedures and so forth; Part 36 is the one that deals with making offers.  It is a powerful weapon.  If a claimant has a claim for £50k, it can offer to take a discount - £30k, say - under Part 36.  Open for a minimum of 21 days.  If the defendant snubs the offer, they go off to trial.  If the claimant gets more than £30k, then, from the date the offer expired, the claimant can ask the court for indemnity costs – maybe 95% of his costs paid, rather than the usual 60-70% or so – and for a punitive interest rate of 10% above base.  Now imagine you make that offer and win £100m.  And you make the offer 2 years before trial.  Woo.

But the offer does not, as such, lapse.  Part 36 is clear.  An offer can be accepted later.  The 21 days minimum requirement is there to let the recipient have a think before the penalties kick in.  If party A makes the Part 36 offer open for 21 days, and party B accepts it 100 days after the offer was made, then the offer is accepted; party A will ask for the penalty costs and interest between days 22 and 100 at least, and the Court will often award them if the parties cannot agree.  If party A genuinely did not want the offer to be accepted, it should withdraw the offer.  And lose the costs protection, but them’s the breaks.

What happened in the C v D case is that the anonymous Claimant made a two-part offer to the similarly anonymous Defendants; either buy a property from C at £10m, or just pay £2m compensation.  The offer was made on 10 December 2009 and was stated to be open for 21 days; the offer was headed Part 36 and so on.  Very much aiming to get within that punishing regime.  The offer included the phrase “Regardless of which settlement offer your client chooses, the offer will be open for 21 days from the date of this letter (the "Relevant Period")”.  A thinking period for the Defendants.

The Claimant chased acceptance until mid-January 2010 (well after the 21 day period, note).  The Defendants did not accept; the parties pootled along to a trial in late November 2010.  Except on 5 November the Defendants had a change of heart.  “We’ll take it.”

That’s not what happened in this case.  The Claimant went to Court to say that the offer had lapsed way back.  It was a time-limited offer.  Once they reached 31 December 2009, it was dead and gone.  But it was still a Part 36 offer, said the Claimant.  We get the costs consequences at trial, only you cannot accept it late.

This would be a surprising construction and the judge, rightly in my view, rejected it.  The offer could either be time-limited or Part 36.  Cannot be both.  So which was it?

The judge commented on how much the letter looked like a Part 36 offer, lots of references to Part 36, the costs being claimed under the letter being the Part 36 offer, the reference to Part 36 in the heading and so on.  Even the use of the definition “Relevant Period” which pretty much matches the definition in Part 36.  Yet he ignored all those specific words and said the offer was time-limited.  All those references to Part 36?  A mistake.  Nonsense.  Mere bagatelle.  Persiflage.  That one single reference to 21 days was, in the view of the judge, betraying that the real intent of the offer letter was to rub out the multifarious references and allusions to Part 36.  Even though Part 36 requires such a period to be included.  Why?  Because the strict wording of Part 36 – wording which was changed in April 2007, perhaps overlooked by most lawyers – states that the letter must specify a period of not less than 21 days within which the defendant will be liable for the claimant's costs in accordance with rule 36.10 if the offer is accepted .  Or, in other words, instead of saying “the offer will be open for 21 days”, it should have said “the offer will be open for 21 days, after which you may only accept in the terms of Part 36” or some such addition.  You cannot import those missing words into the sentence from Part 36, even if you refer to Part 36 repeatedly.  Therefore the Defendants could not accept the offer.  It had gone. 

This in my view is a wrong construction.  The judge interpreted the offer as ambiguous, which is fair enough; the Claimant’s arguments suggested it wanted to have its costs cake and eat it.  But in construing the ambiguity, the judge preferred to read a sentence in the offer really, really, really strictly, as against the continued references to Part 36.  It was surely clear that the Claimant wanted to make a Part 36 offer, hence it going into detail on the costs consequences, and the Defendants took it as such; the Claimant after all chased up the Defendants to see if they were accepting it a couple of weeks after the time limit had gone.  Straightforward interpretation starts from the perspective that, if words are written down, the words must have some meaning.  Surely the inclusion of Part 36 stuff means the drafter wanted to be within Part 36, with the consequence that the offer should remain open afterwards.  Otherwise the time spent referring to Part 36 was wasted.  The judge basically scribbled away half of the letter because of one bit of what might be termed drafting from memory.

I understand that the Defendants have been given permission to appeal.  If I were a betting blogger, I'd have a cheeky twenty on the appeal being allowed.

30 May 2011: UPDATE - and I'd've won.  The Court held that the words "Part 36" must mean something, otherwise they wouldn't be there.  So construed the ambiguity within the remit of the Part 36 requirements.  OK, where shall I get payment?

Wednesday, 24 November 2010

SK Slavia Praha-Fotbal AS v Debt Collect London Ltd [2010] EWCA Civ 1250: jurisdiction battle

They call it the Italian Missile.  If you have a dispute and think you are going to lose, just sue in Italy.  Whether your dispute has anything to do with Italy or not.  Because by the time the Italian court deals with it, five years will have passed, and your exasperated opponent may have settled with you.

The reason for this is because of international law.  Sometimes where a dispute should be heard is not clear; parties can choose in a contract which country's laws apply, or which country people should sue in, but such clauses are not always valid, and if you're driving a Belgian hire car in France and are hit by a German, you have a choice of countries.  Sometimes you even get the odd thing where the English court has to apply French law. 

And often there is a race to court.  Which means you could feasibly have two proceedings in two countries with two results.  A prime case in point is the recent Liverpool FC dispute; at one point the English Court had injuncted Messrs Hicks and Gillett from stopping Liverpool from being sold, whereas a Texan court had injuncted Liverpool from being sold.  Stalemate.  International law however provides the solution.  Using one of the few terms that has survived in the English court system all the way from when your average lawyer knew more Norman French than English.  Seisin.  (See-zin.)  It originally meant an interest in land, but it was conceptually extended to an interest in a court case.  The court first “seised” of the action has the jurisdiction, the second court has to decline.  In the Liverpool case this was simple – Hicks and Gillett had taken part in English proceedings before launching their action in Texas, England was therefore first, and the Texan court stood back.

At least the Texan court acted quickly.  Other courts take a lot longer – and under European law you have to wait for the Italian court to work out that, if the claim involves an English contract, written in English, with an English jurisdiction clause importing English law, breached in England, the appropriate forum is indeed England rather than Italy.  The English Court is not allowed to step in and stop the Italian proceedings; it has to let the Italian system work its inexorable way forward.

Which means that making sure your court is the one first seised (there is still some use for Norman French after all) is often of prime importance.  What amounts to “seisin”?  Just getting the claim in court?  Or something more involved?  It used to be the latter.  Getting the claim issued and served.  This is fraught with difficulty; serving on a non-English-speaking opponent for example may involve translations, notarization of the translations and service in accordance with the local rules.  The case of Molins plc v GD SpA involved a jurisdiction race between England and Italy – Molins claimed a debt from GD, asked for it to be paid, received no answer and so issued a claim in England, but whilst they were trying to get it served, GD's lawyers in Italy faxed an Italian claim form to Molins.  The Court of Appeal gave GD short shrift; Molins had never said it would accept faxed service, so under English law the claim could not be faxed but had to be posted, and, as Molins got its service in Italy right, the English proceedings were served first.  England 1, Italy 0.     

But what happens if service goes wrong because the Court makes a mistake?  In Philips v Symes, the English Court sent the usual bundle of papers to Switzerland for the Swiss court to serve, but a Swiss official removed the claim form from the package – because the English Court had mistakenly stamped it as “not for service outside England”.  The Court glossed over that particular error; it used its inherent jurisdiction to declare that the English Court was seised of the action, on the basis that Mr Philips had done everything in his power to get the service right and, indeed, had got it right.  Not his fault that it had gone wrong somewhere down the line. 

Which brings us to the Slavia Prague case.  More football.  Simple enough claim; the ENIC Group lent Slavia money, Slavia did not pay, ENIC sold the debt to DCL, and DCL sued Slavia for payment.  And obtained summary judgment.  In other words, the Court decided that there was no need for a trial.  Slavia had no defence that could possibly succeed.  So no need to waste time going to trial.  Slavia challenged this judgment on a different tack.  The club alleged that the English Court had no jurisdiction as the matter was before the Czech court - and a defence might have worked there. 

Was the Czech court seised first?  If it was, the English proceedings had to stop.  Slavia had certainly issued in the Czech Republic before DCL issued in England.  The Czechs take the lead.  Problem was Slavia did not serve the claim.  It needed to pay an extra sum of money to the Czech court to get the court to serve it – and by the time it did so, DCL had served its English claim on Slavia.  1-1, England ahead on away goals.

Slavia tried to overturn the English proceedings and failed.  The Court of Appeal said that it was a simple enough matter.  Unlike Mr Phillips, Slavia had not done everything necessary to get the Czech proceedings served.  Even though it was common practice to wait for the Czech court to confirm the amount due to it before service, it still meant Slavia had something more - that little payment - that it should have done before the Court would serve the proceedings.  The Czech court had not served the proceedings, the Czech court was not seised; the English proceedings could go ahead. 

And, as the English proceedings had already concluded in DCL’s favour, Slavia’s jurisdiction challenge had further consequences.  Not only did Slavia not get the matter heard at home, they had already, automatically, lost.  2-1 to England, back of the net.

Tuesday, 23 November 2010

Cairns v Modi [2010] EWHC 2859: libel on twitter

People think the internet is the most lawless regime around.  No.  It is the most lawed regime possible.  Every post on the internet is subject to the laws of every country in which it can be read.  This naturally causes problems; the Wall Street Journal was successfully sued in Australia in libel for an article in its US edition that had been posted to its website.  Because the website could be read in Australia.  Twitter has the same effect, anyone can read tweets anywhere, and for the purposes of libel a tweet is published where it is read – not where it is uploaded.

This can lead to inadvertent libel claims in the UK, as if one person in Britain reads a tweet, that tweet has been published in Britain.  And therefore a claim can be brought here.  The Court has in the past tried to stem this particular forum-shopping tide; in Jameel v Dow Jones, it was held that the damage caused by half-a-dozen people seeing a defamatory article was too small to warrant Court proceedings.  Perhaps the Court was a little harsh on Mr Jameel.  After all, many claims are brought for token damages.  Then again, perhaps the Court took on board damages would be peanuts - certainly too small to cost the thousands a libel action normally costs.

How the Jameel decision can be used has been thrown into question by the Cairns case.  Simple enough facts; Lalit Modi, the chairman of the Indian Premier League posted a tweet accusing the New Zealand cricketer Chris Cairns of fixing matches.  The comment is self-evidently defamatory – it would lower right-thinking people’s opinions of Mr Cairns.  Before even raising the substantive defences (fair comment, truth and qualified privilege), however, Mr Modi challenged jurisdiction.  Yes, it was published in England, but, like Jameel, to too few people.  Damages would be so small that the case would be pointless.

The Court looked at this single issue first.  If it found in favour of Mr Modi, Mr Cairns was out.  Otherwise it would proceed to a trial on the proper issues.  A good tactic from Mr Modi, as this preliminary issue would not need the serious evidence required to support his tweet.  However, Mr Cairns is still at the crease.

Why was this different from Jameel?  Firstly, the number of people who saw the tweet.  Without asking everyone in the world whether they had seen it, the Court had to rely on estimates from experts; Mr Modi’s expert claiming 35 people would have seen it, Mr Cairns’ expert 100.  Not big numbers.  But bigger than in Jameel. 

Secondly, the risk of further publication.  Mr Modi removed his tweet, but apparently continued to refer to it.  There was the risk that more people could hear the allegations; the Court considered it premature to throw out the claim.

Thirdly, Mr Cairns has a substantial reputation in England, and has lived here for substantial periods of time.   His links to the UK are stronger than those of Mr Jameel.  Another good reason for keeping the claim here.

Therefore the Court decided Jameel could be distinguished.  The case continues.

The case does address the nature of libel damages.  Although journalists often campaign for “fairer” libel laws, to prevent so-called forum-shopping (people seeking any excuse to sue in a Claimant-friendly UK), the facts do not really bear this out; the number of libel cases brought per annum is under 300.  A tiny amount.  The main problem with libel is the cost.  If the Cairns v Modi case proceeds to trial, it will be very expensive.  Evidence from India, flights or videolinks involved, a jury, maybe several weeks in Court.  For what?  An allegation read by at most 100 people.  Under normal circumstances, the damage caused by this would be minute.  A few hundred pounds.  Given Mr Cairns' greater fame, and the risk that such a rumour may sweep across the cricketing world, damages may be higher in this particular case, but the principle for the majority of libel cases still stands.  Libel damages are not large.  A commercial case worth a million quid will take a month in Court and cost maybe a third of a mil per party.  A libel case that takes the same time and cost will not exceed £50k in damages.  And your average libel case won't attract damages into five figures.  Yet the costs are allowed to explode.

Why is this?  If someone tried to claim £100,000 in costs for a commercial dispute worth £10,000 they would be laughed out of court by the judge.  Libel does have something else in it, the cleansing of reputation as well as damages pure; but as the damages are meant to have that same effect, how much is a reputation REALLY worth?

Any normal commercial £10k claim would ordinarily be decided by one judge in one day with costs capped.  Personal injury claims will not be that much more convoluted.  Is there any good reason why the principles of proportionality should not apply to libel?  Parties would have to rely on their best evidential shots, certainly; but how much would the extra million or so in costs shift the case from the best couple of points?  Crucially, how difficult is it for a defendant to prove the truth, or, at least, that the defendant was prudent in making such comments?  It is surely not beyond the wit of a judge to suss out between contrasting witnesses.  After all, they do that all the time in road accident cases, why should it be different in libel?    

Friday, 19 November 2010

Aktas v Adepta [2010] EWCA Civ 1170

Time limits are the bane of a litigator’s life.  You can do any number of things in a court case – miss deadlines for document exchange, forget to instruct an expert witness, even fail to turn up at trial – and you can just about get away with it.  The Court wants justice to be done, and even the most incompetent party will be able to get their day in court.

The one thing you CANNOT get away with is missing time limits.  The ocean of law is strewn with the rusting hulks of potentially valid cases that foundered before even getting out of the dock, because the Claimant did not bring a claim until it was too late, or – even worse – sent it to the wrong Defendant on the last day…

The time limits are set out in the Limitation Act 1980.  It is fair to have time limits; there must be a finish somewhere.  Otherwise you could be sued for a building collapse due to iffy blueprints your great-great-grandfather drew up.  They are occasionally fiendish, three years for this, six for that, 90 for the other.  Always worth checking.  (Watch for ballooning accidents.  They are air travel claims, 2 years under the Warsaw Convention.)

The one that is ingrained in most lawyers’ minds is that for claims for negligence that cause injury. You have 3 years to get the claim issued from your injury; you have to watch the starting date, it’s usually when you get hurt.  And often people wait the full 3 years before suing, waiting for the injuries to get worse, or maybe because they are hoping to settle out of court.   The Aktas case is actually a couple of cases in one; conjoined cases dealing with missing the limit.

However the Limitation Act offers the slightest of get-outs.  The Court has a discretion to ignore the time limit; it famously did so in A v. Hoare, when a rapist won the Lottery, thus making it economically worthwhile for a victim of years ago to sue him for damages.  In Aktas, the Claimants issued right up against the time limit, and got the service wrong; one day too late in Mrs Aktas’ case, and the claims were struck out.  So Mrs Aktas and her fellow Claimants just started again, this time asking the Court for it to exercise discretion.  The Defendants applied to strike out the claims, on the basis that they were an abuse of process.  The claims had been decided, they shouldn’t be brought again.  A long-established principle of English law.  If you lose, you appeal, you don't start again - even if you have new grounds.  You have one shot only.

The High Court originally sided with the Defendants, but the Court of Appeal has decided otherwise.  The Court of Appeal was taken with the failure to serve in time being down to the Claimants’ lawyers, rather than the Claimants themselves; further, the Defendants had admitted liability.  Should the Court really throw out valid claims because of a lawyer’s mistake?  Were the Defendants prejudiced in any way, given that the parties were writing to each other and getting medical reports before the claims were issued?  Is it abusive to ask the Court a question – about extending the time limit – that the Claimants did not need to ask before?

The Court of Appeal therefore ruled that the second claims were not abusive.  It needs more than a single slight error to mean any subsequent attempts are an abuse of process.  The “penalty” for being too late is to lose the claim, with the costs consequences, not to bar a party from bringing a second one on different grounds.  As the Claimants’ second claims – unlike the first – asked the Court to ignore the Limitation Act, the new claim was sufficiently different.  The Claimants should not be barred from having a second stab, when their first had been sunk before it launched.

On the face of it, this is perhaps a little bit harsh on the Defendants.  The Claimants had their chance and blew it.  Why should they get a second go?  But if one steps back a little, we have Defendants admitting they have injured Claimants, and yet trying to get away with it because of the smallest procedural error by a lawyer.  The Court is anxious to do justice to the parties, and the Court of Appeal evidently felt that this was the best way to do so.  The Court of Appeal is sometimes slightly sentimental and Claimant-friendly – look for example at Spencer v Wincanton, where Mr Spencer lost one leg thanks to his employer, ill-advisedly tried to walk on his one good leg, fell over, and was allowed to sue his employer for the injury to his “good” leg.

The decision does not mean that the Claimants automatically win; the Court of Appeal just sent the case back down to the High Court for a judge there to consider whether to apply discretion.  If the judge declines to apply that discretion the Claimants will still end up being time-barred.  It is also possible that the Defendants may try to appeal in turn – the House of Lords (as was) reined in some of the Court of Appeal’s kindness in Goodes v East Sussex, where Mr Goodes skidded on snow, sued the local authority for not gritting, and won in the Court of Appeal before losing the big one, so the Supreme Court might be a bit harsher.  Aikens LJ expressed a hope that the principles to be adopted should now be clear and simple to follow; that may be right, but the Defendants might argue it is clearer, simpler and fairer to insist on claimants having to comply with the strictest letter of the law…

Wednesday, 17 November 2010

Humphreys v Norilsk Nickel International (UK) Ltd, [2010] EWHC 1867

How fair does your employer have to be when assessing your entitlement to a bonus?  Not very fair at all.

This is the upshot of the claim brought by Dr Humphreys against his former employer, Norilsk.  Dr Humphreys is an economist, with a particular expertise in judging market price shifts; in 2004 he agreed to become the chief economist for the Norilsk group.  Norilsk agreed to pay him over £400k per year, plus a bonus, depending on his performance – nothing if it were unsatisfactory, over half a million if it exceeded all expectations.

All was satisfactory for the first few years; Dr Humphreys received substantial bonuses.  It went wrong in 2009.  Dr Humphreys left Norilsk and did not receive his bonus by the due date.  He emailed; he was fobbed off.  5 months after the due date, Norilsk’s solicitors told Dr Humphreys’ solicitors that Norilsk would not be paying a bonus for the final year.  The reason?  His performance was unsatisfactory.  His forecasts of the price of nickel were out by over 50%.  Indeed, Norilsk even claimed that Dr Humphreys’ performance in past years was due to market conditions being fairly easy.  Once the going got tough, Dr Humphreys got going.
The issue in the case was whether Norilsk could unilaterally decide the level of bonus.  The High Court said yes.  The contract of employment said that the level of bonus would be decided by the Norilsk management board; the contract did not set out any objectively achievable targets.  Dr Humphreys could not point to a term of the contract and say “I’ve done that” – it was all down to whether his performance was satisfactory, and that was a decision solely down to Norilsk.  Therefore, no matter how much Dr Humphreys had done, or how accurate he had been with his nickel predictions, his bonus was entirely in the hands of his employer.

That is not quite the full story.  The decision whether to award a bonus must be bona fide.   A previous case (Clark v. Nomura International Plc) stated that an employer’s decision must not be irrational or perverse; Burton J charmingly suggested that a “capricious” decision would be one or the other.  So Norilsk had to show that it was not acting perversely or irrationally in refusing Dr Humphreys a bonus.

This is not a high hurdle; the employer is not required to act fairly.  Norilsk duly cleared it with some ease.  For the first two quarters of 2008, Dr Humphreys’ estimates of nickel prices were quite accurate; however the impact of the global recession plunged the prices to under half of Dr Humphreys’ estimate.  Norilsk claimed it had lost out as a result of the erroneous forecast and that provided it with ample reason not to pay out a bonus.  The High Court agreed – a company that had lost half a billion dollars in 2008, in part because the chief economist failed to spot the global recession, was not irrational or perverse in not rewarding such conduct with a bonus.

Although Norilsk won the case, its managers will have spent time on the case that they will not get back, and there will be some irrecoverable legal costs.  The easy way to prevent claims for the failure to award a performance bonus is to make such targets measurable.  If Dr Humphreys had been required to get within, say, 10% of the nickel price before getting a bonus, his arguments would have failed even sooner.  However this may have been a difficult thing to negotiate, and perhaps the parties thought that these circumstances would never arise.  As it turned out, Norilsk retained the power to decide the bonus, so long as they did not do so in a stupid manner.