Legal News

Re Moss Groundworks Ltd [2019] EWHC 3079 ( Ch) (10 September 2019), [2019] All ER ( D) 91 ( Sep) What are the practical implications of this case? The court will not entertain an administration application designed to enable a pre-pack sale to existing management where the evidential foundation is so weak that it triggers reasonable doubts about the propriety of the pre-pack. It will be an uncommon instance in which the court proceeds where, as occurred here at an initial hearing before Snowden J, the supporting material falls markedly short. In particular, the court was not satisfied because: there was a pronounced disparity between the apparent value of book debts and work in progress and the consideration being offered for those assets; the marketing of the business appeared to have been extremely truncated; and, on its face, the marketing was not only abbreviated but also...

Re London Bridge Entertainment Partners illustrates how choices that appear trivial in solvency can become pivotal on insolvency. In this instance, opting to ‘pay first, query later’ from the rent deposit meant the landlord effectively relinquished the priority it might otherwise have enjoyed for those rent sums. The judgment also confirms that the scope of provable debts is interpreted broadly, whereas the category of administration expenses is construed narrowly. Written by Samuel Parsons, barrister at Guildhall Chambers. Re London Bridge Entertainment Partners LLP (in administration) [2019] EWHC 2932 ( Ch), [2019] All ER ( D) 96 ( Nov) What are the practical implications of this case? This decision underscores the caution required when a commercial counterparty cannot pay. It was common ground that, had the rent for the period of the administrators’ beneficial retention remained outstanding, it would have constituted an expense of the...

Emagine Films Ltd v Mister Smith Entertainment Ltd and another company [2019] EWHC 2085 ( Ch) (30 July 2019) What are the practical implications of this case? This decision underlines how difficult it is to legislate for every eventuality in preliminary papers for complex deals, and how implied terms can be used to address unforeseen gaps. An unanticipated issue arose after the term sheet was signed: the producer declined to accept terms consistent with those originally contemplated. The problem did not lie in the term sheet anticipating further formal documentation; that feature did not, by itself, render the arrangement uncertain or ineffective. Rather, the difficulty stemmed from the producer’s refusal to agree to fundamental matters that both Mister Smith and Emagine had assumed would be accepted. In those circumstances, the court was willing to imply a term that brought the term sheet contract to an end. The...

Davies v Revelan Estates ( Wigston) Ltd [2019] EWHC 1766 ( Ch) What are the practical implications of this case? The decision, handed down in January, offers a careful analysis of the make‑up of a guarantor’s covenant and how its terms shape the routes available to a creditor landlord when proceeding against a guarantor. Where, on a proper reading of the covenant, the sum due cannot be categorised as a liquidated amount, a statutory demand is not an appropriate mechanism for recovery. A promise by a guarantor to discharge sums the tenant has failed to pay is a liquidated liability; by contrast, a promise to compensate the landlord for any loss or damage arising from the tenant’s breach of its obligations creates an unliquidated liability. What was the background? The appeal challenged a refusal to set aside a statutory demand served on a guarantor under a lease. The...

Times Travel ( UK) LTD v Pakistan International Airlines Corporation [2019] EWCA Civ 828 What are the practical implications of this case? This judgment makes clear that a contract will not be rescinded for economic duress where: the pressure applied is lawful, and the party applying that pressure genuinely believes they are entitled to act as they did, even if that belief might be criticised as unreasonable The decision also underlines the limited statutory framework for commercial agreements, confirming that such contracts cannot be avoided simply because of the lawful use of a monopoly or disparities in power or bargaining strength. Any evolution of the law in these fields is a matter for Parliament rather than the common law... What was the background? Times Travel ( TT), a small family-run travel agency in Birmingham, was in 2008 accredited by the...

Cathay Pacific Airlines Ltd v Lufthansa Technik AG [2019] EWHC 484 ( Ch), [2019] All ER ( D) 49 ( Mar) What are the practical implications of the judgment? The ruling in Cathay Pacific Airlines Ltd v Lufthansa Technik AG carries notable practical consequences for claimants thinking of starting proceedings under CPR 8. Where a party is minded to proceed under CPR 8 for a claim that could instead be issued via CPR 7, the following should ordinarily occur: notify the intended defendant that CPR 8 is being considered give a short rationale explaining why, on the facts of the case, CPR 8 is thought more suitable than CPR 7 send a draft articulation of the exact issue or question the claimant proposes the court determine under CPR 8, inviting the defendant’s comments set out any agreed facts bearing on that issue or...

High Court judge Simon Picken concluded that Marme Inversiones 2007 SL’s claim against RBS could not succeed, as the Spanish investment vehicle failed to establish that the bank knowingly made false statements when selling it a number of Euribor-linked swaps in 2008. He further held that Marme would not, in any event, have relied on any such statements to enter the trades, since it was unaware of them at the time. In a 230-page judgment favouring the bank, now operating as Nat West Markets PLC, Judge Picken found that RBS neither engaged in, nor intended or attempted to engage in, manipulation of Euribor. Marme, the Spanish vehicle used by property magnate Glenn Maud to undertake a €1.575bn loan with a syndicate of European lenders led by RBS, had contended at trial that the swaps ought to be unwound due to the bank’s...

What impact do the Business Contract Terms ( Assignment of Receivables) Regulations 2018 have on rights of set-off (contractual and other)? The explanatory memorandum to the Business Contract Terms ( Assignment of Receivables) Regulations 2018, SI 2018/1254 (the Regulations), states plainly that these provisions are introduced to render ineffective terms in specified contracts that restrict the assignment of receivables, with effect from 31 December 2018. As a result, many businesses that were previously prevented by contractual limitations will now be able to assign receivables and utilise products such as invoice financing in relation to sums owed to them. This may influence the right of set-off, as some businesses could opt for rapid liquidity by assigning receivables to a third party through arrangements like invoice finance, rather than exercising any right of set-off against invoices presented to them. The principle of set-off is firmly...

Bakhshiyeva (acting as the foreign representative of OJSC International Bank of Azerbaijan) v Sberbank of Russia [2018] EWCA Civ 2802 What are the practical implications of this case? The Court of Appeal reaffirmed the Gibbs rule, a point of real importance for financial institutions, creditors and any commercial party with agreements governed by English law. In consequence, creditors with English law debts can be confident that a foreign insolvency procedure cannot alter or compromise obligations governed by English law. As with many other international counterparties, Sberbank chooses English law for cross-border deals due to its neutrality, the certainty it affords, and the predictability of the English courts. This judgment underlines the reputation, dependability and commercial focus of English law and the English judicial system. The ruling will help ensure that English law (and jurisdiction) continues to be one of the leading choices of law for...

Santander UK Plc v Fletcher & Anor [2018] EWHC 2778 ( Ch) Ashley Fletcher was found guilty of fraud, the target being his mother, Mrs Paula Fletcher. Because of his deception, Mrs Fletcher’s property was charged to Santander for a loan far greater than he had led her to expect. He told her the borrowing would be in the region of £32,000, whereas the facility actually approached £120,000. Nothing had been repaid; by May 2017 the outstanding balance was around £160,000 and still climbing. Santander therefore issued possession proceedings under the mortgage. At trial, the judge upheld Mrs Fletcher’s contention that the mortgage should be rescinded for undue influence, of which Santander had sufficient notice to put it on enquiry (see Royal Bank of Scotland v Etridge ( No 2) [2001] All ER ( D) 156 ( Oct)). He decided that, provided she...

What is the background to this legal action being taken? In Texas, Exxon Mobil faced a lawsuit from shareholders claiming that the decline in its share price between 31 March 2014 and 30 January 2017 stemmed from material misstatements or omissions by the company and its directors, including former CEO (and former US Secretary of State) Rex Tillerson. The case centred on Exxon Mobil’s assertions that none of its assets were, or would become, stranded due to climate change risks, and in particular on its refusal to write down assets rendered unprofitable by the sharp fall in oil prices that began in mid‑2014. While other oil and gas peers recorded more than $200bn of impairments, Exxon Mobil told investors that its superior processes meant no revaluation was required. It recognised no impairments until after a $12bn public debt issue in March 2016,...

Original news Final report and draft Bill published for reforming Land Registration Act 2002, LNB News 24/07/2018 61 The Law Commission has issued its concluding report and a draft Bill to update the Land Registration Act 2002 ( LRA 2002) after a consultation. It proposes targeted technical changes to smooth out anomalies in the law, deter fraud, and make conveyancing quicker, simpler and more affordable for all. What recommendations does this report include? The paper sets out 53 proposals to enhance the current LRA 2002. They are based on the extensive feedback the Law Commission received to its 2016 consultation paper on this topic. How will the proposals in relation to electronic conveyancing help conveyancers? Chapter 20 presents the plans for electronic conveyancing. The Law Commission makes four recommendations, including: conferring a power in the LRA 2002 to mandate electronic conveyancing without also obliging...

DIFC Courts and Smart Dubai The Dubai International Financial Centre Courts ( DIFC Courts) are partnering with the government‑backed Smart Dubai initiative to examine how blockchain can be used to authenticate court judgments for the purpose of cross‑border enforcement. According to the DIFC Courts and Smart Dubai, the purpose of their joint task force is to deliver a ‘blockchain‑powered future for the judiciary’ that will streamline the judicial process by making legal tasks more efficient. Amna Al Owais, chief executive and registrar of the DIFC Courts, said in the statement: ‘ This task force is in line with our’......

Malik (deceased, by her Estate’s court appointed representative, Malik) v Shiekh, [2018] EWHC 973 ( Ch) What are the practical implications of this case? This judgment, on appeal from HHJ Parfitt, required the court to apply the long-established principles in Royal Bank of Scotland v Etridge ( No 2) [2001] UKHL 44, [2001] 4 All ER 449 concerning presumed undue influence. For the presumption to arise, it must be shown that: a party ( A) aiming to set aside a disposition they entered into was influenced to enter that disposition by a party ( B), or by those acting on B’s behalf, and the disposition was not one that A would ordinarily have entered into given their circumstances and knowledge (ie the......

What are the practical implications of this case? Zurich Insurance Plc v Nightscene Ltd [2017] Lexis Citation 445. This ruling is significant, first and foremost, for its analysis of the application of the rule in Shah [2001] EWCA Civ 527 to Deeds executed by companies. Those acquainted with Shah will remember that it addressed the effectiveness of a Deed executed by private individuals. They contended the Deed was ineffective because their signatures had not been attested at the time of signing, so the requirements of s1 of the Law of Property ( Miscellaneous Provisions) Act 1989 ( LP( MP) A 1989) were not fulfilled. The court rejected that case, holding the individuals were estopped from denying the Deed’s validity, essentially because it appeared, on its face, to have been duly executed when it reached the receiving party. This decision logically confirms that the Shah...

What are the practical implications of this case? The bond was found to be triggered by insolvency alone because the parties had agreed a tailored clause to that effect. Even so, the ruling is of wider significance as it reinforces that, under the JCT termination regime: the contractor’s insolvency, by itself, is not a breach of contract by the contractor; and where, following insolvency, the contractor fails to remit sums due to the employer assessed under the contract—for example, the cost of engaging others to complete the works—that failure amounts to a breach of contract This distinction is important where an employer must first establish a contractor breach before calling on a performance bond. That is the position under the unamended ABI Model Form—for a suggested change on this point, see Practice Note: Amendments to ABI Model Form of Guarantee Bond. What was the...

What are the practical implications of this case? Under statutory limitation principles, an equitable set-off defence is ordinarily not caught by a time bar. Typically, limitation statutes render a claim unenforceable rather than erasing the underlying debt or liability. That is, time limits usually bar remedies without destroying the obligation itself. Hence the defence remains available. Consequently, equitable set-off, operating as a shield and not as enforcement, can still neutralise a claim for defendants who have acted a touch late. However, in this matter the High Court confirmed the parties’ contractual freedom to stipulate a different result: that their contractual time limit extinguishes the underlying liability entirely. Applying the now well-rehearsed canons of contractual construction, Mrs Justice May emphasised the need to read each agreement within its own context. This stands as a reminder to contracting parties not to assume that statutory...

Original news UBS AG ( London Branch) and another v Kommunale Wasserwerke Leipzig; UBS Ltd v Depfa Bank plc; UBS AG ( London Branch) v Landesbank Baden- Württemberg [2017] EWCA Civ 1567, [2017] All ER ( D) 119 ( Oct). The Court of Appeal ( Civil Division) concluded that the judge had been wrong to decide that the financial advisers were acting as the claimants’ agents when arranging for their client, the principal defendant, to enter into a single tranche collateralised debt obligation ( STCDO), and to treat any bribe as within that agency, thereby fixing the claimants with legal responsibility despite their lack of knowledge. The court further held that, because the claimants dishonestly assisted the advisers’ abuse of their fiduciary duty to the principal defendant, the bribe tainted the claimants’ conscience, making it inequitable for them to enforce the STCDO secured through that...

Original news Re Lehman Brothers Europe Ltd (in administration) [2017] All ER ( D) 44 ( Aug), [2017] EWHC 2031 ( Ch). In a significant ruling, the court endorsed a plan by the joint administrators to appoint a director to LBEL, already in administration, so that surplus monies could be paid to its sole member, Lehman Brothers Holdings plc ( LBH), rather than to a creditor. The proposal was found to be lawful, practical and advantageous. The application outlined a pragmatic route to unlock value for the member once unsecured debts had been met. How, then, did the administrators approach distributions to members? The principal entities were LBEL, its parent LBH, and an associated company, Lehman Brothers Limited ( LBL), each in administration. After paying LBEL’s unsecured creditors 100 pence in the pound, LBEL’s administrators retained a substantial surplus. They were, however, unable to...

Original news Saw ( SW) 2010 Ltd and another v Wilson and others (as joint administrators of Property Edge Lettings Ltd) and another [2017] EWCA Civ 1001 What was the background to the appeal? In December 2007, SAW ( SW) 2010 Limited ( AW), one of the appellants and both a shareholder in and creditor of Property Edge Lettings Limited (the company), granted the company a long lease of a residential apartment block in Exeter known as Bartholomew House. On 18 December 2007, Capital Homes Loans Limited ( CHL) advanced a £1.25m buy-to-let loan to the company, secured by six fixed charges, in materially the same form, over each flat within Bartholomew House (the CHL charge). The CHL charge also imposed a fixed charge over rental income from the flats and a floating charge over the remainder of the company’s...