Analysis of Supreme Court’s decision in Moulsdale v CRC: Elizabeth Small writes for Taxation
28 April 2023
Views
Corporate Tax Partner, Elizabeth Small touches on the Supreme Court’s decision in Moulsdale v CRC, concluding that taxpayers using anti-avoidance provisions against HMRC and arguing for a wide construction of the anti-avoidance rules are never going to gain much traction with the courts.
Small touches on the fact that Mr Moulsdale thought it was worthwhile going all the way to the Supreme Court (Moulsdale trading as Moulsdale Properties v CRC (Scotland) [2023] UKSC 12) to argue this point (disagreeing with HMRC’s assessment that he should have charged VAT) where he, trading as Moulsdale Properties (Moulsdale):
purchased office property (paying VAT on the purchase price) – the price was over £250,000 so the property was an item subject to the capital goods scheme;
exercised an option to tax over the property (recovering as allowable input VAT most of the VAT paid on the purchase price); and
Government’s proposals to increase planning fees ‘broadly welcomed’ – Matthew Evans speaks to Property Week
27 April 2023
Views
Planning Counsel, Matthew Evans, has spoken to Property Week’s Ciaran Nerval on how the government’s proposals to “hike up planning fees for developers” have been “broadly welcomed”.
However, industry sources have called for “real change” to planning departments through the provision of additional funding.
Evans agreed that the proposals to increase planning fees (by 35% for major applications and 25% for all others) were “broadly welcomed”.
However, he said these proposals needed to deliver “real change to local authority planning departments and translate effectively into increased resource.
“Local authorities have seen budgets slashed due to austerity-era policies, so to see real change we need to ensure the funds generated from increasing planning fees are ringfenced and spent within the department; without this, any change to the fees won’t deliver genuine results.
“There is no quick solution, but there is an urgent need to establish a long-term plan that boosts resource, improves retention and is closely monitored; otherwise, we run the risk of slowing down economic growth, which is so intrinsically linked to the planning system and new development.”
This article was first published in Property Week on 26 April 2023 and is available to read in full here, behind their paywall.
We are delighted to announce that Forsters has been named as a finalist for ‘Litigation Team of the Year’ at The Lawyer Awards 2023.
The Lawyer Awards have honoured top lawyers and law firms across the UK legal sector for the last two decades. Winners are carefully chosen by an esteemed judging panel from The Bar, Private Practice, and In-house sectors.
Our entry focused on our recent Supreme Court win for flat owners in Fearn v Tate. Forsters acted for five residents of the Neo Bankside development, situated on London’s South Bank, who brought a claim against the Tate Modern in nuisance and under the Human right Act 1998 in an attempt to protect their right to privacy from the Viewing Gallery, which is on the tenth floor of the Tate Modern Blavatnik extension. Read more about the case here.
The winners will be announced on the 20 June at the JW Marriott Grosvenor House Hotel. We look forward to joining our fellow nominees on the evening!
Forsters’ highly ranked Property Litigation team provides the full range of contentious services covering both residential and commercial matters. The practice comprises four partners and over 20 lawyers, for further information click here. The firm has a wider team of contentious experts covering Commercial Litigation, Contentious Trusts And Estates, Family And Contentious Construction.
Forsters advises Fiera Real Estate UK and Cubex on the acquisition of a 2.6 acre development site in Bristol
27 April 2023
News
Forsters has advised Fiera Real Estate (“Fiera”) and Cubex on the acquisition of a 2.6-acre site in Filton for the proposed development of a new 75,000 sq.ft Grade A urban logistics scheme with a GDV of £20m. The scheme is expected to complete in the second quarter of 2024.
The site was purchased through the Fiera Real Estate Logistics Development Fund UK (“FRELD”). All assets in FRELD’s portfolio will meet the rigorous environmental and social requirements set out by FRE UK’s Sustainable Design Brief, which align with its ambition to drive positive change and contribute to a low carbon economy. The scheme has had ESG considerations embedded at all stages of its design process and along with future projects for the fund, it will be targeting net-zero carbon construction, BREEAM Excellent and EPC A.
The site is situated in the Filton area of Bristol, which is already a prime industrial location and in close proximity to the M4, M32 and A38. It was previously occupied by Rolls Royce before being acquired by St Francis Group and is the last remaining plot of the Horizon 38 development, which already hosts several investment grade occupiers.
Joe Downey, Managing Director at Cubex, commented “I absolutely love this site. Filton is undoubtedly the best-connected location in Bristol for urban warehousing. The immediate area is home to some of the largest aerospace and defence companies in the world, and the neighbouring Brabazon development will create an entirely new neighbourhood with thousands of new homes.”
Chris Button, Fund Manager at Fiera, added, “We are super excited to be funding another high quality and sustainable development with Cubex and have immediate appetite to invest a further £250m.”
Commercial Real Estate Partner Jade Capper, assisted by Senior Associate Charlie Croft, advised on the deal.
The index recognises the highest calibre of landed estate lawyers, guiding clients with issues ranging from tax to succession planning, residential development to diversification and the overall management of an estate.
Forsters has the greatest number of advisers in the ranking in the 2023 Index, further bolstering the team’s long-standing reputation as one of the leading Rural Land and Business teams in the country. The team are also ranked in Tier 1 for Agriculture and Estates by the Legal 500 and in Band 1 for Agriculture & Rural Affairs by Chambers and Partners.
The index recognises the highest calibre of corporate lawyers advising high net worth individuals, with significant expertise in high-value transactions.
Government’s older person housing taskforce has its work cut out – Natalie Cameron writes for React News
25 April 2023
Views
Commercial Real Estate Senior Associate and member of the Later Living team, Natalie Cameron, has written for React News on the Government’s recent progress in establishing an “Older People’s Housing Taskforce” and the appointment of Professor Julienne Meyer as its Chair.
The taskforce was first announced in the February 2022 ‘Levelling Up’ white paper and is being launched by two Government departments – the Department of Health and Social Care (DHSC) and the Department for Levelling Up, Housing and Communities (DLUHC).
Cameron highlights the differential between the UK and countries such as New Zealand, Australia and the USA, in terms of the availability of homes “with on-site care available”, with the UK (0.6% of total units) lacking far behind similar nations (5-6% total units).
Recognising this supply issue, the taskforce’s purpose is “to work across housing, health and care sectors to drive an increase in the volume and range of housing options, with a particular focus on boosting ‘housing with care’ numbers.”
This is an important issue, as highlighted in Professor Les Mayhew’s review for City University, which concluded that to meet demand, one in four new homes must be built with “housing with care” in mind. This equates to 50,000 of such homes built each year.
Cameron goes on to emphasise the significant role of taskforce appointees in delivering the vision of the ‘Levelling Up’ agenda and state how upcoming legislation aimed at enabling sustainable housing options “tailored to the varying needs of older people will be crucial in the integrated provision of facilities and care services.”
An additional focus for the taskforce will be on potential solutions to the supply of adequate later living housing, including providing clarity on the role of “housing with care” in regard to the planning system and leasehold reform.
The taskforce (consisting of 14 members from a variety of sectors within the later living sphere) will run for 12 months and will work independently of both DLUHC and DHSC ministers, with interim findings to be published after six months.
Cameron concludes by writing: “It is clear that the work to be done by the taskforce is both urgent and vital in enabling the required pace of development of later living accommodation.”
This article was originally published by React News on 20 April 2023 and is available here in full (behind their paywall).
BISNOW Seminar – The UK’s Industrial and Logistics Transformation
21 April 2023
News
On Tuesday 18 April 2023, Commercial Real Estate Senior Associates Daniel Steele and Paul Grayson attended the BISNOW seminar on The UK’s Industrial and Logistics Transformation at the Royal College of General Practitioners.
The seminar focused on two key themes:
Investing In Industrial: Is The Bubble Going To Burst? and
The Future Of Industrial: Sustainability And Technology,
as well as a general discussion regarding the green industrial revolution. The speakers came from a variety of backgrounds, including international investment managers, UK big-box developers, London-focused developers, real estate consultants and a representative of the UK Warehousing Association.
Daniel and Paul share some key insights and thoughts from the various discussions as follows:
Wishful thinking
When each asked one thing that the panellists wished would happen in the next 12 months, pleas for changes to the planning system, for market participants to adjust their expectations and for a move towards adopting multistorey industrial options were all mooted.
It was widely acknowledged by panellists across the afternoon that the current planning system does not appear to be working and changes need to occur in order to make this more transparent and consistent across the UK.
Some market participants still appear to be clinging to memories of before the Liz Truss mini budget in September 2022 and are not adjusting their expectations. While prices are slowly adjusting to realistic levels, the panellists believed that there has been a structural change in pricing that should be accepted and built upon, rather than relying on prayers and hopes of what has happened historically.
Multi-storey developments are common in Europe but UK occupiers appear to be slow to adopt this. Given the demand for space multi-storey options should be considered by tenants as viable options to their needs and should be encouraged by agents to increase uptake. That said, the panel did acknowledge that occupiers will not fully commit to multi-storey developments until it can be widely demonstrated that the ramps/lifts between floors can adequately sustain the demands of industrial use.
High Voltage
While there is a push towards adopting green energy and adapting operations and assets to avoid the use of fossil fuels, there is concern as to whether the grid has the capacity to tolerate increased energy consumption. To mitigate future energy concerns, many developers and landlords are opting to put solar PV panels on their buildings but there are still questions regarding how (and if) excess capacity can be returned to the grid and at what return? Is there enough incentive to developers or landlords to install solar PV panels if the tenant does not have any need for excess power and the energy cannot be sold back to the grid at a reasonable rate?
i-Robot
Many tenants are investing in robotics and are leaving room in their plans to accommodate expanded robotics schemes in the future. The UK market, however, faces issues in attempting to expand robotics, such as:
as mentioned above, does the UK have the energy capacity to cope with this? and
are there enough engineers in the UK to service them?
A panellist described an example of an entire automated facility shutting down and having to wait for an engineer from Europe to fly over and fix the situation. Should the industry be offering apprenticeships so that the UK can train their own engineers to facilitate the expanding growth of robotics in industry?
Mixing it up
The rise of dark kitchens, vertical farms and film studios occupying warehouse space all offer opportunities for access to new tenants and therefore new growth and demand, particularly for urban and last-mile logistics sites (assuming the sites have the energy capacity to cope with tenant’s requirements – film studios are energy hungry!).
ESG and benchmarking
Whilst the market is rightfully driving the ESG agenda, there is still no commonality as to what “net zero” means. Each market participant is undertaking their own ESG initiatives, however the lack of commonality makes it difficult to benchmark one’s performance against others in the market. The market needs to be more transparent as a whole, perhaps an alien concept to investors and developers who closely guard key information such as yields.
Modern Families: Dickon Ceadel speaks at Private Client Global Elite Rising Leaders Brunch 2023
20 April 2023
News
Family Partner, Dickon Ceadel, provided a session in London today at the annual Private Client Global Elite Rising Leaders Brunch entitled ‘Modern Families’ alongside Sarah Aughwane of Withersworldwide.
Dickon’s segment covered the cross dimensional elements of modern family cases focussing on issues surrounding surrogacy and cohabiting couples.
Please contact Dickon if you would like further information on either of these topics.
Will My Prenup Be Valid When I Move To England? – Simon Blain writes for Abode2
19 April 2023
Views
Prenups are often familiar territory to many HNW and UHNW international couples. Still, careful consideration must take place pre-arrival and once moved, as prenups aren’t automatically enforceable in the English courts.
Once a couple becomes habitually resident in England, any future divorce and financial settlement is likely to be determined according to the law of England and Wales. This means that a prenup is only likely be upheld if it meets certain conditions, including:
the prenup has been entered into freely;
each party has taken independent legal advice;
there has been material financial disclosure by both parties; and
the agreement is fair – crucially this is determined at the point of the divorce, rather than at the time the agreement is signed.
It is important that any existing overseas prenup is reviewed to ensure the above criteria are fulfilled and that it takes account of changed circumstances following the relocation.
For those who don’t have a nuptial agreement in place, investing in property in the UK can act as an ideal segue to negotiate a postnup.
How can cohabiting couples protect their property when moving to England?
It’s often assumed that a couple that cohabitates for an extended period of time will have the same rights as a married couple if they separate. However, in England, there’s no such thing as common law marriage. This doesn’t mean that one party can’t make a claim against the other concerning the property, and in fact, there are several legal means by which they can do this, especially when children are involved.
How does a cohabitation agreement work for international couples?
For international cohabiting couples acquiring property, we always recommend a cohabitation agreement, as it can protect the individuals from any issues should the relationship end and mitigate any long legal battles. An agreement allows both parties to regulate the terms of their cohabitation and provides clarity throughout the relationship and if it breaks down.
An agreement incorporates or is accompanied by a declaration of trust in relation to property, confirming the parties’ respective beneficial interests. It can also help couples to navigate resolution around other issues such as how household expenses are split, what happens if one party wishes to sell the party, but the other doesn’t, financial provision during and after cohabitation as well as living arrangements and financial support for any children.
In our experience, the security and clarity through prenups, postnups or cohabitation agreements offer great relief to couples if the relationship ends in the future.
This article deals with the position in England and specialist advice ought to be taken as necessary regarding the position in Scotland.
This article was first published for the Abode2 luxury property publication, which can be accessed here.
For more information on our services for individuals and families relocating to the UK, see here.
Moving to the UK is an exciting life event whether it be a short-term move for work to explore business prospects or a more permanent relocation with the whole family; the UK offers an eclectic range of options to live, work and learn, from the cityscapes of London to vineyards in the English countryside and historic university towns in-between. Setting up life in a new country can feel daunting too and it can be difficult to know where to start.
Avoiding Unwanted Tax Liabilities When Buying a Home in the UK – Xavier Nicholas writes for Abode2
14 April 2023
Views
Alongside identifying quality support on conveyancing, it is essential that international buyers seek legal advice on the tax implications of acquiring a home in the UK.
Unexpected tax liabilities can surprise the unprepared, while well-advised buyers will have the best chance of limiting their exposure.
The main concern will be inheritance tax (IHT). Non-UK domiciled individuals are subject to IHT at a rate of 40% to the extent that the value of their UK estates exceeds the tax-free ‘nil rate band’ allowance (NRB). At a modest £325,000 (or in some cases, £500,000), the limited scope of the NRB can come as a shock to those relocating from (say) the US, where the amount that can pass free of federal estate tax is currently $12.92m.
Owing to significant changes in legislation over recent years, the options for mitigating IHT are limited. Good advice is needed to navigate the rules successfully and ensure that ownership arrangements are tax efficient. Planning might include securing the exemption that applies to transfers on death between spouses and civil partners, using debt to reduce tax exposure, specialist life insurance, and (in some circumstances) co-ownership of a property with children.
In all cases, buyers should take advice before completing a purchase, as some forms of planning may not be effective if put in place later on.
Special attention is needed for those who will continue to be subject to tax in another jurisdiction. Double taxation agreements and cross-border reporting may add to the need for a pre-purchase check-up. For those with a US connection, acquiring a property in the UK makes specialist advice on US-UK estate planning a must-have.
UK tax legislation, with all its complexity and intricacies, has a habit of leading the way in making the case for fact-specific legal counsel. Pre-purchase tax advice should be at the top of the to-do list for those thinking of acquiring a home in the UK.
This article was first published for the Abode2 luxury property publication, which can be accessed here.
For more information on our services for individuals and families relocating to the UK, see here.
Moving to the UK is an exciting life event whether it be a short-term move for work to explore business prospects or a more permanent relocation with the whole family; the UK offers an eclectic range of options to live, work and learn, from the cityscapes of London to vineyards in the English countryside and historic university towns in-between. Setting up life in a new country can feel daunting too and it can be difficult to know where to start.
We need to get the green belt back on the agenda’ – Matthew Evans writes for React News
12 April 2023
Views
Planning Counsel, Matthew Evans, has written a piece for React News on the need for the government to develop its strategy when it comes to housing delivery by once again focusing on green belt sites, rather than solely brownfields as they are currently.
Evans explains that while the government’s recent emphasis on the redevelopment of brownfield sites has been logical, noting to factors such as location, ecological value and offset considerations. However, many of the straightforward sites have now been developed, meaning only “difficult and constrained sites remain.”
The costly redevelopment of these challenging brownfield sites needs to be understood against the fact that they are better suited to high-density apartments rather than family housing (the latter of which is more greatly needed). While the government has put forward £60m via a new “Brownfield Land Release Fund 2”, this is an insignificant sum when looking at the wider issue.
Evans writes: “If we truly want to build the housing the country needs, green belt reviews need to be put firmly back on the agenda. It is a highly politicised topic, but it is crucial. There needs to be careful consideration of green belt versus protected. No one is advocating for runaway urban sprawl, but there are a lot of poor and allegedly green belt sites that are hardstanding or generally low quality – neither of which deserve the high level of protection that green belt designation affords.”
He goes on to recommend a new, additional categorisation of these sites (akin to the recent proposal for Grade-III buildings) that will differentiate between true green belt land and low-quality land that is suitable for housing developments.
“There are places in the home counties that haven’t reviewed their green belt for a very long time, and with changes to the national planning policy framework stating that green belt reviews will not need to be carried out to meet housing need, there is little chance of this changing now.”
Evans concludes by advocating for the need for greater public awareness of the sort of land that is being (unnecessarily) protected, framed against the trends of dwindling supply and rising house prices.
Without a reconsideration of both a reliance on brownfields and the funds required to do so, “it is hard to see how we are going to deliver on growth ambitions and provide the homes that people want and need.”
This article was originally published by React News on 29 March 2023 and is available here in full (behind their paywall).
Restrictions preventing an employee from joining a competitor or setting up in competition for a period (typically between 6 – 12 months) after their employment has ended (a “non-compete”) is a common, albeit at times controversial, feature of UK employment contracts.
But changes appear to be afoot and it seems likely that non-competes as we know them may look a little different in the future.
Used appropriately – such as limiting their application only to senior employees or to those with access to highly confidential information and trade secrets, and then only for a reasonable period – a non-compete makes complete sense. It allows an employer to safeguard its position, preventing parts of its business from being diverted elsewhere, which other post-employment restrictions (such as confidentiality obligations and non-solicitation restrictions) cannot always fully protect.
Conversely, used inappropriately or abusively (as can often be the case), a non-compete arguably prevents free trade, restricts the labour market and innovation and, on a personal level, has a detrimental impact on an individual’s ability to earn a living. The ‘standard issued’ non-compete can, fairly regularly, result in hard working and innovative individuals taking time out to avoid any alleged breach and/or dispute with their former employer, despite the fact that such non-compete might actually be unenforceable. Perhaps the State of California, where non-competes have been banned for some time, is a good place to find evidence for these stifling of free trade and innovation arguments: Silicon Valley has, after all, essentially been built by employees leaving large tech firms and launching their own startups, as they are generally free to do albeit ostensibly in “competition” with their previous employer.
It is because of this tension that the UK government previously consulted on the use of non-competes and associated reforms. The consultation (called: “Measures to reform post-termination non-compete clauses in contracts of employment”) looked, in particular, at:
whether employers should be required to pay employees during a non-compete period (with such periods being limited in duration); and
the idea of banning them altogether.
Unfortunately, despite that consultation closing just over two years ago, we are still awaiting its outcome. That said, since the closing of the consultation, there have been some interesting developments in the non-compete area in other jurisdictions.
The most significant development has perhaps been in the US. Following an executive order to all agencies by Joe Biden to increase productivity, the US regulator, the Federal Trade Commission (“FTC”), has recently outlined plans to ban US employers from using non-competes or relying on existing non-compete provisions. The proposed new rule would categorise a non-compete as an “unfair method of competition’. However, the draft rule does provide for a carve-out in the context of a corporate transaction where a shareholder stays on with the business as an employee.
The fact that just weeks after the FTC outlined its plans, the UK Competition and Markets Authority reminded employers to avoid anti-competitive behaviour (such as wage fixing and agreements not to employ others’ employees) might suggest that we are keeping an eye on what is going on across the pond.
Anecdotally, some employment lawyers in the US believe that the proposed FTC rule is too vague, generating more questions than it answers. They anticipate that, following comment from various stakeholders, the rule (in the event it is passed) will be narrowed – for example, to create further exemptions for senior level executives (i.e. still permitting the use of non-competes in respect of their employment).
That said, other commentators believe a carve out for senior employees could be counter to the overriding executive order designed at increasing productivity, noting that such employees typically generate growth and innovation so restricting them would not achieve the order’s aims. There is also concern that having such a carve out would lead to ‘satellite’ litigation about an employee’s seniority and/or whether an associated non-compete is enforceable.
But perhaps recent developments north of the border, in Canada, will help reassure US lawyers. In 2021, the province of Ontario introduced a similar law (through the “Working for Workers Act”) banning the use of new non-competes (but not those already in existence), unless it is agreed in the context of a corporate transaction (similar to the FTC’s carve out) or for senior employees holding specific positions (for example, Chief Executive Officer, Chief Finance Officer or Chief Legal Officer).
Perhaps it is too early to tell whether the Ontario position strikes the right balance, but it does highlight that this topic seems to be firmly on the agenda in many countries and that changes here in the UK seem likely, especially given the current status in the US. It will certainly be interesting to see whether and how international developments such as those in the US and Canada inform or contribute to the debate here in the UK.
More generally, perhaps one could look closer to home to see how other European countries create a fairer non-compete environment. One of the points the UK government consulted on was the need to pay employees during any non-compete period and both France and Germany (for example) have adopted this model for some time. The financial consequences really focus an employer’s mind as to which employees they need to restrict, and this seems to strike a good balance between giving employers the ability to subject an employee to a non-compete (and pay them) where circumstances require whilst addressing the personal financial impact on the employee. Arguably, such model would be even fairer if the paid non-compete could only be used for senior employees, adopting the concept from Ontario.
So, is there a future for non-competes? I believe so, but perhaps in a different form to what we are familiar with in the UK. Such changes are still up for debate and might, in practice, be informed by any conclusions of the FTC. But in any event, any changes will likely result in a degree of uncertainty and further questions, keeping both employers and lawyers busy. For example:
how would garden leave provisions be considered in light of any ban or restriction on the use of non-competes: are they a non-compete through the backdoor or a standalone contractual provision?
will employers try to be more creative in their use of breach of non-solicitation and non-dealing covenants to try and reach the same outcome as a non-compete?
if non-competes are faded out or restricted in different jurisdictions, how will global companies who grant stock/equity under global plans that tend to be linked to non-competes work? For example, will we see a move away from global harmonised plans to a country specific approach?
International Buyers Continue To Seek UK Homes Despite UK Economy Concerns – Charles Miéville writes for Abode2
11 April 2023
Views
Despite the UK economy and house prices in many sectors currently falling, prime residential property is a sector of the market which continues to flourish as a popular choice for international HNW and UHNW clients looking to relocate or invest.
Whilst these properties have predominantly been in prime Central London, there’s also a keen interest in trophy assets located outside of the capital, although, through a lack of supply, particularly in the countryside, these transactions are undoubtedly fewer in number.
Why is the UK such an attractive place for international buyers?
There are several reasons for this stable trend. One explanation for those moving from overseas is the UK offers an advantageous time zone, being roughly equidistant between North America and Asia.
For all international buyers, English Law is viewed as a safe, stable and secure system under which to buy and own assets, both from a financial and family perspective. The schooling system is also favoured by many international families who then require a bolt-hole in the UK whilst their children are based here.
One huge attraction for US citizens, in particular, is the property tax benefits. State property taxes in the US, particularly in New York and California, are very high. Compare this to the UK, where acquisition taxes are far higher (in the form of stamp duty land tax), but the holding costs are far lower (being limited to council tax and service charge for flats), meaning if US buyers are holding their UK assets for any length of time, it may prove a cheaper alternative to US real estate.
Will the housing market prices dip for high-value houses?
Having spoken to several agents over the last few days, they are still seeing that there is a healthy appetite from individuals in the Middle East, the States and Asia. It is likely that throughout 2023 we will continue to see premium sales continue apace and valuations continue to hold, particularly while stock remains low.
This article was first published for the Abode2 luxury property publication, which can be accessed here.
For more information on our services for individuals and families relocating to the UK, see here.
Moving to the UK is an exciting life event whether it be a short-term move for work to explore business prospects or a more permanent relocation with the whole family; the UK offers an eclectic range of options to live, work and learn, from the cityscapes of London to vineyards in the English countryside and historic university towns in-between. Setting up life in a new country can feel daunting too and it can be difficult to know where to start.
The Great Freeze UK style – Maryam Oghanna writes for Private Client Business
5 April 2023
Views
Contentious Trusts and Estates Senior Associate, Maryam Oghanna, together with Richard Dew of Ten Old Square, have authored an article for Private Client Business on the effect of UK sanctions on trusts with a connection to Russia.
This is the second of two linked articles, the first dealing with restrictions imposed by the EU that targeted trusts with a ‘Russian Connection’ as adopted through two EU regulations, and this second instalment undertaking a comparison of the two regimes.
The full article can be read here, behind a paywall.
The first in the series can be read here, behind a paywall.
Richard Dew and Maryam Oghanna, ‘The great freeze: UK style, Private Client Business 2023, 2, 54-59.
International Bar Association Tech M&A conference – Key Takeaways
3 April 2023
News
Forsters attended the International Bar Association Tech M&A conference in Berlin on 23 and 24 March. While the Tech sector is being impacted by global macroeconomic conditions, there was a lot of optimism. Here are our key takeaways:
The Tech M&A market has seen exponential growth for two decades, with 7 * growth in deal volumes. This has slowed down recently but the market is by its nature innovative, and so there remains a very positive outlook in the medium to long term. In particular, periods of instability are typically followed by a surge in M&A and investment activity once stakeholders gain confidence that valuations have stabilised, and there is a sense that there is a lot of ‘dry powder’ out there.
Like in the UK, Founders of early stage companies across multiple countries are faced with a market of lower valuations and have been slowing their spend to extend existing cash so far as possible. Investors have been even more selective on where they place their money, with some moving away from the typical 1* preference as a way of balancing risk (though a mention of 8* having been proposed is concerning).
Cybersecurity is a top 3 risk to businesses, with a range of solutions for stakeholders to consider when looking to protect themselves, such as checking that standards and measures have been implemented and monitored, insurance, and technical diligence, alongside legal diligence and warranties on deals. This should be considered on all deals involving data and secret information, not just those with a significant amount of personal data involved. Cybersecurity is a c-suite level conversation for businesses.
Employee incentive schemes remain an important way of rewarding management and employees across the globe, with many taking the form of share/stock plans and phantom share schemes.
Data remains a big topic. Tech businesses with international reach need to be on top of their obligations across various data protection frameworks and need an understanding of how they operate together, considering transfer impact assessments, the UK and EU data frameworks, the US executive order, and more.
Divorces hit ten-year high as financial strains show: Dickon Ceadel quoted in ‘The Times’
3 April 2023
Views
Family Partner, Dickon Ceadel, has been quoted in ‘The Times’ on the rise in divorce applications as the increased cost of living puts marriages under further strain.
Dickon comments that ‘Soaring interest rates and high inflation will have put many families under enormous pressure’. However, for wealthier individuals, the currently economy may prove advantageous with business valuations falling. Dickon states ‘Some will be lucky enough to see a business worth £10 million valued at £5 million today’. He goes on to add that ‘falling house prices can also make periods of economic stress a good time for financially weaker parties to divorce – they might be able to take the house in the financial settlement at a reduced valuation.’
The full article can be read here (behind a paywall).
Claims against Accessories to breach of trust: Spotlight on dishonest assistance – Maryam Oghanna writes for ThoughtLeaders4 Private Client Magazine
3 April 2023
Views
Maryam Oghanna, Senior Associate in our Dispute Resolution team, has authored an article for Thought Leaders 4 on the topic of claims against accessories to breach of trust.
The article was first published in ThoughtLeaders4 HNW Divorce Magazine in March 2023 and can be read in full below.
Dishonest assistance is one of a limited number of claims that may be brought against a person, other than a trustee, who has assisted the trustee in committing a breach of trust. Where the remedy against the trustee would be inadequate, accessory claims against a third party (particularly where they involve large financial institutions) can be an appealing prospect. If the claim is successful, the third party is liable to personally account for the breach of trust as if they were the trustee.
In order to bring a successful dishonest assistance claim, a claimant would need to meet the following test:
There is a trust;
There is a breach of trust by the trustee of that trust;
The defendant induces or assists that breach of trust; and
The defendant does so dishonestly.
As we discuss further below, the final test – showing that the defendant acted dishonestly – is the most difficult hurdle for a claimant to overcome. There is no requirement for the trustee to have acted dishonestly in committing the underlying breach of trust. But, given that the accessory defendant is one step removed from the breach of trust, the additional requirement of dishonesty is unsurprising.
Standing
Although the basis of liability is in equitable wrongdoing, a dishonest assistance claim derives from a breach of trust by a trustee. Therefore, the same rules apply in respect of standing to bring the claim. It has been more common for a successor trustee (including administrators) or wronged beneficiaries to bring the claim against the third party, but it is also possible for the trustee who committed the breach of trust to bring the claim.
Untangling the Claim
Requirement 1 – ‘There is a trust’
It must be shown that a trust exists. However, there is no requirement for a formal trust which expressly vests property in a trustee. There need only be a fiduciary duty in relation to that property. For example, a director of a company might be deemed to be a trustee in relation to the company’s property for these purposes, even though the company owns its property.
Requirement 2 – ‘There is a breach of trust by the trustee’
If there is no breach of trust (which includes breach of fiduciary duty), it cannot be shown that the defendant was an accessory. Therefore, it is essential that a breach of trust claim against the relevant trustee has been established prior to the bringing of a dishonest assistance claim.
Requirement 3 – ‘Inducing or assisting the breach of trust’
Whether the defendant induced or assisted the breach of trust will be a matter of fact, and there is no subjective element to this requirement. It must be shown that the defendant’s conduct did, in fact, assist the trustee in committing a breach of trust. The assistance must be more than just of minimal impact, but it need not be shown that it would inevitably lead to the losses that were suffered. Unlike a claim for knowing receipt, the defendant need not have received or handled property.
Requirement 4 – ‘Dishonesty’
The test for dishonesty in a claim of accessory liability for breach of trust is set out in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 at [389], and clearly indicates an objective test of honesty which is a question of law. However, this is to be determined in light of the defendant’s knowledge of the breach and dishonesty at the time, creating a subjective element to the test.
The test has since developed to accept that a defendant does not need to be aware that his conduct would be characterised as dishonest by ordinary standards (Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67; [2018] A.C. 391 at [62]). The subjective element extends to the circumstances at the time, and even the defendant’s own experience and intellect (Twinsectra Ltd v Yardley [2002] UKHL 12; [2002] 2 A.C. 164 at [121]).
Further, when considering the defendant’s ‘knowledge’ at the time of the breach, a defendant may be found liable if they suspected that they may be assisting a breach of trust but wilfully took no steps to ascertain either way: referred to as ‘blind-eye knowledge’ (Manifest Shipping & Co Ltd v. UniPolaris Insurance Co Ltd [2003] 1 AC 469 at [112]). Carelessness will not on its own be sufficient to establish knowledge, but it may be deemed to be a contributing factor.
Where the allegations are against a company or legal person, the dishonesty must still be evidenced by reference to one or more natural persons (Stanford International Bank Ltd v HSBC Bank plc [2021] EWCA Civ 535 at [47]).
Comment
Dishonest assistance is a fault-based and serious claim and the test for the dishonesty requirement has, perhaps unsurprisingly, generated much discussion.
Any allegations of fraud or dishonesty must be clearly pleaded in statements of case, which may cause a significant hurdle and additional cost risk for many claimants who may have limited knowledge of the particulars of the dishonesty.
Further, success of the claim will likely hang on the evidence before the court in relation to the defendant’s dishonesty, which, if the defendant is competent in their deception, may well be documentlight. In those circumstances, oral evidence at trial can carry much weight (as seen in the rather surprising decision of the Supreme Court of Gibraltar in Lavarello v Jyske Bank (Gibraltar) Ltd, unreported, May 17, 2017, Gib SC, later overturned by the Court of Appeal for Gibraltar in Lavarello v Jyske Bank (Gibraltar) Ltd 2017/CACIV/006 & 007).
Despite the difficulties in bringing the claim, the benefit of pursuing a remedy against another, potentially more affluent, party in relation to a breach of trust is weighty. This is particularly the case if trust assets have been dissipated as a consequence of the breach of trust. Accessory claims are therefore likely to remain a regular feature in the English and Welsh High Court.
