Tag Archive: Blacks

BLACKS SOLICITORS: A Brief History of Lateness – missed deadlines and the courts

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Court cases have a reputation for dragging on, with each step taking weeks or months. The courts themselves are only too aware of this and streamlining procedure was one aim of reforms introduced in 2013 which revised the courts’ approach to what lawyers refer to as “relief from sanctions”.

Sanctions in this context refer to the consequences of a party failing to take a particular step by a given deadline. Typical sanctions are that the party cannot rely on evidence which is late or that a claim or defence is struck out completely. A party can apply for relief from sanctions to avoid a penalty and, prior to the reforms, this would generally be granted where the failure did not seriously prejudice the other party.  

However, post-reforms, granting relief from sanctions is considered much more in light of the need to enforce compliance with rules.  This led to a much harsher regime.

This was reflected in 2013’s Mitchell v News Group Newspapers case, a defamation claim where the claimant failed to file a costs budget until the day before the hearing due to consider it. The judge ruled that the budget had arrived too late and deprived the claimant of the chance to recover his, very substantial, costs if he won. Relief from sanctions was applied for but refused. Mitchell looked to have brought in a zero-tolerance era.

The next year saw a raft of challenges to decisions that took the same approach as Mitchell, most prominently Denton v TH White where severe penalties had been imposed for lateness and other breaches. These challenges saw the courts deciding that the Mitchell principles had been applied over-strictly. They also noted that Mitchell had led to an overly antagonistic atmosphere between parties, which had an incentive to make the most of even minor errors by the other side. Since the Denton decisions, the courts have tried to walk a line between being too strict and too lenient, an uncertain environment in which to conduct litigation.

The best approach, of course, is to hit the deadline in the first place, meaning that parties should be thinking about costs, experts, witnesses and other key steps well in advance, rather than rushing to hit a deadline at the eleventh hour. This was underlined in the recent decision in Lakhani v Mahmud.  The defendant’s budget was served one day late and the courts refused to accept it, severely limiting the defendant’s ability to recover costs. The defendant sought relief, as the parties had agreed costs, the delay was slight and prejudice to the other side minimal, but relief was refused, in part because the application itself was made late.  Even a small default, exacerbated by further lateness, proved to have a catastrophic impact on the defaulting party’s prospects.  The lessons to be learned are clear.   

Blacks Solicitors offers expertise on all forms of disputes and can assist in relation to any litigation in the civil courts.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Beware Of Using Work Computers For Personal Matters

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The perils of using your work computer for personal matters was recently highlighted in the High Court case of Simpkin v The Berkeley Group Holdings PLC.  

In that case the Mr Simpkin was the Finance Director of The Berkeley Group.  Berkeley terminated his employment, removed him as a director and decided that he would not be treated as a “good leaver”.  As a result Mr Simpkin would not receive the substantial financial benefits of a long term incentive plan and bonus scheme of which he was a part.  He therefore issued proceedings against Berkeley.  

During Mr Simpkin’s employment with Berkeley he had sent an email from his work email account to his personal email account with an attachment containing an analysis of his expectations under Berkeley’s long-term incentive plan.  He had then forwarded the email from his personal account to his solicitor who was dealing with his divorce.

Berkeley wanted to use the email and attachment in the context of its employment dispute with Mr Simpkin but he argued that they should be prevented from doing so as the documents were protected by legal privilege – broadly speaking communications between a client and their solicitor are protected from use in proceedings by privilege.  However, Berkeley contended that Mr Simpkin was not entitled to claim privilege in relation to those documents because when a privileged document came into the hands of an opposing party in litigation there was nothing to prevent that party from using that document.  They also argued that the document was not confidential as far as it related to Berkeley - it was accepted by both parties that confidentiality was a pre-condition to privilege.  

The court decided that the documents were not confidential because:

  • Mr Simpkin had signed Berkeley’s IT policy which provided that emails sent and received on Berkeley’s IT system were the property of Berkeley.
  • Berkeley’s IT department had full access to all emails sent and received by Mr Simpkin.
  • The document was created by Mr Simpkin during the course of his employment with Berkeley and by using its IT system.

It was therefore impossible for Mr Simpkin to have any reasonable expectation of privacy as regard the preparation of those documents as he should have been aware that they would be stored on Berkeley’s servers.  The judge found that the documents in question were never confidential in relation to Berkeley or, if they were, they lost their confidentiality when they were processed on Berkeley’s IT system.

This case highlights one of a number of risks for employees who use work IT systems for private communications.  It is also a reminder to employers to ensure that their IT policies are as watertight as possible to avoid complications such as this arising both during the employment relationship and after it has ended.   

Blacks Solicitors offer expertise on all forms of disputes and can advise on any issues relating to employment policies.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Partnership Disputes

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A partnership is essentially a business run by two or more people with a view to making a profit.  Unlike an incorporated company it is very simple to set up.  In fact a partnership can be formed by an oral agreement between the parties without any paperwork involved.  Indeed, many people do not realise that by going into business with someone else they are effectively setting up a partnership automatically.  Unfortunately, it is a fact of life that people will have disagreements and some will eventually fall out.

If a partnership comes into being without a formal partnership agreement having been drawn up then any dispute between the partners will be dealt with under the Partnership Act 1890.  However, the Act is not a detailed piece of legislation and only covers the bare essentials of a partnership.  For example, there is no provision for removing an errant partner. This means that in the event the partners have irreconcilable differences, the partnership would have to be dissolved.  

Any dissolution of a partnership is likely to be very disruptive; the partners have to deal with the repayment of partnership debt as well as face the potential of a protracted dispute amongst themselves on any number of issues.

By contrast, a properly drawn up partnership agreement would specify what should occur in certain scenarios and what is expected of each partner within the partnership.  For example, if a partner was to leave the partnership agreement could stipulate the circumstances in which his capital could be withdrawn and how his share of the partnership debt should be repaid as well as determining what are personal and what are partnership assets.  It could also address the introduction of new partners to replace departing ones.  

Just as importantly, to avoid dissolution, a partnership agreement will normally set out the circumstances in which a partner can be removed and include a mechanism for what should happen to his share of partnership assets and the payment of partnership debts if that happens.  There could also be provisions which allow a partner to be bought out by the remaining partners with a detailed mechanism for valuing the outgoing partner’s share of the partnership.

Properly drafted partnership agreements can prevent disputes from arising as they will detail the rights and obligations of the partners.  Where disagreements do arise a partnership agreement can provide a mechanism to resolve those disputes and therefore provide a clear framework for resolving any issues that arise between the partners.  The time and expense incurred in having a formal partnership agreement prepared will far outweigh the time, cost and stress of dealing with a dispute without such an agreement.

At Blacks, we can prepare partnership agreements for all types of businesses or in the event of a dispute we can assist you with the resolution of that dispute.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Can The Court Intervene In Party Wall Disputes?

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The Party Wall etc Act 1996 (“the Act”) provides a framework for preventing or resolving disputes in relation to party walls, boundary walls and excavations near neighbouring buildings.

A building owner wishing to start works covered by the Act must give the adjoining owner notice in a set way.  Adjoining owners can agree or disagree with what is proposed.  Where they disagree, the Act provides a mechanism for resolving disputes involving the appointment of party wall surveyors.

It was previously believed that the assessment of the compensation payable in any dispute covered by the Act could only be determined by the procedure set out in it.  However, the recent case of Lea Valley Developments Limited v Derbyshire has altered this view.  In that case, it was ruled that the court could determine the appropriate method of assessing compensation following a dispute notwithstanding that the Act provided a complete code by which such disputes could be determined by a surveyor without recourse to the courts.

The claimant had entered into a contract to build 12 houses adjacent to the property owned by the defendant which comprised six residential flats.  Those building works required a notice of excavation work to be given.  Severe damage was subsequently caused to the defendant’s property and its tenants had to vacate.  It was accepted by both parties that the property was so badly damaged that it would have to be demolished and rebuilt but the parties could not agree the method of assessing the compensation payable. The defendant’s party wall surveyor argued that compensation should be assessed by reference to the cost of the demolition and rebuilding (which he estimated to be between £1m to £2m) whereas the claimant’s surveyor believed that the correct measure was by reference to the reduction in value of the properties (which he assessed as being between £500,000 to £1m).

The defendant argued that the court could not determine the question of damages because the Act contained a complete code for the resolution of disputes by surveyors and to intervene would be to interfere with the surveyors’ jurisdiction.  However, the court disagreed.  The judge held that the court could grant relief and if the Act had intended the position to be different it would need to include express words to that effect; there was no such wording in the Act.

This decision does not mean that whenever a dispute arises under the Act a party can ask the court to resolve it before following the set procedure.  Instead it demonstrates that the dispute resolution procedure set out is not unchallengeable and that the court can intervene in appropriate circumstances.  

If you are involved in any boundary or building dispute then Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or email him at LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Indemnities and Guarantees – what’s the difference?

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Indemnities and guarantees are both a form of what the law calls suretyship.  A surety is a party who is liable for the payment of another party’s debt or the performance of another party’s obligation in the event of default by that other party.  

An indemnity is a contractual promise in which one party says it will compensate the other for the loss it suffers in certain circumstances.  In a contract of indemnity there are two parties, one, the indemnifier, which promises to indemnify the other; the one whose loss is compensated is known as the indemnified.  

One of the most common examples of an indemnity is a contract of insurance: the insurance company promises to pay for certain losses suffered by the policyholder in return for the payment of insurance premiums by it.  

A guarantee is also a contractual promise.  In it the party giving the guarantee, the guarantor, says that it will make sure that a third party fulfils its obligation to the party receiving the benefit of the guarantee and/or that the guarantor will pay the amount owed by the third party if it fails to do so.  

Guarantees and indemnities are often confused and used interchangeably.  The difference between them, however, is important particularly when considering whether or not they are actually enforceable.  Below are the key differences between the two:

  • In a contract of indemnity, one party makes a promise to the other that he will compensate it for loss incurred by it resulting from the indemnifier’s own actions or other specified events, such as actions by others.  
  • In a contract of guarantee, where one party “A” and another party “B” have entered into a contract and “B” owes a “A” certain contractual obligations, another party “C” promises to perform the obligations or pay the liability due to “A” in the case of default by “B”.
  • In an indemnity there are two parties involved, the indemnifier and the indemnified.  In a contract of guarantee, there are three parties - debtor, creditor and surety.  
  • The liability of the indemnifier in the contract of indemnity is primary whereas in a guarantee the liability of the surety is secondary because the primary liability is that of the debtor (i.e. the surety only becomes liable if the debtor cannot pay).
  • Unlike an indemnity, a guarantee must be in writing and signed by the guarantor in order for it to be effective.

Guarantee documents can actually include both a guarantee and an indemnity so it is possible for a party to have the benefit of both.  They are often executed as deeds to overcome any technical legal arguments about whether a contract has actually been formed.

If you require advice on enforcing or complying with an indemnity or a guarantee or if you require the preparation of an indemnity or guarantee then Blacks Solicitors can assist. Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Insurance Policy Not Good Enough

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In litigation, the usual position in relation to costs is that the losing party has to pay the successful party. Sometimes the defendant has concerns about the claimant’s ability to pay their legal costs in the event that the claim is successfully defended.  In those instances, the defendant may be able to apply to the court for an order for security for costs.  

An order for security for costs means that a claimant is required to pay a sum of money up front in respect of the defendant’s costs, usually into court.  It usually suspends the proceedings until security is provided and if security is not given the claimant’s claim is struck out.  Security for costs therefore provides an element of predictability for a defendant in the event that they are ultimately successful.  

Only defendants can apply for security for costs and an order will only be granted if the claimant:-

  • Is resident out of the jurisdiction; or
  • Is a company and there is reason to believe that it is insolvent; or
  • Has taken steps to evade the consequences of litigation and enforcement.  

Claimants have previously argued that where they have an after the event (ATE) insurance policy to cover the cost of the litigation then that should be sufficient security for the defendant’s costs.  However, in Catalyst Managerial Services v Libya Africa Investment Portfolio the High Court recently held that that was not the case.  

The defendant was an investment portfolio of the Libyan Government.  The claimant and the defendant had entered into various contracts for the claimant to provide management services and development. The claimant alleged wrongful termination of the contracts and sought substantial damages from the defendant as well as claiming $15m in unpaid invoices.  During the proceedings the defendant applied for an order for security of its costs.

The court found that there was a real risk that the claimant was insolvent as it had no assets apart from the claim itself.  It was likely that, upon the claimant’s insolvency, the ATE policy proceeds would go to unsecured creditors and would not be available to pay the defendant’s costs.  The judge ruled that the ATE insurance policy could not be considered as being satisfactory security if the defendant risked becoming an unsecured creditor in a foreign insolvency.  The judge also decided that there was a significant risk of avoidance of the policy by the insurers because (1) the defence in part rested on an allegation of forgery against the claimant and (2) it would be possible to argue that the claimant had misrepresented the facts to them.  

This case illustrates that for an ATE insurance policy to be satisfactory security, it must give the defendant sufficient protection in terms of scope and amount of cover, risk of avoidance and the diversion of funds.  

If you are involved in any litigation then Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Tales from the Riverbank: Adverse Possession by Boat

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Adverse possession, the principle that simply by occupying land for a certain period of time you might acquire legal ownership of that land, is an attractive legal idea to the layman. In practice, and following changes to the law by the Land Registration Act 2002, obtaining adverse possession of land where a legal owner has been registered is now very difficult, but the old principles still apply over unregistered land.

These principles require that a party which claims adverse possession demonstrates that, for at least 12 years beforehand, they had both actual possession of the land, and intended to possess the land to the exclusion of all others. The second point is often where applications fail. It is not enough to simply make use of the land – the applicants must show that they acted as exclusive owners of the land, for example by fencing it off to prevent access by others.

A recent case involved an unusual claim for adverse possession. In Port of London Authority v Mendoza, Mr Mendoza was seeking possession of a stretch of Thames riverbed and foreshore on the basis that his boat had been moored there for over 12 years by the time the Authority sought to register its title to the land.

Whilst this may seem something of a desperate gambit by Mr Mendoza, he was successful at the first tribunal hearing, forcing the Authority to appeal. Mr Mendoza’s factual possession of the land, though disputed, was accepted by the Upper Tribunal, notwithstanding the tides and currents which made his occupation of it somewhat mobile. The point he failed at, as with so many adverse possession applications, was in demonstrating his intention throughout the relevant period of claiming a permanent and exclusive ownership. The mooring of a boat, the Tribunal decided, does not constitute in and of itself an unequivocal intention to possess the mooring site in the same way as, for example, fencing off a plot of land. Mr Mendoza’s residency was insufficient to demonstrate such an intention, and the Upper Tribunal found for the Authority.

Could a case with slightly different facts succeed?  If the boat owner took steps beyond simply residing on the boat for the relevant time period, entirely possibly. A dispute known to Blacks resulted in a victory for the boat owner on the basis that he paid Council Tax and had utilities connected to the boat, which the local authority conceded constituted a sufficiently permanent occupation without referring the matter to a tribunal. In similar cases, it may be the steps the mariners have taken on land that determine their right to ownership on the water.
If you are involved in any litigation or court proceedings, Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com

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BLACKS SOLICITORS: The Price Of Free Services

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The recent judgment by the Court of Appeal in the case of Lejonvarn v Burgess & Another should act as a salutary reminder to professionals of the risk of providing free informal advice and services.

Mrs Lejonvarn had been friends with her neighbours, Mr & Mrs Burgess, for a number of years.  The Burgesses were planning to carry out a high value landscaping project on their garden at their London home.  However, they had received a very expensive quote.  Mrs Lejonvarn, who was an architect and who had previously carried out work for Mr Burgess’ company, agreed to help out her friends by providing various services for free.   These included procuring contractors to carry out the earth works and project managing those works.  It was envisaged that Mrs Lejonvarn would be paid a fee for the design works at a later stage.

Unfortunately, the project turned sour and Mr & Mrs Burgess had to incur additional costs of £235,000 to put matters right.  Mr & Mrs Burgess therefore pursued a claim against Mrs Lejonvarn to recover those additional costs.

The High Court decided that although there was no contract between the parties, Mrs Lejonvarn did owe Mr and Mrs Burgess a duty of care in tort.  Although the services were provided free of charge the Judge found that Mrs Lejonvarn had assumed a duty of care to Mr & Mrs Burgess in providing professional services on a professional basis.  The Judge held that, firstly, Mrs Lejonvarn had assumed a duty of care and, secondly, Mr & Mrs Burgess had relied upon Mrs Lejonvarn to provide those services with reasonable skill and care.  The Judge decided that a duty of care can arise even when the services are provided free of charge.  Mrs Lejonvarn appealed.

The Court of Appeal upheld the original decision.  The Court found that the duty owed by Mrs Lejonvarn was not to provide any services but to exercise reasonable skill and care in relation to any services that she did carry out.  There was no obligation on Mrs Lejonvarn to carry out the services but if she did, she had to carry out those services with reasonable skill and care.

This case provides a clear warning to professionals who are asked to provide free advice and services to friends or relatives as the professional may inadvertently assume a duty of care and end up liable in damages in the event that things go wrong.

If you have any queries in relation to any claims relating to contract or tort or any other litigation related enquiries then please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Adjournment of Hearings on Medical Grounds

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The recent case of Dove v London Borough of Havering highlights what evidence the Court requires if a trial or hearing is to be adjourned on medical grounds.

The Doves were twin sisters who were joint tenants of a council flat in Romford.  Their landlord, Havering LBC, claimed possession of the flat on the grounds that there were serious arrears of rent.  One of the sisters had been legally represented in the possession proceedings through public funding but shortly before the trial that funding was withdrawn and both sisters therefore appeared at the trial without any representation.  They applied for an adjournment but this was refused by the judge on the grounds that there had been delays already and the sisters had failed to comply with a number of directions given by the court.  Instead, the start of the trial was postponed until the following day to enable the sisters to prepare for the case.

Shortly before the trial was due to start one of the sisters made a witness statement in which she referred to a number of health problems from which she suffered.  However, this evidence did not suggest that those medical problems had incapacitated her to such a degree that she was unable to stand trial and the trial continued without her the following day.  The court dismissed the sisters’ defence and granted the Council a possession order.  The sisters appealed.  

The Court of Appeal dismissed the appeal. It held that where an application for adjournment is made on medical grounds the court would normally expect to see evidence from a medical practitioner familiar with the patient and his or her medical condition.  That evidence should identify what the medical condition is and what features of it prevent participation in the trial process.  It should also provide a reasoned prognosis and describe what arrangements short of an adjournment could be made to accommodate a party’s difficulties.  Even then, the ultimate decision as to whether or not to adjourn the trial rested with the court.  The Court of Appeal felt that as no such material had been placed before the trial judge, he was therefore entitled to reject the sisters’ application for an adjournment.

The stance taken by the Court of Appeal is not entirely unexpected given that the courts place considerable importance on not moving trial dates back.  

This case provides helpful guidance to litigants who are seeking an adjournment on medical grounds.  It shows what the court expects by way of evidence if a case is to be adjourned on those grounds.  
If you are involved in any litigation or court proceedings, Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com

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BLACKS SOLICITORS: Failing to Make It Over the Finishing Line

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Part 36 is a provision in the Civil Procedure Rules that creates a certain type of settlement offer which can carry significant costs and/or interest penalties if it is not accepted by the opposing party and that party then fails to beat the offer at trial.  Part 36 Offers are made on a “without prejudice save as to costs” basis meaning that the Court is not made aware of them until after it has given judgment but before it has made an Order in relation to who should pay for the cost of the proceedings.  

Part 36 Offers are designed to encourage parties to settle without going to trial and, if used wisely, they can be a potent negotiating tool.  Making a Part 36 Offer should not be seen as a sign of weakness but instead as an appropriate means of putting pressure on an opponent to settle the dispute.  

The article headed “Marathon Receives Buttons” published in this publication recently referred to the case of Marathon Asset Management LLP v Seddon & Bridgeman.  In that case, Marathon pursued a claim against Mr Seddon and Mr Bridgeman, two former employees, for taking confidential information belonging to Marathon before they left the company.  Marathon sought damages of £15m against their former employees but the Court only awarded nominal damages of £1 against each Defendant as they had not used the information that they had taken and, in any event, Marathon had suffered no financial loss as a result.  

Recently, the matter returned to Court for the Judge to deal with the issue of costs.  Usually, the successful party in litigation is awarded his costs of that litigation.  However, even though Marathon had technically “won” (as it was awarded damages against the Defendants), the Judge ordered it to pay the majority of the Defendants’ costs on the basis that Marathon had failed to accept a Part 36 Offer made by the Defendants during the proceedings - the Defendants had made a £1.5m Part 36 Offer to Marathon but that offer had been rejected.  

As Marathon had failed to beat the Part 36 Offer (as it was only awarded damages of £2) the Judge considered it to be a “game changer” in terms of deciding whether Marathon should be entitled to its costs.  He ruled that Marathon should pay the Defendants’ costs from the date when the Part 36 Offer was rejected.  In the words of the Judge: “the offer made by the Defendants should have rendered that dispute entirely academic… the costs consequences should be visited on parties in Marathon’s position who, instead of taking a realistic attitude, open their mouths too wide”.

This case should act as a stark warning to litigants to consider Part 36 Offers carefully and to accept any which are sensible instead of continuing to litigate.
If you are involved in litigation and require assistance then the Commercial Dispute Resolution Team at Blacks Solicitors is able to assist.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: What Does “Reasonable Endeavours” Mean?

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The words “reasonable endeavours” or “best endeavours” can sometimes be found in contracts but what do they actually mean?  

The High Court was recently asked to consider this question in the case of Astor Management AG v Atalaya Mining Plc.  The case concerned the sale of an interest in a copper mine.  Under the terms of the agreement most of the purchase price was deferred and payable by Atalaya upon it securing a debt facility to operate the mine.  Atalaya was required to use “all reasonable endeavours” to obtain that facility by 31 December 2010.

Ultimately, Atalaya did not obtain the debt facility by the target date but instead raised the necessary funds via loans from its parent company.  Astor argued that the deferred payment was still payable because Atalaya had failed to comply with its obligations to use all reasonable endeavours to obtain a debt facility.  Atalaya denied that this was the case and said that the obligation to use reasonable endeavours was unenforceable because there were no objective criteria to assess the reasonableness of its endeavours to obtain the facility.  

The Court had to consider whether the payment obligation had been triggered and whether there was a legally enforceable obligation to use all reasonable endeavours to obtain the facility and, if so, whether the obligation expired on 31 December 2010.  

It found that by obtaining funding from its parent company Astor had not triggered the payment of the deferred consideration because that funding did not constitute a debt facility.  

However, the Court disagreed with Atalaya’s arguments regarding reasonable endeavours and found that the undertaking within the agreement was enforceable.  It said “the role of the court in a commercial dispute is to give effect to what the parties have agreed, not to throw its hand in the air and refuse to do so because the parties have not made its task easy”.  

The Court also rejected Atalaya’s argument that the obligation to use all reasonable endeavours fell away after 31 December 2010.  Atalaya was under an obligation to obtain the debt facility by this date if practicable and, if not, that obligation continued and it was required to use all reasonable endeavours to obtain the facility as soon as practicable afterwards.

To avoid litigation, parties to a contract should ensure that it clearly sets out what each party is required to do.  For example, an undertaking by a contracting party should stipulate:

  • what specific steps that party is required to take and by when;
  • how they should communicate their progress to the other party;
  • how long the party should be bound by the undertaking;
  • what the consequences would be if the party giving the undertaking failed to comply by the agreed date.  

Blacks Solicitors can assist with all aspects of contractual matters from the drafting contracts to enforcing their terms if there has been a breach.  Please contact Luke Patel on 0113 227 9316 or email him at LPatel@LawBlacks.com.  

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BLACKS SOLICITORS: Once more into the Hedge

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The saga of the mis-selling by the banks of Interest Rate Hedging Products (“IRHP”), commonly known as Interest Rate Swaps, rumbles on.

It was reported in the Sunday Times over the weekend that The Coin Group Limited, an operator of care homes in Buckinghamshire, had settled its High Court claim against Lloyds Bank Plc over the mis-selling of three complex financial products to it by Lloyds.

When settling cases banks typically insist that the Claimant agrees to a Confidentiality Clause in the Settlement Agreement preventing the Claimant from disclosing any details of the settlement.  However, in this instance The Coin Group refused to enter into such a clause because it wanted to demonstrate to the public the flaws in the IRHP Review Scheme which has been set up by the Financial Conduct Authority (“FCA”) for dealing with IRHP mis-selling claims and because Lloyds refused to completely compensate The Coin Group for all of the losses that it had suffered as a result of the mis-sold IRHP.  

Under the settlement, Lloyds agreed to pay The Coin Group £890,923.98 for the IRHP payments which it had paid; to bear the “exit” costs of the remaining IRHP which was estimated to be in the region of £3.5m; and to pay a contribution towards The Coin Group’s legal costs.  The settlement will therefore cost Lloyds in the region of £4.5m albeit the Bank has denied any liability.

What is of particular interest in this case is the fact that The Coin Group initially took part in the IRHP Review Scheme to compensate customers who were mis-sold IRHP.  Under the terms of the Scheme, the banks would decide whether a borrower was entitled to any compensation with the help of an independent reviewer.  The Coin Group was told by Lloyds that it could not claim under the Scheme because it was a “sophisticated customer” and they were specifically excluded from the Scheme.  The Coin Group was judged to be a “sophisticated customer” because, due to the size of its assets, it was deemed to be able to judge the risk of the Swap Products.  The Coin Group is only one of thousands of borrowers who have been refused compensation under the Scheme on that basis.  

The IRHP Scheme has been criticised by many as being similar to having a trial where the Defendant is also the Judge (since the Scheme is self administered by the banks) and it has been alleged that the “sophistication test” is not actually a test of sophistication but a set of criteria designed to save the banks from having to pay compensation owed to customers.  It has also been reported on the BBC that the Treasury pressurised the FCA to water down the Scheme to save billions of pounds of redress from the major Banks, two of whom (Lloyds and Royal Bank of Scotland) are publically owned.  This allegation is denied by the Treasury.  A Judicial Review of the Scheme has now been ordered.  

It was revealed in The Coin Group case that Lloyds delayed notifying The Coin Group by several months of its decision that it considered The Coin Group to be a “sophisticated customer” and would therefore not qualify under the Scheme.  It appears there were no good reasons for this delay other than for Lloyds to frustrate The Coin Group from pursuing a legal claim against the Bank as the decision letter from Lloyds arrived a few weeks after the statutory time limit for The Coin Group to bring a claim had expired.  Fortunately for The Coin Group, it had sought legal advice before that deadline and its lawyers had issued a protective Claim Form before the expiry of the time limit.  

If you have a claim and even if you are currently pursuing your claim through the IRHP Review Scheme, you should not delay in seeking legal advice.  There are strict time limits for bringing legal claims and, even if your claim has been rejected, it does not necessarily mean that you do not have a claim; particularly given that the Scheme is now going to be scrutinised by the courts.   

If you believe you have been mis-sold a product from your bank or if you are concerned about the way your claim is being dealt with under the IRHP Review Scheme then contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Shareholder’s Undertaking Not Good Enough

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In civil proceedings, where a claim is brought by a corporate entity the defendant can, if it has evidence that the claimant is unlikely to be able to pay its legal costs in the event the claimant loses, apply to the court for an order for security for costs.  If granted, the claimant would be required to pay money into court to cover the defendant’s costs before the claim can proceed.  Security for costs applications are therefore a useful weapon in a defendant’s armoury if they are faced with a potentially impecunious claimant company.

Nowadays claimants can obtain after the event (ATE) insurance to cover their legal costs if they are unsuccessful with their claim. However, ATE policies can be expensive and may not always be a viable option.  Claimants who have cover are better able to defeat applications for security for costs on the basis that the defendant’s costs are covered by the policy.

In the case of Dunn Motor Traction Limited v National Express Limited, the claimant was pursuing a £20m claim in respect of profits which it claimed it had lost due to the defendant wrongfully terminating a contract between the parties.  The defendant applied for security for costs as the claimant had conceded that due to the effect of the termination of the contract its financial position had dramatically deteriorated to the extent that it might not be able to meet the defendant’s costs if it lost the case.  

The claimant did not have an ATE insurance policy but its sole shareholder, Mr Dunn, provided an irrevocable undertaking to indemnify the claimant in respect of its costs liability to the defendant.  The claimant argued that this was comparable to cases that have held that the existence of an ATE insurance policy provided satisfactory security.  

However, the High Court disagreed.  The judge found that the approach taken by the courts towards ATE policies did not apply to an indemnity provided by a shareholder.  The reasons for this were because the counterparty to an ATE policy is a “responsible and reputable insurer” whereas the shareholder of a claimant company is, effectively, the adversary of the party seeking security for costs.  Further, whereas ATE policies were a central feature of the ability of parties to gain access to justice, an indemnity provided to a company by its owner in respect of the company’s liability to bear legal costs was not.  Security for costs was therefore granted in favour of the defendant.

This case demonstrates that indemnities from third parties such as shareholders are not adequate security in the same way as ATE insurance policies and that claimants, particularly corporate entities, need to consider obtaining ATE insurance cover if there is likely to be any doubt regarding their ability to meet adverse cost liabilities.  

If you are involved in any proceedings then Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com

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BLACKS SOLICITORS: Your Home May Not Be Your Castle

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The law of property ownership can be a study in contradictions. On the one hand, almost everyone will rent or buy property in some way during their lives.  On the other, the law itself often relies on fairly arcane distinctions going back hundreds of years.

One of the major distinctions the law draws is between freehold and leasehold ownership.  To own freehold is to own outright and forever, without obligation to someone with a better title to the land.  To own leasehold is to receive a limited degree of ownership from someone else – either the freeholder or another leaseholder. The difference between having a 1,000 year lease of a flat and renting for six months under an Assured Shorthold Tenancy is just one of degree.

Leasehold ownership has traditionally been used either for short term occupation or for longer term residency where owning the specific land is not practical, most commonly with flats.  Hence the freeholder might own the land and the building exterior while the leaseholders each own the interior of their own flats.  Who owns what – and therefore who is responsible to pay for repairs, for example – can be a contentious legal matter. However, owning a house has traditionally been a matter of owning a freehold title in most parts of the country.

Recently, however, this has begun to change.  Some modern housing estates, rather than being parcelled out into freehold plots, have been retained by the developers, with the houses sold as leaseholds.  This is a less attractive prospect for the buyer for a number of reasons.  Firstly, all leaseholds attract rent, even if it is a nominal sum (“a peppercorn” in legal parlance).  Whilst the annual sum may only be a hundred pounds or so, this represents a sizeable long-term source of profit for a developer retaining the freehold to hundreds of such leases.  Secondly, a leaseholder has obligations and restrictions imposed by the lease, including limits on building extensions or altering the fabric of the property.  Leaseholders do not have the freedom to do what they wish with their properties – their homes are not their castles, but only outposts in someone else’s property empire.  If the buyer later treats the property in a way that breaches the terms of the lease, the freeholder would be entitled to take legal action to seek compensation, a reversal of any unauthorised changes to the property or, in the worst case, the termination of the lease.

Britain is undergoing a housing shortage, with consequent high prices meaning that buying a property is out of reach for many trying to get on the property ladder.   That an increasing proportion of new properties are being sold as leaseholds rather than freeholds, and without any real reduction in price, is an unwelcome additional pressure on buyers, who are being asked to pay more, but may be getting less and less.

At Blacks, we have experienced lawyers who have a wide range of expertise in all aspects of property law from purchasing freehold and leasehold residential and commercial property to dealing with all aspects of disputes for landlords and tenants to boundary disputes.  If you require any advice or assistance please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Asian Handshake Is Not Good Enough

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The intention to create legal relations is an essential part of any contract.  Without such intention the contract cannot be formed.  This issue was highlighted in the recently decided High Court case of MacInnes v Gross.

In that case, Bruce MacInnes, an investment banker with the investment bank, Investec, claimed that €13.5m was due to him pursuant to an oral contract which he alleged had been entered into over dinner in a Knightsbridge restaurant with Hans Thomas Gross, an Austrian national and the main figure behind a group of companies known as “RunningBall” (a global sports data company).  Mr Gross is also known for being the ex-boyfriend of the socialite, Paris Hilton.

Mr MacInnes claimed that it was agreed that he would personally provide services to Mr Gross with the aim of maximising the return of the sale of RunningBall and that in return he would receive remuneration equivalent to 15% of the difference between the actual sale price of the company and the ‘target’ price.  

Mr MacInnes explained that there had been no written agreement between the parties because Mr Gross had told him that he “made his deals on a handshake – in the Asian way”.  Mr Gross however claimed that the only handshake between them was “just to say goodbye” after dinner.

The Court found that although it was possible for a binding contract to come into existence over dinner in a restaurant, the highly informal and relaxed setting required close scrutiny over whether there was any intention to create legal relations.  It decided that in this case there was no such intention because:

  • Mr MacInnes was an experienced banker who would have been aware of the importance of having a written contract and his failure to produce one or even a draft was a critical omission.
  • There was substantial uncertainty over the terms of the alleged agreement and, in particular, over Mr MacInnes’ remuneration and the services he was to provide.
  • There was no agreement or certainty as to the parties to the transaction – Mr MacInnes was, at the time, an employee of Investec and was therefore not in a position to make any immediate contract with Mr Gross personally; he could only have contracted on behalf of Investec.
  • The fact that the discussions took place in English, a language that was not Mr Gross’ first language (although he was relatively fluent in English) added a further note of caution when considering whether or not a binding agreement had been reached.

Although it is possible to enter into an oral contract, it is advisable for the parties to an agreement to seek legal advice and have a written contract drawn up which accurately reflects the terms agreed between them so as to avoid any dispute arising subsequently.

Blacks Solicitors can assist with all aspects of contractual matters from drawing up the contract to enforcing it if there has been a breach.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Conduct Is All Important

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In litigation, compliance with court directions and court rules is paramount.  

Equally important is a party’s behaviour and conduct. This was highlighted in the recent High Court case of Buchanan -v- Metamorphosis Management Limited and Others.

In that case, the claimant pursued a claim for damages against Metamorphosis Management Limited (‘MML’) and a number of other defendants. However, MML had been struck off the Companies Register and therefore the claimant had to apply to restore it for the purposes of issuing proceedings against it.

There were no directions given by the court in relation to the filing or the service of the defence by MML once it had been restored. The solicitors acting for MML tried to agree directions with the claimant’s solicitors but they received no response.

Subsequently, MML’s solicitors were late in serving its defence and the claimant applied for default judgment against it. However, MML challenged the validity of the default judgment application and in the alternative it applied for relief from sanctions (i.e. that it should not suffer the potentially serious consequences of filing late) and asked that it be allowed an extension of time for the service of its defence.

The court refused to grant the claimant default judgment but instead allowed MML relief from sanctions by granting it an extension of time for the service of its defence. The judge was highly critical of the claimant’s approach to the litigation and the entrenched position that it had adopted which had resulted in the various applications being made to the court.  

The judge stated that this was a case which “cried out for a co-operative approach in agreeing a sensible timetable for a heavy piece of litigation” rather than the tactical approach which had been adopted by the claimant.  

He also decided that the claimant was wholly responsible for the parties having to appear before him on the various applications. For those reasons he dismissed the claimant’s application for default judgment and allowed MML relief from sanctions.  In the judge’s view this “was not a case that required the issuing of applications for default, but for sensible discussion”. 

The Civil Procedure Rules (the procedural rules that govern civil cases) require litigants to engage with each other and to co-operate to move matters forward in any court case.  Where a party fails to do this, as in the above case, they run the real risk of being punished by the court.

If you are involved in litigation and require assistance then the Commercial Dispute Resolution Team at Blacks Solicitors is able to assist.

Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: “As soon as possible” does not always mean as soon as possible

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In most public liability insurance policies there is a duty on the insured to notify the insurer of any event which is likely to give rise to a claim “as soon as possible”.  But what do those words actually mean?  That was the issue which the Court of Appeal had to consider in the case of Zurich Insurance Plc v Maccaferri Limited, a case which was decided at the beginning of this year.  

Maccaferri was an engineering firm which supplied staple guns to the construction industry.  It supplied those guns to a builder’s merchant which, in turn, hired them out to a building company.   

In September 2011, an employee of the building company was injured when a gun went off accidentally.  Maccaferri was informed of the incident and at the time there was no allegation that the gun had been faulty or that anyone had been injured.  The injured employee subsequently brought a claim against his employer in July 2012 and Maccaferri was notified that it had been joined as a Defendant to those proceedings on 22 July 2013.  Maccaferri notified its insurer, Zurich, of the claim on the same day.  The personal injury claim was eventually settled with Maccaferri agreeing to pay a contribution of £233,333.  Maccaferri sought an indemnity from Zurich under its insurance policy.  

However, Zurich refused to pay on the basis that Maccaferri had acted in breach of the policy by not providing notice in writing “as soon as possible after the occurrence of any event likely to give rise to a claim”.  Zurich contended that this condition meant that Maccaferri should have given them notice of the event as soon as it became aware the incident rather than on the 22 July 2013.   

However, the Court of Appeal disagreed and upheld the decision of the lower court that the clause in question required a reasonable assessment by the insured at the time of the “event” as to whether it was likely to give rise to a claim and did not, as Zurich had submitted, impose an obligation on the insured to “carry out something of a rolling assessment, as circumstances develop, as to whether a past event is likely to give rise to a claim”.  The Court found that “an event likely to give rise to a claim” meant an event with at least a 50% chance that a claim would arise.    

The Appeal Judges found that the phrase “as soon as possible” within the policy did not mean that there was an obligation on the insured to notify the insurer whenever the insured knew or should have known that an event which had occurred in the past was likely to give rise to a claim.  If the insurer wanted to impose such a requirement then it had to be clearly spelt out in the policy.  The wording in Zurich’s policy was ambiguous and any ambiguity would be resolved in favour of the insured.  

Although this decision was decided in favour of the insured, it would be good practice  for policyholders to notify their insurers of any claim or potential claim as soon as they become aware of it so as prevent the insurer from raising the issue of none or late notification as a ground for voiding the policy.  

If you are involved in any contract dispute or require advice on the interpretation, clarification or drafting of contract terms then Blacks Solicitors LLP can assist.  Please contact Luke Patel on 0113 227 9316 or email him at LPatel@LawBlacks.com.

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BLACKS SOLICITORS: # Come fly with me … fly with me…

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In litigation a party’s conduct can sometimes have a significant bearing on the outcome of the case.  So it proved in FlyMeNow Limited v Quick Air Jet Charter GmbH, which was heard by the High Court at the end of last year.

The case concerned a dispute between an aircraft charter company (FlyMeNow) and an aviation company which provided air ambulance flights (Quick Air).  Quick Air flew a number of flights for FlyMeNow and issued invoices to it as a result.  However, FlyMeNow failed to pay.  As a consequence Quick Air circulated an email which was headed “WARNING. Company you should not deal with! Pecuniary difficulties!” which stated that FlyMeNow was not able to pay the outstanding amount due to Quick Air.  The email, which was circulated to 26 companies in the aviation industry, suggested that FlyMeNow was insolvent.   

FlyMeNow pursued a claim for damages for libel against Quick Air.

Quick Air admitted that it had published the email and that it had referred to FlyMeNow and that it was defamatory but it relied on the defence of “justification” on the basis that the natural and ordinary meanings of the words complained of were substantially true.  However, notwithstanding Quick Air was able to prove that FlyMeNow was “perilously close” to being insolvent, that it “was operating on a knife edge” (and it was therefore true that it would be financially unsafe for others to deal with them) and it was also true that FlyMeNow was a defaulter who had failed to settle outstanding invoices, its defence ultimately failed as it was unable to prove that the meaning of the email, that FlyMeNow was actually insolvent, was true at the time the email was sent.  

However, although the judge decided that FlyMeNow had been defamed by Quick Air (as FlyMeNow was not technically insolvent as claimed) he held that it was not entitled to substantial damages.  The judge found that the email was “very largely true” and that FlyMeNow had “lied repeatedly” to Quick Air about the reasons for non-payment of its invoices and that it had “behaved disgracefully at the time” and it had “behaved disreputably and disgracefully since”. Further, the judge found that FlyMeNow’s own conduct had played a significant role in causing Quick Air to publish the untrue allegation of insolvency.  For those reasons the Judge awarded FlyMeNow £10 for the damage to its reputation.

This case should act as a warning to all litigants that when going before the court their conduct will be closely scrutinised and any disreputable behaviour will be taken into account.

If you require advice regarding any issues concerning defamation or insolvency then please contact Luke Patel on 0113 227 9316 or at LPatel@LawBlacks.com

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BLACKS SOLICITORS: Do you have capacity?

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In the case of Fehily v Atkinson which was heard by the High Court at the end of last year, the Court had to consider the issue of whether a person had sufficient mental capacity to enter into a transaction.  

In that case, Mrs Fehily was seeking to annul a bankruptcy order which had been made against her following her failure to comply with the terms of an individual voluntary arrangement (IVA) which she had entered into to avoid being made bankrupt by HMRC after her failure to pay a substantial tax liability.  Mrs Fehily argued that she had lacked the necessary mental capacity to enter into the IVA.

The District Judge dismissed Mrs Fehily’s application, rejecting her argument.  The Judge also decided that even if the IVA was ineffective, there would have been little point in annulling the bankruptcy as Mrs Fehily would inevitably have been made bankrupt by HMRC.  Mrs Fehily appealed.

The High Court dismissed Mrs Fehily’s appeal and provided useful guidance on the test to be applied when assessing a person’s mental capacity to enter into a transaction.  The following principles are relevant:

  • The person needs the mental capacity to recognise the issues which must be considered, to obtain, receive, understand and retain relevant information and to weigh the information in the balance in reaching a decision.
  • The person may have capacity for one type of decision but not another.
  • Capacity may vary over time and should be assessed at the specific time when the decision was made.
  • The question to be addressed is whether the person had the ability to understand the transaction and not whether he actually understood it.
  • Although help may be needed to understand the transaction, it did not prevent the person from having the capacity to understand it.  

Ultimately, a person requires the insight and understanding to realise that advice is needed, the ability to find and instruct an appropriate adviser and a capacity to understand and make decisions based on that advice.  

This case has helped clarify the test for mental capacity, a subject which has been raised from time to time by litigants in order to try to extract themselves from a transaction or contract which they have entered into.  

At Blacks Solicitors we can assist in any type of civil or commercial dispute you may be involved in or on any issue concerning insolvency.  Please contact Luke Patel on 0113 227 9316 or at “LPatel@LawBlacks.com

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Yorkshire’s number one law firm: Blacks Solicitors enjoy a stellar 2016

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TRUSTED: The Blacks Solicitors team

TRUSTED: The Blacks Solicitors team

Blacks Solicitors’ reputation as one of the county’s leading practices has been reaffirmed in 2016 with the law firm winning both crucial cases and a handful of glittering awards throughout the past 12 months.

Rounding off the year in an impressive fashion was the bestowment of the title ‘Best Law Firm’ at the Yorkshire Legal Awards in October.

ACCOLADES: Blacks Solicitors scooped up Best Law Firm for the second time in four years at the 2016 YLAs, pictured are Chris Allen and Louise Minchin

ACCOLADES: Blacks Solicitors scooped up Best Law Firm for the second time in four years at the 2016 YLAs, pictured are Chris Allen and Louise Minchin

Successful in the 11 – 30 partners category, the firm beat an impressive competitive line-up of Yorkshire-based firms to seal the title.

SUCCESFUL TEAM: Blacks Solicitors Partners (l-r) David Paterson, Chris Allen and Luke Patel

SUCCESFUL TEAM: Blacks Solicitors Partners (l-r) David Paterson, Chris Allen and Luke Patel

The judging panel, which included Sue Harris, Deputy President of the Leeds Law Society and Judge Geoffrey Kamil, presented the award to Blacks in recognition of the firm’s continued growth, enviable reputation, its wide range of experience across a variety of sectors, and its commitment to training initiatives and CSR.

It is the second time in four years that Blacks have won the coveted accolade of Best Law firm, and have previously also received Awards for Residential Property and Managing Partner of the Year.

Blacks’ emphasis on its strategy has meant that it has prospered at a time when competitors fell by the wayside, or merged with others to survive.

No other firm of its size has raised its profile more during the recession, with the business turning over almost £12 million in 2015/16

Chris Allen, managing partner at Blacks Solicitors LLP, was there on the night to collect the award. He said: “It’s truly an honour to even be shortlisted for Best Law Firm and to win it just shows that the hard work and commitment from the whole team is paying off.

“We wouldn’t be where we are without our loyal clients and dedicated, hard-working team, so this is for all of them.”

The firm’s high staff retention rate is yet another prime example of its achievement, with the headcount rising from 79 in April 2009 to 175 by the end of 2015.

Plans are afoot to move into larger premises to cope with the demand. This will see all of its commercial and corporate services brought together under one roof, to offer a powerful level of support for small and medium enterprises across the region.

The Yorkshire Legal Awards bring together the region’s legal community to celebrate its achievements and recognise the outstanding talent across Yorkshire.

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BLACKS SOLICITORS: Do you have permission?

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In residential tenancies, the landlord usually has the right to re-gain possession of the property if there has been a serious breach of the tenancy agreement by the tenant.  In order to obtain possession the landlord has to apply to the court for a possession order.  In some cases, the court might give the tenant a second chance by granting the order but suspending it on the condition that there are no further breaches by the tenant.  If there are further breaches the landlord can then apply to the court for a warrant of possession in order to enforce the possession order.

Previously, the usual practice adopted by landlords was simply to lodge the warrant with the court together with the appropriate fee and thereafter carry out the eviction on a date set by the court.  However, the recent case of Cardiff County Council v Lee (Flowers) has shown that procedure to be incorrect.  

In that case, Mr Flowers was subject to a suspended possession order in favour of his landlord, Cardiff County Council, following the breach of his tenancy.  The council applied for and was granted a warrant of possession by the court.  However, Mr Flowers argued that the council could not simply apply for the warrant but needed to seek permission from the court beforehand and that therefore the warrant was invalid.  

At first instance, the District Judge held that permission was not required.  Mr Flowers therefore appealed.  The Circuit Judge agreed that permission was required but he decided that the warrant was not invalid because the court could and did waive the council’s breach.  Mr Flowers appealed to the Court of Appeal.  The Court of Appeal decided that where a landlord wishes to apply for a warrant of possession he must first make an application to the court explaining the breach and asking for permission to enforce the possession order.  

Landlords who are seeking possession following the breach of a suspended possession order should therefore ensure that they make the necessary application to the court seeking permission to enforce the possession order before applying for the warrant of possession.  Once permission has been granted by the court the landlord is then entitled to apply for the warrant.  

For landlords this is another procedural hurdle which they will need to clear before they can recover their property.  For tenants this represents another layer of protection as the application for the warrant would be subject to judicial scrutiny before it is granted.  

If you are involved in any dispute concerning a lease or a tenancy agreement then the Property Litigation Team at Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Failure to complete

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On a typical conveyancing transaction the buyer is required to pay to the seller a deposit equivalent to 10% of the purchase price upon exchange of contracts.  The deposit provides the buyer with an incentive to complete and the seller with a guarantee of the performance of the contract.  If the buyer fails to complete after exchange then the deposit is forfeited.

The usual position is that the buyer is not entitled to the return of the deposit but, in certain circumstances, the buyer can apply to the court seeking an order for its return. However, such an order will only be made in exceptional circumstances; the recent case of Solid Rock Investments UK Limited v Reddy shows how difficult it can be for the buyer to succeed.  

In that case the buyer agreed to purchase a property for £430,000 and paid a 10% deposit.  However, it encountered difficulties in obtaining funds from abroad and failed to complete the purchase on the completion date.  The seller rescinded the contract and kept the deposit.  On the following day, the buyer told the seller that it was ready to complete and offered to pay interest and costs in addition to the purchase price but the seller was insistent that the contract had been rescinded.  The seller subsequently sold the property to another party at an increased price.  

The buyer applied to the court for the return of the deposit. However, its application was rejected and it therefore appealed on the basis that the original judge had failed to take into account the fact that the seller had received a financial windfall upon rescission and that the buyer had offered to pay both the seller’s costs and interest so that the seller would not actually suffer any loss following the failure to complete.

The appeal was rejected.  The court outlined the factors which would need to be taken into account in dealing with such an application.  These were:

  • The fact that the seller had not suffered any loss as a result of the buyer’s failure to complete could not, of itself, amount to a ground for order for the return of the deposit but the economic impact on the seller would be a factor that the court could take into account.  
  • It would be relevant to consider how close the buyer came to completing and whether any alternatives were proposed by the buyer and, if so, whether they were more advantageous to the seller than the original terms of the contract.
  • Whether the seller had caused or contributed to the failure to complete.
  • A lack of funding due to matters which were beyond the buyer’s immediate control would not normally entitle the buyer to the return of the deposit.

This case illustrates that, although it is possible, it is extremely difficult for a buyer to recover a deposit which has been paid if there has been a failure to complete on his part.  

If you are involved in a dispute, contractual or otherwise, then the Commercial Dispute Resolution Department at Blacks Solicitors can assist, please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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Blacks Solicitors: No trimming of restrictive covenants for hairdresser

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Restrictive Covenants are typically found in employment contracts where they are used to regulate the activities of employees during their employment and to enforce restrictions post-employment.  However, restrictive covenants can also be found in other areas, for example in agreements in relation to the sale of businesses.  This was the situation in Rush Hair Limited v Hayley Gibson-Forbes and S.J. Forbes Limited, a case which was recently heard by the High Court.  

In that case Rush sought to enforce two restrictive covenants contained in a share purchase agreement relating to the sale of a business to them by Ms Gibson.  The covenants in question stipulated that Ms Gibson would not at any time during the period of two years from completion of the sale of the company:

  • Seek to canvas, solicit, entice or employ key employees from the company.  
  • Be directly or indirectly engaged, concerned, employed or interested in any competing business within a defined geographical area.

Ms Gibson did not directly breach any covenants herself but a company, S.J. Forbes Limited, of which Ms Gibson was a director and shareholder, did.  Accordingly, Ms Gibson argued that as the covenants did not expressly prohibit the conduct of S.J. Forbes, she had therefore not acted in breach of the restrictive covenants.  

However the Court disagreed and upheld both covenants.  

In considering the restrictions contained in the first covenant, the Court found that it prohibited not only activities carried out by Ms Gibson on her own behalf but also activities done by her as an agent for S.J. Forbes.  Ms Gibson had historically operated her business from a limited company of which she was a director and shareholder and it was the limited company that employed the staff.  

The Court was of the view that both Rush and Ms Gibson would have understood that a covenant binding on Ms Gibson only in respect of acts done on her own behalf (rather than as agent for another) would have been ineffective.  The Judge considered that the wording contained in the restrictive covenant did not compel such an interpretation and that the covenant should be construed in the only way that was commercially sensible, namely prohibiting Ms Gibson from canvassing, soliciting, enticing or employing any of the named individuals whether on her own behalf or as an agent for another.

This case illustrates how the courts are prepared to pierce the corporate veil where the alleged breaches are carried out by a company controlled by the breaching party so as to prevent that party from circumventing restrictions to which it had agreed to in the first instance.

If you acquire advice and assistance regarding the drafting of share purchase agreements or employment contracts or with the enforcement of any of the terms of those agreements then please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Keeping time

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There has been plenty of case law on the subject of when a claim is “brought” for the purposes of stopping a limitation period running – it is when the Claim Form is delivered to the court office, accompanied by a request to issue and the appropriate fee.  A recent case, Dixon v Radley House, has explored further what is meant by “the appropriate fee”.  

The Claimants brought claims for misrepresentation, breach of contract and negligence against the Defendants, who were architects and engineering consultants, in respect of works carried out to their home. Proceedings were issued claiming damages for misrepresentation in the sum of £35,894.78 and damages for breach of contract and/or negligence to be assessed. The correct fee for a claim of that amount was paid and the proceedings were issued. However, when the Claim Form and Particulars of Claim were served, they referred to a much higher claim for damages, alleging that the Claimants had been obliged to carry out remedial works amounting to over £500,000.  

When issuing proceedings, the size of the court fee depends on the amount that is being claimed.  In light of this, the Defendants said that as the value of the actual claim was higher than originally stated a much higher court fee should have been paid and that, because it was not, the claim had not been “brought” for the purposes of limitation and the action was statute barred.  

Amongst other things, the Defendants relied on an earlier case, Lewis v Ward Hadaway, which regular readers will remember.  In that case the court decided that an underpayment of the court fee before a limitation period expired was not payment of “the appropriate fee” and therefore that the claims in question were not “brought” in time.  

The Judge did not accept the Defendants’ argument.  The crucial distinction, it was decided, was that the Claimants in this case had not deliberately underpaid the court fee to avoid initial payment of the correct amount.  He said “assuming that the Claimant's behaviour is not abusive, the fact that the Claimant hopes or intends to bring a claim which cannot be either articulated or quantified at the time of the issuing of proceedings should not require payment of the fee that would have been payable if it had been articulated or quantified…If and when the further claims or quantification can be pleaded, further fees may become properly payable.”

The Claimants had therefore paid the correct fee for the claim which had been set out in the Particulars of Claim, even if they intended to claim further amounts later, and so the claim had been properly "brought" for limitation purposes and was allowed to continue.  

Once again, this case highlights the dangers to claimants posed by limitation periods – not least the fact that they can find themselves at the mercy of the Court as to whether or not their claim can proceed.  

If you would like to discuss any issue arising from this case please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Landlord’s Consent – a step too far could be prejudicial

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The relationship between commercial landlords and their tenants is complex. In many cases their interests are diametrically opposed and never more so than when the tenant wishes to leave before the end of the lease.

The majority of commercial leases will be for a fixed term and sometimes the tenant wants to leave while there are still several years left to go. In practice, what this means is that the tenant must find a replacement and assign the lease to them. Needless to say, the landlord will be keenly interested in the nature and creditworthiness of the new tenant.

This process can be entirely painless. The new tenant may be as good as the old, and the old tenant may only be moving because their success requires expansion to larger premises.

Most leases will include a clause restricting the assignment of the lease. In rare cases this may be absolute. More commonly, the consent of the landlord is required. This is usually specified as “not to be unreasonably withheld” but even if the wording is not used, the landlord’s consent must be exercised reasonably or the tenant may be given a free hand.

In the recent case of No 1 West India Quay (Residential) Ltd v East Tower Apartments Ltd, the lease permitted assignment with consent and the landlord applied conditions to that consent being granted, firstly that the incoming tenant provide bank references, secondly that the landlord was able to inspect the premises, and finally, that the tenant pay the landlord’s costs, set at £1,600 plus VAT. The tenant objected and the matter ended up in court.

The court considered it was entirely reasonable for the landlord to investigate the financial position of the incoming tenant. Likewise it was reasonable for the landlord to inspect the property to ascertain that the outgoing tenant had complied with its duties and not, for example, let the property fall into disrepair or made unauthorised alterations – matters that it is far harder to take up with a new tenant not actually responsible for them.

However, the court ruled that the final condition was unreasonable because the sum sought was disproportionate in the circumstances, and on that basis found for the tenant.

The impact of this went beyond simply forcing the landlord to give up its costs. The court’s decision meant that the landlord’s other objections – that would be considered reasonable – were also swept away, leaving the tenant free to assign to its chosen subtenant with neither references nor inspection. The landlord’s consent was therefore no longer a factor at all. If the landlord had limited its requirements to the first two points, or even simply sought a lower sum for its costs, then it would have retained some measure of influence on the assignment process.  

The Property Litigation Team at Blacks can provide advice and assistance on any property related matter.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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Blacks Solicitors win best law firm

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AWARD WINNERS: Blacks Solicitors scooped up Best Law Firm for the second time in four years

AWARD WINNERS: Blacks Solicitors scooped up Best Law Firm for the second time in four years

Yorkshire Legal Awards present dazzling accolade to Leeds firm

Blacks Solicitors’ reputation as one of the county’s leading practices was reaffirmed earlier this month after the group were named as the Best Law Firm at the Yorkshire Legal Awards.

Successful in the 11 – 30 partners category, the firm beat an impressive competitive line-up of Yorkshire-based firms to seal the title.

The judging panel, which included Sue Harris, Deputy President of the Leeds Law Society and Judge Geoffrey Kamil, presented the award to Blacks in recognition of the firm’s continued growth, enviable reputation, its wide range of experience across a variety of sectors, and its commitment to training initiatives and CSR.

It is the second time in four years that Blacks have won the coveted accolade of Best Law firm, and have previously also received Awards for Residential Property and Managing Partner of the Year.

Blacks’ emphasis on its strategy has meant that it has prospered at a time when competitors fell by the wayside, or merged with others to survive.

No other firm of its size has raised its profile more during the recession, with the business turning over almost £12 million in 2015/16

Chris Allen, managing partner at Blacks Solicitors LLP, was there on the night to collect the award. He said: “It’s truly an honour to even be shortlisted for Best Law Firm and to win it just shows that the hard work and commitment from the whole team is paying off.

“We wouldn’t be where we are without our loyal clients and dedicated, hard-working team, so this is for all of them.”

The firm’s high staff retention rate is yet another prime example of its achievement, with the headcount rising from 79 in April 2009 to 175 by the end of 2015.

Plans are afoot to move into larger premises to cope with the demand. This will see all of its commercial and corporate services brought together under one roof, to offer a powerful level of support for small and medium enterprises across the region.

The Yorkshire Legal Awards bring together the region’s legal community to celebrate its achievements and recognise the outstanding talent across Yorkshire.

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BLACKS SOLICITORS: Breach of trust

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It is an established principle in law that if a fiduciary, a person who holds a position of trust, breaches that trust, for example by making a secret profit, then he has not only to account for any gains he has received as a result of that breach but also forfeit the remuneration he was entitled to for the services rendered.  This rule usually applies to agents who are acting on behalf of principals.  

However, in the recent case of Jeremy Hosking v Marathon Asset Management LLP the High Court found that a profit share payable to a member of a limited liability partnership (an ‘LLP’) was capable of being subject to forfeiture where the member was found to have breached his fiduciary duty to the LLP.  

Mr Hosking was one of three founding members of Marathon which was an investment management business.  As such Mr Hosking was entitled to a share in the profits of the business.  Mr Hosking retired from Marathon in December 2012.  However, following his retirement Marathon discovered that Mr Hosking had breached his contractual and fiduciary duties by having discussions with four of Marathon’s employees in July 2012 about the possibility of setting up a competing business.  Marathon therefore commenced arbitration proceedings against Mr Hosking.

The Arbitrator awarded Marathon compensation of £1.38m for the losses suffered as a result of Mr Hosking’s breaches and held that Mr Hosking should forfeit 50% of the profit share payments that he had received in respect of the period from July to December 2012 (i.e. the period when he was in breach of his fiduciary duties) which amounted to a figure of £10,389,957.50.  

Mr Hosking appealed on the grounds that the share of profits in a partnership was not subject to the rule of forfeiture for breach of fiduciary duty.  His primary argument was that the rule related to remuneration for services rather than to a share of profits.

The High Court disagreed.  In what has been hailed by some as a landmark decision, the Court found that a profit share payable to a partner or LLP member (as in this case) could potentially be subject to forfeiture and whilst the principle had mainly been applied to agency cases its rationale extended more widely and could be applicable to other fiduciaries as well.  The Judge found that the absence of a provision for forfeiture in the relevant contractual documentation did not mean that the principle of forfeiture could not apply.  

This decision is of particular importance to partners and members of limited liability partnerships particularly where there are partnership disputes.  If you are involved in any commercial dispute then the Commercial Dispute Resolution Department at Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.

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Priced out of the Market – the effect of court fee increases

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The government’s major increase in civil court issue fees went live back in April 2015. Prior to that date fees were relatively modest, scaling with the amount of money claimed and reaching a maximum of around £2,000.

After it, the fee structure changed entirely for those cases over £10,000 (meaning cases too large to be dealt with in the ‘Small Claims track’.  The new regime calculated the court fee at 5% of the sum claimed, meaning a small increase for cases around the £10,000 mark, but a very dramatic increase for higher value cases – initially capped at £10,000 but with plans to increase this to £20,000. Small Claims fees remain unchanged – although in many cases these already stand at over 5% of the claimed sum, and so would have to be reduced to be brought in line with the fees for higher value cases.

These changes have since been followed in March and April 2016 by wider-ranging increases, including Court of Appeal costs, possession claim costs and a sharp increase to the cost of making applications to court. More recent changes have added 10% to the cost of all enforcement actions.

The Registry of County Court judgments has recently published a report that makes for sobering reading. The number of County Court judgments made in the first half of 2016 is 19% down on the same period of the previous year. The number of High Court judgments, claims of higher value, is down by a huge 50%.

Possession claims are also down by 9%, and County Court bailiff possessions are down by 14% - although in the latter case the slack may be taken up by High Court Enforcement Officers who offer an eviction service that is more expensive but usually swifter than the court’s own bailiffs.

On the face of it, a reduction in litigation might seem like good news for everyone except the lawyers. However, this change is unlikely to reflect a drop in the number of actual disputes, unpaid invoices and recalcitrant tenants. The Bar Council, which opposed the rises along with a number of other legal organisations, has stated that smaller businesses are the sector worst hit by the increases, and that “by increasing court fees the government has cut off those small businesses’ only real and last hope of getting that money”.

The result of the increase in court fees means it is likely that, for individuals and small-to-medium companies, justice through the courts is increasingly out of reach. Similarly, where a claim is made, a struggling debtor now faces a vastly increased court fee to be added to the pre-existing debt. Given these trends (and a further increase to fees has not been ruled out), smaller businesses will likely be far more wary about offering credit to customers, which in itself will make them less competitive against larger rivals, and is unlikely to help speed up economic recovery and growth.

If you are involved in any dispute and require assistance please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.   

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Delay proves fatal

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The recent High Court case of Goldcrest Distribution Limited v (1) Charles McCole (2) Mary McCole and Another is a salutary reminder for those involved in litigation that delay in dealing with their case can prove fatal.  

Goldcrest had provided credit to a company that was owned by Mr McCole, secured by a charge over a residential property jointly owned by him and his wife.  The loan was not repaid so Goldcrest sought possession of the property.

Mrs McCole filed a Defence and Counterclaim to Goldcrest’s claim.  The Defence argued that:

  • The charge was a regulated mortgage contract and was unenforceable because Goldcrest was not licensed by the Financial Conduct Authority.  
  • The charge was void under the Insolvency Act because it was arranged after a bankruptcy petition had been presented against Mr McCole.
  • The property was subject to a trust for the benefit of Mr & Mrs McColes’ daughter.  
  • Mrs McCole had been subject to undue influence at the hands of Mr McCole and Goldcrest had had notice of this.  

In her Counterclaim Mrs McCole sought a declaration that the charge was unenforceable and should be set aside.  

Despite Mrs McCole’s solicitors informing Goldcrest’s solicitors that the time for serving its Defence had long expired, Goldcrest  did not file a Defence to the Counterclaim after six months.  Mrs McCole therefore applied for and obtained a default judgment in respect of her Counterclaim.  

Goldcrest subsequently instructed new solicitors and applied for the judgment to be set aside and for permission to file its Defence.  However, it took Goldcrest a further month to make that application.  

Although the Court agreed that Goldcrest had real prospects of success of defending the Counterclaim, the Judge refused to set the judgment aside on the grounds that he felt that Goldcrest’s delay in making the application was a serious failure for which Goldcrest had provided no reasonable explanation.  The Court therefore decided not to exercise its discretion to grant Goldcrest relief and the default judgment therefore stood.

Although Goldcrest had reasonable prospects of success with its claim, this case once more demonstrates that a party can be severely punished by the Court for poor conduct, in this instance for failing to deal with its claim in a timely manner.  

If you are involved in any litigation or court proceedings, Blacks Solicitors can assist.  Please contact Luke Patel on 0113 2279316 or email him at “LPatel@LawBlacks.com”.

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Breaking up is hard to do

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The area of property law regularly throws up examples of traps for the unwary.  That has proved to be the case once again.  

The recent decision in question this time is Vanquish Properties (UK) Limited Partnership v Brook Street (UK) Limited.  It involves the often problematic issue of break clauses and adds to the mix the involvement of a limited partnership (a common investment vehicle in the UK).  

A lease was granted to “Vanquish Properties (UK) Limited Partnership acting by its general partner Vanquish Properties GP Limited”.  The Defendant was an undertenant under an earlier lease.  The problem arose when a break notice was served on behalf of “Vanquish Properties (UK) Limited Partnership” (“the Partnership”).  It was an important notice too: the Partnership needed to bring the underlease to an end to undertake major redevelopment works.  

The Defendant did not accept the validity of the notice so the Claimant issued proceedings to obtain a declaration that it was valid.  

The most relevant parts of law in this case are that a limited partnership has no legal identity, and that where land is conveyed to more than one person as joint tenants in undivided shares (as can be the case when land is conveyed to a partnership) the maximum number of grantees there can be is four.  

The Defendant argued that the notice could not be valid because it was given by the Partnership which could not be the owner of the lease as it was not a legal entity.  The Claimant accepted that but said that if the Partnership was not the owner then four of its five partners were and the notice was served by them.   It said that it was possible to identify who those four partners were.  It also said that as the same solicitors acted for the general partner company it would have been obvious to the Defendant that a mistake had been made and that a different entity should have been named in the notice.  

The Court did not agree on either count.  It decided that there were no documents which showed any intention of the partners as to which of them would hold the legal estate and that in the absence of that information, the legal owner was the general partner, Vanquish Properties GP Limited (“VPGP”).  VPGP had not served the notice, therefore it was invalid.  It also held that there was no reason for the Defendant to believe that the solicitors involved were also instructed by the general partner company.  

The Claimant now faces the possibility of major redevelopment plans being delayed by a considerable period of time.  The decision provides a further warning, if one were indeed needed, that the content and service of break notices, whatever the circumstances, needs to be very carefully considered.  

If you are involved in any disputes concerning a lease then Blacks Solicitors can assist. Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.  

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To terminate or not to terminate?

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Commercial contracts commonly provide that if a party wishes to terminate the contract then it first needs to take certain steps before it is able to do so, for example, by giving notice or allowing the other party the opportunity to remedy any breach.  But what if one party wishes to terminate the contract due to the unlawful actions of the other party?  This was the scenario which occurred in the case of Vinergy International (PVT) Limited v Richmond Mercantile Limited which was heard by the High Court earlier this year.

Vinergy was an Indian company who entered into an agreement (“the Agreement”) with Richmond, an UEA company, under which Richmond agreed to supply bitumen to Vinergy for 10 years.  However, part way through the Agreement Richmond terminated the Agreement and commenced arbitration proceedings seeking damages on the grounds of Vinergy’s breach of its obligations to buy bitumen exclusively from Richmond and its failure to pay an invoice.  Vinergy claimed that Richmond had terminated the Agreement unlawfully because it had failed to give it notice in accordance with the terms of the Agreement and, as such, it contended that the termination was unlawful and a wrongful repudiation of the Agreement.

At arbitration, the Tribunal ruled that Richmond had lawfully terminated the Agreement.  Vinergy appealed.

The issue which the Court had to decide was whether Richmond could ignore the contractual provisions in the Agreement and instead rely on its common law right to terminate the contract.  At common law, where a party to a contract commits a breach that is sufficiently serious, the innocent party may choose to accept that breach by giving notice to the other party.  The contract is then terminated and the innocent party can claim damages.  This is known as a repudiatory breach.  The issue was therefore whether Richmond could rely on its common law right to terminate the Agreement by reason of a repudiatory breach by Vinergy so as to circumvent the notice requirement within the termination clause of the Agreement.

The Court upheld the Arbitrator’s decision and dismissed the appeal.  It held that there was no general rule that the contract termination requirements should override the common law right to terminate.  The Judge found that the termination provision in the Agreement did not apply to repudiatory breaches and even if it did, the breach in question was incapable of remedy and therefore was not within the scope of the termination clause.

This case illustrates that where one party to a contract informs the other party that it no longer has any intention of being bound by the contract, the innocent party would not reasonably be expected to give notice before being able to terminate the contract.

Where a party is considering whether to terminate a contract, it will need to consider carefully whether or not it has to follow the contractual termination provisions or whether the facts are such that it can terminate on the grounds of repudiatory breach.

If you are involved in any contractual dispute then Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or email him on “LPatel@LawBlacks.com”.

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Fraud unravels all

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When is the settlement of a claim between two parties not final?  When there has been fraud involved.  In what is being hailed as a landmark judgment for the insurance industry, the Supreme Court decided in the case of Hayward v Zurich Insurance Company Plc last month that where an insurer suspects fraud but nevertheless settled a claim, it would be entitled to set aside the settlement if it subsequently discovered that there had indeed been fraud involved.

In 1998 Mr Hayward suffered a back injury at work and pursued a claim against his employer for £420,000.  The claim was settled in 2003 for £134,973.11 after the employer’s insurers, Zurich, obtained video surveillance evidence showing that Mr Hayward had exaggerated his injuries.  However, two years after the settlement, Mr Hayward’s neighbour provided evidence that Mr Hayward had actually made a full recovery from his injury at least one year before the settlement.  Zurich therefore issued proceedings to set aside the settlement and to recover the sums which they had paid on the grounds of Mr Hayward’s fraudulent misrepresentation.

The Judge found that Mr Hayward had dishonestly exaggerated the effects of his injury and ordered that the settlement be set aside and that 90% of the original settlement sum be repaid leaving Mr Hayward with the amount actually found to be due to him, £14,720.

However, the Court of Appeal overturned the County Court decision and held that, given that Zurich was aware of the fraud at the time of the settlement and had pleaded fraud in the original case, it could not now set aside the settlement agreement when proof of fraud was eventually obtained.  The Court of Appeal stated that “parties who settle claims with their eyes wide open should not be entitled to revive them only because better evidence comes along later”.  The Court of Appeal found that Zurich had settled the claim with the risk that the claim may be fraudulent and it therefore had to live with the consequences of that bad bargain.  Zurich appealed to the Supreme Court.

The Supreme Court unanimously allowed Zurich’s appeal, restoring the Judge’s decision.  The Supreme Court was not prepared to allow Mr Hayward to profit from his fraud at the expense of the insurer stating that “it is difficult to envisage any circumstances in which mere suspicion that a claim was fraudulent would preclude unravelling a settlement when fraud is subsequently established”.

Although this case relates to a personal injury claim, it is likely to apply to other types of settlements.  It is not unknown for parties to settle cases even though they have doubts about the veracity of what they have been told by the other party.  If that initial suspicion subsequently proves to be true then the deceived party may now be able to set aside the settlement on the ground of misrepresentation by the other party.

If you are involved in any dispute, contractual or otherwise, then Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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Blacks Solicitors: Sometimes you don’t have to talk

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In an article earlier this year I explained how the courts expect the parties in litigation to try to settle their dispute by Alternative Dispute Resolution (“ADR”) before the matter reaches trial and that failure to do so can lead to costs penalties. However, there are occasions when the court recognises that there may be justifiable reasons why one party might refuse to make the effort. This occurred in the recent case of Altrincham Preparatory School v Cockx.

In that case the Claimant school had sued the Defendants for £1,760 in respect of an early termination fee which was payable due to the Defendants withdrawing their son from the school without providing the requisite notice. In view of the amount of the claim, the case should have proceeded in the Small Claims Track but instead, as a consequence of the Defendants pursuing a Counterclaim for the sum of £12,000, it was taken out of that track and allocated to the Multi Track, where more complex higher value cases are usually heard.

The Claimant argued that the Defendants’ counterclaim was completely without merit (they were arguing about the quality of their son’s schooling and the Claimant’s terms and conditions) and doomed to fail. Although the Claimant was prepared to have the matter dealt with by mediation under the Small Claims Mediation Service (“SCMS”) (a free mediation service offered by the court in small claims cases), it felt it was disproportionate to engage in normal, non SCMS, mediation given that the cost of doing that would be £950 for a claim that was only worth £1,760.

Ultimately, the case did settle in the Claimant’s favour by mediation at a very late stage but by that point its legal costs had rocketed. The Defendants argued that the Claimant’s costs should be reduced due to its refusal to mediate at an early stage. However, the court disagreed. The Defendants appealed.
The Court of Appeal, however, refused permission to appeal. It said that it was not unreasonable for the Claimant to have refused to mediate in circumstances where it had been willing to do so in the appropriate forum, i.e. the SCMS - that step would have been possible but for the Defendants advancing an unmeritorious counterclaim that resulted in the case having to be dealt with in a more expensive forum. It was reasonable for the Claimant to consider the costs of mediation in the Multi Track as being disproportionate in light of the modest value of its claim. The Lord Justice was of the view that the significantly increased costs of the proceedings was solely down to the actions of the Defendants and therefore they should be responsible for those costs.

Although the need for the parties to engage in ADR in any dispute is vital, this case shows that conduct is also an important factor which the courts will look at closely. Parties engaging in poor conduct are likely to be punished.

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To surrender or not surrender

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When is a commercial lease surrendered?  The question may appear straightforward but as the tenant found out in the recent case of Padwick Properties Limited v Punj Lloyd Limited the answer is not always as simple as it seems.

The landlord granted a 21 year lease of an office block to the tenant company.  The lease was guaranteed by the tenant’s parent company.  Subsequently, the tenant ceased trading and went into administration.  The administrators wrote to the landlord’s solicitors to inform them that the tenant had vacated the property stating that “the security and safety of the Property will therefore revert to your client”.  Notwithstanding this the landlord reminded the administrators that the tenant and the guarantor remained liable under the lease and that they should make arrangements to secure the property.  The landlord eventually had to secure the property itself after the tenant failed to do so and upon the insistence of its insurers.

A few months later the administrators returned the keys of the property to the landlord and confirmed their intention to surrender the lease. The landlord only accepted the keys because it was told by the administrators that the keys would otherwise be thrown away. However, the landlord made it clear that it was not accepting a surrender and demanded that the guarantor comply with its obligations.

The tenant subsequently entered into liquidation and the liquidators disclaimed the lease.  The landlord asserted that the lease had not been surrendered, called upon the parent company to honour its guarantee and required it to pay the rent arrears and to enter into a new lease.  The parent company refused to enter into a new lease on the basis that it had already been surrendered.  

The Court ruled in favour of the landlord and held that the lease had not been surrendered because:

  • The acceptance of the keys to the property by the landlord was not, in itself, inconsistent with the continuation of the lease and in any event the landlord had made it expressly clear that it had only accepted the keys for the purposes of maintaining security to the property.
  • The attempt to re-let the premises did not give rise to the surrender although the position would have been different if the property had been successfully re-let.

This case highlights the need for unequivocal conduct by both parties for the surrender of a lease to be effective.  A tenant cannot terminate a lease by simply walking away.  The decision also emphasises the importance of stating your position clearly.  In this case the landlord expressly stated that the return of the keys was only accepted to protect its interest and not because it had agreed that there had been a surrender of the lease.  

If you are involved in any disputes concerning a lease then Blacks Solicitors can assist. Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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Better late than never

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In the recent case of Pineport Limited v Grangeglen Limited the High Court was asked to consider whether a commercial tenant whose lease had been forfeited (i.e. brought to an end) by peaceful re-entry by its landlord on the grounds of non-payment of rent was entitled to relief from forfeiture despite applying for it some 14 months later.  

In commercial leases, there is usually a provision which allows the landlord to forfeit it and regain possession if there are any arrears.  Where a lease has been forfeited like this, a tenant can apply for relief.  If the application is successful the tenant will be placed back into the property and the lease will be reinstated as if the forfeiture had never occurred.  However, a tenant who seeks relief must do so with “reasonable promptitude”.  The general rule is applications must be made within six months.  However, this is not a strict time limit but simply a guide which is followed by the courts.

In this case the tenant had a 125 year lease.  It had paid a £90,000 initial premium and had covenanted to pay the ground rent of £100 per annum, the service charge and the cost of insuring the premises.  

The landlord forfeited the lease by peaceable re-entry for non-payment of the service charge totalling £2,155.  The tenant applied for relief.

Although there had been a significant delay by the tenant in applying, the court decided to grant relief for the following reasons:

  • The tenant had paid a large premium and the ground rent was only £100 per year - the landlord would have received a substantial windfall if relief was not granted as the property was valued between £275,000 to £300,000.
  • As the landlord had not taken any steps to re-let the property after the forfeiture,   there was no prejudice to the landlord or to any third parties.
  • The tenant was able to pay the arrears, interest and costs in full.
  • There was a reasonable explanation by the tenant for the delay - the director of the tenant company had been serving a prison sentence and he was also suffering from depression.

Whilst this case was decided on its own facts, it does highlight the wide discretion which the court has when considering applications for relief from forfeiture.  Although it is usually the case that such an application will fail if the tenant has not made it within six months, this case illustrates that the court will take into account all circumstances when exercising its discretion and that a long delay in applying may not necessarily mean failure.  Having said that, tenants who are seeking relief would be wise to apply without delay and, if at all possible, within six months from when the lease was forfeited.  

If you have any issues relating to leases then the Property Litigation Team at Blacks Solicitors are happy to help.  Please contact Luke Patel on 0113 227 9316 or email him at LPatel@LawBlacks.com.

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BLACKS SOLICITORS: The art of noise

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Leases will almost always contain a clause allowing the tenant “quiet enjoyment” of the premises.  Usually, they will also include a term permitting the landlord to carry out building works.  The recent decision of Timothy Taylor Limited v Mayfair House Corporation & Another explored the conflict between these two competing clauses.  

The tenant, Timothy Taylor Limited, operated a high end art gallery from the basement and ground floor of a premises in Mayfair, London.  The lease was for 20 years commencing in 2007 at an annual rent of £530,000.  From 2013 onwards, the landlord started substantial building works which involved completely rebuilding the interior from the first floor upwards.  Those works resulted in ongoing building noise and at the same time the entire building was surrounded with scaffolding.  

Understandably, the tenant complained.  It subsequently pursued court proceedings against the landlord arguing that its use and enjoyment of the premises was being substantially interfered with due to the high level of noise from the building works and the way the scaffolding and sheeting had been wrapped around the building, giving the appearance that the gallery was closed.  

The lease reserved the right of the landlord to erect scaffolding and to improve the building.  However, the Court found that the landlord had acted unreasonably in the exercise of that right and was in breach of the covenant to allow the tenant quiet enjoyment of the premises for the following reasons:

  • The landlord had failed to accommodate the tenant’s need to keep the gallery open, particularly as it was let at a substantial rent.
  • The landlord had refused to offer any form of discount for the disturbance being caused.
  • The design of the scaffolding ignored the tenant’s interest and unreasonably obstructed access to the gallery.
  • There was no prior consultation with the tenant about the building works, the noise levels, or how the landlord would mitigate the impact of that noise on the gallery.

The tenant claimed damages based on loss of profits for the period of the building works.  However, the Court instead chose to compensate it by allowing a 20% discount on its rent in respect of past breaches.  The Court did not believe it was practical to grant an injunction to have the scaffolding removed but instead decided that the tenant should continue to receive the discounted rent until the works were completed.  

This case highlights that even where a landlord expressly reserves a right in the lease to carry out substantial building works, it does not mean that it can disregard the tenant’s rights.  Any landlord contemplating building works should, firstly, check the lease carefully to see that it is permitted to carry out those works and, secondly, take steps to ensure that it is not breaching its obligations to its tenant.

If you are involved in any dispute concerning a lease then the Property Litigation Team at Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or email him at LPatel@LawBlacks.com.

 

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Addressee gone away

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Commercial leases usually contain a “break clause” which allows the tenant to terminate early.  To activate such a clause the tenant is required to provide the landlord with notice during a specified period in the lease and by a specific method.  Whether a “break notice” has been validly served is often the matter of dispute between the landlord and the tenant as there can be significant consequences for either by getting it wrong particularly where there is only a one-off right to break.

So it proved in the recently reported case of Levett-Dunn and Others v NHS Property Services Limited.  In this case there were four joint landlords and the tenant served break notices by recorded delivery on each of them at the address stated for the landlords in the lease.  The lease itself actually said that where the landlord comprised of more than one individual, service on any one of them would be deemed as service on all of them.  At the date the notices were served, one of the four landlords had ceased to be a landlord and the three remaining landlords were no longer at the address stated in the lease.  The question which the High Court had to decide was whether the break notices had been validly served.  

Under the Law of Property Act 1925, notices served on either party are validly served if they are left at “the last-known place of abode or business” of the receiving party.  The court found in favour of the tenant because the landlords’ “last-known place of abode or business” could reasonably be understood as being the address stated in the lease.  

The court held that it was the landlords’ responsibility to notify the tenant that the address had changed and if they failed to do so then they took the risk that notices and other correspondence would not reach them.  A tenant was under no obligation to check that a landlord’s address was still valid and a landlord has to provide clear notification to a tenant of a new address; correspondence from the landlord from a different address would not by itself constitute notification that it should be the address for future notices.  Landlords, it was held, should not be allowed to benefit from their own failings.  

This case serves as a warning to landlords to notify their tenants clearly of any change of address.  Failure to do so runs the risk of a break notice being validly served on them even though they may not actually have received it.  It is clear that the onus is on the landlord to update the tenant and not for the tenant to check whether his landlord’s address is current.

If you require advice in relation to a break clause in a lease or if you wish to apply for the renewal of a commercial lease then the Property Litigation Team at Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com

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Pound Land

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Under the Landlord & Tenant Act 1954, tenants of premises which are occupied for business purposes (as opposed to residential) are provided with a degree of security of tenure so that when the lease comes to an end they have a right to apply to the court for the grant of a new lease.  The landlord can only object to this request in certain specified circumstances, such as if he wishes to occupy the property for himself or if he requires the property back for development purposes.  

Usually lease renewals are concluded by agreement between the landlord and the tenant but some cases do end up in court.  That was the position in the case of Flanders Community Centre Limited v Newham London Borough Council, a case which was recently heard by the High Court.  

In that case the council did not oppose the tenant’s request for a new lease but the parties could not agree on the amount of the rent.  The original lease provided for a yearly rent of £1, conditional upon the tenant carrying out various repair works to the property.  On renewal the tenant argued that the rent should remain at £1 whereas the council wanted to increase it to £16,000 per annum.  Both sides submitted expert evidence to support their case.  

However, the trial judge found that the expert evidence put forward by both sides was inadequate and she felt unable to rely upon it; in particular, no evidence was given in relation to the terms of the comparable leases relied upon by the council’s expert so it was not known whether they contained any onerous requirements.  In the absence of reliable evidence of market rent, the trial judge relied on the current rent which both sides accepted was a relevant factor and she decided that the new rent should be £1 per annum.  The council appealed.  

The High Court refused to disturb the decision and said that the judge was entitled to have regard to the current rent and it was a matter for her to determine how much weight should be given to it.  Whilst the High Court said that the judge could have carried out her own analysis, she was not obliged to do so in the absence of any assistance from the parties.  The only tangible evidence before the judge was the current rent and in the absence of reliable expert evidence it was a matter for her to determine how relevant that should be.   

This case illustrates the importance of presenting clear, thorough and reliable expert evidence in lease renewal applications as judges do not have an expert knowledge of valuations.  If a party fails to do this then they risk their evidence being disregarded in its entirety, the consequence of which could be very expensive, as Newham Council discovered to its cost.  

At Blacks our specialist Property Litigation Team can assist with lease renewals.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@lawblacks.com”.

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What Constitutes Deliberate Non-Disclosure?

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Anybody buying an insurance policy owes a duty of the utmost good faith to the insurer both to disclose material facts and to avoid making any misrepresentations.  Breach of that duty can result in the insurer avoiding the policy even if the non-disclosure was not deliberate.  However, some policies limit the right of the insurer to avoid the policy to when the non-disclosure has been deliberate or fraudulent.  This was the situation in the case of Mutual Energy Ltd v Starr Underwriting Agents Ltd & Another, a case which was decided by the High Court last month.

In that case the insured, MEL, operated an undersea cable link between the electricity system of Scotland and Northern Ireland.  Five insurers (including the two defendants in the case) provided insurance cover against the risk of the connection failing.  Subsequently there were two separate cable failures resulting in a claim of over £41m by MEL.  Three of the insurers agreed to pay out on the claim but the other two refused on the grounds that there had been deliberate non-disclosure on the part of MEL, namely the failure to disclose previous cable failures.

The relevant clause within the insurance policy stated: “the Insurers agree not to ... avoid this insurance as against any ... claim ... unless deliberate or fraudulent non-disclosure or misrepresentation ... by that Insured is established”.  

The issue which the court had to decide was whether the reference in the insurance policy to “deliberate ... non-disclosure” meant that the contract could be avoided in circumstances where the insured had honestly but mistakenly decided not to disclose a particular document or fact; or whether, as MEL contended, the words meant that avoidance was only available if there had been a deliberate decision not to disclose a particular document or fact which MEL knew was material such that non-disclosure would involve an element of dishonesty.

The court took the view that commercial business sense dictated that the insured should be punished if it had behaved dishonestly but not if it had made an honest but deliberate mistake.  There had been an honest but mistaken decision by MEL not to disclose that there had been historic problems with the cables but that did not amount to it being deliberate or fraudulent.  “Deliberate” non-disclosure meant that MEL must have known what it was doing and therefore an element of dishonesty was required.  On the facts of the case, the judge decided that MEL had not behaved dishonestly and that there had been no deliberate non-disclosure.

This decision will be of comfort for insured parties but less so for insurers.  The insurers in this case were asking the court to interpret a wide meaning of the word “deliberate”.  Had the court had accepted their arguments so that “deliberate” included honest mistakes then it would have allowed insurers to avoid insurance policies for negligent non-disclosure.

If you are involved in any dispute with an insurer and require assistance then please contact Luke Patel at Blacks Solicitors on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

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BLACKS Solicitors: A gentleman’s agreement can be binding

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In English law informal oral agreements can be binding between parties if there is an “intention to create legal relations”.  This was the position in the case of Corporate Oil and Gas Limited -v- Marshall Aviation Services Limited which was decided by the High Court towards the end of last year.

The Claimant was the owner of a jet aircraft and it had engaged the Defendant to carry out maintenance and repair services in relation to it. The dispute arose as to whether the Defendant had adequately performed its obligations and whether the Claimant owed the Defendant any money for the work which had been carried out.

The Defendant claimed that a “gentleman’s agreement” had been reached at a meeting between the parties whereby a discount and a settlement amount for the work that had already been carried out by the Defendant was agreed by the parties.  The Claimant disputed this and argued that the agreement was subject to confirmation by its Chief Executive Officer (CEO) who was not present at the meeting.

The Court held that the “gentleman’s agreement” made between the parties was binding and the entire amount outstanding was payable by the Claimant; the Judge found that the agreement had not required confirmation from the Claimant’s CEO nor was it relevant that it was not confirmed in writing.

In deciding whether an oral contract is binding the Court will look at how, amongst other things, the parties have conducted themselves after any alleged agreement has been reached. In this particular case, after the meeting the Defendant had sent an email to the Claimant confirming the discount agreed and the Claimant had not rejected this, nor was there any request by it for clarification or continuation of negotiations in the weeks and months that followed. Had the Claimant told the Defendant that the agreement was “subject to CEO approval” then the Court would probably have concluded that there was no binding agreement in place.

This case highlights the willingness of the Courts to uphold informal agreements between parties which have not been recorded in writing, particularly in a commercial context where there is a greater likelihood of there being an intention to create legal relations.  If a party does not wish to be bound by any terms discussed during negotiations then it should make it clear that the negotiations are “subject to contract” or subject to any other condition.

At Blacks Solicitors, we can assist you with all aspects of contractual matters from drawing up a contract to dealing with any disputes arising from it.  If you require any advice in relation to such matters then please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.

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Beware of varying a contract

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A contract can be varied either orally or in writing.  However, most contracts will contain what’s called a variation clause which will specify that any variation will only be valid if it is in writing and signed by the parties.

In the case of C&S Associates UK Limited v Enterprise Insurance Company Plc which was heard by the High Court at the end of 2015 the Court had to decide, amongst other things,  whether an agreement had been effectively varied by email correspondence.

C&S Associates was a motor insurance claims handler who brought a claim for wrongful termination against the insurance company, Enterprise.

Initially C&S Associates and Enterprise were on good terms and there was an exchange of emails between them where C&S Associates sought to agree an increase in its fees and to vary the duration of the agreement.

However, the agreement between C&S Associates and Enterprise contained a clause which stated that:  “Any variation of this Agreement shall not be effective unless made in writing and signed by or on behalf of each of the Parties to this Agreement.”

Had the Agreement been varied by the email correspondence?

The Court found that the variation clause was intended to ensure that a party would not be bound by oral communications or informal written documents that were not signed.

However, it also decided that the clause did not require manuscript signatures, paper documents or both parties’ signatures to be on the same document and that an electronic signature such as an email auto-signature would be adequate.

Provided the emails could satisfy the other requirements of contract variation, such as an intention to be bound, then there would be a valid variation.

In this case, the Court found that objectively the parties clearly did intend to be bound by the exchange of emails, despite the fact that they also clearly contemplated that their agreement would subsequently be recorded in a formal contract.  Accordingly, the contract had been validly varied.

Given the extent to which business is carried out by email nowadays, even if there is a formal contract with a variation clause, an exchange of emails using email signatures can vary that contract.

If the parties wish to prevent this from occurring then the contract will need to stipulate specifically that any variation to the contract will only be effective if it is in writing and signed by the parties and that “in writing” does not include emails.

At Blacks, we can assist you with all aspects of contractual matters from drawing up the contract to enforcing it if there has been a breach.

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BLACKS SOLICITORS: A little help from my friends

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Legal disputes between neighbours frequently arise out of long-standing rivalries, moved boundaries, overhanging trees or loud music at antisocial hours, and are notorious for being fought with a bitter passion over matters that seem to be profoundly trivial to the impartial observer. Sometimes, though, such disputes can come out of a neighbour being too neighbourly. Going that extra mile for a friend can be a problem if it’s a mile in the wrong direction and a lack of a formal agreement between the parties doesn’t mean there is no legal responsibility. This is the strong message in the recent case of Burgess & Burgess v Lejonvarn decided earlier this year.

In this case, the parties were neighbours and Lejonvarn had provided architectural design services for the Burgess’s business on a professional basis on several previous occasions. Based on this, they accepted her offer to provide similar services informally and voluntarily for work on their own property when they decided to landscape their garden. Unfortunately, things went wrong and the Burgesses brought claims under both contract and tort.

Liability in UK law is divided into contractual and tortious claims. A contractual claim is based on a prior agreement under which both sides receive some manner of ‘consideration’ or benefit. A claim in tort, on the other hand, is based on the principle that everyone has a duty not to take action that would have a foreseeable negative consequence to others, whether or not they have an existing relationship with them.

Had the Burgesses engaged Lejonvarn with her professional hat on - to undertake the landscaping services in return for remuneration - her contractual liability would have been clear, and alleging the existence of such a contract was their first tactic when they brought the claim to court. However, the judge was unable to find sufficient evidence that any formal agreement had been entered into, or that Lejonvarn was intended to receive anything for her time, and rejected that part of the claim. (That Lejonvarn might have been paid for a later stage of the project was not enough to imply a contract.) Argument then turned to whether the provision of free advice and supervision left Lejonvarn open to tortious liability. Despite a number of arguments run by the defence, the judge found that the relationship between Lejonvarn and the Burgesses was sufficiently close to that of a professional and her clients to allow the Burgesses to succeed in their claim for losses arising from the work. Lejonvarn had “assumed responsibility” for the project, and was liable when it went wrong.

In the field of non-contractual relationships, Burgess v Lejonvarn is actually an extreme case – the project was planned out meticulously and there was considerable written evidence to suggest Lejonvarn was approaching it with a professional mindset. Where matters are muddier – such as where the party providing advice and services is not a professional in that line of work, but just an enthusiastic amateur, then the courts will likely have a difficult time deciding where to draw the line.

If you are involved in any dispute and require assistance then please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.

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BLACKS SOLICITORS: Restrictive Covenants Revisited

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Restrictive covenants are commonly used in employment contracts to control the activities of an employee during the course of his employment and post-employment.  For example, to prevent an employee from setting up in competition with the employer or going to work for a competitor.  However, they are also used in commercial agency agreements - agreements used when a business appoints an agent as an intermediary to negotiate and conclude contracts with customers on its behalf.   Typically the agent is paid a commission on any sales which are generated, usually on a percentage basis.

In the case of One Money Mail Limited v (1) Ria Financial Services (2) Sebastian Wasilewski which was heard by the Court of Appeal towards the end of last year, the Court explored the enforceability of restrictions applying during and after an agency period.  One Money Mail (“OMM”) and Ria Financial Services (“Ria”) were rivals in the money transfer services business.  OMM specialised in the Polish market whilst Ria operated worldwide.  Mr Wasilewski was OMM’s agent in Hereford.  He was unhappy working for OMM so approached Ria to become its agent.  However, Mr Wasilewski was subject to restrictive covenants prohibiting him from acting as an agent for any of OMM’s competitors within five miles of its place of business for a period of six months following termination.

The County Court found that the restrictions were too widely drawn to be enforceable, mainly because they were not accompanied by corresponding restraints upon OMM – it retained the right to appoint other agents within the area that Mr Wasilewski was operating and had in fact already done so.

However, the Court of Appeal disagreed and decided that the restrictions were reasonable and therefore enforceable because OMM had invested in Mr Wasilewski by training him and providing him with a certain level of technical support whilst acting as their agent.

Of particular interest in this case is that, although it was Mr Wasilewski who approached Ria about becoming their agent, OMM was successful with its claim against Ria because Ria had procured the breach of contract: it had been told by OMM of the restrictions within Mr Wasilewski’s contract but nevertheless still entered into a contract with him.  Had OMM not notified Ria of those restrictions then it is unlikely that its claim against Ria would have succeeded.

For OMM though, the result was not all good: although it succeeded in enforcing the restrictive covenants, it failed to recover any damages from Mr  Wasilewski or from Ria for the breach of contract because they were unable to quantify what financial loss they had suffered.

If you require advice regarding the enforceability or the drafting of an agency agreement or any other form of employment contract then please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.

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Costs can be recovered in the small claims court

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Where a claim is for a value of £10,000 or less it is typically allocated by the Court to what is known as the ‘small claims track’.  Within that track the ability of the successful party to recover its costs from the unsuccessful party is limited to court fees and witness expenses unless there has been a finding of unreasonable behaviour by the other party.  This means it is usually uneconomical for parties to obtain legal representation in such cases.   

However, the recent case of Chaplair Limited v Kumari highlights a way of recovering legal costs in circumstances where that is expressly provided for in a contract between the parties.  Chaplair, the Claimant landlord, brought court proceedings against its tenant, Mrs Kumari, in order to recover unpaid rent and service charges.   Although the proceedings were allocated to the small claims track, the Claimant argued that it was entitled to contractual costs under the lease pursuant to a provision that the tenant was to pay the landlord’s costs of various incurred expenses including legal fees.   

At the first instance, the District Judge held that the small claims costs rules applied and he limited the amount of the Claimant’s recoverable costs to £250.  On appeal to the County Court, the decision was reversed and the Circuit Judge allowed the Claimant to recover its costs on the basis that the costs rules did not apply because the costs were not payable under the Civil Procedure Rules but instead under the terms of the lease.  Mrs Kumari appealed to the Court of Appeal.

The Court of Appeal upheld the Circuit Judge’s decision and dismissed the appeal.  It found that the Court retains discretion as to whether to award contractual costs and that such costs were recoverable subject to the Court’s equitable power to disallow unreasonable expenses.

This case demonstrates that if contracts are properly drafted and claims are properly pleaded then there is a reasonable chance that costs may be recoverable even if the claim is a “small” claim.  A landlord with an appropriately worded lease now stands a much better chance of recovering contractual costs in the small claims track.  

This case will provide welcome assistance to parties who have so far been limited in recovering contractual costs in the small claims track, particularly since the limit on that track has been increased to £10,000.  

If you are involved in any dispute, contractual or otherwise, or if you require assistance with the drafting of a lease or any contractual documentation then please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.

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Everything’s coming up roses

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In the case of Interflora Inc & Another –v- Marks and Spencer plc and Another, M&S paid Google AdWords for advertisements for its flower delivery service displayed on the search engine results page when internet users searched for “interflora” and similar terms. This is known as keyword advertising. Interflora brought proceedings against M&S for infringing its trade marks.

The High Court proceedings were lengthy and required a reference to the European Court of Justice as to whether the use of a trademarked term as a keyword amounted to trademark infringement.

The ECJ concluded that if the national court decided that the use of the Interflora trade mark as a keyword led internet users to believe the service offered by M&S was part of the Interflora network, then the trade mark’s function in indicating origin would be damaged.

The High Court, using the criteria set down by the ECJ, found that M&S had infringed Interflora’s trade marks by using them as keywords. This was because the adverts did not enable the reasonably well informed and reasonably observant internet users to work out (or only with difficulty) if the service referred to in the adverts originated from the trade mark owner; a business connected to it; or a third party.

The High Court found that M&S had infringed Interflora’s trade mark because a significant proportion of consumers who searched for “interflora” and were presented with M&S’ adverts were wrongly led to believe that the M&S flower delivery service was part of the Interflora network.

The Judge found that internet users today were more likely to appreciate the distinction between natural search results and paid advertisements on Google’s search engine results pages, as opposed to back in 2008 which was the relevant time period in this case. Nevertheless, even now, a significant proportion of individuals would not appreciate that distinction.

The Judge was not satisfied that the public would be aware that M&S were not part of the Interflora network and indeed were in competition with it; there was nothing in the M&S adverts to inform the reader that M&S were not part of the Interflora network; and given the nature of the Interflora network, it would make it particularly difficult for an individual to determine whether M&S were part of that network or not in the absence of any indication in the advertisement. It was noted that a feature of the Interflora network was that members traded under their own names and had commercial tie-ups with several large retailers, including Tesco. This made it even more plausible that a connection existed between the two.

The Court made it clear that whilst M&S had infringed on the facts of this case, keyword advertising is not inherently or inevitably objectionable from a trade mark perspective. Rather, ECJ case law has recognised that the use of keyword advertising encourages competition.

We at Blacks deal with all aspects of Intellectual Property law, to include claims for Passing Off and Trademark Infringement.

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Face the Music

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The world’s largest social media network, Facebook, is suing leading global law firm DLA Piper (along with other law firms) who represented Paul Ceglia in a previous claim where he alleged he was entitled to an 84% share of Facebook.

Facebook was launched in February 2004 out of a Harvard University dorm room and is now worth over 200 billion dollars, has more than 1.3 billion users and the CEO, Mark Zuckerberg, is one of the richest people in the World. It is therefore not surprising that Mr Zuckerberg has found himself party to many lawsuits over the social network’s founding.

Convicted felon and fraudster Paul Ceglia brought a claim in 2010 alleging he owned an 84% stake in the company based on a contract prepared in 2003. However in April 2014, Ceglia was arrested by the FBI as they discovered the original contract had been contrived to include reference to ‘theFacebook.com’ (the company’s previous name) for the purposes of bringing a fraudulent claim. The original contract merely related to some web development for Zuckerberg on a separate project.

Although Ceglia’s claim was consequently dismissed, and a federal grand jury indicted Ceglia, Facebook are not willing to let matters lie. They now want to hold Ceglia’s lawyers accountable too.

Facebook have filed a lawsuit in New York alleging that DLA Piper, amongst others, conspired to bring the fraudulent lawsuit which was based on an implausible story and fabricated evidence in order to obtain a lucrative settlement against Facebook.

DLA Piper, who were only involved in the 4 year litigation for only 78 days, are not taking these allegations lying down. DLA’s Spokesperson emphasised that,

“This is an entirely baseless lawsuit that has been filed as a tactic to intimidate lawyers from litigation against Facebook.”

The crux of the claim rests on whether Ceglia’s previous legal representatives, Kasowitz Benson, who allegedly discovered the fraud, informed the other lawyers acting for Ceglia (including DLA Piper) of the likely fraud, but continued to pursue the matter regardless. Kasowitz Benson however ceased to act.

DLA Piper, along with other law firms did later withdraw from the case but never disclosed why. Indeed, they may not have been able to disclose their reasons due to their duty of confidentiality owed to Ceglia and the rules relating to attorney-client privilege in the US. However as officers of the Court they are under a duty to disclose information to prevent a crime, or a fraud.

The claim questions the ethical standards of the lawyers involved and will indeed raise issues of legal privilege. Facebook may have taken the world of social media by storm but can a powerful corporate adversary threaten the practices of legal attorneys? One thing is for certain, it will make lawyers think twice about bringing dubious cases and given the reaction of DLA Piper it may be a long time until this matter is laid to rest.

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The Speed of Sound

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In a previous article we looked at the case of Lawrence –v- Fen Tigers Ltd & Others, concerning noise nuisance. The decision has recently been overturned by the Supreme Court in the appeal case of Coventry –v- Lawrence.

A claim for nuisance arises where there is a continuous, unlawful and indirect interference with a person’s enjoyment of land or his rights over it. In this case, the Defendants owned a sports complex comprising of a stadium used for speedway and stock car racing and a track used for motocross racing. The Claimants purchased land nearby and alleged that the use of the track and stadium generated noise amounting to a nuisance.

The Defendants had obtained a certificate of lawful use for the stadium meaning that the stock car racing was considered lawful. They had also obtained planning permission for the track, which included restrictions on days and times of use and levels of noise. The Claimants alleged that they had not been aware of the various forms of motor sport that took place at the sports complex and brought a claim in nuisance.

The Defendants denied that a nuisance existed and stated that they had taken steps to minimise any noise by erecting sound barriers. The High Court ruled that the activities had constituted a nuisance and granted an Injunction.

The Defendants appealed to the Court of Appeal on the basis that the High Court had failed to take into account the planning permissions which had been granted and the fact that the implementation of those permissions had changed the character of the locality. The Court of Appeal agreed and held that whilst a planning authority could not authorise the commission of a nuisance, the implementation of planning permission could change the character of the locality. Accordingly, the Defendants had not caused a nuisance.

The Supreme Court has now overturned that decision and reinstated the Injunction. The Court found that it is possible to obtain an easement to commit what would otherwise be a noise nuisance, albeit that in this case such a right had not been acquired. In order to establish a prescriptive right, it would be necessary for a party to demonstrate that it has generated noise amounting to nuisance for a minimum 20 year period prior to any objection being made by the neighbouring owner.

The Court confirmed that it is no defence to a claim in nuisance to argue that the Claimant commenced occupation of its property after the nuisance had begun (in other words, that the Claimant ‘came to the nuisance’) where the Claimant’s property was being used for substantially the same purpose as it had been by its previous owners. Such an argument may be more successful if for example a Claimant’s property had been modified in such a way that it was only after that modification that the activity became a nuisance.

Finally, the Court confirmed that a Defendant’s use of land can be taken into account when assessing the character of the locality, but only insofar as it is not a nuisance. It will not normally assist a Defendant to argue that they have planning permission to carry out the activity.

Luke Patel

Luke Patel

We at Blacks can advise and assist with the obtaining of Injunctions for a variety of issues, to include claims in nuisance.

Please contact Luke Patel
on 0113 227 9316
or by email at LPatel@LawBlacks.com

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Not for Prophet

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Employers can protect their business from ex-employees by including restrictive covenants within their contracts of employment.  Such covenants have to be very carefully drafted for them to be enforceable because for an employer to be able to rely on a restrictive covenant, the covenant cannot go any further than what is reasonable to protect the employer’s legitimate business interest.  The covenant would usually have to be limited in its duration, scope and the geographical area which it covered.  Even if the restrictive covenant is clear, it may still be struck out if the Court is of the view that the restriction is too onerous.  

It has usually been the case that, where possible, the Court would simply strike out an offending clause to make the covenant more reasonable rather than re-write the wording.  This has meant that employers have been unable to enforce badly drafted restrictive covenants to protect their business interests when a key employee has left.

However, the recently reported case of Prophet Plc –v- Huggett is a surprising exception to this rule.

Mr Huggett was the UK Sales Manager for Prophet Plc, a software developer for the fresh produce industry.  He resigned to join K3 Business Solutions Limited, one of Prophet’s direct competitors.  Prophet sought an Injunction to prevent Mr Huggett from starting work with K3 on the basis that his employment contract contained a “non-compete” covenant preventing him from selling any products which he was involved with during his employment with Prophet for a period of twelve months following the termination of his employment with them.

The High Court found that there had been an error in the drafting of that covenant in that if read literally, it was ineffective to protect Prophet because none of its competitors would actually sell Prophet’s products and those were the only products which Mr Huggett would have been involved with during his employment with Prophet.

However and very surprisingly, the Court found that the intention behind the covenant had clearly been to prevent Mr Huggett from selling products similar to those of Prophet and to make the covenant effective it added the words “or similar thereto” to the restrictive covenant.  The Court found that the covenant as re-drafted was enforceable and therefore granted Prophet the Injunction it was seeking.

While it is common for Court to delete unenforceable parts of a covenant, this decision is highly unusual in that the Court added words to make it commercially effective and enforceable.

However, it should be noted that in this case the Judge found Mr Huggett to be a “thoroughly unreliable witness” and this appears to have influenced his decision.  Had Mr Huggett been a more credible witness then Prophet could well have found that they were unable to enforce the restrictive covenants in Mr Huggett’s employment contract.

This case demonstrates the wide discretion which the Courts have when considering the enforceability of restrictive covenants. However, this is a highly unusual case and is contrary to the usual principle that the Court will not re-write the contract for the parties.  It is unlikely that this case represents a fundamental change in the approach by the Court and employers should continue to ensure that the restrictions contained in employment contracts are properly drafted and if employees change roles or are promoted those restrictions are updated accordingly.

We at Blacks deal with the drafting of employment contracts, to include restrictive covenants, and any disputes arising therefrom.

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Please contact Luke Patel
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or by email at LPatel@LawBlacks.com

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Back in the race

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The British Association of Physicians of Indian Origin (Bapio) has this week been unsuccessful in its Judicial Review claim against the Royal College of General Practitioners (RCGP) and the General Medical Council (GMC), the doctors' regulatory body. Racial discrimination allegations sparked the Judicial Review claim in the Royal Courts of Justice in London.

Bapio began its legal battle against the RCGP and the GMC due to claims that the RCGP’s membership exam, the MRCGP, which doctors must pass to practise as a GP in the UK, discriminates against ethnic minority candidates.

Bapio’s allegations against the RCGP (which conducts the exam) and the GMC (which is accountable for ensuring a fair process), included evidence that white candidates are four times more likely to pass the exam first time than minority ethnic candidates trained in the UK, and 14 times more likely than candidates trained overseas. Particular emphasis was drawn to the Clinical Skills Assessment (CSA), where students are examined on their ability to demonstrate effective communication with patients and colleagues.

At the Judicial Review hearing, Mr Justice Mitting rejected the claim by Bapio that the CSA should be declared unlawful. He found that the RCGP was neither racially discriminatory nor in breach of its public sector equality duty.

Mr Justice Mitting said the claim had been brought in good faith and in the public interest. He then expressed hope that the case would lead to progress: "the bringing of this claim is likely, in the end, to bring something of benefit to the medical profession." Mr Justice Mitting found that there was a disparity in results between different ethnic groups and stated that the RCGP must take action. He then expressed words of warning: "If it does not act and its failure to act is the subject of a further challenge in the future, it may well be that it will be held to have breached its duty," he said. "But, as of now, I am satisfied that it's not in breach of its duty."

Mr Justice Mitting concluded by describing the outcome for Bapio as "if not a legal victory then a moral success".

Bapio president Dr Ramesh Mehta expressed hope in the judge’s remarks:

"Although we may have lost the battle at this time, we feel we have won the war because the
Judge has also said to the RCGP that they must now take action".

Whilst Bapio is undoubtedly disappointed with the judgment it seems that there could be a brighter future ahead for those ethnic minorities due to sit the examination. Mr Justice Mitting’s judgment could be seen as an invitation for Bapio to initiate further Judicial Review proceedings should the RCGP fail to take action to reduce the disparity in the results of the examination. This would not have been achieved without Bapio’s Judicial Review claim.

We at Blacks have experience in handling Judicial Review proceedings and Medical Practice Law.

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Please contact Luke Patel
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or by email at LPatel@LawBlacks.com

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Whistle while you work

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The case of Clyde & Co LLP and Morris -v- Van Winkelhof considers the important question of whether or not a member of a limited liability partnership (“LLP”) can be a worker within the meaning of the Employment Rights Act 1996.

The Claimant in this case, Mrs Van Winkelhof, was a member of the law firm Clyde & Co. Upon joining Clyde & Co, the Claimant signed a Deed of Adherence stating that she would devote her full time and attention to the business and would be faithful to the partnership.

It is common ground in the claim that the Claimant was recruited into Clyde & Co as a result of her favourable connections in the African legal market. Therefore, following her recruitment into Clyde & Co, she worked predominately in Tanzania in order to maintain her relationship with Ako Law, a Tanzanian law firm, which then became an associate firm of Clyde & Co.

On 23 November 2010 the Claimant alleged that the Managing Partner of Ako Law was accepting bribes to secure work and control the outcome of cases and also that he was engaged in money laundering.

Two days after the above report was made, the Claimant was dismissed from Ako Law. The following day she was suspended from Clyde & Co and was later dismissed on 13 January 2011. She alleged her dismissal was unfair on two grounds:

1. She was being subjected to detrimental treatment as a result of making a protected disclosure regarding the activities of the Managing Partner of Ako Law. In other words she had ‘blown the whistle’ on unacceptable conduct and was dismissed as a result; and

2. She was subject to unlawful sex discrimination as a male partner would not have been treated the same way and/or that her dismissal related to the fact that she had recently told Clyde & Co that she was pregnant.

The claim is hotly contested by Clyde & Co, who allege that Mrs Van Winkelhof is not a ‘worker’ within the meaning of the Employment Rights Act 1996. She cannot therefore rely on the ‘whistle blowing’ legislation which is designed to afford protection to workers.

At the first Hearing the Employment Tribunal held that the Claimant was not a worker and was not therefore able to pursue her claim for whistle blowing. However, the Employment Appeal Tribunal reversed that decision on the basis that the Claimant held a subordinate position in the firm. The Court of Appeal disagreed and ruled that the Claimant was not a worker.

The Claimant was granted permission to appeal to the Supreme Court and the decision is currently awaited. The Claimant’s argument is that a member of an LLP should be a worker to allow them to make disclosures about unacceptable conduct without fear of reprisal. If the Supreme Court agrees the case will be remitted to the Employment Tribunal to be heard again.

We at Blacks can provide assistance on all types of employment disputes. We would encourage you to seek legal assistance as soon as possible if you feel you have been unfairly dismissed.

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Please contact Luke Patel
on 0113 227 9316
or by email at LPatel@LawBlacks.com

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