Commercial Disputes Weekly – Issue 15521 March 2023

Duress
The Supreme Court has given Ukraine permission to defend a claim brought against it for non-repayment of instalments of a loan that was in the form of subscriptions for Eurobonds issued by Ukraine to Russia. The court refused Russia’s application for summary judgment, deciding that Ukraine had an arguable defence that the transaction was voidable for duress. It could not be based on economic duress; the threat of trade restrictions were not regarded as inherently illegitimate or contrary to public policy. However, threats to use force to destroy Ukraine’s security and territorial integrity constitute duress of the person and goods and are clear examples of illegitimate pressure. Whether such threats caused Ukraine to enter into the transaction must be considered at trial and the court could consider this issue without determining the validity or lawfulness of Russia’s acts under international or domestic law. The economic pressure is relevant as factual context and may have accentuated the impact of threats of force.
The Law Debenture Trust Corporation plc v Ukraine [2023] UKSC 11, 15 March 2023

Sanctions
LLC Synesis, a Belarussian technology company, was added to the UK sanctions list for providing video surveillance systems to the Belarus government which could be used in the suppression of protestors. LLC Synesis asked for a review of the designation and then challenged the decision not to remove it from the sanctions list under the Sanctions and Anti-Money Laundering Act 2018 on the grounds that the decision not to de-list it was unreasonable or disproportionate. The court rejected the challenge. The established test under English law was that the decision-maker had to have “reasonable grounds to suspect” the person’s involvement in proscribed activities. Suspicion involved making inferences from all available material or information and did not require finding objective facts. The court’s review of a designation decision under the 2018 Act was on Wednesbury reasonableness grounds, namely whether the decision was so unreasonable or irrational that no reasonable authority would have decided it that way.
LLC Synesis v Secretary of State for Foreign, Commonwealth and Development Affairs [2023] EWHC 541 (Admin), 14 March 2023

Landlord and Tenant
A Right to Manage company was incorporated with a view to acquiring the right to manage a block of flats. Notices inviting participation in the company were served on all qualifying tenants who were not already members of the RTM company (as required by the Commonhold and Leasehold Reform Act 2002). Due to various errors, notice was not served on several qualifying tenants. As a result, a claim notice could not be given. The RTM company did not therefore acquire the right to manage the block of flats.
Baron Estate Management Ltd v Wick Hall (Hove) RTM Co Ltd [2023] UKUT 62 (LC), 13 March 2023

Breach of Warranty
The claimant buyers of a company brought a claim against the defendant sellers in relation to the poor performance of that company since the acquisition. The claims were based on alleged breaches of contractual warranties that (1) there had been no material adverse change in the turnover or prospects of the company at the time the contract became effective; and (2) the records of the company were accurate. The court found that there had been a breach of the first warranty and awarded the claimants £1.31m. In reaching this conclusion, the court held that statements as to future prospects or financial projections are not company records. It also held that the correct test of whether a change is material is whether it is so significant that had the other party known of the change it would not have entered into the transaction at all or would have entered into it on significantly different terms. It was an objective test and the accounting concept of materiality was not applicable to use of the word in a contract.
Decision Inc Holdings Proprietary Limited and another v Garbett and El Mariesh [2023] EWHC 588 (Ch), 16 March 2023

Should you wish to discuss any of these cases in further detail, please speak with a member of our London dispute resolution team below, or your regular contact at Watson Farley & Williams: