Frustrated by Brexit? - Contentious business update - Hill Dickinson
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Spring 2019
Contentious business update
Frustrated by
Brexit?
Without doubt, Brexit is likely to have a profoundly
disruptive effect on commercial contracts. Many
businesses are reviewing/have reviewed their
contracts to ascertain whether they are still viable in
a post-Brexit landscape. Few will contain provisions
that entitle the contracts to be terminated in such
circumstances. In the recent case of Canary Wharf
(BP4) T1 Ltd -v- European Medicines Agency [2019]
EWHC 335 (Ch) the High Court looked at the issue of
Brexit for the first time and rejected an argument that
a tenant’s lease would be frustrated because of the
UK’s withdrawal from the European Union (EU).
>>> continues on page 2
When success A warning against Fail to co-operate with
isn’t a success redacting disclosable the spirit of pre-action
Page 4 documents protocols and pay the price
Page 6 Page 10
hilldickinson.com
CONTENTIOUS BUSINESS UPDATE SPRING 2019
Welcome >>> continued from page 1
Facts Frustration argument High Court decision Appeal
Welcome to the spring edition of Hill Dickinson’s
The European Medicines Agency The doctrine of frustration operates The High Court held that the lease The case gives a useful summary Permission has been granted to EMA
contentious business update. The aim of
this publication is to provide an informative, (EMA), an agency of the European to bring a contract prospectively was not and would not be frustrated of the principles of frustration and to appeal the decision to the Court of
readily understandable summary of recent Union, entered into a 25-year lease to an end because of the effect of by Brexit, even in the event of a reinforces the fact that the doctrine is Appeal. The permission was granted
Welcome
legal developments tothat
themayseason
impact onedition
your
of office premises at Canary Wharf, a supervening act. The object of no-deal Brexit. rarely successful as a result of the high on condition that EMA will continue
of Hill Dickinson’s title here
organisation.
London. The lease did not contain the doctrine is to give effect to the threshold requiring that the particular to comply with its obligations under
newsletter,
In our lead story, we which we
look at one hope
of the first you The doctrine of frustration is the
cases where the issue of Brexit has been a break-clause but was capable of demands of justice and to achieve event complained of rendered the lease pending the appeal, but that
will find of interest. equivalent of a ‘get out of jail free’
raised. Without doubt, Brexit is likely to have being assigned or sub-let. In 2017, a just and equitable result where performance ‘radically different’ from those payments are on a contingent
a profoundly disruptive effect on commercial card. These are quite rare and can only
Kind Many
regards, the UK formally invoked Article 50, injustice would result from the that which was undertaken. basis, so that if the lease is found
contracts. businesses are reviewing or have be played sparingly. In giving guidance
already reviewed their contracts to ascertain which began the legal process of enforcement of the literal terms of to have been frustrated on appeal,
whether they are still viable in a post-Brexit on the application of the doctrine, the Key points
Name Here the UK’s withdrawal from the EU. a contract where there has been a any paid rent will be the subject of
landscape. Few will contain provisions that judge gave the following guidance:
Partner,
entitle Sector
the contracts to be terminated in such EMA decided to relocate its London significant change in circumstances. The case is a useful reminder: a restitution claim to recover any
name.here@hilldickinson.com
circumstances. We review a recent High Court office to Amsterdam and wrote to its 1. Whether a contract is frustrated overpaid rent. We will report further
decision that looks at the impact of Brexit for the EMA put forward a number of • Of the principles of the doctrine
landlord, stating that it intended to depends upon a consideration of on the outcome of the appeal when
first time where the Court rejected an argument reasons as to why the lease should be of frustration and reinforces the
that a tenant’s lease would be frustrated because treat Brexit (if and when it occurred) the nature of the bargain the parties that judgment is available.
considered to be frustrated: fact that the doctrine is rarely
of the UK’s withdrawal from the European Union (EU). as an event that frustrated the lease. reached when considered in the
successfully invoked because of For further information on this topic,
We also take a look at the issue of implied duties The landlord sought a declaration in 1. Frustration of common purpose - light of the ‘event’ that is said to
of good faith which has recently come back the need to demonstrate that the please contact
before the courts again. the High Court that the lease should as a matter of EU law, EMA argued frustrate that bargain.
not be considered to be frustrated that it could not continue to occupy supervening event has rendered Moya Clifford
With wide-scale changes to disclosure coming 2. It is only if the ‘event’ renders performance ‘radically different’
into force, we consider a specific issue which by Brexit and that accordingly EMA the premises or make profitable moya.clifford@hilldickinson.com
frequently arises from disclosure, namely the the performance of the bargain from that which was in fact
would continue to be bound by all of use of them. In the circumstances,
redaction of documents. We look at a recent case ‘radically different’ in comparison to undertaken.
which emphasises the importance of exercising the covenants and obligations in the there had been a frustration of the
the deal struck that the contract will
caution when redacting disclosable documents. lease, including the payment of rent common purpose of the lease i.e. to • Where a contracting party
be considered to be frustrated.
We examine a recent decision in an unfair for the remainder of the term. provide a permanent headquarters requires some comfort that, on the
prejudice petition where the Court of Appeal
for the EMA until 2039. In terms of the two arguments put occurrence of a specified event
considered the meaning of success when
deciding what order to make on costs. forward by EMA, it was held: beyond either party’s reasonable
2. Supervening illegality – EMA argued
The ability to claim pre-action costs is one that
that the lease was frustrated by 1. Frustration of common purpose control, it will not be liable for a
frequently arises and we highlight a recent
decision where the issue of commencing court the supervening illegality of the – the Court found that there was resulting failure to perform its
proceedings to include a claim for pre-action performance of the lease. no additional common purpose contractual obligations, the issue
costs was examined.
above and beyond the construction can be specifically dealt with by use
We look at the Competition and Markets Accordingly, it argued that there was of a force majeure clause.
of the lease. It was held that the
Authority’s (CMA) powers in enforcing key no requirement to meet its obligations
consumer protection legislation against the supervening event in the present • There had been some uncertainty
secondary ticket seller, Viagogo. under the lease including, most
case was EMA’s involuntary as to whether the doctrine of
Finally, we review an interesting case where a importantly, the payment of rents due.
departure from the premises due to frustration could apply to a lease.
sporting venue obtained a permanent injunction
to prohibit touting of tickets against classes of circumstances beyond its control. It is now generally accepted that
‘persons unknown’. The lease provided for the sub- the doctrine applies in principle to
We do hope that you find this edition of letting/assignment of the lease leases.
Hill Dickinson’s contentious business update to
be of interest and helpful to you. If you have any
and although the UK’s departure
enquiries or feedback, please do not hesitate to from the EU was not specifically The judgment does not answer
contact our editor: provided for or anticipated, the whether Brexit could ever constitute
Moya Clifford wholescale relocation of EMA away a frustrating event. This question
moya.clifford@hilldickinson.com
from the premises was expressly may well turn on the timing of events
contemplated and provided for.
There could be no injustice in
and whether Brexit was ‘relatively
foreseeable’ at the time the contract ‘The doctrine of
Contents
giving effect to a provision that was
expressly contemplated.
was entered into. There may well be
cases where the parties have entered frustration is the
equivalent of a
contracts after Brexit was foreseeable
Frustrated by Brexit? 1 -3 2. Supervening illegality – even in the and can show a common purpose
event of a no-deal Brexit, it was
“get out of jail
When success isn’t success 4-5 to their contract that specifically
held that EMA would still retain the depended on the UK remaining in the
A warning against redacting disclosable
capacity to deal with immovable
free” card’
documents 6-7 EU, which will allow the frustration
property in the UK and to pay the argument to be successfully raised.
Via-not-gogo! 8-9
rent. There was no frustrating event.
Fail to co-operate with the spirit of
pre-action protocols and pay the price 10-11
Cheltenham Races: touts fall at the first fence? 12-13
Implied duty of good faith – return to sender? 14-15
Can directors be personally liable for inducing
a company to breach an employment contract? 15
Upcoming events 16
2 3
CONTENTIOUS BUSINESS UPDATE SPRING 2019
When success isn’t a success
In a recent unfair prejudice petition (Ashdown and Ors -v- Griffin and Ors [2018])
concerning a company known as Advertising Bins Ltd (AdBins), the Court of Appeal was
required to consider the meaning of success when deciding what order to make on costs.
Background The decision of the High Decision on appeal Comment
AdBins was established in 2007 to The High Court upheld the petitioners’ Court on costs Mr Griffin appealed the issue of costs Moreover, the Court of Appeal Having been granted the relief they
install cigarette bins outside pubs and first head of complaint. The controlling The parties were left to argue about to the Court of Appeal. Generally, gave greater weight to six without sought, it would have been easy for
restaurants. The idea was that the director had abandoned the interests who should pay the costs of the costs awards are at the discretion prejudice offers rejected by the the petitioners to assume that they
bins would be installed free of charge of AdBins in favour of ADL. The Court litigation. The general rule on costs of the trial judge and appellant petitioning creditors. At one stage, would be awarded their costs. The
but revenue would be generated by ordered a buy out of the company is that the losing party will usually courts will only interfere in defined the respondents had offered to pay Court of Appeal’s decision emphasises
advertisements on the bins. AdBins shares without a minority discount. On be ordered to pay the costs of the circumstances, including where the in excess of £500,000 including costs the discretion of the Court to take
only managed to secure one main paper, that was a great result for the successful party; however, the Court judge has erred in principle in his to the petitioners to settle the claim. a wider view on costs and consider
client, Addison Lee Plc (ADL). A petitioners. has an overarching discretion to make approach, or has ignored some factor Lord Justice Newey pointed out that the objectives of the parties in the
number of the shareholders and a a different order. When deciding he should have considered, or the clearly the petitioners would have litigation. Parties to litigation should
However, the sums in issue were
director of AdBins were associated what order to make about costs, decision is wholly wrong because he been better off accepting any of the consider the likely output of a claim
modest. The Court considered the
with ADL. AdBins’ charges to ADL the Court will have regard to all the did not balance the numerous relevant six offers put forward before the trial. and take a reasonable and realistic
petitioning shareholders had ‘grossly
decreased over time to such an extent circumstances including the conduct factors fairly. view on their end position to avoid a
unrealistic expectations (1) as to the Finally, the Court of Appeal
that, by March 2011, AdBins was of the parties, whether a party has pyrrhic victory. All settlement offers
viability of the business of [AdBins] However, the Court of Appeal considered that great weight could
providing advertising to ADL free of succeeded on part of its case and any should be considered carefully and
and (2) the sums which ADL ought to overturned the decision of the High not be attached to Mr Griffin’s
charge. Needless to say, the business admissible offers to settle (CPR 44.2). parties should engage in meaningful
have paid for advertising on the bins’. Court judge holding that, whilst the conduct in the costs context. Whilst
failed. settlement discussions as appropriate.
Following a hearing on quantum, it The Court of first instance ordered Mr petitioning shareholders obtained the he may have expressed arrogance,
Three shareholders of AdBins followed that ‘the shares in [AdBins] Griffin to pay the petitioners’ costs relief they sought, the value of the intransigence and ‘utter contempt’ For specialist advice regarding unfair
commenced proceedings alleging were worthless, or practically so, and all other parties were to bear shares was zero and, as such, they for the petitioners, litigants are not prejudice petitions and shareholder
unfair prejudice. The main respondent and therefore there is no value to be their own costs. The petitioners were were not successful. Lord Justice normally penalised in costs for such disputes please contact
was the controlling director, Mr Griffin. ascribed as the price for the purchase successful in their petition for relief; Newey stated that the judge at first attitudes unless they have resulted in
Kate Steele
The petitioning shareholders asserted of the shares by the respondents’. the value of the shares did not negate instance ‘was plainly mistaken in the proceedings being conducted in
kate.steele@hilldickinson.com
that AdBins’ affairs had been, and Therefore, whilst the petitioners had the petitioners’ success. Further, thinking that the petitioners were an inappropriate way.
were being, conducted in a manner won on paper, in reality the shares whilst Mr Griffin had made without the successful parties’. He reasoned
Taking all of those points into
that was unfairly prejudicial to their they were fighting about were not prejudice offers to settle the claim, that the petitioners commenced
consideration, the Court of Appeal
interests. Firstly, the respondents had worth the paper they were written on. the petitioning shareholders had good the petition in the expectation of
ordered the petitioners to pay all
allowed AdBins to provide free or reason to turn those down. Moreover, obtaining a substantial sum for their
of the costs, to be assessed on the
heavily discounted advertising space the trial judge (who sadly died before shares and, in that, they failed; they
standard basis if not agreed.
to ADL in breach of the fiduciary giving a ruling on costs) had been were denied the prize they fought the
duties they owed to AdBins. Secondly, critical of Mr Griffin’s conduct and action to win.
the respondents had deliberately not that ‘conduct…far outweighed any
sought out other advertisers for the shortcomings in conduct of this claim
bins to ensure bins were available for by the petitioners’. As such, the usual
ADL. costs order was to follow. Mr Griffin
was ordered to make a payment
on account of costs in the sum of
£150,000.
‘the shares they were
fighting about weren’t
worth the paper they
were written on’
4 5
CONTENTIOUS BUSINESS UPDATE SPRING 2019
A warning against redacting
disclosable documents
Parties to litigation are typically required to disclose documents on which they rely as Inspection by the court The decision of the High Court The High Court judge proceeded to
inspect a sample of the documents
well as documents that may adversely affect their own case or that of another party. The court cited numerous authorities The Court held that West Ham had
to determine whether they were
on the appropriateness of exercising established that there were sufficient
Documents may be withheld from inspection in certain circumstances, such as where a the court’s right to inspect documents grounds to challenge the correctness
relevant. He found that the redactions
had been properly made, though
document is privileged (e.g. communications between the party and their solicitors), and withheld from inspection pursuant to of the redactions and it was just to
some modifications or removals were
CPR 31.19. The court considered that exercise the court’s discretion to
disclosable documents may be redacted if, for example, a relevant document contains inspection by the court should be a inspect the documents. Therefore,
necessary to ensure consistency
and intelligibility. E20’s lawyers were
some irrelevant material. last resort and, where the documents the situation fell within the fourth
instructed to carry out a final review
are withheld for reasons of privilege category identified above. The
to ensure relevance and consistency
or relevance, agreed that the court heavy redaction of a large number
A party wishing to dispute a claim Disclosure should proceed in the following of documents justified the Court
of the remaining 323 documents.
to withhold inspection may seek a
The parties were required to carry It was further agreed that West stages: adopting greater vigilance to ensure Whilst the Court was satisfied that
review of the relevant documents
out disclosure in January 2018. E20 Ham would identify a sample of 20 that the right to redact was not being the end redaction of documents was
by the court (CPR 31.19(5)). In WH 1. the court should consider the
disclosed 7,501 documents (with documents which had been redacted abused or too liberally interpreted. largely correct, it took a number of
Holding Ltd, West Ham United evidence produced in respect of the
further documents being disclosed for irrelevance and that the parties reviews and a number of material
Football Club Ltd -v- E20 Stadium application; The Court considered that there
subsequently as part of E20’s would endeavour to agree a process changes to the overall level of
LLP [2018], the High Court considered was an obvious risk that reviewers
ongoing disclosure obligations). Of for determining whether and to what 2. if the court is satisfied that the redactions to get there. Therefore,
the circumstances in which it may may, entirely honestly, have taken
those documents disclosed, 413 were extent those redactions had been right to withhold inspection of a E20 was ordered to pay 50% of West
be appropriate for the court to carry an excessively narrow view of the
redacted for privilege and 3,720 properly made. Those documents document is established by the Ham’s costs.
out such a review and emphasised potential relevance of documents
contained redactions which were were reviewed by a senior lawyer for evidence and there are no sufficient
the importance of exercising or of the need to disclose it to
stated to be for ‘irrelevance and/or E20 and he set out a schedule setting grounds for challenging the
caution when redacting disclosable make intelligible information that
documents.
commercial sensitivity’. out his conclusions. The reason for correctness of that asserted right,
was required to be disclosed. The Clear warning from
each of the redactions for relevance the court will uphold the right;
In July 2018, West Ham issued an possibility that errors of approach the Court
Background application under CPR 31.19(5)
was explained and it was suggested
3. if the court is not satisfied that or judgment might have occurred
that some of the redactions could In reaching its decision, the
The defendant, E20 Stadium LLP seeking further information in respect the right to withhold inspection is was borne out by the fact that
be removed in the interests of Court gave a clear warning to
(E20), owns the stadium built for the of 323 of the redacted documents. established because, for instance, modifications were made to the
transparency or to enable West Ham parties involved in litigation:
London Olympics and Paralympics in E20’s lawyers responded detailing the evidence does not establish a redactions upon the various reviews.
to understand the wider redaction ‘given the difficulties and
2012 (Stadium). the reasons for each redaction and legal right to withhold inspection,
process or because they had been Further, the Court held that the court’s suspicions to which extensive
accepting that 95 of the documents then the court will order inspection
On 22 March 2013, West Ham United made in error. reluctance to inspect documents redaction inevitably gives rise,
could be disclosed fully. of the documents;
Football Club (West Ham) entered arises strongest where documents parties who decide to adopt
West Ham continued to challenge the
into a 99-year concession agreement At the hearing of West Ham’s 4. if sufficient grounds are shown are withheld on the grounds of such an appropriate in disclosure
basis upon which E20’s documents
under which E20 granted certain application, it was agreed that further for challenging the correctness of privilege; here, significant redactions must take enhanced care to
had been redacted for irrelevance. It
concessionary rights to West Ham to steps would be taken in an attempt the asserted right then the court were on the grounds of irrelevance. ensure that such redactions
was asserted that E20’s lawyers had
use the Stadium during the football to resolve the issue over redactions. may order further evidence to be There were no viable options for are accurately made, and must
approached the exercise of redaction
season (concession agreement). Those steps included re-reviewing produced on oath or, if there is the unredacted documents to be be prepared to suffer costs
for relevance too heavy-handedly
33 documents which contained no other appropriate method of seen on a confidential basis by consequences if they are not’.
A dispute arose regarding the and with too narrow a view of what
redactions both for privilege and for properly deciding whether the right West Ham’s lawyers, as West Ham’s
number of seats that West Ham was material might potentially be relevant
other reasons. E20’s lawyers were to to withhold inspection should be lawyers were involved in a number of
entitled to use under the concession to the issues in dispute. Further, the
identify whether any of the redactions upheld, it may decide to inspect the disputes against E20 and, whilst the For further information on this topic
agreement. West Ham alleged that results of certain redactions had been
could be reduced or removed, and documents; and documents in question may not be please contact
E20 was in breach of the concession to make the disclosed parts of the
proceeded to make a number of relevant to the present dispute, the
agreement and legal proceedings documents unintelligible. 5. if it decides to inspect then having Kate Steele
changes to the redactions accordingly. documents may be relevant to other
were issued. inspected the documents it may kate.steele@hilldickinson.com
invite representations. disputes.
6 7
CONTENTIOUS BUSINESS UPDATE SPRING 2019
Via-not-gogo!
The Competition and Markets Authority (CMA) has responsibility for enforcing key
consumer protection legislation and has recently brought successful legal proceedings
against the secondary ticket seller, Viagogo, for breach of consumer protection law
pursuant to Part 8 of the Enterprise Act 2002.
Background Legal action Practical advice
Key consumer protection legislation The CMA formally launched legal The order was granted after Viagogo The CMA has written an open letter
includes the Consumer Rights Act action against Viagogo in August agreed to address all of the CMA’s targeting all secondary ticketing
2015 (CRA), the Consumer Contracts 2018. It sought a court order to make concerns which negated the need for website operators to inform them
(Information, Cancellation and Viagogo change its practices. a full, final, and what would have been of the outcomes of the CMA’s
Additional Charges) Regulations 2013 a high, profile hearing. investigations into the secondary
The CMA secured a court order that
(CCRs), the Consumer Protection ticket market and to remind them of
will force Viagogo to give all of its The order will help ensure that
from Unfair Trading Regulations 2008 their obligations.
consumers more information, notably: consumers’ rights are protected
(CPRs) and the Electronic Commerce
quickly without recourse to further For the avoidance of doubt, if a
(EC Directive) Regulations 2002 • informing ticket purchasers if there
action. In particular, it is hoped that website facilitates the resale of tickets,
(ECRs). The CMA has a mandate is a risk that they could be refused
the directed practices will ensure then it is considered a secondary
to enforce this legislation through entry at the door of an event;
that Viagogo does not repeat ticket provider.
the courts, and where appropriate,
• informing customers which seat historic failures to correctly inform its
obtain additional measures to improve The CMA has recommended that
they will be allocated in a given customers of the face value of tickets
consumer choice, ensure compliance the following steps are to be taken
venue prior to purchase; bought online.
with the law or obtain redress for by secondary ticket websites to
consumers. • providing information in respect The order against Viagogo followed ensure that they adhere to consumer
of who is selling the ticket to allow formal commitments provided by protection law:
Viagogo and other secondary ticket
customers the benefit of enhanced other large secondary ticketing
sellers have often been criticised • Make checks before people can list
rights; websites to issue better information
for providing the platform for touts tickets;
• prohibiting the disclosure of about the resale of tickets.
to harvest tickets and exploit high • require sellers provide important
demand by charging inflated prices. misleading information about the CMA- next steps information before they can list
In June 2018, FIFA filed a complaint availability and popularity of an
As of January 2019, Viagogo (together tickets;
against Viagogo in respect of sales event;
with StubHub and Ticketmaster) were • give important information to buyers;
of World Cup tickets in Russia. Such • facilitating the recovery of monies all required to have overhauled their
high-profile complaints coincided pursuant to Viagogo’s guarantee • take action when notified of a
processes.
with the CMA’s investigation into when things go wrong; and problem;
Viagogo and other secondary ticket The CMA is now undertaking a
sellers regarding alleged breaches of • preventing the sale of tickets where comprehensive review of all of the • review the provision of guarantees;
consumer protection law. Despite the there are ownership issues. changes each website operator and
threat of court action, CMA confirmed has made to ensure that they have • accurately confirm the availability
that Viagogo had failed to make all fully complied with the formal and popularity of tickets.
necessary changes and subsequently commitments given to the CMA. This
took appropriate legal action. will be followed by annual reviews. These steps are not intended to be
Once complete, the reviews will be exhaustive and are no substitute
reported by the CMA. for legal advice. All ticket providers
should review their practices to ensure
If the required changes have not taken compliance with the law.
place, the CMA has confirmed that
‘CMA confirmed that it will take further action. If Viagogo
fails to comply with the court order,
For more information on these issues,
please contact:
Viagogo had failed to the company could face a fine and/
or certain individuals could face
Jon Scally
jon.scally@hilldickinson.com
make necessary changes’ imprisonment.
8 9CONTENTIOUS BUSINESS UPDATE SPRING 2019
Fail to co-operate with the spirit
of pre-action protocols and pay
the price
In a recent High Court decision John Ayton -v- RSM Bentley Jennison & Ors [2018] EWHC
2851 (QB) the issue of commencing court proceedings to include a claim for pre-action
costs was examined.
Background The appeal
The claimant (Mr Ayton) received £103,576.57 into court. RSM continued Mr Ayton appealed against the costs She ordered an interim payment of
investment advice from the to defend the remainder of the claim order. On appeal, the High Court held £430,000 to the claimant in respect of
defendants (RSM), a reputable firm and pleaded that it had no obligation that Mr Ayton was justified in issuing his costs, based on assessment at 60%
of accountants, and advanced the to pay any of Mr Ayton’s pre-action and pursuing a claim to recover his of the total bill (excluding the success
sum of £150,000 for a Russian oil costs. pre-action costs in circumstances fee and ATE premium elements, to which
investment. It is fair to say that Mr where RSM had acted unfairly in 40% only had been applied), which would
The matter proceeded to trial and
Ayton received no return on his refusing to pay and refused several of allow for the prospect of a significant
judgment was awarded in Mr Ayton’s
investment and also lost the principal the claimant’s Part 36 offers. reduction on taxation.
favour in the sum of £119,578.22
sum. Mr Ayton did eventually receive
(including interest), but dismissed Mrs Justice May in the High Court The impact
£50,000 in stages from a third
his car upgrade claim. In respect of emphasised that the professional
party, but the sum of £100,000 The High Court’s decision emphasises the
costs, Mr Ayton was awarded 70% of negligence pre-action protocol
was unrecovered in respect of his potential significant costs implications
his costs up to the date of the Case ensured that the onus to avoid the
investment. of the parties’ failure to co-operate with
Management Conference, but was commencement of proceedings was
the spirit of the pre-action protocols and
Mr Ayton served a letter before action ordered to pay 80% of RSM’s costs on both parties. She considered that
refusal to accept Part 36 offers prior to
on RSM pursuant to the professional thereafter up to and including the trial it must have been obvious to RSM
the commencement of proceedings.
negligence pre-action protocol date. from the outset that an investigation
claiming £100,025 for damages, plus
Interestingly, RSM had ignored a
into serious allegations against a Importantly, the High Court’s decision ‘the onus to avoid the
interest and his legal costs.
RSM responded by sending a cheque
number of Mr Ayton’s Part 36 offers
prior to trial, but it was held that it
reputable professional firm would
incur significant costs and that RSM
provides reassurance to claimant
parties that they can issue a claim solely commencement of
in the sum of £100,025 plus interest to would have been unjust to apply the
had acted unfairly in refusing to pay
any of Mr Ayton’s pre-action costs.
in pursuit of their pre-action costs
despite the fact that the defendant has proceedings was on
Mr Ayton, but refused to pay any of normal costs consequences following
his legal costs. RSM’s position was that RSM’s failure to beat Mr Ayton’s offers, Mrs Justice May concluded that the
offered full payment of their damages.
The decision is crucial for claimants
both parties... the only
it had no obligation to pay Mr Ayton’s
legal costs under the professional
and considered that Mr Ayton in
pursuing his claim for a car upgrade
only option left for a claimant where
a pre-action offer is made to pay
in circumstances where they are put
to considerable time and expenses in
option left for a claimant
negligence pre-action protocol and
there was no mechanism for Mr Ayton
to trial at a disproportionate expense
was an abuse of process.
damages by a defendant, but there is
a persistent refusal to reimburse legal
complying with relevant pre-action where a pre-action offer
protocols and investigating the viability
to seek payment of those costs where
RSM had tendered the full amount of
costs is to commence proceedings.
She expressed the view that any
of their claims. The ruling ensures that is made to pay damages
his claim. concerns RSM may have had about the
uplift under the relevant conditional
claimants should not be left out of pocket
in relation to their pre-action costs where by a defendant, but
Mr Ayton returned RSM’s cheque and
issued proceedings claiming £100,000
fee agreement, the rates applied, the
a defendant has effectively conceded the
claim.
there is a persistent
amount of hours claimed and any
for damages, plus some £1,500 for
consequential loss and expense,
failure to engage with the professional For further advice or information on pre- refusal to reimburse
£30,000 in relation to a car upgrade
and his legal costs. RSM responded
negligence pre-action protocol could
have all been challenged following
action protocols and costs please contact
John Quicler
legal costs is to
to the proceedings by filing a defence
a detailed assessment and were not
proper reasons for RSM refusing to
john.quicler@hilldickinson.com commence proceedings’
pleading tender before claim and paid
remit payment.
10 11CONTENTIOUS BUSINESS UPDATE SPRING 2019
Cheltenham Races: touts fall
What about the punters?
The injunction was made against touts or the website of the claimant and racecourse.’ Given the sums involved
and their accomplices. Those planning have been made aware that the effect in ticket touting operations, other
at the first fence?
on selling tickets to touts should of the terms and conditions made venue owners affected by similar
watch out, as they may be deemed ticket touting an activity which was issues may well sit up and take note.
to be engaging in a commercial or not part of the invitation extended by
If you would like to know more about
trading activity and come within the the claimant.’
obtaining injunctions to prevent
scope of the injunction.
In April 2019 Jockey Club Racecourses Limited (JCR), the owner of 15 racecourses Injunctions for other touting or other activities then please
The judge did not consider the contact our commercial litigation
sporting venues?
nationally including Cheltenham and Aintree, obtained a permanent High Court injunction position of individual punters who team on 0161 817 7200.
maybe have a spare ticket and try A key area of discussion in the
to prohibit touting of tickets at Cheltenham Racecourse. The permanent injunction followed to sell it but the judge hearing the judgment was the classification of the Joseph Cooper
joseph.cooper@hilldickinson.com
on from a temporary/interlocutory injunction which was granted in October 2018. interlocutory injunction did not touts at Cheltenham as trespassers.
think that they would be affected as Racecourses are, in general, more
long as such sales were not ‘in the likely than other sporting venues to
have areas of their grounds that touts
The injunction places restrictions JCR’s obligations to ‘persons unknown’ course of any business transaction’.
on classes of ‘persons unknown’ However, clarity on this issue would be can enter easily in the absence of
This is the first time a permanent injunction has been granted to prevent ticket physical barriers.
should they be engaged in selling beneficial as it may well be possible
touting on a racecourse against persons unknown on the grounds of trespass to
or attempting to sell tickets and/or to argue that any sale whatsoever, Other venues such as football grounds
JCR’s property and in her judgment Miss Penelope Reed QC detailed a number
badges, buying or attempting to buy where money changes hands, is a or music venues may face difficulties
of reasons why he saw fit to grant the injunction, which were:
tickets and/or badges, or assisting ‘business transaction’ falling foul of trying to obtain an injunction as those
in those activities at Cheltenham 1. It had been demonstrated beyond 3. On the evidence there was a real the injunction. The judge said: ‘If ticket touting their tickets often do so on
Racecourse without prior written doubt that ticket touting on the problem with touts which caused touts enter the racecourse with a public streets outside the venue,
consent of JCR. racecourse’s own land was contrary not only financial loss to JCR but view to ticket touting, which is clearly meaning they may not be actually
to the terms and conditions on also a nuisance to the race going contrary to the terms and conditions trespassing.
We cannot imagine that written
which tickets were sold. The terms public. of entry applied by the claimant, they
consent will be forthcoming for It is interesting that the judge
and conditions of the racecourse do so as trespassers. In the unlikely
your average ticket tout, and with 4.The application for an injunction was accepted the evidence that the
provided that ‘no tickets shall be event they enter with an innocent
imprisonment, fines and seizure of supported by the local authority obtaining of the interlocutory
(a) transferred, sold or offered purpose, if they start to buy and sell
assets the potential penalties for (Cheltenham Borough Council) and injunction in October 2018 had
for sale:(i) if prohibited by law;… tickets contrary to the terms and
a contempt of court arising from the police. ‘a remarkable effect of almost
(iii) in the course of any business conditions which clearly would have
breach of the injunction, JCR will hope eradicating the practice from the
transaction whatsoever (including 5. Other attempts to control ticket come to their attention at that point,
that this will put an end to touting
sales to or by any ticket tout)’. touts with the assistance of the they would be acting in excess of the
at Cheltenham once and for all, as
police and Cheltenham Borough permission given to them to be on the
it is said to have cost £1,000,000 - 2. A legal principal had been
Council had failed. racecourse.
£1,500,000 in revenue last season established in the criminal case of
alone. R -v- Jones (John) [1976] 1 WLR 6. There was a real prospect that if It also seems clear to me that anyone
672, that a person who is given a permanent injunction was not carrying out ticket touting would
permission to enter premises for a granted that the trespass would either per se know that this was
purpose and enters in excess of the continue. not an act which is allowed by the
permission is a trespasser. Therefore, racecourse, or would have seen tickets
‘very arguably’ any tout entering the
racecourse for buying and selling
tickets does so as a trespasser.
12 13CONTENTIOUS BUSINESS UPDATE SPRING 2019
Implied duty of good faith – Can directors be personally
liable for inducing a company to
return to sender? breach an employment contract?
Antuzis & Ors -v- DJ Houghton Catching Services Ltd & Ors [2019] EWHC 843 (QB)
The issue of implied duties of good faith has recently come back before the courts again. The High Court has held that a director can potentially be personally liable
for inducing a company to breach an employment contract, where the
In Bates -v- Post Office Ltd (No.3) [2019] EWHC 606 (QB), the High Court held that the breach has a statutory element, which may in turn suggest that the director
liability, payment, termination and suspension provisions of a contract were subject to an has failed to comply with their statutory duties to promote the success of the
company and exercise reasonable care, skill and diligence.
implied duty of good faith.
Legal background
Facts What amounts a relational contract? What does this decision The general principle is that a company director is not personally liable for
inducing breach of contract by that company, if the director is acting bona
The case involved more than 500 The judge said that whether a contract was relational depended on the mean for commercial fide within the scope of his authority. In determining if the director’s actions
claimants who were sub-postmasters circumstances of the relationship, defined by the terms of the agreement in its parties? are bona fide, the focus is on the director’s conduct and intention in relation
responsible for running Post Office commercial context. Relevant characteristics in this case included some of the
Whilst the decision does not create to his duties towards the company - not towards the third party.
branches across the UK. The claims following considerations:
any new precedent, it is subject to Directors are subject to a number of duties under the Companies Act 2006,
were for damages arising from
the general criticism that has been including a:
an electronic point of sale system 1. There were no express contract 6. The parties put trust and confidence
advanced previously namely that the
introduced by the Post Office. The terms that prevented the duty of in one another, though not the kind • duty to promote the success of the company (s172): ‘a director of a
implication of a general good faith
claimants claimed that defects good faith from being implied. of trust and confidence found in company must act in the way he considers, in good faith, would be most
obligation is too unclear. How can a
in the software package caused fiduciary relationships. The judge likely to promote the success of the company…and in doing so have
2. These were long-term contracts. commercial party have any certainty
unexpected shortfalls and accounting found it was essential for the Post regard…to: (a) the likely consequences of any decision in the long term; (b)
Both parties intended each in drafting contractual terms if the
discrepancies which under their Office and sub-postmasters to trust the interests of the company’s employees…(d) the impact of the company’s
appointment as sub-postmaster courts can come along after the event
contracts with the Post Office the each other. He also noted that trust operations on the community and the environment; and (e) the desirability
to be a long-term relationship. and impose a more wide-ranging
claimants had to pay in full to the Post was ‘integral to almost all of the Post of the company maintaining a reputation for high standards of business
Long-term relationships are usually obligation of good faith? It is clear
Office. They claimed damages for Office’s activities carried out in a conduct; and
indicative though not determinative from this decision and preceding
financial loss, personal injury, deceit, branch between the sub-postmaster
of relational contracts. decisions that the implication of a • duty to exercise reasonable care, skill and diligence (s174): ‘a director of a
duress, unconscionable dealing, and members of the public’.
general duty of good faith will be the company must exercise reasonable care, skill and diligence…’
harassment and unjust enrichment. 3. The parties intended their roles to
7. The contract involved a high degree exception rather than the rule.
be performed with integrity and A company secretary is under a comparable common law fiduciary duty to
Implied duty of Good Faith fidelity to their bargain.
of communication, cooperation and
One chink of light may be for parties
predictable performance based on act bona fide in the interests of the company.
We have looked on a number of to expressly exclude the implication
4.The parties were committed to mutual trust and confidence, and
occasions in this publication at the
collaborating to perform the expectations of loyalty.
of a general duty of good faith, Factual background
developing case law on implied duties but this may be a difficult term to The claimants, Lithuanian nationals, worked as chicken catchers, having
contract.
of good faith. The current state of the Clearly what amounts to a relational get agreement on. For parties that been trafficked into the UK, on the promise of decent paying work. Their
case law is that there is no general 5. The spirits and objectives of the contract will depend to a large contract on standard terms, ways to employment conditions were exploitative. They worked extremely long
requirement for good faith under venture could not all be expressed in degree on the facts of the particular avoid this potentially becoming an hours (often many more than as recorded on their payslips), for which they
English contract law, nor is a general a written contract. case. issue are to (i) go as far as possible were paid less than the statutory minimum. They were required to sleep
duty to act in good faith normally to make the terms objectively fair in the back of a mini bus whilst being transported between farms. The
implied in a commercial contract. and reasonable (ii) advise parties to company failed to pay them holiday pay, and often withheld their pay as a
However, in certain circumstances Decision take independent advice and (iii) get form of punishment. When they were paid, they were frequently subjected
a term may be implied to impose a The judge concluded that the signed approval of the terms. to unlawful deductions for accommodation (above the amount permitted
specific or (more rarely) general duty contracts between the Post-office and by the national minimum wage regulations) and work-finding fees. The
For further information about this
of good faith, particularly where the the sub-postmasters were relational High Court considered their claims at a preliminary issue trial and summary
issue please contact
contract gives one party a discretion contracts and a general duty of good judgment application. The key issue before the Court was whether the
or is a long-term ‘relational’ contract faith would be implied for that reason, Moya Clifford
company’s sole shareholder and director, and the company secretary, could
as was found to be the position in the ‘where it was in accordance with the moya.clifford@hilldickinson.com be personally liable for inducing the company to breach the claimant’s
present case.. presumed intention of the parties’. employment contracts.
>>> continues on page 16
14 15CONTENTIOUS BUSINESS UPDATE SPRING 2019
>>> continued from page 15 If you would like to know more about us,
or any other services we provide
please visit our website or contact:
High Court decision Fiona Parry
The High Court held that the director and company secretary were not acting Head of Commercial Litigation
bona fides vis a vis the company because they did not honestly believe that fiona.parry@hilldickinson.com
they were paying the minimum wage, overtime and holiday pay, nor that they +44 (0)151 600 8528
were entitled to make deductions and withhold payments for accommodation
Editorial contact:
costs and work-finding fees. By inducing the company to commit statutory
breaches of employment law, the director and company secretary had ruined Moya Clifford
the reputation of the company, as well as causing it to lose the gangmasters’ Professional Support Lawyer
licence it needed to employ the workers. moya.clifford@hilldickinson.com
The High Court judge held ‘I am in no doubt whatsoever, having heard the +44 (0)161 817 7254
evidence, that both of them ‘actually realised’ that what they were doing
involved causing [the company] to breach its contractual obligations towards
the claimants. What they did was the means to an end. There is no iota of
credible evidence that either [of the] defendants possessed an honest belief
that what they were doing would not involve such a breach.’ They were
therefore personally liable for inducing the company to breach the employment
contracts of the claimants.
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