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Archive for April, 2017

Tuesday 4 April 2017

MH Corporate

Consequential Loss Re-examined

The traditional meaning of damages for consequential loss was established by Hadley v Baxendale (1854)  9 Exch 341, but has recently been re-examined by the High Court in Star Polaris LLC V HHIC-PHIL Inc [2016] EWHC 2941.

Facts

Star Polaris LLC (the Buyer) entered into a contract with HHIC-PHIL Inc (the Seller) to build a ship, the Star Polaris. About eight months after its delivery, the ship suffered serious engine failure and had to be towed to a port for repairs. The Buyer commenced arbitration proceedings against the Seller for breach of contract, seeking compensation for: (i) the cost of repairs to the ship, (ii) various costs arising from the engine failure (namely: towage fees, agency fees, survey fees, off-hire and off-hire bunkers); and (iii) the diminution in value of the ship.

Tuesday 4 April 2017

MH Restructuring

“Targeted Anti Avoidance” – The Fall and Rise (again) of “Phoenixism”?

The recent Finance Act 2016, which came into force on 15 September 2016, introduces a new “targeted anti avoidance” (“TAAR”) provision with a sweeping, and yet potentially unintended, scope in the context of company winding up.

The intention behind the new provision in section 35 of the Act is to ensure that the rules around the payment of tax on a distribution in a company winding up are not abused.  Such a distribution, in the hands of the former company owner, will typically attract capital gains tax (CGT) as a gain on the return of capital at the rate of 10% or 20%. Conversely, dividend payments from the company would usually attract income tax at a much higher rate (potentially up to 38%).

HMRC considers that this tax differential is being exploited by close company stakeholders who contrive to wind up a company, pay a lower amount of CGT on distributions made to them and then start up a new company operating the same or a very similar business (and perhaps repeat the same process routinely). The new TAAR is focused on inhibiting such “phoenixism”. Unfortunately, the new TAAR rules have introduced significant uncertainty.

Tuesday 4 April 2017

MH Dispute Resolution

Recovering debts and resolving disputes – without it costing the earth

The decision to commence Court proceedings can be a daunting one.  Litigation is expensive, time consuming and there is no guarantee of success.  There are, however, alternatives to traditional costly Court proceedings:

1.Mediation 

Mediation is an effective tool used to resolve disputes of all values and complexities at a fraction of the cost of litigation.  The usual format involves a mediator (usually a lawyer) bringing opposing parties together in one location for a day or half a day.  There is often an “all parties” initial meeting followed by “shuttle diplomacy” during which the mediator will shuttle between the parties who will be located in separate rooms.  The aim is for the mediator to try to narrow the issues and focus the parties’ minds on the legal and commercial realities of their dispute so that they may be more agreeable to settling.  Mediation can be used whether or not proceedings have been issued.

Tuesday 4 April 2017

MH Corporate Update

To vary or not to vary

The general principle of contract variation is that parties to a contract may vary its terms by mutual agreement, provided that consideration is given and any necessary formalities are followed.

On this basis, it would not be unreasonable to expect that if a variation clause in an agreement states that the agreement can only be varied by written agreement signed by both parties, any attempted oral variation would fall short of such a test. Such clauses are commonly referred to as “anti-oral variation clauses”, the intention of which is to ensure that verbal communications cannot be treated as variations to the contract…or so the parties may have thought.

Tuesday 4 April 2017

MH Employment Update

Employment Status…….again

The issue of who is an ‘employee’, who is a ‘worker’ and who falls into neither camp is clearly going to be one of the big issues of 2017. Following on from the Uber and Deliveroo cases we highlighted in our November 2016 bulletin, headlines were made recently by the case of Pimlico Plumbers Ltd v Smith in which a plumber is claiming that he should be able to bring a range of employment law claims even though his contractual documentation stressed that he was self-employed.

Mr Smith was engaged by Pimlico Plumbers in 2005. Many of the features of his work were clearly inconsistent with being employed under a contract of employment. He was responsible for purchasing his own raw materials, for example, and was able to charge a ‘mark-up’ to the company when he used them in the course of his work. He also took full advantage of his self-employed tax status by setting off a considerable amount of his earnings as expenses, and was registered for VAT. It could not have been a surprise that the employment tribunal ruled that he was not an employee and could not bring a claim for unfair dismissal.

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