23
Aug
21
Articles, Travel & Cross Border Claims
The Weekly Roundup: the Times Change Edition

We remember the Good Old Days when Augusts were Augusts and 1CL jumped into the chambers charabanc for days out in Seahouses (for the souvenirs), Clacton (for the Amusements) and Porthcawl (for the Elvis festival, obviously – we’re reliably informed that our Hound Dog has to be seen to be believed). But no more! August this year has been a blur of judicial activity, and this week is no exception. Practitioners in all fields will be aware that the long-awaited recommended changes to solicitors’ Guideline Hourly Rates have now been approved by the Master of the Rolls, and will be implemented from 1st October 2021. The new Guide is to be found here.  Elsewhere, the statement of intent for progressing claims cooperatively between the Association of Consumer Support Organisations and the Association of British Insurers has come to an end, and from now on there is likely to be less flexibility around time limits and limitation periods, although some practices, such as remote rehabilitation and medicolegal appointments, are likely to continue, at least in some cases. Meanwhile, the pandemic continues to give rise to jurisdictional issues, and the behaviour of some litigants continues to vex their more ethical representatives.

 

Risk of irreconcilable judgments now not a ‘trump card’ when determining issues of forum conveniens

Coming only a few months after Teare J’s decision in PJSC v Mints [2021] EWHC 692 (Comm) (for which see Conor Kennedy’s article here) the High Court has again refused jurisdiction on forum conveniens grounds – despite related proceedings already being underway in England.

Background

The background to VTB Commodities Trading DAC v JSC Antipinsky Refinery & Ors [2021] EWHC 1758 (Comm) is complex, but in essence involves a claim for breach of contract for failure to deliver certain oil products or reimburse prepayments for the same. VTB, a commodities trader, entered into a series of Offtake Contracts and Prepayment Agreements with Antipinsky, a (now insolvent) operator of a large Russian oil refinery. By January 2019, VTB’s prepayments amounted to nearly €200m relating to 22 expected shipments of vacuum gas oil (“VGO”). In February 2019 however, VTB discovered that Antipinsky was, in fact, shipping VGO cargoes to Petraco, a Swiss oil trader.

VTB commenced multiple LCIA arbitrations against Antipinsky in April 2019. At the same time, VTB applied to the English High Court, under section 44 of the Arbitration Act 1996, for a worldwide freezing order against Antipinsky and a mandatory interim injunction requiring it to deliver a particular VGO cargo (“the Cargo”) to VTB, pending final determination of VTB’s claims in arbitration.

Both the freezing order and injunction were granted. However, in May 2019, Petraco intervened on the basis that it was entitled to the Cargo. Ultimately, the parties reached a compromise under which the freezing order and injunction were set aside, The VGO cargo was sold and the proceeds were paid into court. Directions were given for an expedited trial in order to ascertain the rights and obligations of VTB, Antipinsky and Petraco in respect of the VGO cargo (“the Cargo Trial”). That trial is yet to take place.

In its pleadings in the Cargo Trial, Petraco relied upon contracts between Antipinsky and Machinoimport and onward sale contracts between Machinoimport and itself to demonstrate title to the Cargo. VTB argued that these contracts were void, as a matter of Russian law, as they were entered into in bad faith. In particular, VTB alleged that Antipinsky and Machinoimport were engaging in a fraudulent ‘double selling scheme’. In addition, VTB alleged that Sberbank, which provided finance to Antipinsky, and Machinoimport had made fraudulent representations to induce VTB to make further prepayments in this period.

In August 2019, VTB applied to join Machinoimport and Sberbank as Part 20 Defendants to the Cargo Trial. The application was granted by Teare J in May 2020. Sberbank and Machinoimport applied to set aside that order, by way of a challenge to jurisdiction.

Disposal of the jurisdictional challenge

CPR Part 20 permits a defendant to bring counterclaims against a claimant, or additional claims against any person (whether or not they are already a party).

Cockerill J concluded that because the Cargo Trial concerned a claim by VTB for damages under a cross-undertaking, VTB was not, in substance, a defendant in the Cargo Trial (at [156]) and as a result, could not avail itself of Part 20. It followed that the court did not have jurisdiction to permit the claims against Sberbank or Machinoimport, and the applicants’ challenge succeeded.

Although this disposed of the application, Cockerill J indicated that in any event, she had considerable doubt (though did not decide) whether the Court even had jurisdiction to add Part 20 defendants to an arbitration claim (at [158] to [166]) given the Court’s more limited, supervisory function over ongoing arbitrations.

Forum conveniens

As the final nail in VTB’s coffin, Cockerill J indicated that, even if she had been prepared to exercise her discretion to permit claims against Sberbank and Machinoimport, she would not have permitted service outside the jurisdiction under CPR r.6.37(3), as she was not satisfied that England was the proper forum for the claims.

The Court accepted that there would be a risk of irreconcilable judgments on certain common factual aspects of VTB’s case against Petraco, Sberbank and Machinoimport if it they were not resolved in the same forum. However, she found that the existence of the Cargo Trial did not operate as a ‘Trump Card’, empowering VTB to bring all of its claims within the jurisdiction.

Rather, Cockerill J observed that the substantive dispute was ‘a truly Russian case’, given, among other things, the location of the parties, likely location and language of the evidence, and complex issues of Russian law at its centre. In this context she found that the location of ‘proceedings accessory to now defunct arbitrations’ was of little weight when balancing the various factors to determine the appropriate forum (at [228]). In light of this, Cockerill J found, ‘the answer could only be that Russia is forum conveniens’ (at [243]).

Comment

The balancing act performed by courts when determining forum conveniens is, of course, highly fact-specific, but the decision is an important reminder that parallel proceedings – and the consequent risk of irreconcilable judgments – is but one factor, and does not necessarily assume great (let alone paramount) importance. Parties must carefully analyse the degree and materiality of any overlap between claims and the likelihood and practical consequences of irreconcilable judgments being arrived at in different jurisdictions.

About the Author

Called in 2010, Tom Collins is ranked in the Legal 500 as a specialist in Travel Law. He has considerable experience across a wide range of travel and private international law disputes and has advised claimants and defendants in multi-party actions.

 

Terminating Conditional Fee Agreements: When and Why

His Honour Judge Cadwallader, in Escalate Law Limited, Bermans (2012) Limited v Kennedy [2021] 8 WLUK 99, has recently given guidance as to when and why conditional fee agreements may be terminated and costs sought from the lay client.

The first Claimant litigation funder and the second Claimant firm of solicitors sought to recover fees and disbursements from the Defendants, their former clients. The Defendants had engaged the second Claimant to pursue a claim for professional negligence against their former solicitors (P) in respect of their purchase of a plot of land. The first Claimant agreed to provide funding for the litigation. The Defendants entered into a conditional fee agreement with the second Claimant, and also agreed to the first Claimant’s terms of business and to the second Claimant’s terms set out in an engagement letter. So far, so unremarkable.

The subject of the dispute against P is, at least to this author’s eye, a bit on the esoteric side. The Defendants had bought land subject to an overage agreement, and they asserted that P had failed to advise them of significant flaws in the agreement, in particular, that the overage agreement did not allow any deductions in the calculation of the overage payment for planning, legal and building costs, and that it bound future purchasers of the land to pay the same overage payment. The Defendants had obtained planning permission to build a family home on the land, but had to commence the development within three years of the permission being granted. The second Claimant renegotiated the overage agreement so that a fixed sum would be payable either on the sale of the undeveloped land or on the commencement of the development works.

However, that done, the Defendants failed to provide to them clear instructions as to whether the development works had commenced and whether they had the funds to make the overage payment. The Claimants also asserted that the Defendants had misled them, and instructed them to act in an improper way in renegotiating the overage agreement, all of which amounted to a breach of the CFA. The Claimants therefore terminated the CFA and sought payment of their fees and disbursements amounting to over £75,000.

The Defendants argued that the claimants had not been entitled to terminate the CFA and that it had been varied to become a damages based agreement (DBA), which was invalid as it failed to comply with the Damages-Based Agreements Regulations 2013 reg.3(c), an unattractive argument if ever there was one.

His honour Judge Cadwallader was not impressed. He held that the CFA had not been varied so as to turn it into an unenforceable DBA. The Defendants were correct to assert that a DBA would be void if it did not satisfy the provisions of the 2013 Regulations and s.58 of the Courts and Legal Services Act 1990. However, even if the CFA had been void as modified, the court had power to sever the offending part of the contract if it could be removed without modifying or adding to the other terms; the remaining terms continued to be supported by adequate consideration; and the removal did not change the nature of the contract. Those conditions were met. Therefore, had it been necessary, the court would have severed the offending provision and allowed recovery of the base charges and disbursements in any event.

So the CFA was enforceable. The judge went on to find that the Claimants had misled their solicitors about a number of matters material to their claim against P. Furthermore, their failure to give clear instructions was deliberately misleading; they had allowed their case to be put forward on the basis that they had lost the opportunity to build multiple houses on the land, but they were never in a position to carry out such a development, not least because they did not have the money or the means of obtaining the money:

“…It is hard to resist the conclusion that…[Mr Kennedy] was prepared to say anything he thought he might get away with in order to avoid having to make the payment at that time, whilst at the same time keeping the planning permission open…”

Ouch.

To make matters worse, the Defendant had instructed the Claimants to act improperly, in instructing them to formalise the amended overage agreement with the seller in the knowledge that they would be unable to perform it. The reality was that the Defendants proposed to enter into the amended overage agreement, having made a material start on the development, and wait to be sued for the payment and then sell the land for what they could get if the seller was not prepared to compromise. To instruct the Claimants to proceed in that knowledge involved instructing them to be complicit in a lack of probity and bad faith. Those instructions were therefore improper and unreasonable, and amounted to a breach of the CFA.

“…what Mr Kennedy proposed to do lacked commercial probity, and that instructing the Claimants to proceed in that knowledge involved instructing them to be complicit in that lack of probity and bad faith. Those instructions were therefore to work in a way which was both improper and unreasonable, and amounted to a breach of the CFA…”

Ouch again.

As a result of all of this the Claimants were entitled to be paid their profit costs and disbursements in full, with interest.

The case is something of a morality tale. An innocent solicitor becomes embroiled in the machinations of a dastardly couple prepared to do or say anything to advance their own interests; he refuses to act unethically; they attempt to blame him for the resulting collapse in their case; but he triumphs, after all, due to the intervention of a kindly judge. Really, it’s enough to bring a tear to the eye. And it is also a welcome reminder that virtue is its own reward. That, and £75,000 odd in costs.

About the Author

Called to the Bar in 1997, Sarah Prager has been listed in the legal directories as a Band 1 practitioner in travel law for many years. Together with her colleagues at 1 Chancery Lane, Matthew Chapman QC and Jack Harding, she co-writes the leading legal textbook in the area, and has been involved in most of the leading cases in the field in the last decade. Last year she was named Best Lawyers’ Travel Lawyer of the Year 2020/2021 and the Lawyer Monthly Women in Law Awards 2020: Personal Injury, and she has recently been invited to join the Consultative Group of Experts to the UNWTO Committee for the Development of an International Code for the Protection of Tourists and the Admiralty Court Users’ Committee.

 

…And Finally…

Times may change, but some things are immutable. Ryanair has entered into a new spat with Which?, this one resulting from a poll conducted by the consumer group regarding whether holidaymakers would be prepared to book package holidays with various tour operators again, in the light of their track record on refunds. The 63% of Ryanair’s ‘package holiday’ customers who said they wouldn’t book with the company again said that it was because they no longer trust the company, largely, it would seem, as a result of failure to provide refunds and lack of consumer service. In response to the survey Ryanair issued a typically punchy statement:

“This is yet more ‘fake news’ from Which?. Ryanair does not market or sell package holidays and if misguided or mythical Which? survey participants claim that they will not book non-existent packages with us then this devastating news will not cost us a penny since we don’t sell any package holidays to Which?’s mythical or deluded survey participants.”

You can’t help but admire the company’s unusual approach to customer relations, although we at 1CL do wonder whether labelling our clients ‘deluded’ might not be somewhat counterproductive. Still, there’s only one way to find out…

Written by or involving: Sarah Prager, Tom Collins

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