Latest News

Archived News
2007
2008

Avoiding Online Theft

Theft using IT is a rapidly growing area of crime, with ever-greater sophistication being used to plunder the bank accounts of the vulnerable and to obtain credit and/or goods. The results can be substantial financial loss (in the short term in any event) and a compromised credit history.

In a recent case, a small business had its bank account cleaned out over the Christmas period after falling foul of a ‘key reading’ scam when using a laptop to access the account from an hotel. These scams occur when a public place or hotel room has a ‘key reader’ secreted nearby (or key strokes are read from a laptop situated nearby if a wireless system is used). The key reader records the key strokes and stores them, often yielding credit card numbers as well as the information needed to access online bank accounts.

Here is a short guide to reducing the chances of theft from your online bank accounts:

  1. Make sure you use a secure online bank. The quality of security of Internet banking varies widely. In general, the more interactive (where you respond to prompts, as opposed to just entering information) the access to your account is, the better. Some new accounts offer a card-reader based access which is thought to be highly secure, although a recent report suggests that customers find the use of such devices cumbersome. The key here is to ask yourself how much information a fraudster would need to access your account and how much of that you are inputting. It wouldn’t take too much thought to work out that a surname keyed in by you is probably the correct response to the question ‘what is your mother’s maiden name?’
  2. Make sure anyone with access to your IT or IT security information, or to files where such information is kept, is thoroughly vetted. This might well include cleaners, for example.
  3. Do not access your account when away if at all possible. If you do need to do so, use a wired, as opposed to a wireless, connection. Never use an Internet café or similar establishment to access your bank account.
  4. Make sure you have a good firewall as well as anti-spyware and anti-virus software and make sure you update it and run system scans frequently (daily if possible). Run a scan of your computer system immediately before accessing your bank account.
  5. If you do access your account whilst away, make sure you can prove your whereabouts. That way, if you do suffer a loss, you will be able to prove you could not have made the withdrawals.
  6. Never use a debit card for an online purchase unless you are 100 per cent sure the site you are visiting is safe.
  7. Think about risk and assess it. If in doubt, wait until you are sure you can transact your business safely.
  8. The long stop is your bank’s policy towards such losses. If you are defrauded, the bank must reimburse you. However, banks do differ greatly in their attitude and whilst some reimburse promptly and with minimal fuss, some do make the process difficult and require persuasion that the alleged fraud is genuine. Report any suspicious transaction promptly to your bank.

Theft from Internet bank accounts is not usually carried out by amateur hackers, but by organised criminals. The best protection is a good defence.

Back to the top

Database Actions are Back!

Actions for breaches of database rights are not common in the UK. This is the result of a 2004 decision of the European Court of Justice (ECJ), which narrowed the perceived legal protection offered by the European Database Directive. The Directive protects owners of databases from unauthorised ‘extraction or re-utilisation’ of the data. Interestingly, this right also covers data placed in the public domain by the owner – so copying a database which is made available for public use by its owner would be a breach of database right.

However, the restriction to the right rests in the ECJ’s ruling that for protection to be given, the database owner must have substantially invested in the ‘obtaining, verification and presentation’ of the contents, not merely in the creation of the content of the database itself. It is this stipulation which has led to many unauthorised uses of database information not having legal consequences for the perpetrators.

Recently, however, a claim for breach of the Database Directive was successful in a different context. It involved employees of a furnishing fabric company, who left to form a new company and took with them database information concerning the customers of their old company. Their ex-employers sued them for breach of confidentiality and breach of database rights.

The claim for breach of confidentiality failed, as the information taken (names, addresses, sales etc.) was in the public domain or it was built up as part of the skills and expertise expected of an employee – which could not therefore be restricted by the employers.

However, the High Court agreed that the ex-employees had breached the company’s database rights by removing the information. Furthermore, they had breached their fiduciary duty to their employers by their subsequent use of the information.

“Businesses often face problems when employees leave and set up in business in competition with them,” says Sue Jones. “The first defence against this is an appropriately-worded service agreement which includes an enforceable restraint of trade clause. However, it will be gratifying for businesses to know that there appears to be a further remedy against ex-employees who remove confidential business information held in a database and use it for their own purposes.”

Back to the top

Directors – Be Careful What You Sign!

The Court of Appeal recently handed down a decision which should convince directors to take great care when they sign contractual documents on behalf of their companies… because if the contract contains a misrepresentation, they can in some circumstances be held personally liable for it by the courts. The fact that the contract may not benefit the director is not a defence.

In the case in point, a company entered into a contract to pay for goods it then received. A director of the company signed the contract knowing that the company was insolvent and would be unable to pay for the goods.

The Court of Appeal ruled that the director had made an implied misrepresentation to the supplier. Since he knew the goods would not be paid for, the Court found him personally liable for the sum owed, on account of his deceit.

The message for directors is to be careful what you sign. ‘Limited liability’ may not be limited if the court decides that the director knew that the company could not meet its obligations. This could apply in a variety of instances, for example where the company enters into a long-term agreement such as a lease of new premises.

Says Sue Jones, “The Companies Act 2006 places a statutory burden on directors to adhere to certain standards and consider specifically the effects of their decisions in various ways. A part-time, non-executive or even ‘shadow’ director (one who has no official position in the company but whose decisions are normally followed) can be in the firing line when things go wrong just as surely as can the full-time working directors.”

Back to the top

Disqualification Traps for Directors

The Companies Act 2006, most of which is now in force, imposes tough new criteria governing the behaviour of directors. In particular, when making decisions directors must bear in mind the potential effects of those decisions on various ‘stakeholders’ (those with an interest in their outcome, such as employees and shareholders) and the environment.

In several circumstances, miscreant directors can be disqualified by the Secretary of State from acting as directors. These include:

  • where the director has been convicted of an offence in connection with a company;
  • where the company becomes insolvent and where the conduct of the director is such that it renders them unfit to be a company director;
  • where there is fraudulent trading or fraud or breach of duty in relation to which the company is wound up;
  • where the company persistently defaults in filing documents with the Registrar of Companies; or
  • where in the view of the Secretary of State it is in the public interest for the director to be disqualified.

It is important to note that disqualification may not necessarily be the result of a criminal offence or because the company with which the director was involved has failed.

Just because a person does not carry the title ‘director’ or is a non-executive director does not mean they are not subject to these rules. They apply to anyone who acts in a directorial capacity (whether their title is director or not) or who is on the board of directors of a company.

Disqualification orders can be made for a minimum of two and a maximum of 15 years. Recently, a director was disqualified for refusing to cooperate with an investigation into another company with which he had dealings but of which he was not a director.

For advice on your responsibilities and rights as a director, contact Sue Jones.

Back to the top

Put Up or Shut Up

In conducting legal disputes, it is normally important to raise the issues you want to contest at the beginning of the proceedings. Otherwise, there is a risk that the court will not allow them to be argued, or possibly that it will make an unfavourable order for the division of legal costs.

A recent case illustrates the point. A property dispute had arisen because a house builder, which had used the claimants’ land to construct a sewer, had failed to reinstate the land as required under their agreement. The land owners issued a statement of claim. The builder wished to argue that the claim was issued in the wrong court, which, in its view, did not have jurisdiction to hear the matter in dispute.

However, the acknowledgement of claim did not indicate that the matter of the court’s jurisdiction was to be argued, with the result that the Court of Appeal ruled that the house builder had accepted the jurisdiction of the court. The Court therefore rejected the house builder’s right to argue the point.

For advice on any commercial property matter, please contact Mike Stone.

Back to the top

TUPE and ‘Off-shoring

The Employment Appeal Tribunal (EAT) has handed down a decision which will be of interest to anyone considering selling their business, or a part of their business, to a buyer from abroad.

Regulation 3(1)(a) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) states that the legislation applies when there is ‘a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity’.

In Holis Metal Industries Ltd. v GMB, the EAT has considered the issue, previously untested in UK case law, as to whether TUPE has the potential to apply to the transfer of a business or service entity outside the UK – in this case to Israel and therefore outside the EU.

Newell, owners of the ‘Swish’ blind manufacturing business, had a factory in Tamworth. There were 180 workers at the plant of whom 76 were represented by the GMB union. Newell sold the track and pole manufacturing part of the business, which was due to be closed, to Holis, a company based in Israel. The 107 staff working in that part of the business were informed that the operation was to be moved to Israel and unless they agreed to move also they would be made redundant following the transfer. In the event, although some of the plant and machinery was moved to Israel, none of the employees wished to go and all were made redundant by Holis shortly after the transfer. For administrative reasons, however, the redundancy payments were paid by Newell. The GMB union claimed that there was a breach of the duty to inform and consult over the transfer. Holis sought to strike out the claim but the Employment Tribunal (ET) Chairman, in a preliminary ruling, decided that the TUPE Regulations did apply to a transfer of a business which after transfer is based outside the United Kingdom and also outside the European Union. Holis subsequently appealed against the decision.

The EAT held that TUPE can apply to transfers outside the UK, even though enforcement may present a problem. Such a decision would be in line with the aims of TUPE and, since the business was originally based within the UK, there was sufficient connection with the UK to give jurisdiction to UK courts. However, each case must be decided on the specific facts. Also, there will still be an issue as to whether the entity to be transferred has retained its identity as required under Regulation 3(1)(a). This too will depend on the facts of the individual case. Accordingly, the case was referred back to the ET.

If you are considering outsourcing a part of your business, contact Sue Jones for advice on the legal implications.

Back to the top

Who Decides? Big Decision

Many forms of commercial contract these days contain clauses which seek to bring about a resolution of disputes by referral to an independent expert who ‘determines’ the outcome. Sometimes these work well, offering a flexible and straightforward way to settle the dispute. Sometimes, however, having an expert’s determination might not be at all satisfactory – at least from the standpoint of one of the parties to the dispute.

The main advantages of using an expert determination clause are:

  • it can be an inexpensive and quick method of resolving a dispute;
  • there is no need to go to court; and
  • it is normally a mediated form of settlement, in the sense that the expert hears the points of view of both sides and makes a decision – the degree of confrontation which can occur in litigation is therefore less likely.

The main disadvantages are:

  • there is virtually no right of appeal against a decision by the expert;
  • the expert may not have the breadth of knowledge which might be necessary to understand fully the issues and thus achieve a fair result;
  • the expert cannot compel (as can the court) the parties to the dispute to cooperate; and
  • the decision of an expert can only be enforced by the court.

There will be some sorts of dispute, therefore, which are best dealt with through legal process rather than expert determination. The problem which can arise, however, is that when the contract provides that a dispute will be settled by expert determination, the courts are reluctant to intervene, so in the event of a ‘bad’ decision by the expert, unless the aggrieved party can persuade the expert to issue a revised decision, they may well be stuck with it.

Clearly, the overriding argument for the use of such a clause will be where commercial expediency dictates that the speed and informality of the approach has advantages which outweigh the benefits of using the courts. If such a clause is used, it is essential to make sure that the expert has appropriate qualifications and experience, and that the terms of reference of the decision are very carefully drawn up.

Sue Jones can advise you on any aspect of contract law.

Back to the top

Mediation – Delay May Have Costs Implications

There have been a number of cases in which a refusal to mediate on the part of one party in a dispute has led to that party carrying the costs (at least in part) of the other party, even though the party which refused to mediate won the case. Recently, however, a case has suggested that there may also be adverse costs implications in the event that one of the parties unreasonably delays consenting to the commencement of mediation ‘until very late, when its chances of success are very poor’.

This is another example of the impatience shown by the courts to intransigent litigants.

If you have a commercial dispute, we can help you negotiate a satisfactory outcome.

Back to the top

Arbitration is the Preferred Option

The Law Lords have handed down a significant judgment for people who have disputes over contracts which contain an arbitration clause. The case arose because of a dispute between businesses engaged in the chartering of ships. The ship owners brought an action for damages for conspiracy, bribery and breach of fiduciary duty relating to a charter contract that contained a clause which provided that disputes under the contract would be settled by referral to arbitration.

The ship owners argued that the arbitration clause did not apply for two reasons. Firstly, the question of whether the charters obtained by the defendants were procured by bribery was not a dispute arising under the charter contract and, accordingly, the dispute was ‘outside the agreement’. Secondly, the ship owners argued that the arbitration clause was liable to be rescinded and therefore not binding on them, because they had the right to rescind the entire contract if their allegations of bribery could be sustained.

The House of Lords could not accept these arguments. In its view, a contract was agreed by rational businesspeople who could have placed certain types of dispute outside the arbitration clause had they chosen to do so. In the words of Lord Hoffmann, “The language of the relevant clause of each charter contained nothing to exclude disputes about the validity of a contract on the ground that it was procured by fraud.”

The Lords also considered that the owners’ claim, that if they were right about the bribery they were entitled to rescind the whole contract including the arbitration clause, was flawed. An arbitration agreement can only be rendered void or voidable on grounds relating directly to that agreement. There were no grounds of challenge specific to the arbitration agreement so as to invalidate it. The claim that the main contract had been induced by bribery thus fell to be determined under the arbitration agreement.

If you are offered a contract which contains an arbitration clause, you might care to consider whether you wish to limit the application of the arbitration clause so that certain types of dispute are not covered by it. We can advise you on all contractual matters.

Back to the top

Directors’ Duties Under the 2006 Companies Act

The Companies Act 2006 was designed to modernise British company law, making it ‘fit for purpose’ for the 21st Century. In particular, there are several changes which affect directors. As of 1 October 2007, the duties of directors are, for the first time, specifically defined. They are:

  • (S 171) The duty to act within their powers (the duty to adhere to the company’s constitution);
  • (S 172) The duty to promote the success of the company. There are six things a director must consider here, including consideration of the company’s employees, the long-term consequences of decisions, fairness to members (shareholders) and the impact of decisions on the community and environment;
  • (S 173) The duty to exercise independent judgment. This is not as restrictive as it may seem, but means not being the ‘yes man’ of the person responsible for his or her appointment. It does not prevent having an interest in transactions nor relying on the opinion of an expert where appropriate;
  • (S 174) The duty to exercise reasonable skill, care and diligence. This duty has particular implications for non-executive directors, who can no longer afford to take a ‘hands-off’ approach;
  • (S175) The duty to avoid conflicts of interest. This includes conflicts involving connected persons such as family members;
  • (S176) The duty not to accept benefits from third parties; and
  • (S177) the duty to declare an interest in transactions or arrangements. This includes the duty to declare interests of persons connected with the director.

Directors of companies should ensure that they and their fellow directors are fully aware of the provisions of the Act relating to their duties and comply with them. Contact us for individual advice.

The provisions of the Companies Act are being introduced in stages. For a full implementation timetable, see http://www.berr.gov.uk/files/file42238.doc.

Back to the top

Empty Properties – Rating Change Approaches

It has for some years been a bit of an oddity that with the economy buoyant, quite generous reliefs from business rates have been available where commercial premises are unoccupied.

Ironically, a change in the law reduces these reliefs just as the economy looks to be coming off the boil.

Vacant non-domestic properties are generally exempt from rates for three months. After that, rates are payable at 50 per cent until the property is again in occupation. Industrial properties and storage facilities enjoy 100 per cent rate relief until re-occupied. From 1 April 2008, subject to designated exemptions, the reliefs will disappear – after three months for non-domestic properties generally and after six months for industrial and storage premises.

For landlords with property portfolios including commercial properties currently unlet, there is now a strong incentive to find tenants before the changes have an impact.

For advice on any commercial property matter, please contact Mike Stone.

Back to the top

European Court Backs Squatters’ Rights

The European Court of Human Rights has handed down a judgment which accepts that the UK's law of ‘adverse possession’ is not a breach of the property owner's human rights.

Under UK law, anyone who is allowed unopposed occupation of a piece of land for more than the statutory period can acquire the legal right to the land. This is called adverse possession. Numerous safeguards for property owners were introduced by the Land Registration Act 2002, which introduced a system of notices before the title could be transferred.

An earlier decision of the Court had indicated that to pass the legal title to land by the exercise of ‘squatters’ rights’ would breach the human rights of the original owner as the title would pass without any compensation being paid. This decision was, unsurprisingly, contested in a case in which the land concerned, which had planning permission, was estimated to be worth £10m.

The judgment will serve as a wake-up call to property owners who allow others to occupy land they own as if it were the squatters’ own land.

The system now in place, which involves giving notices to owners of land when an application to transfer the title is made, should reduce the frequency with which ownership by adverse possession is claimed. The new system also makes it relatively easy to prevent the registration of title to the land by squatters. However, there is still much unregistered land in the UK and it is often difficult to ascertain the ownership of that land in order to give the required notices. Furthermore, an owner who is unable to deal with notices served, by way of infirmity or because they are absent from their home, could face particular problems if steps are not taken to oppose the registration of title. Once an application for registration has been refused, if the squatter remains in occupation for a further two years and submits a further application, this will be accepted by the Land Registry.

If you have property occupied by someone else which is not the subject of a lease or licence arrangement involving a payment, take advice to make sure you are not inadvertently exposing yourself to avoidable risk.

Back to the top

£2.5 Million Settlement in Hotel Illness Case

A group of British holidaymakers has won more than £2.5 million in compensation for illness they suffered while staying at a hotel in Spain.

Many holidaymakers contracted the ‘norovirus’ infection while staying at the Beach Club Hotel in Torremolinos between 2000 and 2002. Norovirus is the name given to a group of viruses, the symptoms of which are nausea, vomiting, diarrhoea and stomach cramps. The virus is often contracted from eating or drinking contaminated substances.

The effects of the virus normally last for a few days, but some of the claimants are still suffering from its after-effects years later.

The holidaymakers brought the group action against tour operators Thomson and Thomas Cook, who for a long time denied liability for the claim, even though over a prolonged period a number of people had become ill while staying at the hotel. However, medical evidence was produced as well as documents showing that the hotel management, along with others, had made serious mistakes with regard to hygiene.

Shortly before the case was due to be heard in the High Court, the claim was settled. The tour operators and the hotel agreed to pay more than £2.5 million in compensation, thought to be the largest settlement of its type. The money will be divided between nearly 1,000 claimants on the basis of a number of factors including the severity of their illnesses.

If you are struck down with illness on a package holiday, you may have a right to claim against the tour operator. It is important to remember that such illnesses are common and to obtain compensation you need to prove that the tour operator was at fault and the resort failed to exercise reasonable care to prevent infection. In order for a claim to be successful, there are a number of steps you should take:

  • Get evidence. Obtaining pictures or video footage and supporting evidence from other holidaymakers is important. Make notes of the standard of cleanliness, food hygiene and so on. Ask to see and copy (or make notes on) the complaints file at the resort;
  • Share names and addresses with anyone else at the same resort who is also ill;
  • Make a diary of where you went and where you ate. If you have eaten food not provided by the tour operator, be prepared to show that other people eating at the same place did not become ill;
  • Inform the holiday representative of your illness as soon as possible and make notes of your conversations with them and anyone else working for the holiday company;
  • Be prepared to prove that you were ill. Obtain documentary evidence of your illness from the doctor or hospital. See your doctor as soon as possible once you get home if symptoms persist; and
  • Record your symptoms in detail for as long as they persist and their effect on your everyday life.

It may be difficult to obtain a great deal of evidence – especially when you are ill – but in order to be successful, you will need to demonstrate that the tour operator (i.e. the resort they have contracted themselves to) is the source of the sickness and that they are responsible for it because of a failure to exercise reasonable care to prevent the infection or contamination.

If you have had your holiday ruined by illness, contact John Lennon for advice on how to proceed.

Back to the top

E-Conveyancing on the Way

Plans to update the conveyancing process in England and Wales have been ongoing since 1998, when preliminary proposals were set out in a report, compiled by the Law Commission and the Land Registry, entitled Land Registration for the Twent-First Century. Consultation on how best to go about re-engineering the system has been extensive. The aim is to develop an electronic system of conveyancing that makes buying and selling easier for all those involved in the process.

The Land Registry’s e-conveyancing project, developed by IBM, is expected to go live some time this summer following the introduction of a public key infrastructure (PKI) system that uses cryptography to guarantee the authenticity of property transaction documents. The system is designed to allow authorised users to exchange information quickly, securely and reliably with each other and with the Land Registry. Documents will be encrypted and signed with a digital certificate. Documents will only be able to be produced or read by those in possession of a cryptographic token, username and password. Once up and running, the system should allow property and mortgage registrations to be completed instantly, funds to be transferred immediately, securely and reliably and it will enable accurate and up-to-date information on the progress of all linked conveyancing transactions to be accessed online.

For further information on the e-conveyancing system, see http://www.landregistry.gov.uk/e-conveyancing/.

Back to the top

Government Abandons Plans to Protect Cohabitees

The Government has announced that it does not, for the time being at any rate, intend to proceed with reforms to the law that would have given cohabiting partners similar rights to married couples or civil partners on the breakdown of their relationship.

This unexpected announcement was made by Justice Minister Bridget Prentice and is all the more surprising given the inconsistency of rulings made by the courts in this problematic area.

The Law Commission had spent two years working on proposals to give protection to couples who live together. If introduced, these would have set out the respective rights of cohabitees as regards the financial arrangements on the termination of a relationship.

The number of people who are living together in a relationship but who are neither married nor civil partners continues to rise. Many of these people are probably completely unaware that they have few rights in the event of a break-up of their relationship and that such rights as they do have centre around any children of the relationship.

“The problem stems from the fact that, contrary to popular belief, in law there is no such thing as a ‘common law spouse’,” says Alison Whistler. “Couples who live together do not acquire legal rights and there are no set rules for how their assets should be divided if they split up. With over 2.5 million people currently living together informally, the courts are seeing a flood of disputes about who owns what when such relationships end.”

One common problem is where partners have lived together for a long time but the property they share continues to be held in the name of only one of the couple. If the couple then split up, this may give rise to a claim that the property should belong to both parties. The issues involved are often complex and such disputes can be very expensive to resolve in court. In some cases, people who have made a very substantial contribution to the financing and improvement of a shared home have been left with little or nothing for their efforts.

The review of the law in this area was intended to create more certainty in such cases, but the Government has chosen instead to wait to see what are the effects of planned reforms to the law in Scotland before any changes are made to the law in England and Wales.

“Meanwhile, the position of cohabitees is best protected by having a formal written agreement, which should be made with the benefit of independent legal advice on both sides,” says Alison Whistler. “This is particularly important where the assets involved are substantial, so that in the event that the relationship founders, a drawn out and acrimonious dispute can be avoided.”

Back to the top

Intention Not Enough Rules Court

When promises are made but not kept, the law often provides no redress for the disappointed person, as a recent case involving a couple who looked after a friend demonstrates.

The couple looked after their friend when he became unable to care for himself, and they helped him deal with his affairs. He offered them the use of two properties he owned, which they accepted. Over the ensuing years, they decorated and maintained the properties and even carried out improvements to one of them. The man told the couple that he intended to leave the properties to them when he died and also made other people aware that this was his intention. He signed a document to that effect, but it was not a valid will and he died legally intestate. At the point at which the man died, the properties were worth £280,000.

The couple applied for the title to the properties to be transferred to them. When their request was refused, they went to court claiming that the man’s promise had created a ‘constructive trust’ for them and that they were entitled to the properties because they had acted to their own detriment on account of the man’s promise. Where a person acts to their own detriment on the basis of a promise made by another person, it may be possible to mount a successful claim.

However, the court rejected the couple’s claim. There was, in the mind of the judge, an insufficient link between the promise and the couple’s detriment to mean they should benefit, except by way of compensation for their expenditure and a small amount for their disappointment. Accordingly, an award of £20,000 was made. The couple appealed, claiming that there was in effect a bargain between them and the man which the court should uphold.

The Court of Appeal concluded that the man’s offer of property for use was not accompanied by a requirement that the couple carry out the acts for which they claimed compensation, so there was no ‘bargain’. Nor was there any ground for the assumption that receipt of properties worth £280,000 was in proportion to the detriment (approximately £20,000) that the couple had suffered. The claim was therefore rejected.

Says Michael Cutler, “The couple were no doubt disappointed, but relying on stated intention in such cases is a very risky strategy. The sensible thing to do is to make sure that the correct paperwork is put in place to give effect to the owner’s intention. Creating the documentation needed to transfer property or writing a will is both quick and inexpensive.”

Back to the top

Lack of Clarity Causes Title Disputes

When a couple’s intention is that a property should be owned in a way which is not the same as the legal form of ownership (i.e. where the intention is that they both have an equitable interest in their home, the title to which is in one of their names only), it is always sensible to make sure that the appropriate documentation is put in place to reflect this position – if only to avoid the potential problem of unnecessary legal costs if the ownership is subsequently disputed.

Two recent cases illustrate the potential pitfalls. In the first of these, a divorced couple who had had a stormy relationship for years got back together and bought a house in the name of the ex-husband, although both contributed towards its purchase. When their reconciliation failed, the ex-husband left the property. His ex-wife sought a declaration by the court that the property was hers alone whilst he sought a declaration that the property was jointly owned. The case went to the Court of Appeal, which rejected the ex-wife’s claim. However, the Court considered that she would not have contributed to the purchase and moved in to the house without an assurance that she could continue to live there if their relationship collapsed again. Accordingly, it ruled that the property could not be sold without the consent of the ex-wife and that on sale she would be entitled to half the proceeds.

Another case resulted from the death of a man who emigrated from Bromley to Australia 60 years ago, leaving his house in the UK to be occupied by his relatives here. The house purchase had been financed by a bank loan and loans from members of his family. His will left the residue of his estate to a woman in Australia who had cared for him in his old age. The man’s relatives claimed that he had held the house in Bromley on trust for his family. Again, the case went all the way to the Court of Appeal, which ruled that the man’s family had failed to discharge the burden of proof that their loans were contributions to the purchase price of the property, entitling them to a share in it, rather than just advances of money.

“To avoid problems, it is a simple matter to execute the appropriate legal documents giving someone a legal interest in a property. Failure to make one’s intentions clear can prove expensive and cause delays in the event of a dispute over ownership later on,” says Nessie Orosco–Yousaf.

Back to the top

McCartney Split – Implications for Divorcing Couples

The much-publicised divorce of Paul McCartney and Heather Mills has led to a settlement in favour of Ms Mills of £24.3 million. Press speculation was rife that she might be awarded anything up to £60 million from Sir Paul’s fortune, which is estimated to be £400 million – the figure presented by his side in the proceedings and accepted by the court. Ms Mills, who represented herself, claims that he is worth £800 million.

What is significant about the judgment is that the award is based only on the needs of Ms Mills and the couple’s daughter. The implication of this is that the judge clearly considered that Ms Mills had added nothing of significance to the wealth of the McCartney household during their four years of marriage.

The decision contrasts with the July 2007 divorce of insurance magnate John Charman and his wife Beverley, who received £48 million from Mr Charman’s £130 million-plus fortune.

“The difference between the cases in legal terms is that Mrs Charman was considered to have made a much greater ‘special contribution’ to the couple’s 28-year marriage and to the acquisition of marital assets during that time than Ms Mills had made during her four-year marriage to the former Beatle,” says Alison Whistler.

The McCartney settlement follows a recent case in which a thrice-divorced woman, who on marrying for the fourth time had signed a pre-nuptial agreement to the effect that in the event of divorce neither she nor her husband would make any financial claim against the other, withdrew her claim for a share of her ex-husband’s fortune when the couple divorced, after the judge issued a preliminary ruling that the pre-nuptial agreement would be of material importance to the case.

It appears the courts are looking much more closely not only at the stated intentions of people going into a marriage but also at their relative contributions to the wealth created during the marriage. This does not mean that ‘stay at home’ spouses will necessarily receive a small settlement. If they can demonstrate that they provided the environment and support which enabled or assisted the ‘go getter’ to amass wealth, then there is every chance of them being awarded a significant proportion of the marital assets, particularly if the marriage has lasted several years.

The other factor the court will consider is the wealth brought into the marriage by each party. By and large, the ‘non-marital assets’ are divided in the proportion in which each spouse or civil partner introduced them.

Back to the top

Remarriage Not Ground for Alteration of Divorce Settlement

When financial arrangements are being made on divorce, the issue of the payment of maintenance is often in point. One of the concerns from the point of view of the payer is that if the ex-spouse remarries, their circumstances may well change significantly, so that the payment of maintenance is no longer appropriate.

Another issue which often arises is what happens when the person paying maintenance retires, as this can also affect the appropriate amount of maintenance payable.

Recently, a case was heard which dealt with both these issues. A man had been paying maintenance to his ex-wife for 12 years. As he was coming up for retirement, he sought to pay her a lump sum instead of continuing to pay maintenance. He enquired on more than one occasion whether she was cohabiting or intended to remarry and was informed that neither circumstance applied. In 2005 he therefore agreed to a consent order, as a result of which he paid his ex-wife a lump sum of £125,000 in lieu of future maintenance payments.

In 2006 his ex-wife remarried. He went to court to make an application for the consent order to be set aside on the basis that her remarriage had made the assumptions on which it had been based invalid.

For such an action to succeed, it is necessary that:

  • since the order was made there has been a supervening event which has led to a change of circumstances which undermines or invalidates the basis of the order;
  • the events are such that if leave to appeal out of time were to be given, the appeal would be certain, or very likely, to succeed; and
  • the new events have occurred within a relatively short time of the order having been made.

The court ruled that the man’s ex-wife had not planned to remarry at the time the settlement was negotiated and therefore the settlement stood. The man appealed to the Court of Appeal. The Court considered that the payment of the lump sum was intended to provide for a ‘clean break’. That in turn depended on the intentions of the parties at the time. The purpose of the husband’s enquiries regarding his ex-wife’s domestic situation was to assure himself that she was not cohabiting, rather than to protect himself from the risk of her remarrying. At the time of the agreement, she had no intention of remarrying, but that carried no implications regarding her future intentions. There was no basis for making the assumption that she would not remarry in any particular period, nor had the agreement between them provided for any variation in the event that she did remarry within a particular time frame.

On a majority decision, the Court of Appeal rejected the man’s appeal.

“This case shows how difficult it can be to alter financial arrangements designed to achieve a clean break and proves again that in such matters you get what you negotiate, not necessarily what you deserve,” says Karen Eves.

Back to the top

Taking Children into Care – The Legal Process

We often hear of children being taken into care, but the process by which this occurs is not well known. The Children Act 1989 lays down the circumstances under which it is appropriate for a child to be taken into care or a supervision order made. The necessary criteria, somewhat rephrased, are:

  • that the child concerned is suffering, or is likely to suffer, significant harm; and
  • that the harm, or likelihood of harm, is attributable to the care given to the child (or which would be given if a care or supervision order were not made) and is not what could be reasonably expected of a parent, or that the child is beyond the control of the parents.

In order to determine whether these criteria are met, a thorough fact-finding exercise must first be carried out. One common difficulty arises when the proceedings to take a child into care are based on an expectation that the child may be harmed in the future, rather than on the basis of harm having been done to the child in the past. In such cases, the local authority is required to prepare a clear written analysis of the facts on which the authority’s decision to apply to take the child into care is based. This analysis should be divided into three stages:

  • an establishment of the primary facts;
  • an assessment as to whether the criteria outlined above are met; and
  • an overall assessment of what action is likely to be in the child’s best interests.

All the other parties involved have the right to respond to any allegations made in the analysis.

We can assist you in your dealings with the local authority and other bodies. Contact Alison Whistler for advice.

Back to the top

Uncertainty Prevents Revision of Divorce Arrangements

One factor that comes into play when decisions are being made about the financial arrangements following a divorce is the earning capacity of the couple.

A problem that can arise in such cases is what to do when the earning capacity of one of the ex-spouses is uncertain. In a recent case, which also involved a number of other issues, the wife of an airline pilot went to court over the level of the maintenance payments she received.

Her ex-husband had suffered a severe depressive illness and he had been suspended from flying duties by his airline. The financial arrangements made in the District Court took account of the uncertainty of his future employment prospects.

Some time later, his condition appeared to improve and he was able to return to ground duties, receiving a captain’s basic salary. An occupational physician’s report concluded that it was possible that he might be able to return to flying duties in due course.

The Court of Appeal, however, concluded that the uncertainty surrounding the man’s future employment had to be taken into account. His current earnings were no guide to his future level of earnings. The original decision regarding the division of assets therefore had to stand.

Says Karen Eves, “This decision will be of interest to anyone in similar circumstances and indicates that in the absence of hard and fast evidence of changed circumstances, an appeal is unlikely to change the considered decision of the judge in a lower court.”

Back to the top

Victim Wins Right to Proceed with Compensation Claim

A landmark decision of the House of Lords could pave the way for some victims of sexual abuse to claim compensation from their attackers many years after the attack took place.

Mrs A, a retired teacher, has won the right to sue for damages a man who attacked her in 1988. Her attacker, Iorworth Hoare, was jailed for six sex attacks committed during the 1970s and 1980s.

At the time of the attack, Mrs A was advised not to bring a claim against Mr Hoare because he did not have any money. Instead, she made a claim to the Criminal Injuries Compensation Board and received just £5,000 in compensation.

However, since then Mr Hoare has scooped a £7 million win on the lottery after he bought a ticket whilst on day release from Leyhill open prison in 1994. Mrs A then commenced a claim for compensation in the High Court. However, the Court ruled that her claim was outside the legal six-year time limit for bringing an action. The Court of Appeal rejected Mrs A’s appeal against this decision.

When the case came before the House of Lords, Mrs A asked for a change in the law that prevented compensation claims for sexual assault being made outside the strict time limits. Five Law Lords unanimously ruled that courts should have the discretion to extend the limitation period to permit ‘out of time’ claims. The case will now go back to the High Court to be reconsidered in the light of this decision.

Four other appeals by people seeking compensation for sexual abuse that took place more than six years ago were also heard and these can also now proceed.

Says Karen Eves, “Prior to this judgment, the law prevented victims of sexual assault from bringing a claim after the six-year time limit had expired. In cases of child abuse, claims were only permitted up to six years after the child had reached the age of 18. Such attacks can have long-term traumatic effects on the victim which may prevent them proceeding with a timely damages claim.”

Back to the top

Victory for Pre-Nuptial Agreements

Pre-nuptial agreements have been given a boost following a recent case involving a ‘serial divorcee’.

A pre-nuptial agreement is an agreement made by a couple before they marry specifying how their assets are to be divided in the event that they divorce. They are commonly made by wealthy people, especially where the assets of the couple prior to the marriage are very unequal.

However, UK law does not (in theory) recognise pre-nuptial agreements – the argument being that marriage is to be encouraged in the public benefit, so an agreement which presupposes divorce is contrary to the public good. However, ‘pre-nups.’ are having more influence as the courts increasingly accept that they are indications of a couple’s intentions at the outset of their relationship.

In the case in point, thrice-divorced Susan Crossley abandoned her claim to a share of the fortune of her property developer fourth husband Stuart after their 14-month marriage broke up. Mrs Crossley had received £18 million in divorce settlements from her previous husbands. Prior to her marriage to Mr Crossley, she had signed a pre-nuptial agreement stating that in the event of the failure of their marriage, she would receive nothing. Hours before a scheduled hearing at the High Court, Mrs Crossley abandoned her claim, accepting that she had little or no chance of persuading the Court that the pre-nuptial agreement was invalid.

Mrs Crossley had claimed that the agreement was invalid because her husband, whose wealth is estimated at £45 million, had not disclosed to her ‘tens of millions’ of pounds held in offshore accounts. In an earlier hearing, however, the Court of Appeal ruled that the pre-nuptial agreement should be considered by the Court before looking at any other claim Mrs Crossley might have.

Says Alison Whistler, “The courts are having to cope with increasing numbers of divorces involving wealthy clients, which can take up large amounts of court time, so they are becoming more willing to give weight to pre-nuptial agreements. If you are considering marriage and have, or are likely to have, wealth to protect, a pre-nuptial agreement is worth consideration. Contact us for advice on all family and wealth preservation matters.”

Back to the top

What is Collaborative Law?

Divorce can be highly confrontational and can involve a great deal of negotiation conducted by correspondence on the part of solicitors and their clients. This necessarily takes a great deal of time and can make what is already a stressful process even more so in many cases. Also, the client can seem detached from the whole exercise, especially in cases where there is a great deal of correspondence arguing points between the respective law firms involved.

In a bid to provide a quicker and less confrontational process, a new approach to divorce, termed collaborative law, has been created. The idea behind collaborative law is to allow the parties to resolve their differences as far as possible in a quicker and more flexible way, with the hoped-for results being the better preservation of family assets and maintenance of better relations between the divorcing couple. It is offered by lawyers who are specially trained to work in this way, with the aim of achieving a solution which works for the whole family.

Using collaborative law will not be appropriate in all cases, especially where the degree of conflict is great. If it is used and is not successful, a client may still opt for formal mediation or to use the courts.

The collaborative law process involves the client signing a participation agreement, which is in effect an agreement that they will not go to court. The client can withdraw from this at any time but, if they do so, the lawyers who advised them in collaboration cannot represent them in court. A series of four-way meetings follows, involving the clients and their legal representatives, which focus on finding solutions that work for everyone involved. In some situations, a ‘neutral’ third party may be used to suggest solutions to particular problems.

Collaborative law can have significant benefits in appropriate circumstances. Contact Alison Whistler for more information on using this approach.

Back to the top

Willingness to Improve Enables Father to Regain Custody

A father who showed significant improvement in his ability to look after his son has been granted custody of the child by the Court of Appeal.

The child had been placed in the care of the local authority following the father’s separation from his wife. The authority had become increasingly concerned about the deteriorating mental health of the father and the effect this was having on his two sons. When the father showed suicidal tendencies and threatened to kill his sons, the local authority sought to take them into care.

The father refused to participate in the care hearing and his elder son was taken into care and an interim care order was made with regard to the younger son. The case heard by the court concerned only the elder son. The children were placed separately with foster parents and communications between the father and the elder son were stopped. The elder son wrote several letters to the local authority asking to be reunited with his father and made attempts to return to him and began playing truant from school.

The father had agreed to participate with the local authority in a package of measures intended to improve his parenting skills, as a result of which he would receive help and support and have his parenting monitored.

The Court judged that the local authority’s care plan had clearly failed in relation to the boy and that the fostering arrangements it had made were having an adverse effect on his emotional well-being, schooling and health. The boy wanted to be with his father who, in turn, was attempting to improve his parenting skills. In the circumstances, it was appropriate to set aside the care order and substitute an interim care order under which the boy and his father were reunited. If the revised arrangements prove successful, the father can then apply to have the care order discharged.

“Many people think that when children are taken into care, there is little chance of regaining custody,” says Karen Eves. “However, that is not the case – the court is normally willing to reunite families when circumstances are such that this is in the interests of the child or children.”

Back to the top

A Promise is a Promise

A woman who was widowed mere hours after getting married has been ordered by the Court of Appeal to honour a promise her husband had made to his ex-wife.

Kathleen Soulsby married her husband Owen in 2000 at the London hospital where he was being treated for leukaemia. He had divorced his ex-wife, Elizabeth, in 1986 and they had agreed a settlement under which he was to pay her £12,000 a year plus maintenance for their children. In 1993, he agreed to give her £100,000 on his death in exchange for being relieved of the obligation to pay further maintenance payments. His will was altered to give effect to the agreement.

Under UK law, however, marriage invalidates any previous will and Kathleen argued that the bequest was therefore invalid.

The Court of Appeal considered that the agreement between Owen and Elizabeth was enforceable. She had ceased to receive maintenance in 1993 and had not pursued him for the payments. She had therefore complied with her part of the bargain and his estate was bound to honour his side of it.

Says Michael Cutler, “It is often forgotten that marriage or civil partnership invalidates an earlier will. It may not be very romantic, but it is practical to make sure that after the ceremony a new will is executed as soon as is practicable.”

Back to the top

Adoption Agency Need Not Consult Father

The Adoption and Children Act 2002 does not require a local authority or other adoption agency to consult the father or extended family of a child put up for adoption by its mother. This was the ruling of the Appeal Court in a case involving a mother who wished to give birth without the knowledge of her family or the baby’s father.

In this case, the pregnancy arose from a one night stand. The mother did not want the father, or her own family, to know about the pregnancy and wished to put the child up for adoption at birth. As a consequence of a County Court judge’s ruling, the authority wrote to the mother’s parents, which led to them finding out about their grandchild.

Relying on the Adoption and Children Act 2002, the Court of Appeal held that when a decision needed to be made about the long-term care of a child whom the mother wished to be adopted, there was no duty of an absolute kind to make inquiries. There was only a duty to make inquiries if it was in the interests of the child to do so.

It was further held that the provisions of the European Convention on Human Rights concerning a father’s right to respect for his family life did not apply in this case. The father had no family life with the child. He had never lived with the mother nor expressed any commitment to the child, because he was unaware of the child’s existence.

The Adoption and Children Act requires the interests of the child to be considered. It does not give the family the right to be involved in decisions relating to the child in circumstances such as these.

For advice on adoption, fathers’ rights and other family matters, contact Karen Eves.

Back to the top