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Commercial Disputes Weekly – Issue 13511 October 2022

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BITE SIZE KNOW HOW FROM THE ENGLISH COURTS

"These issues … go to the heart of our understanding of company law, and are of considerable practical importance to the management of companies."BTI 2014 LLC v Sequana SA and others

Directors’ Duties
The Supreme Court held that the duty owed by company directors to act in good faith and in the company’s best interests can sometimes include consideration of the interests of creditors prior to insolvency (following a common law rule that was preserved by section 172(3) of the Companies Act 2006). Creditors’ interests had to be considered, given appropriate weight and balanced against possibly conflicting shareholders’ interests. The directors lawfully distributed a significant dividend to the company’s only shareholder ten years before the company went into insolvent administration. At the time of the dividend the company was solvent but had long-term contingent liabilities which made it a real risk, although not a probability that it might become insolvent at some point in the future. The Supreme Court held that the risk of insolvency had not been sufficient to trigger the creditor duty and so the claim against the directors for breach of duty failed.
BTI 2014 LLC v Sequana SA and others [2022] UKSC 25, 5 October 2022

Maritime – Indemnities
A cargo of crude oil was delivered without presentation of the original bills of lading. Letters of Indemnity (“LOI”) were provided up the charter chain. The Commercial Court held that although the charter required the LOI wording for discharging without presentation of bills of lading to be provided ‘before lifting subs’, the fact that subs were lifted without the wording having been provided, indicated that it was not a condition precedent to an indemnity. Further, the commercial context indicated that the parties intended only to deliver without production of bills when an indemnity was provided. An issue also arose where an intra-group novation of the time charter meant that the time charterer company (CSPL) was not the same company that was demise owner under the voyage charter (CUSA). CUSA had an incoming LOI from the voyage charterer and CSPL had provided an LOI to the demise owner under the time charter. The court held that there was an implied indemnity between the two Clearlake entities.
Trafigura Maritime Logistics PTE Ltd v Clearlake Shipping PTE Ltd, Clearlake Chartering USA INC v Petroleo Brasileiro SA [2022] EWHC 2234 (Comm), 3 October 2022

Disclosure
The Court of Appeal held that the courts of England and Wales did have jurisdiction over an application for third party disclosure from parties who were based in Cyprus, where the documents were located in England. The dispute related in part to two trusts based in Cyprus and the trustees, who were not parties to the dispute, had been advised by a London law firm, to whom the trustees had provided documents. The claimant successful applied for permission to serve the application for third party disclosure on the trustees in Cyprus and the court said that it was not necessary to use the letter of request procedure.
Gorbachev v Guriev [2022] EWCA Civ 1270, 30 September 2022

Contract construction – Agency
In a dispute arising out of the supply of surgical face masks during the Covid-19 pandemic, the court concluded that where the same agent had been appointed by both parties to the negotiations, he was acting as a dual agent. The relationship with both was of a fiduciary nature and it did not matter that he had potentially exposed himself to a conflict of duty. He had been appointed to receive information, provide advice, negotiate fundamental terms and reach agreement in principle on the parties’ behalf. However, neither party created the impression that he had authority to enter into binding contractual commitments and therefore the parties had not concluded a binding contract.
RSW International Ltd v Purple Surgical Manufacturing Ltd [2022] EWHC 2258 (Comm), 31 August 2022

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:

Andrew WardRebecca Williams
Ryland AshCharles Buss
Dev DesaiRobert Fidoe
Andrew HutcheonSarah Ellington
Mike Phillips
Theresa Mohammed

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