Update: commercial law

Contract

Presentation of a cheque is strong evidence of acceptance by conduct of an offer contained in the letter under cover of which it had been received, and a contract is reached '“ even where the cheque later bounces '“ the High Court found in Cantor Index Ltd v Thomson [2008] EWHC 1104.

In this case, Cantor Index demanded payment of a debt from Thomson, seeking (i) confirmation that the amount owed would be paid in full in instalments or (ii) that any queries be raised by 19 February 2007, failing which it would instruct lawyers. Offers and counteroffers were exchanged; it was common ground that each superseded the previous. Around 2 March, Cantor received a letter and a cheque from Thomson's solicitor (both dated 1 March) for the first instalment which it paid into its bank account, notifying Thomson to that effect. On 8 March, Thomson notified Cantor that there was a problem with the cheque but a replacement would be provided. Later that day, Cantor's bank confirmed that the cheque had been returned unpaid, prompting Cantor on 9 March to demand payment of the first instalment, reviving its threat of legal action.

At a preliminary hearing, Cantor argued that a valid agreement had been reached on 2 March, when it paid the cheque into its bank account; Thomson submitted that Cantor's letter of 9 March was part of the facts from which the court should determine whether a settlement agreement existed, and that it showed that Cantor did not intend to accept the 1 March offer but instead to insist on its terms offered in February.

Tugendhat J held that Cantor's payment into its account on 5 March of Thomson's cheque received with his letter of 1 March was, objectively, strong evidence of Cantor's acceptance by conduct of Thomson's offer in his covering letter. As at 5 March, there was no other evidence of objective intention '“ it was to be inferred that, at that date, this was expected by both parties to be the end of the matter so far as the first instalment was concerned so that a settlement agreement had been reached whose terms governed the relationship going forwards notwithstanding that T's cheque had bounced.

Conversion and detinue

The Court of Appeal recently revisited the tort of conversion in Schwarzschild v Harrods Ltd [2008] All ER 299 and clarified that, for a cause of action in statutory conversion to arise (and limitation to start to run), both a demand that goods be returned and an unequivocal refusal to return them are required and limitation does not begin until that time.

In 1955, the claimant's mother contracted with the defendant to rent a safety deposit box to store jewellery. Rental payments ceased and the claimant inherited the box's contents; in 1988, the defendant opened the box to list those contents, continuing to store them; another inspection took place in 1994 and the contents were mixed with those of other boxes (the claimant's case was that Mrs Fayed appropriated some items). In August 1995, the claimant's private investigator contacted the defendant concerning the contents, stating 'I. . . make a formal demand for an immediate commencement of the process to return my client's jewellery . . . you must now indicate . . . whether (1) You have my client's jewellery, (2) You are prepared to let my client have it back, (3) You will abide by my conditions as to its handover'.

The defendant disavowed any idea as to the whereabouts of the contents. The claimant sued for the defendant's conversion.

At first instance, Master Yoxell held that the investigator's 1995 letter had contained an unequivocal demand for the delivery up of the jewellery and that the defendant did not need to demonstrate that it had responded with an unequivocal refusal to the demand. The matter was therefore statute-barred. However on appeal, Eady J found that there must be both a demand and a refusal for there to be an action in conversion: a demand for the goods' return, without actual refusal, was insufficient for a cause of action to arise and to trigger limitation to start.

Commercial agents

Two recent cases have given further guidance on the definition of a 'commercial agent' under the Commercial Agents (Council Directive) Regulations 1993.

In Raoul Sagal (t/a Bunz UK) v Atelier Bunz GMBH [2008] EWHC 789 (Comm), the court held that a person who bought and sold on his own account did not fall within the definition of commercial agent contained within Regulation 2(1)). In this case, the claimant purchased jewellery at a 20 per cent discount to the list price from the defendant only when he had received orders from his own customers. The claimant had no authority to 'negotiate' or 'contract' (key components in the definition contained in Regulation 2(1) on behalf of the defendant. He accounted for the purchases and sales in his trading accounts and this, with the day-to-day trading correspondence, was good evidence that the relationship was one of distributor and not commercial agent.

The court considered the meaning of the phrase 'negotiate a sale' in the context of Regulation 2(1) in the case of Nigel Fryer Joinery Services Ltd v Ian Firth Hardware Ltd [2008] EWHC 767 (Ch). Fryer's role involved marketing IFH's products to customers, quoting indicative prices to them and requesting actual prices from IFH, once they were interested. Thereafter, Fryer would liaise with the customer until an order was placed by the customer with IFH.

The judge relied on the approach adopted in an early case of PJ Pipe Valve Co Ltd v Audio India Ltd, in which the court gave a wide definition to the word 'negotiate' in the context of the regulations, and ruled that the activities carried out by Fryer were sufficient to for him to fall within the definition of a commercial agent. What appears to be crucial is that, to come within the definition a person will need to play a significantly causal part in the overall negotiation process.

Limitation clauses

The recent case of 4 Eng Ltd v Harper & Simpson [2008] EWHC 915 considered the question of reliance on limitation clauses for actions for breach of warranty or valuation of lost opportunity. The claimant had purchased a business from the defendants which had been built on corrupt practices perpetrated on their major customer '“ a fact concealed by the defendants. The claimant claimed deceit, breach of s 2(1) Misrepresentation Act 1967 and breach of contract in respect of the defendants' fraudulent representations and warranties - damages in excess of £8m were ultimately awarded. Two unusual points to note were however as follows:

1. Briggs J refused the defendants' application to strike out the claimant's breach of contract and s 2(1) claims on the basis of the defendants' reliance on the claimant's contractual obligation to provide 'written particulars' of any claim within two years of the sale of the business. Briggs J declined to allow the defendants to rely on this limitation clause because such a clause was not 'applicable to warranties fraudulently given in circumstances where the truth and thereby the breach of warranty is deliberately concealed'.

2. The majority of the damages awarded to the claimant were for its lost opportunity to invest in a business other than that which had bought from the defendants. It was found that, but for the defendants' false representations, the claimant would have invested in an alternative and very valuable business and proved its loss by reference to the actual profits and value of the alternative business which it would have acquired.

Costs guidance

The Court of Appeal in Coyne v DRC Distribution Ltd [2008] EWCA Civ 488 confirmed that the court may exercise its discretion to make a costs order when substantive proceedings have been resolved without a trial and without the parties reaching an agreement on costs. It commented upon the principles that apply when making such an order, particularly that the court may adopt a summary approach to evaluating the prospects of success had the substantive issues been determined ie where it is obvious that one party would have lost, the court may make an order against that party; in other cases, it may be more appropriate to make no order as to costs. In 'exceptional' cases, and where it is impossible to reach a safe summary assessment of the issues, the court may direct that oral evidence be given.

In Koo Golden East Mongolia v Bank of Nova Scotia [2008] EWHC, the High Court dismissed the defendant bank's application for a wasted costs order against the claimant's solicitors, following the bank's successful appeal of a Norwich Pharmacal order. It had not been established that the solicitor had acted 'improperly, unreasonably or negligently' so as to justify an order for wasted costs '“ the fact that a claim had been abandoned on appeal did not mean that it had been negligent to have pursued it at all and a solicitor's failure to appreciate that there was a binding authority which was fatal to his client's case would not automatically justify a wasted costs order. The court further held that an applicant must satisfy the court that it has suffered loss as a result of the solicitor's conduct (and in this case the claimant had not refused or failed to pay the bank's costs) so that the appropriate course for the bank was to seek to recover costs from the claimant before taking action against the solicitor as an application for a wasted costs order should be a remedy of last resort.

Anti-suit injunctions and the integrity of the English courts

In Masri v Consolidated Contractors International Company SAL [2008] EWCA Civ 625, the Court of Appeal considered whether English courts had jurisdiction, after handing down judgment, to grant an anti-suit injunction restraining foreign judgment debtors from embarking on proceedings overseas in Yemen. The Yemeni court had not given judgment with which an English injunction would be inconsistent; rather, the judgment debtors sought to relitigate abroad the merits of a case which, after a lengthy trial, had been lost in England.

The court found that the litigants' behaviour was designed to obstruct the process of the English courts in litigation to which the judgment debtors had accepted but that that acceptance of the English jurisdiction in the proceedings was sufficient for the imposition of the anti-suit injunction.

It was therefore consistent with principle for an English court to restrain relitigation abroad of a claim which had already been subject of an English judgment. This was in accordance with long-established authority that protection of the jurisdiction of the English court, its process and its judgments was a legitimate ground for the grant of an anti-suit injunction.