It’s the stuff films are made about. You are a boss of a company, frustrated at your job, and want a swift exit. Therefore, you send a memo to all of your staff telling them they are fired so you can proceed to pastures new.

Except this is no film script. Instead, this is instead a real-life scenario that unfolded in relation to Nippy Bus, a company with 17 buses operating several public routes across Somerset and Dorset.

An article in the Metro newspaper in London on 1 November 2017 reported how Sydney Hardy, managing director of Nippy Bus, sent a memo to his 27 full and part time staff telling them that he could not work with them “a moment longer”. The ‘four-letter farewell memo’ to staff advised that they could all consider themselves dismissed and redundant. Albeit in slightly more colourful language.

Although amusing, to suddenly terminate any staff member’s employment in this fashion could give rise to a multitude of problems for a business, even if the company is being wound up. Leaving employees are entitled to claim for several losses including but not limited to:

• Salary payments and benefits under their contract of employment
• Notice period payments
• Accrued holiday pay
• Statutory redundancy payments
• Enhanced redundancy payment due under employment contract
• Interest

With a workforce of 27 staff, this could run tens of thousands of pounds depending on how long each employee has been working for Nippy Bus. Consideration should also be given to the fact that there may be a trade union behind the multiple employees with resources to provide them with legal advice and representation in a collective action.

If a business is to cease trading and the directors wish to exit, the risk of costly court action could be minimised by engaging in a reasonable redundancy consultation process.

If you are a business facing possible staff redundancies, or have been made redundant yourself and require further information and guidance, please contact Elaine O’Connor on 0207 940 4000 or at eoc@anthonygold.co.uk.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

The decline in marriage or a desire by parties not to be married has resulted in several couples deciding to co-habit and jointly own the property where they live.

The courts have on several occasions been faced with adjudicating upon disputes concerning the division of property as between cohabiting parties when sadly their relationship breaks down. However, what happens if one party to the relationship decides to leave and have nothing further to do with the relationship or the property in question?

The case law in respect of this type of issue is now to a large degree settled by the cases of Stack v Dowden and Kernett v Jones. However, the way in which the courts interpret the decisions can make the ultimate outcome difficult to predict. It requires considerable experience to analyse the facts and to determine with accuracy the likely outcome.

Kernett v Jones states that where property is jointly owned and has always been jointly owned, the presumption that the property is owned on a 50:50 basis both legally and beneficially is a very strong one. A party seeking to argue that this ‘common intention’ as to ownership has altered, will have to provide ‘compelling evidence’.

However, a court can infer a change in this common intention by having regard to ‘words and/or conduct’. Most of the time a court will be unable to rely on “words” because either there is no written document or there is a conflict of evidence as between the parties as to ‘who said what and when’. Importantly, conduct can be a relevant factor which will then enable the court to infer that it has resulted in the ‘crystallisation’ of one party’s interest at a particular point in time.

Thus, by way of example, if one party to the relationship decides to vacate the property and has nothing whatsoever to do with it for several years, say in excess of 10 years, the court can infer that because of that conduct, there has been a change in the parties’ common intention regarding ownership of it.

If the court concludes that a particular party’s interest “crystallised” (a crystallisation case) then the court will value that interest as at the date of crystallisation.

What does this mean in practice? If a party who is in a relationship leaves the property and makes no financial contribution to it for several years, a court can infer that the individual’s interest crystallised at the point of vacating it. The individual’s interest is the value of that interest as at the date of leaving but valued at today’s date. In such cases there will be no need to account to the remaining partner for payments made for the upkeep of the property, but if the money cannot be raised by way of re-mortgage or loan then the property will have to be sold.

Conduct therefore is an important factor to take into consideration when advising unmarried clients in a dispute concerning ownership of a jointly owned property.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

Two men walk into a pub. Surprisingly, this is not the start of a bad joke, but the actual events that a recent case which re-affirmed the basics of contract formation was based on.

Mr Ashley is the owner of Newcastle United football club and the boss of the retail giant, Sports Direct. Mr Blue, an investment banker, was supplied to Sports Direct by Aspiring Capital Partners to provide consultancy services to Mr Ashley pursuant to a Management Services Agreement. On 24 January 2013, Mr Ashley and Mr Blue were happily drinking in the Horse and Groom public house near to the Oxford Street branch of Sports Direct with three other finance specialists. During the session, the conversation turned to how Mr Blue would be rewarded if the share price of Sports Direct rose from the then trading level of around £4 per share to above £8 per share.

Mr Blue alleged that Mr Ashley orally agreed that he would be paid £15 million if the share price rose to the magic £8. Sure enough, the share price did hit this level at 13.04 on 25 February 2014 and Mr Blue claimed that he was party to a legally binding contract and asked Mr Ashley for the pay-out.

In the Court proceedings, Mr Ashley’s case centred on the fact that a lot of alcohol was drunk that evening in the Horse and Groom and that he couldn’t remember making such a deal. He further stated that, even if he had spoken of a £15million figure, that this would obviously not have been serious.

A major argument in Mr Blue’s case was that Mr Ashley paid him £1 million in May 2014 and that this was a sign that Mr Ashley acknowledged the agreement and therefore should pay the remaining £14 million. It was Mr Ashley’s case that the £1 million was a general bonus for various transactions that Mr Blue had assisted with.

In making judgment, the Court considered what was required to form a legally binding contract.

Agreement

Firstly, there needs to be an agreement where one party makes an offer and the other accepts. As explained by Mr Justice Leggatt in his judgment, “There can be circumstances in which a person uses the language of offer without expressing a genuine willingness to be bound. For example, if someone says at a party, “I will give you a million pounds, if you can speak for a minute on [a random subject] without hesitation, deviation or repetition”, this is unlikely to be interpreted as an offer despite the literal words used.” Therefore, the intentions of the parties are paramount.

Intention to make a legally binding contract

There can be situations where someone makes a real offer which is accepted but that it does not necessarily follow that a legally enforceable contract is created. Mr Justice Leggatt stated, “For example, it two people agree to meet for a drink at an appointed place and time and one does not turn up, no one supposes that the other could sue to receive his wasted travel expenses.” There must be the intention for a legally binding contract to be created.

Consideration

Traditionally in English law, a promise to do something cannot be enforced if nothing is to be done in return. The something in return is known as consideration. Therefore, if Mr Ashley offered £15 million to Mr Blue if the share price reached £8, and Mr Blue did not do anything to make this happen, there would not be a legally binding contract.

However, as Mr Blue needed to at least do some work to make the price reach £8, it would seem that there was consideration in this case.

Mr Ashley argued that the work was already part of the agreement that he had with Mr Blue for his consultancy services and therefore there was no new consideration for the alleged oral agreement in the pub. This argument was not a strong one, as the duties under the consultancy agreement were owed by Aspiring Capital Partners (the company which supplied Mr Blue) to Sports Direct, rather than by Mr Blue personally. Therefore, any work specifically done by Mr Blue for the purposes of raising the share price to £8 after the meeting in the pub would arguably constitute valid consideration. Not surprisingly, this point was not pushed by Mr Ashley’s lawyer at trial.

Certainty and completeness of terms

If the terms of a contract are too vague this may be grounds for saying that the parties did not intend to form a legally binding agreement. Even if intention is found, the contract can still fail if the terms are too uncertain. The Courts are reluctant to try to decide what the parties wanted to include in any agreement, but will try to do so unless the terms make it so difficult as to render the task impossible. The case Durham Tees Valley Airport v bmibaby [2010] EWCA Civ 485 was cited by Mr Justice Leggatt in which Toulson LJ observed:

“Where parties intend to create a contractual obligation, the court will try and give it legal effect. The Court will only hold that the contract, or some part of it, is void for uncertainty if it is legally or practically impossible to give to the agreement (or that part of it) any sensible content” (citing Scammell v Cicker [2005] EWCW Civ 405, para 30, Rix LJ).”

Mr Ashley argued that the alleged oral agreement was so uncertain that it could not create a proper agreement. As there is no evidence that a Court can look at to substantiate an oral agreement (unless recorded), a good guide is the likely understanding of each party of the words used by the other party.

The only evidence available in this case was that of the people involved who were drinking in the bar. The point was made that in this day and age, to rely on the recollection of a conversation in a public house for a claim worth millions of pounds, is ‘rare’. In addition, any subsequent conversations that Mr Blue had with Mr Ashley were not recorded or committed to paper so no inferences could be drawn about the conversation in the bar from later activity.

After considering the witness evidence, the Judge accepted that it was likely that Mr Ashley had said something to the effect that it wouldn’t matter how much he paid Mr Blue if the share price got to £8, as Mr Ashley would be so wealthy. Although the recollection of any final figure was different from all of the witnesses, the Judge did accept from the evidence provided that the figure of £15 million was the substance of the alleged agreement but that there was no specified time frame for the share price to reach £8.

Conclusion – is there a legally binding contract?

Mr Justice Leggatt concluded that the conversation in the bar was conducted under the influence of a lot of alcohol and was jovial in nature. Even though it was likely that Mr Ashley said, or Mr Blue inferred that he could have £15 million if he could get the share price of Sports Direct to £8, when Mr Blue agreed, everyone present laughed. Even though 13 months later, the share price did reach £8, no reasonable person in the Horse & Groom that fateful night of 24 January 2013 would have thought that this was a serious offer.

As Mr Justice Leggatt put it:

“The fact that Mr Blue has since convinced himself that the offer was a serious one, and that a legally binding agreement was made, shows only that the human capacity for wishful thinking knows no bounds”.

If you have any queries about the status of agreements that you have, or are going to enter into, please contact Elaine O’Connor on eoc@anthonygold.co.uk.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

Those acting for bankrupt estates take on a daunting task. They are involved in the complex task of dealing with all the problems of insolvency with an additional overlay of the difficulties of administration of an estate.  They are open to criticism and demands of creditors eager to recover what is theirs as well as beneficiaries, facing disappointment following a bereavement.

The difficulty in balancing the rights of the creditors against the expectations of the beneficiaries is illustrated in the case of the estate of Jimmy Savile.

The Nat West Bank, appointed a PR of the estate, took on the task of administration of what appeared to be an asset rich estate.  Little did they know that the estate will be faced with so many claims. The abuse claims had not at that stage been heard at trial, but the PR concluded that at many of the victims would succeed.  If successful, they would deplete the estate of all its worth, thus leaving nothing for the beneficiaries.  There would be a bankrupt estate. With that in mind, the bank entered into negotiations and proposed setting up a scheme from which the claimant victims could be paid.  The bank applied for the court to approve the terms of the scheme.  The application was strongly opposed by the beneficiaries of the estate, who accused the bank of bias towards the victims.  They asked for the Bank to be removed and replaced in their role as PRs.

The court looking at the application, criticised the beneficiaries heavily for the lateness of their arguments and made a hefty costs order against them.  The matter went to appeal.  At the Court of Appeal [2014] EWCA Civ 1632, the court upheld the approval of the scheme proposed by the bank.  The Court of Appeal was however not as critical of the beneficiaries and it set aside the costs order made at first instance.

The case reminds all how invaluable is the impartiality of PRs administering the estate.  It also shows how important it is that, whenever in doubt over a big decision or a risky action, the PRs apply to the court for a “blessing” of their intended action.  Though often unpopular expense with beneficiaries, the applications for a “blessing of the PRs decision” is can be invaluable further down in the administration process.

The other ways in which PRs may, post-factum, absolve themselves from criticism or even liability for what they have done in administering an insolvent estate are:

1. An application for retrospective approval of an action. For example, PRs can look to the Court for absolution of liability for payment of debts to creditors paid out of order (e.g. paying an unsecured creditor before a secured creditor).  The order will normally be granted only in exceptional circumstances.  The PRs must be able to show they did not realise the estate was insolvent and hence made the payment by mistake.
2. An application for validation of a transaction.  As mentioned in my earlier blogs on insolvent estates, an Insolvency Administration Order dates the bankruptcy to the date of death and hence invalidates all transactions carried out since death to the date of the order (including any agreement to pay the PRs costs).  The PRs can apply for validation for such a transaction, if they can show that the liability was incurred in benefit of creditors as a whole (i.e. for actions seeking to limit the estate’s liabilities or protect the assets in the estate).

Finally, if taken to court for a breach of trust, the PRs have the statutory defence set out in s61 of the Trustee Act, i.e. the court’s power to relief them of liability on the basis that they acted honestly and reasonably in the circumstances and hence ought to be fairly excused.

If you are a PR who has found themselves in hot water and criticism over your administration of a bankrupt estate, contact me or one of my team for advice.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

The judgment of the Supreme Court handed down in R (on the application of UNISON) v Lord Chancellor [2017] UKSC 51 on 26 July 2017 has been heralded as a masterpiece and is certainly a landmark decision and victory for UNISON members.  Seven judges ruled unanimously that fees for Employment Tribunal claims, introduced in 2013, were unconstitutional and unlawful under both EU and UK law.

Employment Tribunal fees were introduced by the then Lord Chancellor, Chris Grayling, via a fees order (Employment Tribunals and the Employment Tribunal Appeal Tribunal Fees Order 2013, SI 2013/1893).  There were two levels of fees for individual claims in the Employment Tribunal depending on the type of dispute.  These were split into a fee for starting the claim and a fee for the hearing itself:

The rationale behind this was to reduce the number of very weak claims and to encourage early settlement.  What actually happened was that there was an 80% reduction in the number of claims brought to the ET but the proportion of these that were successful did not increase significantly.  (If the argument provided for introducing the fees was correct, the expectation was that that the percentage of successful cases would have increased dramatically).   UNISON brought a case against the Government arguing that the introduction of the fees had prevented many people from getting access to justice – after all, if you have just lost your job, you are unlikely to be able to afford fees of £1,200 to take your employer to the Tribunal.

The Supreme Court agreed – stating that the fees order had the “practical effect of making it unaffordable for persons to exercise rights conferred on them by Parliament”.

The implications of the decision are huge and wide ranging.  Initially, the charging of fees has been stopped and the Government will now be required to repay fees paid –  the bill for which has been estimated at £32 million.  How the repayments will work is unclear at this stage, but we will provide further information once the repayment scheme is published.

There are also more tricky questions to deal with.  There will be claimants who have paid fees and not recovered them as they lost their case (fees can usually be recovered by the winning party, although costs for representation by solicitors and barrister cannot normally be).  There will be employers who have had to pay the fees to the employees when they won their cases.  Will the losing parties now seek to recover their fees from the litigant or the Tribunal?  There is also the matter of individuals who can show that they did not make a claim because they could not afford it – will they be allowed to make a claim outside of the usual permitted timescales?

If you have been involved in an Employment Tribunal claim and wish to discuss this further, please contact Elaine O’Connor on 0207 940 4000 or at eoc@anthonygold.co.uk.