Commercial Disputes

Will the European Court of Justice still have power over the UK post-Brexit?
22 September, 2017

For some, the power of the Court of Justice of the EU and British Flag and courtEuropean Union (CJEU) over Westminster has been a source of discontent for years. Escaping the jurisdiction of the CJEU was one of the main priorities for the “Leave” campaign.

The CJEU has two main roles: 1) to ensure that EU countries abide by EU law, and 2) to ensure that EU law is interpreted and applied in the same way in each EU country.

Example: The Snooper’s Charter

A recent example of the CJEU’s “incursions” into parliamentary sovereignty came about after David Davis (the current Brexit secretary) challenged the legality of GCHQ’s indiscriminate interception of call records and online messages. The CJEU ruled that GCHQ’s “general and indiscriminate” retention of emails and electronic communications was illegal under EU law. At a time when terrorist attacks in Paris, Brussels, and Nice were dominating the headlines, some saw this as a victory for the protection of privacy in a democratic society. Others – including the Government – lamented a missed opportunity for a practical and dynamic regime that would help keep people safe.

The CJEU’s ruling bound the UK, and has effectively curtailed the use of those powers under the Investigatory Powers Act 2016 (aka the “Snooper’s Charter”) that are incompatible with the CJEU’s ruling.

This was all despite the fact that, just over a month prior to the CJEU’s ruling, the House of Lords had approved the final version of the Investigatory Powers Bill.

Will the CJEU feature in any future UK-EU agreement?

One of the government’s recent Brexit negotiating position papers – entitled “Enforcement and dispute resolution:  a future partnership paper” – says: “In leaving the European Union, we will bring about an end to the direct jurisdiction of the Court of Justice of the European Union”.

Assuming that the UK and the EU can agree a future trade agreement, disputes are likely to arise in relation to 1) whether the UK and EU are abiding by the terms of the agreement, and 2) how the agreement is to be interpreted. Such disputes will have to be settled by some form of court (just as disputes over EU law are currently settled by the CJEU).

While it may seem obvious that this court should not be the CJEU, the EU might argue otherwise. Its position is that there are limitations, under EU law, on the extent to which the EU can be bound by a body other than the CJEU. If the EU has to be bound by a court other than the CJEU it will, like the UK at the moment, have to give up some of its legal sovereignty. The irony of such an argument would not be lost on the UK.

There will have to be a court that can settle questions arising out of any future trade agreement between the UK and EU. Whether or not that court will be the CJEU is simply another difficult, highly political point that the UK and EU will have to negotiate.

 

 


PSC Register Shines Light on Murky Corporate Structures
1 September, 2017

Recent changes to UK company law mean that we can now see through previously opaque corporate structures and obtain information about the ultimate beneficial owners of the business.  This information can be important for litigants, especially where the ownership of a business is contested or where one party is trying to hide assets, for example in overseas parent companies.

From 6 April 2016 UK companies are required to maintain a register of Persons with Significant Control (PSC).  Significant control essentially means that the person owns or exercises significant control of more than 25% of the shares or voting rights of the company or otherwise exerts that level of influence over the company.  This obligation has received a lot of publicity due to the increased administrative burden on companies, but this can be an important source of information that can help to catch out unscrupulous litigants.  

Under this new legislation companies are required to maintain a PSC register that is available for inspection and publish information on Companies House.  The information contained within this register can be produced as evidence and our specialist litigators at Cripps have been able to use this information to assist clients with:

  1. Shareholder / inter-company disputes.
  2. Family / divorce proceedings to challenge a spouse’s attempt to hide assets.
  3. Contested probate matters.
  4. Tracing beneficial ownership / identifying assets.
  5. Corporate due-diligence.

It is an offence for a company to fail to maintain its PSC register or to knowingly or recklessly make a statement that is misleading, false or materially deceptive.  If you can establish that information supplied in the register is false or misleading then the directors of the company can face prosecution.  The threat of action can also be used to force a company to recognise the rights of a person with significant control to help protect their interest. 

For more information see https://www.cripps.co.uk/the-new-psc-register-your-obligations-at-a-glance/


Dealing with late contractual performance – how a notice making time of the essence can help
17 August, 2017

What can you do if a company has agreed to provide you with goods or services but they fail to deliver when promised?  If the contract didn’t provide that time was to be of the essence then a notice ‘making time of the essence’ could help. 

For a reminder of what ‘time of the essence’ means and when time is of the essence.  Please see my previous blog here

Where performance is delayed, even if time is not of the essence, at some point the continued failure to perform becomes ‘repudiatory’.  This means that it is a serious breach of the contract allowing you to terminate it.  However, it is not always easy to know when a delay has become repudiatory. 

If you terminate too soon, you risk wrongfully terminating the contract and becoming liable for damages. If you delay terminating for too long then you risk being deemed to have accepted the breach and to have affirmed the contract, and you could not then terminate until a further repudiatory breach takes place.

If there is any doubt as to when your right to terminate the contract arises, you can strengthen your position by serving a notice to “make time of the essence”.

 

Contents of the notice

 The notice must:

  • Set out what the defaulting party must do and a reasonable deadline for doing so.
  • Explain that if it is not complied with, the contract may be terminated.

 

Effect of the notice

 Contrary to its name, such a notice doesn’t actually make time of the essence or change the original contract terms as to when performance is due or the effect of delay, as both parties must agree such changes.  However, it does help by setting out your position as to when you consider the other party must deliver by, failing which you consider they will be in serious breach of contract. 

The notice will give the other party a chance to remedy their breach and will hopefully prompt a discussion about why compliance by that date is important.  It may also flush out any issues which might cast doubt on your grounds for termination.

 

Ending the contract after notice

 If the deadline set out in the notice is not met, this will trigger your right to terminate but only if the other party is, in fact, in repudiatory breach of contract – it would be wise to get legal advice on this before actually seeking to terminate. 

To bring the contract to an end, you must communicate your acceptance of the other party’s repudiatory breach and clearly state that the contract is terminated.  You may also have a claim for damages.

If you would like assistance or advice on dealing with delays in contractual performance then please contact Gemma Pearmain.


It’s not fair! Sibling conflict in family businesses
28 July, 2017

Letters saying 'Not Fair'Family companies are often strong and stable businesses and well managed ones can stay in family ownership for generations.

However, all families have heard the cry of “it’s not fair” from battling siblings and this can arise in relation to interests in a family business, just as it can in relation to who has got the biggest portion of ice-cream.

These shareholder disputes can be the hardest to resolve as what is seen as unfair may not be based on commercial thinking but based on resentments linked to historic family grievances or jealousies.

As prevention is better than cure the first step is to consider the likelihood of sibling rivalry in succession planning.  Ensuring parity between siblings is advisable, but not always the best solution.  A better solution may be to give the business to selected children rather than all of them, compensating the non-shareholding children accordingly.  If this is not possible, then can any conflict be managed by the use of a well-drafted shareholders agreement?

If you are too late to do this then managing any conflict to avoid harm to the business must be the priority.  A trusted non-family member in a position of authority (e.g. chairman) can be invaluable by being able to view things objectively and diffuse family tensions.

If they are unable to manage warring siblings then the only option may be some kind of de-merger of the business or an exit by one of the battling shareholders.  However, if everybody wants to keep the business then a solution may be difficult to find.  At that point then legal proceedings may be the only answer, but formal alternative dispute resolution procedures such as mediation should be explored before the litigation button is pressed. 

In summary, as any parent will know, battles between siblings can be bloody affairs.  Within a company it can be very damaging.  If informal methods of resolving the dispute are not effective then there are formal legal routes that can be taken (click here for a more detailed article on this topic) but they are expensive and not a quick solution.  If it comes to that then legal advice should be obtained from an experienced lawyer at the earliest opportunity.

 

 


Design rights – what are they and who owns them?
7 July, 2017

 Design rights – what are they and who owns them?Whilst most people have heard of copyright and trademarks, design right is another type of intellectual property right that can be useful to bear in mind where you have designed a functional product.  You don’t need detailed drawings in order to attract protection, and you don’t even necessarily have to register it.

Design right protects the appearance of a purely functional product with no aesthetic appeal e.g. agricultural tools or clothes pegs.  The default position is that the designer (the person who created the design) is the first owner of design right in his or her work.

You can register your design with the Designs Registry for a fee of £50 (if filed electronically), and your right then lasts for 25 years from the date of registration, subject to the payment of 5-yearly renewal fees (£70 per renewal if filed electronically).

Unregistered designs last for the lessor of (i) 15 years from the end of the calendar year when the design was first recorded in a design document or (if earlier) from when the article was first made to the design; or (ii) 10 years from the end of the calendar year when articles made to the design were first made available for sale or hire.

Example: You designed an original rubber moulded foot for supporting hardware in industrial applications in March 2012, and have a drawing of the foot that you sketched at the time.  You then made a prototype of the foot in February 2013, following which you began manufacture on a larger scale and launched the product in June 2015.  Your unregistered design right protection would last until 1 January 2026, which is 10 years from the end of the calendar year when you first made the product available for sale.

Even though you, as the original designer, own the design right, if you intend to sell the product you should ensure that your sale contract or terms and conditions retain that right, and that you do not inadvertently transfer this to the purchaser.  It is worth double-checking your sale documentation for this and making sure that your (well-drafted) terms and conditions apply to the sale.

If you have any queries about design right protection contact Jo Ford on 01732 224033 or joanna.ford@cripps.co.uk.


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