Litigation

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Motivated by a “visceral reaction” to large-scale economic crime, Nick Ephgrave lays out vision for a bolder, more pragmatic, and more proactive agency.

By Pamela Reddy and Matthew Unsworth

Whistleblowers, dawn raids, and cross-agency collaboration are all top of Nick Ephgrave’s agenda as he settles into his new role as Director of the UK’s Serious Fraud Office (SFO). Taking to the stage for his inaugural speech at the Royal United Services Institute last week,[i] Ephgrave gave a glimpse into his ambitious (if optimistic) plans for the agency under his leadership.

Royal Court of Justice

The time is right to review the rules on electronic service, says judge in a case involving invalid service of claim form.

By Oliver Middleton and Duncan Graves

A recent decision in the English High Court highlights the continued need for litigants to faithfully abide by the procedures governing the service of claim forms, which are “bright line rules” requiring stricter observance than many others in the Civil Procedure Rules (CPR).[1] In the decision, the judge commented that the present framework governing service by electronic means, such as email, may not reflect modern litigation practice and could therefore be due for reform.

Rear view of themis statue

A recent ruling confirms judicial discretion to stay proceedings and instruct parties to seek non-court-based alternatives to litigation.

By Nell Perks and Duncan Graves

The English Court of Appeal has ruled that the court has the authority to stay proceedings and direct the parties to engage in a “non-court based dispute resolution process”. The court can exercise such authority provided the order does not impair the essence of the claimant’s right to proceed to a judicial hearing and is proportionate to achieving the aim of settling the dispute fairly, quickly, and at reasonable cost.[1]

Consistent with the overriding objective which requires the court to actively manage cases and facilitate alternative dispute resolution (ADR), the ruling clarifies the court’s case management powers and signals a potential move toward court-mandated dispute resolution processes.

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Individuals continue to face risk from prosecutions for economic crime, despite media focus on corporate criminal liability reforms.

By Stuart Alford KC, Mair Williams, and Matthew Unsworth

Four individuals have today appeared at Westminster Magistrates’ Court charged with fraud in connection with the collapse of UK café and bakery chain, Patisserie Valerie.[i] This follows a five-year investigation by the Serious Fraud Office (SFO) — codenamed “Operation Venom” — which was launched after the chain suddenly announced that its financial statements over successive years had been “mis-stated and subject to fraudulent activity”.[ii] Among those charged is former CFO, Christopher Marsh, who was arrested on suspicion of fraud when the scandal first emerged but was released on bail soon after.

While corporate criminal liability continues to dominate headlines ahead of reforms to be introduced by the Economic Crime and Corporate Transparency Bill, the Patisserie Valerie charges serve as a reminder that there remains a risk of prosecution at the individual level. Indeed, this is the third case in which the SFO has charged individuals this year, and the agency is targeting a minimum 60% conviction rate of individual (as well as corporate) defendants between 2022 and 2025.[iii]

Rear view of themis statue

The Court held that banks do not owe this duty to customers deceived into instructing their banks to transfer money to fraudsters.

By Nell Perks and Callum Rodgers

On 12 July 2023, the UK Supreme Court handed down its highly anticipated judgment in Philipp v. Barclays Bank UK PLC [2023] UKSC 25, allowing the appeal brought by Barclays Bank UK PLC (Barclays).

The Court’s decision, which resolved longstanding questions about the nature of the Quincecare duty, clarified that the Quincecare duty only arises in cases in which there is fraud by an agent acting for the customer. As a result, it cannot apply in circumstances in which the relevant payment was authorised by the bank’s customer directly, so it has no application in APP fraud cases. The Court overturned the decision of the Court of Appeal, which had expressly held that that it is “at least possible in principle” that the Quincecare duty could apply to a “victim of APP fraud” on the basis that the Quincecare duty “does not depend on the fact that the bank is instructed by an agent of the customer of the bank”. [1]

A recent decision reminds parties about the need to draft dispute resolution clauses that are tailored to the parties’ agreement.

By Oliver E. Browne and Duncan Graves

The Court of Appeal recently ruled that an alternative dispute resolution (ADR) clause in a contract was unenforceable due to lack of clarity. The ruling signals to contracting parties that they should draft ADR clauses carefully, outlining the process to be followed with sufficient detail and clarity so that the clause can be enforced.

The US decision reminds UK companies and their officers to identify and report red flags about misconduct in the workplace.

By Nell Perks, Nathan H. Seltzer, and Georgie Blears

Certain shareholders of McDonald’s Corporation (the Company) sued David Fairhurst, the Company’s former executive vice president and global chief people officer, on behalf of the Company for allegedly breaching his duty of oversight “by allowing a corporate culture to develop that condoned sexual harassment and misconduct” and for “consciously ignoring related red flags”.

In the recent ruling in the matter of In Re McDonalds Corporation Stockholder Derivative Litigation, the Delaware Court of Chancery denied Fairhurst’s motion to dismiss the lawsuit. The court held that corporate officers, like directors, owe shareholders a fiduciary duty of oversight to report upward to more senior officers or to the board credible information that a company may be violating the law, and to not consciously ignore red flags. (Read this Latham Client Alert for more on the decision.)

PE firms face growing regulatory and litigation risks from greenwashing claims as they navigate a fragmented anti-greenwashing landscape.

By Tom D. Evans, Nell Perks, Anne Mainwaring, David J. Walker, and Catherine Campbell

Amid concerns of exaggerated or misleading sustainability claims, the UK Financial Conduct Authority’s (FCA) recent proposal for new labelling and disclosure rules to combat greenwashing (see text box) should put PE firms on alert for a growing range of greenwashing risks. The FCA proposals are just the latest in a wave of new rules and requirements being enacted and contemplated as regulators across jurisdictions look more carefully at green claims and seek to hold regulated firms (including PE sponsors) to account for exaggerated credentials and misstated investment policies.

Similarly, investor and other stakeholder claims over greenwashing are on the rise as firms and portfolio companies come under greater scrutiny and are required to publish ESG disclosures in market-facing and other public information. These claims can be brought under different and overlapping laws, including statute, securities regulations, and “soft law” provisions, making a consistent and proactive risk management approach essential.  

The directives aim to assist claimants in proving the causation of damages and product defectiveness in complex AI systems, creating legal certainty for providers.

By Deborah J. Kirk, Thomas Vogel, Grace E. Erskine, Ben Leigh, Alex Park, and Amy Smyth

On 28 September 2022, the European Commission issued two proposed directives to reform and clarify liability rules on artificial intelligence (AI):

  1. The Directive on Adapting Non-Contractual Civil Liability Rules to Artificial Intelligence (AI Liability Directive) introduces rules on evidence and causation to facilitate civil claims for damages in respect of harm to end users caused by AI systems.
  2. The Directive on Liability for Defective Products (Revised Product Liability Directive) seeks to repeal and replace the 1985 Product Liability Directive (Directive 85/374/EEC) with an updated framework to better reflect the digital economy. The Revised Product Liability Directive proposes to explicitly include AI products within the scope of its strict liability regime and to modify the burden of proof for establishing defectiveness of technically or scientifically complex products like AI systems.

The Court of Appeal reiterates the importance of the specific context in interpreting contractual good-faith duties.

By Oliver E. Browne and Alex Cox

English law does not include a general implied duty of good faith. However, the English courts are willing to enforce contractual duties of good faith. In Mark Faulkner & Ors v. Vollin Holdings Limited & Ors[1], the Court of Appeal provided important clarification on the approach to such contractual good-faith duties.

Background

The case related to an unfair prejudice petition under section 994 of the Companies Act 2006, brought by the minority shareholders (the Minorities) in Compound Photonics Group Limited (CPGL) against the majority investors (the Investors) in CPGL.