When a person is unable to pursue a claim against someone who has been made bankrupt on account of the bankruptcy having been discharged, it may still be possible to pursue the claim against the bankrupt’s insurers, following a recent ruling.

The case involved 12 claims for breach of trust against nine solicitors and a Mr Dixit Shah. It was brought by the Law Society and 19 of the various clients of the solicitors.

Mr Shah had acquired several solicitors’ firms. Allegations had been made that a total of £12.5 million had been misappropriated by Mr Shah from the client accounts of these firms. Three of the solicitors were subsequently made bankrupt and then discharged.

The Law Society’s compensation fund made various payments to the aggrieved clients, totalling £12.5 million. Since the bankrupts no longer had professional indemnity insurance, cover was effectively provided by the Law Society.

However, because the three bankrupts had been discharged, the Law Society was unable to pursue a claim against them. For this reason, the Law Society attempted to make a claim against their insurers under the Third Parties (Rights Against Insurers) Act 1930, in order to recover monies paid out from the compensation fund in respect of the bankrupt solicitors’ clients.

To do this, it was necessary to prove that the claim against the insured was no longer disputable. Although the effect of the discharge of bankruptcy was to refute the Law Society’s incomplete claims, it was possible to elevate those claims to the status of ‘established’ simply by the admission of the claim in bankruptcy.

It follows that although a right to pursue an action against a debtor was lost once the debtor had been discharged from bankruptcy, this did not mean that the underlying cause of action was destroyed.

The ruling allowed the Law Society the means of demonstrating that the discharged bankrupts were liable to the various clients, by simple proof of debt. Once this had been done, the Law Society would then be able to pursue the insurer directly.

“This decision has far-reaching implications in such cases,” says Kate Barnes. “The circumstances of this case are very unusual, but for clients of solicitors it provides the reassurance that in the very unusual event of the bankruptcy of a solicitor who is the subject of a claim, the claim can still be pursued. Not all people offering professional advice are insured. Solicitors must have appropriate insurance arrangements in place in order to protect their clients.”

Partner Note
Times Law Report. Published December 20, 2007.
Law Society of England and Wales and Others v Shah and Others,
before Mr Justice Floyd, Chancery Division – Judgment November 30, 2007.

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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 Twenty-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/.

Partner Note
Widely reported. See
http://www.computerweekly.com/Articles/2008/01/17/228972/land-registry-e-conveyancing-system-to-include-pki.htm.

For further information please contact Lorraine Moser

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The first ‘class action’ brought in the UK regarding price-fixing has been settled, with one of the culprits – who colluded in keeping the price of replica football kit artificially high – agreeing to compensate customers who can prove that they purchased one of the football shirts that was in point.

Following an action brought by the consumer watchdog ‘Which?’, retailer JJB Sports has agreed to pay compensation to the hundreds of customers who sued them. These customers will receive £20 each from the retailer.

The retailer has also agreed to refund £10 to any of its customers who can produce a receipt for the purchase of one of the shirts, which are England, Manchester United, Nottingham Forest, Celtic and Chelsea shirts bought between 2000 and 2001.

The court case follows the levying of fines totalling £17 million by the Competition Commission, in 2003, against JJB, Manchester United, Allsports, Umbro and the Football Association, for fixing the prices of football shirts.

If you have one of these shirts and can find the original receipt, you should be able to obtain the £10 merely by taking it to your local branch of JJB Sports.

More recently, it has been announced that people who inform on those operating cartels may be eligible for rewards of up to £100,000.

Partner Note
Widely reported. See The Solicitors Journal, 15 January 2008.

For further information please contact Kate Barnes

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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 Stephen Harris for more information on using this approach.

Partner Note
There is a good summary in The Legal Executive, February 2008, pp 10 and 11.

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When one member of a cohabiting couple dies, it can come as an unpleasant surprise to the bereaved partner to discover that not all of their late partner’s estate will pass to them in the absence of a will. It is only when this happens that many people become aware that there is no such thing in law as a ‘common law’ spouse, so it is important that people living together give thought to protecting their position by the means currently available to them.

Where there are assets which are jointly held (as ‘joint tenants’ in legal terminology), these will pass by survivorship to the other partner. Property held jointly and joint bank accounts are normally held in this way. Also, if there is a life assurance policy or there are pension benefits payable to a nominated person, then the surviving partner will receive these if they are the named beneficiary.

Once such assets have been dealt with, however, the rules of intestacy apply if there is no will. An intestate estate passes (with a rather complex formula regarding its division depending on the size of the estate) to the relatives of the deceased. This will normally leave the deceased’s partner with nothing.

However, the law does allow a claim for provision to be made from the estate of the deceased by dependents if they are persons for whom the intestate person might reasonably have been expected to make provision.

A surviving cohabitee can make a claim if the deceased died intestate or failed to provide for them in the will if:

they were maintained by the deceased in whole or in part immediately before the death of the deceased; or for two years prior to the death of the deceased they lived in the same household as the deceased as if they were the husband, wife or civil partner of the deceased.

In such cases the court may be requested to make ‘reasonable provision’ for the applicant. There are a series of guidelines which have been set to ensure that the provision made is fair bearing in mind the size of the estate and the circumstances of those with an interest in it.

The court’s powers to divide the estate are considerable and can include making orders for periodical payments or lump sums or the transfer of specific property to the claimant. However, it should be remembered that transfers on death to a cohabitee do not qualify for the ‘spouse’ exemption from Inheritance Tax which applies to transfers to a spouse or civil partner.

“With nearly 2.5 million people cohabiting in the UK, issues arising following the death of one partner are becoming more and more frequent. The sensible thing to do is to make a will. However, don’t forget that if a couple then decide to marry or enter into a civil partnership, previous wills become invalid and new ones should be written.”

For further information please contact David Cocksedge and Alison Damant

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As announced in earlier Budgets, the threshold above which Inheritance Tax is payable on a deceased person’s estate has risen to £312,000 for the tax year 2008/2009. The threshold for 2009/2010 will be £325,000, followed by a further rise bringing the level to £350,000 for the tax year 2010/2011.

For further information please contact David Cocksedge and Alison Damant

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The Advocate General has handed down his opinion in the case of Attridge Law v Coleman. The case concerns the interpretation of the EU Equal Treatment Framework Directive and its impact on disability discrimination legislation in the UK.

Sharon Coleman brought a claim of disability discrimination and constructive dismissal against her ex-employer on the grounds that she had been discriminated against because of her son’s disability. Amongst her claims of unfair treatment were that she was not permitted to work from home, even though other employees were allowed to do so to care for non-disabled children, and that she was placed in a pool of staff selected for redundancy after she said that she intended to make a formal request for flexible working in order to care for her son. Ms Coleman claimed that her employer’s actions had created a hostile environment which forced her to resign.

Section 3A(5) of the Disability Discrimination Act 1995 (DDA) is worded such that a person who is not disabled but who is discriminated against because of another person’s disability cannot bring a claim. It would not appear, therefore, to protect someone caring for a disabled person. Ms Coleman argued that the Equal Treatment Framework Directive does give protection from unfair treatment which arises out of association with a disabled person. The Employment Tribunal referred the question to the European Court of Justice (ECJ) in order to establish whether the UK law properly implements the Directive.

The Advocate General’s opinion is that such discrimination is prohibited under the Directive. He said, “One way of undermining the dignity and autonomy of people who belong to a certain group is to target not them, but third persons who are closely associated with them.” In his view, to be protected by the Directive it is not necessary for someone who is the object of discrimination to have been mistreated on account of their disability. It is enough that they were mistreated on account of disability. Therefore, if Mrs Coleman can prove that she suffered less favourable treatment than other members of staff because of her son’s disability, she should be able to rely on the Directive.

The Advocate General’s opinion is not binding on the ECJ but it is followed in 80 per cent of cases. If the Court does support his decision, it will apply to UK laws on discrimination on other grounds, for example age discrimination, and may require amendments to domestic legislation to make it compatible with EU law.

The ECJ’s decision is expected in May 2008.

For further information please contact Antony Arbuthnot

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If an employer is proposing to make redundant 20 or more employees at one establishment within a period of 90 days, the collective consultation provisions of Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) come into play. Where the employer is proposing to dismiss 100 or more employees, the consultation period must be at least 90 days; otherwise it must be at least 30 days. Failure to consult with the appropriate representatives of affected employees can lead to a protective award requiring the employer to pay each affected employee 90 days’ pay.

In Evans, Motture and Hutchins v Permacell Finesse Ltd., the Employment Appeal Tribunal (EAT) considered the amount of the award payable when there has been a failure to follow the collective consultation provisions.

Mr Hutchins worked for Permacell Finesse Ltd. as a supervisor. He was one of approximately 77 employees that the company proposed to make redundant during a 90 day period, thus triggering an obligation to consult for a minimum of 30 days. However, Permacell made no provision for the election of employee representatives and was therefore unable to consult them. Several employees brought claims for a protective award on account of this failure.

The Employment Tribunal (ET) found that there had been a serious failure to comply with the consultation requirements, with no evidence of any mitigating factors. However, it considered that the breach did not have as great an adverse effect as would have been the case if 100 or more employees had been deprived of a minimum of 90 days consultation and so the sanction should be a 30 day protective award, which amounted to Mr Hutchinson being awarded £2,742.

The level of the award was the subject of an appeal to the EAT, which took as its starting point the judgment in the 2004 case of Susie Radin Ltd. v GMB and Others. This offered guidance on what matters the ET should take into account when determining the level of the protective award and made it clear that the purpose of the award is to punish the employer for breach of its obligations under Section 188 of TULRCA, rather than to compensate the employee for any loss, and that a proper approach where there has been no consultation is to start with the maximum period and to then reduce it only if there are mitigating circumstances. The EAT stated that there is now no specific link between the consultation period and the protected period.

The EAT also referred to the recent case of UK Coal Mining Ltd. v NUM in which the EAT held that protective awards of the maximum 90 days were correct for a serious breach of the statutory requirements on the part of the employer. The limited consultation that had taken place did not mitigate the seriousness of the conduct.

The EAT held that a serious breach of the collective consultation requirements must put the protective award near the maximum payable. The ET had made an error of law. It should have started at 90 days and worked downwards if there were mitigating factors. In this case, however, there was no evidence of mitigating or special circumstances so the EAT substituted a protective award of 90 days.

Says Antony Arbuthnot, “This case serves as a further reminder to employers of the potentially serious financial consequences of failing to consult when making collective redundancies. Even if the obligation to consult is for a minimum 30 day period, a serious breach of the requirement can result in employees being granted a 90 day protective award.”

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The information contained in this newsletter is intended for general guidance only. It provides useful information in a concise form and is not a substitute for obtaining professional advice.