Think carefully before using a winding up petition

A winding up petition can be presented against a company provided that the creditor is owed more than £750. The first step in initiating winding up proceedings is the statutory demand. A statuary demand is a written notice, in a prescribed form, which gives the debtor 21 days to make payment or reach a settlement in the absence of which the creditor will present a winding up petition.

Pursuant to the Insolvency Act 1986 failure to satisfy a statutory demand will deem the debtor company as being unable to pay its debts as they fall due and thus insolvent.

In many cases the statutory demand and the threat of a subsequent winding up petition is sufficient to achieve payment. Where payment is not made it is usually because the debtor is unable to pay or it disputes its liability to pay.

Presenting a Winding up Petition – the process

Once a winding up petition has been presented against a company it must be served on that company and then advertised (no sooner than seven days after it has been served) in the London Gazette. The effect of this is that the company’s bank account(s) will be frozen to prevent the unlawful dispensation of any monies in its account. This will prevent the debtor from being able to trade any further.

At this stage even if a settlement is agreed with the petitioning creditor the company’s fate could be out of its hands as another creditor may apply to the court for permission to be substituted as the petitioning creditor. If this occurs then any settlement with the petitioning creditor may be unwound in an attempt to ensure that all unsecured creditors are on an equal footing in the event that the company is subsequently wound up.

This highlights the risk of using winding up proceedings as a debt collection process as, if the company is wound up, all the company’s creditors will be seeking payment and the company may not have sufficient assets to meet them particularly as unsecured creditors will only receive a dividend once secured creditors and the costs of the liquidation have been paid.

Facing a Winding up Petition

If your company is faced with a statutory demand or a winding up petition, Bradley Bloom, expert insolvency law solicitor, suggests you should take immediate action as failure to act could result in the petition being advertised, its accounts being frozen and ultimately it could result in the company being wound up. This will most likely stop all lines of credit for the company as most contractual covenants will consider insolvency proceedings as an event of default.

Where the petition is undisputed the petitioning creditor should be contacted immediately to make arrangement for payment / settlement in exchange for insolvency proceedings ceasing and this should be recorded in a written agreement.

Where the petition debt is disputed or where it is admitted but the company has a cross claim equal to or exceeding the debt, the petitioning creditor should be contacted immediately with the grounds of the dispute set and a request for an undertaking that the petition will not be presented, or where it has been presented, it will not be advertised.

If the undertaking is declined then the company should consider making an application for an injunction to restrain the creditor. Whilst this could be an expensive application, if successful, the company will be awarded its costs from the petitioning creditor. Equally, if unsuccessful, the petitioning creditor will be awarded its costs for defending the application.

It should be noted that the court will only grant an injunction if the debt is disputed on substantial grounds. Where only part of the debt is disputed, the undisputed sum should still be paid to the creditor.

Summary

The presentation of a winding up petition is a high risk option for any creditor as it is a heavy handed action, expensive, may well not result in the best prospects of recovery and once issued, there can be unforeseen consequences such as another creditor taking over the petition even if you are paid as creditor which may mean that any funds you receive end up having to be put back into a pot of assets if the petition proceeds.

There may also be a technical challenge to whether the company is insolvent – just because a company appears to be insolvent does not necessarily mean that it is in legal terms. The courts do not like the winding up process being used a method of debt collection and there is a real danger that the petition may be disputed (which could have severe cost implications).

There is also a danger that, having incurred the costs of presenting a petition, there may be insufficient assets in liquidation to repay the petitioning creditor. Accordingly, where insolvency proceedings are being considered it may be best for the creditor to accept a reduced amount in settlement or a repayment plan in lieu of presenting the petition as the petition could result in a nil payment.

On the other hand the presentation of a winding up petition may result in quick payment due to the consequences for the debtor company (such as the negative publicity and stigma a petition would bring with it) unlike issuing a claim which can be a slow and expensive process particularly where there is uncertainty as to how any judgment is to be enforced.

In any event winding up proceedings should be considered and commenced with caution.

Legal case studies

With the sheer proliferation of content of all kinds on the web, it can be all too easy to end up being largely anonymous, with similar content and a similar style of website to a great many competitors.

In some sectors, retail immediately springing to mind, the competition can largely be about cost. In other areas, trust and a personal rapport and relationship are important factors and law definitely falls into this category.

Lawyers have slowly woken up to this fact and now many produce content which is linked to the individual lawyer, enabling a potential client not only to assess the lawyer’s legal knowledge but also to get a sense of personality and whether the lawyer can convey legal issues in a way which is accessible and understandable to a client, whether a business client or someone with no knowledge of the law.

Another way of achieving trust is by case studies –  some firms have recognised the value of case studies,these are particularly common on personal injury sites but also there are now some good commercial case studies like these.

Case studies not only provide an insight into what the firm do and how they deal with legal issues and the results obtained but they also often mean that the firm picks up long tail search engine traffic. Increasingly, those searching on the internet will use a long string of words rather than just a 2 or 3 word search term. The searcher may well input a search string including a description of their particular legal issue or problem, and where there is a case study which describes a set of circumstances and facts, that case study may well match the search more closely than a page simply describing what the law firm does.

So, lawyers, produce more case studies, but don’t forget not to name clients without consent !

The Jackson Reforms – our take

The Jackson Reforms and Compensation Culture

In April 2013 there will be some major changes to UK law and they’re primarily concerned with personal injury claims and car accident claims. The changes have been dubbed the ‘Jackson reforms’ and were put together as part of a remedy in order to solve the UK’s apparent compensation culture. Even today, after some 10 years of this subject being a favourite topic of media sensationalism, there are a number of parties which still doubt that such a phenomenon even exists. Continue reading

Divorce

In the UK, married couples can end their marriage providing that there are legal grounds to do so. Divorce is a civil form of legal action that derives mainly from the Matrimonial Causes Act 1973.

What is the difference between divorce and annulment?

Divorce is a civil legal process through which marriage can be dissolved. Unlike divorce, annulment declares marriage totally void (this means that in the eyes of law the marriage in question had never existed).

On what grounds can I file for a divorce?

First of all, English law does not allow to divorce in the first year of marriage (for Northern Ireland the requirement is two years). Providing that you satisfy the above, you can file for a divorce if you can prove that the marriage has broken down irreparably. This can be proved by providing evidence in respect of at least one of the following:

  • Adultery – if your partner has committed adultery and all of the following apply:
    • Your partner had sex with someone else of the opposite sex;
    • You do not want to live together anymore;
    • You made a decision to discontinue living together within six months of the adultery being committed or you discovering it.
    • Unreasonable behaviour – if your partner behaves unreasonably by:
      • Physically abusing you;
      • Verbally abusing you;
      • Failing to provide attention;
      • Restricting your ability to leave the house freely;
      • Giving you reasons to believe that he or she might be committing adultery.
      • Desertion - if your partner has left you with the intention of breaking the relationship, for a period of at least two years in the last two and a half years, without your consent or a good reason to do so.
      • Two years’ separation – if you have lived apart for over two years and your partner consents to divorce; or
      • Five years’ separation – if you have not lived together for over five years, no consent is required. It is important to observe however that your partner can object on the grounds of ‘extreme’ difficulties such as financial difficulties.

It also is important to point out that in most cases unless your partner does not admit fault, it may be difficult to prove it (in particular adultery) and you may need to obtain external evidence such as for instance medical reports in the case of domestic violence.

Any proceedings regarding custody of children or division of financial assets do not form part of divorce proceedings. If you cannot make mutually agreeable arrangements between yourselves the matter will need to be referred to court in separate proceedings.

How to commence divorce proceedings?

You can file for a divorce personally or get a solicitor involved. No matter which way you decide to go, you or your representative will need to file a divorce petition (Form D8). The form must contain the following of your details:

  • Full name and address;
  • Your partner’s full name and address
  • The names and dates of birth of any children you have  with your partner;
  • Your original copy of marriage certificate.

Current fee for filing a divorce petition is £340. This can be discounted if you are in receipt of benefits or your income is low.

What about children?

The court is generally concerned only about ‘children of family’. This includes children below the age of sixteen (or between sixteen and eighteen and still in education) that were born to you and your partner or have been treated as such by both of you. If this is the case you will also need to fill in form D8A. You must include the following details in the form:

  • your children’s dates of birth, names and address of where they live;
  • who the children live with and details of any contact arrangements with the other parent;
  • detailed information about arrangements that you might have made with your partner in respect of financial support;
  • details about state of their health;
  • details about which educational institution they attend.

Ideally, you should make all relevant arrangements for children with your partner prior to making a divorce petition.

Useful resources :-

http://www.family-law-solicitors.com

 

Record award for discrimination claim

Outrageous discrimination treatment by NHS Trust results in record £4.5 million award

A hospital consultant who suffered  a personality change due to post traumatic stress has received a record award based on sex discrimination (although she also succeeded with other claims including unfair dismissal).

The award is almost completely based on projected future loss of earnings, which is the primary factor in almost all large payouts under English law which is largely against high awards for general damages for injury to feelings or penalty damages.

This case was between Dr Eva Michalak, who was a consultant at Pontefract General Infirmary, the Mid Yorkshire Hospitals NHS trust and 3 senior staff members.

The tribunal described the behavior of the defendants as outrageous, comprising a concerted campaign to undermine and discredit Dr Michalak after her return from pregnancy leave and an initial claim she had raised internally for sex discrimination.

As with all cases of this type, the claim required expert evidence on the claimant’s long term health prospects and ability to work generally or in the field she had been working in. In this case, the expert, Professor Hirsch, gave evidence that the Dr Michalak’s condition was in his view directly caused by her treatment by the Trust and that it was a long term condition.

The award in this case is also unusual in that individual employees of the Trust were found liable, being the trust’s medical director, a consultant physician and the human resources manager. It is unlikely these individuals will in reality end up paying the damages.

Representation at a disciplinary hearing

Disciplinary Hearings and Representation

The issue of a disciplinary hearing and who is entitled to attend has become increasingly contentious in recent years.

The law has always provided an employee with a right to attend a disciplinary hearing with a work colleague or a Trade Union representative. It is often the case that when an employee is involved in a disciplinary action they feel uncomfortable taking a work colleague with them or they are unable to find a work colleague to attend. It may also be the case that they are not a member of a Trade Union. In the circumstances, the standard approach was that an employee would have to attend by themselves. They are entitled to request that they have a friend or a lawyer present, but it is unusual that an employer would agree to this and/or that they would be required to do so under the law.

However, following the case of “R (on the application of G) – v – Governors of X School”, there has been a general recognition that employees shall have an entitlement to legal representation at disciplinary hearings in extreme cases. There has however been some confusion as to when that situation will arise and/or when employers are required give to a request by an employee to have a legal representative present.

The above case has recently reached the Supreme Court which overturned the original decision at the Court of Appeal which stated that a Teaching Assistant accused of sexual misconduct could rely on the right to a fair trial in accordance with Article 6 of the European Convention of Human Rights, and therefore was allowed legal representation during the schools disciplinary hearing. The original decision was based on a number of factors including that had the employee been found guilty at the disciplinary hearing then this would have a significant effect on their ability to work in the chosen field going forward. In this case the Supreme Court held that the decision of the disciplinary procedure would not automatically lead to the employee being barred from working as a Teacher. The court held that it did not necessarily follow that a finding of guilt at the disciplinary hearing would lead to a knock on effect and bar from working by the Independent Safeguarding Authority.

What can be seen from this case is that there is a clear distinction between situations where a finding of guilt at a disciplinary would prevent the employee from working in their chose field, and situations more common in the public sector whereby an employers disciplinary process feeds into the procedures of a standard body like the Independent Safeguarding Authority but it does not necessarily determine a decision.

In the case of Kulkarnia – v – Milton Keynes Hospital NHS Foundation Trust, the view, made obiter, was that a doctor accused of inappropriately touching a patient would be entitled to legal representation at a disciplinary hearing.

 Employers need to be aware when an employee may be entitled to legal representation. It seems by the most recent judgement that it would only be in extreme cases, nevertheless, advice should be sought as failure to follow a proper process will lead to a potential unfair dismissal claim against the employer.

If circumstances are not extreme and there is no right to legal representation, then employers should consider who is a reasonable choice of companion. An employer can at their discretion allow an employee to bring a companion who is not a colleague or Trade Union representative. If, however, the choice of companion is unreasonable then an employer is entitled to reject this and proceed with a hearing in any event. An unreasonable companion would for example, be an employee who is involved with the disciplinary, has knowledge of the disciplinary, is used as a witness in a disciplinary and/or would be compromised by attending the disciplinary.

If in doubt, employers should seek advice before beginning a disciplinary. There are a number of obligations which are outlined by statute, case law and the ACAS code of conduct. A tribunal will take into account the size of the employer when assessing the reasonableness of the procedure adopted but there are certain obligations that must be adhered to by all employers.

Click the following link for additional help with disciplinary issues in employment law