Main menu


+44 (0)151 600 3000


+44 (0)161 836 8800


+44 (0)1772 823 921

Search form

Search form


Dispute Resolution

Causation in Professional Negligence Claims
Tuesday 31st May 2016

A High Court Judge has recently dismissed a professional negligence claim against a firm of accountants, labelling arguments made by the Claimant as “opportunistic and unprincipled”.

The Claimant group sought to acquire the Esporta health and leisure business and instructed the accountants Ernst & Young LLP to carry out due diligence on the target.  The accountants were appointed at a late stage in the process after sale and purchase agreements had been signed and the £23 million deposit had been paid.  They provided reports on member growth forecasts and the acquisition completed in February 2007 for £474.3 million.

Following the acquisition the Claimant group alleged that the accountants were in possession of updated figures on membership numbers and that they should have taken these into account in their sensitivity analysis reports.  They sued Ernst & Young LLP for professional negligence.

The accountants denied any breach of duty and also contested the issues of causation and quantum.

The claim was issued shortly before the end of the relevant limitation period and came before Mr. Justice Phillips.  Under cross-examination it was admitted that if the latest available membership figures had been taken into account, the difference in projected figures would have been 0.8%.  To succeed in a professional negligence claim a Claimant must prove not only that their advisor was negligent but that the breach of duty caused the loss they claim.

In this case the Judge found that there was no breach of duty but went on to consider the issue of causation, finding that the 0.8% difference was immaterial and that it was highly unlikely that the Claimants would have withdrawn from the acquisition had this more negative sensitivity been presented by the accountants in their due diligence reports.

On that basis the accountancy firm’s alleged failings made no difference to the Claimant group’s decision to proceed with the acquisition.

The decision is good news for professional indemnity insurers and highlights the importance for Claimants of proving the causation element of their claim.

Barclays Trust Co (Jersey) Ltd (as Trustee for the Ironzar 111 Trust) and others v Ernst & Young LLP [2016] EWHC 869 (Comm).


Variations on a method of variation
Wednesday 16th March 2016

Having spent time agreeing the terms of a carefully drafted contract, it’s common to find a provision that seeks to fix the terms where they stand so as to avoid any argument over what is said and done between the parties subsequently.
Typically, such provisions say that there can be no variation to the terms of a contract without those variations being (i) in writing; and (ii) signed by the parties.
In C&S Associates UK v Enterprise Insurance [2015], the court had to determine whether an exchange of emails between the parties was enough to have varied a contract with just such a provision. 
Despite the fact that it was not signed in manuscript, the court saw no difficulty in determining that an exchange of emails was sufficient to have varied the contract. Because the contractual provision seeking to moderate the manner of any variation did “not go so far as to insist on manuscript signatures, paper documents, or that both parties' signatures must be on the same document” the court was content that emails satisfied the requirement for a variation to be in writing and because the emails contained electronic signatures (i.e. the name and role/ title of the sender), that satisfied the requirement for signatures to be present.


What Are the Powers of a Trustee in Bankruptcy?
Tuesday 1st March 2016

The rapper 50 Cent (real name Curtis James Jackson III) has made the news recently for posing for photographs with stacks of cash, including one where the money spelled the word “BROKE”, despite having filed for bankruptcy in America.
Allegations have been made of non-disclosure in the bankruptcy proceedings and the Judge has reportedly ordered the rapper to attend Court to explain the photographs posted to social media.
In dealing with enforcement clients often ask about the investigatory powers of a trustee in bankruptcy in England and Wales.
The Trustee in Bankruptcy is the Official Receiver or Insolvency Practitioner who takes control of the bankrupt person’s assets on the making of a bankruptcy order.  Their primary duty is to realise the value of the assets within the debtor’s bankruptcy estate and to distribute the proceeds among the creditors to try to satisfy, as far as possible, the debts.
The Trustee in Bankruptcy has wide-ranging powers under the Insolvency Act 1986, including the power to:-
  • Avoid any disposal of property by the debtor made after the bankruptcy petition was presented at Court (unless that disposition was approved or ratified by the Court);
  • Challenge any disposal of assets at an undervalue in the five years before the bankruptcy petition was presented at Court;
  • Challenge any preference given to any creditor in the six months before the bankruptcy petition was presented at Court (or two years in the case of a preference given to a connected party); and
  • Compel the debtor (and other parties with knowledge of the debtor’s affairs) to provide information to the Trustee in Bankruptcy.
It is this last power that will be utilised against bankrupts in this country who appear to be misrepresenting the extent of their assets.  If necessary the Trustee in Bankruptcy can apply to Court for a Court Order requiring the bankrupt to attend a Court hearing for examination about their financial affairs and property.  The Court may issue an arrest warrant if the bankrupt fails to attend.


Contract Claim Sounds Like a Broken Record
Thursday 18th February 2016

The contractual dispute between Rita Ora and Roc Nation, the record label founded by rap artist Jay Z, has taken a new turn recently with news that the company has decided to issue a counterclaim against the pop star.

Rita Ora joined the record company in 2008, when she was 18 years old, and in December last year she commenced Court proceedings against the company in Los Angeles seeking to terminate their relationship.  Since being signed by the record label she has released one album, her debut album “Ora” in 2012.  The recording contract is said to be a five album contract running until 2019.  However, the singer alleges that the company has ‘changed direction’ and is less focused on her career following a change in personnel at the company.

It was reported at the turn of the year that the dispute had been resolved and settlement agreed between the parties to terminate the contract.

However it has now been reported that Roc Nation has issued a counterclaim against the pop star in New York in the sum of US$2.3 million plus damages for breach of contract on the basis that she has four outstanding albums to release under the contract.  They claim that she was an “unknown singer” when joining the record label and that they have “tirelessly promoted [her] career, investing millions of dollars in marketing, recording and other costs, which was instrumental in guiding Ms Ora to her current level of success and fame”.  In a further twist it appears that the counterclaim was instigated by the distributor Sony Music.

The Court proceedings are ongoing but representatives of the singer have stated that settlement terms are being finalised to resolve the dispute.


The £265 Grand…..Design
Friday 22nd January 2016

Many will relate to the scenario when they are asked by family members, friends, friends of friends or neighbours for a “bit of advice”, “as a favour” or “can I just run something past you?”, usually after a couple of drinks at the local pub or at some other non-work related social event.

But when does a friendly favour or nonchalant advice become a potential liability? In a recent High Court decision, this seemingly friendly gesture came at a substantial cost to one unfortunate architect.

It that case, an architect assisted her friends and neighbours with their “Grand Designs” project to landscape their garden. This friendship quickly deteriorated and the architect was blamed for the poor workmanship and delays in the project resulting in her friends bringing a £265,000 damages claim against her.

Despite the architect providing her services to her friends at no cost and insisting that she was “merely involved as a friend who happened to have a professional background” the Judge disagreed and determined that the architect in fact owed her friends a duty of care. The friends were held to be clients of the architect and the assistance that they received was of a professional nature as opposed to purely friendly.

This case serves as an unfortunate reminder of the narrow and often murky boundaries between giving professional advice, which can attract a duty of care, and offering some friendly guidance without any intentions to create any professional relationship or liability.

Our suggestion (without giving advice) is to ensure that next time your asked for a favour by a friend, make sure that there are enough drinks in it to make that friendly advice worthwhile, or otherwise have an engagement letter at the ready in your inside pocket.....


How to quantify claims against estates
Tuesday 12th January 2016

In an important decision for trustees of estates the High Court has recently clarified how to value claims made against an insolvent estate.

In the case of Lockston Group Inc v Nicholas Stewart Wood [2015] EWHC 2962 guidance has been given on how to quantify claims against estates and how those claim values should be determined for voting purposes.

Ordinarily, where an estate is insolvent an application is made for an Insolvency Administration Order by the personal representatives or executors of the deceased. Usually, this is done after death.

The Insolvency Act 1986 and the Insolvency Rules 1986 (as varied by the Administration of Insolvent Estates of Deceased Persons Order 1986) dictate the applicable date for valuing creditor claims and there must be a single date for the identification and quantification of debts which is the date of death.

In this particular case, the question arose how interest and conversion of foreign currency debts were to be treated.  The Court held that the applicable date is the date of death and not the date on which an Insolvency Administration Order is sought or obtained. 

Foreign debts are, therefore, calculated by reference to applicable exchange rates at date of death and interest can be proved to the date of death with statutory interest applying from that point.


The Government announces its intention to abolish the recoverability of success fees and ATE insurance premiums in insolvency proceedings
Monday 11th January 2016

On 17th December 2015, Lord Faulks QC, the Minister of State for Civil Justice, announced that the Government intends to abolish the exemption which currently means that success fees payable under a conditional fee agreement (“success fees”) and after the event insurance premiums (“ATE premiums”) are still recoverable from the loser in insolvency proceedings. It is proposed that the exemption will end in April 2016.

This follows on from the Government’s statement on 26th February 2015 that the exemption would continue to be available “for the time being” ( and Lord Justice Jackson speaking in favour of the abolition of the exemption at the 2015 Mustill Lecture on 16th October 2015 (  

The recoverability of success fees and ATE premiums in insolvency proceedings has been a much debated topic and so the exemption is unlikely to disappear quietly.



Shareholder Disputes: A New Penalty Rule Test
Friday 8th January 2016

Company shareholders may sometimes have a fallout for various reasons. Often that results in one party leaving the company. The leaver’s shares are usually purchased by the other members. The price to be paid for those shares much depends on the terms on which the member leaves; i.e. whether they fall within the description of a ‘good’, ‘intermediate’ or ‘bad’ leaver as defined in the shareholders’ agreement.

The Courts apply a ‘penalty rule’, which can render bad leaver clauses unenforceable if they are interpreted as a sanction.

The Supreme Court in the recent case of Cavendish Square Holdings BV v Talal El Makdessi [2015] established a new test with regards to the so-called ‘penalty rule’. The new test states that the validity of a contractual clause which provides for the consequences of a breach of clause within a contract depends on whether the innocent party has a legitimate interest in the enforcement of the clause. This “legitimate interest” may extend beyond mere monetary compensation but a contractual remedy will not be upheld where the adverse impact of the remedy significantly exceeds the innocent party’s legitimate interest. The emphasis is therefore on “legitimate interest”.

When assessing the enforceability of bad leaver provisions, the Court will consider the wider legitimate interest of the parties and the parties’ commercial intention, and measure the proportionality between them. Even if the provisions are enforceable, the Court will consider whether the resulting reduction of value being paid to the bad leaver is “out of proportion” to those legitimate interests.


Unambiguous Wills Could Avoid Expensive Bills
Monday 4th January 2016

When a will is ambiguously drafted the possible beneficiaries and the appointed executors may need to apply to the Court for interpretation of the will’s terms.

In the case of The Estate of Florence Rosemary Harte (deceased) [2015] EWHC 2351 (ch) the High Court has recently affirmed the long established guidance set out in Marley v Rawlings.

An ambiguous will may be interpreted by making reference to the instructions given to the person who prepared the will by the person making the will and also any notes that the will writer kept. 

Of course, anyone making a will should be sure to engage a reputable solicitor to be sure that their will is properly prepared and executed.  Solicitors and will writers should also be aware of this recent case and ensure that they make and keep notes of their instructions. 


Lord Justice Jackson calls for an end to the recoverability of success fees and ATE premiums in insolvency proceedings
Wednesday 9th December 2015

At the 2015 Mustill Lecture held in Leeds on 16th October 2015, Lord Justice Jackson spoke in favour of the abolition of an exemption which currently means that success fees payable under a conditional fee agreement (“success fees”) and after the event insurance premiums (“ATE premiums”) are still recoverable from the loser in insolvency proceedings.

The exemption has been in place ever since the introduction of the 2013 civil justice reforms which brought an end to recoverability of success fees and ATE premiums for most cases. It has been a much debated issue ever since, with the government acknowledging as recently as February this year that “more time was needed” and so the exemption would continue to be available “for the time being” (see our previous blog post "The winner continues to take it all in insolvency proceedings").

With no government proposals for definitively resolving the issue on the horizon, Lord Justice Jackson has expressed his opinion on the way forward. In calling for the abolition of the exemption, the reasons Lord Justice Jackson gave were detailed but we briefly summarise them as follows:

  1. The original regime for the recoverability of success fees and ATE premiums was not intended to benefit insolvency litigation. The benefits for insolvency litigation were a side effect or, as Lord Justice Jackson calls it, a “windfall”.
  2. The ability for claimants to recover success fees and ATE premiums from defendants can put defendants under unfair pressure even where they have a good defence due to the risk of a disproportionately high costs burden on an unsuccessful defendant.
  3. The recoverability of success fees and ATE premiums can drive up the overall costs of litigation as he believed that there is little incentive to control costs where the claimant will not be paying them in any event.
  4. Insolvency litigation was conducted adequately before the introduction of the recoverability of success fees and ATE premiums and new funding options are available in any event. 

Elsewhere there remains some resistance to the abolition of the existing exemption in insolvency proceedings, with certain professional bodies such The Association of Business Recovery Professionals (“R3”) campaigning for the status quo to be maintained, with R3 placing reliance on a report published in April 2014 by Professor Christopher Walton which considered the possible effects of an abolition of the exemption.

It remains to be seen if and how the government will address the issue.