2010 City Law News

15/07/2010 - Calls for reform of takeover laws

In light of the recent hostile takeover of the British household name Cadbury plc (Cadbury) by US Company Kraft Foods Inc (Kraft), the subject of hostile takeovers and how companies can fend an unwanted bidder off has become a much discussed topic of conversation. The hostile takeover of Cadbury has been widely publicised, especially the initial resistance by Cadbury shareholders to the takeover. Critics have argued that Kraft was able to string the takeover process out long enough so that Cadbury's shareholder register became filled with short-term investors, such as hedge funds, who would be willing to accept any bid to make a quick profit, with arguably no regard to the business's long term prospects or value. It has also raised a number of issues regarding the UK takeover regime generally. In the end, a sufficient percentage of Cadbury shareholders accepted the offer and "squeezed out" the remaining minority shareholders, allowing the takeover bid to complete.
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08/07/2010 - FSA takes two bites out of unauthorised deposit-takers

The High Court has recently reinforced the FSA's right to recoup losses suffered by investors in unauthorised firms, in addition to requiring such firms to disgorge all profits.
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08/07/2010 - Conflict of laws relating to 'legal capacity' and Restitution

A significant principle in relation to a party's capacity to enter into a contract was recently decided in the Court of Appeal. Specificially, the decision related to (1) the approach in interpreting the English conflicts rule relating to a corporation's capacity to enter into a contract, and (2) how English courts should deal with a public policy defence to a restitutionary claim based on a foreign statute.

Facts:

Depfa ACS Bank, an Irish bank (the "Bank") and two Norwegian local authorities (the "Authorities") entered into swap contracts which were governed by English law (the "Contracts"). The Bank was advised by Norwegian lawyers that the Authorities were not restricted under Section 50 of the Norwegian Local Government Act 1992 (the "Act") to enter into the Contracts, i.e. the Authorities had power and authority to enter into the same. The Act restricts the purposes for which the Authorities can enter into loan agreements.
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07/07/2010 - Derivative Actions under Companies Act 2006

The High Court has decided when it would be appropriate for a minority shareholder to continue a claim against directors of a company in accordance with sections 261 and 263 Companies Act 2006.
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05/07/2010 - Two recent appeals confirm that Part 36 CPR is a self- contained code which does not import all of the general rules of contract law

In two appeals heard together the court was asked to consider the interpretation and effect of CPR Part 36.
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15/06/2010 - Set-offs: what is a close enough connection?

Simon Carves Limited ("Carves"), was the main contractor for the building of a bioethanol plant in Teesside. For the construction of the plant it needed to buy pressure vessels for the plant and to have storage tanks installed on the site. There was no connection between these items (other than they were required for the plant), and accordingly the fact that the supply contract was awarded to one party did not mean that the contract for the installation would also be awarded to the same party. As it turned out Carves did contract with one party Geldof Metaalconstructie NV ("Geldof ") for both contracts.
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25/05/2010 - Nylon Capital LLP fails to stay claims by Barclays Bank PLC in the High Court

The High Court recently dismissed an application by Nylon Capital LLP ("Nylon") to stay legal proceedings initiated by Barclays Bank Plc ("Barclays").
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11/05/2010 - Exclusion clause for losses caused by IT company in its standard terms proves unreasonable

An IT company which specialised in providing front and back office booking systems failed to provide an inner London 4 star hotel with a product which was fit for purpose.
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29/04/2010 - Market Abuse: Acts without an 'actuating purpose'

On 22 April 2010, market makers Winterflood Securities Limited (Winterflood) and two of its traders Stephan Sotiriou and Jason Robins (together, the Appellants) lost their appeal against the Financial Services Authority (FSA) in the Court of Appeal and were fined £ 4,000,000, £200,000 and £50,000 respectively. They were also made to pay FSA's costs of the appeal of £52,500.
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28/04/2010 - An extraordinary case of an accountant overstepping over the line.

In mid 2008, the Court heard evidence from an accountant who was charged with fraud and served a prison sentence of 9 months but was ultimately acquitted of money laundering and conspiracy to defraud. His former client, who brought the civil claim against him in negligence and deceit for over £500,000, had also been charged with fraud and admitted using a false instrument and was also convicted of conspiring to furnish false information.
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22/04/2010 - Pension Schemes - Construction, purpose and interpretation of provisions relating ordinary members

The Hobourn Group Pension Trust Company Limited and Independent Trustees ("the Trustees") had, under the Hobourn Group Pension Scheme ("the Scheme"), provided for differing ages for retirement for male and female members of the Scheme and sought to amend a Deed of Variation (attached to the rules of the Scheme) regarding the right to payment from the pension scheme. The original rules provided for a different normal retiring age ("NRA") for men and women, with the NRA for men being 65 years and 60 years for women.
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22/04/2010 - Validity of an out-of-court appointment of administrators

Kaupthing Capital Partners II Master LP Inc (Master) was a limited partnership established in Guernsey. Master was a special purpose vehicle that, alongside other group companies and its ultimate parent company (together, the Group), formed part of an investment fund administrated by an English registered limited partnership.
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20/04/2010 - Freezing Orders over the Assets of Third Parties

Yukos Capital S.a.r.l ("Yukos") obtained a freezing injunction against OJSC Rosneft Oil Co ("Rosneft") and 11 other Defendants. The Sixth to Twelfth Defendants (referred to as the "RT Defendants") sought an order discharging the injunction against them on the basis that the Claimant had no cause of action against them and because they held assets as neither the nominee nor trustee of Rosneft, the primary Defendant.
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07/04/2010 - Corporate Governance - Pension Fund update

The National Association of Pension Funds (the "NAPF") has recently recommended a small number of amendments to its corporate governance policy. It is intended that these amendments should apply during the 2010 AGM voting season.
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06/04/2010 - Formation of Contract

In the much litigated area of contract law relating to the creation of contracts and intention to create legal relations, the Supreme Court recently held that a legally binding contract existed between parties even though there was no formal executed written agreement and the letter of intent incorporated a 'subject to contract' provision.

Facts
In January 2005, RTS Flexible Systems Limited ("RTS"), a supplier of automated machines for the food industry won a tender to manufacture and deliver an automated system for packaging yoghurt pots to Molkrti Sloid Muller Gmbh & Co Kg ("Muller"), a renowned supplier of dairy products. Parties signed a four week letter of intent ("LOI") with the terms of a final contract to be agreed so as to allow RTS commence work and meet the project time scales. The LOI stated that the final contract would incorporate, inter alia, the "MF/1" terms and conditions which were model form terms of the Institute of Electrical Engineers. The MF/1 terms and conditions included a 'subject to contract' provision which provided that the agreement was not effective until it was signed.
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26/03/2010 - Surveyor negligent despite inflated purchase price

The Court has recently provided a reminder that surveyors will be held to account for negligence, even where the purchaser claimant has arguably supplied misleading information.
The claimant purchased a flat in a residential block as a buy-to-let investment. The claimant stated in his application for finance that the purchase price/estimated value of the flat was £353,000, and applied for finance of 80% of that sum.
The defendant surveyor (who worked for Colley's, then part of Halifax plc) provided the lender with a valuation report assessing the market value of the flat as being the price he thought the claimant was going to pay for it (£353,000) and estimated the expected rental at £2,000 per month.
The purchase price, although technically £353,000, was subject to a 'gifted deposit' from the vendor to the claimant, which returned to the claimant 15% of the purchase price initially and a further 10% deferred for a year.
After completion the claimant was only able to achieve a rental of around half that estimated by Colley's, and brought proceedings claiming that the flat was worth only £250,000 at the time it was purchased (although the claimant subsequently sold it for £270,000). The claimant alleged that the valuation report negligently overstated both the value of the flat and the expected rental returns.
Despite Colley's contentions to the contrary, the Court held that:

1. Colley's did owe a duty of care to the claimant, and that the duty had not been excluded by a disclaimer in the mortgage application form;
2. the claimant was not precluded from bringing his claim as a result of the representations as to the price of the flat made to the mortgage lender;


3. the claimant did in fact rely upon the valuation (both of the purchase value and the rental value); and


4. the valuation was sufficiently above the allowable margin for error that it was negligently made.

15/03/2010 - Business sale agreement: assignment of contract

The Court of Appeal had to decide whether a contract providing an indemnity clause had been validly assigned to the purchaser of a business under a business sale agreement, and if so, whether the purchaser could claim repayment by way of indemnity from the other party to the contract.

Facts

Shaw, the appellant, was an independent financial adviser (an "IFA"). Prior to 1999 he had a standard form contract in place (an Appointed Representative Contract, "ARC") with a partnership, Berkeley Wodehouse Associates, BWA, which operated through a network of IFAs.
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03/03/2010 - The consequences of a party seeking to rely on documents in an action when they have been obtained by irregular means

The most recent judgment given in connection with divorce proceedings which commenced in December 2008 and which were quickly followed by injunctive proceedings brought a husband against the wife's brothers and companies after they obtained documents and information from the husband's computers addresses the ramifications for the wife who received the documents.
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26/02/2010 - Claim for consequential loss allowed in claim for negligence against surveying firm

The defendant was a licensed conveyancing firm which had acted for the Claimant in a property transaction. Joyce had purchased a property that had been advertised for sale with a buyer's option to purchase some additional land to the rear of the property if the vendor of the property was unable to obtain planning permission for the construction of a dwelling house on the additional land.
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23/02/2010 - Documents executed by email - further guidance from the Law Society

The Law Society has recently published a practice note relating to the execution of documents at virtual signings or closings: "Execution of documents by virtual means".
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18/02/2010 - Former director of holiday marketing company disqualified for 8 years.

All five former directors of Worldwide International UK Limited have been disqualified following an investigation by the CIB of the Insolvency Service. The company marketed timeshare accomodation, timeshare re-sales, shared ownership of canal boats and holiday club memberships and operated in the UK, Goa, Cyprus and Spain. Its tradings names were "Worldwide International", "Travelwise", "Travelwise Sales", "Majestic Leisure", "Majestic Holidays", "Phoenix Promotions" and other like names.
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18/02/2010 - Client care letters must carefully define the type of work to be done and the costs which may result from that work.

Section 87 of the Solicitors Act 1974, provides, inter alia:
(1) ... 'contentious business' means business done, whether as solicitor or advocate, in or for the purposes of proceedings begun before a court or before an arbitrator ... not being business which falls within the definition of non-contentious or common form probate business contained in [section 128 of the [Senior Courts] Act 1981]'.
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16/02/2010 - Court of Appeal majority preserves sanctity of without prejudice communications in a settlement

The Court of Appeal has ruled that "without prejudice" communications should not be admissible as evidence at a trial as evidence of the interpretation of a term in a settlement agreement. They indicated that when balancing the conflicting principles of without prejudice communications remaining inadmissible and ensuring the best and most useful evidence is before the court, it is preferable to preserve the privilege attached to without prejudice communications in order to encourage parties to have confidence in their ability to freely negotiate settlements.
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12/02/2010 - Standard Terms for Sale of Goods : Practical incorporation steps for a supplier

Companies often overlook the importance of their standard terms of sale ("Terms") and assume that the Terms are accepted by their customers. Whilst Terms are commonplace, large retailers today often have their own standard terms of purchase. Consequently, without proper procedures in place, a supplier may inadvertently enter into a contract on a purchaser's terms.
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08/02/2010 - Managing Director personally liable for preferential payment

The claimant was a property company (Starglade) which claimed that the first defendant (N) was liable for dishonestly assisting in a breach of trust and sought, on the basis of knowing receipt, payment of money Nash had paid himself. Starglade had sold land to a development company (L). Nash was the managing director of L. Proceedings were later commenced by L against a third party and L sought from Starglade, for use in the proceedings, the assignment of a report previously obtained by Starglade. The third defendant (Mr Twining) was a partner at the second defendant law firm which advised L.
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04/02/2010 - Freezing orders and the restriction on the disclosure of information

The claimant bank made a successful application to release the restrictions on the disclosure of information in the first defendant's ("Mr Ablyazov") affidavit and exhibit, which had been provided pursuant to a freezing order.
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19/01/2010 - Recent Amendments to the Solicitors' Code of Conduct 2007

With effect from 1 March 2010, changes made to Rule 2.05 of the Solicitors' Code of Conduct 2007 shall become effective.
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18/01/2010 - Court of Appeal ruling on meaning of "subsidiary"

The Court of Appeal has overturned a High Court decision, ruling that a subsidiary ceased to be a subsidiary of a holding company as a result of the holding company granting a pledge over the subsidiary's shares and registration of the shares in the name of the bank's nominee by way of security.
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05/01/2010 - Users of Wikipedia can be traced by third parties

The Applicants (a mother and young child) applied to the Court for an order requiring the Respondent to disclose the IP address of a registered user of the Wikipedia website (a "Norwich Pharmacal" order). The user in question had made an amendment to an article available on Wikipedia.
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