Unmarried Couples and joint ownership: a cautionary tale

In May of this year the Court of Appeal handed down a decision in the case of Kernott and Jones. This is a cautionary tale, which all unmarried couples who are contemplating the purchase of residential property together as their home, and all solicitors who advise them, should study.

The two parties bought a property many in the early 1980s and joint owners in equal shares. The resided together for a few years but eventually the relationship broke down and Mr K left the property, whilst Ms J remained with the children of the relationship. Only recently the courts have been asked to decide whether it could infer, given the length of time that had passed and the lack of contribution by Mr K to the household, that the parties intention was that Ms K's share would increase to reflect this.

In deciding that it could not make this inference the court commented: -

"I described this case as a cautionary tale. So, in my judgment, it is. The purchase of residential accommodation is perhaps the single most important financial transaction which any individual transacts in a lifetime. It is therefore of the utmost importance, as it seems to me, that those who engage in these transactions, and those who advise them, should take the greatest care over such transactions, and must - particularly if they are unmarried or if their clients are unmarried - address their minds to the size and fate of the respective beneficial interests on acquisition, separation and thereafter. It is simply impossible for a court to analyse personal transactions over years between cohabitants, and the costs of so doing are likely to be disproportionate in any event. Cohabiting partners must, it seems to me, contemplate and address the unthinkable, namely that their relationship will break down and that they will fall out over what they do and do not own."

The Employer Traps and Other Tips

1. GARDEN LEAVE
Ensure that you have a garden leave provision in your contract which can be very useful if you do not want someone on the premises during their period of notice (whether termination is by you, the employer, or by the employee). If you seek to put someone on garden leave when you do not have the contractual right to do so, that can be a breach of contract.
2. NOTICE PERIOD AND HOLIDAYS
It is also a good idea to state in the contract that you, the employer, reserves the right to insist that an employee use up any accrued holiday during their notice period (whether notice has been given by you or by the employee).
3. MISCONDUCT AND RIGHT TO WORK
An employee who is in breach of contract can lose any "right to work". This can arise if the employer discovers that the employee has been in serious breach of duty and in breach of good faith, e.g. if he has been working for a competitor. The employer may insist on the employee serving out the notice period but not actually doing his or her usual work, e.g. not being able to work with clients before going to a competitor and perhaps not earning money if based on a commission. [Standard Life Healthcare Ltd v Gorman & Others]

Employment Law - What's in the pipeline!

EMERGENCY BUDGET 2010

Under the details of the emergency Budget, the following measures are intended:
· A consultation on whether to phase out the default retirement age (currently 65). However, now that there is talk of the age at which state pensions can be accessed being increased on a 5-yearly basis, this would suggest that the default age would have to be scrapped altogether;
· From 2011, the majority of benefits – presumably including maternity pay, sick pay etc – will be up-rated in line with the Consumer Price Index rather than the Retail Prices Index (apparently in order to save over £6 billion a year by the end of the Parliament);
· The threshold at which employers will start to pay National Insurance will increase by £21 per week above indexation from April 2011;
· The personal allowance below which no Income Tax is payable will rise by £1000 to £7475 in April 2011.
Comment As scrapping the default retirement age is going to be essential to the proposed pension reforms, employees must be sure of being able to work beyond 65 if the State will no longer provide, therefore employers will perhaps need to start prizing reliability, experience and literacy more, and more than youth, energy and versatility. It may transpire that the Government will need to introduce legislation so that older workers can insist on part-time work.

FIT NOTES

By now, employers will no doubt be familiar with the new concept of fit notes rather than sick notes, which are supposed to help the employee get back to work. However, employers should treat the fit notes with caution, particularly where the GP indicates that the employee "may be fit for work, subject to advice". The fit notes are not intended to replace the legal obligations of the employer to its employees. Whilst any advice that GPs provide is not binding on the employer, the fit note is intended to prompt discussions between doctors and their patients and between employers and employees on options that might facilitate a return to work. Any recommendations that the GP makes, therefore, will be a focal point of these conversations. Employers need to be careful because of the potential use by the employee of the fit note in any claim that they may bring against the employer, for example, if a fit note provides the employer with more information and advice than it would have had under the old system of sick notes, this may make foreseeability – a necessary factor in stress claims – an easier evidential obstacle for claimants to overcome. Clearly, much will depend on how much information and advice is actually on the fit note; it is suspected that in most cases, a fit note will not contain enough information to trigger the employer’s duty to take steps.

FIT NOTES

By now, employers will no doubt be familiar with the new concept of fit notes rather than sick notes, which are supposed to help the employee get back to work. However, employers should treat the fit notes with caution, particularly where the GP indicates that the employee "may be fit for work, subject to advice". The fit notes are not intended to replace the legal obligations of the employer to its employees. Whilst any advice that GPs provide is not binding on the employer, the fit note is intended to prompt discussions between doctors and their patients and between employers and employees on options that might facilitate a return to work. Any recommendations that the GP makes, therefore, will be a focal point of these conversations. Employers need to be careful because of the potential use by the employee of the fit note in any claim that they may bring against the employer, for example, if a fit note provides the employer with more information and advice than it would have had under the old system of sick notes, this may make foreseeability – a necessary factor in stress claims – an easier evidential obstacle for claimants to overcome. Clearly, much will depend on how much information and advice is actually on the fit note; it is suspected that in most cases, a fit note will not contain enough information to trigger the employer’s duty to take steps.

PROSECUTION UNDER MINIMUM WAGE REGULATIONS

An optician who paid his staff at rates up to 40% less than they were entitled to has been prosecuted for National Minimum Wage offences. The optician, who owns two optician stores in Liverpool, pleaded guilty to failing to pay four of his employees the National Minimum Wage. He received a fine of £3696 from HM Revenue & Customs. Apparently, he attempted to hide the fact that he was not paying what he should by falsifying employee information and then neglected to produce appropriate accounts. Following initial checks by HMRC investigators, he altered contracts and other documentation which he provided to support his claim that he was paying the minimum wage. He also altered pay rates by falsifying documents and back-dating contracts to show different hours of working and removing staff entitlement to paid meal breaks. HMRC’s Assistant Director of Criminal Investigations said that the sentence sends a clear message to all employers, whatever size, that HMRC will actively pursue those whom HMRC suspects of flouting National Minimum Wage law.
The case serves as a reminder to employers to check that they are indeed compliant with the current minimum hourly rates. (These will be going up again in October: watch this space.)

FAKE EMPLOYMENT TRIBUNAL CLAIMS – COMMONSENSE JUDGMENT

There are sometimes stories in the press of disappointed job applicants who start Employment Tribunal proceedings on the ground of some form of discrimination, the applicants being unwilling to accept that they were simply not suitable for the job. Indeed, this Firm has previously successfully challenged a claim brought against its employer client where an applicant for a maths teaching post brought proceedings against the client (and many other institutions) because he did not get the post. In our client’s case, the applicant was invited for an interview but did not even attend, yet despite that, still brought a claim. (We always thought that perhaps he got muddled between all the different institutions he was suing, some of which he had attended for interview but had been rejected for the post). We were also successful in obtaining costs against him (unusual in employment claims) and the story hit a number of newspapers, including some nationals.
It is with some satisfaction, therefore, that a recent judgment may put paid to those who, in a slightly different scenario, use job applications as some kind of "testing ground". Recently, a litigant brought age discrimination claims against twenty recruitment agencies. She lost an appeal to the Employment Appeal Tribunal (EAT) on the grounds that she had no genuine interest in the vacancies for which she had applied. The EAT said the judgment could serve as an authority that a job application "must be genuine before a statutory disadvantage can be suffered".
In this case, the applicant was 51, an experienced accountant who applied for over twenty positions for recently-qualified accountants for which she was over-qualified. After not receiving any job interviews, she began age discrimination proceedings against the recruitment agencies. Some agencies settled immediately but eleven chose to appear before the Employment Tribunal, of which six settled during the proceedings. The Tribunal dismissed her claims against the remaining five agencies on the basis that she had no interest in the vacancies but simply wanted to claim compensation. It awarded costs against her (still a rare occurrence in a Tribunal). The costs are expected to be up to £10,000 for each agency. As stated, the EAT upheld the Tribunal’s ruling. [The case of Keane]

Companies House Issues Liquidation and Insolvency document

In May 2010 Companies House issued a document entitled 'Liquidation and Insolvency'. It contains guidance of a basic nature on liquidations and insolvency. It is a good starting point for the lay person or as the website states: -

"This guide will be relevant to you if:

are a director or secretary of a company

act as an adviser to a company "

It can be found at http://www.companieshouse.gov.uk/about/gbhtml/gpo8.shtml.

Brendan O'Brien

OFT - Market Study on Corporate Insolvency

In accordance with section 5 of the Enterprise Act 2002, the Office of Fair Trading has carried out a market study in respect of Corporate Insolvency and the role played by Insolvency Practitioners.

It has found that the market generates about £5bn per annum is asset recovery and £1bn in fees for the Insolvency Practitioners. It is also refreshing to see that the OFT states that the market works well in most cases, but in about a third of all administrations and creditors voluntary liquidations fails to protect the interests of the small creditor.

On 24 June 2010, the OFT recommended far reaching reforms in the Corporate Insolvency market and its report and recommendations can be found at http://www.oft.gov.uk/shared_oft/reports/Insolvency/oft1245.

In part it seems that the OFT has focussed on the secured lender/IP relationship. Most banks operate a panel of Insolvency Practitioners who will more often than not be instructed where the debt owed to the bank by the company exceeds £200,000.00. Having reviewed this relationship it seems that the OFT has concluded that there is sufficient competition in the market place among IPs who might be viewed as too small to be on the panel to grow their business sufficiently to achieve panel status. There is a sufficient logic issue in this proposition. It disregards the costs to the bank of operating a larger panel than it currently has. Mosts practitioners are faced with the actor/equity card conundrum. We are big enough but because we don't currently do the work we can't get it. Law firms face this problem on a regular basis for instance in acquiring Housing Association or Local Government work. If you don't do the work already you won't get it.

Among the fundamental reforms proposed by the OFT are: -

- an industry-funded independent complaints handling body with broad powers to review IP fees and actions, impose fines, and return overcharged fees to creditors;
- reform of the regulatory system by repositioning the Insolvency Service (IS) as the dedicated oversight regulator of the Recognised Professional Bodies (RPBs) and withdrawing its role as a direct regulator of IPs;
- providing objectives for the regulatory regime against which its performance can be measured; and
- streamlining the currently inefficient way in which the regulatory regime makes decisions.

It is noted that little seems to have been said about the current process of administration and CVL. This bears out the impression of those in the profession that the processes are right but there needs to be some oversight in respect of the unscrupulous IP. We doubt that the Insolvency process can really bear a further change particularly at the present time when it would appear that the floodgates of corporate insolvency are being held closed by the Business Tax Deferment Scheme. But this cannot continue for ever and changes now would impair the ability of the IP to handle the process of administration or CVL effectively to maximise the returns to the creditors.

This report can also be found at http://www.oft.gov.uk/news-and-updates/press/2010/67-10

Brendan O'Brien

Former Company Directors and their continuing duties

Over many years the courts have through innovation created certain duties on the parts of Directors both during their tenure and perhaps more importantly after they have left the company. Over time legislation has played catch up both in the 1985 Companies Act and now specifically in the 2006 Act.

The relevant section in the new act are section 175: -

"(1) The general duties specified in sections 171 to 177 are owed by a director of a company to the company.
(2) A person who ceases to be a director continues to be subject--
(a) to the duty in section 175 (duty to avoid conflicts of interest) as regards the exploitation of any property, information or opportunity of which he became aware at a time when he was a director, and
(b) to the duty in section 176 (duty not to accept benefits from third parties) as regards things done or omitted by him before he ceased to be a director.

To that extent those duties apply to a former director as to a director, subject to any necessary adaptations.
(3) The general duties are based on certain common law rules and equitable principles as they apply in relation to directors and have effect in place of those rules and principles as regards the duties owed to a company by a director.
(4) The general duties shall be interpreted and applied in the same way as common law rules or equitable principles, and regard shall be had to the corresponding common law rules and equitable principles in interpreting and applying the general duties.
(5) The general duties apply to shadow directors where, and to the extent that, the corresponding common law rules or equitable principles so apply."

and section 175: -

"(1) A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company.
(2) This applies in particular to the exploitation of any property, information or opportunity (and it is immaterial whether the company could take advantage of the property, information or opportunity)."

In the case of Thermascan Limited v Norman the courts have for the first time had to consider those provisions and whether the provisions in the 2006 Act changed the law existing previously.

It was held that the statutory provisions did not change the law and for those Company Directors out there reiterated that their duties are: -

1. to avoid a conflict of interest with the company's interest; and

2. not to receive benefits from third parties relating to matters created before the Director left the Company.

However, these sections by themselves creating a contradiction between their impact and public policy. Public policy states that former directors should be able to continue to earn a living using their existing fund of skill and knowledge. Generally, however, it is a well worn path that a business may have protectable business information which if released into the general market or used by other would have a significant detrimental impact on it. More often than not this information is avaliable to the Director of the Company. The line of argument normally followed is that the information is within "their existing fund of skill and knowledge". The determining factor will always be a question of fact.

In conclusion, a director exiting a company should be extremely wary of using business information from the Company from which it exited. What the Director views as own skill and knowledge is likely to be viewed by the Company and its management as its commercially sensitive information protectable as a 'legitimate business interest'.

The pitfalls of the use of Indemnity Insurance in property transactions!

It has long been the case that insurance contracts are based on the principal of uberrimae fidae. In effect, the insurer is entitled to rely on having been told everything it needs to know about the surrounding circumstances that would otherwise prevent the insurer from issuing the policy. It should be remembered that silence can be deemed a mis-representation where a fuller diclosure would otherwise have occured.

With the recession, only just in the recent past and many insurance companies watching for the onslaught of claims that a post-recession period often brings, they will look carefully at the lack of information at the inception of the policy.

With pressure to complete transcations quickly increasing particularly from commercial property clients, solicitors should not seek to 'fix' title issues with indemnity insurance without full disclosure to and approval from the client (and where applicable the lender). If this is not forthcoming then the only alternative is to address the defect head-on and only proceed when the situation has been normalised.

It has been the case over the years that solicitors have been treating indemnity insurance as a panacea for a wide variety of defects. Moreover, with the advent of self issue policies, based on a checklist one has to say that these policies may in some cases have been issued in inappropriate situations. In order to issue a policy, the solicitor needs to look at the policy a tick a number of boxes. Over time the solicitor learns the matters needed for compliance in particular self issue situations and then forgets the real issues involving surrounding circumstances and whether the policy is indeed appropriate.

What is surrouding circumstances?

The court has recently held in the case of Envirocom that the party applying for insurance must ensure that all of the facts have been disclosed so that the insurer can make the right decision on cover and premium.

In this case, disclosure meant actually giving a detailed explanation of the processes whereby the work carried out was done so that such items as oxy-acetylene lamps can be factored into the risks.

From a property perspective, changes in use of a premises may be deemed surrounding circumstances. Even a post inception change may be considered sufficient to obviate the insurance.

What does this all mean?

1. If a solicitor has issued inappropriate policies (or indeed obtained them directly) then the insurance company will deny risk and leave the solicitor's own professional indemnity insurer to make the payout, thereby increasing the possibility that the solicitor's practice may not get insurance in the next insurance year, or if it does at less attractive rates;

2. It is likely as a result of the Envirocom case that solicitors will now be more reticent where previously indemnity insurance was an option. In turn commercial clients will either have to take the risks themselves or accept that certain transactions may have to proceed more slowly. The option in these cases is to have a conditonal contract with a condition precedent relating to the defect and its remedy.

Fake Fit-Notes: Beware

Most of our client have yet to receive one of the new Doctor's 'Fit Notes' yet, but it is worth being aware of the following internet service:

The website http://www.doctorsnotestore.com/ brazenly selling false versions of the new fit notes which are described as "authentic looking replica doctors sick note or medical certificates. Written on official doctors’ notepaper, with real stamp."

This causes concern because, although the website claims the documents are "for novelty use only", workers could try to use them to claim sick pay which is fraudulent. The fake fit notes come with a guaranteed 48-hour delivery, and employees can choose to have their notes stamped by doctors from medical centres in any UK city. Top employment experts have warned HR could be scammed by the facsimiles as they are still getting used to the new fit-note system.
Katherine Ashby, a researcher in the health and wellbeing team at The Work Foundation, was quoted in Personnel Today saying: "It’s a risk that employers could be fooled by them because the fit note is a new concept." Ben Willmott, employee relations adviser at the Chartered Institute of Personnel and Development, agreed it could be "very difficult for employers to spot them", but said if HR were suspicious, they should refer the worker to an independent occupational health adviser or doctor, or alternatively call the surgery which issued the note to check its legitimacy and that it was signed by the doctor named. He added employers could also warn their staff that anyone found using the fakes would face disciplinary action.

Incredibly, Doctorsnotestore.com is currently running a special 'buy one, get one free' offer with a blank fit note, so they will "have a spare one to fill in yourself at a later date – you never know when you'll have to explain your absence again".

To complete the note, the employee has to simply supply their name and address, what they are suffering from, and the date they started to ’suffer’ the problem.

Pre-Adminstration employees and TUPE

In a return to a previous blog following further analysis of the case Oakland v Wellswood (Yorkshire) Ltd te situation has been somewhhat clarified. The Court of Appeal decision does not help in respect of TUPE and administration although the point is referred to in the decision.

In order to decide the position one really needs to look at the case at its earlier stage. Without reference to European cases it is difficult to find cases that refer to TUPE in these circumstances and give a definitive decision on the point.

Where an undertaking (in effect a business) is transferred to another party then TUPE applies subject to exceptions to transfer automatcially the employment (with the associated statutory employment rights to the buyer. It has for many years been a subject of debate what happens in an pre-packed administration (where prior to the company entering administration a purchaser is found - often a new company set up by the old company's directors). The relevant provision applicable to insolvency proceedings are contained in the Transfer of Undertakings (Protection of Employment) Regulations 2006 at article 8 that states: -

(1) If at the time of a relevant transfer the transferor is subject to relevant insolvency proceedings paragraphs (2) to (6) apply.
(2) In this regulation "relevant employee" means an employee of the transferor--
(a) whose contract of employment transfers to the transferee by virtue of the operation of these Regulations; or
(b) whose employment with the transferor is terminated before the time of the relevant transfer in the circumstances described in regulation 7(1).

(3) The relevant statutory scheme specified in paragraph (4)(b) (including that sub-paragraph as applied by paragraph 5 of Schedule 1) shall apply in the case of a relevant employee irrespective of the fact that the qualifying requirement that the employee's employment has been terminated is not met and for those purposes the date of the transfer shall be treated as the date of the termination and the transferor shall be treated as the employer.
(4) In this regulation the "relevant statutory schemes" are--
(a) Chapter VI of Part XI of the 1996 Act;
(b) Part XII of the 1996 Act.

(5) Regulation 4 shall not operate to transfer liability for the sums payable to the relevant employee under the relevant statutory schemes.
(6) In this regulation "relevant insolvency proceedings" means insolvency proceedings which have been opened in relation to the transferor not with a view to the liquidation of the assets of the transferor and which are under the supervision of an insolvency practitioner.

The wording appears to be clear that where a liquidation occurs the employees do not transfer. However, can an administration fall within the defintion "with a view to the liquidation of the assets" of the company in administration. In order for an administration to be the appropriate insolvency process the Administrator needs to ensure that he/she can fulfil one of the objectives set out in Section 3 of Schedule B1 of the Insolvency Act 1986: -

(1) The administrator of a company must perform his functions with the objective of--
(a) rescuing the company as a going concern, or
(b) achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration), or
(c) realising property in order to make a distribution to one or more secured or preferential creditors.

In effect, a prepackaged administration fulfils all of the criteria the latter two requiring liquidation of some of the assets that remain with the vast majority being transferred to the new company. Using the European Court decision in D'URSO (applicants) v. ERCOLE MARELLI ELETTROMECCANICA GENERALE SpA (in special administration), HHJ Peter Clark at the Employment Appeals Tribunal in the Oakland case stated that: -

"26 Having regard to paragraph 25 of the judgment in Dassy, I find that the purpose of the procedure was the liquidation of the assets of Oldco. The deal behind it gave the administrators the chance of making the most advantageous realizations. It so happened in this case that the liquidation of assets involved the sale to Newco in circumstances that would otherwise have engaged regulations 4 and 7."

Th outcome now seems to be clear in respect of Administrations. However, not unsurprisingly the Court of Appeal overturned the decision of HHJ Peter Clark when new law that had been missed previously was introduced; namely section 218 of the Employment Rights Act. It is a matter of fact that the employment continues. Whatever TUPE says ont he subject if it can be substantiated that the employee's terms of employment continued after the event the new employer will find themselves in much the same situation as if regulation 8 of the TUPE did not apply.

It is therefore imperative that the new company buyinmg from a company in administration gets appropriate legal advice from an insolvency or employment lawyer in this respect.

Even when right not following procedure could mean you pay damages!

The Court of Appeal has recently held in Edwards v Chesterfield Royal Hospital NHS Foundation Trust that where as a contractual condition of an employment contract there is a disciplinary procedure in certain circumstances and the employer fails to comply damages will extend to loss of earning. This means that in the present case irrespective of the issues leading to dismissal failure to comply with your own procedures will extend the amount of damages payable.

Normally, the employee would be entitled to payment for the contractual notice period. However, where the contract is breached (by an express or implied condition) the employee can claim damages at large.

For those having to dismiss employees it is essential that the procedures are understood and followed in detail. In other words, take a deep breath before taking action.

Abusive Language a Fundamental Breach of Contract?

In the case of Gledhill v Bently Designes (UK) Ltd it has been held that abusive language from one party to a contract to another may constitute a fundamental breach of contract allowing the innocent party to terminate the relationship. By drawing comparisons between employer/employeen contracts which remain a master and servant relationship the court has to a degree introduced relationship matters into contract law. The concept achieved may be correct but the association with employer/employee relationship is fundamentally flawed. For an employment contract to work the employer must be able to rely on a calm workplace where abusive behaviour cannot be tolerated.

Whilst it may not be conducive to a commercial contractual relationship, contract does have this need for management of behavioural patterns.

Looking at the facts though the defendant must be sick that the contents of his call (where the abusive behaviour took place) and the fact that when given an opportunity to apologise failed to do so.

Whilst the outcome was right the basis upon which it was reached was wrong.

Insolvency Service Consultation: Pre-packaged Administration

It is true to say that the concerns around pre-packaged administrations continue to be a cause for concern and some debate by the practitioners, creditor groups and the Insolvency Service. In order to partcipate in the process of consultation you can find the necessary information at https://www.carb.ie/Global/The%20Insolvency%20Service%20Pre-pack%20consultation%20document.pdf.

The Options identified by the Insolvency Service are: -

1. No change. All options will be considered against the alternative of making no regulatory change. Some changes to the Insolvency Rules 1986 that will come into force on 6th April may incentivise insolvency practitioners to provide fuller details of their pre-appointment work when
involved with pre-pack sales.

2. Giving statutory force to the disclosure requirements currently in Statement of Insolvency Practice (SIP) 16 (Pre-packaged sales in administrations), and providing penalties for non-compliance.

3. Following a pre-pack administration, restrict exit to compulsory liquidation, so as to achieve automatic scrutiny of the directors’ and administrators’ actions by the Official Receiver.

4. Require different insolvency practitioners to undertake pre and postadministration appointment work.

5. Require the approval of the court or creditors, or both, for the approval for all pre-pack business sales to connected parties.

The questions to be answered to provide the evidence necessary to inform the consultation are as follow: -

Question 1: Do you believe that the current framework governing the operation of pre-pack sales in administration provides a sufficient level of confidence that pre-packs are only being used in appropriate circumstances and with an appropriate degree of transparency?

Question 2: If not, what are your main concerns with the way pre-packs are currently executed?

Question 3: Do you believe that pre-packs are presently subject to abuse? If so, how? Please indicate whether you believe it is the actions of directors, insolvency practitioners, secured lenders or any other parties that are contributing to any perceived or actual abuse and to what extent you believe this is a problem.

Question 4: Some of the following options would require a distinction to be drawn between pre-packs and ‘conventional’ administrations. What do you think should be included in a statutory definition as to what constitutes a pre-pack transaction?

Question 5: Do you believe that the new pre-appointment cost recovery mechanism will have a significant effect on transparency and confidence?

Question 6: Do you believe that by giving statutory force to the SIP 16 disclosure requirements creditors would be given better information about the reasons and justification for the pre-pack?

Question 7: Do you believe that such a requirement will increase costs and reduce the returns available to (a) secured creditors, and (b) unsecured creditors? If possible, please provide an estimate of the impact on each.

Question 8: Do you believe that it would be appropriate for details of the pre-pack to be filed at Companies House? If not, why not?

Question 9: Do you believe that it would be appropriate for a statutory offence to be created in circumstances where the pre-pack disclosure requirements are not adequately met?

Question 10: Do you believe that confidence in pre-packs would be improved by requiring companies whose business and assets had been sold through a pre-pack to exit administration via compulsory liquidation? What would be the possible costs and benefits?

Question 11: Do you believe that an insolvency practitioner providing advice to a company on the potential for a pre-pack has an inherent conflict of interest when accepting a formal appointment as administrator with a view to subsequently executing a pre-pack sale?

Question 12: If so, do you believe that such a conflict extends to circumstances where the insolvency practitioner has had an ongoing prior relationship with the company in the context of undertaking review work for a secured lender?

Question 13: Do you believe that a requirement for a different insolvency practitioner to accept appointment as administrator would improve confidence that pre-packs are only used in appropriate circumstances?

Question 14: Do you believe the requirement to use two separate insolvency practitioners would increase costs and delay therefore reducing the returns available to (a) secured creditors, and (b) unsecured creditors? If so, please provide an estimate of the impact on each.

Question 15: Do you believe the requirement to use two separate insolvency practitioners would reduce the number of business sales effected through a pre-pack sale? If so, please provide an estimation of the impact.

Question 16: Is it desirable that unsecured creditors, who may not stand to receive any dividend from the proceedings, be given an opportunity to influence the proposed pre-pack sale where the business is being purchased by a connected party? If so, why?

Question 17: Should approval for such a sale initially be sought from unsecured creditors with a recourse to the court, or from the court in the first instance? If you believe unsecured creditors should be given the opportunity to approve in the first instance, what percentage in value of their claims should be required for approval to be obtained?

Question 18: Would the prior approval of the court or creditors for the proposed sale improve confidence that pre-packs are only used in appropriate circumstances?

Question 19: Do you believe the requirement to obtain court or creditor approval would increase costs and delay therefore reducing the returns available to (a) secured creditors, and (b) unsecured creditors? If so, please provide an estimate of the impact on each.

Question 20: Do you believe the requirement to obtain court or creditor approval would reduce the number of business sales effected through a pre-pack sale? If so, please provide an estimation of the impact.

Question 21: Do you believe that any provision requiring the prior approval of the court or creditors for business sales to connected parties should be extended to apply to such sales out of all formal insolvency procedures (i.e. not restricted solely to administration)? If so, why?

Question 22: Do you believe that a requirement to obtain court or creditor approval for a pre-pack business sale to a connected party should be combined with the attachment of personal liability to directors and connected parties who purchase a business without obtaining the requisite approval?

Question 23: Do you believe that it would be appropriate for pre-pack business sales to connected parties executed without the requisite approval to be rendered void?

Question 24: To what extent do you believe that pre-packs provide a positive contribution to the wider economy by allowing economically viable parts of insolvent companies to continue trading? How would you quantify such a contribution? Please provide any evidence you may have to support your comments.

Question 25: To what extent do you believe that pre-packs create market distortions by allowing companies to ‘dump debts’ and continue trading to the detriment of competitors? How would you quantify this? Please provide any evidence you may have to support your comments.

Question 26: To what extent do you believe that pre-packs create job losses ‘upstream’ by allowing companies to ‘dump debts’ and continue trading to the detriment of suppliers who then experience knock-on financial difficulties? How would you quantify this? Please provide any evidence you may have to support your comments.

Question 27: To what extent do you believe that any economic value preserved by a pre-pack sale (e.g. employees, customers, suppliers) would otherwise transfer to alternative ventures (e.g. competitors) if a pre-pack sale was not undertaken? Please provide any evidence you may have to support your comments.

Question 28: Do you believe that any of the options identified would have a significant impact on the behaviour of secured lenders? If so, what do you think this is likely to be? If possible, please provide an estimation of the impact.

Question 29: Which of the five proposed options would be your preferred solution(s), and why?

Question 30: Are there any alternative measures that you believe ought to be considered?

Question 31: Please provide an indication (if not obvious) as to the nature of your involvement in, or exposure to, pre-pack transactions and the approximate incidence of that involvement or exposure if relevant.

Make Sense of this?

YADOT SU LLAC - DNUORA SSENISUB RUOY NRUT PLEH NAC EW

Having trouble understanding the above phrase? Is this similar to the issues within you business?

Breeze and Wyles Solicitors LLP offers the members of the Hertfordshire Chamber of Commerce and Industry a free half hour business advice service for all of your business needs whether legal or otherwise. Where a matter is not legal in nature, utilising our network of professional advisors and our extensive knowledge of commercial issues we can put you in touch with the right person to provide you with the appropriate solution.

We act for a wide variety of businesses, including banks, SME companies and private individuals in a number of sectors providing advice in relation to : -

- Business Start Up advice
- Mergers, Sales and Acquisitions
- Commercial and Business Premises
- Commercial Property Portfolio management
- Terms and Conditions of Trading
- Intellectual Property
- Employment Law
- Workplace Policies (Internet and E-mail, bullying and equal opportunity policies)
- TUPE matters on business purchases and sales
- Data Protection and Security policies
- Information Technology contracts and e-Commerce
- Insolvency and Corporate Turnaround

When your business is as lean as possible and you are barely breaking even you are probably spending most of your time working in your business rather than on it. Dealing with day to day issues means that the problems aren't getting better, but you are the only person that can make the decisions and take the actions necessary to change the outlook for the business.
Every time you look up is the situation worsening?
You cannot see through the symptoms to the problems and as result no solution is possible. In circumstances like these the one thing that needs to be done is to get an objective opinion about the situation from an outsider. There will undoubtedly be a time when taking formal insolvency advice is the only course of action and indeed that may also be a safe place to start. However, we are seeing many business owners only turning for help when the situation is irretrievable and formal insolvency procedures the only option. The reality is that in most cases early action would have saved the business or created a better outcome.

WE CAN HELP TURN YOUR BUSINESS AROUND – CALL US TODAY

It is the aim of Breeze & Wyles Solicitors LLP to bring clarity to your business. Give us a try by booking an appointment with one of our Directors on 01992 558 411 and speaking to Georgina Meadows or by emailing us at georgina.meadows@breezeandwyles.co.uk .

Breach of Contract? Are you sure?

Where a contract has no termination provision, or a breach does not fall into the category provided in the provision, for a contract to be terminated the breach requires to deprive the no-fault party of, or substantially the whole of the consideration expected.

In the case of Dominion Corporate Trustees Ltd and others v Debenhams Properties Ltd an agreement for lease provided for termination for minor breaches. The court held that the Claimant was deprived of the right ot terminate in mosts cases (but in particular because the contractual provisions were extremely complex) as the clause flouted common business sense.

Brendan O'Brien