In advance of the new year, it may be of interest to see what lessons can be learned from rulings by the Supreme Court (HD) in 2021. Lindahl’s dispute resolution group has therefore summarised a few of the most interesting cases at the HD last year.
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“The total sales target” – a question of a duty of loyalty in contractual relationships (Case T 5613-20)
Under a transfer agreement regarding all shares in a company, the purchasers would pay for the shares partly by taking over half of a surety of SEK 800,000 that the seller had with the bank of the company sold. The purchasers would take over the remainder of the surety when the acquired company’s total annual sales exceeded SEK 10 million or when it had total sales of SEK 10 million calculated from the date of taking of possession (the so-called “total sales target”). After the share transfer, the purchasers credited invoices issued to a company closely related to the purchasers. Furthermore, the purchasers failed to fulfil the customer orders on hand and redirected business at the company to other closely related companies. Just over a year after the share transfer, the company was declared bankrupt. The total sales target in the share transfer agreement was never met. The seller was therefore required to pay half the total surety to the bank. The seller brought an action against the purchasers seeking damages for the payment.
The question at the HD was whether the purchasers had an obligation to loyally endeavour to meet the total sales target and whether the purchasers had in that case become liable for damages to the seller by ignoring that obligation. The HD initially found that the share transfer agreement did not contain any express obligation for the purchasers to continue carrying on business at the company. Nevertheless, the HD considered that the clause containing the total sales target was based on a joint understanding between the parties that business would continue to be carried on at the company. If the purchasers had no obligation to endeavour to meet the total sales target, the HD considered that the clause would be meaningless for the seller, particularly since the seller could not influence the business after the transfer. The HD found that the clause included an obligation for the parties to loyally endeavour to meet the total sales target and that the parties had an obligation to endeavour to the best of their ability to ensure that the company met that target. The HD then examined whether the purchasers had acted contrary to the meaning of the clause. The court noted that the purchasers’ actions had been radical and meant that an extremely large portion of the total sales had ended up outside the company. In other words, their actions directly counteracted the agreed total sales target. The HD thus found that the purchasers had ignored their duty of loyalty and that they had thereby incurred liability for damages to the seller.
Take-aways: Parties to an agreement have a duty of loyalty to each other. However, the scope of the duty of loyalty must be determined according to an overall assessment of the circumstances in each individual case. The legal case illustrates certain factors that may be of significance in this assessment, such as the parties’ reasonable expectations, the relationship between the parties and the risk and control over relevant circumstances. The duty of loyalty may, for example, mean that a party is obliged to endeavour to the best of its ability to ensure that a certain contractual condition is fulfilled.
“The framework agreement” – a question of whether a framework agreement in a public procurement situation is exclusive and confers on a company a sole right to provide services included in the agreement (NJA 2021 p. 643)
A company carried out a procurement of services in the areas of information, branding and integrated communications. The company entered into a four-year framework agreement with the consultant winning the procurement. The consultant brought an action against the company claiming damages for breach of contract consisting of a situation whereby the procuring company, in breach of the framework agreement, purchased and allowed other operators to provide services that were included in the framework agreement.
The question at the HD was whether the framework agreement entered into was exclusive and conferred on the consultant a sole right to provide services that were included in the framework agreement. The HD initially found that the contents of the agreement must be determined on the basis of the wording of the framework agreement and other objective criteria such as tender documentation and administrative regulations. The mutual obligations of the parties are governed by the specific framework agreement and by the application of general contractual law. Procurement legislation and its purpose are a natural starting point for interpretation and fulfilment of a framework agreement in the situation in question. Framework agreements are described as closed systems, both for the procurer and the supplier, and are justified on grounds of transparency and the typical effect of the framework agreement of restricting competition. Furthermore, the HD found that interpretation and fulfilment of a framework agreement may be based on an overall assessment of the agreement and its purpose, taking into consideration the context in terms of procurement law. The interpretation should be in harmony with the agreement in general and should be based on the fact that an agreement must fulfil a rational function and must constitute a reasonable regulation of the parties’ interests. Ultimately, more general principles of contractual law can be used to determine the contents of the agreement.
In the case in question, the HD concluded that the framework agreement constitutes a sole right for the consultant in the sense that it constitutes a breach of contract if the procuring company purchases the services included in the agreement from someone other than the consultant. However, the question of the scope of such a sole right was left unanswered. The HD explained that the scope of the sole right is not entirely clear when it comes to the company’s ability to procure additional framework agreements for the same type of services and to directly procure such services in accordance with the rules of procurement law.
Take-aways: Contractual conditions may differ in framework agreements with entities procuring in accordance with procurement legislation and there is uncertainty as to when a procured framework agreement means a sole right for the supplier and as to the scope of that sole right. In order to avoid uncertainty in this matter, the procuring party may expressly indicate whether or not the framework agreement announced confers a sole right in the tender documentation or administrative regulations. A party to an already ongoing framework agreement should be careful with purchases outside that agreement in order to avoid any liability for damages to the framework agreement supplier.
“Videoslots” – a question of an interim request that a statute should not be applied against the plaintiff to secure a claim for damages (NJA 2021 p. 147)
The gambling company Videoslots brought an action against the Swedish state and requested that the Swedish state be ordered to pay damages to the company. The basis for the action was Videoslots’ assertion that the regulation on temporary responsible gambling measures adopted due to Covid-19 was contrary to EU law. The company also requested that the state be prohibited from applying the regulation against it. The request for a prohibition was refused. The company also requested that the state be immediately prohibited from applying the regulation against the company to secure the company's claim for damages.
The question the HD had to consider was whether the request for a prohibition put forward in connection with the action for damages should be permitted. The HD found that, in accordance with Swedish national rules, it is not possible to bring an action for a particular statute to be declared invalid or not applied against the plaintiff, a so-called “abstract norm review”. Nor does the EU legal principle of effective judicial protection require the existence of a possibility of a provisional measure in the context of an action that is not permitted under the national legal system. The HD found that it is sufficient for there to be a possibility of an interim measure which applies until the court has examined whether national law is contrary to EU law when it is necessary in order to secure the full effectiveness of the later ruling. The HD noted that a right to damages under certain conditions can be secured by an interim prohibition from adopting a disputed measure. However, the HD found that Videoslot’s interim request was not of such a type. The action was also not considered to be for the purpose of securing payment of a future judgment for damages. The fact that the interim request was put forward in connection with a claim for specific performance meant that no other assessment was possible. Overall, the HD therefore found that the interim request concerned a abstract norm review, which constituted grounds for refusal.
Take-aways: There is no possibility of requesting in court that a statute alleged to be in breach of EU law not be applied, even on an interim basis. The party may instead ask the court to adopt another interim measure, such as immediate payment of damages.
“Ascom” – a question of whether another state has immunity under international law from distraint of listed shares (Case No Ö 3828-20)
Ascom and a number of other companies and persons who invested in Kazakhstan were entitled to damages from Kazakhstan based on the so-called “Energy Charter Treaty” in accordance with an arbitration award issued in Stockholm at the Stockholm Chamber of Commerce (SCC). The investors requested enforcement in Sweden in the form, among other things, of market-listed shares held by Kazakhstan in a custody account at a Swedish bank and which formed part of a fund managed by the Kazakhstan National Bank. The assets had been made subject to distraint.
The question at the HD was whether Kazakhstan had immunity under international law from enforcement with regard to those assets. Under international common law, coercive measures such as distraint may not, as a starting point, be adopted against the property of a state. The HD outlined the exception rule under which enforcement may be permitted for state-owned property used or intended to be used for commercial purposes. With reference to previous case law, the HD pointed out that the assessment of the purpose must be carried out on the basis of the actual use of the property at the time of the distraint. Since financial assets on the capital market are rarely subject to actual use, the court held that the assessment of the purpose must be carried out by other means. The HD pointed out, among other things, that the purpose can be reflected in a chosen investment strategy. In the case of listed shares and similar securities, the HD stated that immunity must require the existence of qualified purposes in the nature of jure imperii, or state governmental acts, such as the state’s monetary policy, which are expressed in clear and specific terms in the state’s regulation of how the property is to be used. At the time of the distraint, the distrained shares were included in a savings portfolio subject to ordinary management that appeared to be normal asset management rather than an instrument for discharging the National Bank’s exchange and monetary policy duties. The HD therefore considered that the holding had a commercial aspect. The court went on to examine whether the property could nevertheless be regarded as having a clear, specific link to a qualified purpose in the nature of a state governmental act and thus be subject to immunity. In that part of the judgment, the HD took into account aspects including the fact that, prior to the moment of the distraint, there had been no decision that the distrained property should be used for any specific state purpose. The HD found that the link between the property and a qualified purpose in the nature of a state governmental act was not sufficiently specific and that the property could therefore not be covered by state immunity. The court also made a general statement that long-term state savings for future, albeit unspecified needs cannot in themselves be considered as jure imperii, or state governmental acts.
Take-aways: In order for listed shares and similar securities to be subject to immunity from enforcement under international law, the existence at the time of the distraint of a specific, clear link between the property and a qualified purpose in the nature of a state governmental act is required. It is not enough for the holding to be for the long-term purpose of increasing a state’s wealth for future use.
“The renovation in Västervik” – a question of whether a judgment regarding a payment obligation that was dismissed prevents a new action on a price reduction (NJA 2021 p. 407)
A construction company brought an action against the clients and claimed compensation for work done. The clients argued, firstly, that the requested price was unreasonable and secondly that they were entitled to a price reduction for remedial costs because of faults in the work carried out by the company. The company’s action was dismissed on the grounds that the company was unable to prove that the price requested was reasonable. The clients then brought a new action against the company and requested that the company be required to compensate the clients for remedial costs on the grounds of faults in the work carried out by the company. The company argued that the clients’ action should be dismissed because the legal force of the judgment in the previous proceedings prevented the clients’ action from being heard. The main question at the HD was whether a judgment relating to a payment obligation that was dismissed prevents a new action concerning the payment obligation from being heard.
The HD initially found that the question of an obligation to pay for goods or services is indivisible in terms of legal force, regardless of whether it relates to a price reduction or any other economically equivalent legal consequence. Furthermore, an objection to a price reduction, or other economically equivalent legal consequences, is not a counterclaim in the procedural sense if the objection relates to an amount up to the agreed price. Such an objection must instead be regarded as an objection to the payment obligation itself. The compensation requested by the clients in the case was not higher than the total price for the service and therefore constituted an objection to the payment obligation. Because objections to the payment obligation were subject to the legal force of the first proceedings, the HD found that the legal force prevented a new action on the payment obligation from being heard. However, the legal force is not an obstacle to an action based on circumstances that occurred after the previous judgment. Nor does the legal force prevent a new action on consequential damages, for example, from being heard because they do not relate to the payment obligation and are not an alternative to a price reduction or economically equivalent to a price reduction.
Take-aways: A client must carefully analyse what counterclaims can be filed in ongoing proceedings on the payment obligation. In order not to risk a counterclaim being prevented from being heard in a later trial, the client should file all counterclaims that become known during the course of the proceedings in a cross-action.
“The vehicle fire in Sollentuna” – a question concerning the burden of proof and standard of proof in insurance cases (Case T 3982-20)
A private individual, the policyholder, had an ordinary insurance policy for his car. The car was destroyed in an arson attack. The insurance company refused insurance cover on the grounds that the insurance was only valid in a situation in which the fire had been started by a third party and that the policyholder had not succeeded in proving this through the usual standard of proof for consumers: “show that it may be assumed.” The policyholder brought an action against the insurance company claiming compensation corresponding to the market value of the car.
The question at the HD concerned the parties’ burden of proof and the standard of proof for circumstances relevant to whether or not the insurance covers the alleged damage. The HD stated that the legal situation, based on previous case law, has sometimes been described as the policyholder having the burden of proof for circumstances that mean that conditions governing the scope of the insurance contract are applicable (i.e. whether or not the insurance applies in the situation that has arisen), whereas the insurance company has the burden of proof for circumstances that fall within conditions on exceptions from the insurance in a situation where the insurance otherwise applies. However, according to the HD, there was no clear rule regarding the meaning.
The HD argued that, when it comes to the placement of the burden of proof and the extent of the standard of proof in the case of damage to a motor vehicle caused deliberately, the question must be judged in the light of general evidence-based principles in civil proceedings. That means, according to the HD, that significance must be assigned to factors such as the parties’ ability to secure evidence and the importance of the impact of substantive law.
The HD’s conclusion was that the insurance company normally bears the burden of proof for the question of whether the policyholder intentionally caused the damage for which insurance cover is claimed, regardless of whether the circumstance is governed by provisions concerning scope in the insurance contract (i.e. whether or not the insurance applies in the situation that has arisen) or by conditions concerning exceptions in the insurance (i.e. situations where the insurance would have applied but where there is an express exception in the conditions). As far as the standard of proof is concerned, the HD found that the insurance company must prove that the policyholder deliberately caused the fire and that, consequently, there were insufficient grounds to deviate from what normally applies in civil proceedings.
Take-aways: A trend has been discernible among insurance companies in recent years towards attempting to improve their legal position by reformulating certain insurance conditions to make them into what are referred to as “scope conditions.” According to the HD, this is irrelevant since the burden of proof must be placed between the parties on the basis of general evidence-based principles, which means, inter alia, that the party that has the best chance of securing evidence on a particular circumstance must bear the burden of proof for it. For a policyholder, the ruling by the HD means that the situation must be assessed on the basis of the overall factual situation and not just on a “meticulous read-through” of the insurance conditions.
“The payment to the majority shareholder” – a question as to whether a payment constituted a monetary loan in accordance with Chapter 21, section 1 of the Swedish Companies Act (NJA 2021 p. 388)
A company paid out approximately SEK 1.1 million to the company's main shareholder. The payout had been preceded by contact between the principal owner and the company’s chief financial officer in which the principal owner requested an “additional dividend” in an email. No formal decision on the distribution of earnings had been made in connection with the payment and nor was there any consultation with the minority shareholder at the company. The amount was paid out and entered in the accounts as a receivable from the principal owner. A formal decision was subsequently made on the distribution of earnings. The principal owner’s share was paid out without any deduction for the previous payment. A few days later, the principal owner paid approximately SEK 1.1 million to the company.
Due to the company’s payout of approximately SEK 1.1 million, proceedings were brought against the principal owner for breach of the prohibition on loans in the Swedish Companies Act. The question at the HD was how the payout should be classified. The HD found, inter alia, that the term “monetary loan” should be interpreted somewhat restrictively in this context. Several factors may be relevant when assessing whether a transaction constitutes a monetary loan. It must be a question of an express contract or an implied contract and the transaction must involve the provision of money or some other means of payment. It must be presumed that the amount will be repaid or at least offset against subsequent receivables from the company. According to the HD, the circumstances of the case did not provide significant support for the existence of a loan intention. Instead, the payment appeared to be an advance on a dividend, intended to be formalised later. Such an advance may constitute a covert monetary loan if there is insufficient basis for assessing whether it will be possible for a dividend to take place. However, in this case there was an investigation that supported the assertion that the company could have decided on a dividend corresponding to the amount paid out. In an overall assessment, the HD considered that the payment did not constitute a monetary loan.
Take-aways: If an advance on a dividend is paid out at a moment when there is insufficient basis for assessing whether it will be possible for the dividend to take place, there is a risk that the transaction will subsequently be assessed as a covert monetary loan and thus as constituting a criminal act.
RIGHT TO CLAIM
“The loan agreement with Svea Ekonomi” – a man who lent his e-ID to his cohabiting partner was made liable for loans that she took out using the ID (case T 930-21)
A man lent his e-ID (BankID) to his cohabiting partner so she could use the e-ID to pay household expenses. The cohabiting partner used the e-ID to take out a loan of SEK 20,000 without the man’s consent and then spent the money. The lender brought an action against the man and claimed repayment of the loan. The man disputed the claim.
The question at the HD was whether the man was liable for payment of the loan taken out using his e-ID. The HD found that a binding loan agreement can be entered into electronically using an e-ID if a legal act can be linked to the holder of the e-ID. That means that, as a starting point, the holder will not be bound if his or her e-ID is used without authorisation. However, that is not the case if the e-ID was used with the holder’s consent or according to a power of attorney conferred by the holder. In these cases, the holder must have realised that the transactions with the ID were carried out in the holder’s name and on the holder’s behalf. In the case of unauthorised use, the e-ID holder may be bound if he or she acted negligently or particularly reprehensibly.
In the case in question, the loan had been taken out on the basis of a power of attorney of which the bank was unaware. In such cases, it will be decisive if a third party (i.e. the bank) had justified confidence that the loan had been taken out by an authorised person. If that is the case, there is what is referred to as a “trust power of attorney” that is binding on the e-ID holder (i.e. the man). As a third party, the bank typically has reason to assume that an e-ID (such as BankID or Freja eID) is being used by an authorised person. If the holder has lent the e-ID to someone else for the recipient to use, there is a trust power of attorney that is binding on the holder. The limit up to which the holder is bound is linked to the justified confidence of the third party/bank. It is normally possible in ordinary transactions, i.e. for smaller loans as far as the banks are concerned. If an e-ID is used for legal acts of a more specific nature, e.g. to take out larger loans, a third party has less reason to have justified confidence, particularly when the holder is a consumer. A third party may then be required to carry out additional checks in order to confirm that the legal act derives from the holder.
In this case, there was no reason for the bank to carry out additional checks and the bank therefore had justified confidence that the e-ID was being used by an authorised person. The fact that the man assumed that his cohabiting partner would not use the ID in the way she did does not matter since he had not exercised any supervision over how it was being used. The man was therefore liable for payment of the loan.
Take-aways: As an e-ID holder, you should think about how you manage your e-ID and not lend it to anyone else. If you are forced to lend it, you must be absolutely sure that the person will use the ID in the way you intended and that you supervise its use. As a third party and/or bank, you can normally trust that an e-ID is being used by an authorised person for ordinary transactions. Specific transactions may require additional checks. As a bank, you should review the existing limits on amounts for taking out loans using only an e-ID. Banks should also consider how further checks can be carried out, e.g. through multi-factor authentication in the form of face ID or similar.
“Länna Mark’s claim” – a question about the possibility of filing the assigned cover claim when the main claim has not been paid (NJA 2021 p. 622)
A cooperative housing association had entered into a construction contract with a general contractor for new construction work on the association’s property. A subcontractor subsequently caused damage to the property. This led to the existence of two claims: a main claim that the insurance company (through subrogation in the association’s right) had against the general contractor, which was contractually required to compensate the association, and a cover claim that the general contractor had against the subcontractor since this latter was contractually required to compensate the general contractor. After the insurance company had settled the claim with the association, the insurance company filed a claim against the general contractor, which failed to pay. Instead, the general contractor assigned its cover claim against the subcontractor to the insurance company.
The question at the HD concerned whether it was possible for the insurance company to file a cover claim when the main claim had not yet been paid. The question is of particular interest because it concerns the possibility of “jumping” steps in the chain of contracts – in this case for the insurance company to claim against the subcontractor instead of against the general contractor. The HD found that no principle could be considered to exist whereby a main claim must be paid in order for it to be possible for a cover claim to be filed. The insurance company was thus entitled to file its cover claim against the subcontractor. As a prerequisite for this, it was considered that, as a rule, there must be a specific claim filed against the party that is liable for payment for the main claim, in this case the general contractor. However, what is stated in the ruling must not be seen as general since the HD issued a reservation to the effect that changing circumstances in other areas may affect the legal assessment. In the case, the HD also declared that a prohibition on assignment or other restrictions on transferability agreed between two parties in a claim relationship are typically not binding on a party acquiring the claim.
Take-aways: In a chain of construction contracts, it is at least possible, after assignment of the cover claim, to claim directly against a subcontractor, i.e. to “jump” a link in the chain of contracts. Nevertheless, this is provided that a claim has first been filed against the general contractor.
Do you want to know more or did the article give rise to other questions? You are very welcome to get in touch with one of the contact persons below in dispute resolution or your regular contact at Lindahl.