Legal Practice Notes

Third party debt order ( TPDO) This Practice Note sets out the nature of a third party debt order ( TPDO)—formerly termed a garnishee order—as a method for enforcing a judgment debt, with reference to CPR 72. Such an order compels a third party indebted to the judgment debtor to pay those funds to the judgment creditor instead. It examines when the court may make a TPDO, where appropriate, what such orders can cover, their scope, and their practical effect in practice. For procedural guidance, consult Practice Note: How to apply for a third party debt order ( TPDO). Historically, TPDOs, then known as ‘garnishee’ orders, have formed part of the court’s enforcement toolkit since the nineteenth century under successive procedural codes over time. While the terminology and provisions in CPR 72 are comparatively modern, many of the underlying principles are...

A pre-pack administration sale—some basic principles A pre-pack is the pre-arranged sale of a company’s business, assets, or both, executed immediately after the company enters administration. On appointment, the administrator finalises the deal swiftly to avoid the expense of trading in administration. This route is often chosen to preserve value where the glare of a formal insolvency could depress asset prices, notably goodwill. The buyer is lined up and the sale terms settled before appointment, though the intended administrator is typically involved beforehand. Compared with a conventional corporate disposal, pre-packs involve markedly less due diligence. Warranties and guarantees are uncommon to non-existent, and assets are transferred on an as-seen basis (for an illustrative administration sale agreement, see Precedent: Asset purchase agreement—administration sale). Independent, formal valuations of assets and goodwill are required, and any bid must align with those valuations......

The EBT as a trust An employee benefit trust ( EBT) is a type of trust. A trust is the legal arrangement created by a settlor when assets are placed under the control of a trustee for the benefit of a beneficiary, or to achieve a specified purpose. A trust (including an EBT) typically has these characteristics: the assets form a separate fund and do not belong to the trustee’s own estate legal title to the trust property is held in the name of the trustee the trustee has the power and duty, for which it is accountable, to manage, apply, or dispose of the assets in line with the trust terms and the special obligations imposed by law As a general rule, a trust (including an EBT) must have certainty of objects, and for non-charitable trusts such as an EBT, there must be someone in whose favour the court can...

A long-term incentive plan ( LTIP) An LTIP is widely used by listed companies to denote executive share arrangements where senior employees receive share-based awards that vest after at least three years. To meet institutional shareholder voting requirements where approval is needed, such awards are generally conditional on achieving stated performance targets. With particularly rigorous performance conditions, an LTIP is often labelled a performance share plan ( PSP). In the past, where a particular style of LTIP award was used, some companies called it a restricted share plan. For companies listed in the equity shares (commercial companies) category of the London Stock Exchange, the Financial Conduct Authority ( FCA) handbook provides a specific definition of long-term incentive scheme. See Specific definitions below. The term LTIP is also employed more broadly to describe any incentive arrangement lasting more than one year, including cash bonus...

The term ‘acquisition finance transaction’ generally means a business purchase part-funded with debt raised expressly for that deal. ‘ Acquisition finance’ is the borrowing sourced from banks and institutions that back these transactions. The label is closely tied to leveraged buy-outs, namely private equity sponsored purchases funded with both debt and the sponsor’s equity. It can also cover corporate acquisitions using specially raised debt. This Practice Note: summarises a standard leveraged buy-out structure sets out the main debt types used in an acquisition finance deal details the principal forms of acquisition finance transaction explains, from the sponsor’s perspective, why debt is attractive for funding an acquisition For a fuller primer, see Practice Note: Introductory guide to acquisition finance. For definitions of common expressions, see: Glossary of acquisition finance terms and jargon. Leveraged buy-outs ( LBOs) A leveraged buy-out is a transaction where: debt is used to fund buy-outs,...

This Practice Note explains what occurs to a lease when it is disclaimed, and considers the consequences for landlords, tenants, sub-tenants, former tenants and guarantors, together with the effect of a vesting order... Effect of disclaimer A liquidator or trustee in bankruptcy may disclaim onerous property and contracts. Where a tenant is insolvent, a lease of trading premises will typically be onerous, with unpaid rent forming part of the tenant’s debts and duties... For the steps involved in a disclaimer, refer to the Practice Note on the process by a liquidator or trustee in bankruptcy under sections 178 or 315 of the Insolvency Act 1986... When a liquidator or trustee disclaims, the tenant’s rights, interests and liabilities under the lease cease from the date of disclaimer. If the tenant alone holds any interest or bears liability in relation to the lease, it ends entirely for all...

The sequence for distributing assets in a winding up, after secured creditors (other than holders of floating charges) have realised their security for themselves, is expressly set out in the Insolvency Act 1986 ( IA 1986) and the Insolvency ( England and Wales) Rules 2016 ( IR 2016), SI 2016/1024. Fixed charge holders Sums realised from assets subject to a fixed charge, as granted, are payable to the fixed charge holder, subject to deduction of the liquidator’s costs of realisation. A security that began life as a floating charge but has converted into a fixed charge, e.g. through crystallisation or a notice of conversion prior to the relevant date in IA 1986, s 387, ranks behind preferential debts. Moratorium debts and priority pre-moratorium debts The Corporate Insolvency and Governance Act 2020 ( CIGA 2020) inserted Part A1 into IA 1986, introducing a procedure allowing directors of...

The concept of foreseeability and remoteness in negligence claims The defendant bears responsibility for loss only where it represents a foreseeable result of breaching a common law duty. It is unnecessary to establish that the defendant anticipated the exact sequence of events. It suffices that the harm is of a foreseeable kind, even if it occurred through an unusual mechanism. The focus is on the category of injury rather than the specific manner of its occurrence. See the Practice Notes: Duty of care in personal injury claims and Breach of the duty of care in personal injury claims. Nevertheless, even where the claimant establishes: that the defendant was negligent (ie in breach of duty), and that such negligence actually caused the injury or loss, the defendant is not automatically liable for every consequence. To recover damages in a claim founded in...

Orders for costs against legal representatives Under section 19A(1) of the Prosecution of Offences Act 1985 ( POA 1985), the Court of Appeal, the Crown Court and magistrates’ courts may direct a legal or other representative to pay wasted costs they have caused. The High Court has no authority to make this type of costs order. Separately, the Crown Court can also order costs against a solicitor by invoking its inherent jurisdiction. That jurisdiction is distinct from the power in POA 1985, section 19, and from the Costs in Criminal Cases ( General) Regulations 1986 ( SI 1986/1335), regulation 3. For guidance on recovering costs under these provisions, see Practice Note: Applying for costs from a prosecutor following an unsuccessful criminal prosecution......

This Practice Note This Practice Note outlines the core requirements of a fair procedure (fair process or system) in the setting of an unfair dismissal claim, to assess whether a dismissal is unfair. In addressing procedural unfairness, it considers: the Acas Code of Practice on Disciplinary and Grievance Procedures (‘the Acas Code of Practice’) what amounts to disciplinary situations and grievances whether an employer is fixed with knowledge of matters unknown to the decision-taker the circumstances in which procedural defects can be cured on appeal whether re-opening a concluded disciplinary process may still be procedurally fair It also directs readers to other Practice Notes that examine the fairness of dismissal for each of the statutory reasons. Even where an employer establishes a potentially fair reason for dismissal, the outcome may still be unfair if a fair procedure has not been followed. The Acas Code of Practice will likewise apply, save for...

This Practice Note explores the ideas behind joint privilege and common interest privilege, outlining when they matter, how they come about, their principal features, how they function, illustrations, and the ways they can be waived. The interest in privileged documents of more than one party Joint or common interest privilege may exist where multiple parties assert the right to claim privilege over the same material. The scope turns on their interest in the subject matter and the nature of their relationship, among other considerations. Joint privilege arises where legal advisers are jointly instructed, or where the parties share a joint interest in the advice. It can be invoked to secure access to privileged material held by another participant. Common interest privilege covers communications between parties with an aligned interest even without joint privilege—for instance, neighbours objecting to a nuisance that affects them equally, although only one...

This Practice Note It assesses the range of privileges that can arise in financial remedy proceedings, notably legal professional privilege and litigation privilege. It also outlines when privilege might be waived, issues around disclosure to third parties, the treatment of without prejudice exchanges, and related procedural matters. In financial proceedings there is an ongoing and continuing obligation to give full, frank and transparent disclosure. That disclosure must cover all material facts, documents and papers and other information bearing directly on the issues in the case, together with any significant developments following the initial provision of disclosure. Solicitors are under a duty to explain this obligation to their clients in clear terms, and to warn of the potential consequences if it is breached, which can include criminal penalties under the Fraud Act 2006. Where a party seeks to withhold disclosure by asserting privilege, the burden lies on that...

This Practice Note outlines the key features of a private company limited by shares. It also explains the principal differences from public companies limited by shares, and why this structure might be selected as the preferred business vehicle rather than another UK company form. What is a private company limited by shares? A private company limited by shares is a distinct legal person, separate from its members. Ownership rests with members through their shareholdings, while directors run the company in accordance with the Companies Act 2006 ( CA 2006) and the company’s constitutional document, the articles of association. This is a widely adopted vehicle. The Companies House public register records over five million limited companies, of which more than 95% are private companies limited by shares. The other UK company types available under the CA 2006 are: public companies limited by shares—see Practice Note: Public...

This Practice Note outlines the principle, for certain private law applications under the Children Act 1989 ( Ch A 1989), that a child’s welfare must be the court’s paramount consideration. It explains when the paramountcy principle is to be applied, and also identifies the kinds of applications to which it does not apply. The paramountcy principle When any court decides any question regarding: the upbringing of the child, or the administration of the child’s property or the application of any income arising from it In such cases, the child’s welfare is the court’s paramount consideration, unless statute expressly or by implication excludes it. The court must treat the child’s welfare as its paramount consideration, not its ‘first and paramount consideration’, as under the previous provisions; however, no alteration of practice was intended......

Employers running final salary pension schemes, a form of defined benefit arrangement, have sought to curb financial exposure, with many reshaping benefits, shutting to new joiners or halting future accrual. Even where future accrual stops (a ‘frozen’ scheme), members may still keep a link to their final salary. If that link remains, and pay rises are subdued, a member’s deferred, revalued preserved pension can end up higher than anticipated compared with having no final salary link, which may lessen or even eliminate the expected impact of the employer’s liability reduction plans. This Practice Note looks at the meaning, preservation and consequences of a final salary link. For issues triggered by closing a defined benefit scheme to future accrual, see Practice Notes: Closing a pension scheme to future accrual—employer considerations and Closing a pension scheme to future...

FORTHCOMING CHANGE : The practitioner postal forms PA1P and PA1A, launched on 23 March 2020, were intended to be combined with the versions of the same names used by lay applicants. If implemented, this consolidation may alter the form questions and their numbering. Refer to News Analysis: Developments on the new probate application process for practitioners. Requirement for application form or online application All applications for a grant of representation—apart from a resealing—must be backed by an appropriate statement of truth. Before 27 November 2018, executors or administrators were required to swear an oath before a commissioner for oaths or an independent solicitor holding a practising certificate. At that stage, both each applicant and the person before whom the oath was sworn also had to mark the original Will and any codicil. From 27 November 2018, following the commencement of the Non- Contentious Probate (...

This Practice Note examines statements—spoken or written—made by one party to another before a formal contract is concluded, and outlines the situations in which such a statement might be regarded as forming part of the contract or giving rise to other remedies. For further detail, see Practice Note: Contract interpretation—admissibility of pre-contractual negotiations and statements. Potential rights and remedies arising from pre-contractual statements made before a contract is signed During pre-contract discussions (for example as part of a sales process), parties frequently make statements to each other. Disputes can later arise about whether, and which, of those statements were intended to be incorporated into the contract or might otherwise support alternative remedies. Depending on the facts, a pre-contract statement may take legal effect (and lead to remedies) as follows: Contractual terms: In some circumstances the statement may: be...

This Practice Note It sets out guidance on applying the Protocol. It covers: when the Protocol operates its objectives and scope typical outcomes of non-compliance how it relates to limitation The Protocol replaced the Pre- Action Protocol for Defamation Claims. For how it differs from that earlier regime, see News Analysis: Pre- Action Protocol for Media and Communications Claims. In addition to defamation, the Protocol extends to a range of other media and communications claims which, before 2019, were not governed by a dedicated pre-action protocol. It formed part of broader reforms to media and communications procedure commencing on 1 October 2019, which also introduced a new CPR 53 and a new practice direction. For more on these changes, see News Analysis: New rules for media and communications claims from 1 October 2019......

The purpose of pre-action disclosure An applicant may invite the court to compel a would‑be defendant in civil proceedings to hand over, before any claim is issued and before proceedings have begun, documents probably within that party’s control which would, in due course, fall to be produced as part of standard disclosure in the action. It is, therefore, a mandatory, front‑loaded form of disclosure. The court’s authority to grant such relief derives from section 33(2) of the Senior Courts Act 1981 and CPR 31.16. The court must first be satisfied it has jurisdiction (the threshold conditions being met) and then determine, as a matter of discretion, whether to grant the order. In practice, a potential defendant can apply against a potential claimant, though that route is uncommon. While the prospective claim must be “more than a merely speculative punt” ( Moore‑ Bick LJ in Jet...

General The most recent iteration of the PDIP took effect on 3 July 2020. It supersedes earlier practice directions, practice statements and practice notes concerning insolvency proceedings, except for: the Corporate Insolvency and Governance Act Practice Direction of 3 July 2020 the Temporary Insolvency Practice Direction of 6 April 2020 the Practice Statement for schemes of arrangement concerning Part 26A of the Companies Act 2006 of 30 June 2020 It leaves the Practice Direction: Directors’ Disqualification Proceedings unaffected and should be read alongside insolvency legislation. The PDIP comprises seven sections: part one — general provisions part two — company insolvency part three — personal insolvency part four — appeals part five — Financial Markets and Insolvency ( Settlement Finality) Regulations 1999 ( Financial Markets Regulations), SI 1999/2979 part six — applications concerning the...