Litigation and Dispute Resolution Review - September 2021 - Allen & Overy
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Litigation and Dispute
Resolution Review
September 2021
allenovery.com
Contents
Contract 3 Matthew Rogerson (t/a Cottesmore Hotel, Golf
and Country Club) v Eco Top Heat & Power Ltd
When lawful acts can (and cannot) constitute
[2021] EWHC 1807 (TCC), 2 July 2021
economic duress
Pakistan International Airline Corp v Times Travel Privilege 13
(UK) Ltd [2021] UKSC 4
Without prejudice: privilege considerations in
settlement discussions concerning multi-
UK Supreme Court: liquidated damages
jurisdictional disputes
survive termination
AutoStore Technology AS v Ocado Group Plc &
Triple Point Technology, Inc v PTT Public
ors [2021] EWCA Civ 1003, 7 July 2021
Company Ltd [2021] UKSC 29, 16 July 2021
Litigation privilege not lost despite party
Exclusion clauses under UCTA and
deceiving a third party as to its true purpose in
incorporating standard terms: a five-star
asking for information
lesson
Victorygame Ltd v Ahuja Investments Ltd [2021]
Phoenix Interior Design Ltd v Henley Home [2021]
EWCA Civ 993, 5 July 2021
EWHC 1573 (QB), 9 June 2021
Tort 17
Crime 7
New legal test for professional negligence
Threat of follow-on civil claims against
companies suffering cyberattack dampened Manchester Building Society v Grant Thornton
by recent court judgment [2021] UKSC 20, 18 June 2021
Warren v DSG Retail Ltd [2021] EWHC 2168, 30
Litigation Review consolidated
July 2021
index 2021 21
Disclosure 9
Amy Edwards
Disclosure Pilot Scheme: “control” over third Senior Professional Support Lawyer
party documents Litigation – London
Tel +44 20 3088 2243
Unicredit Bank AG v Euronav NV [2021] EWHC amy.edwards@allenovery.com
1753 (Comm), 11 June 2021
Evidence 11
Changing expert witness only allowed on
disclosure of previous expert’s views
2 Litigation and Dispute Resolution Review | 2021Contract
When lawful acts can (and cannot) constitute economic duress
Pakistan International Airline Corp v Times Travel (UK) Ltd [2021] UKSC 4
Even though economic ‘lawful act’ duress exists in English law, its scope in contractual negotiations is
“extremely limited”. To set aside a contract under lawful act duress, the defendant must have applied
illegitimate pressure on a party which causes that party to enter into a contract. Bad faith is not,
without more, enough to trigger economic duress. There must be something more morally
reprehensible. The commercial pressure exerted by the large airline on a small ticketing agent, no
matter how “hard-nosed”, was not illegitimate and their agreement was not therefore voidable.
Airline secures new contract with exerted by PAC was lawful, and did not constitute
ticketing agent economic duress.
Pakistan International Airline Corp (PAC) entered Test for economic duress
into a contract with Times Travel (TT). TT acted as
The court held that there are two essential elements
the ticketing agent for the airline.
that a claimant must show to rescind a contract due
TT’s business largely depended on the ability to sell to duress:
PAC tickets. By 2012, a dispute had arisen about
i) iIlegitimate threat or pressure by the defendant;
commission that was payable by PAC. Shortly
and
afterwards, PAC gave notice to terminate its
ii) the illegitimate threat or pressure must have
existing contract with TT (the Old Agreement) and
caused the claimant to enter into the contract.
offered a new contract (the New Agreement) on the
condition that TT waive all existing claims for unpaid For economic duress to apply there is an
commission under the Old Agreement. It also stated additional element:
that if the New Agreement were signed, TT’s
allocated ticket stock would be restored. TT’s iii) the claimant must have had no reasonable
dependence on PAC was such that it felt it had to alternative to giving in to the threat or pressure.
accept the New Agreement.
It was not in dispute that TT was pressurised to
TT subsequently initiated proceedings against PAC enter into the New Agreement by PAC’s threats,
to recover the unpaid commission. TT argued that it and that it had no reasonable alternative. The court
could rescind the New Agreement for lawful act therefore only considered question (i), namely
economic duress. At first instance the trial judge whether PAC’s threat was illegitimate.
agreed with TT. The Court of Appeal allowed PAC’s
appeal, holding that lawful act economic duress Illegitimate threat or pressure rare in
does not apply where a party uses lawful pressure commercial dealings
which, in good faith, it believes it can exert to The court held that illegitimate pressure is closely
achieve a desired result. aligned with the equitable concept of
unconscionability. Morally reprehensible behaviour
Supreme Court: no duress that, in equity, renders a contract unenforceable
The UK Supreme Court unanimously upheld the (under the equitable concept of an unconscionable
Court of Appeal’s decision in dismissing TT’s
appeal. The court held that the economic pressure
allenovery.com 3bargain) would amount to illegitimate pressure in ticket allocation by the defendant was a hard-nosed
the context of economic duress. commercial negotiation, it did not, by itself,
constitute illegitimate pressure. Something more
Seldom would this threshold of illegitimacy be met reprehensible was required. What does ‘more
in the context of commercial dealings. The court reprehensible’ mean? The court referred to previous
emphasised the importance of certainty in cases such as where there had been a breach of
commercial dealings, reflected in the fact that, duty by an officer of an insolvent company,
under English law, inequality of bargaining power is dishonest behaviour or misleading activity.
not enough, without more, to avoid a contract.
There is also no general duty of good faith in
Comment
contractual dealings.
It is well established that when a person is
The majority agreed that if “a person is permitted to induced to enter into a contract under the
do something, he will generally be allowed to do it pressure of unlawful acts such as threats of
for any reason or for none. In the context of violence, such person can have the contract set
contractual negotiations, this position enables aside on the grounds of duress. However, there
people to know where they stand and provides has been uncertainty about the impact of threats
certainty as to what is acceptable conduct in the to carry out a lawful act.
bargaining process but it does leave many forms of
socially objectionable conduct unchecked. Again, The Supreme Court’s ruling means that it will be
this is soundly based for judges should not, as a very difficult to apply lawful act duress in the
general rule, be the arbiters of what is socially context of commercial dealings except where
unacceptable and attach legal consequences to there is clear evidence of morally reprehensible
such conduct”. 1 behaviour. It will not apply, for example, just
because one party has a much stronger
Bad faith demand is not, by itself, lawful bargaining position than the other. Nor will it
act duress apply (according to the majority of the Supreme
Court) if a party with a much stronger bargaining
Both the Court of Appeal and Lord Burrows (in his
power extracts payment from an assertion in bad
dissenting judgment) held that lawful act duress
faith of a pre-existing legal entitlement which it
applies where a lawful demand is made in bad faith.
knows/believes to be incorrect.
However, the majority of the Supreme Court
rejected this view. “A ‘bad faith demand’ based on The line between bad faith (not enough for
an asserted pre-existing entitlement may not be a economic duress) and morally reprehensible
rare occurrence in commercial life. Discreditable behaviour (enough for economic duress) may
behaviour can be a feature of commercial activity.” not always be easy to discern. Examples
referred to by the majority involved some breach
The majority preferred its own test of illegitimate
of duty or dishonesty.
conduct, ie whether the defendant’s conduct was
reprehensible. What is clear though is that arguing economic
duress in a commercial context is not for
“Hard-nosed” though not illegitimate
the faint-hearted.
In the present case, the defendant had sent a notice
to the claimant for terminating the Old Agreement. Ishmeet Kaur
Such termination would have heavily reduced the Associate
claimant’s ticket allocation. Against this background, Litigation – Litigation & Investigations –
London
the defendant negotiated the New Agreement.
Tel +44 20 3088 4591
Whilst the court recognised that the reduction of the ishmeet.kaur@allenovery.com
1
“The Use and Abuse of Unjust Enrichment” (Oxford 1991) Professor Jack Beatson.
4 Litigation and Dispute Resolution Review | 2021UK Supreme Court: liquidated damages survive termination
Triple Point Technology, Inc v PTT Public Company Ltd [2021] UKSC 29, 16 July 2021
The UK Supreme Court has held that accrued liquidated damages survive termination where the
contractor never completed the work in question.
The relevant contract was for the development of completed, but would not want the same benefit
software by Triple Point, and provided for the where the work was delayed but never completed.
payment of liquidated damages for undelivered Nor was it likely that they would intend for accrued
work “per day of delay from the due date for delivery rights to liquidated damages to be extinguished on
up to the date PTT accepts such work”. termination of the contract. Moreover the Court of
Appeal’s approach would have the effect that a
The Court of Appeal had noted that the “orthodox” contractor who badly overruns would be
position was that, if the work was never finished, incentivised never to complete the works, which did
liquidated damages accrued up to the date of not make sense. The Supreme Court considered
termination of the contract, but not after. However, that the British Glanzstoff case turned on its own
in Triple Point, the provision that the liquidated facts and established no new proposition of law.
damages were to be paid up to the date of
completion (when the works were accepted) meant The Supreme Court’s decision provides welcome
that they had no application where the contractor clarity (and finality) on the issue and represents a
never completed the works at all, and the employer return to the generally understood position on
would instead need to claim general damages with liquidated damages. If parties do wish to limit the
respect to the outstanding works. The Court of application of liquidated damages to instances
Appeal considered that the little-known case of where the work is ultimately completed, very clear
British Glanzstoff v General Accident may, in some words are likely to be required to achieve that effect.
cases, provide binding authority that liquidated
damages expressed in similar language do not Post script
apply at all. There were two other issues that the Supreme
Court addressed:
Reversing the Court of Appeal judgment, the
Supreme Court held that the orthodox position did − Thankfully the majority in the Supreme Court
apply, with the result that liquidated damages clarified that the Court of Appeal had gone down
accrued until termination even where the work in the wrong route in concluding that the word
question was never completed. The words “up to “negligence”, in the liability cap carve-out,
the date PTT accepts such work” simply provided referred only to an independent tort (ie separate
for an end-date for the payment of liquidated from a contractual breach of an obligation to
damages, and did not mean that liquidated exercise reasonable skill and care).
damages only applied where the work − On the particular wording the Supreme Court
was accepted. agreed with the Court of Appeal that liquidated
damages fell within the cap on liability.
The Supreme Court considered the Court of
Appeal’s approach to be inconsistent with Lawrence Clare
commercial common sense and the accepted Associate
Arbitration – London
purpose of liquidated damages – namely the quick
Tel +44 20 3088 2835
and certain resolution of claims for delay. It would lawrence.clare@allenovery.com
be difficult to see why parties would want to provide
for that benefit where work was delayed and
allenovery.com 5Exclusion clauses under UCTA and incorporating standard terms: a
five-star lesson
Phoenix Interior Design Ltd v Henley Home [2021] EWHC 1573 (QB), 9 June 2021
Standard terms were successfully incorporated into a contract but determined that an exclusion clause
was unreasonable under the Unfair Contract Terms Act 1977 and was therefore ineffective. The
court’s decision provides a welcome reminder of practical points and potential pitfalls for drafters of
exclusion clauses and standard terms.
Henley Homes contracted Phoenix Interior Design final proposal. The court held that whilst the terms
to provide interior design services for the were not “overleaf” or attached to the agreed
refurbishment of the five-star Dunalastair Hotel in proposal, the contract expressly stated that it was
the Scottish Highlands. Henley refused to pay the subject to the standard terms and conditions. A
balance of the contract’s price after there were reasonable person would therefore have concluded
significant delays and arguments over the quality of that this referred to the standard terms and
the furnishings provided by Phoenix. Phoenix conditions Phoenix had provided before.
brought a claim against Henley for this amount.
The exclusion clause stated: “The Seller shall be
Henley’s defence was that the amount was only under no liability under the above warranty (or any
payable on completion, which had not occurred as other warranty, condition or guarantee) if the total
Phoenix’s performance of the contract was so price of the Goods has not been paid by the due
defective. Henley also counterclaimed that they date for payment”.
were entitled to compensation for the defective
goods. In defence to this counterclaim, Phoenix The court determined that the exclusion clause was
sought to rely on an exclusion clause contained ineffective as it was not reasonable under UCTA. In
within its standard terms and conditions. Henley reaching this decision, the court’s reasons included:
submitted that the exclusion clause was not
− The clause was uncommon. It was very different
effective for two reasons:
from a more common anti-set off clause, which
− The standard terms and conditions (including would have sufficed.
the exclusion clause) were not incorporated into − The clause was “tucked away in the
the contract. undergrowth” of the standard terms and
− Even if the exclusion clause was incorporated, it conditions.
was ineffective as it was unreasonable under − The clause was “exorbitant”. A slight delay in
the Unfair Contract Terms Act 1977 (UCTA). payment or underpayment could bar all rights of
redress for the quality of goods supplied.
Henley failed with its first argument but succeeded − The clause was impracticable as it did not state
on its second. a fixed date for making the payment.
The court found that the standard terms and Alexander Davis-White
conditions were incorporated into the contract. Trainee
Litigation – Litigation & Investigations –
Phoenix had emailed an initial work proposal to London
Henley that stated the standard terms and Tel +44 20 3088 2835
conditions were “overleaf”. These terms were alexander.davis-white@allenovery.com
actually attached to the email as a separate
document. They had also been supplied in hard
copy previously. Two revisions of this proposal
followed and the terms were not included with the
6 Litigation and Dispute Resolution Review | 2021Crime
Threat of follow-on civil claims against companies suffering
cyberattack dampened by recent court judgment
Warren v DSG Retail Ltd [2021] EWHC 2168, 30 July 2021
Cyber incidents have a serious regulatory and reputational impact, and increasingly form the subject
of follow-on civil litigation. Such civil claims may be less financially attractive for claimants as a result
of this case, in which the High Court struck out certain claims against a company that had been the
victim of a cyberattack, seeking civil damages for breach of confidence, misuse of private information
and negligence. This limited the claimant’s cause of action to a breach of data protection laws.
Claimants cannot recover ATE insurance premiums for claims for breach of statutory duty, thus
making these types of follow-on claims less financially attractive.
Cyberattack and resultant alleged three broader causes of action: (i) breach of
regulatory action confidence; (ii) misuse of private information; and
(iii) common law negligence. The defendant argued
The defendant is a well-known retailer. In
that these three causes of action had no reasonable
2017/2018, it fell victim to a criminal cyberattack,
prospect of success and sought strike-out or
resulting in the installation of malware on point of
summary judgment.
sale terminals in its stores. This malware gave third
party attackers access to customers’ personal data. No general data security duty found
Following an investigation, the Information
The claimant’s case on the three causes of action
Commissioner determined that the defendant had
was unsuccessful.
breached the seventh data protection principle
(DPP7), which requires “appropriate technical and Breach of confidence/misuse of private information:
organisational measures to be taken against The claimant was unable to show that the defendant
unauthorised or unlawful processing of data”. In itself took any positive wrongful action. There was
January 2020, the defendant was issued with a no suggestion that the defendant purposely
GBP500,000 monetary penalty notice (the Notice) facilitated the attack, even if the Notice issued by
(then the maximum amount, and currently subject the Information Commissioner described failings in
to appeal). its data systems and controls.
Nature of attempted follow-on civil claims The action for breach of confidence imposes a
The individual claimant (the claimant) had negative obligation not to disclose confidential
purchased goods from one of the defendant’s information; similarly, the tort of misuse of private
stores. He claimed that his personal information information imposes an obligation not to positively
(name, address, phone number, date of birth and misuse information. They do not give rise to a
email address) was compromised in the attack, general duty to keep data secure.
and claimed GBP5,000 in damages for
distress suffered. As such, a failure to keep data sufficiently secure
from unauthorised third party access (ie an
Alongside the claim for breach of statutory duty omission) was not considered at law to be a
under the Data Protection Act 1998 (DPA 1998) sufficiently positive act to amount to a breach of
(which was allowed to proceed), the claimant confidence or misuse of private information.
allenovery.com 7Common law negligence: The negligence claim was Typically, there is significant strategic advantage to
similarly unsuccessful, on two grounds. First, there claimants bringing these now-dismissed causes of
was no duty of care: there was no need to construct action as part of efforts to recover from a company
a concurrent duty of care in negligence where subject to a data breach, as an ATE insurance
there was a bespoke statutory regime determining premium is recoverable for such privacy-based
the liability of data controllers (ie the DPA 1998). causes of action. However, if the only remaining
Second, the nature of the claimed loss was cause of action is for breach of statutory duty, ATE
distress only – while this could form the basis of a premiums will not form part of a successful
claim for breach of statutory duty under the DPA, it claimant’s recoverable costs. This may dissuade
was not sufficient personal injury to base a claim claimants from pursuing low-value litigation in the
in negligence. event of a data breach through external attacks.
Accordingly, all three causes of action were As ever, however, there will likely be attempts in
struck out. future litigation to limit the application of this case.
This could include attempts to re-characterise a lack
Breach of statutory duty claim of care for data security into some sort of de facto
remains available positive act, and limit the findings in the case to
The claimant’s claim for breach of statutory duty circumstances where the data breach arises from
arising from the alleged breach of DPP7 was not third party/external actions (rather than internally
disputed and was allowed to proceed. However, it facilitated data breaches).
was stayed pending determination of the appeal Stacey McEvoy
against the Information Commissioner’s Notice. Senior Associate
Litigation – Litigation & Investigations –
Implications for future litigation London
The decision significantly limits the legal causes of Tel +44 20 3088 3009
stacey.mcevoy@allenovery.com
action available to claimants where a data controller
company suffers an external cyberattack. Such
claims are an increasing issue for businesses and
public authorities, as the increase in criminal cyber-
activity continues, and the value of each individual
claim post-attack generally far outweighs associated
litigation costs.
8 Litigation and Dispute Resolution Review | 2021Disclosure
Disclosure Pilot Scheme: meaning of “control” over third party
documents
Unicredit Bank AG v Euronav NV [2021] EWHC 1753 (Comm), 11 June 2021
In proceedings subject to the Disclosure Pilot Scheme, a third party’s willingness to cooperate in the
provision of potentially relevant documents did not amount to a party’s “control” over those documents.
Even if a party does have “control” over third party documents, a court will be hard pressed to
circumvent the normal disclosure process.
Unicredit financed the purchase of fuel oil by Gulf, issues, and reduce the amount of documents, time
which was shipped by a vessel owned by Euronav. and costs associated with disclosure.
Unicredit claims that Euronav discharged the cargo
without its authorisation. In order for it to be “just and convenient” to grant
Euronav’s application and bypass the disclosure
Euronav applied to the court for an order that process under PD 51U, the court held that: (i) Gulf’s
Unicredit and Euronav sign a letter of consent to documents must be relevant to the Issues for
Gulf providing documents before disclosure was Disclosure; and (ii) it must be desirable for Gulf’s
due to take place. Euronav argued this application documents to be provided at this stage of the
was necessary because Gulf had indicated it would proceedings (ie prior to disclosure).
provide the documents if both parties consented.
Euronav also said that the restructuring of Gulf The court held that the relevance requirement had
meant there was a risk that any subsequent not been satisfied for the following reasons:
insolvency might make the documents more difficult
− The categories of documents sought by
to obtain.
Euronav were incredibly broad. In
The Disclosure Pilot Scheme under Practice circumstances where the Issues for Disclosure
Direction 51U of the Civil Procedure Rules have not been agreed between the parties, it
(PD 51U) applied. would be pre-emptive for the court to grant an
order requiring the provision of documents
Just and convenient which are potentially irrelevant to the issues in
The court first considered whether it was “just and the dispute.
convenient” to exercise its discretion to require − Under PD 51U, Euronav was not entitled to
Unicredit to consent to early disclosure. Extended Disclosure and, in particular, to Model
D or Model E disclosure (ie the most extensive
The court emphasised that, for the purpose of search-based disclosure models). Moreover,
disclosure under PD 51U, documents should be where Model D or Model E does apply, it only
responsive to “only those key issues in dispute, captures “documents which are likely to support
which the parties consider will need to be or adversely affect” the disclosing party’s claim
determined by the court with some reference to or defence. The court therefore considered the
contemporaneous documents” (ie Issues for extensive nature of Euronav’s disclosure
Disclosure), the purpose being to isolate the issues request to be inconsistent with the requirements
in dispute, limit the scope of disclosure to those under PD 51U, particularly in circumstances
allenovery.com 9where the issues were yet to be agreed On (ii), the court held that some, but not all, of Gulf’s
between the parties. documents might be caught by the relevant
provisions of the financing agreements. However, it
The court held that it was not desirable for the could not be said that the broad range of
documents to be provided at this early stage. documents requested by Euronav were within the
‘control’ of Unicredit.
While the court acknowledged the risk that Gulf’s
restructuring might result in documents being The court concluded that, where the claimant has
unavailable in the future, the court did not believe ‘control’ over some or all documents held by a third
there to be sufficient evidence to justify that this was party, they will be subject to the normal disclosure
a real risk. process. If the claimant does not have ‘control’ over
some of the third party documents sought, there is
Defining “control” of documents
no good reason why the court should circumvent
The court also considered whether Gulf’s the rules on third party disclosure orders. The
documents would be disclosed as part of the normal application ‘cut across’ the entire scheme of the
disclosure process under PD 51U. The court Practice Direction.
examined whether Unicredit had ‘control’ over Gulf’s
documents for the purposes of PD 51U.
Comment
Under PD 51U, ‘control’ is defined as follows: This case concerned a litigant keen to get early
access to documents held by a third party. The
“‘Control’ in the context of disclosure includes ruling shows the court being unwilling to deviate
documents: (a) which are or were in a party’s from disclosure rules where, as here, there was
physical possession; (b) in respect of which a party insufficient evidence that the other litigant had
has or has had a right to possession; or (c) in ‘control’ over the documents, the request was
respect of which a party has or has had a right to very broad and there was insufficient risk of the
inspect or take copies”. third party becoming insolvent.
Euronav submitted that Gulf’s documents were in The ruling also emphasises that a third party’s
the ‘control’ of Unicredit because: (i) there was an willingness to cooperate does not necessarily
arrangement or understanding that Unicredit could mean that a litigant has ‘control’ of all relevant
access the documents with Gulf’s consent; and/or documents held by that party for the purposes of
(ii) Unicredit was entitled to the documents pursuant English court disclosure rules.
to the financing agreements entered into between
Unicredit and Gulf. Now in its third year, this case highlights some of
the key aspirations for the Disclosure Pilot
On (i), Euronav submitted, relying on Schlumberger Scheme which, as the court put it, is intended to
Holdings Limited v Electromagnetic Geoservices AS create a “new, proportionate culture of disclosure
[2008] EWHC 56 (Pat), that where there is evidence and to strike a better balance between wider
that a ‘general consent’ has been given by a third disclosure, where appropriate, and the aim of
party to search for documents which are reducing the amount of unnecessary document
disclosable in litigation, such an arrangement or disclosure”. To this end, parties should not make
understanding exists. The court, after considering broad disclosure requests, but should instead
the factual evidence, held that Gulf’s willingness to tailor requests to only capture documents
cooperate did not equate to its consent to responsive to the Issues for Disclosure.
Unicredit freely accessing documents sought by
Euronav (distinguishing Schlumberger as being
very different).
10 Litigation and Dispute Resolution Review | 2021Elliott Glover
Associate
Litigation – Litigation & Investigations –
London
Tel +44 20 3088 1769
elliott.glover@allenovery.com
Evidence
Changing expert witness only allowed on disclosure of previous
expert’s views
Matthew Rogerson (t/a Cottesmore Hotel, Golf and Country Club) v Eco Top Heat & Power Ltd [2021]
EWHC 1807 (TCC), 2 July 2021
The English court does not like expert shopping. If a party seeks permission to change its expert, the
court is likely to order disclosure of documents evidencing the previous expert’s views as the ‘price’ of
the change, even where that would require a party to waive privilege. The jurisdiction to make such an
order can stretch back to an expert instruction given before the pre-action protocol.
The dispute arose because of a fire at Cottesmore with Dr Nagalingam, the defendant sought to
Hotel, Golf and Country Club in June 2018. The fire appoint another expert: a Ms Wilson. The claimant
broke out while the defendant was installing did not oppose the defendant’s choice of Ms Wilson.
windows at the hotel and the claimant alleged that it Instead, it applied for disclosure of various
was caused by the defendant’s negligence. categories of documents concerning
Specifically, the claimant said that one of Dr Nagalingam’s work as the condition (or ‘price’) of
Eco Top’s employees had probably started the the defendant’s change of experts.
blaze by discarding a cigarette. Eco Top denied
the allegations. Mr Alexander Nissen QC, sitting as a High Court
Judge, granted the application, ordering disclosure
Shortly after the fire, both parties retained experts to of the privileged attendance note setting out
examine the site and establish the cause of the fire. Dr Nagalingam’s views on causation. He
The defendant’s expert was a Dr Nagalingam. The identified two key principles in exercising the
experts conducted joint site visits and interviewed court’s discretion.
witnesses, following which they continued to
discuss a number of queries arising from their A true change of expert?
investigation. Dr Nagalingam did not prepare an The defendant opposed the application, stating that
expert report, but did provide his expert views on Dr Nagalingam had been instructed in the
causation to the defendant’s solicitors in October immediate aftermath of the fire for the purposes of
2018, which were recorded in a privileged taking private advice on the matter, before
attendance note. engaging in the pre-action protocol. As such, the
defendant’s instruction of Ms Wilson was not really
The claimant issued proceedings in August 2020. At a change of expert. The court was unconvinced by
the directions stage, the defendant sought these submissions.
permission to rely on expert evidence as to the
cause of the fire. However, rather than continuing
allenovery.com 11Disclosure of expert reports prepared before the on causation, either to the defendant’s solicitors
commencement of proceedings, where the expert is or to the claimant’s experts. The defendant
not instructed to prepare a report for the court, will subsequently conceded that an expert view had
not usually be ordered unless there are unusual been given to its solicitors, and did not deploy
factors at play. However, although Dr Nagalingam any evidence to suggest that such a view had
had been instructed prior to the pre-action protocol, not been given to the claimant’s experts.
the extent of his engagement and of his − Dr Nagalingam was an appropriate expert to
collaboration with the claimant’s experts went act in the matter and was as well qualified as
further than that of an expert simply employed to Ms Wilson.
provide a private assessment of the matter.
The court therefore concluded that this was a
In the absence of any convincing evidence from the case of expert shopping, justifying disclosure of
defendant to the contrary, the court inferred that the privileged attendance note containing
Dr Nagalingam had been instructed by the Dr Nagalingam’s views on causation as the ‘price’
defendant to advise on the litigation, such that the for the change of expert.
defendant’s decision to instruct Ms Wilson did
constitute a change of expert. Comment
The court’s discretion to order disclosure Although instructing an expert at the early stages
of a potential dispute can be vital in assessing
The court held that, when determining whether to
the merits of the case, the court’s judgment in
attach conditions to a party’s change of expert
Rogerson is an important reminder of the
witness, such as disclosure of the previous expert’s
possible pitfalls.
report, there was “a sliding scale with flagrant expert
shopping at one end and an unexpected need to The importance of selecting an appropriate
replace the expert for objectively justifiable reasons expert at the first attempt cannot be understated,
at the other”. The closer the circumstances to the as the court takes a consistently dim view of
former, the more likely the court would be to impose expert shopping. If a party instructs an expert
significant conditions on its approval of the change, and then wishes to change that expert, the court
such as the waiver of privilege over a document. will likely require disclosure of the original
expert’s work as the ‘price’ for approving that
The court further held that its determination of
change. This can be the case even where the
whether expert shopping had taken place would
original expert is instructed before the pre-action
“almost always have to be one reached by
protocol and can involve waiving privilege.
inference”: given the court’s express aversion to the
practice, it is “hardly likely to be patent or admitted”. It is therefore vital to be clear about the scope of
In Rogerson, the court found that such an inference the instructions of any expert retained in the
could be drawn on the facts of the case, namely: nascent stages of a dispute, and to canvass
potential experts thoroughly and effectively
− The defendant did not disclose its retainer with
before any instructions are given.
Dr Nagalingam, which could have provided
clarity on the nature of his instruction. In fact,
the defendant had initially sought to imply that David Siesage
Associate
Dr Nagalingam was actually instructed by a
Litigation – Litigation & Investigations –
third party (an implication the court found to London
be incorrect). Tel +44 20 3088 2006
− The defendant initially denied that david.siesage@allenovery.com
Dr Nagalingam had expressed any expert view
12 Litigation and Dispute Resolution Review | 2021Privilege
Without prejudice: privilege considerations in settlement discussions
concerning multi-jurisdictional disputes
AutoStore Technology AS v Ocado Group Plc & ors [2021] EWCA Civ 1003, 7 July 2021
A decision of the Court of Appeal highlights the challenges, in multi-jurisdictional disputes, of
conducting without prejudice settlement discussions.
AutoStore sued Ocado for patent infringement in A high probability of establishing
England relating to automated storage technology. your case
Ocado denied infringement and counterclaimed that
According to the majority of the Court of Appeal,
the patents were invalid. As well as in England,
Ocado had to show a high probability of succeeding
proceedings were also taking place in Germany,
at trial. This was akin to the test for an anti-suit
before the European patent office, in two states in
injunction. The reason was that if an injunction was
the U.S., and in the ITC. Ocado was claiming in the
granted to enforce the alleged agreement not to
ITC that AutoStore made certain statements about
deploy the document that would interfere with the
the scope of the invention that Ocado relied on
foreign ITC proceedings.
when designing and importing its products to the
U.S. market. To rebut this, AutoStore wanted to What agreement had been reached on
deploy, before the ITC, evidence of settlement the facts?
discussions that took place in London. Ocado
The majority held that it would expect AutoStore to
sought an injunction from the English court to
establish at trial:
prevent this.
− that by the third meeting, the parties had agreed
The crucial document was marked “CONFIDENTIAL
that “any U.S. law discussions were to be
& WITHOUT PREJUDICE PROVIDED FOR
governed by rule 408”, rather than the English
PURPOSES OF SETTLEMENT NEGOTIATIONS
without prejudice rule;
ONLY”. In the minutes to the third meeting where
settlement was discussed and for which the − this variation necessarily imported an
understanding that it would be up to a U.S. court
document was produced, Ocado’s solicitor noted
that “this meeting was a continuation of the to decide upon the admissibility of materials
confidential and without prejudice discussions discussed in London into U.S. proceedings
between Ocado and AutoStore ... and that any US based on FRE 408; and
law discussions were to be governed by rule 408 of − in those circumstances, however wide the
the rules of evidence”. This was a reference to the “without prejudice” agreement may have been, it
did not include decisions that would fall to be
U.S. Federal Rules of Evidence, Rule 408 of which
made in future U.S. proceedings.
deals with compromise offers and negotiations. FRE
408 applies to proceedings in the ITC. It has
The injunction was refused.
affinities with, but is not identical to, the without
prejudice rule under English law.
allenovery.com 13Comment show an inconsistent statement or position.
There are two bases for the English without FRE 408 provides explicit exceptions but in
prejudice rule: public policy and an general, if the settlement materials are being
implied/express agreement between the parties. offered for another purpose, to show intent or
Where the basis is public policy only, you cannot mental state, for example, the evidence can be
restrain use of the materials in foreign litigation admitted. The ITC likely will apply FRE 408 and
(The Prudential Insurance Company of America its contours to the question of materials’
v the Prudential Assurance Company Ltd [2003] admissibility at trial. From the available facts, the
EWCA Civ 1154). Ocado had therefore to rely on intended use of these materials is to
an agreement. This “agreement” is not really a demonstrate a prior position that is inconsistent
true agreement in the contractual sense, since it with the one now being taken at trial – a use of
can apply to “opening shots”. Despite its settlement materials explicitly prohibited under
artificiality it is susceptible to contractual FRE 408. If this approach is pursued, it may
analysis. Here the real question was: what had prove difficult to persuade the ITC to allow the
the parties agreed? By a majority, the court material to be admitted. If, however, the material
decided the words in the minutes meant that the can be offered for another credible and
U.S. rule applied in place of (and not in addition legitimate purpose, for example, to properly
to) the English rule. As a result, it will be for construe the claims or reliance that the ITC
the judge hearing the ITC proceedings to believes is separate from the issues of liability or
decide admissibility. amount, the materials may be admitted.
It is rare in practice for parties to specify The uncertainty of the application of FRE 408,
expressly the scope of the without prejudice however, for the parties in this matter supports
protection they want including the governing law. the view that ambiguity over the parties’
There is flexibility to be derived from this agreement on the use of settlement materials at
approach. This case may serve as a prompt to trial can have a material impact on the
reconsider whether it is better to set out in some proceedings, and therefore, clarity in the
detail the basis on which settlement discussions contours of what can (and cannot) be used
are taking place. should be determined at the outset.
The U.S., for its part, does not apply a “Without Jason Rix
Prejudice” standard to settlement negotiations, Senior Professional Support Lawyer
and its recognition of that approach through the Litigation – London
laws of comity is uncertain and fraught with Tel +44 20 3088 4957
jason.rix @allenovery.com
issues. FRE 408, and the various state
corollaries, provide the standard by which
settlement communications will be determined to Paul B Keller
Partner
be admissible in proceedings (discoverability is
Litigation – Intellectual Property –
an entirely different subject of concern in the London
U.S.). By its terms, FRE 408 limits the Tel +1 212 610 6493
admissibility of settlement communications for paul.keller@allenovery.com
the purposes of proving a party is liable (or not)
for the claims being asserted in the matter, the
amount of the damages incurred (or not); or to
14 Litigation and Dispute Resolution Review | 2021Litigation privilege not lost despite party deceiving a third party as to its
true purpose in asking for information
Victorygame Ltd v Ahuja Investments Ltd [2021] EWCA Civ 993, 5 July 2021
Legal professional privilege is absolute unless overridden by statute or the party entitled to claim
privilege waives that privilege or is estopped from claiming it. There is no principle of law that if a party
misleads a third party as to the true purpose of obtaining information, it is prevented from claiming
litigation privilege.
Litigation privilege right to maintain the privilege is lost because of a
Litigation privilege protects confidential competing public interest that outweighs it.
communications between a lawyer and its client, or
Litigation privilege maintained despite
between either of them and a third party, made for
the dominant purpose of seeking or obtaining
‘element of deception’
legal advice in connection with the conduct of The Court of Appeal rejected the defendant’s
litigation which is pending, reasonably contemplated arguments. The claimant could maintain privilege
or existing. over its communications with its former lawyers
and their insurers despite there being an
This judgment concerns what constitutes ‘dominant ‘element of deception’ as to the purpose of
purpose’ and whether privilege can be lost where those communications.
there is deception as to that purpose.
Whose purpose?
Information obtained by a deception Although not the subject of the appeal (permission
The claimant tried unsuccessfully to obtain material to appeal was refused for this ground), the Court of
from its former solicitors to assist it in its litigation Appeal confirmed that the relevant purpose for
against the defendants. The claimant therefore litigation privilege is that of the person who was the
decided to try a different tack. It sent a letter of instigator of the communication in question (who
claim to its former solicitors claiming negligence in may or may not be its author). Their purpose should
the hope it would elicit the material it had previously be determined objectively based upon all the
requested. Its former solicitors’ insurers responded evidence, including their subjective intention.
to that letter, providing various documents.
The Court of Appeal acknowledged that in Property
The claimant claimed litigation privilege over these Alliance Group v Royal Bank of Scotland (No 3)
communications on the basis that its dominant [2015] EWHC 3341 (Ch) the court had assessed
purpose was to obtain information for its litigation purpose differently. The court held in those
with the defendant. proceedings that purpose could also take into
account the information providers’ purposes (and
The defendant challenged this claim. It argued that not just the instigator’s) in circumstances where
although the dominant purpose might be satisfied, those providers were potential witnesses who had
privilege had been lost as the claimant had misled been actively deceived as to the true purpose of a
its former solicitors as to its true purpose in seeking meeting at which they provided information. The
the information (by asking for the material in a letter Court of Appeal considered that the PAG judgment
of claim in relation to a different action). If one party did not assist the defendant in this case and tightly
deliberately misleads another party as to the confined it to its facts. What was at issue in this
purpose for which information is required, and that appeal was whether the claimant had lost privilege
party provides the information, the requesting party (not whether something was privileged in the first
cannot maintain privilege over the information. The place as was the case in PAG). The material at
allenovery.com 15issue was correspondence with a third party (rather situation in which the supplier of the information is a
than a meeting with potential witnesses). There was third party (as in the present case) as it is less likely
also not the same level of deception in this case. that they will be detrimentally affected by the use
The former solicitors probably inferred that the to which it is going to be put by the person
claimant would use the material in its claim against requesting it.
the defendant and, in addition, the claimant
probably had the right to the material in any event. Comment
Deception does not mean privilege lost This judgment makes clear that ‘purpose’ in the
The Court of Appeal affirmed that legal professional context of litigation privilege (outside the PAG
privilege, once acquired, cannot be overridden by scenario) is assessed from the perspective of the
some supposedly greater public interest. The instigator of the privileged communications.
person entitled to claim privilege can, of course, Once that privilege is acquired, it is ‘bullet proof’,
waive or be estopped from claiming it, or the and can only be lost in very limited
privilege can be overridden by statute, but it is circumstances.
otherwise absolute.
Christabel Constance
The Court of Appeal noted (without deciding the Senior Professional Support Lawyer
point as it was not argued) that an estoppel might Litigation – London
be found to arise where a party deliberately lied to a Tel +44 20 3088 3841
prospective defendant to obtain information it would christabel.constance@allenovery.com
not have otherwise been obliged to give (at least at
that point in time). However, it acknowledged that it
is less easy to apply the estoppel analysis to a
16 Litigation and Dispute Resolution Review | 2021Tort
New legal test for professional negligence
Manchester Building Society v Grant Thornton [2021] UKSC 20, 18 June 2021
The UK Supreme Court has restated the SAAMCO principle in relation to damages for negligent
professional advice
The Supreme Court has restated the principles in GT negligently advised that MBS could apply hedge
South Australia Asset Management Corp v York accounting to these swaps under the International
Montague Ltd [1997] A.C. 91 (SAAMCO) for Financial Reporting Standards (IFRS), such that
determining the limits of the losses recoverable from MBS’ accounts did not recognise the volatility of the
a negligent professional advisor, overturning the fair value of the swaps. When GT informed MBS in
Court of Appeal’s own restatement in the process. 2013 that it could not apply hedge accounting,
An enlarged panel of seven Justices unanimously interest rates had fallen to historically low levels,
agreed that the losses in question were within the and thus recognising the fair value of the swaps in
scope of the relevant accountant’s duty of care, but MBS’ 2011 accounts resulted in a regulatory capital
in doing so gave three separate judgments with deficit of GBP17.9 million. Under regulatory
three distinct routes to that answer. The leading pressure to address that deficit, MBS closed out the
judgment of five of the seven Justices held that the swaps incurring GBP32.7m in close-out costs,
scope of any professional advisor’s duty of care is alongside significant transaction fees. MBS claimed
governed by the purpose of the duty, judged on an the close-out costs from GT (in addition to other
objective basis by reference to the reason why the losses not in issue before the Supreme Court).
particular advice is being given. The majority
emphasised that the distinction originally drawn in Recap – damages for negligence
SAAMCO between ‘advice’ cases and ‘information’ Once a professional advisor’s negligence has been
cases, which the Court of Appeal had held to be the established, the quantum of their liability for the
critical question, is not to be viewed as a rigid or consequences of that negligence is subject to three
binary rule. They also held that the SAAMCO hurdles or filters:
counterfactual – which asks whether in an
‘information’ case the claimant’s actions would have − Causation – is the negligent advice the factual
resulted in the same loss if the advice given had and legal cause of the loss claimed?
been correct – is simply a tool to cross-check the − Reasonable foreseeability – is the loss a
result of the objective analysis of the purpose of reasonably foreseeable consequence of the
the duty. advice being wrong, or is it too remote?
− What has become known as the SAAMCO
Accounting standards and interest principle – is the loss within the scope of the
rate swaps duty of care owed? This case concerns this third
filter.
Grant Thornton UK LLP (GT) audited the accounts
of Manchester Building Society (MBS) from 1997-
2012. During this time MBS issued a number of
fixed interest lifetime mortgages in the UK and
Spain. MBS hedged its resulting interest rate risk by
entering into certain long-dated interest rate swaps.
allenovery.com 17High Court and Court of − In contrast, in an ‘information’ case, the advisor
Appeal judgments is not responsible for the financial
consequences of the decision taken, only for the
High Court foreseeable financial consequences of the
information or advice provided being wrong. The
At first instance (see Swap close-out costs –
foreseeable financial consequences are only
causation but no assumption of responsibility
those that would not have been suffered if the
by auditors) GT accepted its advice was negligent,
correct advice or information had been provided
and Teare J found that GT’s advice was both the
– sometimes known as the SAAMCO
factual and an effective legal cause of MBS’ losses
counterfactual.
in closing out the swaps, and that those losses were
the reasonably foreseeable consequences of GT’s The Court of Appeal held that this was clearly an
negligence. Following the Supreme Court’s decision ‘information’ case; GT had assumed responsibility
in Hughes-Holland v BPE Solicitors [2017] 2 WLR for the provision of correct accounting advice only,
1029, Teare J then identified the key question for not for the decision-making process by which MBS
the court to ascertain whether the close-out costs entered into the swaps. It thus held that GT was not
were within the scope of GT’s duty of care to be liable for the close-out costs.
whether GT had assumed responsibility for those
costs, and in particular “whether the loss flowed Supreme Court – SAAMCO restated
from the particular feature of the defendant’s The Supreme Court unanimously allowed the
conduct which made it wrongful”. In doing so he appeal, holding that the close-out costs were within
rejected the distinction drawn in SAAMCO and the scope of the duty of care assumed by GT. Lord
Hughes-Holland between ‘information’ cases and Hodge and Lord Sales gave a joint leading
‘advice’ cases. Teare J held that “in the round” the judgment for the majority, holding that:
loss resulted from a business decision by MBS to
enter into the swaps, for which GT had not assumed − The scope of duty question is located within a
responsibility. general conceptual framework in the law of the
tort of negligence.
Court of Appeal
− The scope of the duty of care is governed by the
The Court of Appeal (see Swaps close-out costs: purpose of the duty, judged on an objective
auditor not responsible for financial basis by reference to the reason why the advice
consequences of decision to enter into swaps) is being given.
disagreed with Teare J on the law but agreed on the − That objective judgment is reached by asking
outcome. It held that Teare J had erred in treating what risk the duty was supposed to guard
the key question for the application of the SAAMCO against, and then asking whether the loss
principle as whether GT assumed responsibility for suffered represented the fruition of that risk.
the relevant losses. The Court of Appeal held that − The distinction between ‘advice’ and
Hughes-Holland had authoritatively restated the ‘information’ cases drawn in SAAMCO is not to
applicable legal principles. It must be decided be treated as a rigid rule, contrary to the Court
whether each case is an ‘information’ or ‘advice’ of Appeal’s reading of Hughes-Holland. Cases
case, as the scope of the defendant’s duty, and should properly be viewed as on a spectrum,
thus the measure of liability, differ between the two. not subject to a binary categorisation that is
Specifically: liable to mislead. The court’s focus is on
identifying the purpose served by the duty of
− In an ‘advice’ case, the advisor assumes
care assumed in each case.
responsibility for the decision taken, and is thus
− The SAAMCO counterfactual is a useful tool to
liable for the foreseeable financial
cross-check the result of the objective analysis
consequences flowing from that decision.
18 Litigation and Dispute Resolution Review | 2021of the purpose of the duty, but is subordinate to
Comment
that analysis and should not supplant it.
In this case, together with the separate case of
Applying that framework to this case, the majority Khan v Meadows [2021] UKSC 21 (a medical
held that: negligence case heard by the same panel of
Justices at the same time), the Supreme Court
− The purpose of GT’s advice was to establish has sought to authoritatively restate the law on
whether MBS could use hedge accounting to the scope of duty of care. The majority do so by
implement its proposed lifetime mortgages embarking on a detailed analysis of the place of
business model. the scope of duty principle within the conceptual
− GT negligently advised that it could, which framework of the tort of negligence, and re-
resulted in the relevant hedges being entered formulating the central question for the court to
into, exposing MBS to the close-out costs when ask itself when considering that principle. In
it realised in fact it could not. doing so the Supreme Court has reduced both
− That was a risk that GT’s advice was supposed the distinction between ‘advice’ and ‘information’
to allow MBS to assess, and which its cases and the SAAMCO counterfactual – which
negligence meant it failed to understand. The in previous cases had at times attained the
loss suffered was therefore within the scope status of central questions themselves – to
of GT’s duty of care, in light of the purpose of useful tools to cross-check the analysis of the
its advice. objective purpose of the relevant duty. However,
Lord Leggatt and Lord Burrows’ alternative
Lord Leggatt agreed with the conclusion of the
analyses, while leading to the same answer in
majority, but articulated his analysis of the scope of
this case, set out different conceptual
duty principle through the lens of causation. In his
frameworks that, on different facts, may lead to
concurring judgment he considered that the central
different answers (as the majority
question is whether there is a sufficient causal
acknowledged). Therefore while this case is a
relationship between what made the information or
significant restatement of law in this area, it also
advice wrong and the ‘basic loss’, ie the factually
illustrates the depth and complexity of the
caused loss. Lord Leggatt considered there was a
jurisprudential debate, itself showing that this
causal connection between GT’s negligent advice
case is unlikely to be the last word on SAAMCO.
and MBS bearing the close-out costs, as they were
caused by the lack of an effective hedging Further, in adopting a principled but open-
relationship between the swaps and the lifetime textured test, and moving the law away from the
mortgages, on which GT had negligently failed to clearer (if potentially arbitrary) distinction
advise MBS. between ‘advice’ and ‘information’ cases and the
use of the SAAMCO counterfactual in the latter,
Finally, Lord Burrows also agreed with the
the majority’s judgment may well make it harder
conclusion of the majority for reasons closer to their
for practitioners to give definitive advice in this
analysis than Lord Leggatt’s causation analysis. He
area.
concurred with the importance of identifying the
objective purpose of the duty of care in analysing its The Supreme Court also recognised that most
scope and the subordination of the SAAMCO professional advice in a financial services
counterfactual to that analysis. However, Lord context will be given pursuant to contract (unlike
Burrows placed greater emphasis on the policy the medical advice in issue in Khan v Meadows),
considerations of achieving a fair and reasonable giving rise to parallel duties of care in contract
allocation of risk between the advisor and client, and tort. The Supreme Court emphasised that its
than he did on the conceptual framework of the tort analysis as to the ascertainment of the scope of
of negligence. the duty assumed by a professional advisor
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