The elected few: key developments in case law

Posted: 08/06/2017

Whisper it, but - for the first time ever - we have sympathy with our politicians. How to choose which issues to highlight? What some of you find central to your practice, others may dismiss as a sideshow. Focusing on the bigger (often already much discussed) issues may lead to eye-rolling or disengagement… and there are so many issues to cover! Here are our (s)elected few for this edition.

The Aldi guidelines

Our first candidate is the Court of Appeal’s confirmation of the importance of the Aldi guidelines in Otkritie Capital Management Ltd v Threadneedle Asset Management Ltd.

Should you, by any chance, require a reminder, the Aldi guidelines were laid down by the Court of Appeal in Aldi Stores Ltd v WSP Group plc. These mandatory “guidelines” require a party to seek directions from the court about the possibility that a separate action may be brought in respect of the same facts against another person/entity, who may not have been a party to the first action. The rationale is to allow the court to consider the proper use of its resources and the efficient and economical conduct of the litigation.

First count

In Otkritie, Otkritie had succeeded against several individuals, including an employee of Threadneedle, but not Threadneedle itself (action 1). It then sought to make Threadneedle liable through vicarious liability in separate proceedings (action 2). Otkritie never sought management directions during action 1 about the most just and cost-effective way of establishing liability on Threadneedle’s part if it was right in its contentions against the individuals.  

Knowles J refused to strike out action 2 as an abuse of process because of Otkritie’s failure to join Threadneedle in action 1. Even if Otkritie had sought directions (the hypothetical scenario), it was unlikely that the court would have required Threadneedle to be joined to action 1 because of the consequent delay to the trial. Instead he ordered that Otkritie should pay 75% of Threadneedle's costs of the application.

Threadneedle appealed the decision on strike out; Otkritie counter-appealed on costs.

Second count

The Court of Appeal unanimously dismissed Threadneedle's submission that non-compliance with the Aldi guidelines was sufficient for action 2 to be struck out. The first instance judge had to come to a broad merits-based judgment as to whether it was unfair and oppressive to Threadneedle for Otkritie to pursue action 2. He had to weigh all the circumstances of the case, including the seriousness of the non-compliance with the Aldi guidelines and the hypothetical scenario. He did so correctly.

Knowles J’s costs order was also upheld, because it reflected his view of Otkritie's conduct of the litigation, in particular in non-compliance with the Aldi guidelines.

Result

The practical impact of this runaway victory is that, if you have a potential further claim, you must consider the Aldi guidelines in the case management context of your current action. Failure to do so may result in your subsequent action being struck out, unless you can convince the court that raising the matter in the current action would not have changed the ultimate result. The Court of Appeal was clear that the Aldi guidelines are neither subject to exceptions nor optional, and that “Those who do not observe the practice cannot hereafter complain that they thought that it was a practice to which there were exceptions. The fact that the Aldi guidelines have not been translated into a rule of procedure in the CPR or been made the subject of a Practice Direction does not matter."

(In the interests of transparency, no funding or other support has been received from any major supermarkets during the writing of this article.)

Challenges to jurisdiction

In law as in politics, timing can be crucial. In Apex Global Management v Global Torch, our second candidate, the appellants sought a stay of execution of a judgment. The court found that the respondent's version of a share purchase agreement (SPA), which contained an exclusive jurisdiction clause for the Saudi Arabian courts, was the true version. The appellants argued that the court should have honoured that finding and declined jurisdiction to deal with any other issues.

CPR Part 11 requires an application to dispute the court’s jurisdiction to try the claim to be brought "within 14 days after filing an acknowledgement of service" (CPR r. 11(4)(a)). A party who fails to do so is, ordinarily, deemed to have accepted the English court’s jurisdiction. However it is possible to make a late application disputing jurisdiction in certain circumstances.

The Denton test

Gloster LJ set out the principles governing such a late application. In Zumax Nigeria Limited v First City Monument Bank Plc, the Court of Appeal confirmed that a late application for an extension of time for compliance with the rules would be treated as an application for relief from sanctions. Gloster LJ approved this approach, noting it had also been followed in Le Guevel-Mouly v AIG Europe Limited.

This provides an opening for an old friend: the three stage test in Denton v TH White. Gloster LJ was clear that the failure to raise the issue of jurisdiction timeously was a serious and significant breach, for which no compelling reason had been given. In her view, the proper time for the appellants to have made an application regarding jurisdiction was when the terms of the version of the SPA upon which the respondent sought to rely were first known to them. This would have been, at the latest, on exchange of witness statements, rather than after the judgment was handed down. She also gave short shrift to the appellants' essential proposition that, since they were contending that the respondent's version of the SPA did not exist at all, they could not make any application which contemplated its validity.

What should the appellants have done? The Court of Appeal observed that they could have sought to reserve their position on jurisdiction, even whilst disputing that the true contract contained any such jurisdiction clause. This would have protected their position should the court have then concluded that the respondent’s version was indeed the true version of the SPA, and would have alerted the respondent and court to a possible issue regarding jurisdiction.

It was not permissible for the appellants to remain silent about what they claimed was the effect of that clause until after judgment had been given – that judgment having proceeded upon the appearance of no (extant) issues as to jurisdiction. “The obvious but fundamental point is that challenges to jurisdiction must be made as early as possible” (paragraph 21).

We hope that these latest insights have got your vote!

This article was published in Commercial Litigation Journal in June 2017 and is also available at lawjournals.co.uk.

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