Business Dispute – Private & Commercial Litigation Solicitors | Insolvency Legal Advice |

Does agreeing to “reasonable costs” mean assessment on the indemnity basis?

admin — Tue, 16 Nov 2021 10:29:28 +0000

Yes, held the Commercial Court.

In Alafco Irish Aircraft Leasing Sixteen Ltd v Hong Kong Airlines Ltd [2019] EWHC 3668 (Comm) the parties had entered into a lease which contained a clause that the Defendant (who was the lessee) was to pay all of the Claimant’s (the lessor’s) “reasonable costs and expenses” of litigation, including its legal costs.

The Claimant had successfully obtained summary judgment against the Defendant and sought costs on the indemnity basis (rather than the standard basis), which meant that their costs did not have to be proportionate. Moulder J commented in particular that the word “reasonable” did not mean that indemnity costs could not be sought.

It is a common clause in lease agreements that lessees agree to paying the lessor’s reasonable costs and expenses, which include legal costs in the event that action is needed to recover arrears of rent, for example. Often, a lessee will sign a lease agreement including this clause without realising the potentially catastrophic consequences.

It is important that before entering into a lease you seek advice in relation to its terms in order to protect your position.

For further information on the above, please contact us on 0207 467 3980 and speak to a member of our dispute resolution team now. Alternatively, email us with your query at info@jamesedwardassociates.com and we will be sure to call you back straightaway at a time convenient for you. All communications will, of course, be dealt with in the strictest of confidence.

Can foreign litigants be bound by English jurisdiction clauses contained in contracts to which they are not a party

admin — Tue, 16 Nov 2021 10:19:24 +0000

Airbus SAS v Generali Italia SPA and others [2019] EWCA Civ 805

In its recent decision Airbus SAS v Generali Italia SPA and others, the Court of Appeal dismissed an appeal against a declaration that the English court had jurisdiction to determine a claim by insurers concerning damage to an aircraft pursuant to an English jurisdiction clause in a warranties agreement to which they were not a party.

What is an exclusive jurisdiction clause?

Under a jurisdiction clause, the parties to a contract can elect which courts will have the rights to adjudicate any disputes which arise out of the contract. More specifically, an exclusive jurisdiction clause confers jurisdiction on the courts of a particular country to the exclusion of any other.

Example:

“Each party irrevocably agrees that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with this agreement or its subject matter or formation.”

What are the specific facts of the case?

Airbus SAS (“SAS”) is a French company that manufactures various types of aircraft. Under a purchase agreement dated October 2005, SAS sold several aircraft to Air One; a low-cost Italian airline.

The aircraft purchased came to be operated by another Italian company called Aitalia through a series of agreements, and ultimately, a sub-lease.

The sub-lease was concluded between a company called Mainstream and Aitalia. The agreement was governed by English law and stipulated that any disputes would be in the exclusive jurisdiction of the English courts. In addition to the sub-lease, a warranties agreement was entered into between Airbus, Mainstream, other related parties, and Aitalia which also purported to give exclusive jurisdiction to the courts of England.

In September 2013, an aircraft operated by Aitalia was forced to make an emergency landing at Rome’s Fiumicino Airport with the landing gear partially retracted which resulted in significant damage. Italian investigators found that a defect in the right hand main landing gear door actuator acted as the catalyst to this incident.

Aitalia was indemnified in respect of circa $11 million worth of damage caused by the accident by their insurance company, Generali Italia. However, in July 2017, Generali Italia commenced proceedings against Airbus in Italy seeking damages for negligence under Italian law (specifically, the Italian Civil Code); the basis of the claim being that Airbus had failed to take preventative action it should have in the light of earlier incidents involving similar aircraft.

A claim for damages was made in the Italian courts by Generali Italia both:

In its capacity as insurer of Aitalia, exercising rights of subrogation;
On a non-contractual basis under art. 2043 of the Italian Civil Code

Airbus, in its reply, sought a declaration that the proceedings commenced against it were commenced contrary to the terms of the warranties agreement which contained an exclusive jurisdiction clause (clause 13.2) that read:

“the parties hereto irrevocably agree that the courts of England shall have
exclusive jurisdiction to settle any disputes arising out of or in connection
with this agreement or any non-contractual obligations connected with it.”

The Judgement

At first instance it was held by Moulder J that the English court had jurisdiction of the claims by virtue of the exclusive jurisdiction clause.

In determining how clause 13.2 should have been construed, the judge found that Airbus had successfully satisfied the test of ‘good arguable cause’ and that “the intention of the parties was that clause 13.2 should apply to all disputes arising out of or in connection with the warranties agreement, including substantive claims under the warranties.”

To this end, the judge also held that the claim advanced by Generali Italia was “connected with” the warranties agreement because it pertained to an alleged manufacturing defect of one of the components of the Aircraft.

The Appeal Judgement

In the appeal, the appellants argued that they could not be in breach of an exclusive jurisdiction clause to which, as insurers, they were never parties to and accordingly there could be no basis on which the English court could make a declaration on them.

The court held that there was at least ‘good arguable cause’ that the claim commenced by the appellants was sufficiently closely connected with the warranties to fall within the scope of the exclusive jurisdiction clause in the warranties agreement and accordingly, the court dismissed the appeal and held that the English court has jurisdiction to determine the claims.

What is the significance of this case?

This case highlights the Court’s approach in determining whether parties can be bound by exclusive jurisdiction clause and the relevance of claims being ‘closely connected’ enough to be caught by such a clause. Careful consideration and early advice should be sought when parties are considering relying on such a clause and the impact it has on another parties.

How we can help

Our experienced commercial solicitors based in London have over 90 years’ experience in providing specialist legal advice on Commercial Dispute Resolution and Litigation

Not only are we based in the heart of legal London, just a stone’s throw away to the Royal Courts of Justice, the Employment Appeal’s Tribunal and Inns of Court, but as members of the International Legal and Accounting Solutions (ILAS) we can help you via our network of trusted professional advisors both in the UK and internationally.

Make An Enquiry Now

For more information please call us on +44 7441912822, complete a Free Online Enquiry or email info@jamesedwardassociates.com and one of our lawyers will contact you.

Why and how to present a Winding-up Petition

admin — Tue, 16 Nov 2021 10:13:55 +0000

Oh dear. A company owes you money. They know they are supposed to pay you, but they’ve just gone silent. What is the quickest way to recover an undisputed debt like this?

Generally, you have two choices:

Commence a conventional debt recovery claim

Depending on the amount you’re owed, you can take the debtor to the County Court or High Court.

The problem is that the process can be slow. Various stages have to be followed, including the exchange of documents known as ‘discovery’, gathering and drafting witness statements, and other delays. This means you might have to wait up to 12-18 months for a trial date, or even longer.

That’s a long time to wait for your money. So here’s another option…

Present a Winding-up Petition

If the debt is for £750 or more, you could issue a Winding-up Petition.

First, your solicitor would write a Letter of Claim to the debtor company setting out the details of the debt and asking for payment by a certain deadline. The letter should be drafted professionally by somebody who’s an expert at dealing with Winding-up Petitions (James Edward & Associates, for example).

Alternatively, we could prepare a document called a Statutory Demand. This isn’t a court document but it does have to be in a legal format. It will set out details of the creditor, and brief details of the debt including invoice date, invoice number and amount due. It will also contain the debtor’s details in full, including their registered office address.

If the debtor still doesn’t reply or pay you, we would then draft a Winding-up Petition. This contains similar information to the Statutory Demand, but is a legal document that is lodged with the appropriate court. You pay a court fee and Official Receiver’s deposit, and the court clerk sets a date for the hearing. The court clerk also seals or stamps the Winding-up Petition, and gives you a copy.

The sealed document has to be personally served on the debtor at their registered address. It is common to employ a process server or enquiry agent to do this.

Why choose to issue a Winding-up Petition

The beauty of choosing this option is that the hearing will be a lot quicker, possibly in as little as 7-12 weeks.

It’s seen as an aggressive step for a creditor to take, because the impact on the debtor is draconian.

The presentation of the Winding-up Petition will be advertised in the London Gazette
Other creditors will become aware that the company has financial difficulties, and might support the Winding-up Petition
Their bank might see the announcement and freeze the debtor’s account so they can’t pay their staff or landlord

What happens next?

If a Winding-up Order is made at the hearing, the company will be placed into compulsory liquidation.

The Official Receiver will interview the directors and appoint a liquidator whose job is to investigate the company’s affairs and establish the reasons for its failure. The liquidator will also seek to realise the company’s assets. This may include bringing personal claims against the directors themselves, including actions for misfeasance, wrongful trading, illegal payment of dividends, and overdrawn loan accounts. The liquidator might also bring a claim against them for antecedent transactions – for example, if the company tried to transfer assets to a third party without receiving proper consideration it’s called a transfer at undervalue. The court can then undo these transactions.

As a creditor, remember that the liquidator will have to repay all the company’s unsecured debts on a pari passu basis (that means sharing out the money equally between creditors).

If the debtor wishes to undo the Winding-up Order, they’ll have to make a formal application for rescission.

As you can tell, this is such a draconian process that it is quite common for the debtor to pay up before things escalate to a Winding-up Order.

P.S. If you’ve received a Winding-up Petition, read this article >

If you’d like more information about winding-up petitions, call us on +44 7441912822. We’ll be happy to help.

“Help! I’ve received a Winding-up Petition.”

admin — Tue, 16 Nov 2021 10:12:09 +0000

If your company owes money to a creditor, and you haven’t responded to their requests for payment, they might send you a Statutory Demand.

This is not a formal court document, but if you ignore it the next step could be a Winding-up Petition.

Why would they send a Winding-up Petition?

A creditor might choose to send a Winding-up Petition because it’s heard in the Companies Court. This is said to be faster than going through normal County Court or High Court proceedings.

It’s also more draconian, because of the effect it has on the debtor’s business.

The risk is that, when a Winding-up Petition is presented to the court, they might make a Winding-up Order.

And then, seven days after service of the petition on the registered office address, an advert can be posted in the London Gazette. Banks monitor these adverts and freeze the bank accounts of any customer companies mentioned.

Any transfers of company property made after presentation immediately become null and void, including delivery of goods to a third party and the payment of staff wages.

In effect, your company is wound up / shut down.

What’s a Statutory Demand?

Let’s go back a step.

The Statutory Demand will usually state that you have 21 days to either pay the debt or apply for injunctive relief – that is, a court order to stop the creditor pursuing an injunction.

It’s important to be aware that the creditor does not have to wait 21 days. It is quite common for their solicitor to write a letter demanding payment within 48 hours or less. If you don’t pay within the deadline, you might be served with a Winding-up Petition.

Case study

We had a client who received a Statutory Demand for payment. On investigation, we discovered that the supplier was contracted to deliver some coding within 30 days, and had failed to do so. We were able to dispute the Statutory Demand, and bring a counterclaim on our client’s behalf. We also obtained a hefty costs order on our client’s behalf against the creditor.

What to do about the Winding-up Petition you’ve received

The last thing you need is to have your company’s bank account frozen with the threat that you can’t pay your staff or landlord.

It’s therefore imperative that you consult a specialist solicitor as a matter of urgency. Don’t delay – get on the phone and get representation! (If you’d like our help, the best number to call is +44 7441912822.)

Most probably, the Winding-up Petition will be sent to your company’s registered address.

If that’s your accountant’s address, it’s of paramount importance that your accountant knows what to do – that is, to inform you immediately so you can take action.

Note that the creditor’s agent will hand over the document in person, saying something like: “I’m serving you with this Winding-up Petition” – so you can’t pretend you haven’t received it.

What happens next?

The Winding-up Petition will comprise three or four pages of A4, including the date the petition will be heard.

If you dispute the amount owed, you’ll need to explain why and provide evidence. For example, maybe the contract says 90 days and they are chasing you after only 30 days, or the goods were defective, or the services were inadequate.

It must be a bona fide dispute. Whatever your argument, you’ll have to prove it.

Collate all the relevant paperwork and give it to your solicitor. We’ll need chapter and verse, including witness statements and written evidence.

Ideally, sort it into date order and number the paragraphs (this will save us time and so save you money).

What we’ll do

If you have a case, we will write to the creditor’s solicitor explaining why it’s inappropriate to pursue the Winding-up Petition.

If they don’t withdraw it, we will apply for injunctive relief to prevent them from advertising in the London Gazette (remember, that’s where your bank will see the notice and freeze your account).

If you don’t have a case, the danger is that the Companies Court will make a Winding-up Order, and then it’s “Bye bye, business”. You can apply to ‘rescind’ or cancel the Winding-up Order, but it’s more expensive and you have to make the application within a certain deadline.

P.S. This advice applies to companies that have received a Winding-up Petition. We can also help if a company owes you money and you want to issue a Winding-up Petition. We’ll write more on that subject next month.

If you’d like more information about winding-up petitions, call us on +44 7441912822. We’ll be happy to help.

5 top tips about business disputes, from a business solicitor

admin — Tue, 16 Nov 2021 10:11:13 +0000

It can be stressful when you find yourself involved in a business dispute, especially if you’re a partnership or SME. As business solicitors, we’ve resolved all sorts of business disputes.

Here are some of the self-help measures you can take to avoid business disputes in the first place.

Draw up proper agreements

A small business is often set up with friends or family, where everyone knows each other. When you fall out with a partner, director or shareholder, this leads to all sorts of complications.

Getting the relationships properly documented in a formal partnership or shareholder’s agreement, and it helps take the emotion out of the dispute. Rather than one person’s word against another, whatever is in writing usually applies.

Do your due diligence

Sometimes, the person who briefs you to do the job isn’t the decision-maker or budget-holder. This can lead to problems later on, if the budget-holder disagrees with the brief, or decides not to pay.

When you take on a new client:

Find out whether they are a sole trader, partnership, LLP or limited company
If a limited company, search their details at Companies House (it’s free)
Search them on credit reference agencies such as Experian or CreditSafe
Consider setting a credit limit
Consider obtaining a personal guarantee from the director

Large UK companies and LLPs now have a duty to report on their payment policies, practices and procedures twice-yearly – this means you can assess their standard payment terms and discover how often they vary them. Check this data to improve your negotiating power.

Negotiate terms at the outset

Don’t send your T&Cs with the invoice, because at that stage they won’t protect you. They need to be discussed and agreed at the start of the contract.

Often, the work is urgent, and it’s tempting to commence anyway because you don’t want to lose the business – but this can be a dangerous decision.

Time spent discussing these issues in advance will save misunderstandings and tears at a later date.

Understand your client’s purchase process, such as obtaining a PO number before you start
Review your T&Cs regularly, especially in light of legislative changes such as GDPR

Avoid the ‘battle of the forms’

Often the question arises about whose T&Cs prevail – yours, or your client’s. If they are a large entity, they are likely to have their own T&Cs, and will try to insist that theirs apply.

It all comes down to strength of bargaining position, and trying to negotiate T&Cs with a PLC is likely to end in failure.

When T&Cs are passing to and fro, the court will ask: “Whose were the last to be communicated?” The most recent document will override any others. This applies even if your document arrived with a junior who didn’t understand what it was and filed it away without passing it on to the person in power. Because it was not rejected, it was accepted ‘by silence’ and a continued relationship.

Incentivise prompt payment

When we draft T&Cs for our clients, we include clauses to protect you. For example, we define the payment period for your invoices. Perhaps we’d include a discount for early payment (the carrot), or a penalty for late payment (the stick).

If you tell clients in advance, the Late Payment of Commercial Debts Regulations 2013 allow you to charge interest at 8% above bank base rate, plus £40 for a debt under £1,000 or £70 for a debt up to £10,000, and £100 over that, plus debt collection costs.

If a client owes you money, keep making a fuss. It’s common that whoever shouts loudest gets paid first. If you’re still stuck we can help.

Those are just a few of the business disputes we commonly help with. If you’re looking for a business solicitor, please call us on +44 7441912822 for an initial chat.