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A B C D E F G H I J K L M N O P R S T V W Y

Dispute Resolution

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.


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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.....


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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.


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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” (http://www.brabners.com/blogs/dispute-resolution/winner-continues-take-it-all-insolvency-proceedings) and Lord Justice Jackson speaking in favour of the abolition of the exemption at the 2015 Mustill Lecture on 16th October 2015 (http://www.brabners.com/blogs/dispute-resolution/lord-justice-jackson-calls-end-recoverability-success-fees-and-ate-premiums)  

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.

Source:

https://www.gov.uk/government/speeches/insolvency-litigation  


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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.


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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. 


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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.

Sources:

https://www.judiciary.gov.uk/wp-content/uploads/2015/10/mustill-jackson-lj.pdf

https://www.r3.org.uk/media/documents/policy/Jackson_Campaign/Jackson_Reforms_Insolvency_Litigation_April_2014.pdf


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Court names and shames Dickensian style warring relatives
Monday 7th December 2015

As Charles Dickens commented about his fictional case of Jarndyce v Jarndyce it is not unusual for the costs of claims against deceased’s estates to spiral out of control and exhaust the estate.  This is particularly the case where there are warring relatives.

The Court of Protection has recently taken the unusual step of naming and shaming the parties in Aidiniantz v Aidiniantz and others [2015] EXCOP 65 as a warning and deterrent to anyone else conducting similar litigation.

The issue before the Court was where an 88 year old protected lady should live and what was in her best interests. Her 4 adult children had incurred legal costs of over £270,000 in the proceedings. 

Mr Justice Jackson commented that ‘happily, very few families descend to the level of mutual acrimony that exists in this family’ and he determined that the conduct of the parties in the proceedings meant that they should forfeit the right to be taken seriously about what they believed to be in their mother’s best interests.


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Break Clauses in Commercial Leases: No Implied Term to Apportion Rent
Monday 7th December 2015

The Supreme Court has now handed down its eagerly-awaited decision in the case of Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited [2015].

The case concerned a break clause in a commercial lease. The Supreme Court was asked to consider whether the tenant, Marks and Spencer, was entitled to a refund of rent paid in advance where the break date in their lease did not coincide with the end of a quarter. The Supreme Court ruled unanimously that Marks and Spencer was not entitled to recover the over-paid rent.

In this case, the lease had been granted for a fixed term, and rent was payable in advance on the usual quarter days. Marks and Spencer validly exercised its right under the break clause to determine the lease on 24 January 2012, after it had paid the full quarter’s rent due on 25 December 2011. Marks and Spencer claimed that there should be an implied term written into the lease which would allow it to recover from the landlord the apportioned rent from the break date until the end of the quarter.

Accordingly, the Supreme Court was required to reconsider the law in respect of implied terms in contracts. The Court stated that a term will only be implied where it is strictly necessary for business efficacy, i.e only where, without the term, the contract would lack commercial or practical coherence. A term will not be implied if it ‘lies uneasily’ with the express terms in the contract.

The Supreme Court also confirmed that rent payable in advance is not apportionable under section 2 of the Apportionment Act 1870. Therefore, rent payable in advance can only ever be apportioned as a result of a clear and unambiguous clause to that effect in the contract. There is no doubt, however, that section 2 of the Apportionment Act applies to rent payable in arrears. 

The Supreme Court clarified that the same conclusion applied to the car park licence fee and the insurance rent paid by Marks and Spencer, but not to the service charge; in respect of the service charge, there was a specific provision in the lease which contemplated repayment.

But where a tenant has exercised its right under a break clause to determine the lease, and the break date does not coincide with the end of the quarter, can the tenant simply pay an apportioned final rental payment? Unfortunately, the Supreme Court did not answer this question, and such a scenario remains open to challenge in the future.  


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Privilege in court proceedings
Thursday 3rd December 2015

The High Court has recently given an important judgment about the legal professional privilege status of documents in Court proceedings.

The case of Property Alliance Group Ltd v The Royal Bank of Scotland Plc [2015] was about a £30 million damages claim relating to LIBOR interest rate swaps from 2004 to 2008. The bank founded an Executive Steering Group (ESG) to oversee the investigations and related litigation, and their lawyers prepared summary reports before and after meetings. PAG demanded the disclosure of these reports and the bank argued that they were privileged.

A party to litigation can argue that certain documents are not disclosed in the court proceedings because they are privileged:

  1. Legal professional privilege

    This covers confidential communications between the lawyer and client for the purpose of seeking or giving legal advice.
     
  2. Litigation privilege

    This type of privilege is wider. It covers communications between the lawyer and client, between the lawyer and a third party, and also between the client and a third party. The important point is that the communication must be made after litigation has started or is in reasonable contemplation. Also, the communication must be for the sole or dominant purpose of litigation.

In the Property Alliance Group UK Limited case the judges held that there were three main reasons why the summary reports were privileged. Firstly, it was the lawyers who drafted the reports for their client for the purpose of the litigation. Secondly, the lawyers had clearly marked the documents “confidential and privileged”. Thirdly, all of the reports were drafted and communicated to their client either before or after the meeting.

This case shows how important it is when creating new documents during a dispute to consider whether or not they will have to be disclosed in the litigation. 


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