Legal News

Colin Robert Parr v Keystone Healthcare Ltd and others [2019] EWCA Civ 1246 What are the practical implications of this case? The Court of Appeal confirmed, on established authority, that any advantage secured by a fiduciary while breaching his duties must be stripped and handed to the principal. Stripping that gain is neither compensatory nor restitutionary; instead, it is a sanction aimed at removing the benefit the fiduciary has wrongly acquired. Advisers should avoid confusing loss, or damages, with the accounting for profits required from a fiduciary who has acted in breach and earned money from that wrongdoing. The court also commented on the proper use of citations and warned of potential costs consequences where parties fail to observe the applicable Practice Directions. What was the background? Mr Parr and Mr and Mrs Ward held the shares in Keystone and also served as its...

Re: Dinglis Properties Limited [2019] EWHC 1664 ( Ch) What are the practical implications of this case? This is an unusual unfair prejudice matter where one party is entirely blameless. Commonly, in response to a perceived unfair act by a co‑venturer, a petitioner resorts to self‑help that, in one guise or another, breaches the understanding underpinning the quasi‑partnership or their obligations as a director, an employee, or both. Such behaviour frequently only surfaces during litigation after relations have collapsed and the petitioner has been excluded. In the typical scenario, where the respondent cannot defend the exclusion by reference to what they knew at the moment of exclusion, the outcome may turn on whether they can rely upon the petitioner’s conduct that occurred before and at the time of exclusion but was not known to the respondent then. This ruling confirms that 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 This judgment makes clear that a contract will not be rescinded for economic duress where: the pressure applied is lawful, and the party applying that pressure genuinely believes they are entitled to act as they did, even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...

BV Nederlandse Industrie Van Eiprodukten v Rembrandt Enterprises, Inc. [2019] EWCA Civ 596 What are the practical implications of this case? This appeal sharpens the test for fraudulent misrepresentation and evidential presumption. The representee must show that the statement was a real, factor in the decision to enter the contract, consciously operating on their mind. Where a statement is of a kind likely to persuade, the law presumes it did so. Although that presumption is not easily displaced, the ruling underlines that the burden of proof remains with the claimant and is not flipped. The court also addressed transferred loss, confirming it as a helpful yet narrow exception to the basic rule that a claimant recovers only the loss they have sustained. In addition, the judgment serves as a reminder to respect the distinctness of companies in a corporate group when assessing loss. Parties cannot take...

Caroline Tighe V (1) Alistair Fraser Peters (2) Mike Kienlen & Rob Adamson ( As Joint Administrators of Sprout Land Holdings Limited) [2019] What are the practical implications of this case? This ruling appears to illuminate two points arising from a stalemated board and a majority of shareholders seeking to put the company into administration, in that particular context and factual setting. First, the courts will not overlook a complete disregard of the statutory process for members’ resolutions under CA 2006, Part 2, as prescribed and expected by the legislation. In this matter, it was said the resolution would have passed in any event, so the court should forgive the company’s omission to consider and circulate it—both functions performed by a single director rather than the company. Moreover, although CA 2006, s 293 allows circulation at different times, under the statute itself, it is not meant to...

Does the GDPR apply to unincorporated associations, such as sports clubs, and who is responsible for compliance by an unincorporated association with the GDPR? Who is ‘controller’ or ‘processor’? Yes—the General Data Protection Regulation, Regulation ( EU) 2016/679, applies to unincorporated associations in the same way it applies to companies or partnerships. The GDPR’s definitions of a ‘controller’ and a ‘processor’ encompass both natural persons and legal persons. The challenge for unincorporated associations is that they are not legal persons. They have no separate legal personality; they exist by contract, and neither statute nor case law sets out clear, definitive rules for what their governing provisions must contain. What truly matters under the GDPR is not the category of person or entity undertaking the processing, but the overall activity of collecting and using personal data. The rationale is...

Scottish Pension Fund Trustees Ltd v Marshall Ross & Munro and others [2018] CSIH 39 What are the practical implications of this case? While appearing to be a ‘pensions’ dispute, the judgment has far wider relevance for the commercial sector. It advances the reconciliation between a strictly technical view of partnership law in Scotland and the practical realities of day-to-day business operations. The court confirmed that, where a business has traded as a single continuing entity over time, there is a presumption under Scottish law—absent in English law—that liabilities transfer to successor partnerships. In this matter, the onus fell on the party with specific knowledge of how each partnership alteration occurred to rebut that presumption. A central policy reason is the protection of creditors. Of broader importance is the dicta of Lord Drummond Young, who reiterates two significant principles in the context of a pension...

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...

Watson & Ors v Watchfinder.co.uk Ltd [2017] EWHC 1275 ( Comm) In this decision, the High Court examined a clause in an option agreement that seemed to grant the company’s board an absolute veto over any exercise of the option. The court considered whether an implied obligation bound the directors not to behave unreasonably, capriciously or arbitrarily when deciding whether to give consent. What was the background to the case? This was a claim by three individuals— Marcus Watson, Rob Hersov and Twysden Moore (the Claimants)—for specific performance of a written share option agreement between them and Watchfinder.co.uk Limited ( Watchfinder). The Claimants were directors and shareholders of Adoreum Partners ( Adoreum), a business development consultancy engaged by Watchfinder to provide services including introducing new prospects, investment investors and partners. Adoreum was paid a monthly retainer under a services agreement, and separately the Claimants and...

What is Australia’s approach towards international free trade agreements? Australia is a proactive participant in global trade. In recent years, its commercial ties have centred on Asia, having lately finalised free trade agreements ( FTAs) with China, Japan and South Korea. Shortly after the 2016 EU referendum, the Australian Government signalled its readiness to negotiate an FTA with the UK. To advance this, a trade working group was established with a remit to ‘scop[e] out the parameters of a future ambitious and comprehensive’ FTA. The group first met in late November 2016. However, talks may not start until the UK has left the EU. How does Australia’s market compare to the UK? UK– Australia trade has taken place within the EU framework. The EU is Australia’s third-largest trading partner. Australia’s sales to the EU are dominated by mineral commodities (fuels and mining products) and...

Original news Senior HBOS banker and associates found guilty of corruption, LNB News 31/01/2017 141 A former HBOS manager, a financial adviser and their network were found guilty of corruption, fraudulent trading and laundering funds after operating a racket that eventually left the bank facing losses of about £250m in total. Ex-banker David Mills and cohorts plotted to line their own pockets, forcing companies into collapse along the way. Their conduct deliberately prioritised personal gain, with severe consequences for the companies involved and for the businesses affected. What is the background to the investigation in this case? On 30 January 2017, Judge Beddoe at Southwark Crown Court passed sentence on five banking staff and private business advisers for offences tied to a £245m fraud on HBOS customers between 2003 and 2007. This stemmed from a complex, six-year Thames Valley Police inquiry, codenamed Operation Hornet. It became the...

Original news Brexit must not trade away environmental protections, Committee warns, LNB News 04/01/2017 90 The Environmental Audit Committee has cautioned ministers that safeguards for the environment must not be diluted during the UK’s exit from the EU or thereafter, and urges the introduction of a new Environmental Protection Act alongside Article 50 TEU talks to preserve the UK’s high environmental benchmarks. Such legislation would limit the danger of ‘zombie legislation’—that is, EU-derived rules carried into domestic law but left unrefreshed, vulnerable to being whittled away via statutory instruments with scant parliamentary oversight. What prompted the Committee to issue this report? Titled ‘ The Future of the Natural Environment after the EU Referendum’, it forms part of a suite of inquiries by the Committee into the real‑world consequences for UK environmental policy once we leave the EU. This work follows an earlier...

Introduction Most observers consider that, on its own, Brexit is unlikely to materially alter the regulation of the UK oil and gas sector, including activities on the UK Continental Shelf ( UKCS). This stems largely from the UK government’s longstanding control of energy policy, encompassing the development of oil and gas reserves. Core policy areas—such as licensing and taxation of exploration, appraisal, development and production—have always been, and continue to be, determined by the UK government, though elements of the industry have been shaped by the EU. Nevertheless, the referendum has set in motion other significant shifts that may have a substantial effect on the UK’s oil and gas industry and the wider energy industry for the reasons set out below. Does European law still apply? Will the current legal and regulatory framework change once withdrawal from the EU is complete? The...

What is the ideology behind CICs? What advantages do they have over local authority control of services? At its core, the rationale for transferring a council-run service into a community interest company ( CIC) is that establishing an autonomous, community‑orientated body—protected so that assets are applied for community benefit—releases potential for the service to grow and develop in ways that may not be possible if it remains under the local authority’s control. Placing management within a new entity is expected to free the CIC from inflexible managerial and pay frameworks associated with local authorities, together with stark financial constraints and the limited scope to secure third‑party funding. In turn, the CIC is anticipated to be more agile and to possess greater capacity for innovation. In many cases, services that are spun out could instead be operated by an independent charity. A key perceived reason for...

Original news Re Ralls Builders Ltd (in liquidation); Grant and another v Ralls and others [2016] EWHC 1812 ( Ch), [2016] All ER ( D) 113 ( Jul). The Chancery Division determined that, as the joint liquidators’ application under section 214 of the Insolvency Act 1986 for a contribution from the company’s directors on a wrongful trading basis had failed, it was not appropriate to order the directors to add to the company’s assets in respect of the liquidators’ fees and expenses incurred in examining and advancing that unsuccessful claim. What was the background to this judgment? This was a wrongful trading claim brought under IA 1986, s 214. The liquidators, Steven Grant of Wilkins Kennedy and James Tickell of Portland, sought a £1.5m contribution to the company’s assets from three former directors of a South East building company that entered...

Practical implications This ruling is notable for its observations on the need for dishonesty under LA 1980, s 21(1). It is settled that dishonesty is required for LA 1980, s 21(1)(a)—no limitation where a trustee commits a fraudulent breach of trust. Yet, although the court appeared to imply that dishonesty is also demanded for LA 1980, s 21(1)(b)—no limitation on recovering trust property from a trustee who holds it or has converted it to his own use— Smith J nevertheless concluded that LA 1980, s 21(1)(b) was satisfied, notwithstanding the absence of dishonesty on the evidence. The decision likewise indicates that, where there is a single active director who has committed undisclosed breaches of fiduciary duty, they owe a continuing obligation to disclose those breaches while they remain a director; and whilst the non-disclosure persists, those breaches are likely to be regarded as...

Original news Re Codere Finance ( UK) Ltd [2015] EWHC 3778, [2016] All ER ( D) 27 ( Jan) Codere Finance ( UK) Ltd sought an order approving a scheme of arrangement under Part 26 of the Companies Act 2006. The company, incorporated in England, was a subsidiary of Codere SA, a Spanish entity that sat at the top of the corporate group. Efforts to negotiate a restructuring had been underway for over two years before these proceedings. It was concluded that the most effective route was to rely on the scheme jurisdiction available in England and Wales, and Codere Finance ( UK) Ltd was acquired for that very purpose. The court was asked to decide whether to sanction the scheme, with particular focus on the fact that the group had only recently bought Codere Finance ( UK) Ltd...

Practical implications This judgment: offers a clear and carefully set out account (with hypothetical examples) of the difference between how damages are assessed in contract and in tort underlines the importance of ensuring that suitable and necessary valuation evidence is put before the court for determination. Although the absence of such evidence did not prevent the court from arriving at a damages figure payable for breach of warranty, the task would have been more straightforward had that material been placed before the court, and it is ordinarily sensible to make sure it is hints at the potential value, in claims of this type, of pleading both damages for breach of warranty and, where the facts allow, an alternative tort claim for misrepresentation (especially if fraudulent). In this matter, however, it was the contractual warranty claim that enabled Mr Karim to recover What was the breach of warranty...