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Corporate Services Team – Spring Seminar – 8th May 2014


Finding Solutions to Everyday Business Problems

Corporate Services Seminar - Invite - 8th May 2014

Corporate Services Seminar – Invite – 8th May 2014

 

 

Written by Herbert Bosin

March 27th, 2014 at 5:03 pm

Posted in News,Seminars

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Top Ten Tips for Businesses On How To Deal With Commercial Disputes


Paul Trincas

Paul Trincas

Dealing with a commercial dispute can significantly disrupt the smooth flow of a business. Paul Trincas, corporate services lawyer with Charles Lucas & Marshall gives his top ten tips on how best to handle them. 

It is a fact of life that, from time to time, a business will be faced with having to deal with some form of commercial dispute.

It can be expensive – not forgetting the soft costs of wasted manpower time – as well as the hard costs such as lawyer’s fees and other costs which might arise if the dispute is not resolved in the business’ favour.

Having specialised in the area of commercial disputes over many years, here are my top 10 tips on managing them: 

1. Do not ignore the fact that a commercial dispute has arisen.

2. Don’t let the dispute fester.

3. Don’t put the dispute on the ‘back-burner’ in the hope that it will simply go away.

4. Face up to the dispute head on at an early stage as this may very well help ‘nip it in the bud’.

5. Engage in early dialogue with a view to resolving the dispute. Time and again, I deal with clients who have simply not bothered to speak to the other side, with the result that this simply adds to the problem, and a dispute which could have been resolved with early dialogue, drags on, often, unnecessarily.

6. If early dialogue does not resolve matters, then you may need to seek legal advice. If so, seeking legal advice at an early stage can pay dividends. A lawyer, entering the forum afresh and unbiased, may see ways in which the dispute can be resolved without proceeding any further.

7. If you do need to seek legal advice, then preparation, in advance, for the lawyer, of a bundle or file of relevant documents in strict chronological date order, can save an enormous amount of time and money. There have been too many occasions to mention when I have received a file of papers from a client with papers jumbled up and out of order. This means I have to make sense of them, sometimes at a significant cost to the client, before I can even embark on a consideration of the factual and legal issues involved.

8. If the commercial dispute does end up in court, then it is paramount that you, as the client. comply with all deadlines set, as failure to do so can nowadays have serious consequences to the proper conduct of your case, not to mention potentially serious adverse cost consequences.

9. If some form of alternative dispute resolution is offered in an attempt to resolve matters, then do not turn down such an opportunity, no matter how strong you may feel your case is. Statistics show that some 80 per cent of cases that proceed to some form of dispute resolution are successful in resolving the dispute.

10. Always be aware and mindful of the fact that no matter how strong you may feel your case is, if the matter ends up in court it is not your view that counts, but the view of the judge, who may not agree with your assessment.

For further information contact Paul Trincas on 01635 521212 or paul.trincas@clmlaw.co.uk

Written by Paul Trincas

January 9th, 2014 at 8:30 pm

Directors’ Guarantees – A Warning


In today’s current climate when a company is able to secure bank lending, it is common practice for the bank to ask for a personal guarantee from directors. Rupert Wright, a corporate services specialist with law firm Charles Lucas & Marshall, explains the implications of signing a personal guarantee.

A Court of Appeal decision earlier this year should act as a warning to directors who sign personal guarantees.

The Court of Appeal ruled that a director was liable for more than £330,000 almost seven years after he had resigned from the company. The lender provided the company with a significant amount of credit. After the company fell into arrears, the lender sought personal guarantees from the directors which they at first declined to give. When the lender threatened to withdraw the company’s credit, the directors signed a written guarantee giving rise to joint and several liability for all sums due to the society by the company. At the time of signing, the personal guarantee was limited to £200,000.

In 2006 when the director resigned as one of the directors of the company and sold his shareholding, the company’s debt to the lender stood at approximately £400,000. This increased so that at the time when the company ceased to trade, the debt to the lender had increased to £700,000.

The director challenged the lower court ruling on a range of issues, but the court held in favour of the lender.

The case illustrated that the courts will look at the wording of a document and if it is clearly an all monies type of guarantee, the credit limit can be varied and the director’s liability would not be limited to the credit limit at the time the guarantee was given or the limit in place when they resigned from the company. Directors when resigning from a company should ensure that they secure their release from any personal guarantee given, or at the very least, seek an indemnity from remaining directors.

Generally directors should seek legal advice when committing themselves to guarantees, particularly when guaranteeing someone else’s debt. They need to know if the person asking for the guarantee has the ability to service and repay the loan. They need to check this person’s credit history and they need to be sure that this person can meet all the borrower’s obligations.

Also, the guarantor should note that generally lenders are not obliged to notify guarantors of a borrower’s financial difficulty. In fact, the bank would be in breach of its duty of confidentiality to the borrower if it did so.

Guarantors should also note the bank does not have to pursue the borrower for the debt. Once the borrower is in default, the bank has a right to pursue the guarantor. If more than one guarantor has guaranteed the borrower’s debts the bank can choose who to pursue.

In summary, it is vital that legal advice should be sought at all times before directors enter into guarantees so that they are aware of its implications.

For further information contact Rupert Wright on 01635 521212 or rupert.wright@clmlaw.co.uk

 

 

Written by Rupert Wright

January 9th, 2014 at 8:20 pm

Posted in Banks,Debt

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Can Tenants Withhold Rent?


James Woodhouse, a litigation specialist with law firm, Charles Lucas & Marshall, asks if tenants in residential property can withhold rent if their landlord is in breach of repair obligations? 

James Woodhouse

James Woodhouse

This is an area of some complexity and both tenants and landlords should take advice as to firstly, whether the landlord is in breach of its repair obligations and secondly, remedies which might available to the tenant.

Much will depend on the facts of each case, including the terms of the tenancy agreement and the nature of disrepair.

If the landlord is in breach of its repair obligation (which in itself might be in dispute) the tenant will have an action in breach of covenant. As in any claim for damages, thought will need to be given to the proper value of the tenant’s claim. In the first instance, the tenant should expect re-dress for the fact that – whilst the property is in disrepair – he is not getting proper value for the rent he is paying.

The tenant has two options: to continue to pay rent in full and pursue the landlord separately for damages or exercise a right of set-off, by withholding rent against the tenant’s disrepair claim.

The second option might appear the more attractive, as it puts the landlord under pressure to complete the repairs sooner rather than later.

Scenario One: Landlord agrees to accept reduced amount of rent whilst repairs remain outstanding – this is the ideal outcom, but the agreement should be properly recorded.

Scenario Two: Landlord insists, that despite the disrepair, rent still be paid in full – the tenant’s only option here is to withhold rent regardless and rely upon a right of set-off when responding to the landlord’s claim for rent arrears / possession.

Many tenancy agreements will attempt to exclude the tenant’s right of set-off, by requiring the tenant to pay rent ‘without deductions’. That form of wording in itself might be too imprecise to prevent the tenant exercising a right of set-off.

Further, a provision which requires the tenant to pay rent free of deductions might fall foul of consumer protection laws.

The tenant will of course need to decide how much rent it should withhold. This involves the tenant effectively attempting a valuation exercise. There is no guarantee that the Court will agree with the tenant’s assessment.

The first option suggested above (continuing to pay rent in full and pursuing a damages claim separately) involves the tenant bringing the action, rather than wilfully defaulting on rent and then responding to the landlord’s claim. The tenant avoids the two issues identified above: establishing a right of set-off and calculating how much rent to withhold.

For further information please contact James Woodhouse on 01635 521212 or james.woodhouse@clmlaw.co.uk.

Written by James Woodhouse

November 13th, 2013 at 11:49 pm

When Is A Company Insolvent


In the current economic climate, directors must be careful to check the solvency position of their company, says Rupert Wright, a corporate services lawyer with Charles Lucas & Marshall. 

In the event that a company later goes into liquidation, a liquidator can argue that a dividend payment made to a shareholder of the company could constitute an unlawful dividend which they could recover.

Rupert Wright

Rupert Wright

Also, if a director’s loan is repaid at the time the company was insolvent, this could constitute an unlawful preference and the liquidator might be entitled to recover this, depending upon the solvency position of the company.

Under the Insolvency Act, a company is deemed to be unable to pay its debts if the company is unable to pay its debts as and when they fall due -  and also if the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.

The first factor is the so called cashflow test and the second consideration is the balance sheet test.  A recent Supreme Court decision which related to Eurosail-UK concerned the interpretation of what constitutes balance sheet insolvency and in this context, the treatment of contingent and prospective liabilities.

Eurosail was set up in 2007 by Lehman Brothers which purchased a portfolio involving sub-prime mortgage loans secured on UK residential property.

As a result of the collapse of the swap agreements with Lehmans and the accounting standards to which Eurosail’s accounts were prepared, there was a deficit shown on its balance sheet.  Therefore, the question was whether this balance sheet in fact reflected the commercial outcome for creditors.

The liquidators applied to the Court for a ruling as to whether Eurosail could be considered to be unable to pay its debts and therefore whether it could be placed into liquidation, notwithstanding that the principal amounts under the loan were not yet due and payable.

The Supreme Court upheld the Court of Appeal’s Decision that the values on the balance sheet must involve consideration of the relevant facts of the case including when the prospective liability fell due.  Therefore, they did not consider that Eurosail could be considered to be insolvent.

This case shows the importance of the commercial context and reality of a company’s financial position in making an assessment as to whether a company is balance sheet insolvent.

Contingent and future liabilities should be considered in all the commercial circumstances of the case.  The larger, closer and more likely the contingency is, the more likely it is that the company will be deemed insolvent.  However, such assessment will always be dependent on all the circumstances of the case and legal advice should always be sought.

For further information contact Rupert Wright on 01635 521212 or rupert.wright@clmlaw.co.uk

 

Written by Rupert Wright

August 19th, 2013 at 1:33 pm

Posted in Business Debts,Insolvency

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Business debts: “To Sue Or Not To Sue – That Is The Question”


Paul Trincas, a litigation specialist at law firm, Charles Lucas & Marshall weighs up how far a business should go to recover money it is owed.

Paul Trincas

Paul Trincas

Very often, the first, and perhaps most natural reaction for a business owner faced with a customer or client who has failed to pay without good reason, is to sue for the monies owed.

However, to implement that initial reaction is not as easy or straightforward as you think it might be. Several business and economic factors need to be weighed in the balance before making the decision to sue.

Is there an on-going commercial relationship to maintain ?

It may well be that the monies owed are small compared to the overall gain to be

achieved by not pursuing it through the courts and securing future business worth significantly more, in financial terms, than the current sum owed.

Is the amount worth suing for ?

If the amount is of any significance, and all other measures to secure payment have failed, then it may well be worth suing through the courts. If you succeed in your claim, you would also be entitled to seek payment of your legal costs.

However, where the sum involved is £5,000 or less, then this will constitute a ‘small claim’, where normal costs rules do not apply. Instead, in such cases, the costs rule, subject to very limited exceptions, is that each party, win or lose, will have to pay its own costs. All the successful creditor will be able to recover are the court fee and limited fixed costs. This means that for lesser value claims, the whole exercise is not economically viable.

Will you actually get paid ?

Having succeeded in the action, you will get a Judgment, effectively ordering the customer or client to pay the money. But what if the client or customer does not pay? In this scenario, there is no magical formula for securing payment of your money. The client or customer will not go to prison for defaulting on payment on the Judgment as this is a civil debt and not a criminal matter.

You as the business owner, will then have to go back to court in order to enforce the Judgment debt in the most appropriate method, given the financial circumstances of your customer or client. However, further costs will be incurred in the enforcement process, and, you will only be able to recover limited fixed costs – normally a fraction of the total costs incurred in the enforcement process.

You can contact Paul Trincas on 01635 521212 or paul.trincas@clmlaw.co.uk

Written by Paul Trincas

August 16th, 2013 at 4:09 pm

DIY Commercial Litigation – A False Economy?


James Woodhouse, a litigation specialist with law firm, Charles Lucas & Marshall, explains why it pays to use a lawyer in commercial disputes.

James Woodhouse

James Woodhouse

Many businesses are reluctant to instruct solicitors in commercial disputes because they are concerned about the financial implications. Increasingly businesses are resorting to DIY litigation which often costs them more in the long run. This is because people underestimate just how much work is involved running a civil action and how complicated matters can become.

Here are a few examples of the advantages of using a lawyer to represent you in disputes of a certain size:

Stating your Case: At the outset of any commercial litigation, each party will be required to state their case in pleadings. Quite often litigants in person struggle to set out their position clearly. This results from ignorance of the law and / or lack of expertise and experience in legal drafting. In many cases the judge will have already formed a view based on the paperwork alone before the trial has even begun. A defendant may have the best defence in the world, but if his statement of case goes on for pages, is poorly structured and fails to adequately explain why the claimant is wrong, he has already shot himself in the foot.

Procedural Matters: The rules that govern how the civil court system operates are set out in the Civil Procedures Rules. It follows that if a litigant in person is up against an opponent solicitor or barrister well versed in procedural matters he can easily become unstuck and feel intimidated. Cost penalties might result from failure to comply properly with court directions.

Objectivity: It is all too easy to become emotionally embroiled in a commercial dispute. Whether the dispute in question involves a debt, or a claim for damages, businesses of all sizes resent having to chase payment. Hard feelings can result from the breakdown of any business relationship, which can cloud judgement. A competent lawyer should be able to take an impartial view of prospects, determine the commercial reality of the situation and advise his client accordingly.

Technical Expertise: Whilst the Internet contains a wealth of information about the law, there is no substitute for a proper training and experience. Commercial litigation can and often does result from the most basic of disputes. However, the potential for complicated legal issues to arise out of what appear to be the simplest of circumstances should not be underestimated.

Getting the Best Result: One of the most challenging aspects of litigation is addressing the issue of remedy. The legal principles in a claim for damages (as opposed to a simple debt claim) need to be fully considered before calculating the likely value of any claim. Although the tendency for the uninitiated is to over-value claims (which will not impress the court), in some circumstances litigants will find themselves claiming a sum of money less than their proper entitlement.

Generally, solicitors are keen to promote to their clients the benefits of trying to settle. Doing so is preferable to bearing the litigation risks and expense of trial. If by seeking legal representation a dispute settles in the early stages of litigation costs might be kept to a manageable level.

For further information please contact James Woodhouse on 01635 521212 or james.woodhouse@clmlaw.co.uk.

 

Written by James Woodhouse

August 16th, 2013 at 2:53 pm

Case Report on Human Rights / Employment Law Issues: Eweida and Others v the United Kingdom (judgment 15 January 2013)


Case Report on Human Rights / Employment Law Issues:  Eweida and Others v the United Kingdom (judgment 15 January 2013)

We live in an age in which the principles of diversity and equality are supposedly held sacred.  The European Convention on Human Rights requires the UK to uphold basic human rights and at the same time prevent certain classes of people (e.g. religious groups) suffering discrimination.  Domestic legislation also promotes equality in the workplace.  Difficulties arise when certain members of religious groups claim exemptions from rules imposed upon them by their employment on the basis that those rules offend their religious beliefs.  Often the right to express those religious beliefs will need to be balanced against competing considerations.

In Eweida and Others -v- the UK the European Court of Human Rights had to decide whether domestic UK law had failed to protect the applicants’ right to religious freedom.  There were four applicants in this case and their complaints arose out of their employment:

1.         Ms Eweida had, for a period, remained away from work whilst her employer, British    Airways PLC, prevented her from displaying a cross on her necklace whilst performing a customer facing role.  Following media pressure, British Airways PLC soon reversed this policy, but Ms Eweida was not paid salary for her time off.  The UK courts had declined to uphold Ms Eweida’s claim for indirect discrimination.

2.         Ms Chaplin’s complaint also related to her employer’s refusal to permit her to display a cross whilst performing nursing duties.  Ms Chaplin’s was employed by a    health authority, which had argued its defence successfully on the basis that its decision was justified by health and safety considerations.

3.         Ms Ladele was employed by the London Borough of Islington as a Register of Births, Marriages and Deaths.  This applicant was demoted after refusing to officiate at ceremonies involving two people of the same sex when the law was changed to allow civil partnerships.  Ms Ladele’s objection to doing so was influenced by her religious belief that same-sex civil partnerships were contrary to God’s law.  Her claim for indirect discrimination had been unsuccessful in the UK courts because her right to religious freedom could not override the local authority’s duty to its homosexual community.

4.         Mr McFarlane was dismissed from his job with a counselling service provider due to    concerns he had expressed in relation to providing psycho-sexual therapy to same sex couples (on religious grounds).  Again the UK courts had found for the employer, which had been entitled to refuse to accommodate Mr McFarlane’s religious views where they had contradicted its Equal Opportunities Policy.

It is clear from its judgment that the European Court of Human Rights had to weigh up various considerations in deciding this case.  In the second complaint above, one of the principle issues was whether it was right that health and safety considerations had taken priority over the applicant’s right to display a cross (which the Court decided had been a valid manifestation of Ms Chaplin’s faith).  In the third and fourth complaints above, the competing considerations were rights enshrined within the Convention itself: the right for certain classes of people (here homosexual people) to be treated fairly and equally.

In all but the first complaint, the European Court of Human Rights dismissed the applicants’ claims for violation of their human rights.  It is submitted that Ms Eweida’s complaint may have had better prospects of success, because here the competing consideration had been the preservation of British Airway’s corporate image, which the Court might have viewed as rather less important than principles of health and safety / sexual orientation rights.  The Court decided that when balancing “competing rights” national authorities should be permitted a margin of appreciation.  That margin had not been exceeded in the remaining three complaints.

The outcome of this case might be viewed as a victory for employers concerned about staff members flouting the rules on the basis of religious freedom.  Nevertheless, employers need to tread carefully around issues of religious sensibility.  In some cases an employer will be able to justify discriminatory treatment by showing that its actions were “a proportionate means of achieving a legitimate aim”.  Otherwise, religious groups are going to be keen to capitalise on the Eweida decision to crack down on religious intolerance by employers.

For further information please contact James Woodhouse on 01635 521212 or james.woodhouse@clmlaw.co.uk.

Written by James Woodhouse

January 17th, 2013 at 4:49 pm

Posted in Human Rights

Tagged with ,

Are Associates Self-Employed?


The dental industry treats Associates as self-employed freeing the employer dentists from much employment legislation and responsibility for tax and pay as you earn. The position also seems to have been accepted by HMRC. That is not a problem where the Associate is working for more than one dentist. Such Associate is self-employed.

But what if and there is always a “what if” the Associate is working only for one dentist either full time or on a part time basis? That scenario has always seemed to me to mean that the Associate is employed. That is whether or not the Associate is working under a BDA Contract. If the Associate is an employee, then the employer dentist becomes caught by employment legislation including such things as unfair dismissal or redundancy and has liability for the payment of the tax on the earnings of the Associate and the payment of NI contributions.

There is also a hidden problem when the dentist sells his business. The warranties which are incorporated in any Sale and Purchase Agreement refer to employees from which Associates are excluded. “So what?” you may ask, to which I answer “the warranties are placed in a Sale and Purchase Agreement so that if they are inaccurate the purchaser can claim damages against the selling dentist”. Even if the selling dentist’s solicitors knows his job and limits such liability under warranties, claims can arise. The selling dentist does not want to find that he thought his sale proceeds would enable him to sail into the sunset but because of a warranty claim resulting in damages instead of sailing into the sunset he can only afford a small rowboat and has to row into the sunset.

Why am I raising this now? Because I have heard that HMRC are about to start investigations into dentists in Northern Ireland as to whether Associates are Associates or employees. It is amazing what the Government will do to find cash. If Northern Ireland is to go under the microscope then the rest of the UK is sure to follow.

You can contact Hugh Ellins on 01793 511055 or hugh.ellins@clmlaw.co.uk

Charles Lucas & Marshall – Legal Services for Dentists.

Written by Hugh Ellins

January 17th, 2013 at 4:06 pm

Lawyers Call for Reduction in Red Tape


Thames Valley lawyers, Charles Lucas & Marshall say small businesses are spending too much time on administration and feel swamped by the volume of regulations they have to comply with.

Rupert Wright

Rupert Wright

Rupert Wright, a corporate lawyer at Charles Lucas & Marshall, says the over-riding and consistent message from small to medium sized business clients, is that they feel overwhelmed by a ‘compliance-led’ environment which consumes too much of their time.

“More businesses feel under pressure to appoint compliance officers or add to their administrative capacity – and yet these are not productive roles,” says Rupert Wright. “There are so many hoops businesses have to jump through which are a distraction from their main business.”

In recent years, businesses have had to accommodate legislation in areas such as employment, the environment and health and safety. This has created growing pressure with businesses often feeling they do not have the resources to deal with the quantity of regulation.

“Appointing people to deal with responsibilities in these areas is expensive,” added Rupert Wright. “Often they are appointments at a senior level and remuneration has to reflect this.

“As lawyers we can hold our clients’ hands to some extent and yes, there will be fees involved, but it is invariably more cost effective than appointing full-time personnel.”

For further information contact Rupert Wright on 01635 521212 or rupert.wright@clmlaw.co.uk

Written by Rupert Wright

January 17th, 2013 at 11:01 am

Posted in News

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