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Legal and Financial Risk – May 2015

May 2015

Hogan Lovells Legal and Financial Risk is a bi-monthly newsletter on recent legal developments that will impact upon corporates and financial institutions.

Defendant held liable for damages for misrepresentation even though subordinated loan notes were bought through a third party on the secondary market

In Taberna Europe CDO II Plc v Selskabet AF1.September 2008 In Bankruptcy (Formerly Roskilde Bank A/s) (2015), the Claimant, an Irish investment company, alleged that untrue representations made by the Defendant, a bankrupt Danish bank, induced the Claimant into purchasing subordinated loan notes issued by the Defendant. The Claimant brought a claim for damages based on misrepresentation, alleging that the untrue representations were made by the Defendant in its own public documents and through certain other communications made by a third party bank. The High Court found that the Defendant was liable even though the Claimant bought the notes on the secondary market from the third party bank, concluding that, on the particular facts, the Claimant had a contractual relationship with the Defendant.

High Court denies Iranian bank's claim for reflective loss under the Human Rights Act 1998

In Bank Mellat v Her Majesty's Treasury (2015), the High Court decided three preliminary issues relating to Bank Mellat's USD 4 billion damages claim under the Human Rights Act 1998. The claim arises out of financial restrictions imposed against Bank Mellat, which the Supreme Court held to be unlawful in 2013. The High Court held that principles of reflective loss did not apply in this case and, as it was established that there had been an unlawful interference with possessions, damages were recoverable for whatever loss and damage was suffered as a consequence of that unlawful interference.

High Court limits judgment debtors' ability to appeal against registration of EU judgments

In Christofi v National Bank of Greece (Cyprus) Ltd (2015), the High Court refused to extend the time limit for a judgment debtor to appeal against an order registering the judgment of a Cyprus court in England and Wales. Andrews J held that she did not have a discretion to grant any extension under the 2001 Brussels Regulation on jurisdiction and the recognition and enforcement of foreign judgments.

Good faith in commercial contracts – decision or discretion?
In the latest of a series of High Court decisions on good faith in commercial contracts, Sir William Blackburne found that an issuer of loan notes (Kestrel) was not obliged to act in good faith when exercising a contractual right (as opposed to a broader contractual discretion) to subordinate and postpone redemption of the notes issued.

Ousting jurisdiction: adjudication agreements, recourse to the courts and the UTCCR

The Technology and Construction Court held in (1) Anjali Khurana (2) Mohit Khurana v Webster Construction Limited (2015) that it was possible for parties to an adjudication agreement expressly to agree to exclude their right of recourse to the courts in respect of the subject matter of the adjudication. The fact that the parties came within the ambit of the Unfair Terms in Consumer Contract Regulations 2007 was not relevant to the validity of the term on the facts.

Changes to CPR Part 36 – What practical impact will they have?

In February 2015, we reported on Shaw v Merthyr Tydfil County Borough Council (2014), in which the Court of Appeal underlined the importance of complying with the formal requirements of Part 36 of the Civil Procedural Rules (the "CPR") when making a formal offer to settle. We also touched briefly on the changes to Part 36 which came into force on 6 April 2015. Most of the changes are technical in nature and do not affect the overall working of Part 36, but a few have broader impact and are important for everyone in settling actual or prospective court proceedings, or who wants to limit the cost of them.

Can false representations become 'spent'?

In OMV Petrom SA v Glencore International AG (2015), the High Court considered whether representations that were relied upon by an agent at the time of contractual negotiations could not be relied upon subsequently by any other party because they were "spent." In this claim a commission agent contracted with Glencore International AG for the supply and delivery of a certain grade of crude oil. Glencore International AG (who was the Defendant supplier of the crude oil) made certain false representations to the agent regarding the various grades of crude oil due to be shipped under the contract. The High Court found the Defendant liable in the tort of deceit, rejecting the Defendant's submission that the representations were spent.

High Court finds implied duty of honesty and integrity in contract relating to vehicle recovery services

In D&G Cars Limited v Essex Police Authority (2015), the High Court found an implied duty of honesty and integrity in a contract for vehicle recovery services as a result of the nature of the relationship between the parties. Dove J summarised four key factors which pointed to the existence of this type of implied term, focusing on the contractual relationship between the parties, including expectations about behaviour.

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The team

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