Two recent English cases illustrate the court’s receptiveness to disclosure orders in relation to informal communications on personal devices.

By Dan Smith and Aisling Billington

In two recent decisions, the English Court has demonstrated a pragmatic and targeted approach to ordering disclosure of material held on personal devices of third parties, and a recognition of the value of informal communications as evidence of disputed factual allegations. The decisions are discussed below.

Regardless of whether disclosure is sought under the existing provisions of the Civil Procedure Rule (CPR), or the Disclosure Pilot Scheme, the Court will apply the principle of proportionality in making or varying an order for disclosure. Notably, while the Court is mindful of the privacy rights of individuals, there is increasing recognition that work is carried out on personal electronic devices (including over more informal channels such as WhatsApp), any mingling of personal and work data will not itself be sufficient to circumvent a disclosure order.

The Court found that the Administration of Justice Act 1920 should be interpreted purposively rather than literally.

By Oliver E. Browne and Callum Rodgers

The English Court of Appeal has considered for the first time whether the Administration of Justice Act 1920 should be interpreted as permitting the registration of a Commonwealth State judgment in England and Wales, which was itself a judgment enforcing an original judgment given by the courts of a third State.

Buyers’ best defence against M&A fraud requires rigorous, pre-closing due diligence — when fraud is suspected, deal teams should seek legal advice and proceed with caution.

Oliver Browne, Richard ButterwickAlanna Andrew, Frederick Brodie, Connor Cahalane, and Catherine Campbell

Recent high-profile fraud cases gravely illustrate how a failure to detect fraudulent activity can cause lasting damage to corporate value. In January 2019, publicly listed bakery chain Patisserie Valerie collapsed following allegations of a £40 million accounting fraud.

In our view, instances of fraud in the context of acquisitions are more common than is often thought. There can be (or have been) allegations of artificial inflation of reported revenues, revenue growth, and gross margins or other distortions — underlining the high stakes and public nature of M&A fraud allegations.

The best protection against fraud comes from specialist due diligence and an early emphasis on fraud detection pre-closing. Where concerns arise post-closing, English law provides some innate protections, but deal teams should seek legal advice early on to help navigate this complex area without causing further damage.

By Oliver Browne, Daniel Harrison, and Eleanor Scogings

The English High Court recently dismissed a challenge to an arbitral award, holding that the tribunal’s alleged failure to take account of evidence did not amount to a serious irregularity under section 68 of the Arbitration Act 1996 (the Act).[i]

The Challenge Under Section 68 (Serious Irregularity)

Great Station Properties S.A. and others (Great Station) entered into a joint venture agreement and an option agreement with UMS Holdings Ltd and others (UMS). A dispute arose and, in the subsequent arbitration, Great Station alleged that UMS had diverted profits and opportunities to UMS-associated companies in breach of the joint venture agreement, causing damage of US$55.8 million. Great Station alleged also that it was entitled to US$250 million pursuant to a put option under the option agreement. Great Station succeeded on both claims.

By JP Sweny, Matthew Brown and Rachel Croft

A number of recent English court decisions have recast the test for determining when a contractual provision may be unenforceable under English law as a “penalty clause”.

The rule against penalty clauses is particularly important in project finance transactions, which typically involve a complex set of commercial contracts and contractual terms that allocate risk between the parties. For example, liquidated damages provisions (often included in construction and supply contracts), “take-or-pay” or “use-or-pay” provisions (often included in offtake agreements, power purchase agreements and agreements for the use of port or transhipment services), and joint venture provisions that require a defaulting party to forcibly transfer its interest in a joint venture, all provide for a pre-agreed contractual outcome. This provision prevents the parties from needing to seek damages or other redress from the courts (or an arbitral tribunal) in certain prescribed circumstances.

Until recently, the general test for determining whether a provision is an unenforceable “penalty” was whether the provision was excessive in its operation, or was intended to deter a breach of the contract by the other party, and/or was not a “genuine pre-estimate” of loss.