The decision is of interest in illustrating the court’s approach to arguments that a party should have mitigated its loss by negotiating with the party in breach. While each case will turn on its facts, the key practical points arising from this decision are:

• Where a party is in breach of contract and wishes to make an offer that will allow the innocent party to mitigate the loss, it should take care to put forward a proper, detailed proposal that is capable of acceptance by the innocent party. If it fails to do so, arguments that the counterparty acted unreasonably in failing to negotiate may be met with little sympathy.
• Innocent parties should think carefully before closing the door to negotiation with the party in breach, where such negotiation might enable them to reduce or eliminate their loss. Depending on the circumstsances, the court may consider their actions unreasonable.

Background

A defendant who is in breach of contract will not be liable for losses that the claimant could have avoided by taking reasonable steps to mitigate its loss. The onus is on the defendant to show that the claimant failed to act reasonably, and the standard of what is reasonable for these purposes is not a high one. 

In this case, the appellant (Manton) had supplied a reach forklift truck for use by the respondent (Ash) in its warehouses. A Manton representative had attended at Ash’s site to take measurements of its racking arrangements and the model supplied was one of two that it had recommended as suitable.

After delivery, Ash discovered that the forklift did not fit within the racking, and took the view that it was not fit for purpose. Manton proposed to remove the truck and have it modified to correct the problem. Ash expressed various concerns including as to whether the proposed modifications would comply with relevant legislation and regulations. The tone of the correspondence became less conciliatory, discussions broke down, and the forklift was rejected by Ash.

The sole issue for determination at trial was whether Ash had failed reasonably to mitigate its loss.

Decision

The Court of Appeal rejected Manton’s argument that Ash had failed to mitigate. Manton had not put forward an offer that Ash could reasonably have been expected to accept without more. Ash had not shut the door to negotiations; its “apparent intransigence” had to be considered in light of the “combative tone” of Manton’s correspondence.

On the facts, there was nothing to prevent Manton putting forward a detailed proposal supported by a proper specification and drawings, as well as information as to how the relevant legislative and regulatory requirements would be met. As the court put it, “A detailed and documented proposal could have been put forward which Ash might then have rejected at its peril.” In the circumstances, Ash had not acted unreasonably.

Comment

The question of what steps an innocent party will be expected to take to mitigate its loss is necessarily fact-sensitive. In some circumstances, a claimant may be expected to accept an offer from the defendant in order to eliminate or reduce the loss. The claimant might even be expected to initiate negotiations, and a failure to do so may be held to be unreasonable – though, conversely, there may be cases where the defendant’s conduct has been so poor that the claimant cannot reasonably expected to deal further with him. 

The court is likely to take into account the relative positions of the parties in deciding what is reasonable. Here the court pointed out that Manton was the expert in the field, and so it was for Manton to satisfy Ash that its proposal was lawful and that it could deliver its proposed solution. Issues of timing may also be important; where time is of the essence, there may realistically be only one chance for the defendant to make an offer before the claimant makes other arrangements (as in Copley v Lawn [2009] EWCA Civ 580, a decision referred to by the court). All will depend on the circumstances.

Having reviewed the case law, the court confirmed that the tort of deceit contains four ingredients, namely:

1. The defendant makes a false representation to the claimant.
2. The defendant knows that the representation is false, alternatively is reckless as to whether it is true or false.
3. The defendant intends that the claimant should act in reliance on it.
4. The claimant does act in reliance on it and in consequence suffers loss.

The phrase “intention to deceive” is merely another way of describing the mental element of the tort, comprised of ingredients 2 and 3 above. On the judge’s findings of fact in this case all four ingredients had been established. There was no further requirement for the judge to find that there had been an intention to deceive.

This decision highlights an important practical point where there is a possibility of forum shopping between EU member state courts. Parties commencing proceedings which must be served in England before the foreign court is deemed to be seised should send the proceedings by fax to the FPS as soon as possible.

Background 

The case concerned whether the English court or the French court was first seised of proceedings and therefore which court’s proceedings should have primacy for the purpose of article 27 of the Brussels Regulation (No 44/2001/EC). Under article 27, courts other than the court first seised must stay their proceedings if they involve the same cause of action.

The French proceedings were commenced on 24 October 2012 and sent by fax and post the same day to the FPS for service. The fax arrived that day; the postal copy arrived on 30 October. On 26 October 2012 proceedings were issued in England.

Article 30 of the Brussels Regulation determines when a court is seised for the purposes of article 27 (and 28). It provides: “… a court shall be deemed to be seised:

1. At the time when the document instituting the proceedings or an equivalent document is lodged with the court …, or
2. If the document has to be served before being lodged with the court, at the time when it is received  by the authority responsible for service….”

Article 30(1) applies to proceedings in England as they are instituted by the court issuing a claim form. Article 30(2) applies to proceedings commenced in France because the writ has to be served before it is lodged with the French court.

Service of EU proceedings takes place pursuant to the Service Regulation (No 193/2007/EC). The Regulation sets out the procedure for service, including the requirement for a receiving agency to be appointed in each country and for a manual containing information relating to those agencies to be published on the European Commission internet site. 

The section of the manual dealing with the means of receipt of documents available in the UK provides: “Documents will be transmitted by fax and post.”

Decision

The question before the court was therefore whether this phrase should be interpreted as requiring documents to be sent both by fax and post or whether either would be sufficient.

The judge accepted that both interpretations were available as a matter of language, but decided receipt by either method sufficed. In reaching this decision he took into account a number of factors, including practice elsewhere in the EU, the fact that there was no good reason for requiring transmission by both fax and post, and that allowing receipt by fax promotes speed and efficiency.

As the FPS, which was the authority responsible for service, had received the fax before the English proceedings were issued, the French court was the court first seised and the English court proceedings were stayed.

Background

The Norwich Pharmacal remedy emerged in the ruling of the House of Lords in Norwich Pharmacal Company and others v Commissioners of Customs & Excise [1973] UKHL 6 as a perhaps obvious (but no less controversial) response to a perceived “gap in justice”: the customs authorities held the names of importers of products which infringed the claimant’s patent rights and an order requiring disclosure of those names was the only means by which the claimant could bring its claim.

The jurisdiction was developed quickly: to assist the victims of fraud in obtaining information from innocent banks holding laundered funds secreted there by fraudsters and their accomplices; to reveal the identity of journalistic sources who were in breach of their duty of confidence; and to require an employer to identify an internal complainant to enable an employee to bring defamation proceedings.

As the jurisdiction has evolved, at least three guiding principles have been highlighted along the way. First, the tendency has been to grant disclosure where otherwise no proceedings at all could be brought by the claimant; secondly, it must be “necessary” to grant the disclosure by way of Norwich Pharmacal relief; and thirdly, as a creature of judicial creativity, the remedy should be “flexible”.

No proceedings without disclosure

It was originally considered important to pay heed to the “mere witness” rule, namely the rule that a witness could not be compelled to give discovery before trial where that person could be called as a witness at a trial in due course.  Norwich Pharmacal relief against such a “witness” was nonetheless justified in certain circumstances because no trial would ever be possible without that witness’s disclosure. 

This guiding principle justified the expansion into what are commonly known as Bankers Trust orders, whereby information can be ordered to be disclosed to assist a claimant to trace and protect a trust fund since otherwise any recovery proceedings would be potentially futile.  The principle has also helped to shape the “missing piece of the jigsaw” order where the claimant already knows the identity of the alleged wrongdoer but needs from a third party a vital piece of information without which he cannot formulate and issue his claim.  

However, the courts also concluded that the relief should not be confined to situations where it was envisaged that the claimant would sue with the benefit of the information disclosed.  Perhaps the claimant might want to initiate some quasi-judicial process, an arbitration, or indeed merely know the names of persons to whom defamatory remarks had been made with a view to writing to them to put the record straight.  More recently, the courts have moved away from the mere witness rule completely and have focused instead upon flexibility.

Necessity and flexibility

In one way or another the flexible adaptations of the first guiding principle above have all been considered “necessary” in the sense of being in the interests of justice, and “necessary” in the sense that the relief was needed by the claimant to pursue a claim or other genuine legal redress.

At one stage, it was thought that Norwich Pharmacal relief was a “remedy of last resort” and one where the “necessity required to justify exercise of this intrusive jurisdiction is a necessity arising from the absence of any other practicable means of obtaining the essential information” (in particular Mitsui & Co Ltd v Nexen Petroleum UK Ltd [2005] EWHC 625). 

This raising of the bar could have restricted the jurisdiction’s freedom of movement, but it did not last long, and flexibility was restored in The Queen on the Application of Binyam Mohamed v Secretary of State for Foreign and Commonwealth Affairs [2008] EWHC 2048.  In that case the flexibility of the remedy in the face of novel circumstances was heavily stressed by the Divisional Court. The case was brought by an individual accused of terrorist charges in the US and facing the death penalty, where he alleged that a confession he had given had been coerced from him by means of torture. He was seeking urgent disclosure from the UK Government.

The Mohamed case is notable for several reasons. First, it illustrated yet a further form of legal redress for which the relief was needed; secondly, the test of necessity was not to be measured strictly by reference to whether the claimant had exhausted all other available avenues; and, thirdly, very little attention was paid to the fact that the information being sought was in respect of ongoing foreign proceedings in circumstances where there were overlapping mechanisms for obtaining evidence in use in such proceedings. The court in Mohamed seemed to pay high regard to the specific facts of the case, considering them to be “truly exceptional” and justifying disclosure of the information sought “to serve the ends of justice”.

Omar case: impact on flexibility?

The basic facts in R (on the application of Omar and Others) v Secretary of State for Foreign and Commonwealth Affairs [2013] EWCA 118 are in some respects similar to those in the Mohamed case. The applicants had been accused of involvement in certain bombings and had made applications to the Ugandan Constitutional Court alleging, amongst other things, unlawful rendition and ill treatment.  They applied for Norwich Pharmacal relief against the Foreign Secretary contending that the UK intelligence services had been involved during their detention. They proposed to use any evidence in support of their application to the Constitutional Court.  It was common ground that the Constitutional Court proceedings were criminal in nature and a key question became the overlap with the statutory regime for international cooperation contained in the Crime (International Co-operation) Act 2003.

In Omar, the Court of Appeal concluded that the common law remedy of Norwich Pharmacal relief could not have been intended by Parliament to survive the introduction of the statutory regime which was a “carefully calibrated scheme”.

The Omar decision is confined to the regime for assistance in relation to criminal matters under the 2003 Act.  This leaves open the question as to the availability of Norwich Pharmacal relief for use in foreign civil proceedings where the Evidence (Proceedings in Other Jurisdictions) Act 1975 is in play. The relief is likely to remain available for the purpose of initiating such foreign civil proceedings, but perhaps not so where the proceedings are on foot and statutory regime is available. 

A particular difficulty exists where, for example, important information is sought for use in ongoing civil proceedings abroad but the statutory regime is unavailable, either for reasons of being too late in the day or because the possibility of seeking assistance is excluded by the foreign tribunal, possibly inexplicably.  In these circumstances, how far will the English courts be prepared to go?  The answer to this may lie in an examination of the principles of “expediency” in the context of the granting of interim relief under section 25 of the Civil Jurisdiction and Judgments Act 1982.  The cases decided under that provision give useful guidance as to when the court is likely to favour the grant of relief in support of contemplated or actual proceedings abroad.  In this context the English courts will pay regard to whether, for example, the relief granted is likely to overlap with orders made by the primary court.

Conclusions

Where does this leave Norwich Pharmacal‘s fundamental flexibility?  There is no doubt that the Omar decision has brought some much needed “discipline” to an area of obvious overlap.  Norwich Pharmacal was never intended to be used as a way of “queue-jumping” or even forum shopping when it comes to securing evidence for use in ongoing foreign proceedings.  One of the issues with this particular jurisdiction is that in many cases there is a lower level of opposition from the relevant third party, which means that the degree of legal scrutiny given to some applications is understandably light.  From time to time its flexibility is abused by hopeful (and mostly unsuccessful) litigants and less frequently it has come to the aid of a deserving claimant (for example in the case of Mohamed) where, literally, time was running out.

Norwich Pharmacal remains nothing if not flexible, but it cannot meander through the courts of the land looking to plug every “gap in justice” there happens to be.

These issues are considered further in “Disclosure of Information: Norwich Pharmacal and Related Principles”.

• summarise current investment trends, legal frameworks and operating environments;
• highlight the risks most often encountered in M&A and financing in Africa drawing on real-life deals;
• introduce the Herbert Smith Freehills Guide to dispute resolution in Africa summarising the legal systems across Africa’s 54 jurisdictions and how litigation and arbitration operate in each of them.

This webinar (which is an abridged version of our seminar on 19 March) is part of our series of “Soundbite” webinars, which are designed to update Herbert Smith Freehills LLP clients and contacts on the latest developments without having to leave their desks. The webinars, both live and archived events, also qualify for one CPD point.   

The webinar can be accessed “live”, with a facility to send in questions by e-mail, or can be downloaded as a podcast after the event. If you would like to register for a webinar, or to obtain a link to the archived version, please contact Jane Webber.

Background

Libel reform featured in the three main political parties’ general election manifestos in 2010 and has been the subject of a lengthy campaign by a wide spectrum of the public, from those seeking better protection for freedom of speech to those more interested in a law to protect their reputation.

Content of the Act

The Act is not designed to codify the law into a single statute; it sits alongside, and amends where applicable, the Defamation Acts of 1952 and 1996.

The key points to note are as follows:

• claimants must show that they have suffered serious harm before suing for defamation;
• corporate bodies (trading for profit) must show that the defamatory publication has caused or is likely to cause serious financial loss;
• there are new statutory defences of responsible publication on matters of public interest, truth and honest opinion to replace the defences of Reynolds (Reynolds v Times Newspapers & others), justification and fair comment;
• operators of websites that host user-generated content have increased protection, providing they comply with the procedure to enable the complainant to resolve disputes directly with the author of the material concerned;
• a statement in a scientific or academic journal is privileged (and therefore not capable of founding an action in defamation) if the statement: a) relates to a scientific or academic matter; b) is reviewed by the journal’s editor or peers with expertise in the matter concerned; and c) is made without malice.  Publication of a fair and accurate copy of, extract from or summary of the statement is also privileged;
• the single publication rule: the first publication to the public triggers the one year limitation period within which the claimant must commence a claim. Subsequent statements, unless materially different, will not affect the accrual of the claimant’s cause of action on the date of publication of the first statement;
• UK courts only have jurisdiction to hear a case against a non-domiciled (in UK, Member State or party to the Lugano Convention) defendant if it is clearly the most appropriate place in which to bring an action;
• there is no longer a presumption in favour of a jury trial.

Comment

Whilst the Act makes a number of substantive changes, some of the key areas are already established in case law. In practice, therefore, the specific points to highlight to our clients are as follows:

• the requirement for corporations to show serious financial loss. It is a subject of debate amongst solicitors and barristers as to how this will be demonstrated; a witness statement from the CFO without hard evidence is unlikely to suffice. We will be recommending to clients, therefore, to set up a system to enable snapshots of the company’s financial position without revealing confidential information at such an early and public stage of proceedings;
• the defence of responsible publication on matters of public interest is less like the  Reynolds defence, which required responsible journalism to be proved, since it just requires it to be reasonable that the defendant believed that publishing the statement was in the public interest. This will make the defence much easier for publishers use;
• the single publication rule is designed to remove the threat which hangs over publishers that every time they repeat a statement a new cause of action accrues. It therefore requires claimants to take decisive action about the first defamatory statement which is published.

And finally… Leveson and the Royal Charter

The House of Lords sought to give effect to some of the Leveson Report’s proposals in the Defamation Bill. This was resisted by the House of Commons. The matter was resolved with the cross-party agreement of the Royal Charter for press regulation, which meant that the Defamation Bill could pass through without the Leveson amendments.

The Royal Charter itself is a confusing attempt to implement Leveson’s recommendations. The Royal Charter gives legal backing to a new state-recognised press regulator, which includes an arbitration service to settle libel claims. It requires relevant publishers (defined as “significant news publishers”) to sign up to it, which many are currently refusing to do. If a relevant publisher does not agree to place itself under the new regulator, it will be subject to exemplary damages under the Crime and Courts Bill which is currently going through Parliament. In other words, if a relevant publisher does not offer the arbitration service prescribed under the Royal Charter and it is sued, it will have to pay the costs of both sides – even if the other side loses.

News International, Telegraph Media Group, Associated Newspapers, Trinity Mirror and Express Newspapers have drawn up an alternative draft Royal Charter proposing an independent system of self-regulation with the power to administer £1 million fines but which would not be backed by statute. This and the cross-party Royal Charter is due to be presented at the next meeting of the Privy Council on 8 May 2013.

Herbert Smith Freehills gives presentations to suit your needs on any/all of the above, in order to keep you fully updated with this area of law.

The court noted that the starting point is the wording of the document itself and the principle that the commercial parties who agreed the provisions intended the words used to mean what they say. If there are two possible constructions, a court is entitled to prefer the construction which is more consistent with “business common sense” if that can be ascertained (see our post on the Supreme Court decision in Rainy Sky SA and others v Kookmin Bank [2011] UKSC 50).  However:

• “commercial common sense” is not to be elevated to an overriding criterion of construction;
• the parties should not be subjected to the individual judge’s own notions of what might have been the sensible solution to the parties’ conundrum;
• still less should the issue of construction be determined by what seems like “commercial common sense” from the point of view of one of the parties to the contract.

Here the court considered that the structure and wording of the relevant clause pointed to one clear meaning. There was no lack of “commercial common sense” in the clause, which was no doubt arrived at as a compromise after much negotiation. The court highlighted the fact that the parties to the contract were commercial entities who employed experienced commercial lawyers to negotiate the terms in very great detail over a period of three months, which supported the notion that the clause was intended to mean what it said. The result was that the borrower’s prepayment of a loan facility following a voluntary refinancing was held not to trigger a prepayment fee provision in the loan agreement. Click here to read our banking litigation team’s e-bulletin on the decision.

• Changes to the Brussels Regulation – in force now and effective from January 2015
• Stays of English proceedings in favour of non EU member states
• The Supreme court decision in VTB Capital, refusing to pierce the corporate veil
• The effectiveness of unilateral jurisdiction clauses
• Jurisdiction in claims against employees
• Service outside of the jurisdiction by alternative means

This webinar is part of our series of “Soundbite” webinars, which are designed to update Herbert Smith Freehills LLP clients and contacts on the latest developments without having to leave their desks. The webinars, both live and archived events, also qualify for one CPD point.   

The webinar can be accessed “live”, with a facility to send in questions by e-mail, or can be downloaded as a podcast after the event. If you would like to register for a webinar, or to obtain a link to the archived version, please contact Jane Webber.

The Handbook is intended to inform litigants, lawyers and judges about the benefits of ADR in the hope that it will become more readily deployed in the context of civil litigation. It covers the full gamut of ADR processes, from negotiation through to arbitration, and contains in depth guidance on mediation practice and procedure, as well as dedicated chapters on other ADR processes such as early neutral evaluation, conciliation, ombudsmen, expert determination and adjudication. Additional materials on mediation providers and specimen documents are available on a supporting website. Click here to read more about this development in our ADR e-bulletin.

In broad terms, the French blocking statute prohibits persons located in France from requesting, searching for or communicating “documents or information of an economic, commercial, industrial, financial or technical nature” for use in foreign litigation. The prohibition attracts criminal sanctions.

The High Court (Roth J) held that it was appropriate to order disclosure regardless of whether this would infringe the French blocking statute. The critical question was the likelihood of a prosecution being brought, which the judge concluded was “virtually inconceivable” on the facts of this case and bearing in mind that only one successful prosecution has ever been brought under that legislation.

Subject to appeal (which is due to be heard between 17 September 2013 and 17 January 2014) the decision suggests that an English court is unlikely to refrain from ordering disclosure against French parties to litigation on the basis of the French blocking statute.

This may of course cause difficulties for French parties, who could be at risk of criminal prosecution in France as a result of compliance with an English court order. Alexandra Neri, a partner in our Paris office who regularly advises on information governance issues, comments: “In pre-judging the approach of the French authorities to a breach of the blocking statute, the English court’s decision puts French parties in a very difficult position. By complying with an order of a foreign court, they put themselves at risk of criminal prosecution in France, however theoretical the English court might consider that risk to be.”

Background

The question of disclosure arose in the context of a large-scale follow-on damages action against various defendants in respect of an illegal cartel relating to heavy electrical equipment used in power substations. The trial of the action is due to commence in June 2014.

A number of defendants to the action, who are French companies, objected to the claimant’s application for specific disclosure on the basis of the French blocking statute. They contended that providing such disclosure would put them in breach of this prohibition, which attracts criminal penalties, and it therefore should not be ordered.

In light of this objection, the court initially excluded the French defendants from the disclosure orders while requests were issued to the French Ministry of Justice to permit the disclosure to be conducted in France via the direct route under Council Regulation (EC) 1206/2001 (the “EU Evidence Regulation”). This provides for two alternative routes for the taking of evidence in another EU member state:

• The taking of evidence by a court following a request transmitted directly between the requesting court and the court to which the request is directed (“the court-to-court route”).
• The direct taking of evidence by the requesting court, ie without requesting the assistance of the courts of the state where the evidence is to be obtained (“the direct route”).

Those requests were rejected by the French authorities, in part on the basis that such requests were not required when the English court could simply order the French defendants to provide disclosure. Whilst recognising that the requests avoided the risk of prosecution under the French blocking statute, they said this would be an abuse of process since in reality no taking of evidence was required to achieve the desired result.

The claimant therefore renewed its application for disclosure against the French defendants. 

Decision

The court held that the French defendants should be subject to an order for disclosure in the same way as all the other defendants. 

The French defendants accepted that the court had a discretion as to whether it should order disclosure from a foreign party notwithstanding that compliance might violate a prohibition under an applicable foreign law. The judge assumed, without deciding, that production of the documents by the French defendants would infringe the French blocking statute.

The critical question, the judge said, was the likelihood of any prosection being brought against the French defendants. The French law experts were agreed that the Public Prosecutor had a discretion whether or not to institute a prosecution and in exercising that discretion he would take into account the public policy reasons underlying the statute. In that regard:

• It was striking that the one instance of a successful prosecution under the French blocking statute arose on very exceptional facts where the disclosure was not made pursuant to a court order and was in fact procured by fraud. French companies frequently give discovery in English legal proceedings but, it seems, are not prosecuted.
• The French blocking statute was introduced because of concerns in France at what were seen as abusive discovery requests being made of French companies facing litigation in particular in the US, but even when French companies comply with US disclosure orders it appears that they are not prosecuted.
• It was “virtually inconceivable” that where, as here, the court was exercising jurisdiction over a company pursuant to an EU regulation in respect of violations of fundamental provisions of EU competition law, the public authorities of an EU member state would exercise their discretion to institute criminal proceedings against that company for complying with the procedural rules of the courts of the member state where the proceedings were brought.

The judge rejected the French defendants’ argument that the court should instead issue a request under the court-to-court route of the EU Evidence Regulation, since the Regulation was not basically concerned with the provision of disclosure between parties to litigation at all and since significant time had already been lost through an abortive attempt to use the direct route under the Regulation.