1

Furmston and Chuah: Commercial Law, 2nd Edition

Update – May 2015

Chapter 1: What is commercial law

Page 1 para 1.1.1. – Formation of commercial contracts.

As is stated in ch1 ‘Many transactions involving the sale of goods are
solved in common law systems by applying the general rules of contract’.
It is worth noting that there is no general rule in English law that
commercial contracts must be in writing outside specified areas such as
consumer credit contracts and contracts of guarantee. Sensible business
parties would normally reduce to writing significant transactions if only for
evidential purposes in the event of a dispute. However an oral contract
maybe perfectly valid as illustrated by the Supreme Court decision in
Carlye v Royal Bank of Scotland [2015] UKSC 13, 11/3/15. Here
the court upheld the trial judge’s decision that the parties had orally
agreed that a bank would fund not only the purchase of a property but
also the development of the property via a loan for £700,000, by a long
standing customer. The court also emphasised that the appeal courts
should be reluctant to second guess a trial judge’s primary findings of fact
unless they were clearly wrong. Objectively interpreted the conversations
had created a valid contract. There was a valid collateral warranty to
fund the discussed developments.

Chapter 2: Aspects of property, security and guarantees

P8 – para 2.1.4. – Creation of a security – Whether a ‘sale and rent

back’ agreement prior to sale of house gave seller of property
priority over holder of mortgage used to buy the house – creation
 2

of propriety interest – priority in relation to the mortgage – nature

of proprietary interest
In Scott v Southern Pacific Mortgages [2015] 1 All ER 277 the
Supreme Court had to consider the creation of proprietary interest in land.
Under a ‘sale and rent back’ scheme S had sold her house to purchaser,
N, on the strength of N’s promise that she could remain in the house
indefinitely as a tenant. N bought the house with the assistance of a
mortgage from M who did not know about N’s promise to S. N granted S
a two-year assured shorthold tenancy which was in breach of the
mortgage which permitted only a 12 month tenancy. N defaulted on the
loan and M wished to possess the house. S argued that N’s promise
constituted an equitable proprietary right which took priority over M’s
mortgage interest. The Supreme Court ruled that a purchaser of land
could not create a proprietary interest in land, capable of being an
overriding proprietary interest until after the completion of the contract of
sale S had acquired merely a personal right against N when she agreed to
sell on the basis of its promise. Her rights only became proprietary and
capable of taking priority over a mortgage when N acquired the legal
estate on completion, at which point the acquisition of the legal estate and
the grant of the charge were one indivisible transaction – the conveyance
to N and N’s mortgage with M were one indivisible transaction and thus
M’s interest took priority over S’s.

P27 – para 2.4.1.7 – Distinction between contract of surety and

performance bond
In Spliethoff’s Bevrachtingskantoor BV v Bank of China [2015]
EWHC 999 (Com), Carr J, 17/4/15 the court considered whether two
guarantees were contracts of surety or in the nature of on-demand
performance bonds. The court concluded that they were not contracts o
guarantee but on-demand performance bonds. A Chinese bank was
ordered to honour guarantees issued in support of two shipbuilding
contracts where the nature of the guarantees was by way of performance
 3

bonds and not contracts of surety, and their express terms excluded
discharge, notwithstanding that the party in whose favour they had been
issued had been found culpable of fraud by the Chinese courts in relation
to the installation of second-hand engines. Moreover, the fraud had
nothing to do with the fraudulent party's right to cancel the contracts,
since there was no suggestion that the late delivery was caused by the
nature of the engines. 
The contracts were made between S and a
Chinese company (X). Pursuant to the contracts, S paid advance
instalments to X towards the purchase prices on terms that the
instalments would be refunded if the contracts were cancelled. The
guarantees secured X's obligation to refund. The ships were not delivered
on time and S claimed repayment of the instalments.

Chapter 3: Agency

P81 – para 3.10.3 – Breach of Warranty of Authority

In Navig8 v South Vigour Shipping co Inc [2015] 1 Ll Rep 436
four charterparties had been signed by the manager of the vessels
understood to be acting on behalf of the vessels' registered owners, but
the evidence demonstrated, on the balance of probabilities, that they had
not expressly authorised the manager to conclude charters of the vessels
on their behalf and so the charterer's claim against them for withdrawing
the vessels from service had to be dismissed. However, the manager was
liable in damages to the charterer for breach of an implied

P86 – para 3.11.3.2.Agent’s accountability for bribes and secret

profits
In FHR European Ventures LLP v Cedar Capital Partners [2014] 4
All ER 79 the Supreme Court ruled that when an agent received a bribe
or secret commission in breach of his fiduciary duty to his principal he
held the bribe or secret trust for his principle, which meant that the
 4

principal had a proprietary interest in that bribe or any property into which
it had been converted.

While advising F in relation to their purchase of a hotel, C had entered into

an agreement with the sellers of the hotel under which C was to receive a
fixed commission of €10 million for securing a purchaser. C failed to notify
F of that agreement and received the commission when F bought the
hotel. F sought to recover the €10 million from C. The Court of Appeal
held that C had received the commission on constructive trust for F. The
issue concerned the scope of the equitable rule that where an agent
acquired a benefit which came to his notice as a result of his fiduciary
position, or pursuant to an opportunity which resulted from his fiduciary
position, he was to be treated as having acquired the benefit on behalf of
his principal. The question was whether that rule applied to a bribe or a
secret commission obtained by an agent in breach of his fiduciary duty.

F
submitted that where an agent received a bribe or secret commission in
breach of his fiduciary duty to his principal, the agent held the sum on
trust for the principal, giving the principal a proprietary claim to it. C
argued that a bribe or secret commission was not a benefit which could
properly be said to be the property of the principal, meaning that the
principal merely had a claim for equitable compensation.

The Supreme Court overruled the controversial decision in Lister & Co v
Stubbs (1890) 45 Ch.D 1

P86 – para 3.11.3.2 – Equitable compensation award against

parties that dishonestly assist a party in breach of their fiduciary
duty
In Novoship (UK) v Niktin [2015] 2 WLR 526 the Court of Appeal
ruled that the remedy of an account of profits was available against a
defendant who had dishonestly assisted in another’s breach of fiduciary
duty. A former employee of H had sought bribers in relation to
negotiation of charters of vessels in breach of his fiduciary duties to his
 5

employer. Y who controlled the companies with whom these charters had
been arranged was held liable to pay equitable compensation when it was
found that he had known of these corrupt relationships.

P95 – para 3.1.4.4. – Compensation on termination of a

commercial agency
In Warren (T/a On-Line Cartons and Print) v Drukkerij Flach BV
[2015] 1 Ll Rep 111 the Court of Appeal upheld an award of £18,000 on
terminaton of his agency under Reg 17 CA(CD) Regs 1993. In 1997, W
started working as an agent for D. His role included introducing United
Kingdom customers to D's products, acting as a conduit for orders and
responding to customer problems. In September 2009 he decided to retire
and gave three months' notice to terminate his agency. The agency
relationship consequently ended in December 2009 and the parties parted
on good terms. However, W later discovered that in the six months
following the end of his agency, orders worth around £230,000 were
placed with D by two customers he had been maintaining prior to his
retirement. Had the agency relationship still existed, he would have been
entitled to a large commission. He made a claim for compensation for
damage suffered as a result of the termination of the agency under reg.17
and was successful. In deciding the amount of compensation to award,
the judge referred to an accountant's report in order to come to a
conclusion as to what a reasonable hypothetical purchaser would have
paid for the income stream provided by the agency.

D argued that (1)
the judge had erred in saying that he had to assume that there was a
hypothetical buyer for the agency which should, therefore, be valued on
the basis that a buyer existed who would pay something for the agency;
(2) once that error of law was corrected, the evidence showed that there
was in fact no buyer who would be prepared to pay anything for the
agency. On reviewing the judge’s treatment of facts Court of Appeal
upheld his award
 6

Chapter 4: Sale of Goods

P 102 - para 4.1.5 – Commercial and Consumer Sales

The divide between B2B and B2C transactions is widened by the passing
of the Consumer Rights Act 2015 which reforms the regime governing
sales by business to consumers – people not buying in the course of a
business – the scope of the Act is discussed below in ch 7 updates – it
thus makes it important for a student to identify the status of a
transaction when preparing an answer to a sales question.

P125 – para 4.5.3.1. – Delivery of goods – s29 Sale of Goods Act

1979
In Mercuria Energy Trading PTE LT V CITIBANK NA [2015] EWNC
1481 (Com), Phillips J, 22/5/15, M, who were metal traders, entered
into to sales and repurchase arrangements in relation to metal under a
master agreement entered into with C, the defendant banking companies.
The master agreements provided for C to purchase metal from M and for
C to sell and M repurchase equivalent metal at a specified future date at a
higher price. The intended commercial effect of the transactions was that
C was to provide finance to M on the security of M’s inventory of metal –
the common intention was that these sales and re-sales would take place
without the metal leaving a third party warehouse much of which was
stored in Chinese port warehouses. The master agreement provided that
full title and ownership of the metal would pass to C. C held warehouse
receipts evidencing ownership and the right to possession of the relevant
metal. Evidence of fraud emerged and it appeared that a large amount of
the metal was missing as a result of multiple pledging. C issued a “bring
forward” notice requiring repurchase on a specified date of all metals.
M served a notice declaring a termination event which in effect
required C to delivery equivalent metal before M was obliged to pay the
price. C purported to deliver the metal by tendering warehouse receipts
endorsed in blank. C had not issued release instructions to the warehouse
 7

operators who had not attorned to M by acknowledging that they held the
metal on M’s behalf. Held that under s29(4) SGA 1979 the tendering of
endorsed warehouse receipts was not effective re-delivery of metal under
repurchase contracts in the absence of an attornment or acknowledgment
from the warehouse operators that they held the metal on behalf of the
purchasers.

P 32- para 4.2.2 – Undue Influence – Advantageous Gift –

rebutting presumption
In Hart v Burbridge [2014] WTLR 1361 the Court of Appeal held that a
married couple had exercised presumed undue influence over the wife’s
mother who had made substantial gifts to them and they had not rebutted
this presumption of undue influence and shown that the gifts were
independently made of mother’s free will and not the product of undue
influence.

P 214 – para 4.9.3 – Unfair Contract Terms new regime for

consumer contracts
Pt II Consumer Rights Act 2015 introduces a new regime controlling
exemption clauses in B2C contracts, but not an employment or
apprenticeship contract – in effect consolidating and reforming the
provisions of the Unfair Contract Terms Act 1977 as they apply to
consumer contracts with the provisions of the Unfair Terms in Consumer
Contracts Regulations 1999 – so again important student determines
status of sale contract they are dealing with. UCTA 1977 as amended will
continue to apply to B2B contracts.

P 231 – para 4.10.3 – Scope of s49 action by seller for price

A useful article discussing scope of Court of Appeal decision in F G Wilson
(Engineering) Ltd v John Holt & Co (Liverpool) [2014] 1 WLR 2365
(noted in 2014 Companion Website Update) is “The interpretation
of retention title clauses: some difficulties” Louise Gullifer,
 8

L.M.C.L.Q. 2014 4(Nov) 564-580, where the author examines whether,

in an action for the outstanding price under a sale of goods contract: (1)
the property in the goods had passed to the buyer, thereby permitting a
claim under the Sale of Goods Act 1979 s.49, where the contract
contained a retention of title clause; and (2) s.49 set out the only
situations in which an action for the price could be brought. Raises
concerns about the ruling.

P 232 – para 4.10.4 – Seller’s remedy for non-acceptance of goods

– s50 Sale of Goods Act 1979
In Glencore Energy UK Ltd v Cirrus Oil Services Ltd [2014] 2 Ll
Rep 1 G had agreed to sell 630,000 barrels of blended crude oil to C. G
had yet to take delivery of the oil from its supplier (S). C planned to sell
the oil on to another company (T), but T later stated that it would not
accept "blended" oil. C refused to proceed with the sale and G managed to
terminate its contract with S without any liability. However, G purported
to accept C's refusal as a repudiation of contract and sought damages for
non-acceptance under the Sale of Goods Act 1979 s.50(2) and (3). 
C
argued that G's claim was effectively a claim for loss of the profit it would
have earned if the transaction had proceeded, and that a contrast was to
be drawn between lost profit on the one hand and out of pocket
expenditure, or physical damages caused by a quality problem with the
cargo, on the other. C further argued that the effect of cl.32.1 was to
exclude all liability for loss of anticipated profits, whether or not they could
be seen as "indirect or consequential losses or expenses" within the
second limb of Hadley v Baxendale 156 E.R. 145. 
 The judge held that
the seller should be awarded damages under the Sale of Goods Act 1979
s.50(2) and (3) after the buyer refused to accept the cargo. The award
was designed to compensate the seller for the loss of the bargain and did
not relate to lost profits. The contract price/market price differential was
not a computation of lost profit. Lost profit was the difference between the
total net cost to the seller of acquiring the goods and bringing them to
 9

market on the one hand and the net sale price that would have been
achieved on the other. The measure of damage constituted by s.50(2) and
(3) was designed to compensate the seller for the loss of the bargain with
the buyer by computing how much worse off the seller would be, if at the
time of the breach, he had sold the goods to a substitute buyer. The
measure constituted both a ceiling and a floor to the loss claim on the
assumption that the seller had gone out into the market and sold at the
date of breach. Movement in the market thereafter was then excluded
from the calculation on the basis that any change in the figures affected
thereby was the result of the seller's own decision to play the market. No-
one who understood the way in which the 1979 Act worked would refer to
that measure of loss as "lost profits" or "loss of anticipated profits"

P 235 – para 4.10.4 – Buyer’s remedy for non-delivery of goods

s51 Sale of Goods Act 1979
In Somasteel Sarl v Coresteel DMCC, Lawtel 1/5/2015 a seller had
breached two contracts for the supply of four consignments of steel
billtets the judge concluded however that the non-delivery had not caused
the buyer’s loss of profits but instead the judge assessed damages using
the deemed market price rule in s51(3) and the judge assessed these
using available evidence as to the market price for steel at the points the
four consignments should have been delivered.

P 236 – para 4.10.4 – Buyer’s action for breach of warranty –

s53(2) Sale of Goods Act 1979
In Saipol SA v Interco Trade SA [2015] 1 Ll Rep 26 – the court held
that the buyer of Ukrainian sunflower oil was entitled to damages for
breach of warranty under s53(2) SGA 1979 when EU authorities ordered
the recall of food products into which the sunflower had been incorporated
when it was discovered that the cargo had been contaminated with
mineral oil this was a loss that flowed in the ordinary and natural course
of events from the breach.
 10

Chapter 5: International Sale of Goods

P260 – para 5.2.3.6. – Right of actions under a bill of lading –

rights of indorsee
In Standard Chartered Bank v Dorchester LNG (The Erin Schulte)
[2015] 2 All ER 395 the Court of Appeal had to consider the position of
an indorsee (in this case a bank) in relation to rights to sue under ss2&5
Carriage of Goods by Sea Act 1992 the court ruled that the mere transfer
of possession of a bill of lading was not sufficient to constitute completion
of an indorsement by delivery. It was necessary for the transferor and
transferee both to intend that the rights under the bill should pass from
one to the other by the combined effect of the indorsement and the
transfer of possession. There was a difference in treatment between
consignees and indorsees in the Carriage of Goods by Sea Act 1992. By
virtue of s.5(2)(a) for a named consignee to become the holder of a bill of
lading it was sufficient that he was in possession of it. There was no
equivalent to the requirement in s.5(2)(b) that there was completion of
the indorsement by delivery of the bill. Delivery was an essential element
in a series of voluntary acts designed to give effect to the holder's
intention to transfer the rights which it represented . Completion of an
indorsement by delivery required the voluntary and unconditional transfer
of possession by the holder to the indorsee and an unconditional
acceptance by the indorsee which on the facts of this case had not been
the case as the bank had rejected the documents as non-compliant but
had retained possession of them and later sought to sue on them.

P284 – para 5.6.1. – Nature of FOB contracts – right of rejection of

documents and right of rejection of goods
The case of Aston FFI (Suisse) v Louis Dreyfus Commodities Suisse
SA [2015] 1 Ll Rep 413 once again emphasises the distinction between
two separate rights the right to reject on the grounds of non-compliant
documents and the right to reject on the grounds that the physical goods
 11

are non-compliant. In this case the buyers purchased 30,ooo mt of

Russian milling wheat in bulk which provided for inspection and analysis
certificates to be issued. The argument revolved around the issue of
whether rejection of the goods was precluded if the chosen surveyors
were not properly accredited and their certificate of inspection did not
comply with the contract (which the court held on the facts did in fact
comply). The court ruled that this would not preclude the right to reject
the goods.
As to the certificate point, a compliant certificate was one of the
documents which had to be presented by the sellers under the contract to
obtain “cash”. It necessarily followed that the absence of such a compliant
certificate prevented the sellers from obtaining “cash” under the contract.
However, the question was whether the buyers were entitled to reject the
cargo under the contract absent a contractually compliant certificate. An
fob buyer ordinarily had two separate rights of rejection, ie a right to
reject the documents and a right to reject the goods. Clear words would
be necessary to exclude the buyers’ independent right to reject the cargo
for non-conformity. In the present case, the terms of the contract relied
on by the sellers did not have that effect. There was nothing in the
contract nor the GTT nor GAFTA 124 which provided either expressly or
impliedly that the issuance of an inspection certificate compliant with sub-
clause (5) of the payment section of the GTT was determinative of the
quality of the goods such that the absence of such contractually compliant
certificate would preclude the buyers from rejecting the goods for relevant
disconformity

P292 – para 5.7.1.2 – Buyer’s remedies – mitigation

It is a general proposition in both international and domestic sale
contracts that a buyer should take appropriate steps to mitigate any loss
arising from the seller’s breach. This was illustrated in the case of SC
Confectia SA v Miss Mania Wholesale [2014] EWCA Civ 1484 where
the appellant manufacturer of garments appealed against an award of
 12

damages to the wholesale supplier. C, the manufacturer, had contracted

to supply M, the wholesaler, with garments and M was the to be the
ultimate arbiter of the appropriate quality of these garments with C having
a duty to rectify deficiencies. In relation to one consignment of 588
garments sold to M for £5 and resold to a retailer P for £32.40 each the
retailer claimed the goods were defective and requested their return. M
issued a credit note to P but did not get them back as P refused to return
them pending trial of the dispute and had then gone into liquidation. M
had not to sought to collect the goods from P because of cost and
complexity of exercise. If M had immediately sold them at the time of the
breach immediately after Christmas 2010 the judge assessed they could
have been sold for £6 and deducted this per item from the credit for
£12,782 which M had issued to the retailer. The Court of Appeal upheld
the award. First, the duty to take reasonable efforts in mitigation arose at
the date of the breach. M's failure to recover the garments had prevented
the recovery of the entire £12,782. Secondly, it would not have been
reasonable to require M to keep the garments without selling them for
another nine or 11 months in the hope that the market would improve,
given the expenses involved such as storage. Although M had stated that
it would send the recovered goods to C for correction and then seek a sale
a year later to recoup the costs, it had not been possible for M to get them
back. Thirdly, there was no evidence supporting C's assertion that the
garments' value had risen, only the unchallenged evidence of the value at
the time of the breach.

It had been appropriate to measure damages for a manufacturer's breach
of contract, by supplying defective garments, by reference to the value of
the garments at the point of breach. It would not have been appropriate
to require the purchaser to hold on to those garments and sell them when
they were next in season, at a possible higher value, especially where
there was no evidence on that point.
 13

Chapter 6: Payment and payment instruments

P331 – para 6.4 – Funds Transfer – Payment through CHAPs

In Tidal Energy Ltd v Bank of Scotland [2015] 2 All ER 15 by a
majority of 2:1 the Court of Appeal ruled on the proper construction of the
transfer form used in the clearing houses automated payment system
(CHAPS), a remitting bank was authorised to debit a customer's account
when the form had correctly identified the beneficiary's receiving bank,
sort code and account number: the standard banking practice governing
CHAPS transactions did not require correspondence between those
identifiers and the beneficiary's name. A customer who had named a
beneficiary correctly but entered an incorrect sort code and account
number on the CHAPS form could not recover the completed payment
from the remitting bank.

P331 – para 6.4 – Funds Transfer – Direct Debits

In Bathija v Lloyds TSB Bank [2014] EWHC 4092 (Ch) the court
ruled that a bank was not in breach of contract for failing to honour a
direct debit which would have caused the client's account to substantially
exceed the overdraft limit. However, it was in breach of contract for failing
to ensure that the payment reached the recipient's account two days
later, since it had subsequentl authorised the payment by the 15.00
deadline for same-day CHAPS payments, so there was no reason why the
payment should not have been made on the same day.

P336 – para 6.5 – A new payment services regulator

A new payment services regulator operating under the auspices of the
Financial Conduct Authority has been set up – information on its powers
and regulatory controls is to be found at the below page
https://www.psr.org.uk
The Payment Systems Regulator (PSR), the new economic regulator for
payment systems, today confirmed how it will regulate the industry from
 14

1 April 2015. The PSR’s aim is to make payment systems work well for
the people and organisations that use them, and deliver greater choice,
innovation and competition. Payment systems let people pay a deposit on
a house, withdraw money from a cash machine, transfer money via
smartphone, receive salaries into bank accounts, and much more. They
are vital to the UK’s financial system and process in the region of 21
billion transactions worth around £75 trillion a year. The regulatory
powers are based on Pt 5 Financial Services (Banking Reform) Act
2013 - s49 sets out the regulator’s general duties and s50 its
competition objective, s51 its innovation objective, s52 its service-user
objective and s53 the regulatory principles. section 108 of the Financial
Services (Banking Reform) Act 2013 has been amended to give the PSR
the ability to use its powers to enable firms to gain access to payment
systems that are designated under the EU Settlement Finality Directive.

P370 – para 6.8.2 – Cheque imaging – s13 Small Business,

Enterprise and Employment Act 2015
Section 13 makes provision for ‘cheque imaging’. This allows for cheques
to be paid electronically, through presenting an electronic image in place
of the cheque itself. Many other countries including the United States,
China, India, France and a number of other European countries already
operate a cheque imaging process. The use of cheque imaging will enable
more open access to the arrangements for processing cheques and a
faster and better service for users. The traditional methods for paying in
physical cheques will be preserved. Section 13 Small Business,
Enterprise and Employment Act 2015 inserts a new s89A (1) Bills
of Exchange Act 1882:
Presentment for payment of an instrument to which this section applies
may be effected by provision of an electronic image of both faces of the
instrument, instead of by presenting the physical instrument, if the person
to whom presentment is made accepts the presentment as effective.
P381 – para 6.10.2 – Performance bond or contract of surety -
 15

Distinction between contract of surety and performance bond

In Spliethoff’s Bevrachtingskantoor BV v Bank of China [2015]
EWHC 999 (Com), Carr J, 17/4/15 the court considered whether two
guarantees were contracts of surety or in the nature of on-demand
performance bonds. The court concluded that they were not contracts o
guarantee but on-demand performance bonds. A Chinese bank was
ordered to honour guarantees issued in support of two shipbuilding
contracts where the nature of the guarantees was by way of performance
bonds and not contracts of surety, and their express terms excluded
discharge, notwithstanding that the party in whose favour they had been
issued had been found culpable of fraud by the Chinese courts in relation
to the installation of second-hand engines. Moreover, the fraud had
nothing to do with the fraudulent party's right to cancel the contracts,
since there was no suggestion that the late delivery was caused by the
nature of the engines. 
The contracts were made between S and a
Chinese company (X). Pursuant to the contracts, S paid advance
instalments to X towards the purchase prices on terms that the
instalments would be refunded if the contracts were cancelled. The
guarantees secured X's obligation to refund. The ships were not delivered
on time and S claimed repayment of the instalments.

P383 – para 6.10.3 – Factoring - invalidation of ban on invoice

assignment clauses
Section 1 Small Business, Enterprise and Employment Act 2015
allows the Payment Services Regulator to invalidate certain restrictive
terms of business contracts such as contracts of sales –
“(1) The appropriate authority [Sec if Sate for BIS or relevant Scottish
Minister] may by regulations make provision for the purpose of securing
that any non-assignment of receivables term of a relevant contract—
has no effect;
has no effect in relation to persons of a prescribed description;
 16

has effect in relation to persons of a prescribed description only for such

purposes as may be prescribed.”
A “non-assignment of receivables term” of a contract is a term which
prohibits or imposes a condition, or other restriction, on the assignment
(or, in Scotland, assignation) by a party to the contract of the right to be
paid any amount under the contract or any other contract between the
parties.

For rationale for restriction – mainly to advantage those carrying on small

business to access cash through factoring more easily see
Nullification of Ban on Invoice Assignment Clauses, December 2014, BIS
https://www.gov.uk/government/uploads/system/uploads/attachment_da
ta/file/392477/bis-14-1232-nullification-of-ban-on-invoice-assignment-
clauses-consultation.pdf

Chapter 7: Consumer Protection

P400 – para 7.2.3 – Cancellation Rights

The Consumer Contracts (Information, Cancellation And Additional
Charges) Regulations 2013 implement obligations of the UK under the
Consumer Rights Directive 2011/83/EU relating to pre-contract
information rights and post-contract cancellation rights and replace the
Consumer Protection (Distance Selling) Regulations 2008 and Cancellation
of Contracts made in a Consumer’s Home or Place of Work etc Regulations
2008. A key provision is the extension of the cancellation period from 7 to
14 days to regulated contracts. Provision of information both in relation
to off-premises but on premises contracts.
For distance and off-premises contracts much of the information
requirements are already required under existing regulations however
there are a number of key changes:
traders for all sales of digital content must describe, if relevant, the
functionality and interoperability of any digital content;
 17

where cancellation rights exist, traders must provide consumers with a

model cancellation form that can be used to return the goods or cancel a
service (although the consumer is not obliged to use it);
information on the main characteristics, total price, minimum durations of
any obligations and how to terminate must be clear and prominent
directly before the consumer places their order;
all costs, including potential costs the consumer may incur in the future,
must be made clear and, if an exact cost cannot be given up front, the
trader must show on what basis the final cost will be calculated;
the trader must also make clear whether the consumer must pay for
returns should they cancel; and
within a reasonable time after the contract is concluded (and, in any
event, not later than the delivery of the goods or commencement of
services), the trader must provide the consumer with confirmation of the
contract and all pre-contract information on a "durable medium" (i.e. by
email, post or SMS).

P400 – para 7.2.3 – Failure to issue cancellation notice

The Supreme Court has ruled that failure to issue a cancellation notice
under the Cancellation of Contracts Made In A Consumer’s Home or
Place of Work ect Regs 2008 does not stop the cancellation period
running and if no notification has been issued then the cancellation
period does not expire – see Toby Robertson v Swift [2014] 4 All ER
859

P400 - para 7.2.3. – Cancellation Rights

The Court of Appeal in Cox v Woodlands Manor Care Home Ltd
[2015] EWCA Civ 415, 27/1/15 ruled that a Conditional Fee
Agreement signed by an injured employee at home because it was more
convenient in the light of her injury was unenforceable because she had
not been given a cancellation notice contrary regs 5 & 7 Cancellation of
Contracts made in a Consumer’s Home or Place of Work etc
 18

Regulations 2008. This was despite the fact that the agreement at the
time of signature might never been activated as the insurers under a legal
expenses policy she held might stipulate that she use one of their panel of
solicitors. The agreement was made when she signed at home and their
was an intention to create legal relations.

P427 – para 7.4.3. – Reform of package holiday protections

A new regime is to be introduced to protect package holiday makers under
a new EU Directive which is it claimed is expected to reduce damages to
consumers by about 430 million euros a year
See
http://ec.europa.eu/consumers/consumer_rights/travel/documents/factsh
eet_new-package-travel_en.pdf
The rules will extend protection of the 1990 EU Package Travel Directive
to cover not only traditional package holidays, but also give clear
protection to 120 million consumers who book other forms of combined
travel, e.g. a self-chosen combination on a website of a flight plus hotel or
car rental. There will always be protection where travel services are
advertised as a package or where they are offered at a total or inclusive
price.

P427- para 7.4.3..2 – Holiday accident tour operator’s liability and

burden of proof
In Lougheed v On the Bearch Ltd [2014] EWCA Civ 1358 in a
damages claim brought against a travel company by a holidaymaker for
breach of reg 15(1) Package Travel etc Regs 1992 and who sustained
personal injuries from slipping on a wet staircase, a finding of liability was
overturned where there had been no enquiry as to local standards of care
and the judge had wrongly imposed an evidential burden of proof on the
holiday company to adduce evidence of the exercise of reasonable skill
and care in the performance of the contract. An evidential burden should
not be imposed upon a party such as the holiday company unless it was at
 19

least shown that the party for whose performance it was liable, namely
the hotel, knew of the likelihood of the presence of a hazard such as
spillage, and of the danger to consumers posed by that hazard if not dealt
with promptly. The judge was justified in finding the second of those
prerequisites established, but not the first (paras 31-34).

P 434 – para 7.5.4 – Product Liability – Defective product

In an important case the Court of Justice of the European Union (Fourth
Chamber) in Boston Scientific Medizintechnick Gmbh v AOK
Sachsen-Anhalt (CaseC-503/13), 5/3/15 has ruled on whether in the
case of pacemakers implantable cardioverter defibrillators they can be
regarded as defective and the costs or replacing them recovered from the
manufacturers can be recovered where there have been incidents of
problems with other patients but not with patient in question. The Court
ruled under Council Directive 85/374/EEC of 25 July 1985 on
Liability for Defective Products (implemented in the UK under Pt I
Consumer Protection Act 1987 as amended) that where it is found
that products belonging to the same group or forming part of the same
production series, such as pacemakers and implantable cardioverter
defibrillators, have a potential defect, such a product may be classified as
defective without there being a need to establish that the particular
product has such a defect and that damage covers the costs of a surgical
operation for the replacement of such a defective product by a non-
defective product. This will constitute “damage caused by death or
personal injury’ where the operation is necessary to overcome the
potential defect.

P440 – para 7.6.3 – Product safety – prohibition of sale of ‘drug

like substance’ not banned under Misuse of Drugs Act 1971
Relying on Article 8(1)(a) General Product Safety Regulations 2005 the
Attorney-General secured an injunction stopping sale of a drug type
 20

substance which was considered dangerous, albeit not prohibited under

the Misuse of Drugs Act 1971:
A distributor shall act with due care in order to help ensure compliance
with the applicable safety requirements and in particular he—

(a) shall not expose or possess for supply or offer or agree to supply, or
supply, a product to any person which he knows or should have
presumed, on the basis of the information in his possession and as a
professional, is a dangerous product;
See Attorney-General for Northern Ireland v Campbell [2014] NI
Ch 28

P440 – para 7.6.3 – Reform of General Product Safety law

The EU Commission has proposed a package of measures to reform and
tighter general product safety rules these are currently being considered
the EU Council and Parliament
The package includes:
Communication from the Commission on more product safety and
better market surveillance in the Single Market for products
Proposal for a Regulation of the European Parliament and of the

Council on consumer product safety, (208 kB) repealing

Directive (87/357/EEC) on dangerous imitations and Directive
2001/95/EC (General Product Safety Directive (GPSD))
Proposal for a Regulation on market surveillance of

products (260 kB)

Communication from the Commission on 20 actions for safer and
compliant products for Europe: multi-annual plan for the
surveillance of products in the EU
Report from the Commission on the implementation of Regulation

(EC) No 765/2008; Annex1 (209 kB) ; Annex2 (119 kB)

 21

P453- para 7.7.4.3 – Unfair contract terms – Main subject matter

of contract
The European Court of Justice has affirmed in Kasler v OTP
Jeizalogbank Zrt (Case 26/13) [2014] 2 All ER (Comm) 443 - A
contract term defining the main subject matter of the contract was
exempt from an assessment of its unfairness only if it was in plain,
intelligible language, to the effect that consumers who contracted a loan
in foreign currency must be able to assess the economic consequences of
the application of a rate of exchange (the selling rate) to the repayment of
the loan which was different from that applicable to the calculation of the
amount of the loan when it was made available (the buying rate). The
national court may substitute an unfair term with a provision of national
law in order to re-establish a balance between the parties to the contract
and to preserve the contract's validity. Here a mortgage taken out by a
Hungarian capital but the instalments repayable in Swiss Francs had to be
able to have clean information on the conversion rates etc to enable them
to properly assess their monthly repayments. If the core term was not in
plain and intelligible language the court could substitute an unfair term
with a provision of national law in order to re-establish a balance between
the parties to the contract and preserve the contract’s validity. If such a
substitution were not allowed and if the court were obliged to annul the
contract, the dissuasive nature of the penalty of nullity and the objective
seeking to protect consumers might be jeopardised. In the present case,
such an annulment would have the consequence that the whole of the
outstanding sum would become due. That was likely to be in excess of the
consumer's financial capacities and, as a result, to penalise him rather
than the lender who, in the light of that consequence, might not be
dissuaded from inserting such terms in its contracts.

P455 – para 7.7.4.5 – Unfair Contract Terms Directive covers

contracts with professionals
 22

In Siba v Devenas (Case C-573/13) [2015] Bus L.R. 291 the CJEU
confirmed that the Unfair Contract Terms Directive covered contracts
between professionals such as in this case a Lithuanian lawyer – they
came within the phrase ‘seller or supplier’ within Article 2(1)(c) of
Council Directive 93/13/EC

P455 – para 7.7.4.5 – Unfair Contract Terms

In Parkingeye Ltd v Beavis [2015] EWCA Civ 402, 23/4/15 the
Court of Appeal held that parking charges imposed on motorists for
overstaying permitted periods of parking were recoverable even if they
constituted a penalty rather than a liquidated sum for financial loss as
long as they had been brought to the clear notice of the motorist and were
not exorbitant or unconscionable. The court was not confined to
determining whether the charges had a commercial justification, but had
also to take account of social factors and proportionality. For the
purposes of reg.5 of the Unfair Terms in Consumer Contract Regulations,
the operator had not failed to deal in good faith. It had prominently
displayed the conditions for use of the car park and the fact that it was
making a profit from the charge was irrelevant, Director General of Fair
Trading v First National Bank Plc [2001] UKHL 52, [2002] 1 A.C. 481
applied and the terms did not infringe the UTCCR 1999.

P460 – para 7.7.4.8 – Reform of the law on unfair contract terms

Part 2 Consumer Rights Act 2015 introduces a major reform of the law
on unfair contract terms in effect consolidating and reforming the law on
unfair contract terms contained in the Unfair Contract Terms Act 1977 and
Unfair Terms in Consumer Contracts Regulations 1999 insofar as they
relate to contracts between a trader and a consumer. This in effect
creates a dual regime that for B2B contracts in the Unfair Contract Terms
Act 1977 and for B2C in the Consumer Rights Act 2015

P469 – para 7.8.4 – Unfair Commercial Practices

 23

Reg 6 Consumer Protection from Unfair Trading Regulations 2008

proscribes misleading omissions as is illustrated in Secretary of State
for Business Innovation & Skills v PLT Anti-Marketing Ltd [2015]
EWCA Civ 76, 10/2/15. The Secretary of State of Business Innovation
and Skills was seeking to wind up a company which proffered services
aimed at reducing unwanted marketing calls on public interest grounds
because they failed to inform the public that you could register with the
Telephone Preference Service (TPS) and Mail Preference Service (MPS)
free of charge while the company were charging users a fee. While the
petition was pending the company gave a voluntary undertaking to inform
consumers that they could register free of charge before charging for their
services. The company then sought to vary the undertaking and judge
then treated as a preliminary issue whether they were breaching
reg6(1)(a) and found that they had and he refused to vary the
undertaking. The Court of Appeal upheld his decision not to vary the
undertaking however the judge should not have made the preliminary
ruling. The judge had erred in assuming that information was material
information on the basis of need regardless of whether it could be
obtained by a reasonably circumspect consumer otherwise than from the
company. Further, the judge had treated as decisive the fact that,
because the company was obtaining registration with the services as part
of its business, it knew that it was available free, and did not have to trawl
the market to find that out. That would be true of any case where the
allegedly material information consisted of the price at which the trader
obtained part of the product offered from a wholesaler, manufacturer or
sub-contractor. The judge had erred in stating a general principle that a
supplier of a service for which it was proposing to charge would always be
obliged to inform the consumer if the same service was available from an
alternative supplier. That was clearly erroneous, especially if only part of
the service which the trader was offering could be obtained free. The
company had not itself offered a registration service in the sense of
providing the relevant registers. It had offered to do what the customers
 24

could have done for themselves, namely obtain registration on the

services' registers. That was not a service provided, free or otherwise, by
TPS or MPS. The company's real omission was not, therefore, a failure to
tell customers that the service being offered was available free, but failure
to tell them that no part of the company's cost of discharging that part of
its service would include a registration fee payable to TPS or MPS.
However, it did not follow that the only correct conclusion was that the
fact that TPS and MPS provided their services free was not material
information within reg.6. The answer to that depended on the
circumstances.

Page 475 – para 7.8.7 - Part 8 Enterprise Act - Consumer Rights

Act 2015 s79 & Schedule 7 – Civil Enforcement Orders – Enhanced
Consumer Measures
Trading Standards Officers and other approved enforcers can seek
voluntary undertakings, and if these are refused, civil enforcement orders
to restrain breach of UK and EU consumer protection legislation under Part
8 Enterprise Act 2002 (as amended) s79 and Schedule 7 Consumer
Rights Act 2015 adds what are called ‘enhanced consumer measures’ to
provide greater flexibility and to get better outcomes for consumers who
have been the victims of a breach of the law. The main formal sanction
for dealing with the most serious breaches of consumer law will remain
criminal prosecution. Enforcers can seek a civil injunction (interdict in
Scotland) under Part 8 of the Enterprise Act 2002 against infringements of
consumer protection legislation. ECMs widen the orders that the enforcer
can seek in the civil courts, giving the flexibility to seek orders aimed at
achieving one or more of:

• _redress for consumers who have suffered loss from breaches of

consumer law;
• _remedies from traders who have breached consumer law to improve
their compliance and reduce the likelihood of future breaches;
 25

• _remedies to give consumers more information so they can exercise

greater choice and help improve the functioning of the market for
consumers and other businesses
The Department of Business Innovation and Skills have issued guidance
for enforcers - Enhanced Consumer Measures, May 2015
https://www.gov.uk/government/publications/consumer-law-more-
powers-for-enforcers

Chapter 8: Consumer Credit law and regulation

P487 – para 8.2 – New regulatory structure

The transfer or regulatory responsibility for consumer credit matters has
been implemented and the new regulator is the Financial Conduct
Authority created under the Financial Services and Markets Act 2000 (as
amended) they have taken over authorisation arrangements from the now
defunct Office of Fair Trading (which has been replaced by the
Competition and Markets Authority in relation to general consumer
protection matters)
See: https://www.fca.org.uk/firms/firm-types/consumer-credit
An early example is the tougher new rules laid down by the FCA for
‘payday lenders’
The biggest changes come for payday lenders and debt management
companies, including:
limiting the number of loan roll-overs to two
restricting (to two) the number of times a firm can seek repayment using
a continuous payment authority (CPA)
a requirement to provide information to customers on how to get free
debt advice
requiring debt management firms to pass on more money to creditors
from day one of a debt management plan, and to protect client money
See FCA confirms tough new rules for £200bn consumer credit
market
 26

https://www.fca.org.uk/news/fca-confirms-tough-new-rules-for-
200bn-consumer-credit-market
One consequence of these changes are substantial repeals of provisions of
the Consumer Credit Act 1974 – including Pt III Licensing, ss43-47, 52-
54, 55A & 55B, Pt X Licensing of Ancillary Businesses

P496 – Exempt Agreements – False declaration that loan was for

business purposes
In Wood v Capital Bridging Finance [2015] EWCA Civ 451, 7/5/15
– an elderly lady was persuaded by her son-in-law to obtain for him in her
name a 6 month bridging loan she then signed a declaration that the loan
was for businesses purposes and thus exempt from the Consumer Credit
Act 1974 under s16B(2). The facts were communicated to the lender.
The Court of Appeal held that the declaration was invalid and the lender
was unable to show the loan was for a business purpose of the borrower
and the borrower was not estopped from denying the invalidity of the
declaration despite the collusion of the lender the Court of Appeal gave
leave for the lender to apply for an enforcement order under s127 CCA
1974.

P552 – para 8.13.2 – Invalid declaration by debtor that loan for

business purposes

P555 – para 8.13.6 – Unfair relationships

In Plevin v Paragon Personal Finance [2015] 1 All ER 625 –
Supreme Court overruled the Court of Appeal decision in Harrison v Black
Horse [2011] EWCA Civ 1128 and held that a PPI agreement which was
part of the credit package was capable of being unfair because of lack of
suitability for the debtor and the excessive amount of commission being
paid by the insurer regardless of the fact that the rules of the Financial
Services Authority did not at that point require the disclosure of such
commissions.
 27

Section 140A was not concerned with whether the creditor or anyone else
was in breach of a duty; it was concerned with whether the creditor's
relationship with the debtor was unfair. The unfairness did not have to
involve a breach of duty. The rules imposed a minimum standard of
conduct applicable in a wide range of situations. Section 140A introduced
a broader test of fairness applied to the particular debtor-creditor
relationship, which could lead to the transaction being reopened as a
matter of judicial discretion. Most of the rules imposed hard-edged
requirements, whereas the question of fairness involved a large element
of forensic judgment. A wider range of considerations might be relevant to
the fairness of the relationship, including the borrower's characteristics,
their vulnerability, the extent of their knowledge and the degree to which
the creditor should have been aware of those matters. The non-disclosure
of the commissions made P's relationship with X unfair. A sufficiently
extreme inequality of knowledge and understanding was a classic source
of unfairness in any relationship between a creditor and a non-commercial
debtor. It was a question of degree. P had to have known that some
commission would be payable to intermediaries. However, commissions
could become so large that the relationship could not be regarded as fair if
the customer was kept in ignorance. The instant commissions were a long
way beyond the tipping point. Any reasonable person in P's position who
had been properly informed would be bound to question whether the
insurance represented value for money.
However the debtor still failed as the assessment of suitability of the PPI
had been carried out by a broker and the court concluded that this was
not by or on behalf of the creditor

P544 – para 8.12 – Scope of statutory agency s56

In Scotland v British Credit Trust [2015] 1 All ER 708 a challenge
was made to the fairness of an agreement for the installation of double-
glazed windows and doors on credit and including a substantial ancillary
PPI agreement. A salesman working for the installer visited the borrower
 28

and offered to arrange credit through and associate broker and also stated
that the buyer would need to take out a PPI policy. The judge held that
the retailer via its salesman had made a false representation that it was
necessary to purchase PPI insurance. Over 6 years later the buyer started
proceedings arguing the relationship was unfair. One issue was the
application of s56 – the judge concluded that the negotiations were
conducted on behalf of the creditor. The Court of Appeal concluded that
even though the only agreement was for the double-glazing the
negotiations re the PPI were made in relation to that principal transaction
and fell within the scope of s56(1)(c) CCA 1974 and within s56(2)
deemed to have been conducted on behalf of the creditor.
In relation to the PPI agreement however s56 did not apply - Section
140C(4)(b) of the Act provides that references to an agreement related to
a credit agreement are references to a linked transaction in relation to the
main agreement. The concept of a linked transaction is then defined by
section 19 . However, there is no reference in section 56 to the concept of
a linked transaction and so the deemed agency provisions it contains do
not apply to make the creditor responsible for negotiations conducted by a
broker in relation to such a PPI transaction.

[the other issues in this case as to the application of s140A CCA and
whether salesman acting by or on behalf of the creditor, regardless of the
operation of ss56 & 75 CCA should be treated with great caution in light
of Supreme Court decision in Plevin v Paragon Finance [2015] 1 All ER
625]

P559 – para 8.14 – Enforcement of a mortgage whether unfair

In Graves v Capital Home Loans [2014] EWCA Civ 1297 9/10/14 a
mortgage lender had enforced re-possession of a buy-to-let property
against a debtor who had of defaulting and over whom there were serious
questions about future ability to repay. The borrower had an intermittent
mental problems and had been compulsorily sectioned at a certain point.
 29

A power of sale was provided for where the borrower and become
incapable by reason of mental capacity of managing his own affairs. The
debtor argued that their had been a failure to observe OFT Guidance on
Irresponsible Lending and the Money Advice Centre Guidance on
Consumers with Mental Health Problems and Debt (2009). The Court of
Appeal ruled that the mortgagees had not acted unfairly and it would only
be in exceptional cases that the court would conclude that a mortgagee
with a power of sale which had become exercisable because of non-
payment would be treated as having acted unfairly within the terms of
s140A & B CCA 1974. In this case even allowing for treatment with
consideration in the guidance the lenders did not have to ignore the long
history of the account or the ability of the borrower to maintain it in the
future.

Chapter 9: Commercial mediation, conciliation and

arbitration

P572 – para 9.2.1. – Enforceability of dispute resolution clause

Teare J ruled in Emirates Trading Agency LLC v Prime Mineral
Exports Private [2015] 1 WLR 1145, a case concerning a Long Term
Contract for the purchase of iron ore that a dispute resolution clause in a
contract which required the parties to seek to resolve a dispute by friendly
discussions in good faith and within a limited period of time before the
dispute could be referred to arbitration was enforceable. However in
respect of an earlier partial award which had been treated as binding and
not been challenged the award could not be set aside on the grounds of
lack of jurisdiction as there was no power in a reconstituted tribunal to
review or challenge a decision which had been reached on an issue and
which was final and binding as to the matters decided as such a challenge
was precluded by s73 Arbitration Act 1996 – see Emirates Trading
Agency Ltd v Sociedade de Fomento Industrial Private Ltd [2015]
 30

EWHC 1452 (Comm), Popplewell J, 20/5/15.

P581 – para 9.3.4 – Duties of arbitration tribunal – impartiality

S33 Arbitration Act 1996 imposes a duty on a tribunal to act fairly and
impartially as between parties and under s24(1)(a) a court may remove
an arbitrator if circumstances exist that give rise to justifiable doubts as to
his impartiality. A recent case demonstrate this, Sierra Fishing Co v
Farran [2015] 1 Ll Rep 514 where the court granted an application to
remove an arbitrator where he had a financial interest in his father’s law
firm where the firm and his father acted for one of the parties to the
arbitration and derived significant financial benefit from that continuing
commercial relationship. The arbitrator had failed to disclose those
matters to all parties at the outset of the arbitration.

P581 – para 9.3.4. – Duties of arbitration tribunal – letting parties

put their case to the tribunal
Section 33 Arbitration Act 2996 provides that a tribunal give each party a
reasonable opportunity to put their case. In Alfred Uwe Maass v
Musion Events [2015] EWHC 1346 (Comm) 18/5/15, a dispute
arose in connection with an exclusive licensing agreement and the
licensing of relevant intellectual property rights. A dispute arose as to
whether the licences that had been granted under the master agreement
remained in force and if not the effect of their termination. There was a
dispute as to whether the arbitrator had jurisdiction in particular as the
applicant argued that the first respondent was not party to the arbitration
agreement. The arbitrator assumed jurisdiction without hearing the
evidence or submissions of the applicant. The judge upheld the challenge
and ruled that the irregularity was a serious one under s68 Arbitration Act
1996 and relief would be granted.

P582 – para 9.3.5 – Challenging arbitrator’s award

In Union Marine Classification Services LLC v Comoros [2015]
 31

EWHC 508 (Comm) Eder J, 6/3/15 UMC provided shipping registration

services for the Government of Comoros and were to pay the Government
50% of revenues raised with a minimum payment of $11,000 a month.
The Government purported to terminate the agreement on the grounds of
fraudulent statements as to revenue by the claimant. The arbitrator held
such as a case had not been made out so the Government was in breach.
The Government then applied for a correction of the award on the basis
that the claimants had not paid the minimum monthly payments and for
an account of revenues received under s57 Arbitration Act 1996 which
allows correction of an award and to make an additional award in respect
of any claim. The arbitrator acceded to these requests and the claimants
argued he did not have jurisdiction under s67 Arbitration Act 1996. The
court held that s67 was inapplicable as it related to the lack of substantive
jurisdiction as set out in s30 Arbitration Act and that the application
should have been made under s68 on the grounds that there was a
serious irregularity in the form of the tribunal exceeding its powers.
However there was no substantial injustice in the case and the arbitrator
had been entitled to correct his award on the basis of an accidental slip or
omission under s57(3)(a) AA 1996.

Chapter 10: Commercial conflict of laws

P590 – The Hague Convention on Choice of Courts of Agreements

2005
H.E. Mr Maris Klišans, Ambassador of the Republic of Latvia, signed and
deposited the instrument of approval of the 2005 Hauge Choice of
Court Convention on behalf of the European Union, as the Republic of
Latvia currently holds the rotating presidency of the Council of the
European Union. The approval of the 2005 Choice of Court Convention by
the European Union will trigger the Convention’s entry into force on
Thursday 1 October 2015. Twenty-eight States (all EU Member States
 32

except Denmark — as well as Mexico, which was the first State to accede
to the Convention on 26 September 2007) will then be bound by
the Convention.
The Convention promotes trade by clarifying the rules governing
international trade disputes, where the parties involved have chosen a
competent court. In detail, the Convention provides clarity on: jurisdiction
rules, which court is competent and on the recognition and enforcement of
judgments given by courts in the countries which apply the Convention.
In practice, this will ensure that EU companies have more legal
certainty when doing business with firms outside the EU: they will
be able to trust that their choice of court to deal with a dispute will be
respected by the courts of the countries that have ratified the Convention,
and that the judgment given by the chosen court will be
recognised and enforced in the countries which apply it.
The reform of the so-called Brussels I Regulation paved the way for
the ratification of the Choice of Courts Convention. This
regulation determines which national court has jurisdiction in cross-border
cases involving EU firms and how court judgments issued in one EU
country are recognised and enforced in another. The reform of these EU-
internal rules will ensure coherence with the Convention.
http://www.hcch.net/index_en.php?act=conventions.text&cid=98

P591 – para 10-2 – Recasting of Brussels I – Regulation

1215/2012
The re-casting of Brussels I Regulation contained in EU Regulation
1215/2012 came into force on 10 January 2015.
Regulation 1215/2012 seeks to facilitate access to justice, in particular
by providing the rules on the jurisdiction of the courts and the rules on a
rapid and simple recognition and enforcement of judgments in civil and
commercial matters given in the Member States.
The Regulation replaces Regulation 44/2001 (the Brussels I
Regulation) which, however, continues to apply to proceedings
 33

instituted before Regulation 1215/2012 comes into application on

10 January 2015 (for further details see Article 66 of Regulation
1215/2012).
The Regulation applies between all Member States of the European Union
including Denmark which has concluded the 2005 Agreement between the
European Community and the Kingdom of Denmark on jurisdiction and the
recognition and enforcement of judgments in civil and commercial
matters. The necessary legislative amendments in Denmark already
entered into force on 1 June 2013.
The Regulation determines the courts of which Member State have
jurisdiction to decide on a civil and commercial dispute where there is an
international element.
The Regulation further provides that a judgment given in a Member State
shall be recognised in the other Member States without any special
procedure being required.
A judgment given in a Member State and enforceable in that State shall
be enforced in another Member State without any declaration of
enforceability being required.
The Regulation provides for two forms, namely, the certificate concerning
a judgment and the certificate concerning an authentic instrument/court
settlement.
In accordance with the Regulation, the Member States have notified the
competent courts to which the application for refusal of enforcement has
to be submitted and the courts competent to deal with the appeals. To
view specific notifications, please select one of the flags listed on
the right hand side.
In accordance with Article 26(2), for certain matters, the court shall,
before assuming jurisdiction, ensure that the defendant is informed of his
right to contest the jurisdiction of the court and of the consequences of
entering or not entering an appearance". For that purpose, the European
Judicial Network in civil and commercial matters established a non-

mandatory standard text (192 Kb) containing the information which

 34

the court could use to fulfil its obligation to provide to the defendant with
the information pursuant to Article 26(2) of the Regulation.
The text of the regulation can be seen at
http://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:32012R1215&from=EN

A useful summary of reforms can be seen at ‘Enforcement of civil

and commercial judgments under the Brussels la Regulation
(Regulation 1215/2012), Fitchen, ICCR 2015 26(4) 145-152
(Westlaw)

P596 – para 10.2.2.2 – Jurisdiction in relation a claim for

compensation on termination of cross-border distribution
agreement
The case of Corman-Collins SA v La Maison du Whisky SA (C-9/12) [2014]
2 WLR 494 a French distributor of whiskey had appointed Belgium
distributors under an exclusive distributorship agreement which was then
terminated and the Belgium firm was seeking compensation. Action was
commenced in Belgium courts which the French firm challenged arguing
that the French courts had jurisdiction under Article 2 of
Regulation44/2001. The ECJ held that the provisions of Brussels I applied
to a case such as this and not Belgium law. Under Article 5(1) the French
firm could be sued in the place where the contract was to be performed
and under sub-indent (b) that the provision for disputes relating to
contracts for the supply of services was applicable in the case of a legal
action by which a claimant established in one Member State claimed
against a defendant established in another Member State, rights arising
from an exclusive distributorship agreement, which required the contract
binding the parties to contain specific terms concerning the distribution by
the distributor of goods sold be the grantor. It was for the national court
to ascertain whether that was so in the case before it.
 35

Page 596 – para 10.2.2.2 – Jurisdiction in relation to cross-border

claim for unfair competition
In Brogsitter v Fabrication de Montres Normandes EURL (C-
548/12) [2014] 2 WLR 1600 a cross-border dispute arose out of an
alleged breach of a contract for the development of movements for luxury
watches. The claim in the national court was framed in tort as one for
breach of rules on unfair competition. The CJEU ruled that for the
purposes of ascertaining which court has jurisdiction the issue had to be
considered as “matters relating to contract” within the meaning of Article
5(1)(a) where the conduct in question might be considered also to be in
breach of the terms of the contract.

Page 598 – para 10.2.2.2 – Jurisdiction in action relating to trade

mark infringement and unfair competition
In Coty Germany Gmbh v First Note Perfumes NV (C-360/12)
[2014] ETMR 49 - Coty Germany were suing a Belguim firm in relation
to the sale of counterfeit Coty perfumes which were then illegally resold in
Germany, arguing breach of a Community Trade Mark right and unfair
competition – the question which national court was to be seised in
relation to the issues – it was argued that under Article 5(3) Brussels I it
should be Belgium –

in matters relating to tort, delict or quasi-delict, in the courts for the place
where the harmful event occurred or may occur;

The CJEU ruled that Article 5(3) Brussels I did not apply if the perpetrator
who was sued there did not himself act there. By contrast the provision
did allow jurisdiction to be established, on the basis of the place of
occurrence of damage, to hear an action for damages based on the
national law (such as unfair comparative advertising and unfair imitation
of a sign, even where the sign concerned was a Community Trade Mark)
brought against a person established in another Member State and who
 36

was alleged to have committed, in that State, an act which caused or may
have caused damage within the jurisdiction of that court.

However Article 5(3) did not apply to an action for breach of a Community
Trade Mark which was governed by Regulation 40/94 Article 97(5) [now
Article 98(5) Reg 2007/2009] – here the court seised must be in “the
Member State in which the act of infringement had been committed’ –
which meant the courts of the Member State in which the defendant
actually committed the unlawful act e.g. in this case Belgium not the
courts of Germany where the harmful effects of the infringement
occurred.

P 620 – para 10.2.7 – Anti-suit injunctions – jurisdiction in

insolvency cases
The case of Stichting Shell Pensionfonds v Krys [2015] 2 WLR 689
was one of the cases consequent on the collapse of the notorious US Ponzi
scheme operated by Bernie Madoff. The appellant a Dutch pension fund
appealed against an anti-suit injunction granted by the Court of Appeal of
the British Virgin Islands restraining if from pursuing proceedings
commenced in the Netherlands against the respondent liquidators of a
British Virgin islands investment fund which had participated in the illegal
scheme. The Privy Council upheld the injunction holding that where a
company was being wound up in the jurisdiction where it was
incorporated, and where a foreign creditor had submitted a proof of debt
to the liquidators, that creditor had submitted to the jurisdiction of the
court responsible for administering the insolvency process and could not
pursue proceedings in the creditor’s domestic jurisdiction with a view to
obtaining priority over other creditors.
 37

Chapter 11: Insurance

P661 – para 11.1 – Clarity of insurance charges

The Financial Conduct Authority which regulates the provision of insurance
firms and insurance products being provided to consumers in particular
have expressed concern about the online sale of home and car insurance
– reviewing 13 insurers and 30 insurance intermediaries. In the FCA’s
view the review has revealed that insurers and insurance intermediaries
are not always providing customers with clear information about the
different payment options available, when buying general insurance
products. See TR15/5: Provision of premium finance to retail
general insurance customers, 11/5/15:
http://www.fca.org.uk/news/tr15-5-provision-of-premium-finance-to-
retail-general-insurance-customers

P663 – para 11.3 – Insurable Interest

Reform of the law on ‘insurable interests’ as part of their project for the
overall modernisation and reform of insurance law the Law Commission
has published an update of their 2011 issues document suggesting
reforms to the law (Issues Paper No 10 – the documents are also a useful
discussion of the current law and its complexity and deficiencies. See:
http://lawcommission.justice.gov.uk/docs/cp201_extract_insurable_intere
st.pdf
and
http://lawcommission.justice.gov.uk/docs/insurable_interest_issues.pdf

Pp 665-667 - Paras 11.5-11.5.4 – Insurance Act 2015

The Insurance Act 2015 substantially reforms and modernises the law of
commercial insurance which is currently based on the Marine Insurance
Act 1906 and largely follows the recommendations of the Law Commission
Report: Insurance Contract Law: Business Disclosure; Warranties;
Insurers’ Remedies for Fraudulent Claims and Late Payment, Law
 38

Comm No 353 & Scot Law Com No 238, July 2014 – with the
exception of the recommendations re late payment. The new law is due
to come into force in August 2016. The Act also corrects certain technical
problems with the Third Parties (Rights Against Insurers) Act 2010 so that
Act can be brought into force. Key provisions are s3 replacing s18-20
Marine Insurance Act 1906 and the duty of utmost good faith with a more
modern concept of ‘fair presentation’. The insurer’s remedies for non-
disclosure are modified – the insurer will only be entitled to avoid the
policy entirely (in absence of fraud) where the breach of the duty of fair
presentation is ‘deliberate or reckless’ and where the insurer can show
that he would not have entered the contract had he known the
information or would only have done so on different terms. The remedies
are rendered more proportionate to the insured’s breach rather than total
avoidance of the policy. S14 abolishes the rule allowing avoidance on the
grounds of breach of the duty of ‘utmost good faith’. The overall effect of
the Act is to modernise and provide a greater degree of balance between
the rights of the insured and the insurer. A useful Parliamentary
explanatory note on the proposed working of the Act can be found at
http://www.publications.parliament.uk/pa/bills/cbill/2014-
2015/0155/en/15155en.pdf