Cameron Ford International Arbitration

The 4As of Courting Corporate Counsel

Mon, 20 Nov 2017 23:16:32 -0800

Rachel’s dilemma.

Rachel is in-house counsel who has been asked by her CEO to recommend external counsel for an international arbitration. She notices the word “recommend”. The appointment will be by the CEO, overseen by the Board, paid for by the company, and if anything goes wrong to embarrass the CEO before the Board or others, Rachel’s recommendation may be questioned. Immediately three names of lawyers practising in that area come to her mind. They are Alex, Brook and Casey whom she knows decreasingly well in that order. Their fees are much the same expect for Brook whose fees are around 10% lower. Rachel realises this could be significant over the course of an arbitration and if she recommends Brook, she could save the company about her own salary.

She knows Alex best from initially meeting at a conference and then having the occasional coffee or casual lunch. They are professionally friendly and relaxed without being personal friends. Alex has encouraged Rachel to email or call when she has questions which Alex could answer without research, and Alex always responds within an hour or so free of charge. Through these interactions she has developed something of a connection with Alex and has had a chance to assess Alex’s ability.

Brook is perfectly pleasant and once took her to a fabulous 10 course degustation dinner at a Michelin starred restaurant. It had been amazing food and the conversation with Brook and a partner from Brook’s firm had been convivial. She had not heard much from Brook since then although they were friendly when they bumped into each other now and then.

Casey is different. Casey is undoubtedly the most technically proficient of the three and known to be a masterful, merciless tactician. Perhaps because of these skills, Casey is also known to be grumpy and difficult to contact, shunning emails and routing all calls through a fiercely protective personal assistant. People said you never...Read More

Forum non conveniens test: Canada vs UK.

Mon, 20 Feb 2017 23:35:39 -0800

One-stage Canadian test

The British Columbia Court of Appeal has held that British Columbia is the more appropriate forum to hear a claim by Guatemalan citizens shot at a mine in Guatemala ultimately owned by a British Columbian company: Garcia v Tahoe Resources Inc [2017] FICR 17.

A chambers judge had stayed proceedings in British Columbia, holding that that Guatemala was the more appropriate forum because criminal proceedings were pending there, the events occurred there and evidence was located there, the courts there were not particularly corrupt and might extend the expired civil limitation period. She applied the test of whether the foreign legal system was capable of providing justice and held that it was.

The Guatemalan plaintiffs appealed with new evidence that criminal proceedings had been adjourned indefinitely because the main accused had fled Guatemala and was being held in Peru subject to doubtful extradition proceedings. They also had new evidence of corruption and lack of independence in the Guatemalan judicial system of arrests and disciplining of judges. The Court of Appeal admitted the first evidence but rejected the second.

The court said that the judge applied the wrong test and should have asked whether there was a real risk of an unfair process in the foreign court. The indefinite adjournment of the criminal proceedings, the uncertainty over the extension of the civil limitation period and the inadequate discovery process in Guatemala meant that there was a real risk.

Canada and England take a different approach to forum non conveniens. In England, a defendant must establish that its proposed alternate forum is more appropriate; if this burden is met, then a stay will ordinarily be granted unless the plaintiff can establish other circumstances which make...Read More

Dunlop rules penalties in BC.

Mon, 20 Feb 2017 01:01:38 -0800

Exit fee not a penalty

The British Columbia Court of Appeal has held that an exit fee payable to a broker on default under a loan was not a penalty under the common law or s 8 of the Interest Act. The court applied the test of the House of Lords in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd and asked whether the 0.67% fee was a genuine pre-estimate of damages, holding that it was open to the trial judge to find that it was: Bankers Mortgage Corporation v Plaza 500 Hotels Ltd [2017] FICR 15.

The court said that where a single lump sum is made payable by way of compensation on the occurrence of one or more or all of several events, some serious and others less so, there is a presumption (but no more) that it is a penalty. That presumption may be displaced.

There was no discussion of the recent contretemps between the UK Supreme Court and the High Court of Australia in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30, Cavendish Square Holding BV v Makdessi [2015] UKSC 67; [2015] 3 WLR 1373; [2016] 2 All ER 519, and finally in Paciocco v Australia and New Zealand Banking Group Limited Land Titles Act entitled third parties to rely on the register, the Act said that payout statements should be obtained from the address for payment on the mortgage, and the lender knew the broker was signing payout statements but did not stop her or qualify her authority: Toronto-Dominion Bank (TD Canada Trust) v Currie [2017] FICR 14 at [20].

The court held that it is for someone relying on an agent's action to show the agent had ostensible authority, but for the principal to show that there is some limitation on their agent's actual authority which was conveyed to the person relying.

Here the agent had actual authority to send payout statements and receive payment and the lender principal had not conveyed any limitation to the third parties .

Read the full head note on Ford's International Commercial Reports here: Toronto-Dominion Bank (TD Canada Trust) v Currie [2017] FICR 14.

No inconsistent implied term

Wed, 15 Feb 2017 19:00:33 -0800

Two types of inconsistency

The Court of Appeal has refused to imply a term into a contract where it would be inconsistent with the operation an express term: Irish Bank Resolution Corporation Ltd v Camden Market Holdings Corp & Ors [2017] FICR 13. A bank was marketing loans of a borrower at the same time as the borrower was marketing properties developed with the loans. The borrower said the bank's marketing of the loans suggested they were distressed and reduced the value of the properties. It alleged there was an implied term in the loan agreement that the bank would not do anything to hinder the borrower's marketing of the properties.

The problem for the borrower was that there was an express term in the loan agreement which allowed the bank to market the loans for sale and to provide information about them to any potential buyer. The bank made a summary judgment application, arguing that the implied term was inconsistent with that express term, but the a judge held it was arguable the implied term was not inconsistent, and refused the application. The bank appealed.

Beatson LJ for the Court of Appeal reiterated that terms are not to be implied lightly, especially in long and detailed contracts and where the contract makes express provision about the issue. There are two forms of inconsistency between express and implied terms - linguistic and substantive. Here there was no linguistic inconsistency but the express and the implied terms could not operate together, therefore there was substantive inconsistency. The court allowed the appeal and entered summary judgment.

Read the full head note on Ford's International Commercial Reports here: Read More

Dodging SOP Act

Sun, 12 Feb 2017 21:33:19 -0800

A unanimous five member bench of the High Court of Australia has reversed the NSW Court of Appeal and held that a contractor must have a present entitlement to payment under a construction contract to make a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW):

Southern Han Breakfast Point Pty Ltd (in Liq) v Lewence Construction Pty Ltd [2016] FICR 40; [2016] HCA 252

Put that way the decision seems unremarkable, but it has opened up a device for head contractors to avoid the operation of the security of payment legislation.

A construction contract contained provisions that, in certain circumstances, the head contractor could take work out of the contractor's hands and suspend payment, or terminate the contract. If the contract were terminated, the parties' rights and liabilities would be for the innocent party to recover damages from the defaulting party.

In this case, the head contractor gave notice that it was taking work out of the contractor's hands, the contractor accepted this as a repudiation of the contract and terminated, and then made a payment claim under the Act for work done to termination.

The adjudicator ruled there was an entitlement to payment; Ball J in the Supreme Court disagreed; the Court of Appeal disagreed with Ball J, and the High Court disagreed with the Court of Appeal.

Here the contract set a date for making payment claims during the existence of the contract but then converted the right to payment claims to a right to damages on termination. There was therefore "express provision" but no reference date.

The...Read More

"Subject to contract" bites back.

Fri, 10 Feb 2017 01:39:11 -0800

Contract formation by negotiation

The Court of Appeal has held that a contract was not formed in a phone call following a letter of offer marked “WITHOUT PREJUDICE – SUBJECT TO CONTRACT”. There was no evidence of the unequivocal wavier of that condition required to form a contract and the parties' conduct after the call clearly showed no contract had been concluded: Global Asset Capital Inc v Aabar Block S.A.R.L. [2017] FICR 12.

A borrower who had defaulted on a €250 million loan wrote to the lender offering to purchase the rights to the loan. They had a phone call later and the lender asked the borrower to resent the letter in open and binding form and to show he was able to pay.

Three days later the borrower sent the letter again but with material changes such as the words “Upon your agreement that you are willing to proceed with the Proposed Transaction” and an expiry date. He provided a funding letter which spoke of the funder's "intention" to fund but expressly disclaiming contractual obligations to anyone.

The lender refused to go through with the deal and the borrowed sued. The lender made a summary judgement application which the judge refused, saying the borrower had realistic prospects of establishing a contract was formed in the phone call. The judge refused to consider conduct after the call, believing that to be the law. The lender appealed.

The Court of Appeal held that the court can look at conduct after the alleged formation of a contract to determine whether a contract was formed. "Subject to contract" negates contractual intention and the acceptance of such an offer only amounts to an agreement to agree. Waiver of that condition must be unequivocal and the court will not lightly so hold.

Here the language of the letter, the...Read More

Litigation lock-step - attributing steps to co-defendant.

Mon, 06 Feb 2017 06:11:55 -0800

Exceptional but possible.

The Singapore Court of Appeal has taken the rare step of holding that the step of one defendant in proceedings was to be attributed to a co-defendant who had not even been served with the statement of claim. That step was filing an application to strike out proceedings on the merits with the effect of disentitling both the applicant and the un-served co-defendant from applying for a stay in favour of arbitration under s 6(1) of the International Arbitration Act.

The court found that the un-served co-defendant had the real interest in the application, greater than the interest of the applicant which was controlled by the co-defendant and was only a shell company. The relief in the application was sought on behalf of the co- defendant.

While it would only be in exceptional circumstances that the court would attribute an application taken up by one defendant to a co-defendant, those circumstances pertained in this case.

Read the full head note here: [2017] FICR 11.

Tread lightly to avoid step in the proceeding

Mon, 06 Feb 2017 05:25:36 -0800

Merits strike-out usually a step.

The Singapore Court of Appeal has held that an application to strike out proceedings on the merits will almost always be a step in the proceedings to preclude the granting of a stay of litigation in favour of arbitration under s6(1) of the International Arbitration Act.

One of two defendants applied to strike out litigation on the merits and sought a stay under the Act in the alternative. It filed affidavits and submissions on the strike-out application but did not proceed at the hearing and instead pressed only the stay application. The trial judge held it was not a step in the proceeding sufficient to disentitle the defendant to a stay under s6(1).

The Court of Appeal disagreed and held that an application to strike out proceedings on the merits would ordinarily be a step in the proceedings sufficient to preclude the applicant from applying for a stay under s 6(1). Speaking for the court, the Chief Justice said a pragmatic approach should be taken to assessing whether a step in the proceedings has been taken, and the court should not place “an undue premium on procedural subtleties rather than on the substance of the issue at hand”.

His Honour said whether a party has taken a step in the proceedings is a fact-sensitive inquiry that should not be approached with undue technicality or formalism; rather, the court must look at the substance of the events that transpired to determine whether the party in question had taken a step in the proceedings.

Read the full head note here: [2017] FICR 11

Minority oppression generally arbitrable

Mon, 06 Feb 2017 00:25:10 -0800

Not usually against public policy.

The Singapore Court of Appeal has affirmed that it is not against public policy to arbitrate minority oppression claims, but individual claims may be and need to be scrutined: L Capital Jones Ltd and another v Maniach Pte Ltd [2017] FICR 11.

A shareholder brought minority oppression proceedings against the company and the majority shareholder who applied to strike out or stay the proceedings on the basis of an arbitration agreement in the shareholders' agreement. The shareholder countered by arguing that it was against public policy to arbitrate minority oppression claims. Section 11(1) of the International Arbitration Act said "Any dispute which the parties have agreed to submit to arbitration under an arbitration agreement may be determined by arbitration unless it is contrary to public policy to do so."

The Court of Appeal had held in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373 that it was not generally against public policy to arbitrate oppression claims, but said here that the facts of particular oppression claims might raise public policy considerations against arbitration because of other features of the dispute. The actual assertions in the claim must be examined to determine if it would be against public policy to arbitrate that dispute.

Here, an allegation that the defendants had abused Australian court proceedings to transfer shares in the company at an undervalue was not essential to the oppression proceedings which were concerned with whether the transfer was unfair, not how it was effected.

Read the full head note here: [2017] FICR 11.