Launched in 2017, the esteemed Global Elite Directory lists the world’s most respected lawyers advising High Net Worth clients, as nominated by peers within the private wealth industry. Each year the list is narrowed down to just 250 industry experts from over 6,000 nominations.
The recognition of lawyers from across our Private Wealth practice is a testament to the strength and breadth of services we provide to private clients.
The Forsters lawyers featured have all maintained their listing in the prestigious Directory since the inaugural 2017 list:
Breaking Good – Episode Five: Splitigation – going to court to sort out finances on divorce
22 January 2021
Podcasts and videos
Co-hosts Marcus Brigstocke and Head of Family, Jo Edwards are joined once again by Rosie Schumm to talk about going to court to sort out money issues on divorce. They explore when involving the court is the right thing to do, the process, what powers the court has and why it’s usually not as melodramatic as movies would have us believe…
You can listen to more episodes of Breaking Good and the More Than Law podcast here on our website, as well as subscribe on your favourite podcast services, including:
To continue the conversation on social media, use #ForstersBreakingGood.
Leading divorce and family law experts – How can we help?
Known for the highest quality service and achieving the best results for our clients, our focus is always on the needs of each individual. Our top ranked Family team will take the time to understand each client’s unique personal situations – and we work with them to develop the course of action which best suits them.
We cover the full range of family law matters including pre and post nuptial agreements, separation arrangements, matters involving children, financial issues and divorce for clients both in the UK and overseas. In addition, we are experts in mediation and collaborative law.
Coming to a decision to separate or divorce is difficult and often distressing. For many, the process that lies ahead is a mystery and it is assumed that it will be confrontational and drawn-out. However, there is in fact a wide range of forward-thinking, constructive approaches to resolving the issues flowing from your divorce or separation.
Forsters’ Commercial Real Estate team advises Octopus Real Estate on one of its biggest care home portfolio purchases to date
14 January 2021
News
Forsters has advised Octopus Real Estate in relation to the acquisition of eight new care homes from LNT Care Developments for an overall purchase price of over £100 million.
Octopus Real Estate, part of the Octopus Group, is a specialist real estate lender and investor, and Forsters has advised its care home team since early 2018.
This deal is one of the biggest portfolio purchases to date for the Octopus Healthcare Fund, managed by Octopus Real Estate. The Fund has committed to buy five of the care homes at practical completion and forward fund the construction of three care homes over their 12 month build period.
The care homes are purpose built by LNT Care Developments and are located around the country. At practical completion seven of the homes will be let to existing care home operator, Ideal Carehomes, and the remaining home will be let to Elmfield Care, a new ‘LNT care partnership’ operator formed by LNT in partnership with Elmfield’s Directors.
Octopus Real Estate is passionate about executing its strategy of funding the development of modern care homes to bridge the existing gap in investment in the care home market.
The deal saw Forsters’ Commercial Real Estate, Construction and Planning teams working together to advise Octopus Real Estate and was another example of Forsters’ continuing growth into the healthcare/retirement living sector.
Senior Partner Smita Edwards and Senior Associate Amy France led the Forsters team, assisted by Commercial Real Estate Senior Associates Ruth de Maupeou and Danielle Kenyon, Associate Emma Francombe, Construction Senior Associate Richard Spring and Associate Caitlin Ervine. Planning advice was given by Senior Chartered Legal Executive Lauren Archer, Senior Associate Laura Parrish and Associate Sophie Smith.
Defective Cladding / Fire Protection – Residential flatowners need to act fast
12 January 2021
News
Since the tragic Grenfell Tower fire on 14 June 2017, it has become clear that many residential buildings are unsafe and require urgent and substantial remedial action. Grenfell Tower had Aluminium Composite Material (“ACM”) cladding but many other cladding systems, as well as insulation and other materials making up the external walls, have now been found to also be combustible and unsafe. Moreover, many buildings have been built without adequate cavity barriers to stop the spread of fire.
Flatowners in such buildings not only face great concern as to the safety of the occupiers of their flats, and the costs of remedial works, but also in relation to the amount of money they may have to contribute in relation to protective measures required pending their buildings being made safe. Until their buildings have passed an External Wall Fire Review (i.e. obtained an EWS1 sign off by an accredited engineer), their flats will be extremely difficult to sell or mortgage. It is understood that EWS inspections so far carried out have identified in many cases the need for fire safety related works before the building can be duly certified.
There have been various unsuccessful challenges by flatowners to being held liable to pay by way of the service charge for protective measures and remediation works. It is claimed that flatowners are paying £2.2 billion a year in total for interim safety measures (such as waking watch patrols and the installation of communal fire alarms) whilst remedial works are delayed or arranged, as well as for additional building insurance.
The draft Building Safety Bill published in July 2020, and currently going through the consultation process, proposes that further liability be put on flatowners to meet remediation costs by way of the ‘building safety charge’, a new type of service charge specifically for fire safety works that will be implied into the existing and new long leases of higher-risk buildings.
It is estimated that some 4 million flatowners are affected by fire safety related issues in one way or another. The Government has set up a number of funds, particularly for residential buildings over 18 metres high with dangerous cladding, but the amount of funding that has been promised is limited and will only cover a small fraction of buildings affected. Moreover, flatowners are expected in the first instance to seek reimbursement from third parties, such as developers and contractors and warranty providers, who are responsible for the design, installation or inspection of defective cladding systems or materials.
To date, only about 200 out of approximately 12,000 affected buildings have been completely remediated.
The most important questions and answers in relation to leaseholders being able to hold the relevant parties responsible are:
Who may be responsible and why?
The original developer/vendor and their building contractors, architects, engineers, surveyors, suppliers of materials, and cladding consultants/sub-contractors. If a building has been built defectively and/or in breach of Building Regulations, a Claim may be brought in contract (preferably), in negligence, and/or pursuant to the Defective Premises Act 1972.
In addition, most owners of newly built or converted residential buildings have new home warranties from the likes of NHBC, LABC, or Premier Guarantee which may well cover claims in relation to the structure and/or building regulation compliance of such buildings.
Is there a time limit for making a claim?
Yes, and a very strict one. The usual time period is six years from the breach of contract or negligence causing the damage (which will ordinarily be the date of the first sale) but this requires court or arbitration proceedings to actually be commenced within this period. It is, however, possible to agree Standstill Agreements with the Defendants to extend this time period and avoid the costs of issuing Proceedings.
In relation to new home warranties, claims need to be made within eight to ten years of the completion of the building.
Will court/arbitration proceedings be necessary?
Hopefully not if you are clearly within time to pursue a Claim. For reputational and commercial reasons, substantial developers may well be willing to undertake remedial action whether or not they accept liability. Some have already pledged to do so and/or made financial provision for this. If there is no substantial developer to pursue, then there may be a substantial contractor who is insured and any professional who is liable for defective design or supervision will also be insured.
Companies like NHBC who provide new home warranties, and who often also acted as the Building Inspector, may also well accept liability if the Claim is made in time. They may also pressurise the developer/contractor to remedy the defects.
Much will depend on when the building was designed and built, however, and what the actual failings are with it. Many Defendants will claim they were not at fault as the buildings were built in accordance with Building Regulations at that time. The ongoing Grenfell Inquiry, and invasive investigations undertaken into the construction of many high-rise blocks, have, however, shown that corners were often cut and works and materials were often sub-standard or non-compliant.
How much will court/arbitration proceedings cost?
It depends very much on what Defences are run and whether the case proceeds to Trial but costs can be very substantial. And the losing party is likely to be liable to pay the successful party or parties’ costs as well. Accordingly, it is important that leaseholders of buildings enter into Participation Agreements so that they can act together to defray the costs and/or to seek to secure third party funding and costs insurance (which is available for sizeable meritorious claims) and/or instruct their legal advisors on a contingency basis.
What should I do next if my building has cladding issues?
If you have not already done so, you do need to collate details of the defects and then take urgent advice from a lawyer and/or building surveyor/engineer who have experience in cladding claims/issues. It is sensible to join with any Residents Association or Leaseholders Group in doing so. As stated above, time is of the essence.
You should also check whether you have any legal expenses insurance (such as part of your contents cover) and research what surveying advice, if any, you received on your purchase.
In relation to relevant documentation, you need to collate your purchase contract and any new home warranty, or any other warranty, and any information received from your Landlord/Managing Agents as to the action they are taking or proposing to take and the likely costs.
A PDF copy of the article above is also available to download here.
Natasha Rees is Head of Forsters’ Property Litigation team. Jonathan Ross is a Partner and Sarah Heatley is an Associate in the Property Litigation team. Andrew Parker is a Partner in the Construction team.
Flexible working from home and the second home abroad
4 January 2021
News
The long-cherished dream of many people, i.e. cashing in the South London three-bed semi and buying the gorgeous villa with sea views (and good broadband) before retirement, is now a tangible possibility – or is it?
First of all, if you are an employee you need to consider whether your employer will allow you to do this and they will be assessing a number of factors, including:
Whether you will be able to carry out all of your duties from home, how often you might still need to go to your workplace in the UK and whether you are in the right time zone (so possibly New Zealand might not be suitable).
Whether your working from home causes any immigration, visa or regulatory issues, for example, do you have a right to work in the US and will you need to pass any further exams or comply with any local rules before you can regularly work in your new jurisdiction?
Whether working in your new jurisdiction will result in your employer having a fixed place of business from either a VAT or a corporation tax perspective.
Whether you will be subject to employment income tax where you work or where your employer is based. Your level of income may also have a bearing here – Denmark, Ireland, Germany, Greece, Norway and Sweden, for example, may have higher marginal rates of tax. Also, will your employer have any special security and pension obligations in your new jurisdiction?
What happens if you become sick? Is there a health care system or insurance policy you can claim on and who will fund that? The cost of US health insurance, for example, may make the US a less favourable jurisdiction.
Secondly, let’s consider your property purchase. You may need a more sophisticated lender than your typical high street bank and in particular, any bank is going to be concerned that you can prove good title to your proposed acquisition. In countries like Greece, where there may not be a national land register, proving title can be particularly time-consuming and expensive. You and the lending bank will want to ensure that there are no restrictions on purchases by foreigners (Thailand could be difficult) or the size or location of the property. Some countries only allow foreigners to buy new developments (off-plan), whilst others restrict the location (for example, not on the coast), whilst yet others restrict the acreage.
Thirdly, what about tax on purchase? For example, France charges VAT at 20% on the purchase of new developments!
Case Update: Directors’ liability for unlawful distributions
4 January 2021
News
The recent High Court Judgment in SSF Realisations Limited -v- Loch Fyne Oysters Ltd and Others (21 December 2020) is an example of how essential it is for Directors to only sanction distributions out of available profits as supported by the company’s last annual accounts (or interim accounts where the last accounts don’t evidence sufficient reserves).
Where companies become insolvent, recent cases have shown that the Liquidators have been able to make recovery from Directors who have made payments, or obtained security, that simply could not be justified once closely examined.
Alongside cases such as BTI 2014 LLP v Sequana SA (6 February 2019) (where the court found that a lawful distribution was a transaction defrauding creditors), it is important that Directors consciously turn their minds to the solvency of a company (current and future) when recommending or declaring dividends or other distributions, even if there are sufficient reserves. Where there are sufficient reserves, but the future solvency is or reasonably should be in doubt, the Directors are required to consider the interests of creditors in recommending or declaring any distribution. If not properly considered, the distribution itself, the actions of the company and the Directors are liable to be scrutinised should a creditor feel that it has been prejudiced by those actions.
As more and more insolvencies occur due to Covid-19 and market conditions, Directors are going to be under even more detailed scrutiny as to their actions, particularly where any distribution has been made in recent times.
The Facts
SSF Realisations Ltd (“the Company”) was incorporated in 1974 and supplied fish to shops and restaurants. It was acquired in 2008 by Loch Fyne Oysters Ltd (“LFO”) for £1.9 million but both the Company and LFO were in financial difficulty by 2011 and it was decided to sell LFO free from any liability to the Company. At the time, LFO owed the Company a sum of about £900,000 according to the Comp[any’s accounts.
In order to reduce this debt, the Directors of the Company resolved at a Board Meeting in November 2011 to declare a dividend of £500,000, and a management charge of £330,000, in favour of LFO. The management charge was stated to relate to various services that had been supplied to the Company but never charged for. It was subsequently reduced to £244,916.
The effect of the dividend and management charge was to put the Company into a position where it had net liabilities of £142,710 based on its management accounts as at November 2011.
The Company continued to trade but never returned to solvency and, after it went into creditors’ voluntary liquidation in 2016, the Liquidators pursued a claim against LFO and the Company’s Directors based on the whole amount of £744,916 being an unlawful distribution out of capital in breach of Part 23 of the Companies Act 2006.
The Judgement
After a 3 day hearing, the Judge concluded as follows:-
The management charge was not a genuine liability. It was a disguised distribution. Although LFO had supplied various services, it was as a shareholder and not a creditor (as it had never previously charged for these or factored these into any accounts and there had never been any contractual liability on the part of the Company to pay for any of these services). Accordingly, the sum of £244,916 was to be treated as a distribution within S.829 of the 2006 Act.
To decide whether a distribution is lawful, it is necessary to consider the relevant accounts, either being the last annual accounts or later interim accounts. In this case, the relevant accounts were the October 2011 management accounts which, when corrected for an understatement of liabilities, showed distributable profits of only £428,057.
The distribution of £744,916 exceeded the distributable profits of £428,057 by £316,859 and this excess was therefore unlawful.
LFO was liable to repay the excess under S.847 of the 2006 Act as, at the time, it knew, or had reasonable grounds to believe that, based on the relevant accounts as properly stated, this sum was beyond the amount lawfully distributable and was therefore in contravention of Part 23 of the 2006 Act.
The relevant Directors of the Company were potentially personally liable as well as, although they had not acted dishonestly, they were to be treated as trustees of the Company’s funds and they were aware of the relevant facts that made the distribution of the sum of £316,859 unlawful. They were directly involved in relation to the making of the management charge and securing the sale of LFO free from any liability to the Company. Although there were certain accounting issues at the time that confused the true financial position of the Company, this did not absolve the Directors as it was their responsibility to ensure proper books and records were maintained.
It was open to any Director to seek to be excused from personal liability for breach of duty under S.1157 of the 2006 Act if they acted honestly and reasonably and, in all the circumstances, if they ought fairly to be excused. Of the three Directors in question, two were highly experienced businessmen who fully understood their actions and took no steps to reverse the transactions when it was apparent they rendered the Company insolvent. So they were not to be excused but the third Director had no financial or accounting expertise and had relied on the others, and he was excused from liability.
The Conclusion
The Company, through the Liquidators, succeeded in the sum of £316,859 and can no doubt also recover interest and costs. This liability was largely due to the failure of the Directors to properly prepare the accounts they used to justify the distribution. Additionally, the creation of a management charge that had no historic or legal basis was clearly unjustified and this case serves to remind us that the Court will look at substance in deciding where a management charge is genuine or a sham.
The case also reminds us that Directors can be held to a subjective standard in relation to their own skills and experience, and in this case it is telling that the Director who did not have expertise in, or responsibility for, financial or accounting matters was not found personally liable for the failure relating to the preparation of the accounts. It may be the case that the Directors who were found liable are insured against their liability under D&O cover but, if not, they are likely to have a heavy liability to bear as they were presumably only pursued as it was believed LFO was not able to make repayment itself.
