September 2009 News Articles
Directors breached their duties when buying property
The difficulties that can arise when directors are involved with different companies at the same time was illustrated in a recent case before the Court of Appeal.
The case involved a woman and two men who were directors at a finance company. The two men also owned another separate business.
During the course of their work for the finance company the two men came across an attractive investment property which they bought on their own behalf for their other business. The woman objected because she believed the benefit of the purchase should have gone to the finance company.
The business relationship broke down and she took legal action to force the two other directors to buy her shares in the company at a fair price. The judge ruled against her saying that the property investment lay outside the finance company’s scope of business and so therefore she had not been prejudiced.
However, that ruling has now been overturned by the Court of Appeal. It held that the two men had come across the investment opportunity during the course of their work for the finance company and therefore the finance company should have been offered the chance to take advantage of it.
That had not happened and the men had therefore breached their fiduciary duties – that is, their obligation to act in the best interests of the company they are representing.
The case has now been referred back to the lower court to determine to what extent the woman’s interests had been prejudiced and how much compensation she should receive.
Please contact us if you would like more information about this or any aspect of company law.
College not bound by 70-year-old restrictive covenant
A court has ruled that a college was not bound by a 70-year-old covenant which would prevent it from building on some of its land.
Norwich City College wanted to develop its campus but was informed that there was a restrictive covenant stating that nothing could be done to the land that would create a nuisance to the surrounding neighbourhood.
The college therefore sought a declaration under the Law of Property Act 1925 that the freehold land on which its campus stood was no longer affected by the restrictive covenant which was drawn up 70 years earlier.
The court heard that the current college grounds were part of a much larger estate which was sold off in several sections in the 1930s. The judge examined the wording of the covenants and concluded that they were designed purely to protect the interests of the vendor at that time as he sold the land off in small sections.
The vendor did not want purchasers to do anything that might affect the parts of the estate which remained unsold at that time. However, the wording made it clear that the protection was merely for the benefit of the original vendor and that benefit did not pass on to subsequent purchasers.
Therefore, it could not prevent the college from proceeding with its development.
Company entitled to damages from director who set up rival firm
A company is to receive compensation from a former director who set up a rival firm.
The company provided engineering and technical personnel for clients including the United States Defence Department. Its operations director, who was also an employee of the company, was responsible for the management of the business.
While still working for the company, the director set up a rival firm. He didn’t tell the company that he had done so. He also approached some of the company’s customers and took confidential documents.
The company claimed damages for conspiracy, breach of contract and breach of fiduciary duty – that is, the duty directors have to act in the best interest of the company employing them.
The court held that once he had resigned, the director was entitled to compete against his former company in any way he chose. However, he had been in breach of his duty because while working for his former company, he had failed to alert them that he was about to set up a rival business.
He had also taken documents and approached customers.
The court granted an order for damages to be assessed and also granted an injunction preventing the director from providing rival services until a year after his resignation.
Government announces timetable for new planning regime
The Government has published its timetable for implementing the new planning regime for major infrastructure projects.
The Infrastructure Planning Commission (IPC) was introduced by the Planning Act 2008. It’s designed to speed up the application process for large projects such as wind farms, power stations and railways. It’s hoped to reduce the time taken to make decisions from up to seven years to less than one year.
The IPC will also give the public more opportunities to express their views.
Ministers have now announced that the IPC will be up and running from October and will then begin accepting applications from the energy and transport sectors next year.
The Department for Communities and Local Government has published a route map for implementation. The IPC will begin accepting applications for the energy and transport sectors from 1st March 2010, for the waste water and hazardous waste sectors in April 2011 and the water supply sector in April 2012.
The Housing and Planning Minister John Healey says the timetable will enable developers to speak to the IPC and seek advice before it starts taking applications.
The route map and tables have been published at www.communities.gov.uk/planningandbuilding/planning/planningpolicyimplementation/reformplanningsystem/planningbill/.
Tenant’s notice to exercise break clause was not valid
Two companies belonging to the same group have failed to exercise their right to break a commercial lease because only one of them served notice on the landlord.
One of the firms involved was dormant and was a completely owned subsidiary of the other, active company. Together they had been granted a ten-year lease on a warehouse.
The active company then served notice on the landlord that it wanted to exercise the break clause. The name of the dormant company was not mentioned in the notice.
The landlord argued that the notice was invalid as it did not come from both companies. The companies responded by saying that a reasonable landlord would have known that giving only one name had simply been an administrative error, especially as one of the companies was dormant, and so the notice was valid.
However, the High Court has ruled in favour of the landlord. The judge said the notice was invalid because it created real doubt as to whether it came from both companies, especially as there had been nothing in the communications between the two sides to suggest that a reference to one of the companies should be taken as a reference to both.
Please contact us if you would like more information about commercial leases or any aspect of commercial property law.
Company wins damages against fraudulent project manager
A company has won its case to be paid damages by one of its project managers who had accepted bribes from a contractor to conspire in various dishonest practices such as approving fraudulent time sheets.
The company was engaged in operating and maintaining high voltage electricity systems. The work was overseen by a number of project managers who worked closely with the various contractors needed to carry out the work.
One of the project managers then started taking bribes from a contractor to provide it with repeat orders and to approve fraudulent timesheets and expenses. He had also been involved in the fraudulent acquisition of vehicles.
The court held that the company had proved the allegations and so the project manager was ordered to pay damages to cover the overcharging on labour costs, the cost of wrongly procured goods and other expenses.
The contractor was also held to be partly liable for some of the payments including the costs incurred by the company in carrying out its investigations.
Please contact us if you would like more information.
Appeal Court ruling gives extra weight to pre-nuptial agreements
Couples wishing to draw up legally binding pre-nuptial agreements have received a welcome boost from a landmark ruling by the Court of Appeal.
It means courts will have to give agreements far more weight in future and it may eventually pave the way for them to become legally binding
The case involved the wealthy German heiress Katrin Radmacher and her former husband, Nicolas Granatino, who is French. When they married they drew up a pre-nup saying that he would not make a claim on her money if they ended up divorcing.
That pre-nup would have been enforceable in their native Germany and France but they married in England, where the legal position has been less certain.
British courts will take pre-nups into account but they are still not legally binding under UK law. This has led to some debate as to their value, especially last year after the High Court decided that it would be unfair to hold Mr Granatino to the pre-nup agreement and awarded him £5.8m from Miss Radmacher’s fortune.
However, that ruling has now been overturned by the Court of Appeal which has cut the payment to £1m – a figure Miss Radmacher was happy to accept. In giving his judgment after the hearing, Lord Justice Thorpe said it was becoming “increasingly unrealistic” for courts to disregard pre-nups. He believed that a “carefully fashioned contract” could provide a valuable alternative to the “stress, anxiety and expense” of going to court.
He said judges “should give due weight to the marital property regime into which the parties freely entered”.
The uncertainty about pre-nups will remain until parliament clarifies the law but this ruling by the Court of Appeal means they are far more likely to be enforced than they were in the past. It has major implications, not just for the wealthy but for millions of ordinary couples as well, as Lord Justice Thorpe was keen to point out.
“There are many instances in which mature couples, perhaps each contemplating a second marriage, wish to regulate the future enjoyment of their assets and perhaps to protect the interests of the children of their earlier marriages upon dissolution of a second marriage.
“They may not unreasonably seek that clarity before making the commitment to a second marriage.”
The Court of Appeal ruling will influence future divorce settlements with the presumption being that pre-nups should be enforced unless there are compelling reasons to doubt their validity. Such doubts might arise if one party signed without getting proper legal advice or if someone failed to disclose all their assets when the contract was being drawn up.
The ruling means that people drawing up pre-nuptial agreements can feel more confident that their wishes will be followed. This is of particular value to older couples who may be far from rich but may still have built up considerable assets such as a home or small business which they may want to protect for their own benefit and that of their children from a previous marriage.
Please contact us if you would like more information about pre-nuptial agreements.
New LPA forms make it easier to protect your future
New forms making it easier to protect your future by registering Lasting Powers of Attorney (LPA) have been presented to Parliament and will soon be available for the public to use.
LPAs allow you to nominate someone you trust to make decisions about your financial and/or personal affairs if an accident or illness prevents you from being able do so yourself at some time in the future.
The person you choose, often but not always a family member, is known as the attorney.
Martin John, Chief Executive of the Office of the Public Guardian, said many people had found the existing forms too long and too easy to get wrong. The new forms have been designed to be simpler to use and understand without compromising the necessary safeguards.
There are two new forms, one relating to Property and Financial Affairs and the other to Health and Welfare.
LPAs should be drawn up with the help of a solicitor in order to protect your interests and to ensure that they fully represent your wishes. The LPA then needs to be registered with the Office of the Public Guardian for a fee of £120 before they can be used.
Justice Minister Bridget Prentice, said: “An accident or illness that robs you of your ability to make decisions is traumatic enough without having legal worries to contend with too. This is a straightforward solution, now all the more simpler, that makes sure the legal system protects and helps people rather than hindering them, exactly as it should do.”
The new forms were designed with help from Solicitors for the Elderly, Society of Trust and Estates Practitioners and the Law Society.
The Office of the Public Guardian aims to make the forms available from 1st October this year.
Please contact us if you would like more information about Lasting Powers of Attorney.
Rules for administering wills and probate to be revised
The system for administering wills and probate is to be given a major overhaul for the first time in more than 20 years.
Probate is the process of administering a person’s estate in accordance with their wishes as expressed in their will. A grant of probate is basically a court order confirming that a will is valid and that the executors can proceed with putting it into effect.
Now a working group is to be set up to review the Non Contentious Probate Rules. These are the rules that set out the procedure to be followed for obtaining a grant of probate when there is no dispute regarding the will.
The group is being established by Sir Mark Potter, President of the Family Division. Sir Mark said: “The current rules are far from user-friendly and provide little guidance. They have not been widely updated since 1987 and I hope that the rules produced by the working group will be more readily understood by the public, as well as bringing the procedures into line with more recent legislation.”
As Sir Mark indicates, the whole area of wills and probate can be complicated. It is wise take legal advice when dealing with such matters to make sure everything is carried out correctly in accordance with the law so that any potential problems can be identified and avoided.
Please contact us if you would like more information about any aspect of wills and probate.
Woman has no rights over house she helped her brother to buy
A woman who helped her brother buy a house has been told she has no claim on the property and cannot force it to be sold to enable her to get her money back.
The house was bought in the brother’s sole name in 1999. The sister said she contributed a substantial sum of money towards the purchase on the basis of an express agreement that he would hold the property on trust for her.
She said she didn’t register an interest in the property at the time because she had complete trust in her brother and believed that he would reimburse her.
The property was then let out for about five years with the sister acting as her brother’s agent.
However, in 2004, the brother decided to move into the house with his wife. The relationship between sister and brother then broke down. The sister sought an order for the sale of the property so she could get her money back. She told the court she would not have made such a substantial contribution towards the purchase price if she had not thought she was acquiring an interest in the property.
However, the court has ruled against her. It held that, on the balance of probabilities, the money she had contributed was no more than an unsecured loan for which she had expected a substantial commercial return, to be earned from letting the property.
If it was not a loan, it was difficult to see why the property had not been purchased in both names. The sister’s claim for a beneficial interest in the property was therefore dismissed.
The case highlights the need for people to draw up the appropriate legal documents when making substantial investments of this kind. Casual verbal arrangements can become blurred and lead to disagreements several years down the line – even among close family members as in this case.
Please contact us if you would like more information about this or any aspect of buying and selling property.
Father retains the right to have contact with his daughter
A father has retained the right to have contact with his daughter even though both she and her mother had accused him of making inappropriate comments.
The father had been allowed to have contact with the girl during school holidays and on alternate weekends following the breakdown of his marriage. The mother then made an application to suspend contact on the basis that the father had made inappropriate remarks to the girl.
The father denied this but the girl also said that he had made such comments.
However, the judge at the hearing declined to grant the application because he considered that there were other credible explanations as to why the girl might have made the allegations against her father.
He said it was difficult to assess her evidence because of the way she had been exposed to the acrimony between her parents. She had been seen by various professionals prior to the hearing and all considered her to be honest, yet she had reported different things to each of them.
The judge also found that there were several inconsistencies in the mother’s evidence and he considered that the father had been a more credible witness. He held that the allegations had not been proven and the father could continue to have contact with his daughter as before.
The decision has now been upheld by the Court of Appeal which said that the judge was entitled to prefer the father’s evidence in this case.
Please contact us if you would like more information about family law.
Delay proves costly for women making equal pay claim
A group of women hospital cleaners have lost part of their equal pay claim because they delayed too long before taking action.
The women had originally been employed by the NHS but their employment was then transferred to a contractor as part of a privatisation process.
Five years later they brought an equal pay claim for a period going back six years. This spanned the date of their transfer of employment.
However, the women maintained that the new contractor was still liable to meet the pay claim in full because it had taken on liability under the Transfer of Undertakings (Protection of Employment) Regulations 1981.
They won their case at the employment tribunal but the Employment Appeal Tribunal then ruled that although the women could claim for the period after the transfer, they could not claim for the period before. This was because such proceedings should have been brought within six months of the transfer taking place.
That decision has now been upheld by the Court of Appeal. It ruled that although the new contractor had taken on responsibility for the women’s employment claims, those claims had to be made within six months of the transfer or they would become time-barred.
Employment law is often complex and, as this case shows, employees faced with important issues at work should seek legal advice as soon as possible if they wish to protect their interests and their rights.
Please contact us if you would like more information.
Woman awarded damages for hearing loss caused at work
A woman has been awarded £3,000 in compensation for hearing loss caused by exposure to loud noise at the mill where she worked nearly 30 years ago.
The woman had been a ring doffer at a textile mill between 1972 and 1981. Twenty one years after leaving that job she noticed that her hearing in her left ear had decreased. She was unable to hear people properly even though they were close to her and she found herself having to lip read.
The volume on the television needed to be turned up for her and people said she tended to shout rather than speak to them.
Her doctor diagnosed that she was suffering from sensorineural hearing loss.
She brought a compensation claim on the basis that the mill had been negligent in exposing her to harmful levels of noise for long periods. The mill admitted liability and she agreed to accept £3,000 in an out-of-court settlement.
Anyone who suffers injury as a result of someone else’s negligence is entitled to claim compensation. Please contact us if you would like more information.