A Halloween Litigation Special.
EXPLORING THE LATEST TRENDS AND DEVELOPMENTS IN PROPERTY & CORPORATE LAW
EDITION
BUILDING NIGHTMARES, AND ZOMBIE COMPANIES -A LITIGATION SPECIAL PLUS BONUS BUDGET REPORT
CONTENTS
Introduction By Vijay Parikh, Managing Partner
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#TRENDS The impact of case law on social, cultural and commercial norms – a litigator’s perspective By Sarju Kotecha, Solicitor and Legal Director Dispute Resolution, International
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Interview with Ian Clarke KC Judge and Head of Selborne Chambers
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Zombie Companies By Niten Chauhan, Head of Restructuring & Insolvency
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No rabbits here - Budget 2024 Yedidya Zaiden, Partner at Raffingers Accountants discusses the Chancellor’s 2024 Budget and its impact on businesses, landlords and individuals.
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Building Nightmares: Disputes in Construction Projects By Jon Mahony, Partner and Head of Dispute Resolution
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Strategies to help manage litigation stress By Alan Heyes of Therapy Partners
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No-one likes conflict – so how do we make it less scary? By Bhavini Kalaria, Partner Dispute Resolution, International
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Case Study: Nightmare scenario for landlords Commercial premises used for cannabis farming.
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We also discuss building nightmares, when construction projects go wrong, and consider how disputes have shaped social and cultural norms. We are grateful to Ian Clarke KC, who spoke to us about his experience as a judge, and what this means for litigants. In this special, we are also thankful to Alan Heyes, of Therapy Partners for offering his insight into how litigation stress can be better managed. With an article on the mental health impact of legal disputes and a case study involving unexpected claims, Alan provides both guidance and reassur - ance for those who find themselves in the thick of conflict. I hope you enjoy this edition, and as always, our team at Harold Benjamin is here to support you through the challenges ahead. Please feel free to reach out with any questions or to discuss how we can help navigate the complexities of today’s legal landscape.
In this issue Welcome to the Halloween edition of Legal Corner! As we embrace the autumnal change, it’s an ideal time to reflect on the transformations and challenges in our legal landscape. This issue brings together an array of topics that touch on both the familiar and the novel, with a particular focus on navigating uncertainties in the business world. Our team has explored issues that resonate strongly with many of our clients, including the phenomenon of ’Zombie Companies’ businesses that, despite their operational struggles, continue to exist in a state of limbo. This growing concern is a reflection of broader economic challenges and raises important questions about sustainability and innovation in our commercial ecosystem.
VIJAY PARIKH Managing Partner
vijay.parikh@haroldbenjamin.com
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The impact of case law on social, cultural and commercial norms - a litigator’s perspective.
BY SARJU KOTECHA Solicitor and Legal Director Dispute Resolution, International
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Another interesting feature of English law is its readiness to hold property owners strictly liable, even for matters outside their control. Ryland’s efforts in safeguarding his reservoir were insufficient to convince the courts that the inevitable breach mitigated any liability. The presence of the reservoir was a risk enough. Anything that followed would make Ryland strictly liable. The risk of hazard in the 1860s was significant. It is unsurprising that during a time of huge industrial activity, in the absence of regulation, the courts took steps to allocate risk and responsibility. Concurrent with industrial growth was the increase in entrepreneurial ventures. English case law remained a mechanism through which risk and responsibility were allocated. Take Carlill v Carbolic Smoke Ball as a case in point. This case revolved around a carbolic acid-filled rubber ball that, when squeezed, would release vapours. It was boldly advertised, with the manufacturer claiming that the device would prevent influenza (the flu had had a deadly impact during this time in 1890) and if it didn’t, they would deposit £100 in the bank account of anyone for whom the product didn’t work. Unfortunately, Mrs. Carlill did fall ill and, once recovered, sued the smoke ball company. The court rejected the idea that there was no contract – by making the The concept that a higher level of care is owed by those who offer advice, is another transformation achieved through judicial ingenuity.
The uncodified nature of the English legal system has endowed it with a malleable quality, allowing it to respond to social, cultural and commercial changes. More significantly, this feature has enabled case law to establish principles of fairness, pre-empting and challenging existing norms, and offering alternative visions. Sarju Kotecha discusses the impact of case law on present-day social, cultural and commercial norms. Law students are familiar with the fate of the poor snail that found itself in Stevenson’s factory. Its adventure is forever remembered in textbooks when Mrs. Donoghue mistakenly consumed its decomposed body with her unlucky purchase of bottled ginger beer. Following a bout of illness, Mrs. Donoghue sued Stevenson, the manufacturer, despite having no direct contract with him, and won. Lord Atkin’s ‘neighbour principle’ has since become a fundamental prism through which to understand social relationships beyond the contract. The concept that a higher level of care is owed by those who offer advice, is another transformation achieved through judicial ingenuity. Words have an impact and should be offered carefully, especially when they are to be relied upon. This idea, first promulgated in the 1964 House of Lords decision of Hedley Byrne v Heller, established that negligent statements, where they could foreseeably be relied upon, could form the basis of a claim for losses. Balance is achieved through extrapolation, discussion, and debate. In their wisdom, the courts provided guidance in Caparo Industries about 30 years later, establishing three parts: a duty of care could only be imposed when it was foreseeable, proximate, and fair.
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offer, the seller had established an intention to create legal relations. Case law once again stepped in where regulation around advertisement and health risks was poor. One of the most famous and consequential judges remains Lord Denning. Promissory estoppel, the idea that one cannot go back on a promise once relied upon, is so prevalent and intuitive to modern practice that its absence is inconceivable. It introduced a degree of flex - ibility to prevent unfairness and injustice in a rent-recovery case, where property landlords tried to recover full rent for a period during which they had promised to reduce it (in the war). We see once again the role of the courts in responding to circumstances and finding threads linking decision-making to much more current settings. Contract law, dependent as it is on a differentiation between major and minor terms, with remedies flowing from these, can often lead to unfair or unjust results. Accordingly, here again, judicial decision- making has been adept at showing innovation and adaptability. For example, in the case of Hong Kong Fir Shipping Co., a ship chartered for 24 months was delivered late and in poor condition, causing significant delays. The charterers sought to terminate the contract, arguing that the ship was unseaworthy. The court introduced the concept of innominate terms, allowing more flexibility in remedies. If these cases predominantly dealt with risk, responsibility, and liability in commercial spheres, the courts have not been averse to pushing social and cultural boundaries or responding to cultural change either. The Lady Chatterley’s Lover obscenity trial, brought by the Crown as prosecutor against Penguin Books, famously asked the court whether this was a book “you would wish your
wife or servants to read.” This was in 1960. Penguin Books won the case, leading to the liberalisation of publishing laws and changes in attitudes, having a significant cultural impact. More recent cases, such as the BHS collapse following significant, serious and systematic mismanagement by Phillip Green, which left a pension deficit for workers, led to many investigations. The legal pressure and public scrutiny brought corporate greed to the forefront of public discourse. Finally, there is no better example of the impact of cases on the cultural framework than the so-called Wagatha Christie trial (Rooney v Vardy) in 2022. This case reflected the social media age, highlighting the intersection between social media, privacy, and defamation. The agility of the English legal system has allowed the law to develop to meet commercial, social and cultural needs and changes.
sarju.kotecha@haroldbenjamin.com
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Interview with IAN CLARKE KC
We discuss Ian’s route into the law, and his experience as a judge.
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What inspired you to pursue a career in law, and what were some of the pivotal moments that led you to become a barrister and even- tually a King’s Counsel (KC)?
You sit as a judge in the First-Tier Tribunal system. For our readers unfamiliar with the judicial system, could you explain what the First-Tier Tribunal (FTT) is and how it fits within the broader UK courts and tribunals structure? What kinds of cases are typical heard in the FTT? The FTT is an amalgamation of different jurisdictions dealing with a range of issues including special educational needs, tax matters to war pensions and land registration disputes (to name but a few). It sits entirely outside of the Court system and is divided into Chambers (e.g. the Property Chamber), within which there are divisions such as the Land Registration Division, where I sit. As for that particular jurisdiction's history, originally it was exercised by the Solicitor to the Land Registry and, between 2004 and 2013, by the Adjudicator to the Land Registry. Rectification cases can be brought directly to the Tribunal (LRA 2002, s.108) but otherwise cases must be referred by the Land Registry. The caseload is enormously varied. Boundary disputes, fraudulent transfers, adverse possession, the acquisition of prescriptive rights – every application in relation to registered land which is disputed and where that dispute is not groundless is referred to the tribunal. Judgment is always reserved and the body of individuals sitting as judges have enormous experience. It is a specialist tribunal in every sense of the word.
I read law at university, really as a result of parental pressure – I would have much preferred to have indulged my love of history for three years and then taken stock! But my father had quite strong views to the contrary and so we compromised on a law degree. It was land law that I first fell in love with – the blend of history, precision and social considerations very much appealed to me. The realisation that not everything was "black letter law" and that advocacy played an essential part in a dispute dawned on me during my third year at university, whilst representing a university society in a disciplinary hearing, and from that point onwards, I was sold on a career at the Bar. I think the single most pivotal event in being able to take silk would have been my successful defence of the finance director of Bernie Madoff’s London company; by this stage, my practice had a very strong element of fiduciary duties/fiduciary breach and it was a high-profile case against prominent opponents before Popplewell J. It gave me enormous confidence and a belief that the next step was not entirely unrealistic.
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How do you balance your dual roles as head of Chambers and a part-time judge in the First-Tier Tribunal? What are the unique challenges and benefits of switch - ing between advocacy, management and judging? Whilst I've been sitting in the FTT for 20 years, I'm relatively new to the Head of Chambers role, so it might be a bit early to draw any firm conclusions! Happily, the time commitment in the FTT is not unduly burdensome (c 15 days per annum), so there's plenty of time to carry on the "day job" and also discharge HoC functions. In that regard, I'm very lucky in having first- rate support from Paul and Darren as Senior Clerks, Charlie as Head of Marketing and Denise as Chambers Administrator. All of that has meant (so far at least!) that the role is relatively plain sailing…! When presiding over cases in the FTT, what is your approach to decision-mak- ing? Do you have any guiding principles or strategies that help you ensure fairness and impartiality? Read all of the papers and shut up – at least to begin with! I try and let all parties (especially those representing themselves) to acclimatise without too much direction from me (at least until closing). I very much value the site views that are very common in FTT cases; one gets a feel of what the case is about and often how unreasonable one party or the other (and occasionally, both!) are being. Technology has profoundly changed things. What sort of challenges does the judiciary face in the future as a consequence of these changes? What changes would you like to see? The glib answer would be two screens in each court room for all users (or at least the judge!), to enable bundles and other documents to be more easily read. In-Court technology outside of the Rolls Building (and
especially in the FTT) is woeful but somehow I doubt that this is any government’s priority. Longer term, there is a risk from AI in ‘manufacturing’ submissions and arguments which are (at best) off-point or (at worst) simply wrong but, on the whole, technology generally (and soft copy, searchable documents, in particular) have been an enormous boon. Couple with carefully selected hard-copy bundles of (genuinely!) key documents and you have the perfect mix. Having e-bundles earlier than currently often directed would make a huge difference in terms of familiarisation. With Halloween around the corner, have you ever encountered a case with “spooky” or unusual elements in the FTT? How do you handle cases that are outside the ordinary? Whilst I can’t say that I have experienced anything ‘supernatural’ whilst sitting, ‘out of the ordinary’ is quite usual! I have been taken to a site view on a miniature steam train, walked the length of a medieval mill leet, determined issues of accretion and diluvian (erosion) on the North Norfolk coast, deciphered many an historic conveyance (as once was said, difficult to read and disgusting to touch) and applied more presumptions than I care to remember. It’s land law, in its full, diverse glory! For individuals or businesses considering litigation as a way to resolve disputes, what advice would you give before they enter the courtroom? Are there any key factors they should consider or common pitfalls they should avoid? Read your witness statement! (2) Understand the issues (both factual and legal). A client and a witness who has done both generally gives clearer, crisper evidence. One who is fa- miliar with the documents avoids sounding hesitant, in fear of being contradicted. More generally, litigation is a process to secure commercial resolution without
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Ian is consistently rated as a top-tier advisor on breach of contract and fiduciary matters. For more information please contact Selbourne Chambers success is that it now stands at 53 members (including 9 silks), many of whom have specialist qualifications or appointments to the Crown Panels. Oh, and Legal Cheek voted us Best Chambers for Social Life 2024…. environment with able and supportive colleagues. I think the measure of its (necessarily) going to trial. By all means pursue it but the client should be encouraged to understand that cases are rarely ‘cut-and-dried’; over-confidence in the outcome can be very damaging. Looking back on your career, is there a particular case or moment that stands out as a highlight or turning point for you? What made it so significant? Being part of the small group who founded Selborne Chambers in 2002. From that point on, I was able to focus on developing my commercial-Chancery practice, in a specialist set, with dedicat- ed clerks and with a modern approach to practice management. True, I kept and developed my real property practice but equally, I was able to pursue company law matters, fraud and fiduciary disputes, and my career as an arbitrator and mediator developed in a forward-thinking
...LONGER TERM THERE IS A RISK FROM AI IN 'MANUFAC- TURING' SUBMISSIONS AND ARGUMENTS WHICH ARE AT BEST OFF POINT OR AT WORST, WRONG.
ian.clarke@selbornechambers.co.uk
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Zombie COMPANIES
Exploring the phenomenon of companies that are insolvent but continue to operate.
BY NITEN CHAUHAN Head of Restructuring & Insolvency
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‘Zombie companies’ is a term increasingly used by financial professionals, business owners and lawyers, as they have emerged as a growing concern. These companies generate just enough revenue to cover their interest payments but lack the ability to pay down the principal of their debt or invest in growth. They are seen as symptomatic of deeper financial issues within the economy. Their existence not only reflects the struggles of individual businesses but also highlights broader economic challenges, such as prolonged low interest rates and the aftermath of the recent crises which have plagued the UK economy.
Recent data indicates that the prevalence of zombie companies is on the rise, particularly in mid-market sectors. For example, in the UK, it was reported in March 2024 that 12.4% of mid-market businesses were at risk of becoming zombie companies, a slight in - crease from 12% in the previous year. This uptick reflects ongoing challenges such as global financial instability, rising interest rates, and sluggish economic growth, all of which have exacerbated the conditions that allow zombie companies to persist.
Causes of Zombie Companies
Several factors contribute to the existence and persistence of zombie companies. One of the primary causes is the prolonged period of low interest rates that characterised global financial markets for much of the past decade. Low interest rates make it easier for struggling businesses to service their debt, as the cost of borrowing remains relatively low. However, this also means that companies that would otherwise be forced to restructure or exit the market can continue operating without making the necessary adjustments to improve their financial health. Another significant factor is the approach taken by creditors, including banks and other lenders. In many cases, lenders are reluctant to push struggling companies into administration or liquidation, particularly if there is a chance of recovering more of their debt by allowing the company to continue operating. This tendency towards forbear - ance, where creditors give companies more time or better terms in the hope of eventual repayment, can enable zombie companies to survive for longer than they might otherwise. Government policies and actions, particularly those related to taxation and regulation, also play a role. For instance, while tax authorities may crack down on tax avoidance, they may also provide companies with some leeway in meeting their tax obligations through negotiation and payment plans. This can prevent companies from facing immediate closure due to tax debts but may also contribute to their ongoing financial distress.
What is a Zombie Company?
A zombie company is characterised by its inability to generate enough revenue to do more than service its debt interest, rather than making progress in repaying the principal. These companies continue to operate, but their financial state prevents them from investing in expansion, innovation, or even necessary operational improvements. Essentially, they are in a state of limbo— neither thriving nor failing outright. While they may not be in immediate danger of liquidation, their long-term viability is highly questionable. Zombie companies are in a Catch-22 situation. They lack the financial resources to invest in growth, such as hiring new employees or upgrading technology, yet they also cannot afford to downsize effectively. The absence of funds for redundancy payments, for instance, leaves them unable to reduce workforce costs, which might otherwise help them stabilize financially. This stagnation not only affects the companies themselves but also has broader economic implications. Zombie companies can stifle competition and innovation by occupying market space that could otherwise be used by more dynamic and profitable enterprises. Economists argue that these companies contribute to a drag on overall economic productivity, as they consume resources that could be better utilized elsewhere.
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Industries that have been particularly hard hit by recent events, such as the COVID-19 pandemic and subsequent economic disruptions, are more likely to see a higher incidence of zombie companies. For example, the Leisure and Hospitality sector in the UK has been identified as particularly vulnerable, with 22.3% of businesses in this industry deemed to be at risk, reflecting the severe impact of inflation, labour shortages, and reduced consumer spending.
might also explore new markets or develop new products to better align with current consumer demand, ensuring long-term sustainability.
How can a lawyer help?
Legal compliance and strategic planning are integral to the turnaround process. Legal professionals play a crucial role in ensuring that restructuring efforts are carried out in compliance with applicable laws. This is particularly important in negotiating with creditors, or entering administration to gain protection from creditors while restructuring. In the long term, building resilience into the company’s operations—such as by diversifying revenue streams, strengthening supply chains, and investing in innovation—is essential for avoiding future financial distress. Lawyers play a critical role in helping zombie companies navigate the complex process of turnaround and recovery. They provide essential guidance in restructuring debt, negotiating with creditors, and ensuring compliance with legal obligations. Working alongside Insolvency Practitioners, they can also help secure agreements like Company Voluntary Arrangements (CVAs) and advise on entering administration if necessary, offering protection from creditors while the company restructures. Their expertise is crucial in managing legal risks, safeguarding the company's interests, and facilitating a successful turnaround strategy that aligns with both short-term needs and long-term goals.
Tools for Business Turnaround for Zombie Companies
Turning around a zombie company requires a focused approach that addresses both immediate financial distress and underlying structural issues. Financial restructuring is often the first step, involving the reorganisation of debt to improve cash flow. This can include refinancing existing loans to secure more favourable terms, such as lower interest rates or extended repayment periods. This can provide immediate relief and free up cash for operational needs. In some cases, debt-for-equity swaps might be necessary, where creditors convert a portion of the debt into equity, reducing the company’s debt burden while giving creditors an ownership stake. Operational efficiency is another critical area of focus. Zombie companies typically suffer from bloated cost structures that are unsustainable given their limited revenue. Companies need to conduct rigorous cost-cutting, which may involve reducing overhead expenses, downsizing staff, or renegotiating supplier contracts. Improving cash flow management is also essential, ensuring that the company can meet its obligations as they arise, and redirecting resources toward areas that can drive growth. In addition to financial and operational restructuring, companies may need to undertake more significant changes to their business model. This could involve downsizing the organisational structure, closing or consolidating unprofitable business units, and focusing on core areas that are more likely to generate a return on investment. Companies
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NO RABBITS HERE BUDGET 2024
BY YEDIDYA ZAIDEN Partner, Raffingers Accountants
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At the same time, Reeves announced an increase in the National Living Wage to £12.21 an hour and the intention to align rates so that there is one rate of pay for all adults. The NLW had already been increased in the previous budget and this measure which represents an increase to the NLW of 20% in the past two years will put pressure on businesses already struggling to recruit and retain staff. Some have warned that these two measures will force businesses to mitigate their impact by outsourcing or offshoring services so that they reduce the number of employees employed. No doubt HMRC will be looking closely at any arrangements made to ensure they are genuine and will seek to challenge potential cases of false self-employment. There was some relief for those in the hos - pitality and retail sectors. The 75% business rates relief which was due to expire in March 2025 has been extended through 2026, but has been reduced to 40%, and the small business tax multiplier has been frozen. The commercial rating system is outdated and perhaps a more fundamental change to the system is something which will be looked at after 2026.
In my guest appearance in the Harold Benjamin podcast just after the elections, I discussed how business accepts that tax rises would be necessary, and that they would have to pay more tax. What business owners really want, is a clear roadmap from government as to how they intend to support and tax businesses so that they can plan ahead confidently. Unfortunately, the decision to delay the budget for the better part of four months, and the Prime Minister’s repeated warnings of difficult decisions to be made, allowed rumours to spread, and created a mood of uncertainty and apprehension. In my opinion, the Chancellor’s Statement went some way in reassuring business owners. Although the lead headline by the BBC was that businesses will be paying more than half of the £40bn of the taxes raised, some of the measures introduced were not as harsh as anticipated, and there were still a number of proverbial rabbits which the Chancellor pulled out of her hat.
Impact on Small Business
The big revenue raiser is the increase in employers’ National Insurance Contributions. This is expected to raise £25bn a year and will be achieved by increasing the rate from the current 13.8% to 15% and by lowering the threshold at which it becomes payable to £5,000. For a business which employs 5 work - ers at a wage of £50,000 each this translates into an additional £5,500 of tax per year. Smaller employers will be pleased that the Employment Allowance is to be increased to £10,500. As explained by the Chancellor this means that a small business could employ four members of staff at the National Living Wage without having to pay any employers NI.
Impact on the Property Sector
Landlords always seem to bear the brunt of tax rises, and this budget was no different. The additional rate of Stamp Duty Land Tax payable on second homes has been raised to 5% and this together with increases in Council Tax which can be levied on second homes and the existing restrictions on tax relief available on interest will push many smaller BTL landlords out of the market. Interestingly, for those landlords who are thinking of selling, although rates of Capital Gains Tax were increased, the rates
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applicable to those disposing of property remained unchanged with the higher rate of 24% now the same as the general CGT higher rate. It is worth noting that the following temporary SDLT rates are set to expire at the end of March 2025. The 0% SDLT threshold applying on the purchase of residential property will drop from £250,000 to £125,000. The nil-rate threshold for first time buyers’ (FTB) relief will drop from £425,000 to £300,000 and the maximum house price on which FTB relief can be claimed will drop from £625,000 to £500,000. Landlords always seem to bear the brunt of tax rises and this budget was no different.
Asset Disposal Relief will see a more gradual rise in CGT rates from the current 10% to 14% in April 2025 and 18% in April 2026 on lifetime gains up to £1m. Whilst Inheritance Tax thresholds have been frozen until 2030, the bad news is that from 2027 unspent pension pots, previously treat - ed as outside of the deceased Estate for IHT purposes will now fall within the charge to IHT after which beneficiaries will be charged tax at their marginal rates when they with- draw funds. Pensions have been an impor- tant tool in IHT planning and this change will require a change in strategy for many.
Conclusion
Whilst the budget promised investment and growth, business owners are bearing the bulk of the tax rises and this may result in a stagnation of a sector which is key to the generation of wealth and opportunity in the country.
Impact on Private Clients
raffingers.co.uk
Reeves was keen to emphasise that she was keeping to the manifesto pledge not to raise income tax, National Insurance (NI) paid by employees, and VAT, and in a surprising move, she announced that from 2028 the Income Tax threshold would once again rise in line with inflation. However, as predicted, rates of Capital Gains Tax increased with higher rate taxpayers now charged 24% on gains. Carried interest CGT will increase to 32% from April 2025 and from April 2026 will be largely be taxed within the Income Tax and National Insurance regimes. Business owners who qualify for Business
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yedidya.zaiden@raffingers.co.uk
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BUILDING
Disputes in Construction Projects
THE LEGAL CORNER MAGAZINE | ISSUE 009 OCTOBER '24 | HALLOWEEN EDITION HB 20
BY JONATHAN MAHONY Partner and Head of Dispute Resolution Business Disputes
Disastrous Delays
The construction industry, more than most, requires a high level of co-ordination between a number of different trades, professions and suppliers in order to successfully deliver pro- jects. However, collaboration disputes frequently arise which can transform even the simplest construction project into a costly nightmare. In the spirit of Halloween, we explore some of these construction nightmares and consider how expert legal intervention can help.
Delays are among the most dreaded issues in construction projects, often leading to significant financial losses and strained relationships between stakeholders. Whether caused by unforeseen circumstances like severe weather or supply chain disruptions, or by more predictable issues such as mismanagement or insufficient planning, delays can derail a project and lead to a cascade of legal disputes. The Crossrail project, also known as the Elizabeth Line, is one of the largest infrastructure projects which has taken place in the UK. Crossrail was initially scheduled for completion in 2018. However, the project was beset by delays, attributed to complex engineering challenges and difficulties in coordinating the various contractors involved. The completion date was pushed back several years and it only opened in May 2022. The delays not only led to significant cost over - runs but also sparked disputes over liability and compensation between the various stakeholders, including contractors, suppliers, and government agencies. Properly drafted construction contracts and associated documents allow parties to properly manage the risk of delays by specifying how they will be handled, including who is responsible for the additional costs incurred. When disputes arise, lawyers can represent their clients in negotiations or court proceedings to determine liability and secure compensation. In large, complex projects like Crossrail, where multiple parties are involved, lawyers also play a key role in coordinating and managing the various legal claims that may arise.
Latent Defects and the Limitation Axe
Latent defects are a particular type of construction nightmare that can remain hidden for years, only to surface long after a project is completed. These defects, often structural or related to building systems, can undermine the safety and integrity of a building, leading to costly repairs and significant and expensive legal disputes. For newly constructed homes, many latent defects are covered by new building warranties (such as the NHBC Buildmark warranty) for defined periods of time after construction. However, if a claim is made after the expiry of the relevant warranty period, the provider is not required to indemnify the innocent property owner. Similarly, there are various statutory time limits (or limitation periods) for commencing court proceedings relating to defective works. If missed, these can prevent an innocent party from recovering the cost of rectifying defects and other losses from the party in breach. Where latent defects arise, to minimise the risk of your claim being “axed” at an early stage it is important to consult lawyers at the outset to ensure that the relevant time limits for bringing a claim against warranty providers and/or issuing court proceedings are understood and not missed.
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I n payment disputes, lawyers play a critical role
Scope Creep
Another common issue in construction projects is the problem of scope creep, where the project’s scope expands beyond the original plans. Construction projects, particularly large-scale projects, often evolve as the project progresses – clients may request alterations to the specification, or unforeseen factors mean that changes to the scope have to be made. These can lead to unexpected cost and delay: the HS2 Phase 1 (London to Birmingham) project was originally forecast to cost between £15.4 billion and £17.3 billion, but by 2023, HS2 Ltd’s projected costs had risen to between £49 billion and £57 billion. Whilst this is an extreme example, scope creep on even the smallest construction projects can significantly impact on the finances of both employers and contractors. Solicitors can help manage the risks associated with design changes by drafting contracts that include clear provisions for handling variations in the project scope. These provisions should specify how changes will be approved, how costs will be allocated, and how any additional time required will be managed. When disputes arise, we can provide representation in negotiations or litigation and, where relevant, help to ensure that the project stays on track and within budget.
in advising on and enforcing
statutory payment mechanisms, which can help resolve payment disputes.
Payment Nightmares
Payment disputes are one of the most common and contentious issues in construction projects. Disagreements over payment can arise from a variety of sources, including non-payment, underpayment, or disputes over the valuation of work completed. These disputes can quickly escalate, threatening the financial stability of the parties involved and leading to delays in project completion. In payment disputes, lawyers play a critical role in advising on and enforcing statutory payment mechanisms, which can help resolve payment disputes, including the use of adjudication, which is a quicker and less costly alternative to court proceedings. Lawyers can also rep- resent clients in negotiations or litigation to ensure that they receive the payment they are entitled to or, conversely, that they do not pay more than what is fair.
jonathan.mahony@haroldbenjamin.com
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STRATEGIES TO HELP MANAGE
BY ALAN HEYES Therapy Partners
THE LEGAL CORNER MAGAZINE | ISSUE 009 OCTOBER '24 | HALLOWEEN EDITION HB 24
Litigation can be an overwhelming and highly stressful experience, often leading to emotional exhaustion, anxiety, and feelings of uncertainty. While lawyers play an important role in guiding their clients through the legal process, there are several strategies that parties to the legal process can adopt to manage litigation stress and improve their mental well-being. Alan Heyes of Therapy Partners discusses how litigation stress can be better managed, ensuring better mental health, and improving engagement and co-operation throughout the court process.
What is Litigation Stress?
Litigation stress refers to the psychological and emotional strain experienced during legal disputes. Studies show that clients involved in litigation can face a range of stressors, includ- ing financial concerns, uncertainty about out - comes, and the adversarial nature of the legal process (Carbone & Cahn, 2021). Recognising these stressors early on can help clients take proactive steps to manage them.
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Seeking Support
Clients often feel a loss of control, exacer- bated by unfamiliar legal jargon and fears about personal reputation or public per- ception. The complexity of legal matters can create confusion, which worsens stress. Chronic stress can negatively impact both physical and mental health. By understand- ing the sources of stress, clients can take action to mitigate its effects.
For clients dealing with high levels of litigation stress, especially in emotionally charged cases like family law or complex commercial disputes, seeking professional support is a valuable step. Research shows that emotional support networks, including therapists, play a key role in helping clients manage stress. Clients should not hesitate to reach out for help, whether through therapy, mindfulness practices, or support groups. These tools can provide effective coping strategies, enabling clients to maintain emotional resilience throughout their case.
Effective Communication
One of the most important steps is to establish clear and transparent communication with legal advisors. It has been shown that those people who stay informed about their cases tend to feel more in control and less stressed (Brown & Lewis, 2020). Asking questions, seeking clarification, and understanding the legal process can reduce uncertainty and help clients set realistic expectations. Clients should feel comfortable initiating conversations and requesting updates from their legal team. Being proactive in understanding the stages of their case can foster a sense of partnership, which can significantly alleviate litigation- induced stress.
Self-Care
Clients often overlook the importance of self-care during litigation, yet this is critical for stress management. Engaging in regular exercise, getting adequate sleep, and maintaining a balanced diet are all proven ways to reduce stress. Taking time to pursue hobbies or activities outside of the litigation process can provide necessary breaks from the intensity of legal disputes. Since litigation is typically a lengthy process, maintaining physical and emotional health is essential for enduring stress over time.
Managing Expectations
Unrealistic expectations can heighten litigation stress. Clients often enter legal disputes with hopes shaped by media portrayals or a lack of experience in the legal system. This can lead to disappointment if outcomes don't align with their expectations (O'Connor et al., 2019). To manage this, clients should actively engage with their lawyer to understand the range of possible outcomes. Having an open mind about alternative dispute- resolution options, such as mediation or arbitration, can also provide less stressful alternatives to a full court process. Being flexible with expectations and preparing for various outcomes can reduce stress in the long term.
Conclusion
While litigation can be an inherently stressful process, clients can take practical steps to reduce the psychological toll. By establishing clear communication with their legal team, managing expectations, seeking therapeutic support, and focusing on self-care, clients can better navigate the legal process and protect their mental health.
www.therapypartners.co.uk
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MAKE IT LESS SCARY?
Bhavini Kalaria, partner in the dispute resolution team, discusses contract as a conflict mitigation tool, and the impact of a well-drafted contract on conflict resolution.
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Conflict management is most effective when it is considered at the start, setting out clear expectations and establishing routes to resolution. This involves clearly defining roles and responsibilities to prevent any ambiguity, setting measurable performance standards to avoid disputes over quality and delivery, and establishing regular communication protocols to address concerns before they escalate into bigger problems. Dispute resolution clauses are the corner- stone of managing conflicts within a contract. These can offer a clear process for resolving disputes and can take various forms, such as negotiation clauses that encourage parties to resolve disputes through direct discussions before pursuing more formal methods; mediation clauses that involve third parties who can facilitate a confidential and non-binding resolution process focused on finding common ground; and arbitration clauses that provide a binding resolution by an arbitrator. Whilst dispute resolution clauses are fun- damental to effectively manage conflicts, governing law and termination clauses can also play a critical role. These clauses deter - mine which jurisdiction’s laws will govern the contract and where disputes will be resolved. This is particularly important in international contracts to avoid jurisdictional conflicts. Further, termination and force majeure clauses can help end a contract under specific conditions, by being structured to allow a party to exit the agreement if the other party breaches key obligations, whether for cause or simply for convenience. Force majeure clauses excuse non- performance when extraordinary events
In my experience, the closer the relationship between the parties involved, the broader and more nuanced the tools for conflict resolution need to be. For instance, in a family business, where relationships can be deeply intertwined, the overlap between the formal business framework and personal dynamics is significant. In contrast, in a purely commercial transaction, the legal avenues available for dispute resolution tend to be narrower and more defined. The challenge is not merely that the law can’t manage a conflict, but rather that the parties’ interests might be out of alignment with the rigid approach that it sometimes takes. On the other hand, the sort of rigidity offered by, say, a contract, can be helpful when there are unequal parties, providing a formal mechanism within which parties can maintain healthy and sustainable relationships. It’s important to recognise that conflict resolution isn’t something that should be addressed only after a dispute arises. Instead, the foundation of effective conflict management can be setbeforehand, in an agreement. At the same time, then mecha - nisms of conflict resolution are diverse, offering the sort of broad approach that is sometime necessary in resolving a problem. This article explores how conflict management often starts with a well-drafted contract, which not only defines the terms of the business relationship but also anticipates potential ways conflicts can be resolved. By considering the types of clauses that should be included, the strategic choices involved in selecting dispute resolution methods, and the role of ongoing contract management, fairer systems can be implemented to preserve relationships and manage power dynamics effectively.
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"DISPUTE RESOLUTION CLauses are the corner- stone of managing conflicts within a contract"
beyond the parties' control—such as natural disasters or significant disruptions— occur, helping to manage the risks associated with these unforeseen circumstances. These clauses are important in ensuring that parties have clear, predefined pathways for respond - ing to both breaches and unexpected events. It important to consider which dispute resolu- tion mechanisms and clauses best align with the nature of the relationship and the types of conflicts that might arise. For instance, in close-knit relationships like those in family businesses, non-adversarial methods such as mediation may be more suitable to maintain harmony. On the other hand, complex legal issues might necessitate arbitration or expert determination to achieve a binding resolu- tion. Flexibility is also key in some circum- stances, and here hybrid clauses or termina- tion-for-convenience clauses can offer the necessary adaptability, particularly in long- term agreements.
Conclusion
Conflict management and resolution go beyond merely addressing legal issues—they involve managing relationships, power dy- namics, and the differing interests of the parties. A well-drafted contract anticipates potential conflicts and provides fair, struc - tured mechanisms for resolving them. By carefully considering the clauses included in a contract, parties can create a framework that supports long-term collaboration, preserves relationships, and effectively manages the risks associated with disputes. Ultimately, a contract that addresses conflict management holistically is key to maintaining a balanced and equitable business relationship.
bhavini.kalaria@haroldbenjamin.com
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CASE STUDY: NIGHTMARE SCENARIO FOR LANDLORDS Commercial premises used for cannabis farming.
THE LEGAL CORNER MAGAZINE | ISSUE 009 OCTOBER '24 | HALLOWEEN EDITION HB 32
Background
A corporate client faced a dispute with an energy supplier over the recovery of costs associated with electricity theft at a commercial property. Our client let a large industrial unit to tenants. The property be - came occupied by people who operated an illegal cannabis farm from it. The electricity meter and supply were tampered with to steal electricity costing approximately £190,000 from neighbouring land. The energy supplier attempted to hold our client responsible for that theft, despite acknowledging that the client did not commit the theft.
No substantive response to the correspondence sent by Sarju was ever received from the supplier’s solicitors, who instead sought to threaten an application to the Court for pre-action disclosure unless various documents and information were provided. The threat of pre-action disclosure under CPR 31.16 was countered robustly on the basis that the criteria for pre-action disclosure of documents had not been met, the client was not the perpetrator of the theft, and the supplier had not identified any legal basis to hold the client liable. Money taken by the supplier was recovered using the bank’s direct debit guarantee, and the matter did not proceed any further.
Key Issues
An energy supplier cannot recover costs from anyone other than the actual perpetrator of the theft, where the electricity is being taken from outside the actual premises. This is pur - suant to statutory, regulatory and contractual obligations of the supplier. Additionally, the supplier is obliged to act in a fair, transparent, and professional manner in dealing with electricity theft.
Conclusion
Harold Benjamin Solicitors successfully defended the client against the energy supplier’s disproportionate and unjustified actions. By emphasising regulatory obligations, challenging inappropriate conduct, and demanding proper legal procedures be followed, the team ensured that the client’s rights were protected.
Action taken by Harold Benjamin Solicitors
The supplier’s conduct was highlighted with attention drawn to the distress caused by the supplier’s recovery agent and the inappropriate attempt to withdraw a large sum from the client’s bank account via direct debit. Sarju Kotecha, acting in this matter, asserted in correspondence that the supplier’s actions were contrary to its regulatory duties and the principles of fair and reasonable conduct. Specialist Counsel’s advice demonstrated that the supplier’s claim lacked merit.
sarju.kotecha@haroldbenjamin.com
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Find out more about Dispute Resolution
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