Cap On Damages Amounts To Informed Consent

Cap On Damages Amounts To Informed Consent

Capping the amount a solicitor can take from a client’s damages is enough to show that the client gave ‘informed consent’ to the deduction, the High Court has ruled in a judgment affecting 400 conditional fee agreements.

In Swann v Slater & Gordon, District Judge Rouine sitting in the High Court in Birmingham also held that no fiduciary duty could arise during the process of negotiating a retainer.

Regional costs judge Rouine was tasked with dealing with more than 400 ‘solicitor and own client’ costs assessments being brought against national firm Slater and Gordon. Swann was the lead case, with the judge asked to determine a number of preliminary issues to then be applied to the wider caseload. In an order dated 12 March he found in favour of Slater and Gordon on all points before him.

Each retainer contained a provision capping the client’s potential liability at 25% of their damages. DJ Rouine said the existence of this cap had a ‘magnetic attraction’ in terms of informed consent.

He added: ‘Being told that there is a cap, and what that cap might be, is more than sufficient information… for the purposes of obtaining informed consent from a client for deductions to be made from their award of damages.’

DJ Rouine said it would be an ‘impossible task’ for a solicitor to ‘provide a client with specific advice as to every scenario and every level of damages which might be awarded and the impact that such an award would have on the sums which the solicitors say could be deducted from the award of damages.’

He added: ‘The realistic and pragmatic approach… is for the client to be made aware of their potential maximum exposure to a deduction from damages.’

DJ Rouine also considered whether any breach of fiduciary duty could have occurred in relation to the retainer. He said he accepted Slater and Gordon’s arguments that a fiduciary duty cannot arise while ‘the process of negotiating the terms of the retainer relating to the solicitor’s remuneration remains ongoing’.

The judgment also distinguished Swann from last October’s ruling in Belsner v Cam Legal Services, in which Mr Justice Lavender found that informed consent had not been given. DJ Rouine noted that he was not bound by an earlier High Court decision, and said the existence of a defined cap on the client’s liability amounted to a ‘a very significant factual difference’.

The judge refused permission to appeal.

The original version of this article was first published in www.lawgazette.co.uk By Rachel Rothwell

Employment law changes from 6 April 2020

New legislation making major employment law changes to existing regulations comes into force from Monday 6 April 2020.

Employers and employees can find the updated advice here on Acas’s website. The most significant employment law changes are:

Parental bereavement leave and pay
The Parental Bereavement Leave and Pay Act 2018 gives all employed parents the right to 2 weeks’ paid leave if their child aged under 18 dies, or if they have a stillbirth at 24 weeks or later.

See our advice on parental bereavement leave and pay.

Written terms (‘written statement of employment particulars’)
Workers now have the same right as employees to written terms (a ‘written statement of employment particulars’) from their employer.

Employers must provide their workers and employees with their written statement on or before their first day of employment, no matter how long they’re employed for.

The written statement must include details about:

  • the hours and days of the week the worker or employee is required to work, and whether they may be varied and how
  • entitlements to any paid leave
  • any other benefits not covered elsewhere in the written statement
  • any probationary period
  • any training provided by the employer

See our advice on written terms (the ‘written statement’).

Agency workers’ rights
The Swedish Derogation (referred to as ‘pay between assignments’ contracts) is abolished from 6 April 2020, so all agency workers are entitled to the same rate of pay as their permanent counterparts after 12 weeks.

All agency workers are entitled to a key information document that clearly sets out the type of contract they will have and the pay they’ll receive.

See our new guide on agency workers.

ICE (Information and Consultation of Employees) Regulations
From 6 April 2020, it’s been made easier to request an information and consultation agreement. A minimum of 2%, rather than 10% of employees (or at least 15 people), in workplaces with 50 employees or more can request a formal agreement to be informed and consulted about workplace matters.

See our new guides on ICE (Information and Consultation of Employees) Regulations.

Changes to holiday pay calculations
From 6 April 2020, the period used to calculate a week’s pay for holiday pay purposes increases from the previous 12 weeks of work to the previous 52 weeks.

See our updated advice on calculating holiday pay.

The original version of this article was first published in www.acas.org.uk

Top Ten Tips To Avoid Commercial Disputes

Commercial Disputes in business are inevitable, but they don’t have to cost the earth or damage your reputation. Here are some tips to avoid commercial disputes from escalating.

Nine times out of ten, business relationships are uncomplicated, undemanding and straightforward from start to finish. Hiccups happen, but in most cases, they are but bumps in the road of an otherwise smooth transaction. However, even the most reasonable of business leaders is not immune to a conflict.

Anyone running a business will know that commercial disputes can arise at almost any time. It may be a supplier failing to deliver an element of a project and acting defensively when questioned; you may become embroiled in a conflict with an employee regarding commission and expectations around targets; a customer may argue that the product or service received was not up to par and refuse to pay on that basis.

Any of these circumstances could trigger commercial disputes that, if not properly managed, could quickly escalate into a bitterly fought conflict that drags both parties in and drains the business of valuable time and costs from legal expenses. Litigation should always be the last resort, so if you’re currently teetering on the edge of an argument, read on – we’ve set out 10 of our top tips for avoiding commercial disputes.

1. Carry out research and due diligence
When a new business opportunity arises, it’s easy to assume the best and jump into an agreement knowing very little about the people running the business and their reputation. Similarly, after a painfully long recruitment process, seeking out references doesn’t seem so important once you’ve found what looks to be a dream candidate who ticks all your boxes. Once again, suppliers who can quickly meet the demands of an upcoming project can be rushed in without prior research.

In all these cases, a lack of background research opens a business up to the risk of disputes. A variety of checks can be performed nowadays to vet a business or individual before agreeing to anything, such as Companies House Beta, Land Registry and even Google reviews. Professional non-payers don’t come with a warning, but there are ways to uncover information and identify red flags before a contract is signed.

2. Create clear and understandable agreements
It’s not uncommon for incomprehensible contracts to be drawn up due to boilerplate text being thrown in by a senior person who doesn’t possess a legal background. This typically happens when a business wants to either save on legal costs or the presumed time involved in seeking advice.

It may seem like an obvious point, but the need for watertight agreements that are clear on the rights, responsibilities and liabilities of all parties is paramount to preventing disputes. The more room for subjective interpretation in your contracts, the higher the risk that the counterparty will take advantage of ambiguity for their own gain. If you aren’t certain on how a clause implicates you or the counterparty when signing, you can only blame yourself when things go wrong.

3. Carefully consider any limitations on liability when drawing up a contract
Every commercial transaction has a risk of liability attached to it. From breach of contract to infringement of intellectual property rights, regulatory offences and negligence, the possible risks involved in a transaction can be mitigated by limiting your liability through explicit terms in the contract. Limitations of liability can either refer to specific events and state that there will be no liability for them, exclude all warranties unless they are specified in the contract or exclude legal claims based on misrepresentation. This isn’t something you’ll want to copy and paste into a contract, but rather an area that you should seek specialist advice for to ensure that your interests are protected when entering into a new agreement. Similarly, if the contracting party has snuck in a limitation or exclusion of liability clause at the last minute, think carefully about the potential consequences for your business before agreeing to anything.

4. Agree a process for dispute resolution
A simple measure but a critical one in the prevention of commercial and shareholder disputes is a clause in your commercial contracts and shareholders agreements that outlines the process for resolution should matters turn sour. This is another area that is easily glossed over when embarking on new business ventures, but one that arguably gives all parties involved in a contract the best chance of keeping the time and costs as low as possible in the event of a disagreement. The contents of a dispute resolution clause will vary between types of agreements, but the key considerations to address include:

  • Which country’s laws will govern the contract (in cases of cross-border transactions)
  • Who should apply the governing law and make a decision on any dispute,
  • What steps the parties must take to resolve the dispute.

5. Keep all relevant documentation
If you suspect a dispute has the potential to escalate, it’s important to adopt a no-destruction policy on all relevant documentation, and to ensure everyone involved in the contract does the same. While litigation should always be avoided, it’s best to prepare for the worst should further action be taken against you. As such, if it is found that you have destroyed documentation that was relevant to the dispute, it won’t be a good look in court and can have serious consequences. As well as that, the better able you are to document your case – the better your chances of a successful outcome.

6. Be prepared to negotiate and explore alternative dispute resolution
Litigation is expensive, time consuming and, depending on the outcome, can be highly damaging to your reputation. Before a case reaches court, the Judge expects that both parties have at least attempted to resolve the dispute outside of court. That means you should be prepared to compromise and find a settlement that suits you and the opposing party. This could be through a face-to-face meeting, formal mediation or arbitration. Alternative dispute resolution is quicker and cheaper and, in the best-case scenario, may even preserve the commercial relationship.

7. Be prepared to negotiate and explore alternative dispute resolution
If the opposing party has breached the contract, you may have the right to terminate the contract altogether. However, this right is lost if you fail to alert the opposing party of your intention to terminate or take further action. It is perfectly normal for you to take some time to decide the best course of action, but be careful not to take too long – there comes a point where inaction can be construed as a decision to ‘affirm’ the contract. While explicit termination leaves little doubt as to your intentions, inaction does tend to blur the lines in the eyes of judges. If you become aware of the breach, speak to a commercial dispute resolution lawyer about the best way to proceed as soon as you can.

8. Consider training your staff on handling complaints
They may be an expert in their field, but without proper training, staff who aren’t typically customer-facing can find themselves struggling to deal with a frustrated customer due to their lack of training in complaints handling. Negative feedback is rarely well-received, but by developing a complaint handling process and providing the necessary training, you create a standardised procedure for which all your employees can operate from to improve customer satisfaction and minimise the risk of conflict. At the same time, it’s imperative to recognise when a customer is taking advantage of goodwill and to know when to step in to protect your employee and preserve peace between your business and the client.

9. Be proactive in the face of a potential dispute
Reducing the risk of conflict requires a proactive approach from business leaders. For example, if an angry customer isn’t backing down, don’t ignore the signs. Instead, acknowledge the problem and try to find ways to rectify the issue before the matter escalates any further. In most cases, what someone puts in an email will be very different to how they act when speaking face to face or on a call. Misunderstandings happen, and they can usually be resolved if you get on top of them before they evolve into something bigger. Simply picking up the phone to the aggrieved party to empathise with their frustrations and find a way forward can make all the difference in avoiding a costly legal dispute.

10. Be proactive in the face of a potential dispute
Don’t leave it until the dispute has escalated to get a lawyer involved. The moment matters start to become complicated or a disagreement is showing no signs of resolution, seek advice from a commercial solicitor. They should be well-equipped to provide you with a bespoke roadmap for resolution, along with expert advice to minimise the risk of future disputes.

The original version of this article was first published in Start Ups Magazine by Robert Taylor

Virtual Arbitration: An Overdue Addition or a Ticking Time Bomb?

Virtual Arbitration – An Overdue Addition or a Ticking Time Bomb?
The effects of Covid-19 have been evident throughout the legal sector, primarily causing the English legal system to be dragged hastily into the 21st century. The once traditional formal hearings, now, have a consistent utterance of ‘can you put your microphone on?’, and ‘your connection dropped, could you repeat that?’.

The intent has always been to slowly introduce technology into the court system by giving it the necessary time to adjust and iron out any teething problems. Instead, the industry underwent an abrupt shift to incorporate virtual meetings, which allow hearings to go ahead despite global physical distancing measures. The use of virtual hearings has now flourished due to the certainty in scheduling and the safety from the pandemic. It was time for some form of modernisation for UK hearings, but the drastic changes rising from the pandemic may not be at all sufficient and permit abuse from those who understand the loopholes of telecommunications.

The international arbitration community was no stranger to virtual proceedings, even before the Covid-19 crisis. Efforts to transfer to the online interface started a few decades ago, but growth remained almost stagnant compared to the exponentially growing popularity of alternative dispute resolution in general. Most dispute resolution centres – including the ICC, LCIA, and ICDR, can facilitate virtual hearings if needed. Despite the versatility of most institutions, completely virtual proceedings have been the crushing minority of cases.

Ironically, the situation is rapidly changing due to Covid-19 and the parallel need for social distancing and dispute resolution accommodation. Even though a year has passed since the beginning of the pandemic, governments are still placing physical restrictions on an ad hoc basis, which causes uncertainty in scheduling hearings. This has led to counsels advising parties to proceed with virtual hearings or online arbitration whenever possible. As virtual hearings are coming to the limelight, it is worth exploring some relevant challenges and asking: is the current system sufficient?

Due process complications: a potential challenge to the award?
It is straightforward that when both parties consent to virtual proceedings, there will be no issue of due process and any related challenge to the award is likely to fail. When the motion to transfer to virtual hearings is made by one of the parties or by the tribunal itself, that might compromise the enforceability of the arbitral award on due process grounds.

According to Article 18 of the UNCITRAL Model Law on International Commercial Arbitration, the parties must be ‘treated with equality’ and must be ‘given a full opportunity to present their case.’ Under Article V(1)(b) and (d) of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) a national court might refuse the recognition and enforcement of the arbitral award if due process was not observed during the proceedings. While there is no apparent reason why a party’s procedural rights might be compromised during virtual hearings, the practical implications of transferring to the new interface can have a considerable impact on a party’s ability to participate.

Concerningly, the processes involved in arbitration are at risk of exploitation through virtual hearings. One risk is that parties and witnesses can have other people in the room, potentially coaching answers to questions, which can be detrimental to the opposing party. [i] This could breach Article 18 of the Model Law, as the parties are not on equal footing when this occurs. However, guidance has suggested 360-degree video conferencing to mitigate this risk. [ii]

Similarly, there are issues with timing in global arbitration. When there are multiple time-zones involved, there can be a need for more breaks due to the risks associated with the overuse of screens. [iii] When the so-called ‘Zoom-Fatigue’ sets in, parties are less aware and less receptive to the presented information.[iv] When one party has to participate late at night, further breaks may need to be provided due to the lack of sleep. In such cases, not providing breaks could grant the opposition an unfair advantage.

If the parties are unaware of how to resolve connection issues, the flow of proceedings may be interrupted and may even need to be postponed, which can be detrimental and time-consuming for all stakeholders.[v] This is also an aspect of virtual hearings, which is vulnerable to manipulation by uncooperative parties. Some may exploit the freedom to cut off their Internet to postpone a hearing which is not working in their favour. This phenomenon, essentially ‘rage quitting,’ is not preventable during a hearing, and it may negatively impact the other party. Of course, there is always the risk of due process claims at the recognition and enforcement stage.

Not granted: the cost of access to technology
Virtual hearings tend to be more cost-effective than court litigation; however, it should not be taken for granted that virtuality necessarily results in less cost for some parties. Although technology has advanced vastly over the past decades and is still advancing exponentially, it has evolved unevenly around the world. Many states have the infrastructure and the tools to support virtual arbitration hearings, while other states do not, resulting in a significant disparity of cost of access from state to state.

The unevenness is evident when comparing developed to developing nations. According to the World Bank, only 35% of developing countries have access to the Internet, in stark contrast to the 80% in developed nations.[vi] Even amongst developed nations, the cost of access to technology can be a ‘make or break’ factor for a party participating in virtual hearings. For those who have access to data, that comes at vastly different price tags, making the cost of participation significantly different from country to country. According to Cable’s report on Worldwide Mobile Data Pricing, the disparity in data cost can be large even in the developed world, where reportedly 80% of the population have access to the Internet.[vii] As of February 2020, the UK’s average price of 1GB of data was $1.39, with Russia’s average price being $0.52 and Canada averaging at $12.55.[viii]

Given these numbers, the cost of an hour’s streaming of virtual hearings is bound to be significantly more expensive at a state with higher rates, whereas its counterparty might be facing a fraction of the cost. Instantly, the burden of the virtual hearings becomes tangible for one party but remains a hustle-free option for the other. The stark inequality of expenses associated with participating in virtual hearings across the globe will not improve until the use of data is made more readily available globally.

Privacy and confidentiality
Another issue presented by virtual hearings is confidentiality, as additional steps are required to ensure it is maintained. Hacking or the parties covertly recording the proceedings are more likely to occur in the virtual interface, breaching the rules of the arbitration and leading to unfairness. In an attempt to prevent issues of this kind, Annex I Paragraph C of the ICC practice note requires parties to have a meeting with the tribunal to discuss what needs to be established to protect the parties.[ix] This involves discussing privacy issues, such as whether to record the session or if they wish for 360-degree views of each participant’s room. Parties can also consult about confidentiality in the context of establishing minimum requirements of encryption against hacking. The American Arbitration Association issued a virtual hearing guide, which lists more detailed guidance on maintaining confidentiality, including preventing the use of public internet connections. [x]

The above aim at protecting the parties as much as possible in a virtual hearing. However, issues such as the breach of confidentiality are always a risk, as they can only be mitigated to an extent and are very difficult to be entirely prevented. While privacy & confidentiality will likely remain an issue in virtual arbitration, all the add-on elements available by arbitration institutions are bound to increase the cost of arbitration significantly, even though they are essential to safeguard against the frustration of the arbitral process and tactical proceedings at the recognition and enforcement stage. The lack of standardised rules, in this regard, is evidence of how hastily the world moved to virtual hearings and provides food for thought; it is perhaps time for online arbitration rules to name elements such as encryption as the base standard, given their cruciality.

Final thoughts
Awards made during virtual hearings are widely considered to be valid alternatives to traditional awards in arbitration.[xi] Covid-19 has ensured a quick turnaround in introducing these hearings, meaning that teething problems are underway and may continue to be for some time. There are issues with fairness within the system, but it is possible to take steps to mitigate the risk of injustices occurring. The development of virtual hearings is ongoing, and while they remain adequate, further steps will likely be taken to improve their quality.

[i] Norton Rose Fulbright, ‘Institutional responses to the COVID-19 pandemic’ (2020) accessed 3rd March 2021.
[ii] International Court of Arbitration, ‘ICC Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic’ (ICCWBO, 2020) accessed 1st March 2021.
[iii] Ibid.
[iv] Correia, Fleury, Gama e Silva Advogados, ‘Virtual hearings on the merits of the arbitration: a step too far or the only path to follow?’ (The legal 500, 2020) accessed 3rd March 2021.
[v] International Court of Arbitration, ‘ICC Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic’ (ICCWBO, 2020) accessed 1st March 2021.
[vi] The World Bank, ‘Connection for Inclusion: Broadband Access for All’ accessed 3rd March 2021.
[vii] Ibid.
[viii]Dan Howdle, ‘Worldwide Mobile Data Pricing’ (Cable.co.uk, 2020) accessed 2nd March 2021.
[ix] International Court of Arbitration, ‘ICC Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic’ (ICCWBO, 2020) accessed 1st March 2021.
[x] American Arbitration Association, ‘AAA-ICDR® Virtual Hearing Guide for Arbitrators and Parties’ (AAA, 2020) accessed 3rd March 2021.
[xi] Norton Rose Fulbright, ‘Institutional responses to the COVID-19 pandemic’ (2020) accessed 3rd March 2021.

The original version of this article was first published in The Legal Compass by Konstantina Kalaitsoglou, Stephanie Stephenson

Eviction Ban Extended Until End of March

The original version of this article was first published in The Law Society Gazette by Monidipa Fouzder

The government has extended the current eviction ban until the end of March – a decision that has been cautiously welcomed by housing lawyers who remain concerned that tenants can still be made homeless due to Covid-related rent arrears.

The Ministry of Housing, Communities and Local Government announced over the weekend that the ban on bailiff evictions has been extended until 31 March. Exemptions to the eviction ban include illegal occupation, anti-social behaviour and rent arrears of six months or more. Landlords must give six months’ notice before starting possession proceedings.

Housing secretary Robert Jenrick said: ‘By extending the ban on the enforcement of evictions by bailiffs, in all but the most serious cases, we are ensuring renters remain protected during this difficult time. Our measures strike the right balance between protecting tenants and enabling landlords to exercise their right to justice.’

The Law Society welcomed the extension but is worried tenants can be evicted as a result of the redefined exemption for arrears.

David Greene, Society president, said: ‘Eventually, fewer tenants will be protected by the ban and may become homeless, making it difficult to contain the virus. Funded early expert legal advice is vital to preventing unnecessary evictions and must continue to be available to all tenants alongside the mediation pilot, now deployed across all courts.’

The Housing Law Practitioners Association welcomed the extension but said: ‘It remains HLPA’s position that nobody should be evicted into a pandemic health crisis, not least because eviction, home-seeking and homelessness are not conducive to public health and dilute the message to stay at home and save lives.

‘The January regulations watered down the November regulation and that should be reversed. The ban on evictions should not have any exceptions other than those necessary for public health reasons. Otherwise the measures do not, to quote [Jenrick], “strike the right balance between protecting tenants and enabling landlords to exercise their right to justice”. Instead they leave renters and the general public at risk for the sake of assuaging private landlords.’

Solicitor Amy Stirton, an associate in the housing and regeneration department at Forbes Solicitors, said: ‘Whilst it doesn’t come as a surprise that the eviction ban has been further extended, I am sure that it will be unwelcome news to the thousands of victims of antisocial behaviour who have endured the wider consequences of the ban for the best part of the last 12 months.

‘I hope the courts will enable landlords to apply the exemptions more easily going forward to ensure that those suffering the most are able to gain some respite. Going forward, I think that it is important that each case is dealt with on an individual basis to enable the correct balance to be achieved.’

The National Residential Landlords Association said the government’s latest announcement does not help over 800,000 private renters who have built rent arrears during the pandemic.

Ben Beadle, the association’s chief executive, said: ‘It means debts will continue to mount to the point where they have no hope of paying them off. It will lead eventually to them having to leave their home and face serious damage to their credit scores. A package of hardship loans and grants is needed as a matter of urgency. To expect landlords and tenants simply to muddle through without further support is a strategy that has passed its sell by date.’

Principle of Finality in Litigation

The original version of this article was first published in The Law Society Gazette by Masood Ahmed

Principle of Finality in Litigation – A judgment made in open court takes effect when it is made and not when it is subsequently sealed. The lapse of time between the making of an order in open court and sealing it may be taken by the unsuccessful party as an opportunity to rehearse legal arguments or to produce new evidence to persuade the court to revisit and amend its order before it is sealed.
Principle of Finality in Litigation Blake-Turner
In AIC Ltd v The Federal Airports Authority of Nigeria [2020] EWCA Civ 1585 the Court of Appeal provided guidance on the correct approach the courts should take when determining an application to reconsider an order before it is sealed.

Facts and first instance decision

On 6 December 2018, AIC Ltd (AIC), a Nigerian construction and property development company, made an application to the High Court to enforce a Nigerian arbitration award of over $48m against the Federal Airports Authority of Nigeria (FAAN), an airport-operating agency. However, before the order was sealed, the judge rescinded AIC’s right to enforce the award on the grounds that there had been a significant change in circumstances in that FAAN had obtained a guarantee for security for costs. The judge also granted FAAN relief from sanctions for failing to comply with various deadlines. AIC appealed the reconsidered order, asserting that the judge had no discretion to reconsider her order because, although it had not been sealed at that stage, it had been pronounced in open court and therefore took effect immediately.

Facts and first instance decision

Allowing the appeal, Coulson LJ held that there were two distinct questions which the court must ask itself. The first was whether the application to reconsider should be entertained in principle; if the court answered the question in the negative, that was the end of the matter. If the court concluded that reconsideration was appropriate in principle, then it became an open-ended matter of discretion, to be exercised in accordance with the overriding objective, as to whether the order should be changed. Coulson LJ provided further guidance on first question when he said: ‘In my view, the court should be looking for a sufficiently compelling reason that may justify reconsideration; something which might outweigh the importance of finality and justify the opening up of a question or questions which, following the pronouncement of the order in open court, appeared to have been finally answered. Of course, it is quite right to say, as the authorities stress, that those categories of case are not closed. But, assuming that the request to reconsider comes from the parties and not the court, the court should instinctively be looking for something which has been missed or otherwise gone awry: a mistake or a fundamental misapprehension; a fundamental piece of evidence or a point of law that was overlooked. The court’s undoubted jurisdiction to reconsider its earlier order cannot be permitted to become a gateway for a second round of wide-ranging debate.’

Coulson LJ held that the judge had failed to consider whether the application identified a sufficiently compelling reason for the court to entertain an application to reconsider the 6 December order which had been an error of law. To the extent that it might be said that the judge had identified the significant change in circumstances as the compelling reason for entertaining the application, she had been wrong as a matter of fact. The arrival of the guarantee was not a significant change in circumstances but simply the culmination of what FAAN had been saying in its evidence for some time, which had been taken into account when the 6 December order was made.

Leaving aside the error of principle, Coulson LJ also found that the judge had failed to take into account matters which she ought to have taken into account, and gave weight to other matters which were irrelevant. Therefore, this was a case in which interference with the exercise of the judge’s discretion was justified.

Although AIC Ltd concerned an application for enforcement of an arbitral award, its application is of broader significance because it is applicable to any applications for reconsideration of court orders made in civil proceedings. When considering an application to reconsider, the courts need to ensure that their jurisdiction must, as Coulson LJ put it, be ‘carefully patrolled’ so that the principle of finality in litigation is not undermined.

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The Corporate Insolvency and Governance Act 2020

The Corporate Insolvency and Governance Act 2020

The Government implemented both temporary and permanent reforms to the UK insolvency regime in light of the COVID-19 (COVID) pandemic and resulting economic crisis. Significant changes were made by the Corporate Insolvency and Governance Act 2020 (CIGA) which aimed to ease the pressure on businesses under financial pressure and avoid mass insolvencies.
CIGA came into force on 25 June, following an accelerated parliamentary process.
The moratorium procedure
CIGA introduced a new standalone moratorium procedure with the intention of giving companies space from creditors to turn around their business and avoid insolvency. The moratorium covers an initial period of 20 days. This initial period can be extended without permission for another 20 days and can be further extended with the permission of pre-moratorium creditors or the court. The moratorium involves an insolvency practitioner monitoring the company’s directors, who remain in control.
Companies eligible to use the moratorium should have been:

  • Incorporated under the Companies Act 2006 or, if unregistered, would be wound up under the Insolvency Act 1986.
  • Unable to or likely to be unable to pay its debts in the opinion of the directors.
  • Rescuable as a going concern in the opinion of the insolvency practitioner.

Wrongful trading (temporary)
CIGA also temporarily lifted wrongful trading restrictions which would prevent a company from operating during an impending insolvency. Normally directors could be subjected to personal liability for continuing to trade in the face of an impending insolvency under Section 214 and Section 246ZB of the Insolvency Act 1986.
Restructuring Plan
CIGA inserted Part 26A into the Companies Act 2006 (Arrangements and Reconstructions for Companies in Financial Difficulties) which applies to companies liable to be wound up under the Insolvency Act 1986. This permits creditors with genuine economic interests from participating in the formulation of a restructuring plan and for the court to be able to sanction plans it considers to be just and equitable.
The “Ipso Facto” regime
CIGA made changes to the effect of Ipso Facto termination clauses; these automatically entitle a party to terminate a contract or automatically terminate a contract without any election being made in the event that a certain event occurs, for example, insolvency. Suppliers cannot end contracts for non-payment of pre-insolvency debts.
The effect of this regime is widespread and some provisions have been included to prevent unfairness to suppliers. For example, they are able to apply to the court to be exempt from the regime if it would cause undue hardship to continue to supply a business. If a company enters into a standalone moratorium, debt owed to the supplier during this period will be prioritised over other creditors. There are exceptions for ‘essential suppliers’ and ‘small suppliers’, which are dealt with under separate legislation.
Further developments
There were concerns that the Act was rushed without consideration to certain stakeholders. The Pensions Regulator, the Pension Protection Fund, and other retirement scheme representatives felt the changes may negatively impact pensioners, as the moratorium would prioritise debts falling during this period over beneficiaries of underfunded undefined pension schemes. However, some of these concerns were addressed while the Corporate Insolvency and Governance Bill was being debated and also by the Pension Protection Fund (Moratorium and Arrangements and Reconstructions for Companies in Financial Difficulty) Regulations 2020 (SI 2020/ 693) which came into force on 7 July 2020. There have also been concerns that that some creditors may be disadvantaged by the suspension of wrongful trading offences.
The temporary provisions will be phased out by the end of September and though the other changes are not subjected to time limits, however this may change in light of future developments.
For further information please contact Paul Cooper: paul.cooper@blaketurner.com or 020 7480 6655

Partnership Disputes and LLP Disputes

Before the introduction of the Limited Liability Partnership (“LLP”) as a legal entity in English law 20 years ago, the only form of legal partnership that existed was a partnership under the Partnership Act 1890.  A significant difference was that in an old style partnerships each partner had joint (but not several) liability.  In an LLP some or all of the partners have a form of limited liability similar to that of shareholders of a company.  Unlike a company, the partners have the right to manage a business directly.

As such, the range of partnership disputes is now wider than before and includes disputes between members (as they are known) of an LLP and not just partners of a partnership.

As with an old-style partnership, LLPs are often governed by an agreement between the members which are generally known and referred to as partners.  This agreement obviously comes into play in the event of a partnership dispute.  Absent a written agreement the relationship between the members and the LLP and third parties is governed by the Limited Liability Partnerships Act 2000 and the Limited Liability Partnership Regulations 2001 and subsequent amendments thereto.

Often one of the central features of a partnership dispute focuses on who has control of the LLP (or partnership) during the dispute between members or partners.

Focusing on LLPs there may well be a dispute resolution procedure in any written LLP agreement but in the absence of such, it must be remembered that under the 2000 Act each member has the right to manage the affairs of the LLP.  This, of course, can be curtailed or controlled by any LLP Agreement, but in the absence of one, it can lead to great difficulties not only between the members themselves but apropos third parties.  Members do have the same rights as shareholders to claim for unfair prejudice if the LLP is being conducted in a manner unfairly prejudicial.  However, many LLP agreements expressly exclude such rights and a member is therefore left to resort to the agreement and the Act and its regulations to seek redress.

If the relationship between the members breaks down and cannot be repaired either informally or through the procedures set out in any written agreement (if there is one) then it is crucial that you should take early legal advice to determine from the start what position you as a member (especially a minority one) are in advance of taking action.  Often LLP agreements are drafted to ensure a deadlock situation between equal partners, which makes matters even more difficult.  Together with a lawyer, a strategy can be put in place to try to achieve the speediest and most economical resolution to a dispute (which may or may not involve purchasing or selling of one member’s share to others).

Rupert Farr, head of Litigation at Blake-Turner, has extensive experience in partnership disputes, both old-style partnerships and LLPs, in different areas of industry and business (including accountants, facilities management, digital payment companies, and others).  He would be happy to discuss any partnership dispute case which you have with an initial consultation being free of charge before a decision is made as to whether to go forward.

How to correctly conclude a claim by way of a consent order

How to correctly conclude a claim by way of a consent order

In the matter Spice and Anor –v- Tuli and Anor [2012] which was heard in the Court of Appeal, the Defendant appealed the decision that the Claimant was allowed to bring a claim by way of a consent order based on the same set of facts as a claim which they agreed to dismiss.

The case discusses the use of the words “withdrawn”, “dismissed” and “discontinued” when concluding cases by way of consent. The word “withdrawn” is not appropriate as there is no provision in the CPR for a claim to be withdrawn, only discontinued or dismissed.

Facts

Spicer and Anor originally bought proceedings for possession. The day before the final hearing the Defendant provided disclosure. As the Claimant needed more time to investigate this disclosure they agreed a Consent Order dismissing the proceedings. In agreeing the consent order the Claimant’s Solicitor made it clear they would be investigating the disclosure and its validity.

Two months after the Order was filed the Claimant filed new proceedings, including the original claim for possession. The Defendant sought to strike out the claim on the basis that the claim for possession was barred as a result of cause of action estoppel. In addition, they argued that the fresh action was an abuse of process.

The application was unsuccessful and the Claimant was allowed to bring the second claim. The Defendant appealed the decision.

Decision

At the appeal it was concluded that there was no abuse of process. First, it was in the public interest that the disclosure was investigated for validity and secondly that the Claimant’s Solicitors had made it clear they would not stop the investigation just because the claim had been dismissed by way of consent.

The Court of Appeal considered the principle of cause of action estoppel. Whilst the principle of estoppel relies on the principle that there is finality of litigation it was created as “judge-made law”. As Judges often avoid setting absolute limits to any rule the Court of Appeal could understand why, in previous cases, the principle had been applied with a degree of flexibility rather than using a rigid application.

The case of Ako v Rothschild Asset Management Limited [2002] was considered. This is an Employment Tribunal case in which Dyson LJ concluded that a withdrawal or judgment by consent invariably results in a cause of action or issue estoppel. It was concluded that if it is clear that a party withdrawing their claim is not intending to abandon it or any issue within it then they cannot be barred from raising the point in subsequent proceedings unless it would be an abuse of process.

Although the Ako case was an Employment Tribunal case, and therefore subject to different rules than the Courts, Lewison LJ applied the case outside of Tribunal proceedings.
The appeal was dismissed and the Claimant was allowed to bring their second claim.

Comments

As a Claimant, care needs to be taken when signing consent orders. If there is an intention to bring the claim again in the future then proceedings need to be discontinued and not dismissed. In addition, it should be made clear to the Defendant’s Solicitors that there is an intention to bring future proceedings based on the same claim.

As a Defendant, before signing consent orders the Claimant’s intentions need to be clear. Defendant’s need to be aware of the implications in relation to the possibility of future proceedings against them.

IMPORTANT: This blog is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

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