Help and Advice on Commercial Litigation and Dispute Resolution
Whether you have a commercial property dispute, an intellectual property dispute, are going through a dispute of contract or need an emergency freezing injunction, you need a team who are fast and reliable. At PLS our large and experienced team of commercial litigation solicitors are here to ensure that it’s as effective and efficient as possible.
Business debt collection is important to many companies. If customers or clients refuse to pay it can severely affect your finances, so having someone you can call on to arrange business debt recovery quickly and easily is a vital consideration.
Breach of Contract
An agreement or contract can be oral or written or a combination of both and each of us make agreements both in our personal and business lives each and every day, whether it being in buying a pint of milk, taking the tram to work, buying a car or property, taking a lease, providing services etc etc. The list is endless.
In many and probably most cases, everything runs smoothly with each party to the agreement doing what they have agreed or are obliged, to do. However, things can and do go wrong especially in business agreements with one or more parties breaching the terms of an agreement.
Where there is a breach (or alleged breach) or when a party believes another intends to breach the terms of a contract then depending on the extent and / or seriousness of the breach or breaches, one or more parties may seek to enforce (by way of an injunction) or rescind (repudiate) the contact and/or claim damages.
Generally, claims based on Breach of Contract must, be commenced by the issue of court proceedings within 6 years of the breach (or 12 years if a Deed) otherwise the right is lost.
Injunctions are orders of the court requiring a party to do (mandatory) or not do (prohibitory), a specified act. They can be interim (temporary) or permanent and are discretionary orders.
There are various types of injunction including:
In some circumstances, a party to (proposed) litigation may believe that there is a serious risk that the opponent will dispose of or dissipate assets before trial, thereby prevent enforcement of any judgment that may ultimately be obtained.
In order to prevent such action and preserve the assets, application can be made to the Court for a freezing (“Mareva”) injunction.
In main conditions for applying are:
- the application is made promptly;
- the English courts have jurisdiction;
- the applicant has a good arguable case (which includes a counterclaim);
- there is a real risk that the opponent may dispose of or dissipate those assets before judgment can be enforced.
- cross undertaking as to damages.
The power to grant the injunction is discretionary and when considering, the court will apply the “balance of convenience” test and it will way up all factors, including the benefit/detriment to the parties and whether the opponent can be properly compensated in damages if wrongly granted.
Cross Undertakings in Damages.
An applicant for a freezing inunction must undertake to the court to pay any damages that the respondent sustains by reason of the freezing order if it later turns out that the order should not have been granted. This undertaking extends to damage suffered by any other party notified of the order. The court may require the applicant to give security or to identify assets in support of any undertaking and there must be full and frank disclosure of facts which materially affect the value of the security offered.
Personal guarantees (“PG’s”) are common place and in essence are agreements whereby one party promises to honour or guarantees, the obligations of another. PG’s can be found in agreements for bank loans, leases, trade supplies and credit, to name but a few. PG’s are frequently in relation to financial obligations but can also be in relation covenants in leases and other non-monitory obligations.
Careful thought should be given and proper advice obtained as to the potential consequences, before signing any PG.
Problems arise when there is default and the party who has given the PG is called upon to discharge the obligations of the other party whether due to their default or otherwise. Default can potential have far reaching consequences not only for those who have given PG’s but also for their families and in serious cases can result in properties being sold and even bankruptcy.
Minority Shareholders (Unfair Prejudice and Derivative Claims)
Whilst Directors and Shareholders of a Limited Company or Members of an LLP conduct the business of the company / LLP for the benefit of all the shareholders/members then all is well and good but what happens if there is deadlock or the majority seek to act for their own benefit, to the detriment of the minority?
In general, the majority can decide and dictate what happens within the business as they can simply out vote the minority. However, the minority are not entirely without power and in certain circumstances or where there is deadlock, application can be made to the court to curb the actions of the majority or to resolve the deadlock.
In the absence of a shareholders agreement regulating what can and cannot be done by directors, shareholders and members, Section 994 of the Companies Act 2006 provides that a member of the company can apply to the court on the grounds:
- that the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of the members generally or of some part of its members (including at least himself); or
- that an actual proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.
Unfair prejudice is made up of two parts and both need to be present to successfully pursue a claim:
- The conduct must be prejudicial in the sense of causing prejudice or harm to the relevant interest of the members or some part of the members of the company (shareholders); and
- It must be unfair
Common examples of what may constitute unfairly prejudicial conduct are:
- Exclusion from management in circumstances where there is a legitimate expectation of participation
- Diversion of business to another company in which the majority shareholder holds an interest
- The awarding by the majority shareholder to themselves of excessive financial benefits
- Abuses of power and breaches of the articles of association
Under the Act, the court can:
- Regulate the conduct of the company’s affairs in the future
- Require the company to refrain from doing or continuing an act complained about, or to do an act which the petitioner has complained that it has omitted to do
- Authorise civil proceedings to be brought in the name and on behalf of the company by such persons and on such terms as the court may direct
- Require the company not to make any, or any specified, alterations in its articles without believe of the court
- Provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of the purchase by the company itself, the reduction of the company’s capital accordingly
Minority Shareholder can take comfort from the fact that company and LLP funds cannot be used by the majority shareholders/members to funds the defence of claims under this section and the Court will, on application, prevent any attempt to do so.
Another option open to shareholder was introduced by s.260(3) of the Companies Act 2006,whereby a derivative claim may be brought by a member of the company, i.e. a shareholder, in the name of the company (subject to the permission of the court) against a director of a company or a third party, in the following circumstances:
- Breach of duty or Breach of trust.
The Act places the duties of common law directors’ on a statutory footing and introduced new duties including;
- duty to promote the success of the company (s.172);
- duty to avoid conflict of interest (s.175);
- duty not to accept benefits from third parties (s.176).
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