(a)   to deal with more extensive disclosure; and

(b)   to participate in ADR

In Elliott Group Limited the applicants (E) sought an adjournment of their trial (which had been fixed for July 2010) against the respondents.  E claimed that the trial should be adjourned and that there should be a new timetable which would lead up to a new trial in October 2010.  E said that they had underestimated the amount of documents, particularly electronic material, which they were likely to have in their possession.  They also said that a delay to the trial would allow a structured ADR to take place. 

When considering an adjournment, Mr Justice Coulson said that the court must consider the overriding objective CPR 1.1 as to whether;-

1. the parties are on an equal  footing
2. the case is dealt with proportionately. expeditiously and fairly; and
3. a proportionate and appropriate share of the court’s resources is allocated to the case

and as to whether it may be necessary to grant an applicant’s request for an adjournment, Mr Justice Coulson said that the court must consider: 

1. the parties’ conduct and the reason for the delay;
2. the extent to which the consequences of the delays can be overcome before the trial;
3. the extent to which a fair trial may have been jeopardised by the delays;
4. the consequences of an adjournment for the claimant, the defendant and the court

Mr Justice Coulson said that it would require a very strong case for a trial to be adjourned merely because a party’s disclosure was a more extensive task than was originally contemplated – no such case existed.  Where a party is aware that disclosure is going to be an extensive exercise, any delays could be ameliorated by the devotion of greater resources to the task. 

Further, the opportunity to allow parties to litigation to settle a case was not in itself a good enough reason for an adjournment of a fixed trial date.  Once started, court proceedings have to be brought to a conclusion as expeditiously and cost-efficiently as possible.  It is not cost efficient to delay a trial or the process leading up to it on the basis that if the parties were granted a bit more time, they might settle the case.  Mr Justice Coulson said that effective case management requires the court to do not only what it can to facilitate the ADR process but also to recognise that, despite their good intentions, the parties may fail to avail themselves of a settlement opportunity and that a trial may be necessary after all.

Although ADR might lead to settlement, ADR could just as easily be used as a “stalling tactic” as in this case, an argument designed to secure the claimant more time to comply with directions.  Here, the judge was keen to adhere to the tight timetable and the avoidance of a loss of a trial date.    It was therefore held that the case could properly and fairly be prepared in the time remaining before the fixed trial date.

Therefore it can be seen that the court is faced with a balancing exercise between the obvious desirability of retaining a fixed trial date (promoting certainty) and avoiding any adjournment (which only leads to increased costs of the proceedings) and on the other hand the risk of irredeemable prejudice to one party if the case goes ahead in circumstance where one party has not had proper or reasonable time to prepare its case.  Although ADR is encouraged, it can be engaged in conjunction with, rather than in priority to, compliance with the court’s directions.

This article is jointly written by Tim Constable and Justine Ash

The Aims of Directive 2008/52/EC

 The Directive itself addresses 5 key issues:-

• Ensuring the quality of mediation
• Court intervention
• Enforceability of agreements resulting from mediation
• Confidentiality
• Limitation

However, its main aims are set out in Article 1 which include (i) to facilitate access to alternative dispute resolution (ADR) and (ii) to promote the amicable settlement of disputes by encouraging the use of mediation and by ensuring a balanced relationship between mediation and judicial proceedings.

Member states (apart from Denmark) must confirm to the European Commission details of the courts or authorities who will be competent (under Article 6(3)) to ensure the enforceability of agreements resulting from mediation, by 21 November 2010 and must bring all other provisions of the Directive into force before 21 May 2011.  This is so the Commission can publicise this information to make it easier for citizens and businesses to use mediation.

Mediating cross-border disputes

It is fair to say that cross-border disputes are more complex due to the different national laws and jurisdictions involved, as well as practical matters like culture, language and costs.  Even for skilled mediators, mediating a cross-border dispute is tricky.  As a result, all parties to a cross- border dispute need common rules they can rely on.  The Directive aims to ensure there is in place a high-quality process for resolving such complex cross-border European disputes.

Article 4 of the Directive requires Member States to encourage the development of, and compliance with, voluntary codes of conduct for mediators and mediator providers, together with other quality control mechanisms for the provision of mediation services. Member states are free to use any means they consider appropriate for complying with this.  Further, Member states are required to encourage mediation training to ensure that mediation is conducted in an effective, impartial and competent way.  Such details are left to individual member states.

In July 2004, the European Code of Conduct on Mediation was launched.  Although the Directive does not make specific reference to it, both the Centre for Effective Dispute Resolution (CEDR) and ADR Group are signed up to this Code.

“European Commission calls for saving time and money in cross-border legal disputes through mediation”

As the deadlines for implementation approach, the European Commission has published a press release (title above) reminding member states of the potential benefits of mediation.   The Commission emphasizes that the EU measures on settling cross-border disputes by mediation are important because “they promote an alternative and additional access to justice in everyday life”. It goes on to say that settling disputes and disagreements through the courts is not only costly and time-consuming but can also destroy profitable business relationships.  Member States are encouraged and should be allowed to settle cross-border disputes amicably.  A recent study published June 2010, “The Cost of Non ADR” found that based on a claim for EUR200,000 on average, where mediation is not used, there will be between 331 and 436 days of wasted time, with resulting additional costs of between EUR12,471 to EUR13,738 per case.

The press release also provides an interesting update on the progress of implementation to date. Estonia, France, Italy and Portugal have already notified the Commission that they have implemented the Directive, while Lithuania and Slovakia have provided notification of the competent courts for enforcing cross-border mediation settlements.

Article 11 also provides that the Commission must submit for review, a report on the development of mediation through the EU in order to assess the impact of the Directive.  The Commission must submit a report on these issues to the European Parliament, the Council and the European Economic and Social Committee no later than 21 May 2016 and the report may include proposals for amendments to the Directive.

The UK view

One final observation for thought.  The Jackson Report, published in January 2010,  firmly held the view that mediation should not be made compulsory in the UK courts, and whilst mediation was recognized as bringing considerable benefits, it was stated that parties should not be compelled to mediate.  The UK courts should however, encourage parties to mediate.  (please also refer to Tim Constable’s blog on Mediation – The Lord Justice Jackson review dated 14 January 2010 and Justine Ash’s blog on Compulsory Mediation – the European perspective dated 30 March 2010 for more information)

A law firm committed a fraud by collecting in 27 mortgage advances totalling £5,779,1666 from lenders none of which was applied in completion of transactions for which the advance had been made.  The Law Society intervened in the law firm’s practice and ascertained that £450,150 was paid out of its client account to a company, Habitable Concepts Ltd (“Habitable”) whose sole shareholder and director was Mr Onuiri.   

As the law firm paid out of its client account in breach of trust, the Law Society had the right to recover this money.  The Law Society made various claims against Habitable and Mr Onuiri for the return of this money. Although Habitable and Mr Onuiri served a defence, they did not appear at a trial, but it was still for the Law Society to prove its case.

The Law Society claimed for knowing receipt.  In order to establish a claim for knowing receipt, the Law Society had to prove: 

• that the receipt by Habitable was beneficial; and
• that Habitable received the payment with the requisite knowledge.

 As no direct evidence of these matters was available, the court had to assess what inferences might be properly drawn from the proved facts.

The court held that the inherently implausible nature of Habitable’s pleaded case was such to cry out for testing by cross-examination and in the absence of this, the Judge was prepared to accept the Law Society’s case.  Accordingly, Habitable knowingly received money by the law firm in breach of trust and must account as constructive trustee for the money received and the Law Society could trace into the proceeds of the payment.

Although the Law Society submitted that it could pierce the corporate veil, the court disagreed.  It needed to be proved that receipt by Habitable was a façade or device to facilitate or conceal receipt by Mr Onuiri.  Although the whole arrangement seemed deeply suspect, suspicion is not a substitute for proof. 

The court, however, held that although Mr Onuiri did not receive property in breach of trust, he nonetheless dishonestly assisted in a breach of trust.  It had to be established that Mr Onuiri’s knowledge about the payment by the law firm had to be such as to render his participation contrary to normal and acceptable standards of honest conduct.  This involved looking at his state of knowledge and then measuring his conduct in the light of that knowledge by reference to the objective standards of honest conduct. The court noted that:

•  Mr Onuiri had provided Habitable’s banking details to the law firm.
• He knew that the money was not at the free disposal of the law firm.
• He knew there was no commercial relationship between the law firm and Habitable.
• He received no explanation as to the reason for the payment.
• He made no enquiry as to the reason for the payment.
• He chose to deal with the payment for the benefit of Habitable.

The proper inference was that he was assisting the law firm to dispose of money which did not belong to it in an unauthorised manner.

This case is interesting as it confirms that where a defence has been filed, but the defendant does not appear at trial, it is still for the claimant to prove its case.  It also highlights the requirements necessary to establish a claim for knowing receipt, when it is possible to pierce the corporate veil and the necessary ingredients to establish a claim for dishonestly assisting in a breach of trust.

The Law Society of England and Wales v Habitable Concepts Limited and Mr Onuiri [2010] EWCH 1449

The legal importance of the decision is that it is the first reported authority in which commercial agents and their principals have been found to have a mutual duty of trust and confidence akin to a contract of employment.

I will write a longer post shortly.

Shortly, these are the facts. Miss Jones, “a peripatetic hairdresser”,  was 26 when she met Mr Kernott in 1980 and 3 years later they were sharing her caravan,  a year before their first child was born in 1984. In 1985 Miss Jones sold her caravan and she and Mr Kernott jointly purchased a house for £30,000.  The purchase was funded by £6,000 of Miss Jones caravan sale proceeds and an interest only  mortgage in their joint names, backed by an endowment policy, also in their joint names. Mr Kernott was to do some repairs and refurbishment at the property, principally an extension, the size and effect of which was apparently to increase the value of the property by 50% on its purchase price.  In law,  although they clearly made different initial  financial contributions, they bought it as joint tenants, without specifying their respective interests, an ommission still depressingly common today. No declaration of trust was drawn up or any form of cohabitation agreement. The judgment makes no mention of whether the parties made wills or if they did what they provided, so it is probably fair to assume that they were “paperwork lite” in their arrangements, as is so often the case.

Miss Jones and Mr Kernott had a second child in 1986. Miss Jones continued as a home hairdresser and Mr Kernott was variously an ice cream salesman or a builder or on benefits. Mr Kernott gave Miss Jones £100 a week as housekeeping and that, with her earnings, met all the household outgoings, including the mortgage and endowment payments. Mr Kernott appears to have bought the extension materials and built it.

In 1993, 13 years after their relationship started and 8 years after their house purchase, Miss Jones and Mr Kernott parted. She stayed in the house with the children. The Court of Appeal don’t tell us where Mr Kernott then went, but by 1996 he was buying a property for himself.  From the time they separated, Mr Kernott paid nothing towards the house and gave nothing to Miss Jones for the children, although he saw them from time to time. Miss Jones redecorated several times over the following years, replaced the flat roof on Mr Kernott’s extension and added a gate and fences to the property.

In 1995, the property owned by Miss Jones and Mr Kernott was put on the market, but didn’t sell. In 1996 the joint names endowment policy was surrendered and divided equally, Mr Kernott using his share as the deposit on his new house. In 2006, once the property was no longer their children’s home, Mr Kernott asked Miss Jones for his share of the value of it. In 2007, Miss Jones launched an application under the Trusts of Land and Appointment of Trustees Act 1996 (often referred to as TLATA), seeking a declaration that she owned the entirety of the property, or that if she didn’t then she had an interest both in this property and the one that Mr Kernott had subsequently bought in his sole name using part of the joint endowment policy proceeds; Miss Jones later abandoned this alternative claim before the trial judge in Southend. In March 2008, Mr Kernott served a notice of severance of joint tenancy, ostensibly converting the joint ownership to a tenancy in common in equal shares. At the conclusion of that trial in April 2008, based on his analysis of their respective financial contributions to the property over the years, HHJ Dedman concluded that Miss Jones was entitled to 90% of the value in the property and Mr Kernott the remaining 10%, a conclusion he felt able to draw from the authorities of the House of Lords in Stack v Dowden (2007) and the Court of Appeal in Oxley v Hiscock (2004) and Goodman v Gallant (1986), the major decisions on beneficial interests in property. At that time the equity in the property was assessed to be £218,300; by comparison, Mr Kernott’s equity in the house he owned in his sole name stood at around £268,000.

Unfortunately for Miss Jones, two out of the three judges hearing Mr Kernott’s appeal in the Court of Appeal, saw it differently. On their analysis, a property bought in joint names, with no express indications to the contrary, is owned equally. On their view there had been no change to that ownership over the years, notwithstanding arguments that one had contributed more financially than the other, one had done more work on it than the other, or one had (and the other hadn’t) occupied it solely for some years.

In the leading judgment of Wall LJ, following Stack v Dowden “the conveyance into joint names…created joint beneficial interests and the parties agreed that when they separated they had equal interests. There has to be something to displace those interests, and I have come to the conclusion that the passage of time is insufficient to do so, even if, in the meantime, [Mr Kernott] has acquired alternative accommodation, and [Miss Jones] has paid all the outgoings.”  Consequently, Miss Jones owes Mr Kernott around £109,000.

Unless and until the Supreme Court see it differently, this remains the approach the Courts are required to apply in such cases. It can be avoided by evidence of an agreement to the contrary, either express or to be inferred. Rather than leave it to a judge to decide, best advice must be put such agreements in place, in writing, and compare periodically the arrangements the documents envisage with what is happening in fact.

Legal costs in dealing with and fighting boundary disputes are notoriously out of line with the monetary value of the issues in dispute and the effect on neighbour relations and stress high. “Principles” take over and costs mount to £1000s before you know it.  The alternative  is for the parties to try to resolve matters by agreeing terms with eachother on the best terms possible for both parties. There might be no winner and no loser, but a solution which both parties can live with without incurring huge costs and without further souring relations.

Alternative dispute resolution can help at the outset once solicitors are involved. Parties coming together on site with a mediator and solicitors can often focus the parties’ minds on the reality of the situation. On site resolution seems the most sensible and cost effective method of dealing with such a dispute rather than lengthy correspondence, compliance with Court procedure, the associated costs and growing animosity.  A day long mediation will be money well spent  if not to resolve matters entirely then to at least narrow down the issues remaining in dispute.  If matters cannot be resolved at such a meeting, then the parties can decide whether or not they wish to litigate and proceed with litigation but should be fully aware of the potential costs liability they may incur. This is not to say neighbours who wish to fight a boundary dispute should not, nor does it trivialise the importance of issues relating to someone’s property. It can be a commercial approach to dealing with what is otherwise an expensive and emotionally exhausting experience.

The Jackson Report on litigation costs included some novelties, for example the concept of “hot tubbing”. 

Hot tubbing or “concurrent evidence”, is a method of giving evidence where both experts give evidence simultaneously and the court or tribunal chairs a discussion between them.  Hot tubbing is regularly practised in Australian Courts and international arbitration proceedings, where it is often used after cross-examination.  

In his Final Report, Jackson LJ recommended that hot tubbing should be piloted in cases where all parties and the judge agree to it.  This has the potential not only to save costs but to improve the quality of court decision making.

How does it work?

Although the format of hot tubbing differs from case to case the basic approach is that experts are sworn in at the same time and the judge chairs a discussion between them.  The pre-trial documents (recording the matters upon which the experts agree/disagree) serve as the agenda.  Counsel is able to join in the discussion and can put questions to the experts, as and when permitted by the judge.  In addition, the experts can put questions to each other.

 The theory is that experts are more likely to make concessions and reach a greater degree of agreement in the hot tub than through cross-examination.   In the hot tub, experts are more relaxed and can therefore take part in a more constructive discussion.

Experts often answer questions at the same time and so hot tubbing is effective in helping to identify areas where the experts truly disagree. Unlike cross examination, the experts in a hot tub scenario are asked broad questions which generally seem to elicit helpful answers.

Also, as each expert is subject to simultaneous peer scrutiny, the risk of misleading answers is reduced and so any inaccuracies should be picked up immediately. If there is any confusion or uncertainty, the experts can be asked questions straight away to clarify an issue.

Pros and Cons

Hot tubbing has a number of advantages:

• It saves both time and costs.  Instead of counsel turning round to take whispered instructions during cross-examination, counsel can now put his questions to the experts in the hot tub.  Both/all experts can then deal with that particular point.
• Experts can properly help the court to resolve disputes
• Hot tubbing does away with the “one on one” gladiatorial combat between cross-examining counsel and each expert
• From the experience of the Australian courts, it would seem that overall, the procedure works well, especially where the experts know and respect each other.

But there are also disadvantages. Where the experts do not know or respect one another’s expertise or where there is a suggestion that an expert is not acting in good faith, hot tubbing may not work.  Or, time may be wasted as the experts go round in circles or digress from relevant issues. From the practitioner’s perspective a concern is loss of control.  An expert may lose his concentration and may also lose the fear that he would experience under cross examination. This may lead him to make concessions that he would not make if he was in the box on his own (and would not make if he thought about the question properly). To reduce this risk, experts need to be thoroughly prepared for the hot tub.

If there is no cross examination, as the Jackson report seems to suggest, there is a risk that counsel will not have the opportunity to make all the points that they would like to make, particularly if questions from the advocates are not permitted as part of the process. There is also a risk that key documents might be missed if the advocates cannot bring them to the attention of the court. 

Will hot tubbing work for me?

You should consider “hot tubbing” if:

• You have a strong case and your expert is confident and persuasive (especially where you know he will come across better than the other expert – weak experts can easily be exposed in the hot tub).
• Your expert has had previous experience of being in the hot tub (especially if his opposite number hasn’t).
• The issues in dispute are complex and you want to give your expert a chance to explain his theories.

Where it comes down to a simple choice between the hot tub or cross examination, it might be best to steer clear of the hot tub where the credibility of your opponent’s expert is in issue. Here a tough cross examination will probably be more advantageous.

The extent of hot tubbing in the UK courts will depend on the approach taken by any pilot. This firm intends to become involved in the pilot project so watch this space.

Tim Constable comments – as with the concept of single joint experts, hot tubbing sounds superficially attractive but in reality it is dangerous for the parties – one wrong comment in this notionally relaxed atmosphere could spell doom for an otherwise meritorious case. Consequently, experts will be inclined to clam up  which rather defeats the purpose.

Landlords of residential properties where the annual rent is more than £25,000 are not currently required to register a tenant’s deposit with a tenancy deposit scheme but they will  need to protect that deposit before 1 October 2010. Failure to do so will result in a Landlord falling foul of the requirement to protect a tenant’s deposit in accordance with the provisions of the Housing Act 2004, leaving them open to a claim by a tenant for failing to register the deposit.

For tenants this change means greater protection as they will be afforded the rights granted to them under the Housing Act 1988. Landlords face potential claims against them for failing to register a tenant’s deposit. The change will of course impact Landlords with expensive properties in London where rents are higher than the rest of the country as well as Landlords of larger properties which are occupied by multiple tenants such as student houses where the rent is more likely to exceed the current threshold.

The changes will increase the number of tenancies coming within the Assured Shorthold Tenancy regime which will standardise procedures for Landlords to gain possession and allow use of the accelerated possession route (only open to Landlords of Assured Shorthold Tenancy Agreements).  Landlords who do not and who are required to register a tenant’s deposit will be unable to get possession of a property on a “no fault” basis until the deposit is registered, causing unnecessary delay.

Landlords – review rental levels register your deposits without delay.

Managing Agents – notify your Landlord clients immediately of the impact of this change and the steps they need to take.

We are already seeing cases in the County Courts regarding non-registration of deposits and no doubt Court offices across the country will see further cases next year arising out of these changes.

See my previous blogs on the new Act and what it means for businesses.

 In the case of Rosalba Alassini Italian consumers brought proceedings for breach of contract against their telecoms suppliers. The telecoms companies claimed that the action was inadmissible because the applicants had not first attempted an out-of-court settlement in accordance with Article 3 of Decision No 173/07/CONS.  The claimants complained that the courts’ refusal to hear their cases, because they had not gone through the out-of-court disputes process, amounted to a breach of Article 6(1) of the European Convention of Human Rights (the Convention) which provides for the right to a fair trial.  The court referred a question to the ECJ, asking whether the provision that required end-users to seek an out-of-court settlement before taking out court proceedings was precluded by Community law. 

 Advocate General Kokott concluded that it is not an infringement of the right to effective judicial protection, for an Italian law to require customer complaints against telecoms suppliers to be dealt with in an out-of-court dispute resolution procedure, before judicial proceedings can be brought. The provisions constitute a minor infringement on the right to enforcement by the courts, which is outweighed by the opportunity to end the dispute quickly and inexpensively.

 Background to the Legislation

EC Legislation

Article 1(2) of the Universal Service Directive (2002/22/EC) lays down the rights of end-users, and corresponding obligations on undertakings providing electronic communications networks and services.

 Article 34 of the Directive requires member states to make available out-of-court procedures for dealing with unresolved disputes. These are without prejudice to national court procedures.

Italian Leglislation

Article 3 of  Decision No 173/07/CONS states that no court proceedings may be brought until a mandatory attempt to settle the dispute has been undertaken. The time limit for completion of the settlement procedure is 30 days, after which the parties may bring court proceedings even if the procedure is incomplete.

The disputes procedure in Italy

Italian national law provides that the authority is responsible for setting up procedures to deal with disputes between service providers and end-users.  Under the authority’s procedures there is a time limit of 30 days for the out-of-court settlement procedure to be gone through once it has been started.  Once that period has passed the parties may bring court proceedings even if the settlement procedure has not been finished. 

The Italian government argued that the aim of mandatory procedure was to force would-be litigants to attempt to settle the dispute in a way which was quicker and less expensive before turning to the court system.  It said that a quicker and less expensive method of settlement was in the interests of all parties and also lightened the burden on the court system.  The Italian government said that “an agreement which the parties have reached out-of-court is frequently more likely to bring about the long-term resolution of the dispute that a judicial decision with which the parties are dissatisfied”.

 Advocate General Kokott concluded that the Italian compulsory out-of-court dispute resolution provisions were pursuing “legitimate objectives in the general interest (ie. a quicker, less expensive method of dispute settlement which also lightened the burden on the court system and was likely to produce a more satisfactory long term solution to the dispute”.  The Italian government’s argument was accepted that “an out-of-court dispute resolution procedure that is merely optional is not as efficient as a mandatory one that must be conducted before any legal action can be brought”.

 Under the Italian provisions, there is a delay for 30 days, at the end of which 30 day period the claimant can bring a claim before the courts regardless of whether or not the out-of-court settlement stage has been finished.  In the circumstances, Advocate General Kokott concluded that the “mandatory dispute resolution procedure without which judicial proceedings may not be brought does not constitute a disproportionate infringement upon the right to effective judicial protection…Provisions such as these constitute a minor infringement upon the right to enforcement by the courts that is outweighed by the opportunity to end the dispute quickly and inexpensively”. 

 The UK Approach

 The original Court of Appeal decision in Halsey came out against compulsory  mediation. However the decision has since been subject to some debate.

 For example Lightman J – ”The Court in Halsey appears to have been unfamiliar with the mediation process and to have confused an order for mediation with an order for arbitration or some other order which places a permanent stay on proceedings…An order for mediation does not interfere with the right to a trial; at most it merely imposes a short delay to afford an opportunity for settlement…and indeed the order for mediation may not even do that, for the order for mediation may require or allow the parties to proceed with preparation for trial.” And Sir Anthony Clarke MR:  “mediation….does not interfere with the right to fair trial but simply imposes a short delay on the trial process”. 

 However, the Jackson Report on costs has decided that mediation should not be made compulsory. The Jackson Report states: “in spite of the considerable benefits which mediation brings in appropriate cases, I do not believe that parties should ever be compelled to mediate”.  However, where appropriate, the UK courts should  encourage mediation, point out its considerable benefits, direct the parties to meet and/or discuss mediation and penalise in costs parties which have unreasonably refused to mediate. See also the blog entitled Mediation – The Lord Justice Jackson Review by Tim Constable dated 14 January 2010.

Summary

Although the debate continues in England, across the Channel it seems that opinion is turning in favour of compulsory mediation. Although some believe it is wrong to compel unwilling parties to mediate, believing that such compulsion would be a breach of the right of access to the courts required by the European Convention on Human Rights (ECHR), others see that compulsory mediation is not depriving parties of their rights of access to the court.  Rather it is saying you can have access to the court, but while that procedure is running, you must also attempt mediation.

George Key, an 89 year old farmer lost his wife of 65 years in December 2006. A week later he made a Will leaving his two daughters £300,000 each, the bulk of his estate,  unchanged at his death in August 2008. His previous Will in 2001, in the context that his wife Sybil survived him, made provision for his daughter Jane to receive £10,000, his daughter Mary £5,000 and his 2 sons, Richard and John, Hall Farm and the residue of his estate.

The sons contested the 2006 Will, maintaining, in effect, that the 2001 version should prevail. After hearing evidence from 20 factual witnesses, including 2 expert psychiatrists, the issue for Mr Justice Briggs to decide was whether George Key, elderly and grief-ridden, had testamentary capacity in 2006 when he made the last Will. In a conclusion extending the ambit of the traditional tests of capacity, based on comprehension, laid down so long ago as 1870 in Banks v Goodfellow, the Court decided that “Mr Key was simply unable during the week following his wife’s death to exercise the decision-making powers required of a testator ” which ..”compels a conclusion that he did not know and approve the contents of his will”. The sisters were therefore subtantially disentitled, as the greter part of the Estate passed under the 2001 Will to their brothers.

The case is of interest not just for the furious family dispute put in evidence to the Court, but for the wider approach to capacity promoted in Mr Justice Briggs words “by the greater understanding of the mind now available from modern psychiatric medicine, in particular as to affective disorder.” It is also interesting in that it highlights that where you might have thought that in the 20 months or so before he died, if he thought at any time his Will did not reflect his current wishes, George Key could have changed it (and didn’t), that of itself is irrelevant. The key consideration is the testator’s capacity at the time the will is entered into, a circumstance which the solicitor on the case, a Mr Cadge, failed to take into account. Had he done so, then he would have obeyed the Golden Rule, requiring him to satisy himself of mental capacity with the assistance of a suitably qualified medical practitioner, as near as possible to the signing of the Will itself.

Mr Justice Briggs felt that whilst he had dealt with the legal issues before him the family would remain divided. It remains to be seen whether that  results in an appeal, or perhaps consideration of action against the draftsman and overseer of the overturned Will in this case. Either way, in matters of this nature, it pays to take appropriate steps during the testator’s lifetime.

The Bill has had its second reading in the Commons and goes into its committee stage tomorrow. It looks likely to receive Royal assent before the General Election (probably 6 May 2010).

In Gavin Goodale v The Ministry of Justice, Queen’s Bench Senior Master Whitaker dealt with exactly this problem.

The Senior Master ordered the defendants to make a reasonable search for documents, including documents contained in electronically stored information. In so doing, he required them to complete the draft e-disclosure questionnaire which is presently being considered (together with a draft practice direction on e-disclosure by the Civil Procedure Rules Committee (CPRC). The completed questionnaire would provide the claimants and the court with the necessary information in a structured manner, regarding any issues that might arise in relation to searches for electronic documents. This is the first known case in which the draft e-disclosure questionnaire has been used as a tool in case management. The Master attached the questionnaire in a schedule to the judgment, even though it has not been finalised and approved by the CPRC.

The general rule for standard disclosure under CPR31.6 requires a party to disclose the documents on which he relies, the documents which adversely affect his own case or adversely affect another’s party’[s case or support another party’s case and documents which he is required to disclose by a relevant practice direction. CPR31.7 requires a party to make a reasonable search search for these documents. What constitutes a reasonable search is fact-specific. There are additional factors to bear in mind when scoping and conducting a reasonable search for electronic documents, set out in Practice Direction PD 31.2A.

Electronic documents include email and other electronic communications, word processed documents and databases. In addition to documents that are readily accessible from computer systems and other electronic devises and media, the definition covers those documents that are stored on servers and back-up systems and electronic documents that have been “deleted”. It also extends to additional information stored and associated with electronic documents known as metadata.

Parties to litigation should from the outset discuss any issues that may arise regarding searches for and the preservation of electronic documents. This can involve the parties providing information about the categories of electronic documents within their control, the computer systems, electronic devises and media on which any relevant documents may be held, the storage systems maintained by the parties and their document retention policies. Where there is disagreement, the matter should be referred to a judge for directions at the earliest practical date, if possible at the first Case Management Conference.

The Senior Master’s judgment also provides a number of useful reminders as to the general approach which should be taken when dealing with e-disclosure. In particular, he emphasised the importance of taking a staged approach to avoid running up unnecessary and disproportionate costs and explains how this can be done.. The judgment is useful for a number of reminders that are highly relevant to the general approach to disclosure of electronically stored documents. Since every case is different, you should take specific advice on each search as it arises.

Cotswold Geotechnical Holdings is accused over the death of 27 year old employee Alex Wright of Cheltenham. The geologist died in September 2008 when a trench collapsed on him as he collected soil samples in Brimscombe. The Company director, Peter Eaton, also faced a charge of gross negligence manslaughter.

The trial represents the first time a company has been charged under the Corporate Manslaughter and Corporate Homicide Act 2007. The firm has been charged with the criminal offence of corporate manslaughter and the company director, Mr Eaton, has been charged with the common law offence of gross negligence manslaughter. If convicted, the director could be jailed for life. The maximum sentence for his firm, which also faces charges for health and safety breaches, is an unlimited fine.

The Corporate Manslaughter Act 2007, which came into force on 6 April 2008, is a landmark law and was introduced to make corporate manslaughter cases easier to bring. For the first time, companies and organisations can be found guilty of corporate manslaughter as a result of serious management failures resulting in a gross breach of a duty of care.

Penalties that companies face include unlimited fines, remedial orders and publicity orders. A remedial order will require a company or organisation to take steps to remedy any management failure that led to a death. The court can also impose an order requiring a company or organisation to publicise that it has been convicted of the offence, giving the details, the amount of any fine imposed and the terms of any remedial order made. The publicity order provisions will not come into force until the Sentencing Guidelines Council has completed its work on the relevant guidance.

The Act is not retrospective and only applies to deaths that have occurred from 6 April 2008 onwards. Deaths that occur before 6 April 2008 will continue to be covered by the previous law on corporate manslaughter. Further information on the Act can be found here.

UPDATE: Bristol Crown Court has further adjourned the trial. Press reports have suggested that it will not commence until Autumn 2010, due to the ill-health of Mr Eaton.

As the Court of Appeal noted, a bank is in the unenviable position that if they entertain suspicions but do not report them or, if they report them, but carry out the instructions without authorisations they are at risk of criminal prosecution.  If, on the other hand, the bank acts on the authorisation the customer is likely to become incensed and may begin litigation. 

The claim

Mr Shah, who was a customer of the bank, issued proceedings against the bank primarily on the ground that the bank failed to promptly carry out his instructions.  As a result of the delay Mr Shah claimed he suffered losses in the sum of $300 million.  The bank’s response was that it suspected that the transactions constituted money laundering and that if it had carried out his instructions then the bank would be committing a criminal offence. 

At first instance, the bank successfully sought summary judgment in respect of the whole claim.  Mr Shah appealed. 

The Court of Appeal

•  Mr Shah made a number of assertions, which the Court of Appeal were not prepared to entertain.  However, on the question of whether the bank suspected Mr Shah of money laundering, the Court of Appeal held that a bank could be required to prove its case that it had the relevant suspicion.
• There was no reason why the bank should not be required to prove the facts of suspicion in the ordinary way at trial by first making relevant disclosure and then calling either primary or secondary evidence from relevant witnesses.
• If the bank at the time of the pre-trial review genuinely takes the view that it will be dangerous for a witness to give evidence then the court can take steps to protect the witness or otherwise ensure that the gist of the evidence is available while still ensuring a fair trial.
• The bank also submitted that no court would or should order disclosure of any relevant documents particularly the documents reporting the suspicions to Serious Organised Crime Agency, but the Court of Appeal stated that there may be good grounds for concealing part of any relevant documents.
• As the bank acted promptly in making disclosure within two days of receiving the relevant payment instruction, the bank was not in breach of a duty of care.
• The court also decided that there must (arguably) come a time when Mr Shah is entitled to have more information about the conduct of his affairs than he has yet been given.

 Impact

The question of whether the bank, in fact, suspected Mr Shah of money laundering and the entitlement to have more information will now have to go to trial. 

This decision means that potentially a bank’s internal records and its reports to the relevant authorities may be discloseable in any claim by a dissatisfied customer and the bank officials could be cross-examined on their belief that there may be money laundering although a court may be able to impose restrictions to protect the bank’s procedures and witnesses. 

Shah v HSBC [2010] EWCA Civ 31

The defendant had applied for the case to be reallocated to the fast or multi-track, but without success.  The judgment notes that the case remained as a small claim despite the amount of the counterclaim and its obvious complexity.  The defendant relied on the fact that there was a contractual provision entitling the defendant to cost.  The claimant drew the court’s attention to the Consumer Contracts Regulation 1999, in an attempt to hold the term as an unfair term.  Although the term was not individually negotiated, the Judge held that the terms did not restrict the claimant’s ability to take legal action or exercise any other legal remedy.  As such there was no good reason why the defendant should be deprived of their costs.  The Judge therefore awarded the defendant their costs from the county court hearing and the high court.

This brief judgment demonstrates that it still may be possible to recover costs where the contract provides for costs even though a claim is allocated to the small claims.

 Robert Shaw v Nine Regions Limited [2009] EWHC 3553

The draft guidance consists of a document setting out the technical legal issues for businesses and consumer advisers, and a simpler version for consumers.

The consultation is open until 21 April 2010.  The technical legal advice makes the following points:

•  Consumers have been given an exaggerated expectation of what the creditor or owner must do in order to comply with an information request as a result of misleading claims by claims management companies and inaccurate information on the internet.
• A number of creditors, appear not to understand their obligations under these sections.
• The purpose of these sections is to provide information to the consumer, not to provide a method for consumers to avoid paying their debts.
• The OFT considers that the creditor in sections 77 and 78 and the owner in section 79 includes a person who has merely bought the debts under the agreement. 
• As well as assignees ensuring that they are able to obtain from the assignor copies of the agreements and documents and historical information on the account, the original creditor should ensure that if necessary and appropriate, it is able to readily obtain from assignees any necessary information on the most recent state of the account.
• The creditor should satisfy itself that the writer of the request has the proper authority to obtain the information.  If there is no authority with the request the creditor is entitled to reply by asking to see the authority.
• If the request comes from only one debtor where there are two or more debtors, it must be complied with and the response given to both or all debtors.
• The creditor is not entitled to charge more than £1.
• The creditor can send the documents by ordinary second class post to the address given in the request.
• It is wise to retain some record of posting.
• If a claims management company does not hold a license then the OFT would expect the creditor to inform the debtor/hirer  why the information is being sent direct to him and to notify the OFT and Ministry of Justice.
• The request should be complied within 12 working days after the receipt is received.  The day the request is received is not included, but it will include the day the information is sent.
• A true copy as confirmed in the recent case of Carey v HSBC Bank plc does not mean an exact copy.
• There is no obligation to provide a signed copy.  The creditor may be able to provide evidence that its practice was always to require a signature to its agreements.
• The creditor can reconstitute a copy of the agreement.  The name and address at the time of execution must be included, but this can be taken from any source available.
• If the reason why no copy of the agreement is given to a request under these sections is that there never was an executed agreement, the creditor should acknowledge this in its response.
• Where there has been a variation, the duty is to provide the original agreement, but a copy of the latest variation or a clear statement of the terms of the agreement as varied.
• Any copy must be easily legible.
• The consultation provides details of the documents to be provided.
• The consultation also provides details of the statements of account that should be provided.
• The duty does not apply if the agreement has been paid off or terminated.
• It does not apply where judgment has been obtained unless there is an interest-after judgment clause in the agreement which the creditor or owner has not expressly waived.
• If the creditor fails to comply with the duty, it is not entitled, while the failure to comply continues, to enforce the agreement.
• If sections cannot be complied with, the debt does not disappear and it is perfectly acceptable for a creditor to seek to pursue the debt and to register any arrears or default with a credit reference agency.
• If a creditor were to threaten court action, knowing that such action is not possible, this would be misleading and oppressive.
• Where an agreement is unenforceable because of non-compliance with the sections:
• The OFT would expect the creditor to take steps to check that there was an agreement and that there are monies outstanding.
• No communications or requests should threaten court action or other enforcement of the debt where the creditor is aware that it cannot or will not be entitled to enforce the agreement.
• The creditor should make it clear in communications that the debt is unenforceable.  Failure to do so would unfairly mislead the debtor.
• Where a creditor has satisfied itself that a debt does exist and is correctly described, it is acting fairly in registering a default with credit reference agencies and informing the debtor or hirer that it intends to do so. 

The short answer, given by Arnold J in his judgment in Williams v Hull [2009] EWHC 2844 (Ch) is  “without prejudice to my position in any subsequent proceedings”.

The judge reached this conclusion in an application centered around the interpretation of a single letter sent by Mr Hull, a financial consultant, to his former cohabitant, Ms Williams, a solicitor, concerning the value and allocation of their jointly owned home and its contents, following the breakdown of their relationship.

Mr Hull had said that he thought he owned half of the property. Ms Williams contended he owned 7%, based on a draft Deed of  Co-ownership prepared, but never signed, when the property was purchased.

In his letter dated 19 October 2009 and headed “Without Prejudice” Mr Hull advanced arguments based on an assumption that he owned 12% of the property, not half. Not unnaturally, Ms Williams sought to tie Mr Hull to that concession. If the letter was validly headed “Without Prejudice” she could not, but if it wasn’t then she could.

Arnold J reviewed the established authorities and concluded that the “without prejudice” rule is founded on the public policy of encouraging litigants to settle their differences. It is intended to enable parties in dispute to lay their cards on the table  and negotiate without fear that by so doing they will have compromised their legal position, if subsequently their issues are taken to a litigated conclusion.  Whether or not a particular document bears that heading or whether proceedings have been issued is not an essential requirement; it’s all a question of context and interpretation.

On his interpretaion of three letters passing betwen these parties, the second and third of which were headed “Without prejudice”, the label was properly applied, and was not a “cloak for perjury” or a mere assetion of rights as Ms Williams had contended; consequently, the content of the “Without prejudice” correspondence should not be referred to at trial. In reaching this conclusion he reversed the decision of HHJ Marshall QC, who first considered the point.

Whilst the decision has provided clarity for these parties, issues of context and interpretation continue to mean that for the label to be effective, thought has to be given to its use.  The case also underlines that in such circumstances it remains better to be safe than sorry – if you are buying property jointly, don’t just have a deed drafted, have it signed and dated too!

However, in an otherwise bold report, Lord Justice Jackson chose not to recommend any significant changes to the current way in which Courts deal with mediation. There is to be no Court compulsion to mediate, nor at an early stage in the proceedings. Costs sanctions for unreasonably refusing to mediate will also remain as they are. CEDR’s lobby has been roundly rejected.

Instead Jackson LJ recommends a campaign to promote the use of mediation and an authoritative handbook to explain mediation (along with other types of alternative dispute resolution (ADR)).

Tim Constable, a partner at Matthew Arnold & Baldwin LLP comments: “Lord Justice Jackson’s conclusions will surprise many (and dismay CEDR) but from my viewpoint as a litigator, mediator and mediation advocate, he has made the right call. The system ignores the discretion of the legal adviser at its peril; any additional Court compulsion to mediate at any early stage will result in increasing use of extremely cheap mediation. The cheapest the writer has found is about £250 per party for a one hour telephone mediation, which ticks all the boxes but results in inevitable failure. Increased knowledge of the mediation process is also to be welcomed, if it actually happens.”

What is mediation?

Mediation is the most well-known forms of ADR. It is a formal meeting between the parties to a dispute, conducted in private and “without prejudice”. It usually lasts up to a day and takes place in three separate rooms in the same building. The meeting is chaired by the mediator, an independent neutral appointed jointly by the parties, whose job is not to act as judge or referee, but rather to facilitate dialogue between the parties to help them resolve their dispute. Usually (but not always) there is an initial joint meeting in which the mediator introduces the day and explains the ground rules. Then each party is given an opportunity to say whatever they wish to say to their opponents. The parties then retire to their own rooms and the mediator shuttles between them, exploring the issues and conveying messages including offers to settle. An essential part of the mediation process is that anything which is said to the mediator in the private rooms is kept entirely confidential from the other party – nothing which is said will be passed on except with express permission. This promotes free and frank dialogue. Over 50% of mediations result in settlement on the day or shortly thereafter. The cost of a mediator varies widely, from about £250 per party up to £3-4,000 per party depending on the mediator and complexity of the case.

The headline proposals are as follows:

• Conditional fees.  These are commonly known as “no win, no fee” agreements.  In his view, these agreements have been a major contributor to disproportionate costs and therefore success fees and after-the-event insurance should no longer be recoverable from unsuccessful opponents.  The “no win, no fee” could still be recoverable from clients’ lawyer, but the success fees will be payable by the client and likely to come out of the damages recovered.
• Qualified one way shifting.  This would mean that the claimant would not pay the defendant’s costs, if unsuccessful, but the defendant would be required to pay the claimant’s costs if the claimant was successful.  There would need to be further consultation on which categories this qualified one way shifting would apply to.
• Contingency fees. This is where a lawyer will only be paid if their claim is successful and the lawyer is paid out of the settlement sum or damages recovered and usually as a percentage of that amount.  Lawyers should now be allowed to enter into contingency fees.  If ordered to pay costs, the unsuccessful party will only be required to pay a conventional amount with any difference paid by the successful party.  This is a very dramatic proposal. Previously, contingency fees have been associated with the perceived problems of litigating in the US.
• Before the event insurance (“BTE”).  This covers legal expenses and is taken out before an event which gives rise to civil litigation.  Lord Justice Jackson proposes that if BTE were to be used more widely it could produce benefits for small and medium sized enterprises. 
• Fixed costs in fast track litigation.  Personal injury costs should be fixed.  For other cases there should be a dual system whereby costs are fixed for certain types of case and in other cases, there be a financial limit on costs recoverable.  The ideal is for costs to be fixed for all types of claims in the fast track.
• Bankruptcy and insolvency.  For routine bankruptcy and insolvency cases the costs should be benchmarked.
• Pre-action protocols.  The specific protocols should remain and have been successful, but substantial parts of the general pre-action protocol should be repealed as “the one size fits all approach” has not worked.
• Alternative dispute resolution (“ADR”).  ADR has a vital role to play.  Lord Justice Jackson has not gone as far as saying that ADR should be compulsory, but proposes that there should be a serious campaign to ensure that everyone is better informed.  An authoritative handbook for ADR should be prepared.
• Disclosure. Disclosure is necessary, but can be an expensive process particularly in higher, complex cases.  Where the costs are likely to be disproportionate there should be a “menu” of disclosure options.
• Witness statements and expert evidence.  There is nothing fundamentally wrong with the manner in which evidence is currently adduced, but the substantial complaint is that witness statements and expert reports are unduly long.  Lord Justice Jackson recommends that for appropriate cases controls should be imposed on the content or length of the statement and costs sanctions should be imposed.
• Case management.  Where practicable cases should be allocated to judges with relevant expertise, a case remains with the same judge (as far as possible), standardising case management directions and ensuring that case management conferences and other interim hearings are not formulaic, but are used for effective case management. 
• Costs management.  Lawyers and judges should receive training in costs budgeting.  There should be a standard costs management procedure, which the Judges would have discretion to adopt.
• Part 36.  Part 36 does not go far enough and defendants need even more encouragement to accept offers made by claimant.  Where a defendant fails to beat a claimant’s offer, the claimant’s recovery should be enhanced by 10%.
• IT.  IT has an important role to play and e-working should be rolled out across the High Court in London and suitably adapted for the county courts.
• Summary and detailed assessments.  This generally works well.  For detailed assessments a new format for bills should be developed.

Having heard all the evidence, the Judge decided that it was overwhelmingly likely that whoever signed the guarantee with its distinctive signature was duly authorised to do so.  There were many documents disclosed which had the same signature.  The probability was that these other documents were signed by the same signatory as the guarantee, with authority from FGH.  It was unrealistic that FGH were unaware of these documents.  The Judge also relied on the adverse view she took of FGH’s witness. She concluded that the authority was either expressly given or impliedly given from a course of dealings. 

This case demonstrates that where the authority of the signatory is dispute, evidence can be produced to establish that it was either expressly given or impliedly given by a course of dealings. 

A/S Dan Bunkering Limited v F G Hawkes (Western) Limited and others [2009]  EWHC 3141

 Judge David Waksman held that the banks could satisfy its duty sunder s78 by providing a reconstituted version of the executed agreement which may be from sources other than the actual signed agreement itself.

It is estimated that claims management companies have been looking at  thousands of cases in an attempt to exploit s78 of the Act.  S78 imposes an obligation on the bank to provide a copy of the executed agreement under a regulated agreement for running-account credit within 12 days after receiving a request in writing from the debtor and a payment of a fee of £1.

Sometimes the banks were unable to provide an exact copy of the agreement and these claims management companies sought to claim that the debts were not enforceable.  The Judge disagreed although held that the s78 copy must contain the name address of the debtor as it was at the time of the execution of the agreement.  The creditor can provide the name and address from whatever source it has of those details.  It does not have to take them from the executed agreement itself.  If an agreement has been varied by the creditor under a unilateral power of variation, the creditor must still provide a copy of the original agreement, as well as the varied terms.

The Judge also decided that a breach of s78 this does not of itself give rise to an unfair relationship within the meaning of section 140A of the Act thus defeating a significant number of claims.

 This decision is truly a triumph of common sense.  When introduced, the aim of the Act was to release the credit industry from outdated restrictions and allow it to develop a framework to encourage competition whilst at the same time providing consistent and adequate protection for consumers across the whole spectrum of credit transactions.  The attempts by the claims management companies to exploit the provisions of the Act achieved none of these goals.

 This decision is certainly good news for the banks and what with the failure of the OFT in the Supreme Court to challenge bank charges, 2010 will have a more optimistic start.

At the times the loans were made, they made good business sense for the defendant and so were legally binding agreements.  There was an imbalance in their relationship as the defendant looked up to the claimant because of his greater education and achievements.  To charge an interest rate almost three times greater than the base rate was completely out of line with the terms of the original loans and in the circumstances exorbitant.  

The court has a very wide discretion under section 140B of the Consumer Credit Act 1974 and so reduced the sum payable by the defendant. 

This case provides a good example of when a court will intervene under the Consumer Credit Act 1974  to ensure that the terms of a loan agreement are fair.

Patel v Patel [2009] EWHC 3264 10 December 2009

Meanwhile, in a dramatic turn of events, Intel has paid AMD US$1.25bn as a settlement in a bid to end the ongoing legal disputes between the companies over Intel’s sales tactics. In return for the billion dollar settlement, AMD has agreed to withdraw all litigation and regulatory complaints worldwide. Under the terms of the settlement, the companies have agreed to enter into a five year cross-licensing agreement for patent rights.

Earlier this year, the European Commission fined Intel €1.06billion (£948million) for anti-competitive practices – the highest individual fine ever imposed by the Commission. Following years of investigations, the Commission found that Intel had engaged in illegal abusive conduct to exclude competitors from the market for CPUs between 2002 and 2007. Whilst the European Commission has acknowledged the settlement between Intel and AMD, a spokesman for the European Union stated that this does not change Intel’s duty to comply with EU competition law. Intel is continuing its appeal against the fine.