July 2011 News Articles
Company director found guilty of wrongful trading
A director has been found guilty of wrongful trading after taking money for services his company could not provide.
The director was the sole shareholder of a company that tried to provide a DX mailing service. He allowed an employee to market the business and take advance payments from customers who entered into contracts for DX services.
This money was then paid to the director and the employee for their personal benefit, even though the company was never in a position to provide those services.
The company was later wound up when the Revenue tried to recover outstanding VAT.
The liquidator sought a declaration that the director was guilty of misfeasance, breach of trust and wrongful trading.
The court granted the declaration saying that, at the very least, the director was negligent in taking money when the company was unable to provide the required services. There was no evidence that he exercised any control over the employee’s activities.
A reasonably diligent person, with the general knowledge, skill and experience expected of a sole director, would not have acted as he did. His actions showed a total disregard for his duties, which included protecting the company’s creditors.
Please contact us if you would like more information about the issues raised in this article.
Breaking point - when are vacant premises really vacant?
A commercial tenant failed to exercise a break clause correctly because it was still carrying out repairs to the leased premises after the day it should have given up vacant possession.
The case involved a company that had two break options on a warehouse that it leased. The first date was for April 2009 and the second was for December 2009.
The tenant decided to exercise the break clause on the April date. The landlord drew up a schedule of dilapidation repairs that needed to be carried out in accordance with the lease.
A site inspection was carried out two days before the termination date. The warehouse was then empty and all the tenant’s fixtures and fittings had been removed. The tenant agreed that a few more minor repairs were needed and arranged for the work to be done.
However, the tenant’s contractors didn’t complete the repairs until six days after the termination date. The landlord said this meant the break clause had not been properly exercised and demanded rent until the next termination date in December.
The tenant disputed this but the court found in favour of the landlord.
The tenant appealed on the basis that it was unjust to say a failure to complete a few minor repairs on time amounted to a failure to give up vacant possession. In also submitted that it had not tried to exclude the landlord from the premises after the break clause termination date.
The Court of Appeal, however, upheld the original decision. It held that the fact that the tenant had not tried to exclude the landlord from the premises was irrelevant. What mattered was that the tenant had failed to satisfy the conditions of the break clause.
These demanded that the tenant had to give up possession to the landlord by midnight on the designated date and not a minute later.
Please contact us if you would like more information about landlord and tenant issues.
Red Tape challenge puts spotlight on Equality Act
The Government’s Red Tape challenge website has put the spotlight on the Equality Act which came into effect last year.
The Act replaced nine major pieces of legislation and scrapped 100 sets of regulations relating to equality and discrimination.
Now ministers are asking businesses and voluntary organisations for ideas on what more can be done to “simplify or deregulate equality legislation”.
Equalities Minister Lynne Featherstone said: "We want to hear from individuals, businesses, public sector organisations and voluntary and community organisations about how the Act is working in practice. We want to know whether the Act could be simplified, better implemented, or if certain provisions should be dropped or amended, or whether it should be kept exactly as it is."
The Government has already said that the gender pay reporting measures in section 78 of the Act will not be implemented. Instead, ministers are encouraging businesses to publish equality workforce data on a voluntary basis.
However, there are plenty of other provisions that may cause unforeseen problems for employers. For example, the Act introduced the concept of preventing discrimination against people who have what is described as a “protected characteristic”.
These characteristics include disability, gender reassignment, pregnancy and maternity, race – including ethnic or national origins, colour and nationality, religion or belief, sex and sexual orientation.
With the exception of pregnancy and maternity, the protection also applies if a person is unfairly treated because they are wrongly perceived to have a particular characteristic.
This might apply, for example, if a person is discriminated against because they are perceived to be gay when in fact they are not.
The protection also extends to people who are treated unfairly because they associate with someone who has a protected characteristic.
Please contact us if you would like more information about the Equality Act or any of the issues raised in this article.
Surge in number of firms facing critical difficulties
There’s been a large increase in the number of firms facing critical difficulties, according to new research.
The Red Flag Report produced by Begbies Traynor shows that 186,554 UK businesses were experiencing significant or critical financial problems in the first quarter of this year.
That was a 15% increase on the same period in 2010.
Sectors that are dependent on discretionary spending were the worst affected. Taken year on year, the number of businesses showing signs of distress in the Bar and Restaurant sector rose by 68%.
The increase was 60% in the Leisure and Culture sector and 23% in the Sports and Recreation sector.
Professional Services firms have also been badly hit with a 61% increase in the number facing significant or critical problems.
The research also shows that more firms are taking a tougher line to ensure invoices are paid. A spokesman for Begbies Traynor said: “High levels of legal actions taken against debtors indicate that creditors are attempting to maximise cash collection right across their customer base.
“The hike in oil prices and January’s VAT increase has made cash flow and credit control essential priorities for most businesses with some seeking payments through the courts.”
With cash flow problems at crisis point for many firms, it is not surprising that they are taking legal action to ensure payment and protect their futures.
Many find that a letter from a solicitor is often enough to secure payment. For more entrenched debtors there are several other legal options to take, up to and including court action.
Please contact us if you would like more information about credit control and debt collection.
Judge wants to reform laws on divorce and cohabitation
A High Court judge has called for a radical shake-up of “outdated” family laws which he described as no longer fit for purpose.
Sir Paul Coleridge says an independent commission should be set up to look at ways of reforming the law relating to divorce and cohabitation because family relationships are now “unrecognisable” from 60 years ago when the last review was carried out.
Sir Paul, who sits as Mr Justice Coleridge in the High Court, said that in the last five years there had been a 35% increase in private law cases, including those involving divorcing couples and cohabiting couples whose relationships had broken down.
He said there had also been a 31% rise over the last two years in public law cases, partly reflecting the fact that more children were brought into care in the wake of the Baby P case.
Sir Paul said that approximately 320,000 children enter the family law system each year which meant that more than 3 million are now involved in some form of legal process.
He said: “The scale of the problem is genuinely alarming. The incidence of family breakdown is so terribly high now that the way in which family law is shaped and managed has, I believe, a direct and profound impact on the private lives of huge numbers of the population.”
Sir Paul said reform was long overdue because there had been no comprehensive examination of divorce law since the Royal Commission of 1950.
“When the last major reform was introduced there was no such thing as cohabitation outside marriage. The current law is ‘a dead parrot’ - it is no longer fit for purpose.”
Sir Paul said a commission should examine the rights of unmarried partners and consider introducing pre-divorce information sessions.
Please contact us if you would like more information about the issues raised in this article or any aspect of family law.
Mortgage lenders urged to back self-build home revolution
Britain’s mortgage lenders are being urged to back a housing revolution by lending more to people who want to build their own homes.
Housing Minister Grant Shapps says he wants self-build projects to become more widespread as a way of creating a much needed supply of affordable homes.
Mr Shapps has written a letter to banks and building societies calling on them to provide more mortgages and other specialist finance products for self-builders.
He says lenders should be encouraged by the fact that people who want to build or oversee the building of their own home are usually very reliable and unlikely to default on mortgage payments.
The Government is currently looking at ways to reduce the burden of regulation on house builders and releasing more public land.
Mr Shapps said: "I want to create a self-build revolution where building your own home is not just the preserve of the privileged few. As the mortgage market continues its recovery, lenders have an ideal opportunity to diversify lending into areas such as this.
"I think there are real business opportunities for lenders here - as the market grows - and I call on them to help make this important housing sector more mainstream."
Please contact us if you would like more information about funding self-build projects or any aspect of buying and selling a home.
Court orders that girl should live with grandmother
A court has ordered that a girl should live with her grandmother because her parents were not capable of looking after her properly.
The parents had what was described in court as a “tumultuous relationship”. They had left their daughter with her maternal grandmother when she was one and a half years old.
They later took her back but the authorities became concerned that they weren’t providing her with adequate care.
Proceedings began and during a fact-finding hearing it was found that the mother was “volatile, unpredictable and confrontational”. She had also made several allegations that the father had been violent towards her. She had often called for police assistance but then withdrew the allegations.
The father denied that he had been violent.
The hearing found that the mother had failed to provide her daughter with safe and stable accommodation.
The local authority invited the judge to make a special guardianship order placing the girl with the grandmother.
Both parents opposed this as they wanted to look after their daughter themselves.
However, the judge found that she was unable to believe anything the mother said and she was also scathing about the father.
The court granted a special guardianship order in favour of the grandmother. It also made an order preventing any further applications by the parents for two years and four months.
The parents took the case to the Court of Appeal but that has upheld the judge’s decision.
Please contact us if you would like more information about family law issues.
Woman ‘entitled to a house’ from her partner’s estate
A court has ruled that a woman was entitled to be provided with a house from her partner’s estate, even though he had died without making a will.
The couple had been in a relationship for five years and although they had become engaged, they had never married.
They bought a property together in Spain which they lived in for five years. They sold it and shared the proceeds when they decided to return to the UK. They then bought a house in Wales but the man paid for it and it was put in his sole name.
The couple believed this would provide tax benefits as the woman already owned a home which she rented out. The man then drew up a draft will in which he left the house in Wales and his pension valued at £35,000 to his partner. The rest of his estate was to pass to his sons.
However, he developed cancer and the will was never made.
He therefore died intestate, which meant all of his estate would pass to his sons.
The woman then applied for reasonable provision from her partner’s estate.
The court held that the law relating to intestacy had not made reasonable provision for her. She needed a home which would allow her to continue earning an income from the property she owned and rented out.
The court held that she should be allowed to buy a house with a purchase price of no more than £110,000. She would be allowed to live in the house for as long as she wished but it would be held on trust and would pass to the sons after she died.
Please contact us if you would like more information about wills and probate matters.