Litigation

UK LITIGATION REVIEW 2020 8 parties for contractual relationships and the desirability of either including them as named parties (where possible) or expressly providing for the consequences of the CRTPA and any agency relationship. Interpretation In Lehman Brothers International (Europe) (In Administration) v Exotix Partners LLP, 5 the High Court had to determine the terms of an oral contract in circumstances where the parties took very different views as to its terms. LBIE mistakenly delivered 22,955 depository notes worth $7.7 million to Exotix, believing at the time that it only had a much smaller proportion of "scraps" of notes to deliver. Exotix paid only $7.7K for them. Neither party was aware of the mistake at the time of sale. The key issue was what the parties had agreed the subject matter of the contract was, and its price. The Court found that the parties had objectively agreed to sell the number of notes whose total price (at an agreed percentage of their face value) was $7,700, i.e., 22.955 notes. However, as it was impossible to deliver a fraction of a note, to make the contract workable, the Court also found that it was necessary to imply a term that the fraction of a note was to be settled in cash. Consequently, Exotix was ordered to give monetary restitution in respect of the over-delivered notes. While the Court hesitated to imply a term in relation to cash settlement (because if asked at the time of the contract, the parties would likely have not agreed to it), Exotix shows the Court's preparedness to apply business common sense to give effect to the parties' overall objective intent, notwithstanding any mistake or unworkability affecting the contract the parties appear to have agreed. The case of Hancock v Promontoria (Chestnut) Ltd 6 raised an "important point of principle" as to whether a party is entitled to redact a document that a court has been asked to construe based on a solicitor's statement that the redacted sections are irrelevant. A deed of assignment had been reviewed by a solicitor who had left unredacted the parts of the deed establishing the existence of an effective assignment and redacted all other parts as irrelevant. The Court of Appeal held that, where the court is asked to construe a contractual document, the whole document should be provided. Irrelevance will not ordinarily justify redactions unless "convincingly justified and kept to an absolute 5 [2019] EWHC 2380. 6 [2020] EWCA Civ 907. minimum." Confidentiality alone would not justify the redaction of relevant provisions. Finally, FCA v Arch Insurance (UK) Ltd 7 was a high- profile test case brought by the FCA in the context of COVID-19. In this recent case, the Commercial Court broadly favoured a wider interpretation advocated by the FCA in respect of certain clauses under a sample of business interruption insurance policies. The Court held that most of the disease clauses in the sample of policies before it would extend to the COVID pandemic, and that cover would not be limited to losses arising solely from local outbreaks. The Court also found that denial of access clauses could also cover the consequences of the outbreak, though these would be interpreted more narrowly than disease clauses and would be dependent on the wording of the clause itself and the relevant factual circumstances. As to the applicability of trend clauses, which allow adjustments to be made to the compensation paid under the policy to reflect trends which were present notwithstanding the insured event, the pandemic and the government's response constituted a single cause of loss, so no adjustment could be made in respect of the wider effects of the coronavirus. The FCA and some of the insurers have been granted "leapfrog" certificates by the High Court to apply for permission to appeal directly to the Supreme Court. and no determination has been made of the amounts payable under each individual policy. Rectification for common mistake On the subject of mistake, in the important judgment of FSHC Group Holdings Limited v Glas Trust Corporation Limited, 8 the Court of Appeal considered whether there is a subjective element to the test for rectification of a document for common mistake. In general terms, rectification for common mistake is available where, at the time a contract is executed, the parties had a common intention (even if not amounting to a binding agreement) which, as a result of a mistake on the part of both parties, the document fails accurately to record. The parties in this case entered two deeds with the common intention that they would provide (and only provide) security that was missing from a prior transaction. The parties subsequently realised that the mechanism chosen to achieve this—their accession to pre-existing security agreements—imposed additional, 7 [2020] EWHC 2448. 8 [2019] EWCA Civ 1361.

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