Update: commercial

Given the fast-pace of change in IT and the fact that Commonwealth judgments are often persuasive in English courts, the judgment of Master Harper sitting in the Australian Capital Territory Supreme Court in MKM Capital Property Ltd v Corbo and Poyser (a bankrupt) (SC 608 of 2008) should be of interest in the near future.

Are you being served?

The claimant's lawyers, Meyer Vandenberg, encountered difficulties in serving a default judgment but discovered that the defendants had profiles on Facebook which contained their dates of birth and email addresses. MV produced print-outs of this material to the master, which satisfied him that the judgment could reasonably be expected to be brought to the defendants' attention if notice of it and its terms were forwarded by private message via Facebook. He found, accordingly, that Facebook was an adequate method of effecting service on the defendants (in addition to service at last known address and specified email address).

The courts, and in particular the Commercial Court, have increasingly little patience with parties who seek to play the rules to evade service and an applicant may be assisted by thinking creatively of ways in which to bring a court document to the attention of the other party; under the CPR, service of the Claim Form (CPR 6.15) and other documents (CPR 6.27) may be allowed by an alternative method or at an alternative place if an applicant shows that there is a 'good reason' for alternative service and explains why he believes that the document is likely to reach the respondent if served by the alternative method proposed.

The danger of relying on the HPI register alone

A company has been found liable for the tort of conversion after selling on motorcycles purchased from a third party (T), which neither owned nor had authority to sell them '“ notwithstanding that the claimant finance company (C) which did in fact own the vehicles had failed to register with HPI its interest in them (an HPI check being the method by which buyers of used cars in the UK can confirm the identity of the vehicle).

Industrial & Corporate Finance Ltd v Wyder Group Ltd (T/A Ducati) [2008] QBD (Merc) 8 August 2008 is a reminder that merely checking the HPI register is not a failsafe way to guarantee that the party from whom one buys an asset has title in it to be able to pass on. While it is good practice to register an interest in a vehicle at HPI, there is no duty on finance companies or others and a failure to do so is not conclusive as to lack of interest; nor can it be relied upon as an omission by the finance company warranting it being stripped of its lawful entitlement.

T had assigned three motorcycles to C and a bill of sale was registered with the court; the effect of which was that C had acquired title to the goods, but possession of the goods remained with T. When T defaulted on the terms of the bill of sale, C sought the motorcycles in order to seize them but was unable to locate them. It transpired that by then T had sold them to the defendant company (D) and D had sold them onto other purchasers.

C commenced proceedings, initially against T and then against D for the tort of conversion. On C's application for summary judgment against D, D submitted that C was estopped from alleging that D had acquired no better title to the goods than T in accordance with s.21(1) of the Sale of Goods Act 1979 ('SGA') and that it was standard practice for finance companies to register any interest in property such as the motorcycles with HPI precisely so that dealers such as D could check the register and rely upon it. It pointed out that, while D had acted in accordance with that practice, C had failed to do so.

Judge Langan QC was not persuaded by D's arguments and granted C's application, holding that s.21(1) SGA applied with the effect that D, as buyer of the goods, had acquired no better title to the goods than T, as seller of the goods, could grant. D therefore had acquired no title at all and could rely on no estoppel defence to C's claim in conversion as there was no duty on finance companies to register their interest in a vehicle or anything else at HPI. Accordingly, D was liable for conversion to make due payment to C as owner of the motorcycles.

Arbitration clauses in terms and conditions

Mylcrist Builders Limited v Mrs G Buck [2008] EWCH 2172 TCC serves as a warning to businesses of the risks of including an arbitration clause in standard terms and conditions (T&Cs) when dealing with consumers, unless the clause and its effect have been fully explained in advance. A consumer will not generally be familiar enough with the process of arbitration to appreciate, for example, the more limited rights of appeal and likelihood of having to pay an arbitrator. Arbitration is a consensual process not to be entered into by a lay person without a full grasp of its implications and in particular, that any court proceedings will be automatically stayed under s9.

The claimant builders (C) sought to enforce an arbitration award against a consumer (D), who had engaged C on C's T&Cs '“ which contained an arbitration clause. Ramsey J refused the application to enforce the award because, inter alia, the arbitration clause was not binding on D and was unenforceable as an unfair term within the Unfair Terms in Consumer Contracts Regulations 1999.

Ramsey J examined whether, contrary to the requirement of good faith, the arbitration clause (which had not been individually negotiated within the meaning of Regs 5(1) and (2)) created a significant imbalance in the parties' rights and obligations under the contract.

He held that the existence of the arbitration clause, coupled with the requirement for a mandatory stay of court proceedings under s.9 of the Act, meant that an obligation to arbitrate 'exclude[d] or hinder[ed] a consumer's right to take legal action'; here it prevented D from having access to the court and thereby caused an imbalance between the professional builder and lay person. He also found that the requirement for fair and open dealing was not met in that D, as a lay person, would have been less likely to appreciate the impact of the arbitration clause '“ had its effect been drawn to D's attention, she may well have objected. By including an arbitration clause in its T&Cs, C had taken advantage of D as a lay consumer.

Light relief against vexatious litigants

Commercial entities often find vexatious litigants to be the bane of their lives but the recent case of Forrester Ketley & Co v David Brent [2008] EWHC3150 (Ch) gives a little further relief.

The High Court refused the defendant's application, pursuant to an existing Civil Restraint Order (CRO), for permission to make a number of applications against the claimant. It held that, in deciding whether to grant such a permission, it was 'highly relevant' to consider whether the suggested claim or application or step had a realistic prospect of success and, if it did not, it found that generally it would be right to withhold permission save where there was some other reason why permission should be granted; equally, even where claims or applications had a realistic prospect of success, if they were unduly oppressive to the other party, the court could refuse permission.

This gives commercial entities a little further reassurance that the CRO regime will be treated by the courts as a filter to weed out claims without merit and enable them thus to thwart the activities of some vexatious litigants at an early, and less expensive, stage.

Incurring interest for late payments

All commercial entities who send out or receive trading invoices should note the recent Court of Appeal decision of Ruttle Plant Hire Ltd v Secretary of State for Environment Food and Rural Affairs [2009] EWCA Civ 97, as it concerns liability under the Late Payment of Commercial Debts (Interest) Act 1998 and deals with the situation where a paying party relies on a defect in an invoice as justification for delaying in (or not paying) a receiving party, without giving any further reason.

Ruttle emphasises that it is the paying party who must check invoices. He must then pay any sums which he reasonably judges are due. In Ruttle, the paying party withheld all payment and that was held to be not good enough. If the paying party disputes the basis for any element, he cannot simply ignore it but must explain in a timely fashion why he is not paying in full; querying with the receiving party the sums in question.

If you withhold all payment without alerting the invoicing party to the problem and merely await a corrected invoice, you risk incurring interest under the 1998 Act (which provides for the recovery of a high rate of interest on commercial debts that are not paid on time).

There is however some light at the end of the tunnel: the court also gave more general guidance as to when and on what basis a paying party can argue that such interest should in whole or in part be 'remitted' (using the wording of s.5 of the 1998 Act, i.e. 'reduced'). Trading parties should consider what arguments they might want to deploy, or expect from the other side, where the question of late payment arises and the issue of interest is raised.

The Ruttle judgment makes clear that the rate of statutory interest is not a relevant factor when exercising the court's discretion under s.5 to reduce the rate of interest, and that the court will look solely at such factors as the reasonableness of the parties' conduct and whether the interests of justice are served in continuing to allow statutory interest in respect of a period for which it would otherwise run.

There is then in principle an automatic right by the receiving party to interest, but both parties' conduct after the invoice is received and/or queries raised will have a direct effect on liability/entitlement to interest on top.