Welcome to the thirty-sixth edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2015
This week's caselaw:
Tidewater Marine International Inc v Phoenixtide Offshore Nigeria Ltd & Ors
Court considers the test for a respondent to a freezing order being allowed to use frozen assets to fund its defence
http://www.bailii.org/ew/cases/EWHC/Comm/2015/2748.html
Clyde & Co (Mark Walsh and Harriet Defreyne Kelk) for claimant
The claimant obtained a worldwide freezing order against the respondents. It contained the usual provision permitting the respondents to spend a reasonable sum on legal advice and representation, but that before doing so, the respondents must tell the claimant where the money is to come from. The respondents subsequently wished to use funds in one of their accounts to fund their defence (funds in another account having become depleted), and when the claimant objected, permission was sought from the court.
Males J summarised the applicable legal principles as follows:
- Payments in the ordinary course of business are allowed following the grant of a freezing order, even if that results in the defendant's assets being completely depleted before judgment. As long as the payment is made in good faith, "the court does not enquire as to whether it is made in order to discharge a legal obligation or whether it represents good or bad business on the defendant's part".
- Where the respondent has no other assets with which to fund the litigation, "the ordinary rule" is that it should be allowed to use the frozen funds to finance its defence. However, it is possible to depart from that rule, in the interests of justice.
- The respondent has the burden of proving that there are no other assets which could be used to fund the litigation. Since the court will have already concluded that there was a risk of dissipation (which is why the freezing order was granted), judges are entitled to have a "very healthy scepticism" about unsupported assertions by the respondent.
Accordingly, the court will consider whether the respondent has other assets and also whether others may be willing to help fund the litigation. This can result in the wrong conclusion being reached by the court, but Males J held that this "should not deter the court from making the best assessment it can on the material available".
Here, the court was entitled to take into account the fact that the respondents had flouted court orders and were in contempt of court. The judge held that this case was exceptional, in that not only were the respondents in contempt, but it was only because of the contempt that the proceedings were continuing. Accordingly, the overall justice of the case required the court to deny the respondents access to the funds, even if that meant that the respondents would be left unrepresented. In any event, the respondents had also failed to persuade the court that they did not have access to any other funds.
Global Maritime Investments v OW Supply & Trading
Whether an agreement to submit to a jurisdiction amounted to an exclusive jurisdiction clause
http://www.bailii.org/ew/cases/EWHC/Comm/2015/2690.html
One of the issues in this case was whether the following clause amounted to an exclusive jurisdiction clause: "With respect to any...proceedings relating to these general terms...each party irrevocably submits to the jurisdiction of the English courts".
There is prior caselaw which supports the following principle: If the clause is transitive (ie the parties submit disputes), it is exclusive, but if it is intransitive (ie the parties submit themselves), it is non-exclusive. Teare J noted that that principle has been criticised by the textbook Dicey, Morris and Collins on the Conflict of Laws (which said the principle "would appear to have practically nothing to recommend it").
Although the clause in issue here is not transitive, the judge said that "the notion that each party is free to submit a claim to the jurisdiction of a court other than the English court in circumstances where each party has "irrevocably" submitted to the jurisdiction of the English court is difficult".
He concluded that the meaning which the clause would reasonably by understood to bear is that it conferred exclusive jurisdiction on the English courts for claims relating to the general terms. Even if that was wrong, the fact that proceedings relating to the general terms had already been commenced in England, meant that parallel proceedings could not be commenced elsewhere (either now or following the conclusion of the English proceedings).
Deutsche Bank v Sebastian Holdings
Whether a foreign director could be ordered to produce documents and information because he had been temporarily in England
http://www.bailii.org/ew/cases/EWHC/QB/2015/2773.html
The claimant obtained judgment against the defendant but the judgment debt has not been paid. The claimant obtained an order under CPR r71 to examine the foreign sole owner and director of the defendant and to order him to produce certain documents, and the defendant sought to have that order set aside. In Masri v Consolidated Contractors (see Weekly Update 30/09), the House of Lords held that the English courts do not have jurisdiction to order the examination of a foreign director of a debtor company under CPR r71.
However, in this case, the claimant argued that there was nothing to prevent an order being made against a director who is temporarily within the jurisdiction and Cooke J agreed with that argument. He accepted that Masri had said nothing at all about the situation where a non-resident was served within the jurisdiction. Although care should taken when making such an order generally, in this case, it would not be extravagant or exorbitant, especially since the director was not an independent person unconnected to the English litigation and judgment debt: "There is no threshold requirement of "exceptional circumstances" for an application of the kind made here, but [the director's] direct connection with [the defendant] and his interest in every element of its financial affairs and procurement of the transfers are exceptional in nature". Furthermore, no other foreign court would be likely to grant the relief being sought here. The defendant's application therefore failed.
Other News
CPR changes which came into force on 1st October 2015 include the following:
- The court's case management powers have been amended, to include the power to hear an Early Neutral Evaluation with the aim of helping the parties settle the case. More detail about Early Neutral Evaluations can be found here:
- A new Financial List had been introduced. Claims relating, broadly, to banking transactions issued in either the Chancery Division or the Commercial Court can be heard by an authorised Financial List Judge. If the claim raises issues of general importance to the financial markets (in relation to which immediately relevant authoritative English law guidance is needed), it can follow the Financial Markets Test Case Scheme. In particularly urgent or important cases, the trial may be heard by two Financial List judges or a Financial List judge and a Lord or Lady Justice of Appeal.
- Two pilot schemes will run until 30 September 2017:
- the Shorter Trial Scheme. For commercial cases where which do not require extensive disclosure or evidence (and there are no allegations of fraud), a streamlined procedure should result in judgment within a year of starting proceedings. Different procedure rules will also apply – for example, disclosure will be limited to the documents on which a party relies plus particular documents requested by the other side. The costs budgeting rules will only apply if the parties agree.
- the Flexible Trial Scheme. The parties can agree to adopt more flexible and simplified case management procedures.
- CPR r3.1A introduces new rules on directions and procedure where one of the parties is a litigant in person.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
