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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

Costs in Insolvency Proceedings brought in line.
Monday 11th July 2016

It has been a few years now since the Legal Aid, Sentencing and Punishment of Offenders Act 2012 prohibited the recovery of success fees and the costs of insurance policies against opponents costs in civil proceedings.  Until very recently, that prohibition excluded insolvency proceedings.

As from 6 April 2016 the exemption for insolvency proceedings has been brought to an end and there is now a level playing field across all civil proceedings.

Practically speaking, this means that defendants to new insolvency proceedings are at risk of a significantly smaller costs burden if they are unsuccessful in their defences. 

Insolvency practitioners will no longer have the ability to hold the threat of costs plus an additional success fee and plus insurance premium over the heads of Defendants and apply pressure unfairly in settlement talks.

For Insolvency practitioners it will be increasingly important to get the right advice on the merits of claims at the earliest opportunity and to explore alternative means of dispute resolution.  They are now going to have to apply some subtlety and strategy to negotiations for settlement of claims and to consider much more carefully whether to issue claims at all if robust defences appear to be raised from the outset.   

Increasingly, it is important for insolvency practitioners to get the right advice on the merits of claims at the earliest opportunity and to explore alternative means of dispute resolution.


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Is Your Glass Half Full or Half Empty?
Monday 11th July 2016

Everyone knows the common expression about a glass being half full or half empty to indicate a person’s general optimism or pessimism.  The phrase has been extended in recent years to include engineers seeing the glass as twice as big as it needs to be, and some people wondering who drank the other half.  However the expression has taken on a new meaning for certain Starbucks customers in America who have filed a class action against the corporation claiming that their lattes have been under-filled.

The claim alleges that Starbucks are “short-changing” their customers by underfilling their tall, grande and venti lattes, by approximately a quarter of the sizes on the menu.  Apparently a new latte recipe was introduced in 2009 to save on the cost of milk and it is alleged that the pitchers used for heating milk have resulted in under-filling.  The Complainants claim damages for fraud and false advertising.

The class action recently came before a US district judge who has allowed the claims to continue.

Starbucks deny the claims and say that they are without merit.

This comes on the back of another claim recently filed against Starbucks in America where the complainant seeks damages of US$5 million because of the amount of ice used in their iced drinks.

Sale of goods laws in England protect consumers in the form of a term implied into contracts for the sale of goods that the goods must “match” the description (under new Consumer Rights Act 2015), or that they must “correspond” with the description (if sold before 1st October 2015, in which case the Sale of Goods Act 1979 still applies).  The description must be incorporated as a term of the contract.  Pub-goers in England also have some certainty as to the measure of their chosen beverage from the Weights and Measures Act 1985.  Cheers!


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Who can challenge the validity of a will?
Thursday 7th July 2016

It has been established for quite some time that someone who has an interest in an estate has standing to challenge a will.  The question is what will count as an interest in the estate.

In the recent Court of Appeal case of Randall v Randall [2014] EWHC 3134 (Ch) the Court has broadened the scope of who is entitled to challenge a Will.

In this particular case Mr Randall brought a claim against his ex-wife relating to the estate of his mother-in-law.    Mr Randall claimed that the Court order which concluded the divorce proceedings with his ex-wife provided that she would pay to him 50% of the value of her mother’s estate over £100,000 after her death.

The estate was valued at in the region of £250,000.  By the terms of her will Mr Randall’s wife’s mother capped her daughter’s inheritance at £100,000.

On a strict interpretation Mr Randall did not have an interest in the estate and, to the extent his ex-wife might receive more than 50% of the value of her mother’s estate he was her creditor.  The Court of Appeal led by the Master of the Rolls took a broader view than this confirming that having an interest in the estate is only a procedural requirement to bring proceedings to challenge a will.

Specifically the Court of Appeal held that to bring proceedings to challenge a will a claimant need only show a "clear and accepted financial interest in the outcome" or a "real interest in challenging the validity of the will".

This judgment is also likely to mean that any person intending to bring a claim against an estate for provision for maintenance or for a reasonable financial provision under the Inheritance (Provision for Family and Dependants) Act 1975 will also have sufficient interest to bring proceedings to challenge a will.  


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‘Wolf of Wall Street’ Defamation Claim
Monday 4th July 2016

A Judge has ordered the actor Leonardo DiCaprio to attend witness questioning in a US defamation case where the Claimant alleges that the portrayal of a character in the film ‘Wolf of Wall Street’ has defamed him.

The Claimant was on the board of directors at the stockbroker firm Stratton Oakmont that is portrayed in the film and he claims that the film’s character Nicky Koskoff (nicknamed “Rugrat”) bore a resemblance to himself.  In the film Koskoff wears a wig and he is one of the cohorts of the main character Jordan Belfort (played by DiCaprio).  The Claimant was a childhood friend of Belfort, was head of corporate finance at Stratton Oakmont and wore a hairpiece.

The Claimant alleges that Koskoff is portrayed as a “criminal, drug user, degenerate, depraved and devoid of any morals or ethics” and that this portrayal has damaged his professional reputation as an investment banker.  He has sued Paramount Pictures for defamation, claiming US$50 million.

The filmmakers say that the film was based on a book by Belfort and that Koskoff is a fictional amalgamation of several people in the book.  They submit several other defences, including that statements alleged to be defamatory are factually accurate.

Late last year a Judge gave permission for the claim to continue and it has now been reported that DiCaprio has been ordered to attend witness testimony on the basis that the film’s director and screenwriter regularly met with him to discuss the script.

In English law a Claimant in a defamation claim must prove that the allegedly defamatory statements were published about him or her.  This is straightforward where the Claimant is named in the statements.  Where they are not, English law applies an objective test of whether reasonable people would understand the words to refer to the Claimant.


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Financial Ombudsman Service Annual Report Shows Trends in Financial Complaints
Friday 17th June 2016

The Financial Ombudsman Service (FOS) has recently published its annual report, showing a small increase in the number of new complaints compared with the previous year, with the biggest percentage increases in types of new complaint being those related to pay-day loans, spread betting and packaged bank accounts.

The report reveals that in the year 1st April 2015 to 31st March 2016 the FOS received 340,899 new complaints (an increase of just over 3% from the previous year).  Of this number, 188,712 new complaints were about the sale of payment protection insurance (PPI).

The largest type of issue complained about remains sales and advice and the FOS have highlighted the issue of communication between insurers and their customers, both at the point of sale of the insurance product and during the claim process.

Complaints about pensions have increased by 5% compared with the previous year.  The report shows that most complaints were about miss-selling and suitability.

The annual report also shows a 48% increase in the number of interest rate hedging product (IRHP) complaints made to the FOS.  IRHPs include structured collars, swaps, simple collars and cap products.  The Financial Conduct Authority (FCA) has recently reported that the banks have nearly completed their reviews of IRHPs to unsophisticated customers which started in 2013.  The banks expect to deal with all remaining cases (including consequential loss claims) in the coming months.


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Is ‘Old Flo’ on the Move?
Thursday 9th June 2016

The Court of Appeal has recently dealt with a dispute regarding the ownership of the Henry Moore sculpture ‘Draped Seated Woman’, popularly known as ‘Old Flo’.

The bronze sculpture was created by the British artist in 1957-58 and depicts a female figure resting in a seated position.  The drapery draws attention to parts of the figure and it is said to reflect the artist’s experience of the wartime blitz in London.

At least six casts were made and this dispute involves the one acquired by London County Council in 1962.  It is now valued at £17 million.  The sculpture was originally placed on open land next to a residential tower block on the Stifford Estate in Stepney, East London.  The estate was later demolished and in 1997 the sculpture was loaned to the Yorkshire Sculpture Park where it remains today.

In 2012 Tower Hamlets Council decided that it would sell the sculpture at public auction.  There then followed a campaign to prevent the sale and a heated legal dispute over ownership of the artwork.

The London Borough of Bromley argued that it was the real owner on the basis that the sculpture was not listed in the transfer when Tower Hamlets council was created, so it remained the property of the Greater London Council (which had replaced London County Council) until that body was dissolved, from when it vested in the London Residuary Body and then to its successor the London Borough of Bromley.

The two councils were unable to resolve the dispute so proceedings were commenced in the High Court to determine title.  Mr. Justice Norris accepted the arguments made by the London Borough of Bromley but then found that Tower Hamlets Council had committed the tort of conversion.  Conversion is where a person interferes with property belonging to another so as to amount to appropriating the property for himself.  The limitation period to pursue a claim of conversion is six years.  Here, since more than six years had passed since the act of conversion, the Judge decided that Bromley’s title had extinguished and that ownership was with Tower Hamlets.

The London Borough of Bromley sought permission to appeal but that application was rejected by the Court of Appeal, meaning that the High Court decision is upheld.

The Mayor of Tower Hamlets has said that “I’m keen to have the sculpture brought back to the East End and put on public display”.


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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).


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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.
 

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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.
 

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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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