Barrister & Company Secretary Caroline BuchanChambers of Miss C Buchan
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Relevant commercial case law

There is so much more to the law for a business than having contracts drafted and letters written.  Behind every bit of barrister’s or judicial reasoning lies a whole wealth of legislation and/or case law.  Where there is no precedent in law a new one can be created by considered and clever argument. Every decision in the realms of employment law, contract law, intellectual property, data protection, shipping and corporate law to name just a few areas has the potential to have a very real impact on your business.

VTB Capital Plc v Nutritek International Corp & Ors [2012] EWCA Civ 808 - 20th June 2012

 

The main issue centred on the consequences of a judicial determination that the corporate veil should be pierced. The appellant, a bank incorporated in England, entered into a Facility Agreement and an Interest Rate Swap Agreement with a Russian company (RAP) to loan funds for the acquisition by the latter of dairy plants and associated companies from the first respondent, Nutritek. RAP defaulted on the loan, with the result that the bank recovered less than eighteen per cent by way of securities. The appellant alleged that it was induced to enter into the agreements by fraudulent misrepresentations made by Nutritek, for which the other defendants as controllers of the company were jointly liable on the grounds that first, if a company is used by its controller as a mere façade to conceal his true identity, the controller will be regarded as a party to the contract; and secondly, even though the controller and the company will in practice be regarded as one and the same, the controller will not simply be substituted for the company as a contracting party but will be jointly and severally liable under the contract with the company.  

Appeal dismissed. The court could not identify a principled basis upon which the law could be incrementally developed so as to support the proposition that as a legal consequence of piercing the corporate veil the court was entitled to find a company's controllers as parties to a contract between the company and a third party and vice versa.  

Held, inter alia; The principle of piercing the corporate veil is limited. Although a company and its controller may be so closely identified to justify granting judicial remedy against both, that did not warrant a departure from the basic principle of separate corporate personality by imposing contractual liability. Such an extension would be contrary to the common law and would not be a modest development of existing principle. It would, in substance, amount to the adoption by the courts of a jurisdiction to subject parties to contractual obligations under a contract to which neither they, nor the only undisputed parties to the contract, had ever agreed or intended that they should be subject. Gramsci and Alliance overruled; i) There was no analogy with the anomalous law relating to undisclosed principals on the assumed facts. The issue had to be solved by reference to general principle; ii) The basic principle that contracts are the result of a consensual arrangement between intending parties did not allow, except in exceptional circumstances, that a stranger to a contract should be held to be a party to it; iii) Necessity to provide a claimant with an effective remedy was not a condition on veil piercing: where the veil is lifted any order made in consequence is an exercise of a court's discretionary jurisdiction; iv) The extension of the law in Gramsci and Alliance imposing contractual liability on a stranger to a contract, whether company or controller, on the basis that they themselves were parties to it upon piercing the veil was incorrect. The authorities did not support the proposition, which itself failed by its own inherent unreality and would require the court to decide a case on the basis of pure fiction. N.B: The Supreme Court granted permission to appeal on 26th July 2012.

 

Pihl UK Ltd v Ramboll UK Ltd [2012] CSOH 139 - 29th August 2012

 

The pursuer, Pihl UK Ltd, sought to enforce an adjudication award against the defender, Ramboll UK Ltd, for sums accrued in the course of a construction contract. Enforcement was resisted on the basis of invalidity upon two grounds said to amount to a breach of natural justice; first, the adjudicator failed to explain the legal source of the obligation to repay the sum and; secondly, the adjudicator failed to explain the basis upon which the sum was calculated, as any sum due could only be quantified by reference to the ultimate overall costs of the contract which was not as yet ascertainable. 

The purser's application was granted. The attack on the validity of the adjudication award was without merit.

Held, inter alia; i) An adjudicator's award is not expected to demonstrate the same quality of reasoning as that of a judge. If challenged it should not be subjected to an overly analytical or critical scrutiny. It was important to adhere to Diamond v PJW Enterprises Ltd 2004 SC 430  and other cases which warn against a strict approach to the reasons given for an adjudicator's decision. The purpose of adjudication, which is to provide a swift and binding, albeit provisional resolution to a dispute in the course of a construction contract would be defeated if the losing party could refuse compliance on the basis that the adjudicator's decision is wrong in fact or law; ii) In this case, there was no real doubt or uncertainty as to the adjudicator's reasoning, nor as to the basis upon which he calculated the amount of the overpayment. At its most general, a complaint of a breach of the rules of natural justice involves an allegation of obvious unfairness in the decision-making process, which was not present on the facts. 

Midlothian Innovation and Technology Trust (MITT) v Robert William Ferguson [2012] CSOH 116 - 2nd July 2012

 

 The defender (Mr Ferguson) sought interim interdict against the pursuer (MITT) to prevent progression of an arbitration between the parties. The appeal concerned an application challenging the arbiter's conclusion that he had jurisdiction to i) determine the dispute and ii) award damages. 

The pursuer entered into a contract with the defender to grant a lease and to confer an option to purchase the property (a business park). A Minute of Lease and Minute of Agreement were both signed. The former governed the tenancy, providing for; the exercise of an option to purchase the property; imposed a responsibility on the defender, as landlord at the relevant time, for costs, repairs and renewals to ensure compliance with statutory regulations and the obtaining of statutory consents and; any dispute arising out of the lease to be referred to arbitration. The Minute of Agreement provided a mechanism for implementing the option but contained no reference to arbitration. The pursuer sought to negotiate a reduced price of the option because of alleged breaches by the defender of statutory compliance. The defender submitted that the arbiter had no jurisdiction to rule on a claim that arose under the Minute of Agreement as it contained no arbitration clause. 

Held; i) the arbiter had jurisdiction to decide whether a claim pled under the lease is a relevant claim. No view was expressed as to whether the clause relied on in the lease was an executorial clause and could only be relied on during the currency of the lease. In deciding the matter it was necessary that the arbiter have regard to the terms of the lease, including the clause of the lease which set out the rights of the parties on the exercise of the option, the close relationship between the landlord's obligations, whether it was sufficient that the pursuer had intimated certain claims during the currency of the lease and whether those claims were reflected in the attempts to re-negotiate the price before exercising and implementing its option to purchase; ii) On the submission that the arbiter had no jurisdiction to award damages, the test was whether the parties had conferred on an arbiter such jurisdiction depending on the terms of the contract in each case. In this case, prima facie, the arbiter had not exceeded his powers as the parties had expressly consented in an application to the chairman of Royal Institute of Chartered Surveyors (RICS) and secondly, the parties failed to raise any objection and had impliedly consented to confer on him the power to award damages. The second basis was not a question of competency of raising a challenge to jurisdiction of an arbiter but an assertion of bar resulting from acquiescence. Even if the case prima facie was not set out, the judge was satisfied that the balance of convenience did not favour the grant of interim interdict and did not warrant halting arbitration proceedings pending challenge. Lastly, it was not fatal to an application for interim interdict to fail to give notice to an arbiter of an application to interdict proceedings before him.

 

 

JW Spear & Sons Ltd & Ors v Zynga Inc [2012] EWHC 3345 (Ch) - 28/11/12

 

In trade mark infringement proceedings relating to the SCRABBLE game, D's application for summary judgment on its counterclaim for invalidity of one of the registered marks was granted. The 'tile mark' was not a 'sign' under art 2 of Directive 2008/95/EC. It covered an infinite number of permutations of different sizes, positions and combinations of letter and number on a tile and did not specify the size of colour or the tile. The graphic representation was not clear, precise, intelligible or objective. It did not enable the competent authorities or competitors to determine the scope of protection. The mark fell at the first hurdle and there was no prospect of successfully arguing to the contrary.

Court: High Court (Chancery Division) (England and Wales)

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