Last week in commercial law: frozen yoghurt, cultivated milk, and Covid lockdowns

Esther Louw slips on melted frozen yoghurt in a shopping centre. She sues the owners of the shopping centre, the managing agent, and the shopping centre’s cleaning company (Bidvest) [your summarist notes that there was an inspection in loco at the shopping centre, where Ms Louw’s lawyers emptied a tub of frozen yoghurt on the floor and, during what must’ve been a very awkward silence while lawyers and judge stared at the floor, “it was observed that it took a considerable time to melt”]. Western Cape Division: because it takes up a bucket and mop, Bidvest owes a duty of care to the public [your summarist has just about given up his fight against “duty of care”—which the SCA says we shouldn’t say—and is also sceptical about wrongfulness in these cases, siding with the dissent in Chartaprops], and the trial court was wrong about Ms Louw’s contributory negligence because shoppers shouldn’t have to be on the lookout for puddles of formerly frozen yoghurt.

Electric Safari Vehicles has a contract with Homestead Hospitality. Homestead Hospitality repudiates. Electric Safari Vehicles sues for specific performance [your summarist again laments that lawyers and judges continue to say parties “accept” or “reject” repudiation despite the SCA saying we shouldn’t use that English way of speaking and thinking about repudiation]. A few years later, Electric Safari Vehicles wants to amend its particulars of claim to cancel the contract and get its money back. Western Cape Division: Electric Safari Vehicles made an election not to cancel and it can’t go back on that now, so leave to amend is refused [the court seems concerned about Electric Safari Vehicles not explaining its change in stance, but your summarist isn’t sure why an explanation would matter: in response to Homestead Hospitality’s breach, Electric Safari Vehicles elected not to cancel, which means it lost its right to cancel, and no amount of explaining could revive that right—at most, Electric Safari Vehicles could’ve asked for an order for specific performance of the contract and an order cancelling the contract if Homestead Hospitality didn’t comply with an order for specific performance, also known as the Custom Credit double-barrel procedure].

Traderoot sells payments software. Efficacy, a payments start-up, wants some of Traderoot’s software. Traderoot sends a proposal to Efficacy. The proposal says it’s for “proposal purposes only” and “should not be construed as a commitment by Traderoot”. The proposal envisages the parties concluding a master agreement, but it lists a R3 million licence fee and other contractual detritus. Efficacy signs the proposal and pays some early payments mentioned in the proposal. The relationship quickly breaks down and Efficacy tells Traderoot it won’t be going ahead with the master agreement (which no one ends up signing). Traderoot sues for payment of the licence fee, alleging that the proposal binds Efficacy. Western Cape Division: there’s not enough in the proposal to show that the parties intended it to be binding.

[In the 1980s, Adriaan Nieuwoudt famously promised R10 for every envelope of dried milk concoction you sent back, which you could easily make from the comfort of your own home by mixing some milk with a handy activating powder that you bought from him for just R500 (your summarist has no explanation other than it was the 80s and Dynasty was only on once a week so people had a lot of spare time to cultivate milk products for onward posting). Shockingly, the whole thing was a pyramid scheme. Fast forward a few decades and today’s pyramid schemes involve generally less milk but are, in the end, no more sophisticated.] In 2019, Johann Steynberg starts Mirror Trading International in South Africa. He hoodwinks investors into thinking Mirror Trading is a platform for trading crypto into foreign currencies. People from all over the world invest, returns flow, and life is good. Until it’s not. Mirror Trading is, well, smoke and mirrors, and the ‘returns’ are just money from new investors. Mirror Trading is liquidated in South Africa. Its liquidators sue here and abroad to recover bitcoin that the scheme paid out before its collapse as dispositions without value or voidable preferences—in total, more than 4,000 claims in South Africa and 750 claims in foreign jurisdictions. The liquidators say all these claims are worth about R15 billion. But litigation is expensive, and some of Mirror Trading’s creditors worry that it’s not worth it, pointing out that paying for all these expensive lawyers has already shrunk the estate from R1 billion to R500 million and that the liquidators have not fully considered a prescription defence to the claims in England. One of the concerned creditors, Anton Lee, applies for the removal of the liquidators. Western Cape Division: the liquidators are acting reasonably and there’s no reason to remove them [the South African liquidators can sue in England under section 426(4) of the English Insolvency Act, which deals with cross-border co-operation, and the South African Insolvency Act applies to those claims under section 426(5), which is basically a custom conflict of laws rule for insolvency—and the consequence of South African law applying to the South African statutory claims is that South African prescription law, not English law, then applies under the Foreign Limitation Periods Act, which is a simpler but less interesting way to deal with prescription in the conflict of laws].

Twenty-odd years ago, the oil tanker Prestige sinks off the Spanish coast, polluting the Spanish and French coastlines. The London P&I Club insures the Prestige’s owners. The policy has a London-seated arbitration clause. The Spanish Penal Code has a nifty provision that gives third parties direct rights of action against insurers. Relying on that right, Spain and France sue the Club in Spain. Around the same time, the Club initiates arbitrations against Spain and France in London before the same arbitrator, relying on the arbitration clause in the policy. Spain and France don’t participate in the arbitrations. The arbitrator accepts that Spain’s and France’s claims under the Spanish Penal Code are claims deriving from the policy, and so he makes an award declaring that the arbitration clause in the policy binds Spain and France (under something called the conditional benefit principle of English law, a third party taking the benefit of a contract also takes obligations like an arbitration clause). The arbitrator also finds that Spain and France have no claims under the policy because of a ‘pay to be paid’ clause (which makes payment of an insured’s liability to the third party a condition precedent for the insurer’s liability under the policy). The Club later initiates a second round of arbitrations against Spain and France, alleging that they pursued the Spanish litigation in breach of their obligations to arbitrate under the policy. The arbitrators award the Club equitable compensation for breaches by Spain and France of what the arbitrators characterised as equitable obligations to arbitrate. Spain and France appeal—appeals against arbitral awards on points of law is a thing under the English Arbitration Act. UK Supreme Court: the arbitrators were wrong to award equitable compensation because the obligation to arbitrate is a legal obligation, not an equitable obligation, so the right remedy is common law damages not equitable compensation [an equitable wrong, the Supreme Court tells us, is a civil wrong that has its historical origin in the body of law known as equity which was developed by the Court of Chancery—which might seem a very loosey-goosey but equity is structured and, in some sense, rules-based, which is why your summarist finds it odd to see South African judges talking about equitable discretion and equitable remedies because equity (at least in a law/equity sense) doesn’t make sense in a legal system that never had a law and equity divide]. 

[Here’s a question that keeps your summarist up at night: is it a requirement for an interim interdict that an applicant give an undertaking to pay damages for harm caused to the respondent if it turns out that the interim interdict was wrongly granted? The SCA describes the “very common rider” added to an interim interdict that the applicant “tender[s] an undertaking to cover the respondents' losses should it transpire that the interim relief it sought should not have been granted” (and see also this dissent in the Constitutional Court). But it’s very rare to see that “very common rider” in practice (for a rare sighting of one, see Blue Cloud Developments (Pty) Ltd v Steyn 2004 JDR 0158 (C) and, more recently in the context of an Anton Piller—and a bonus point for any reader that directs your summarist to other examples of this “very common rider”)]. An undertaking in damages is a standard requirement for an interim interdict under English law—often described as the price of an injunction (a practice direction to the English civil procedure rules even says any order for an injunction “must contain … an undertaking by the applicant to the court to pay any damages which the respondent sustains which the court considers the applicant should pay.”). Enter Arcadia, an oil trader. In 2015, it accuses its then-CEO, Peter Bosworth, and then-CFO, Colin Hurley, of fraudulently diverting business opportunities and gets a worldwide freezing injunction against them pending a trial. Arcadia loses spectacularly at trial, and the court orders an inquiry into damages that Mr Bosworth and Mr Hurley suffered as a result of the freezing injunction. Commercial Court: but for the freezing injunction, Mr Bosworth and Mr Hurley would have started their own oil trading business, and they are entitled to damages for the profit they would have made, plus losses from other missed investment opportunities, plus general damages (the exact amount is still to be determined but will likely exceed $100 million).

Oxford colleges have business interruption insurance policies with Aviva. The colleges lost revenue when they closed during Covid lockdowns. Everyone agrees (or is willing to assume) that the colleges’ losses are caused by cases of Covid at each college (or within the agreed radius of each college) and by cases of Covid outside each college (or outside the agreed radius of each college) [it will come as a shock to many at Magdalen various Oxford college that life does, in fact, exist outside Oxford]. The policy says the colleges are covered “in respect of interruption or interference with The Business during the Period of Insurance following … a Specified Disease occurring at The Premises or within the distance in miles from the boundary of The Premises stated in The Schedule” but an exclusion says that the colleges are not covered “for reduction in the turnover of any premises, or where insured by this Section, a reduction in Revenue, Fees, or Rentals caused by … any occurrence of a Specified Disease not at The Premises or not within the distance in miles from the boundary of The Premises stated in The Schedule”. In the main Covid insurance litigation, the Supreme Court held, based on an older causation case called the Miss Jay Jay [confirming your summarist’s belief that the best stuff in English law is from cases about ships], that if there are cases of Covid on an insured premises (or within the defined radius of the insured premises), then it’s not a defence for an insurer to point to cases of Covid occurring outside the radius that were concurrent proximate causes of business-interruption loss at the premises, provided that the policy does not expressly exclude cover for the off-premises causes. In other words, there’s cover if there are two causes of a loss and the policy covers one cause but not the other cause, as long as the other cause is not expressly excluded. Commercial Court: this policy wording specifically excludes Covid not at the colleges or not within the agreed radius of the colleges, so the Miss Jay Jay argument doesn’t work (and if there are two causes for a loss, one of which is covered and one of which is expressly excluded, then the exclusion prevails).  

And finally, one of your summarist’s favourite topics: conflict of laws and enforcement of foreign judgments. James Sinclair starts EnterpriseJungle, a software company, with his sister, Emma Sinclair. They fall out and, after a long dispute, conclude a settlement. In the settlement, Emma agrees to pay James $6 million. The settlement provides that if there’s an event of default, James can get an ex parte judgment in California against Emma for $6 million and against EnterpriseJungle for $1.5 million. There’s an event of default and James gets an ex parte judgment against Emma and EnterpriseJungle. He sues in England to enforce the California judgment. Emma and EnterpriseJungle argue that the California judgment is unenforceable because there is a pending appeal in the California courts and because the provision in the settlement allowing judgment against EnterpriseJungle is a penalty. Commercial Court: a pending appeal in a foreign jurisdiction is not a reason against enforcement of a foreign judgment, but it may be a reason for a stay of execution of the English judgment that enforces the foreign judgment (which is warranted here), and the claim against EnterpriseJungle is not a penalty because the rule against enforcing foreign penalties applies only to sums payable to the state (and, in any event, this is not even a penalty on any view of contractual penalties under English contract law).