Commercial Disputes Weekly – Issue 17810 October 2023

Adjudication – Privilege
The UK Technology and Construction Court held that an adjudicator’s decision was unenforceable as a result of having reviewed without prejudice material. The dispute related to whether a contract had been concluded between the parties for replacement works of a building’s stair core pressurisation systems. The adjudicator determined that there had been a contract but in doing so considered material that was subject to without prejudice privilege as it contained negotiation discussions. It was deployed by AZ to undermine the contractual position that BY had adopted in the adjudication by indicating concessions BY had apparently made in the negotiations. Such evidence was not admissible. The court concluded that there was apparent bias, namely that a fair-minded observer would conclude that there was a real possibility that the adjudicator was biased as a result of having seen the inadmissible material. The material played a significant role in AZ’s case and the adjudicator concluded that the relevant matters had been agreed, thereby raising the question as to whether the inadmissible material had shaped the outcome of the hearing. As a result, there had been a breach of the rules of natural justice and the decision was not enforceable.
AZ v BY [2023] EWHC 2388 (TCC), 27 September 2023

Limitation of Time
In a dispute relating to mis-sold payment protection insurance (“PPI”), the UK Supreme Court has concluded that the claims had been brought before the time limit expired. The claims were brought under section 140B of the Consumer Credit Act 1974 (“CCA”) and sought repayment of the money paid for PPI. The issue was when time started running in relation to the claim for limitation purposes. The CCA required the court to assess whether the credit relationship was unfair to the debtor and section 140A provides that the relevant time for that assessment, where the relationship has ended, was the time when the relationship ended. The Supreme Court held that the right to claim a remedy did not arise when each PPI payment was made, but rather when the relationship was assessed to be unfair, namely at the date the relationship ended. The claims were not time-barred.
Smith v Royal Bank of Scotland Plc [2023] UKSC 34, 4 October 2023

Dishonest Assistance – Compensation
Mr Ruhan was a director of Hotel Portfolio II UK Ltd (the “Company”) and found to be in breach of fiduciary and other duties that he owed to the Company in relation to the sale of hotels owned by the Company to another company in which Mr Ruhan had an interest. Mr Stevens was Mr Ruhan’s nominee and was held to have been liable for dishonest assistance in the breaches of duty. Mr Ruhan was ordered to give an account of profits and Mr Stevens was ordered to pay equitable compensation in the same amount. The UK Court of Appeal held that it would be unjust for the Company to receive both sums where it been unable to exploit the development opportunities in the hotels and therefore make the profits itself. Mr Ruhan’s account of profits returns the gain made by him from his breach of duty. The equitable compensation from Mr Stevens would compensate the Company for its loss but the Company had not established that it had suffered any loss. Equity was satisfied by the account of profits.
Hotel Portfolio II UK Ltd (in liquidation) and another v Ruhan and Stevens [2023] EWCA Civ 1120, 4 October 2023

Contract Interpretation – Conditional Fee Agreements
The defendant solicitors agreed to act for the claimant in an arbitration on the basis of a conditional fee agreement, where the fees would be discounted by 30% but in the event of an award or settlement in the claimant’s favour, the defendants would receive an additional sum. The agreement did not satisfy the requirements for a conditional fee agreement under the Courts and Legal Services Act 1990 and as a result was not enforceable. The defendants were not entitled to recover any fees and were also obliged to repay the sums that the claimants had paid on account. The problematic sections of the contract could not be severed from the rest as that would fundamentally change the nature of the agreement. Further, it would be contrary to public policy to allow recovery of fees on a quantum meruit basis.
Diag Human SE v Volterra Fietta [2023] EWCA Civ 1107, 4 October 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: