Legal News

Nirro Holdings SA v Patrick O’ Brien [2021] EWHC 279 ( Ch) What are the practical implications of this case? This decision illustrates how the court approaches construing contracts, and in particular how guarantees are read. The judge reviewed the general authorities on interpretation, examined the precise language of the guarantee signed by the surety, and assessed the situations that would engage an obligation to discharge the company’s liabilities as though the guarantor were the primary debtor. In Kookmin Bank v Rainy Sky SA [2011] UKSC 50 (at para [21]), Lord Clarke explained that construction is a single, integrated exercise: the court considers the words chosen and determines what a reasonable person — equipped with the background knowledge reasonably available to the parties at the time — would have taken them to mean. The court must take account of all relevant context. Where two...

What is the WTO government procurement agreement ( GPA)? The WTO GPA is a voluntary, plurilateral pact that obliges its parties to grant one another access to their respective government contracting and public purchasing markets on a reciprocal basis. Through its EU membership, the UK participated in the WTO GPA; the EU constitutes one of the 20 current participants. The UK has now sought independent accession to the GPA in its own right, and a further 22 jurisdictions hold observer status. Signatories are not free to design procurement systems without constraint; foundational principles are embedded within the Agreement and, indeed, many of these shaped the drafting of the current EU procurement rules. What are the key features of the regime? As noted, the GPA is more than a minimal framework. It comprises the Agreement’s main body together with members’ coverage schedules. While the Agreement...

Why did you set up the Arbitration in Finance project, and what do you hope to achieve? KPB: The initiative unites the Institute for Banking Law with the University of Cologne’s Centre for Transnational Law. We set out to assess the potential of alternative dispute resolution ( ADR) — in particular arbitration and mediation — to secure more time- and cost‑efficient outcomes in business‑to‑business conflicts within banking and finance. We also aim to deepen market understanding of arbitration’s benefits, especially as financial markets and products become ever more complex and sophisticated... Why is arbitration a good solution for solving disputes in the financial services sector? KPB: Banks and other financial institutions have traditionally been cautious about adopting arbitration and related ADR mechanisms. However, many of the grounds for that caution no longer hold true. This is evidenced, for example, by the 2016 Report on...

Banco San Juan Internacional, Inc v Petroleos De Venezuela SA [2020] EWHC 2937 ( Comm) What are the practical implications of this case? This ruling underscores the extremely limited reach of the exception commonly called the ‘ Ralli Bros rule’, derived from Ralli Bros v Compania Naviera Sota y Aznar [1920] 2 KB 287, to the general rule that contravention of foreign law does not frustrate nor otherwise excuse performance of an English law contract. With various coronavirus ( COVID-19) restrictions operating globally, the courts may well see more attempts to invoke the exception, since such measures could, at least in theory, render performance of an English law agreement unlawful under a foreign legal system. The principal points to note are: where a party can discharge its contractual duties by an alternative means that is not the one said to be unlawful, it cannot rely on the...

TOTSA Total Oil Trading SA v New Stream Trading AG [2020] EWHC 855 ( Comm) (27 March 2020) What are the practical implications of this case? In the midst of the current pandemic, force majeure clauses in agreements are likely to be uppermost in parties’ thoughts. This decision confirms that, even where force majeure might be engaged, unequivocal language in a collateral provision requiring a party to make payment (here, repayment) on a delay occurring for ‘whatever reason’ will operate unless the force majeure wording expressly changes that outcome. In this case there was a cross-reference between the two key clauses, which appears to have prompted the disagreement on construction. Contract drafters should therefore aim to make any cross-reference expressly clear as to the effect it is intended to have. If a cross-reference does not in fact elucidate or mirror the parties’ intention...

Adare Finance DAC v Yellowstone Capital Management SA and another [2020] EWHC 2760 ( Comm) What are the practical implications of this case? This ruling serves as a convenient and accessible single reference point for practitioners on how to approach applications for summary judgment or strike out in general practice, and on the scope and interpretation of the equitable doctrines of unconscionable bargains, economic duress and penal provisions in particular detail. After a thorough and careful wide-ranging survey of the authorities, Peter Mac Donald Eggers QC, sitting as a Deputy Judge of the High Court, firmly concluded that the defendants could not sidestep their freely negotiated contractual obligations by advancing nebulous allegations of victimisation by Adare. The judgment further emphasises that a litigant who is an experienced businessman with substantial means and access to top-quality legal advice cannot be treated as...

Travelport Ltd and others v Wex Inc; Olding and others v Wex Inc [2020] EWHC 2670 ( Comm) What are the practical implications of this case? In this matter, the intricate MAE provision contained numerous carve-outs stating that specified circumstances were not to count as a material adverse effect; however, those carve-outs were themselves qualified by a further proviso allowing certain matters to be considered where they had a disproportionate impact on either of the two corporate groups when set against appropriate industry comparators, each group being viewed in the round collectively. The degree of abstraction (e.g. no express definition of what amounted to 'material') left significant room for contention over the contract’s interpretation. There was little English authority addressing the proper approach to construing provisions of this kind. Its layered structure—exceptions upon exceptions with a...

Falk J held that the interim notes—together with any associated discounts and backstop fees—and the advisers’ fees did not bear on class composition. Although the judge regarded the work fee as relevant to class formulation, and even if the interim notes were also pertinent, the scheme creditors could still be consulted in a single class because their rights were not materially distinct, especially given that the most likely alternative to the scheme was the Codere group’s liquidation. Re Codere Finance 2 ( UK) Ltd [2020] EWHC 2441 ( Ch) What are the practical implications of this case? The decision offers clear guidance for practitioners assisting companies proposing schemes of arrangement on the correct approach to defining creditor classes for voting. Matters practitioners should keep in mind when advising an applicant scheme company include: the creditors’ existing rights and the effect the scheme terms would have on those...

Re Legal and General Assurance Society Ltd and another company [2020] EWHC 2299 ( Ch), [2020] All ER ( D) 37 ( Sep) What are the practical implications of this case? This ruling is plainly positive for insurers and banks seeking to utilise the Part VII transfer mechanism under the Financial Services and Markets Act 2000 ( FSMA 2000). Notably, the court’s method of distinguishing this transfer from that in Re Prudential Assurance Company Ltd and others [2019] EWHC 2245 ( Ch) is especially helpful, enabling many schemes to progress without companies being overly anxious about contravening the Re Prudential decision. That stance should reassure stakeholders relying on established practice while still acknowledging the court’s vigilance arising from the earlier decision and debate. However, it would be incorrect to claim that the Re Prudential judgment—at least pending the outcome of the intended...

Introduction The UK’s disapplication of so‑called ipso facto clauses—contract terms allowing a party to end the agreement when insolvency proceedings begin against the other—was made a permanent feature by the Corporate Insolvency and Governance Act 2020 ( CIGA 2020). For deeper commentary on CIGA 2020’s reforms, see News Analysis: Corporate Insolvency and Governance Act 2020—the rise of the moratorium and restructuring plan and the fall of the Scheme? Halting such terminations marks a significant shift in UK insolvency practice. Ipso facto defaults are standard in most formal agreements, save for the briefest or most transitory. Further, English authority has treated a counterparty’s insolvency as repudiatory where it deprives the insolvent of the ability to perform. Statutes invalidating these provisions exist in many jurisdictions. The UK legislation mirrors the conventional model: first declaring...

AXA SA v Genworth Financial International Holdings, LLC and Genworth Financial, Inc (and named third parties) [2020] EWHC 2024 ( Comm) What are the practical implications of this case? In AXA v Genworth, the High Court examined a routine SPA clause requiring a gross-up for any tax arising in the recipient’s hands on a payment (here, a seller’s indemnity for 90% of liabilities tied to PPI mis-selling by the acquired entities). The court ruled that the expression ‘subject to taxation in the hands of the receiving party’ means ‘actually taxed in the hands of the receiving party’. It also decided that any extra sum to gross up for tax in hand is only payable once the recipient is under an enforceable duty to pay an actual sum of tax (at para [222]). That conclusion followed from construing the gross-up wording and the SPA in line with the...

Pengelly v Business Mortgage Finance 4 plc [2020] EWHC 2002 ( Ch) What are the practical implications of this case? Practitioners will recognise that the agreements reviewed in this matter are largely boilerplate—typical and widely used across the market. Its consequences are likely to be extensive. The broker’s terms given to the borrower provided that it might obtain payments from lenders to whom it introduced mortgages, and that, before arranging a loan, it would set out the fee in writing; where the fee was below £250 it would confirm receipt of up to that figure, and where the fee was £250 or more it would specify the exact amount. The brokers probably took two streams of commission—one from the borrower and another from the lender. The lender accepted that it routinely paid a 2–4% commission, but expected the broker to handle...

Contractual interpretation and worked examples— The terms to which the parties have turned their minds ( Altera Voyageur Production Ltd v Premier Oil E& P UK Ltd) The court held that illustrative calculations may serve as a significant tool for construing terms when the drafting has misfired; in a boilerplate, they may encapsulate the very provisions the parties actually considered. Notably, this judgment is only the second reported decision to address the interpretative effect of worked examples. In this dispute, the examples incorporated an extra step in the calculation and so seemed in tension with the contract’s governing clauses; nevertheless, they steered the court towards the real meaning of the parties’ bargain. Written by Lauren Godfrey, barrister, Hardwicke Chambers. Altera Voyageur Production Ltd v Premier Oil E& P UK Ltd [2020] EWHC 1891 ( Comm) What are the practical implications of this case? This decision is of broad...

The Loan Market Association ( LMA) has issued a guidance note and optional riders regarding the...

Should compliant, ordinary individuals enjoy confidentiality over what they own? And does pushing that confidentiality into full anonymity heighten the chance of misuse by organised criminals and terrorist groups? The question of asset privacy is hotly disputed. Its position is unambiguous and forceful. The EU’s Fifth Money Laundering Directive ( Directive ( EU) 2018/843, known as 5MLD) plants its flag by aiming to dismantle the anonymity embedded in ownership frameworks: notably within certain trusts and corporate bodies. Unsurprisingly, the Directive also focuses on the anonymity surrounding cryptoassets, though the EU favours the label ‘virtual currencies’. It proposes to achieve this through the novel application of rules to crypto exchanges and custodian wallet providers offering services relating to cryptoassets, as such providers operate today. Exchange providers— SI 2017/692, reg 14( A)(1) vs article 1(1)(c) of MLD5 Under the Money Laundering, Terrorist Financing and Transfer of Funds...

Introduction At the start of 2020, the spread of coronavirus visibly harmed virtually every part of society in China. Countless enterprises confronted severe cash flow pressures while struggling to endure through these difficult months. In response to the epidemic, China’s policy‑making machinery worked intensively to roll out a range of essential measures intended to restart the economy. In particular, the Supreme People’s Court of the People’s Republic of China, the principal authority shaping bankruptcy policy, issued at least two significant guidelines on the judicial hearing of civil cases linked to the coronavirus outbreak. The first, dated 20 April 2020, centred chiefly on adjudicating disputes concerning enforcement of contract, employment relations, and consumer protection in the production of medical goods. The second, released on 19 May 2020, placed strong emphasis on hearings about the enforcement of contract and, moreover, on the...

Prompted by the coronavirus ( COVID-19) outbreak, government has unveiled details of the Corporate Insolvency and Governance Bill. It had earlier consulted on reforms to the UK insolvency framework and issued its reply on 26 August 2018 (see News Analysis: Exploring the government’s response to the insolvency and corporate governance consultation). The Bill is moving through parliament and its provisions may still change during that journey. Broadly, it reflects the conclusions in the government’s response, and this News Analysis considers the Bill as at 20 May 2020. Among the measures proposed, the Bill (at clause 7 and Sch 9) inserts a new Part 26A into the Companies Act 2006 ( CA 2006)— Arrangements and Reconstructions for Companies in Financial Difficulty (a ‘restructuring plan’). What are the practical implications? We have already witnessed multiple significant corporate collapses worldwide tied to coronavirus recently. Some failures have been...

Man Ching Yuen v Landy Chet Kin Wong , First-tier Tribunal ( Property Chamber), 2020 (ref 2016/1089) What are the practical implications of this case? Every day, innumerable deeds are completed across the country. By virtue of section 1(3) of the Law of Property ( Miscellaneous Provisions) Act 1989 ( LP( MP) A 1989), a deed must be signed in the presence of a witness who attests the signing. Yet what amounts to presence? Could witnessing occur via Skype, Facetime, Whats App or similar platforms? In addressing that issue, the FTT indicated, without a definitive ruling, that, under present law, whether the phrase in LP( MP) A 1989, s 1(3) ‘in the presence of a witness’ can be met via video link admits more than one arguable view. The tribunal’s indication fell short of a determination, acknowledging that the statutory wording, as it stands, could...

Bioconstruct Gmb H v Winspear and another [2020] EWHC 7 ( QB) What are the practical implications of this case? The ruling rekindles discussion about optimal methods for completing a closing with pre-executed pages, particularly where multiple parties and signatories are involved and where amendments or corrections are made to previously circulated written contracts. The court’s analysis, relating to a deed that was both signed and acted upon by the party seeking to rely on it, yet held invalid and unenforceable, underscores the need for caution when attaching pre-signed signature pages to deeds. In this respect, the judgment draws attention to a circumstance not expressly covered by the Law Society of England & Wales’ Practice Note, ‘ Execution of documents by virtual means’ (16 February 2010). That guidance identifies Koenigsblatt v Sweet as the leading authority on ratification for written...

What are the practical implications of this case? Here, the applicant, Ms Vorotyntseva, applied for, and the High Court made, freezing orders over cryptocurrency ( Bitcoin and Ethereum) against a trading platform, Money-4 Limited (trading as Nebeus.com) ( Nebeus), with its directors. Practitioners will note the judge’s rigorous scrutiny of the technical material. Birss J held that, of two screenshots adduced, one did not show the platform still retained Ms Vorotyntseva’s Bitcoin, while the other (examined in hard copy and on an i Pad) seemed to have been manipulated so it looked as though Ms Vorotyntseva’s name appeared on a screenshot when it did not. Accordingly, Birss J had no hesitation in finding a real risk of dissipation. Crucially, the matter proceeded on the footing that cryptocurrency constitutes property. In particular, there was no disagreement that the...