Weekly Trade Disputes – Issue 135

“These questions … go to the heart of our understanding of company law and are of considerable practical importance for the management of businesses.”BTI 2014 LLC v Sequana SA and others

Directors’ duties
The Supreme Court has held that the duty of corporate officers to act in good faith and in the best interests of the company can sometimes include taking into account the interests of creditors before insolvency (under a rule of common law preserved by section 172(3) of the Companies Act 2006). The interests of creditors had to be taken into account, appropriately weighted and balanced against the potentially conflicting interests of shareholders. The directors legally distributed a large dividend to the company’s sole shareholder ten years before the company became insolvent. At the time of the dividend, the company was solvent but had long-term contingent liabilities, making it a real risk, although it is unlikely to become insolvent at some point in the future. The Supreme Court held that the risk of insolvency had not been sufficient to trigger the obligation of the creditor and that the action against the directors for breach of obligation therefore failed.
BTI 2014 LLC v Sequana SA and others [2022] UKSC October 25, 5, 2022

Maritime – Allowances
A shipment of crude oil was delivered without presentation of the original bills of lading. Letters of Indemnity (“LOI”) were provided throughout the charter chain. The Commercial Court held that although the charter required that wording of the letter of intent to discharge without presentation of bills of lading be provided “prior to lifting the submarines”, the fact that the submarines were lifted without that the wording was provided, indicated that it was not a condition precedent to compensation. Moreover, the commercial context indicated that the parties only intended to deliver without production of invoices when an indemnity was provided for. A problem also arose when an intra-group novation of the time charter meant that the time charter company (CSPL) was not the same company that was the owner under the voyage charter (CUSA). CUSA had an incoming letter of intent from the voyage charterer and CSPL had provided a letter of intent to the dead owner under the time charter. The court found 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), October 3, 2022

Disclosure
The Court of Appeal held that the courts of England and Wales had jurisdiction to hear a request for disclosure to a third party from parties 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 which the trustees had provided documents. The plaintiff successfully applied for permission to serve the Third Party Disclosure Demand on the administrators in Cyprus and the court declared that it was not necessary to use the demand letter procedure.
Gorbachev versus Guriev [2022] EWCA Civ 1270, September 30, 2022

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

If you would like to discuss any of these cases in more detail, please speak to a member of our Dispute Resolution team in London below, or your usual contact at Watson Farley & Williams:

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