Dispute Resolution: Use of Reserve my rights

 

“I reserve my rights!”: But do you really?

Written on 12 Feb 2020

Parties frequently write in their correspondence with each other that they are reserving their rights. The hope is that this formula will protect them against an argument that they did not intend to (or have actively chosen not to) raise a particular argument or defence or assert a particular right – and so have foregone the right to do so in future.

There are various principles of English law that such an opponent may seek to rely on: waiver, estoppel, election or affirmation. Does a "reservation of all rights" sentence in correspondence really protect against all of those arguments?

Too vague to be effective

At the beginning of 2019, the Court of Appeal held in the case of Bresco v Michael J Lonsdale that a purported reservation of the "right to raise any jurisdictional and/or other issues, in due course, whether previously raised or not and whether within the forum of adjudication or other proceedings" was held to be ineffective because it was so vague.

The Court of Appeal's concern was that such a reservation might be used as sword rather than a shield in that case: in other words, the party might wait before unleashing (an already known) jurisdictional objection in "other proceedings", namely at the enforcement stage: "That is precisely the sort of approach .. which, in my view, the courts should be vigilant to discourage."

A different sort of criticism of a reservation of rights was also made more recently in LJH Paving v Meeres Civil Engineering, where the defendant had stated that it "reserves its rights to maintain its position … on further issues which …may have arisen and are not addressed herein". The judge again held that that was "so vague as to be ineffective", particularly given it is not possible to reserve rights you don't (yet) know you have.

Reserve your rights effectively

The following tips will help ensure you are able to rely on a reservation of rights:

1. Make sure you know what rights you are reserving. As far as possible, you should identify what specific rights or defences you might otherwise be said to be abandoning or waiving. Wider is not necessarily better when drafting a reservation of rights.
2. Remember: a reservation is only necessary if you know you have a defence or right and have done or said something which suggests you might be giving that up (or might do so in the very near future).
3. Don't shoot yourself in the foot. There is no point using the phrase and then (in conduct or words) acting in a contrary manner.
4. If you are going to reserve your rights, do it as quickly as possible, to avoid any suggestion that you may have already abandoned the argument or right.
5. Even an effective reservation of rights only "holds the ring" for a short period of time, after which you would need to decide what you want to do.
6. Check your contract to ensure you are complying with its terms, such as any term about how notices should be delivered.

Reference:https://www.osborneclarke.com/insights/reserve-rights-really/