Commercial disputes

English courts seek to maintain international custom post-Brexit
10 July, 2018

Major London BuildingsThe legal services industry is an important part of the UK economy. England and Wales in particular is the jurisdiction and law of choice for many international business agreements. Recently, however, Brexit has presented an opportunity for countries that are attempting to lure lucrative legal custom away from England and Wales and into their own courtrooms.

 

France has recently unveiled its English language, common law commercial court in an attempt to entice international court users, such as U.S. companies, away from London.

 

Paris is seeking to capitalise on its EU membership as the UK prepares to leave. Paris boasts that, whilst the ease with which future UK judgments can be enforced across the EU remains uncertain, the judgments of its courts will be guaranteed recognition. It has also undercut London in terms of cost: whereas claims issued in the High Court in London worth £200,000 or more attract a £10,000 court fee, Paris has a maximum fee of €100 whatever the value of the claim. “The rest”, explained the French minister of justice, “is taken care of by the state”.

 

France isn’t the only country gunning for London’s global litigation crown. The Netherlands, Germany, and Belgium have also established English language courts.

 

But London hasn’t stayed silent. The Courts and Tribunals Judiciary has produced a brochure titled “English Law, UK Courts and UK Legal Services after Brexit – the View beyond 2019”. The 12 page document explains why English law remains the gold standard and London is, and will remain, the place to resolve disputes. According to the brochure, one of the reasons for choosing London is its modern litigation facilities: “The Business and Property Courts of England and Wales are housed in the Rolls Building, a state-of-the-art centre for international dispute resolution in the heart of legal London. It is the biggest dedicated business court in the world, and around four times bigger than its nearest competitor. It includes three ‘super courts’ to handle the heaviest international and national high value disputes.”

 

The modern physical infrastructure of the Rolls Building has been matched by a modernisation of the Business and Property Court’s filing system. For certain claims it is now compulsory for lawyers to file documents and correspondence with the court electronically. Filing is secure and instantaneous, saving time (and costs) for court users.

 

Sir Geoffrey Vos, the Chancellor of the High Court, has recently outlined his vision for the future of business disputes. With the adoption of blockchain (the technology underpinning cryptocurrencies) based contracts, in relation to which oral evidence and cross examination may be unnecessary, Sir Vos thinks that the traditional “trial” could in many instances be rendered obsolete. If evidence was needed, it could be given in writing or via video conference. This would save the costs associated with teams of lawyers attending trial over a number of days. Whilst Paris seeks to simply replicate that which is already available in London, if the English Courts can lead in terms of innovation and system-wide costs cutting the legal industry here will stay ahead of the field.

 

The Courts and Tribunals Judiciary brochure ends with the following: “The English Courts are universally recognised to be a forum where litigants can be confident that their disputes will be determined fairly on their intrinsic merits. That will not change following Brexit.” The legal industry will be hoping that the number of litigants choosing London will not change for the worse after Brexit, either.

 

 


Excessive directors’ pay and unfair dividends – what can a minority shareholder do?
12 June, 2018

Ferrari and luxury boat

Owner / managers of businesses are entitled to be paid for their management role but this pay must not be unfair in relation to shareholders who are not managers

 

A common situation is that there will be shareholders who have management roles and shareholders who do not. In most such companies the shareholders and directors will agree a fair split.  This can be achieved in different ways.  In some companies the shares may be split into different classes and different levels of dividends paid for each class relating to wider contribution to the company from the members in that class.  In other words, those who are the managers get bigger dividends.  Alternatively, where there is only one class of shares then managers may be rewarded by payment of salaries, such payments then dictating what profits are available for pro rata distribution via dividends to shareholders.

 

However, there is always the risk that the interests of the managing shareholders and the non-managing shareholders will diverge.  In those situations the managing shareholders may use their powers on the board of directors to increase their salaries and / or reduce dividends payable (either generally or to a specific class of shares).  In the absence of a shareholders agreement regulating this or restrictions in the articles of association of the company, what can the other shareholders do?

 

If the non-managing shareholders hold the majority of the shares then they may be able to remove and add directors to change the board. However, often the managing shareholders control a majority of the shares which means that this is not possible.  Where does this leave the minority shareholders?

 

The starting point is that in the absence of an agreement between them shareholders do not have a legitimate expectation of being paid dividends. The directors can quite properly decide that it is in the interests of the company to not pay dividends.

 

However, a 2017 case illustrates how the court can assist. The company in question was a family owned recycling business.  The directors were the majority shareholders.  Over a long period the company stopped paying any dividends, the directors’ salaries increased to what was found to be above reasonable market rates and the directors used company money to purchase a fleet of luxury cars and a yacht to which they, but not the minority shareholders, had access to.  The minority shareholders did receive offers to buy them out but these offers were well below any realistic market valuation of their shares.

 

The minority shareholders petitioned under s.994 of the Companies Act. The court found that they had been unfairly prejudiced as the directors had breached their duties under the Companies Act in relation to both their remuneration and the policy not to pay dividends.  What they did was held to be in their personal interests and not the interests of the company.  As a result the majority shareholders were ordered to buy out the minority shareholders at a fair value.

 

Whilst the facts of this particular case are quite extreme, it is clear that the court can step in where directors who are also majority shareholders turn off the dividend tap by increasing their salaries. Where this amounts to a breach of statutory duties then such actions will be unfairly prejudicial to the minority shareholders.

 

The case referred to is [2017] EWHC 457 (Ch) – In the matter of CF Booth Ltd.

 

Click here for more articles and guidance on this topic.

 


The Risks of using Social media: Defamation
1 June, 2018

 

If you’re careless about what you post online (regardless of intention) you will be held liable for your actions whChocolate Pieces with sauceere that  comment is defamatory (i.e. it is untrue and causes serious harm to another’s reputation).

 

The ease and speed at which comments are now posted on social media can give a misleading impression that they are throw-away or less meaningful, but the truth is that online content is impactful, long-lasting and therefore potentially very damaging.

It’s easy to get caught out: only this week a Thameslink tweet, intending to placate a frustrated passenger, referred to the quality of Poundland’s cooking chocolate, which drew the ire of the discount retailer and a public threat of legal action.

 

Serious Harm

Considerable commercial interests are now vested in the social media profiles of brands, public figures and ‘Influencers’ alike, therefore an action to combat defamatory comments online may not stop at a take-down request: circumstances may dictate that legal action is pursued.

It is common sense that caution is exercised every time a social media post is made. Notwithstanding, if you do find yourself facing a claim of defamation, all is not necessarily lost.

 

Potential Defences

A number of defences may be available, the most common being:

    • Truth: but the burden as defendant is on you to prove what you posted is true; and
    • Honest Opinion: subject to it being your honestly held opinion, based upon existing facts, absent malice.

 

Responding to a Claim

Each must be judged on its own set of facts and not every claim has merit. The risk of simply ignoring a claim, however, is that proceedings may be issued at Court and you could face an injunction, considerable damages and costs liability.

Therefore, if a claim is raised against you, we recommend as an initial step that a lawyer specialising in defamation law is instructed to;

  1. Undertake an objective analysis of the facts of the case to give a realistic assessment of the strength of the claim against you; and
  2. Advise on a suitable rebuttal strategy, seeking to minimise further damage and bring about a swift resolution.

 

Further reading

If you wish to know more, or to speak to us about how we could help you, you will find further guidance and our contact details on our page: Protecting your Reputation which now includes a Guidance Note on responding to a Defamation Claim.


#Fakenews: Real Damage – Tackling Online Defamation
22 May, 2018

In a #fakenews climate, it can be difficult online to identify the truth.

 

Comments made on social media, either deliberately (sometimes maliciously), or carelessly as to the truth, can inflict serious and long-lasting damage to a reputation, destroying relationships and (in the case of an individual) jeopardising employment prospects.

 

In law, a comment is defamatory if it is untrue and causes serious reputational harm.

 

Those who find themselves the victim of online defamation can consider taking the following action:

1. Contact the Author
Request the removal of the comment by communicating with the author of the defamatory comment directly (keeping it private if possible, through a direct message).

2.  Report the Comment
 As well as the above (particularly if you cannot identify the author in the first instance), the comment could be reported to the social  media platform in question, as a violation of its terms of  use (platforms are now particularly conscious of not being seen to  facilitate online abuse).

3.  Seek Legal Advice
The above are practical steps which can be taken without instructing a solicitor. However, particularly if a company has been defamed (and may have suffered considerable financial loss),  we recommend seeking legal advice from a solicitor specialising in defamation law before contact is made with the other side, in order to:

  1. Advise on an appropriate legal strategy, considering available  remedies, including: damages; an injunction; and/or the  court  ordered removal of the defamatory comment;
  2.  Issue a Letter of Claim (as appropriate), under the Court’s Defamation Pre-action Protocol; and
  3. If required, act as intermediary in any negotiations with the other side.       

There is limited scope as to what the Court can award a successful party at a defamation trial beyond damages (it cannot order an apology, for example), and so the best outcome may be achieved through negotiations with the other side, outside of litigation, against the background of a Letter of Claim and the threat of legal action.

 

Defamation is increasingly problematic for individuals and companies alike online, as comments can be published in only a few seconds, with little thought.

 

Each case will turn on its own facts, so it is recommended that legal advice is sought at the outset of a potential dispute so that any initial actions/communications avoid potentially prejudicing the victim’s position and the best case is put forward.

 

Further reading: Taking Action against Online Defamation


The Importance of Partnership Agreements for GP Practices
2 May, 2018

Four hands signing around a table

There can be many benefits to both an individual GP and to a practice, of a GP being appointed as a new partner.  But once the decision has been made for a GP practice to take on one or more new partners, it’s important that the arrangement is formalised quickly by way of a written partnership agreement so that all partners are very clear as to the terms of the working relationship.  Once signed, the partnership agreement will set out matters such as each partner’s obligations and responsibilities, financial commitments, profit share and any restrictions on the partners.  Importantly it should also deal with retirement from and dissolution of the partnership. 

 

In practice however, negotiations as to the terms of a partnership agreement with incoming partners can take some time to finalise.  Whilst it may be tempting for GPs to start working together in partnership pending the finalisation of a new partnership agreement, this should be avoided where possible.  As discussed in my article here concerning the Court of Appeal case of Cheema v Jones, the risk of proceeding whilst new terms are still being drafted, is that the arrangement is likely to create a new ‘partnership at will’ between the continuing and incoming new partners which is governed by the provisions of the Partnership Act 1890 (the Act). 

 

The Act is somewhat outdated and not really suited to a modern GP practice.  It doesn’t contain any useful provisions such as probationary periods to help deal with issues which might arise whilst the suitability of new partners is under review and provides that profits are to be equally shared between all partners from the outset.  Further it does not sufficiently set out the partners’ duties and restrictions or allow any partner to be expelled even if there are grounds to do so.  Under the Act any partner can serve notice to end the partnership at any time and certain events such as the bankruptcy of a partner can also trigger dissolution of the partnership which may put the NHS Contract at risk.  The provisions of the Act are therefore likely to be very different from what partners might intend or usually agree in a written partnership agreement.  Ensuring that a written partnership agreement is concluded between all partners at the outset will avoid the implications of the Act and help minimise the risk of disputes arising in the future.    


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