News from St Philips Commercial

Spring 2013

WebsiteLaunch

St Philips Commercial website now live. 10

AlSo iNSide...

Articles from the groupsdetails of upcoming seminars

C o m m e r C i A l

2

Emma KellyEditor, Inside Commercial

Welcome to our first edition of Inside Commercial showcasing the eleven specialist teams that form St Philips Commercial. I hope you enjoy the diverse selection of articles provided by each of the teams.

2013 has already proved to be a success for St Philips. Ed Pepperall has well deservedly been appointed as Queen’s Counsel to add yet further strength to the impressive array of Silks St Philips Commercial has to offer. Both Ed and Tariq Sadiq were nominated for the final of the prestigious “Barrister of the Year 2013” award by Birmingham Law Society. Tariq won the award, making it the second year running that a St Philips’ barrister took the title after John Randall QC was successful in 2012.

St Philips Commercial has run immensely successful seminars on the Jackson Reforms. Such was the demand that the seminar was repeated to accommodate approximately 150 commercial solicitors.

The remainder of 2013 looks equally positive. St Philips is expanding and opening chambers in both London and Leeds. The standard of excellence will continue to prevail in the new locations, making it even easier for clients to access a first class legal service.

The popular seminar programme will continue with each of the teams hosting specialist events throughout the year. Details of the seminars can be found on page 12. Please book early to avoid disappointment.

If you have any comments on Inside Commercial or as to particular subject matters you would like to see covered by future seminars or newsletters, please feel free to contact me at ekelly@st-philips.com.

White v Jones – Slow Train Coming 4

Personal Representatives: 6 When Is It Time To Go?

Accounts and inquiries 7 – how to achieve an equal footing

Big Changes in Property Litigation? 8

Leasehold Enfranchisement News 9

Feature 10 New Website Launches

St Philips Commercial Seminar Programme 12

Get it in Writing! 13

Causation in Financial Mis-selling claims 14

“ Bribes, Fiduciaries and Constructive Trusts” 15

Football Dataco & Others v 16 Stan James Plc & Others and Sportradar Gmbh & Others [2013] EWCA Civ 27.

Historic Misappropriations 18

Getting away from it all? 19 Bankruptcy Tourism

Misfeasance Claims: 19 Documents and Burdens

Contents

CONTENTS |

Welcome from the editor

3Spring 2013

New is our St Philips

Commercial website.

It is the product of

listening to what you,

our clients, would find helpful –

and then putting in the time and

resource to produce it. We hope

you like it, and particularly hope

that, whatever your views, you

will give us plenty of feedback

to enable us to refine it further

in due course. Our senior clerk,

Justin Luckman, gives a more

detailed introduction to our

new website, and some of the

ways in which you can use it,

on page 10.

New are our 11

specialist teams.

Many of our clients

already know which

of our barristers they would like

to instruct for their case, whilst

others welcome either guidance

or reassurance as to which

barristers of the appropriate

seniority have demonstrable

specialist experience in the

relevant field. Entry to our

specialist teams is subject to a

strict internal admission policy,

and the members’ specialist CVs

available on each team’s area of

the website afford you and your

clients ‘chapter and verse’ as to

their experience, reported cases,

and directory listings, together

with other relevant information

demonstrating their specialist

credentials. And, of course, there

remains the tried and trusted way

of taking guidance and advice

from our highly experienced

clerking team, led by Justin and

his deputy Stuart Smith. Within

this newsletter there are articles

provided by members of each

of our 11 specialist teams.

New in 2013 will be

our chambers in

Leeds and in London.

St Philips has had an

alliance with a niche Chancery

and Commercial set in Leeds,

Chancery House Chambers,

for a year now, and it has been

very well received by clients

in the North East and beyond.

We very much look forward

to St Philips opening in new

premises in both Leeds and

London later this year, and

offering clients across the

country local access to the same

wide range of specialist expertise

with which our Midlands based

clients are already familiar.

And we have a new

Silk this Easter in

Edward Pepperall QC.

Many of you will know

Ed already, as he has been in

practice at St Philips, and before

its formation in 1998 one of

its predecessor sets, Priory

Chambers, for over 22 years. He is

Vice-Chairman and Secretary of

St Philips Commercial, and is a

member of the Civil Procedure

Rule Committee (the only

barrister member based outside

London). We are delighted to be

able to offer our clients a choice

of 4 silks in Avtar Khangure QC,

Mohammed Zaman QC,

Ed Pepperall QC and myself,

offering a range of areas of

particular expertise as well as

of personal styles. Watch out for

our 2013 Silks Week this autumn.

this is St Philips Commercial’s first newsletter of 2013,

and we have plenty of ‘news’ to send!

News in brief

| NEWS

New

New

New

New

by John Randall QCHead of St Philips Commercial

Ed Pepperall QC with Senior

Clerk Justin Luckman at the

Silk Ceremony.

4

White v Jones

– Slow Train Coming

5Spring 2013

By 3:2, the appeal of the

Solicitor’s Indemnity Fund had

been rejected. Two middle-

aged sisters from Sheldon had

recovered £9000 each because

the solicitor’s firm concerned

had failed promptly (or at all) to

draft the Will of their father in

their favour.

I summarise inadequately

the effect of the majority

opinions: Lord Goff found that

there was no principled remedy

available, but that a new remedy

in tort should be fashioned to

fill the lacuna. Lord Browne-

Wilkinson found that there was

a remedy available based on

Nocton v Lord Ashburton [1914]

A C 932. Lord Nolan agreed with

both and with the Court of Appeal

– which had approved Ross v

Caunters [1980] Chancery 297.

The reasoning of Lord

Goff, in particular, imposed two

restraints: (1) Any tortious duty to

the disappointed beneficiary was

congruent with the contractual

duty to the Testator (i.e. conflict

between their interests voided

duty) and (2) no cause of

action arose in favour of the

disappointed legatee where the

estate itself had suffered damage.

Since he was the only one of

the five law lords with whom

any two others agreed at critical

points, it was his analysis that was

subsequently taken as the ratio

of the case (see Chadwick LJ

Carr-Glynn v Frearsons [1999] Ch

326 at 354B).

Revolving around

the refinement or release of

these restraints, then and still

“ .. The implications of White v

Jones are being explored case

by case” (Peter Gibson LJ in

Richards v Hughes [2004] PNLR

35). In that case, the Court of

Appeal refused to strike out

a claim brought in tort under

White v Jones in respect of

an inter vivos gift where the

Lords in 1995 had suggested

such a claim might not lie. In

Carr – Glynn v Frearsons the

remedy was extended to allow

recovery where the estate did

have a claim against the solicitor

concerned, although the

damages recovered would be

complementary to rather than

duplicatory of those awarded

to the disappointed beneficiary.

In Gorham v British

Telecommunications [2000]

1 WLR 2129 the family of a

customer given negligent advice

by an insurance company

succeeded in establishing a

White v Jones duty, although,

on the facts, they failed on

causation. In Rind v Theodore

Goddard [2008] EWHC 459,

Morgan J. refused to strike out

a claim for damages in respect

of inheritance tax payable as the

result of a deceased’s negligently

constructed avoidance trust.

Yet, as late as April 2010,

Counsel felt able to argue in

Vinton v Fladgate Fielder [2010]

PNLR 26; [2010] EWHC 904 (Ch)

that White v Jones applied only

in cases involving the making of

Wills. In declining to strike out

a claim in respect of another

unsuccessful IHT scheme, Norris

J reviewed the development of

the remedy and ruled decisively

against that submission.

It’s a slow train, but it’s

coming.

1 OED Bathos: A ludicrous descent from the elevated to the commonplace.

by James Quirke

White v Jones [1995] 2 aC 217 is 18 years in the past.

On February 16, 1995, I took judgment and argued

costs in the case at a hatch looking into the

Chamber of the House of Lords. I returned from London euston

on the 20:55. the train stopped between Milton Keynes and

Coventry and remained unheated on the tracks until I was taken

off on a stepladder at 5am next morning - bathos1 personified.

| PROFESSIONAL LIABILITY

6

When is someone

enough of

a pain in the

neck to warrant

a Judge

exercising their discretion under

s50 Administration of Justice

Act 1985 to remove or substitute

them as personal representative?

The exercise of the

discretion was set out in

Letterstedt v Broers (1884) 9

App Cas 371. The overriding

consideration is the welfare

of the beneficiaries. Not every

“mistake or neglect of duty,

or inaccuracy of conduct of

trustees” [Letterstedt at page

386] will warrant their removal.

In Kershaw v

Micklethwaite [2010] EWHC 506

(Ch), the fact that the executors,

Mr Kershaw’s siblings, had

overlooked to pass information

onto him was not sufficient

to undermine their role as

executors. It was significant

that their mother had expressly

excluded her son Mr Kershaw

from the executorship (but not

her will, hence the opening

quote) because he would “rule

the roost”.

By contrast, in Thomas

& Agnes Carvel Foundation

[2007] EWHC 1314 (Ch), Lewison

J found that the executor of

Agnes Carvel’s will, her niece

Pamela Carvel, at best “does not

understand her responsibilities,

and is not willing to learn

them”, and at worst had “acted

dishonestly or with deliberate

disregard of her duties” [para 51].

Agnes had made a

mutual, mirror-image will with

her husband Thomas by which

they each left their residuary

estate on trust for the Foundation.

Thomas died first. Agnes revoked

her earlier will and left her estate

to an alternative foundation of

which Pamela was Director. Upon

Agnes’s death, Pamela obtained

judgment in the High Court in her

personal capacity against herself

as executor of Agnes’s estate for

£8m expenses.

When the Foundation

found out about this, they

applied for Pamela to be

removed as executor.

Lewison J found that

the Foundation did not have

standing to bring a claim under

s50 AJA 1985 because it was

not a beneficiary of Agnes’s

last will. The Foundation did

however have standing to

bring a claim under s1 Judicial

Trustees Act 1896, being the

beneficiary of the trust - of

which Pamela was a trustee -

which arose upon the death

of Thomas without his having

revoked the mutual will.

The Judge had no

difficulty in finding that Pamela

had failed in the guiding

principle to act in the welfare

of the beneficiaries of the trust.

Amongst other things, she had

engaged in the “procedural

nonsense” [para 49] of bringing

proceedings in which she was

both Claimant and Defendant.

She was removed as executor

and the Judgment she had

obtained was set aside.

In the very recent case

of Goodman v Goodman [2013]

EWMC 758 (Ch), it was upheld

that a personal representative

could be removed under s50

AJA 1985 even before probate

had been obtained. A single

sentence to the contrary that

had appeared in Perotti v

Watson [2001] EWCA Civ 116

was merely obiter and did not

therefore bind the Court.

by Naomi Candlin

Personal Representatives:

When Is It Time To Go?

WILLS, TRUSTS & PROBATE |

“I could screw his

neck round but he

is still my son.”

7Spring 2013

Frequently the record holder

tries to hide behind CPR 31.6

(disclosure). Money is wasted

with correspondence debating

whether classes of documents

are “relevant” or not. This is a red

herring and should be avoided.

A partner has an

absolute right to access/inspect

the partnership’s books and

accounts: s.24(9) Partnership

Act 1890. It is not a right for

the record holder to police

or curtail. In the absence

of access, jurisdiction for

injunctive relief does exist:

Greatrex v Greatrex (1847) 1

DeG. & Sm. 692.

Another tactical step

for the “accounting party” is

to dispute what is or is not a

partnership book and record.

The Partnership Act 1890 does

not provide a definition. There is

also limited judicial authority.

In the case of Till v

Morris CLMD [2012] C.L. 219

(WL 6943227) HHJ David

Cooke dealt with an application

by Mr Till for access to and

inspection of partnership books

and records of an insolvency

practice. Mr Till’s status as

a partner was not in issue.

However, Mr Morris resisted the

application on the basis that the

partnership books and records

did not include the files created

by him as an office holder

(“Office Holder Files”).

Mr Morris relied upon

the Court of Appeal’s decision

in the case of Casson Beckman

v Papi [1991] BCC 68, per Sir

Denys Buckley (p.80F-H):-

“... documents

brought into existence [by

the office holder]... cannot, in

my judgment, be accurately

classified as assets of the firm

notwithstanding that Mr Papi

may be under the fiduciary

obligation ... to account to the

firm for any financial benefits

which have accrued or may

accrue to him from any office

of his as liquidator or receiver.”

HHJ Cooke granted the

orders sought by Mr Till without

needing to adjudicate upon the

Casson Beckman case on the

basis that:-

1. the absolute right to access of

partnership books and records

was conceded (properly so);

2. the proprietary right to

possession of the Office

Holder Files was different

to the right of access for

a partner who wished to

ascertain the true position of

the partnership; and

3. safeguards were provided

regarding the (minimal) risk to

third party confidentiality and

the cost of retrieving records.

Depending on the

circumstances of a case, it may

well be expedient to deal with

access and inspection before

the “accounting party” (the one

in jealous guard of the records)

puts forward his/her version of

the final account: CPR40PDA.2.

That way it levels the

playing field, reduces cost and

brings the Overriding Objective

back onto the horizon.

Accounts and inquiries often

arouse the same human

behaviour found with

ancillary relief proceedings. One party

sits in jealous guard of the financial

records and impedes any progress.

by Paul Dean

Accounts and inquiries

– how to achieve an equal footing

| PARTNERSHIP

8

At the time of writing,

the launch of the

“Property Chamber”

of the Tribunal Service

has been postponed

to 1st July 2013, so as to fit better

the parliamentary timetable for

the new rules (and, yes, that does

mean there are no final rules

as yet). Even so, the Chamber

under its new president, Siobhan

McGrath (formerly president

of the Residential Property

Tribunal Service or “RPTS”),

will soon be a regular feature

of all our practices.

The Property Chamber

will start as an amalgam of

the Adjudicator to H.M. Land

Registry, the Agricultural Land

Tribunal and the RPTS (Rent

Assessment Committee,

Leasehold Valuation Tribunal and

Residential Property Tribunal).

It will have a new appeal

structure to the Upper Tribunal

Land Chamber, which was

formerly the Lands Tribunal, but

which may be supplemented

in some way to take account of

the fact that, until now, appeals

from the Adjudicator go to the

single judge of the High Court,

Chancery Division.

What difference will

this make? Well, until the new

rules are finalised, it is a little

difficult to say. Since the judicial

and administrative personnel

of the component Tribunals

are being retained, and the

type of application dictates

the procedures used, the initial

changes may not be overly

radical. Lawyer Chairs and

Deputy Adjudicators will become

“Judges” in the latest piece of

label inflation, and a careful eye

will be required to rules while

they bed in, but what then?

One area of special

interest will be the treatment of

appeals. Historically, the RPTS

considered itself free to depart

from Lands Tribunal decisions

and the Lands Tribunal would

accept points not made below,

but the former seems unlikely to

last (the latter is almost inevitable

when represented parties are

a rarity at first instance). By

contrast, the decisions of the

Adjudicator and his deputies

have been accorded “weighted

deference” in the High Court and

the Court of Appeal (Wilkinson v

Farmer [2010] EWCA Civ 1148 @

[25]; Orme v Lyons [2012] EWHC

3308 (Ch)). Will this survive a

culture change?

In the realms of a major

reform with details to be worked

out, the future is uncertain.

If the Property Chamber thrives,

then expect its jurisdiction to

increase, perhaps with more

housing work (disrepair being

an obvious candidate) or even

taking some of the first instance

work from the Upper Tribunal

Land Chamber (for example,

the modification of restrictive

covenants). Having said that,

if the current pace of change

continues, then new powers

will have a long gestation.

Anthony Verduyn is a deputy

Adjudicator to Hm land registry

and a lawyer chair of the

residential Property Tribunal

Service, but the views expressed

here are entirely his own and

not that of the Tribunal service.

by Anthony Verduyn

Big Changesin Property Litigation?

Giving new structures for specialists may

be the flavour of the season for St Philips

Commercial, but the same applies

to some, at least, of the tribunals

in which we appear.

PROPERTY |

9Spring 2013

In this niche practice area

business is quiet. Because of

the mortgage famine, very

few people are buying or

selling leasehold houses or

flats, and there is little need for

advice about rights under the

Leasehold Reform Act 1967 or the

Leasehold Reform, Housing and

Urban Development Act 1993.

Contested cases under the 1967

Act are now few and far between

at the Midlands Leasehold

Valuation Tribunal, or, as it will

be from May 2013, the Lower

Tribunal of the Lands Chamber.

The deferment rate

argument has settled down now,

at least for the West Midlands,

since the decision of the Upper

Tribunal of the Lands Chamber

in Zuckerman v Calthorpe (Re

Kelton Court) [2009] UKUT

235 (LC); [2010] 1 E.G.L.R. 187

(Mr Norman Rose FRICS). It is

generally accepted that the

deferment rate (for calculating

the price payable to the landlord

for a freehold reversion) should

normally be 5½% for houses, and

6% for flats, instead of the rates of

4¾% for houses and 5% for flats

decided upon in Earl Cadogan v

Sportelli [2007] 1 E.G.L.R. 153.

The main recent

development in the law of

leasehold enfranchisement is

the decision of the Supreme

Court in Hosebay Ltd v Day and

another, Lexgorge Ltd v Howard

de Walden Estates Ltd [2012]

UKSC 41; [2012] 1 W.L.R. 2884.

This turns on the definition of

a “house” in section 8 of the

Leasehold Reform Act 1967:

“‘house’ includes any building

designed or adapted for living

in and reasonably so called...”.

It appeared to be the law

that if a building had ever been

a “house” it was always a house,

even if it had been turned into

offices, a hostel or an antiques

showroom. Property advisers

were suggesting that the owners

of long leasehold offices, shops

etc. should look carefully at

their buildings to see if they

could possibly be described as

a “house”. Since the abolition of

the residence requirement by the

Commonhold and Leasehold

Reform Act 2002, it is possible

for non-resident lessees, even

companies, to exercise the right

to acquire the freehold under the

1967 Act. The formula for fixing

the price is generally favourable

to the tenant.

However, their Lordships

have put paid to this line of

business for surveyors and

property lawyers. The seven-man

Supreme Court delivered one

judgment, that of Lord Carnwath,

and he neatly summed up the

whole matter in the following

words: “A building wholly used

for offices, whatever its original

design or current appearance, is

not a house reasonably so called.

The fact that it was designed as

a house, and is still described

as a house for many purposes,

including in architectural

histories, is beside the point.”

The consequences of this

very sensible decision will include

the abandonment of a number

of interesting enfranchisement

claims throughout Birmingham,

especially Edgbaston.

Leasehold

Enfranchisement

News

“...the fact that it was designed as a house, and is still described as a house for many

purposes, including in architectural histories,

is beside the point.”

by Douglas Readings

| LANDLORD & TENANT

10

This isn’t a revamped

or a relaunched site,

but a completely

new and bespoke

one designed

to enable Commercial, Property

and Private Client lawyers to

access and explore our services

in the most convenient and

user-friendly fashion.

New Website Launches

It has been a while in the making but

I’m now delighted to be able to say

that the new St Philips Commercial

website is live.

1 Homepage 2 Resource Centre

3 Contact Us

by Justin Luckman

“It was therefore important to design

our site from the outset to be clear and logical, with

information found where you’d

expect it to be”

1

11Spring 2013

When we conducted

market research last year, many

clients said they wanted to see

more content that helped them

choose barristers with particular

skill sets, and included CVs that

were easy for their clients to view

and that made sense to them.

We hope that we’ve succeeded

in doing this, and more.

We understand that our

website is an important tool for

you and that quite often you have

it open while speaking with us

on the telephone. We also know

that your clients are likely to view

our website to see for themselves

the barrister that you are

recommending. It was therefore

important to design our site from

the outset to be clear and logical,

with information found where

you’d expect it to be. We have

reorganised our specialist teams

to showcase the tremendous

amount of talent we have at

St Philips; the individuals in each

of these teams have been subject

to a strict internal admission

policy, designed to provide

you and your clients with the

confidence that each of our

specialist teams“ do what it says

on the tin”. We also wanted to

make our services and people

more accessible, so you will

find specialist team homepages

with CVs filled with information

relevant to that area and direct

contact details for those

barristers. Those pages will also

show details of area-specific

articles, seminars and news

items that are there to keep you

informed and provide a useful

reference tool. You will now

find profiles of the clerks, to give

you an insight to the people you

regularly speak to and who are

a vital part of your relationship

with St Philips.

We hope that you will

also find the Resource Centre

section of the site particularly

useful. From here you can link

directly to the group’s reported

cases; see our latest news; book

on to our seminars; browse

articles written by our members

for both our own newsletters and

external publications; and sign

up to receive information from

us in the specific areas that are

of interest to you, either via email

or through the various forms of

social media that are available.

You will also find our

“Brochure Builder” in this section.

This enables you to choose

specific CVs of the individuals

who interest you and create your

own custom-made “brochure”

of them. When you’ve completed

your selections an electronic

brochure will be generated, with

covers and contact details added

to your chosen CVs. You then

have the option to print it off or

download it to your pc, laptop

or tablet. You will also be able

to email it directly to someone.

Whether compiling a handy list

of your personal favourites or to

compile a selection of barristers

to beauty-parade to a client,

we hope you will find this a very

useful tool.

Now that we’ve done

this, we’d love to talk about it.

If you have particular likes

or dislikes, if you have any

suggestions on how we can

improve it and make anything

about our site even more usable,

please do contact me. We’d also

welcome the opportunity to

meet and speak in greater detail

about the services we can offer

and how we may be able to tailor

them to meet your requirements.

Hopefully this newsletter

will give you a taste of what

our new teams and website

are about but this is, of course,

only a part of the changes

we are introducing to make

using St Philips Commercial

an experience that gets better

and better. We want to build

long term relationships with our

clients and will continue to work

harder and innovate to bring you

closer to us. With 2013 heralding

the launch of our two new

chambers in London and Leeds,

and new services being added

to what we already offer, it is

an exciting time for us and one

which we hope pays dividends

for you and your clients.

| FEATURE

2 3

12

throughout the year St Philips Commercial provide topical

and relevant CPD accredited training seminars and events

for the benefit of our clients.

Our 2013 series of talks has so far proved extremely popular with our talk on the Jackson Reforms having

to be run twice on the same day after being over subscribed , along with full delegate lists for our spring

programme at our Insolvency, Defamation, Banking & Financial Services and Company Law Seminars.

Below you will find details of our summer seminar programme. Full details and a booking facility

are available via the resource Centre on our website.

date Seminar details location

4th June 2013 JCT Summer Seminar Leeds

6th June 2013 Property Law Summer Breakfast Seminar Birmingham

11th June 2013Professional Liability Spring

Breakfast SeminarBirmingham

11th June 2013Property and Landlord & Tenant

Summer Breakfast SeminarLeeds

13th June 2013 Partnership Law Summer Breakfast Seminar Birmingham

20th June 2013 Landlord & Tenant Summer Breakfast Seminar Birmingham

25th June 2013Commercial Litigation Summer

Breakfast SeminarLeeds

27th June 2013Restraint of Trade & Confidentiality

Summer SeminarBirmingham

4th July 2013Wills, Trusts & Probate Summer

Breakfast Seminar Birmingham

Autumn 2013 Silks Week Birmingham

St Philips Commercial

Seminar Programme

Press release from the Chancellor of the High Court

“The Chancellor of the High

Court has announced a review

of the practice and procedure

of the Chancery division,

both in and outside london,

with a brief to make

recommendations for change.

He has asked mr Justice Briggs

to be the judge in charge,

assisted by mr Justice Newey.

There is to be an experienced

advisory panel, including

representation for the Circuits.

The review is to be completed

within 2013.

many of you will shortly be

receiving an invitation to

contribute to the review by

setting out your thoughts

about what needs changing,

and what needs preserving,

in Chancery division practice.

mr Justice Briggs asks:

Please start thinking now!”

The email address for

submitting suggestions to

mr Justice Briggs will be

chancerymr@judiciary.gsi.gov.uk

SEMINAR PROGRAMME |

13Spring 2013

In Ranson v Customer Systems

[2012] IRLR 769 (CA), the

Court held that the ordinary

duty of fidelity for employees

was simply “an obligation

loyally to carry out the job that

the employee agreed to do”, and

implied terms did not generally

oblige an employee to disclose

others’ misconduct still less his

own misconduct. Therefore,

in the absence of an express

term, there was no breach in

an employee in the final days

of his job accepting on behalf

of his new employer a business

opportunity ‘off his patch’ at the

current employer; or just having

lunch with another customer of

the current employer. Likewise,

in Caterpillar v Huesca [2012]

IRLR 410, St Philips’ own Ed

Pepperall persuaded the Court

of Appeal not to develop

the equitable jurisdiction of

‘barring-out relief’ to prevent

an employee from taking up

a position with a competitor

where there was a risk (but no

direct evidence) of them using

confidential information of the

old employer. (Moreover, an

attempt to claim proprietary

rights to information in e-mails

rather than their storage in

databases failed recently in

Fairstar v Adkins [2012] EWHC

2952 (TCC)).

Likewise, in CEF v

Mundey [2012] IRLR 912 (HC)

(as well as warning against

no or short notice injunction

applications) Silber J held no

implied term survived termination

to prevent poaching of former

colleagues, and even with breach

during employment, there

was no basis for a springboard

injunction because there

was no specific competitive

disadvantage (and the express

covenants were unenforceable

as too wide). Moreover, Cox J in

Towry v Bennett [2012] EWHC

224 (QB), held that whilst ‘non-

solicitation’ covenants were

enforceable, there was no breach

of them because there was no

evidence the individuals had

actively sought to encourage

clients to move.

By contrast, in QBd v

dymoke [2012] IRLR 458 (HC),

Haddon-Cave J held that there

was a breach of the implied

term of fidelity and the basis

for a springboard injunction

when there was an orchestrated

covert mass exit of employees

to compete with their former

employer by stealing clients and

staff, even when the express

restrictive covenants were

unenforceable. Likewise, in Tullett

v BGC [2011] IRLR 420, the Court

of Appeal held that an employer

did not act in repudiatory breach

of contract invalidating covenants

by pressurising employees to

stay rather than participating in

an unlawful team move, despite

the fact that the employees had

signed ‘forward contracts’ with

their potential employer (which

were unenforceable because of

its conduct).

Clearly, courts will

fashion employers a remedy

based on implied terms in such

clear cases. But wise employers

will pre-empt such problems

with well-drafted and up-to-date

express terms – a valuable fee-

earning opportunity for us.

Over the last year, there have been a number

of ingenious attempts by employers with no

or inadequate written restrictive covenants to seek

similar injunctive relief using implied terms.

they have tended to fail. the lesson is that there

is no substitute for a well-drafted express term.

by Jim Tindal

“ St Philips’ own ed Pepperall persuaded the Court of appeal not to develop the equitable jurisdiction of ‘barring-out relief’ to prevent an employee from taking up a position with a competitor where there was a risk (but no direct evidence) of them using confidential information of the old employer.”

Get it in Writing!

| RESTRAINT OF TRADE & CONFIDENTIALITY

14

In Rubenstein v HSBC

[2013] PNLR 9, the

Court of Appeal

overturned a decision

that the bank’s adviser was not

liable for losses arising from

“advice” relating to the investment

of £1.25m into an AIG fund.

The trial judge had

found that although the adviser

had indeed given the claimant

negligent advice, the prospect

of a run on AIG was so remote

that no financial adviser would

have been required to point it

out as posing a risk to capital.

Accordingly, the loss was not

caused by the negligence on

the part of the IFA in making the

recommendation. The loss was

not reasonably foreseeable and

was too remote to be recoverable

as damages for breach of

contract or in tort. However, this

decision was overturned by the

Court of Appeal.

In the leading judgment,

Lord Justice Rix found that the

trial judge confused the risk

of default by AIG with the risk

arising from general market

collapse or illiquidity. He found

that it was the bank’s duty to

protect Mr Rubenstein from

exposure to market forces. It

was wrong in such a context

to say that when the risk from

exposure to market forces arises,

the bank is free of responsibility

because the incidence of market

loss was unexpected. The Court

of Appeal held that, where a

bank is under a duty not to put a

retail customer in an investment

exposed to market forces, and

where loss occurred due to

such forces, the loss is not too

remote, however unforeseeable

that might have been at the time

of the advice.

By contrast, In Zaki v

Credit Suisse [2013]

EWCA Civ 14, the

widow and two

daughters of a businessman

appealed against a finding that

the bank was not liable for

financial losses suffered as a

result of breaches of its statutory

duty. The businessman had

invested in structured financial

products bought from the

bank. Following the downturn

in the markets in 2008, the

bank had issued a margin call

which the businessman was

unable to meet, which resulted

in substantial losses. He was

classified under the Conduct of

Business Sourcebook Rules as a

“private customer”. Under COBS

the bank was required to take

reasonable steps to ensure that

its investment advice was suitable

and to assess his financial

standing, and to take reasonable

care to ensure arrangements

for the loan, and its amount,

were suitable for the transaction

proposed. At first instance, the

judge found that there had not

been a breach of duty in respect

of the notes and the notes were

suitable. In the Court of Appeal,

Rix LJ held that what ultimately

counted had been whether the

investments, leveraged as they

had been, had been suitable

for the businessman, with his

knowledge and appreciation of

and appetite for risk. Accordingly,

the appeal was dismissed.

The message from

these cases is that bad advice

is usually readily identifiable;

causation, however, is a more

difficult concept that requires

to be underpinned by cogent

evidence, usually in the form of

expert evidence.

The usual causation defence in

financial transactions is raised on

the basis that although the advice

given was negligent and non-compliant,

the loss suffered by the investor was not

actually caused by that wrong advice.

two very recent Court of appeal cases

shed some light on this issue.

Causation in

Financial

Mis-selling claims

Case #1

Case #2

by Andrew Maguire

BANKING & FINANCIAL SERVICES |

15Spring 2013

It has become common place for an equitable remedy to be sought

in commercial disputes and for good reason. It is usually done in

order to lay claim to a proprietary right that would not otherwise

be available or in order to avoid the impact of common law concepts

of remoteness and contributory negligence.

“ Bribes, Fiduciaries and

Constructive Trusts”

by John Brennan

The deployment of

equitable principles

in the twentieth

century in areas

that would have

been regarded in the nineteenth

century as terra incognita has not

infrequently been accompanied

by three unfortunate tendencies.

The first is the adoption of

common law terms of reference.

The second is the invocation

of ill-defined notions of

unconscionability as a catch-all

justification for the imposition of

an equitable remedy. The third

is the reliance on a constructive

trust as a panacea whenever the

right to an equitable remedy is

recognised. The end-result has

sometimes been the distortion

of the equitable principle in

question; a consequence that

has done nothing to enhance

the coherence or predictability

of the law.

The use and abuse of

equitable principles is neatly

encapsulated by the approach

to the bribery of a fiduciary.

In Lister & Co v Stubbs (1890)

45 Ch. D. 1, having accepted

bribes, a fiduciary applied the

same towards the purchase of

a house. The Court of Appeal

rejected his principal’s attempt

to prove that the house was

held on constructive trust for its

benefit. As Lindley LJ said, the

relationship between the corrupt

fiduciary and his principal was

one of debtor and creditor rather

than trustee and beneficiary.

Over a hundred years later, in

Attorney General of Hong Kong

v Reid [1994] 1 A.C. 324, the Privy

Council came to the opposite

conclusion and thereby stood

that analysis on its head.

A more rigorous

approach is now being taken to

such claims. This, too, is illustrated

by the approach to the bribery of

a fiduciary. In Sinclair Investments

(UK) Ltd v Versailles Trade Finance

Ltd (In Administration) [2011] 3

W.L.R. 1153, the Court of Appeal

held that when a fiduciary

receives a bribe from a third party

he does not become a trustee

of the bribe but merely assumes

a personal liability to pay a sum

equivalent to its value to his

principal.

The difference between

Reid and Sinclair is to be found

not only in the result. The Court

of Appeal analysed whether a

principled justification for the

imposition of a constructive

trust arose; an approach

conspicuous by its absence in

Reid in which the justification for

the imposition of a constructive

trust was taken for granted.

After Sinclair Investments,

it is now clear that a claim for a

constructive trust arising from

a breach of a fiduciary duty has

no prospect of success unless

the fiduciary held the asset in

question or its substitute on trust

(see Cadogan Petroleum Plc v

Tolley [2012] 1 P. & C.R. DG5).

| COMMERCIAL FRAUD

16

FOOTBALL DATACO (“FDC”) maintains a database

which includes “live” data about

football matches. FDC sends a

football analyst to a match with

instructions to report by mobile

phone information about events

on the field including goals,

scorers, assists, cards, fouls,

saves, corners, substitutions etc.

FDC licenses the database to

customers such as the BBC

and estimates that the

operation costs approximately

£600,000 per season.

SPORTRADAR is a

German company. It has a

database called Betradar in which

is a section called Live Scores

that includes data extracted

from FDC’s database without

authorisation from FDC.

In a judgment of 6 February 2013, the Court of appeal

confirmed that under english law “the owner of any website

anywhere in the world will be a joint tortfeasor with a

uK user of that website if the inevitable consequence of access

to that site by the user is infringement by that user.” this will be

of concern to sites displaying third party content since the

uK has much narrower defences to copyright and database right

infringement than the united States and much of europe.

Football Dataco & Others

v Stan James Plc & Others

and Sportradar Gmbh & Others

[2013] EWCA Civ 27.

by Aubrey Craig

17Spring 2013

STAN JAMES is a

bookmaker conducting business

through a website hosted in

Gibraltar but aimed at UK users.

The website has a button

“Live Scores” which

communicates with the Live

Scores section of Betradar and

downloads Live Scores data

into the user’s computer.

Football Dataco assert

that their database is protected

by the sui generis database right

provided for under the Database

Directive and that Sportradar

and Stan James were jointly

liable with customers of Stan

James for acts of database right

infringement committed by

them in the United Kingdom.

There are no “fair use” type

defences to infringement of

Database Right.

By the time the CA

heard the appeal from Floyd J,

the CJEU – acting on an earlier

reference from the CA - had

confirmed that the sending of

data by Betradar to Stan James’

customers constituted a

re-utilisation of the data and

that such re-utilisation took

place in the Member State

where the recipient of the

data is located provided the

Defendant intended to target

members of the public in that

State. Mere accessibility of the

data within a Member State

would be an insufficient basis

for the courts of that Member

State to assume jurisdiction

[2012] EUECJ C-173/1.

Sportradar conceded that

it had that intention.

The CA held that:

(a) There is a sui generis

database right in FDC’s

database (agreeing with

Floyd J);

(b) Stan James’ UK users

extract a substantial part

of that database when they

use the pop-up facility on

the Stan James website;

(overturning the judgment

of Floyd J)

(c) Both Stan James and

Sportradar are joint

tortfeasors with the UK

punters; (disagreeing with

Floyd J in part), ………..

The Court’s holding

in relation to joint

tortfeasorship has obvious

ramifications for social media

sites and others that host and

display third party content.

Such sites will need to

consider their potential liability

very carefully, in particular,

the availability of the hosting

exemption safe harbour under

the E-Commerce Directive

(2000/31/EC).

An appeal to the

Supreme Court seems likely.

“the Court’s holding in relation to joint tortfeasorship has obvious ramifications

for social media sites and others that host and display third party content.”

| INTELLECTUAL PROPERTY

18

Most substantial

cases of breach of

fiduciary duty that

one sees (£2M

plus) occur in

family owned and run companies

over a long period of time.

Family member directors are

in post for many years, happily

salting away substantial secret

benefits in breach of fiduciary

duty, and the accretions

can become huge. In these

circumstances, two common

issues arise. How can a full

recovery be made if the

proceeds are shared with

a spouse? How do you deal

with limitation?

If the errant director

is good for the entirety of the

benefit received, the problem

disappears. It is long established

that a director in breach of

fiduciary duty who fraudulently

depletes a company’s assets is

treated as a category 1 trustee for

limitation purposes and, thus, no

limitation period applies1.

If the director’s assets do

not match the misappropriated

funds and the compound interest

due on them, and he/she is going

to end up insolvent with a short-

fall, the position is more difficult.

If traceable assets

have been removed from the

company into the hands of a

volunteer spouse, there is no

particular problem other than

the state of his/her knowledge:

join in the spouse and pursue

a proprietary claim.

In most situations, this

will not be the case. It follows

that you either pursue a personal

claim in the proceedings against

the spouse or you attempt to set

aside any transaction between

the director and the spouse in

insolvency proceedings against

the director.

Setting aside a transaction

at an undervalue as between

insolvent director and spouse

is subject to a 5 year limitation

period2 unless you can show that

the purpose of that transaction

was to defeat creditors. In lengthy

misappropriation scenarios, the

latter is rarely the case. Further,

the clock continues to tick as

the primary litigation between

company and director grinds

its way to a judgment and then

presentation of a bankruptcy

petition. The probability of

getting only two or three years

of transactions set aside is hardly

likely to satisfy the defrauded

shareholders.

Commonly, however, in

this sort of situation, the spouses

work together in the company,

with the non-director spouse

taking a junior employee, almost

PA role, assisting the director.

This opens up an argument of

conspiracy, breach of the contract

of employment, breach of

fiduciary duty (A junior employee

can be a fiduciary if he/she is in a

position of trust and confidence)

and or knowing assistance.

Breach of contract has

a 6 year limitation period, as

does conspiracy. This is pretty

unhelpful, albeit you can put the

start date back on a fraudulent

or concealed conspiracy claim

if you can prove the company

was unaware of the fraud or

conspiracy and did not have

knowledge of facts to put it on

notice of the same until such

time as it did.

If you can establish

that the spouse is a fiduciary,

he/she will be a category 1

trustee and limitation will not

apply. Establishing the duty is,

however, problematic.

Aid now comes from

Court of Appeal which has

recently decided that there is

no applicable limitation period

to dishonest assistance in

circumstances where a third

part knowingly assists a director

to breach his/her fiduciary duty.

This is a far more

satisfactory approach than

attempting to recover in

subsequent insolvency

proceedings, and, indeed,

than having to prove a

conspiracy and a delayed start

date for limitation purposes.

Historic Misappropriations– Directors, Private Companies, Spouses and Limitation

by Gregory Pipe

1 S21(1)(a) Limitation Act 19802 S341 Insolvency Act 1986

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19Spring 2013

An office-holder

comes to an

administration or

liquidation as a

relative stranger and

tries to piece together what has

happened in the period before

his appointment. It is often the

case that the books and records

are incomplete or missing, not

infrequently in circumstances

where the directors claim they

have been lost in fires, thefts

or floods. An interesting survey

would be the incidence of such

events in insolvent companies

as compared to their solvent

counterparts. This absence of

information presents challenges

to the office-holder, particularly

where the directors claim that

substantial payments made to

them by the company were for

commercial purposes.

However, help is at hand.

In GHLM Trading Ltd v Maroo

[2012] EWHC 61 (Ch), Newey J.

reviewed prior authorities and

concluded at [149] that, once it

is shown that the directors have

received company money, the

burden is on them, as fiduciaries,

to “show that the payment was

proper.” Similarly “it must be

incumbent on the director to

justify credit entries on [their

loan] account”. This is consistent

with directors having been

responsible for management

and under the CA 2006 for

ensuring proper accounting

records were kept.

If the directors cannot

discharge this burden then they

will almost certainly be in breach

of fiduciary duty, regardless

of whether the company was

insolvent at the time. It is also

likely that the payments will

be void, as directors do not

have authority to enter into

transactions that are not in the

best interests of the company

(GHLM at [171]).

Strict insolvency

regimes in some other

European jurisdiction, in

comparison to the fairly

short period of one year

before automatic discharge from

bankruptcy in England & Wales,

has led to some debtors seeking

to move to this jurisdiction for

the purposes of bankruptcy.

When will this be

permissible? The key is the

determination of the debtor’s

Centre of Main Interests (“COMI”).

In Re: Benk [2012] BPIR

1258, the debtor sought to petition

for his own bankruptcy in England

& Wales. He claimed to have

moved his COMI to England and

therefore the court had jurisdiction

to open main proceedings.

The Applicant, a

German bank owed some

€3m, successfully annulled the

bankruptcy on the grounds

that the debtor had not in fact

moved his COMI and so the

court had lacked jurisdiction to

open main proceedings. HHJ

Purle QC found that the debtor’s

COMI had remained in Germany

bearing in mind, among other

things, his professional domicile,

the temporary nature of his work

in England & Wales as a loss-

making self-employed sports

photographer, together with

the fact that he was financially

supported by his girlfriend,

who was habitually resident

in Germany.

The Judge concluded

that the debtor had sought

to create an illusion of having

a COMI in England and that

his activities as a sports

photographer were nothing

more than window dressing,

designed to create that illusion.

This case makes clear

that the determination of a

debtor’s COMI is primarily

a question of fact in all the

circumstances of any given case.

Misfeasance Claims:

Documents and Burdens

Getting away from it all?

Bankruptcy Tourism

by James Morgan

by Marc Brown

| INSOLVENCY

LEADING SET

2012

www.st-philipscommercial.com

Tel: +44 (0)121 246 7000

Justin LuckmanSenior Civil ClerkT: +44(0) 121 246 7050E: jluckman@st-philips.com

Stuart SmithDeputy Senior Civil ClerkT: +44(0) 121 246 2065E: ssmith@st-philips.com

St Philips Chambers55 Temple Row, Birmingham, B2 5LSDX 723240 Birmingham 56T: +44(0) 121 246 7000F: +44(0) 121 246 7001 E: commercial@st-philips.com

For more information please contact our clerks:

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St Philips, the Multi-award Winning Barristers’ Chambers.Opening in London and Leeds in 2013.