Barristers Feature Page 14
All ER 21) and Spectrum (National Westminster Bank plc v Spectrum Plus Limited [2005] UKHL 41) cases. ‘The banks were shocked to discover that their security by way of fixed charges over book debts was seriously compromised. As a result, they have moved away from granting overdraft facilities to SMEs [small and medium-sized enterprises] secured by debentures, and into the purchase of debts by way of invoice finance,’ he says.
The property market, of course, has probably been hit hardest by the financial crisis. As Jonathan Seitler QC, property litigator at Wilberforce Chambers, bluntly puts it: ‘Property transactions are dead or close to dead’. Property litigation, however, thrives – at least for the time being. ‘Much of it relates to attempts to avoid or modify the terms of property transactions entered into in 2007,’ he says. Katharine Holland, barrister at Landmark Chambers in London, also has plenty of property litigation work, especially in relation to administrations and termination and/or specific performance of development agreements.‘Current interesting projects relate to a number of cases involving administrations, including the recent Court of Appeal decision in Innovate Logistics v Sunberry [2008] EWCA Civ 1261 in which the courts are having to consider where the balance should be struck between the interests of landlords and the interests of companies in administration,’ she says.
Serious disputes
The credit crunch has led to insolvency-related property work rearing its ugly head for the first time in more than a decade, says Jonathan Small QC of Falcon Chambers in London. ‘When all else has gone, often there is only an office, house or farm to fight over. Development-led work has been replaced by serious disputes over sale and purchase and joint venture agreements. Landowners are trying to enforce these against developers and many developers – typically house-builders – are trying to extricate themselves from such agreements. The early signs indicate an increase in litigation during the recession,’ he adds. The question of what happens when an informal joint venture agreement breaks down was explored in Cobbe v Yeoman’s Row Management Ltd and another [2008] UKHL 55 – now the leading case on proprietary estoppel. This is one of two important House of Lords cases in which Falcon Chambers was involved this year: the other being Scottish & Newcastle plc v Raguz [2008] UKHL 65, which concerns the rental liability of former tenants and guarantors. Both cases, says Seitler, have restored common sense in these two important areas. Christopher Pymont QC, of London’s Maitland Chambers, says regular statutory interventions in recent years have kept property practitioners on their toes. These include the Landlord and Tenant (Covenants) Act 1995, the Trusts of Land and Appointment of Trustees Act 1996 and the Land Registration Act 2002. ‘The Law Commission is currently undertaking a major review of the law of easements, profits and covenants which may have a substantial impact in that area,’ he adds. Although commercial landlord and tenant (L&T) work is quieter than it has been, private and social housing L&T is as busy as ever, says Nick Grundy of 5 Paper Buildings. ‘Tenants continue to behave in breach of their tenancy agreements and/or in an anti-social way and defence lawyers continue to try and come up with ingenious ways of defeating what are otherwise quite valid claims for possession,’ he says. Although the Housing and Regeneration Act 2008 rewrites the rules on financing new council housing, theoretically helping councils to build new social homes in their areas, Grundy predicts the credit crunch will lead to more repossessions. This will put even greater pressure on access to the public rented sector – already a scarce resource. As a result there will be greater numbers of challenges of Local Housing Authorities and Registered Social Landlords.
Undoubtedly, the credit crunch has had a big impact on both commercial litigation and insolvency, says Lance Ashworth QC of St Philips Chambers, in Birmingham. ‘As far as commercial litigation is concerned, there has been an increase in the number of warranty claims consequent on purchases of company’s shares, where – partly as a result of the economic downturn – the sale has turned out not to be as profitable as had been hoped. Insolvency has been affected as companies are beginning to struggle to fund ongoing trading.’ He anticipates that in the next few months, more companies will find themselves in serious financial difficulties and will end up in administration. ‘This will inevitably lead to more litigation as parties squabble over the carcasses of these companies,’ he adds. Watson-Gandy (pictured left) says the impact of the credit crunch on the insolvency field has been curious with the increasingly popular ‘pre-pack administrations’ where directors seek to put a company into administration but simultaneously offer to buy the business back – suddenly becoming less appealing. He says: ‘While there are starting to be more insolvencies, the finance is no longer available to buy back the assets. Pre-packing directors can’t persuade banks to let them buy the business back. Worse still the market for “second-hand businesses” or their assets has dried up.’
Coyne v DRC [2008] EWCA Civ 488, he says, also highlighted a new problem for pre-packs after the court ruled that the administrator had a duty to first recover company’s business and assets before inviting offers from interested parties on a level playing field or attempting a sale.
‘Particularly frighteningly the court compelled the administrator to unscramble a sale,’ he adds. ‘This does not mean that pre-packs are dead. It does however mean administrators need to undertake due diligence. Conveyor-belt administrations now look risky.’ Stephen Eyre of Birmingham-based St Philips Chambers says that though the insolvency world is busy, there has not been the level of increase one might have expected. ‘This is because for it to be worth going to court – or even contemplating doing so – in an insolvency there needs to be some assets of value somewhere, whether in a company’s assets or in property belonging to a director or to a bankrupt. If there are no assets there is nothing to fight over.’ The amendments made to the Insolvency Act 1986 by the
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