Omitted takings affect share valuation, rules court.

A recent case on company valuation may well end up being of great interest to HM Revenue and Customs (HMRC) as well as the two directors involved. It concerned a company which operated a restaurant. When the directors fell out, in order to enable one director to buy out the other's shareholding, the company shares had to be valued.

The problem that arose was that the valuer, quite sensibly, based the valuation on the company's profit as per its statutory accounts. The director being bought out took issue with the valuation on the basis that the disclosed accounts had been artificially suppressed by excluding some of the takings from the financial records.

She claimed that some of the takings were only recorded as 'handwritten takings', and that their inclusion was necessary to form an accurate picture of the company's profitability. These arguments were rejected by the judge and the director appealed to the Court of Appeal. 

The Court upheld her challenge and overturned the valuation, concluding that the handwritten takings formed part of the company's 'books and records' and that the valuer, by failing to take them into consideration, had failed to place a fair value on her shareholding. It was not enough to argue that a willing buyer would have been found at the price indicated by the expert's valuation, but 'the price to be determined is the price which a willing buyer and a willing seller in the actual position of these parties would have arrived at. A willing seller would clearly have put forward the handwritten takings as reflecting the actual takings of the business, on the basis that the trading accounts used for tax purposes were understated...'

It would be surprising indeed if the outcome of this decision were not an HMRC enquiry into the business, as a failure to record all takings would almost certainly have resulted in a lower VAT and Corporation Tax yield than would otherwise have been the case.

Given the penalties and interest charges that can result from such an enquiry, this may well turn out to be a Pyrrhic victory. For advice on how to negotiate the dissolution of any business relationship, contact John Irving on 0121 698 2200 or email

Contracts mean what they say, not what they don't

A High Court case concerning an agreement to supply cupcakes has underlined the legal principle that contracts are generally taken to mean what they say and that extrinsic evidence cannot normally be used to assist in their interpretation.

The dispute started with a simple contract for one company to manufacture and supply cupcakes to another company. The former argued that the contract precluded the latter from making cupcakes of its own and required it to place minimum annual orders worth £600,000.

When the second company did not adhere to these stipulations, the manufacturer sued its client, alleging breach of contract.

In striking out the company's breach of contract claim, however, the Court noted that its interpretation of the agreement involved adding words which were not there and would do 'extreme violence' to the natural and ordinary meaning of the wording in fact employed.

There was nothing ambiguous about the agreement and it was thus impermissible to take into account extraneous evidence regarding the parties' alleged intentions. The Court could detect no mistake in the drafting of the contract and it was not possible to argue that it did not make commercial common sense.

For advice on the negotiation or interpretation of any contract, please contact John Irving on 0121 698 2200 or email j.irving



Personal bankruptcy limits increase

Changes to the Insolvency Act 1986 that are being introduced on 1 October 2015 will mean that a person will no longer be able to be made bankrupt if they fail to pay a judgment debt of as little as £750 (a sum which has remained the same for 19 years).

Under the revised regulations, a petition for bankruptcy will only be able to be presented if the debt due is £5,000 or more.

If you are owed money by an individual which is under £5000 and are considering a bankruptcy petition this must be presented to the court before the 1 October 2015; should you require assistance with this contact Leanne Schneider-Rose on 0121 698 2200 or email


Entering Into a Partnership? Get it in Writing!

Business partners who failed to define their working relationship in writing – instead reaching agreements orally over bottles of red wine in a pub – paid the price when a dispute over money erupted and made its way to the Court of Appeal.
Partner A had joined Partner B in her professional practice and had contributed capital to the firm's account. On his retirement, partner A sought the return of those sums. Partner B denied that it had ever been agreed that he would be entitled to the contents of his capital account on his departure.
No agreement as to their partnership, or the terms of partner A's retirement, had been put into writing or executed. However, in ruling in partner A's favour, a judge found that a contract had been agreed, partly orally and partly by conduct, to the effect that he would be entitled to recoup his capital investment on leaving the firm.
In rejecting partner B's challenge to that decision, the Court of Appeal noted that the judge had had the benefit of hearing the witnesses and ruled that his findings of fact could not be faulted. His conclusions were strongly supported by such documentary evidence as was available. In reaching its decision, the Court expressed surprise that two professional people had not formalised their agreements in writing and had chosen to litigate the matter rather than resolve their differences through mediation or arbitration.
The moral of the story is that in any partnership, company, LLP or other business organisation, you should have a clear written agreement as to what will happen in the event that the business ceases or those involved decide to part company with one another. Failing to do so is in all too many cases a false economy. We can advise you on your individual circumstances.  Please contact John Irving on 0121 698 2200 or email

ACTAPS Award for Richard Cooper

Sydney Mitchell is pleased to announce that Richard Cooper, a solicitor in the firm’s Dispute Resolution department, has been appointed as a full Member of The Association of Contentious Trust and Probate Specialists (ACTAPS).

Only solicitors and barristers who have specialist expertise in Contentious Probate are admitted to ACTAPS.

ACTAPS provides a code of conduct which all members must comply with. The code is designed to ensure that contentious probate matters are dealt with in a manner which attempts to avoid protracted litigation in what are generally highly emotive proceedings.

Sydney Mitchell's contentious probate team is consistently ranked as a top tier specialist in the Legal 500, a guide to leading lawyers.  Other specialist teams include employment, commercial property, company and commercial services, litigation, insolvency, licensing and gambling law. Private client teams include family law, residential property, dispute resolution and wills and probate, tax and trusts and personal injury.

Continuing Healthcare alert

Midlands Top Tier Award Winning law firm Sydney Mitchell LLP highlights the need for specialist legal advice when dealing with continuing health care and the affordability to pay for care in later life. "All too often we see continuing healthcare checklists and full continuing healthcare assessment completed incorrectly without full representation of the evidence and needs" says Paul Gill, Specialist Care Adviser at Sydney Mitchell.

Healthcare specialist, CHC assessment help, retrospective claims NHS

Paul Gill has practised as a registered mental health nurse in the NHS for 31 years, gaining experience in numerous fields before specialising in working with older clients in both acute physical healthcare and psychiatric environments.  He joined the Continuing Healthcare team in Solihull in 2008 and worked as a Clinical Nurse Specialist Continuing Healthcare (Mental Health) until joining Sydney Mitchell in 2014.

We have attended many review cases, to discover that individuals should not have been paying for care as they have a primary health need.  In many cases clients were not aware that they had undergone an assessment and the family or relatives had not been informed or made fully aware of their legal entitlement.

According to facts and figures from Age UK Dec 2014 and Laing and Buisson Care of Elderly People Market Survey, the combined care market value for care for older people, including local authority funded, voluntary and private expenditure, is estimated to be worth over £22.2 billion, of which £13.4 billion is attributable to residential care and £8.8 billion to non-residential care.

Tracy Creed, Head of Probate at Sydney Mitchell commented:  

With an ever increasing aging population more and more people will be affected by care placement and care funding issues.  It is ever more important that Continuing Health Care assessments come to the fore and members of the public are informed and involved in the assessment processes.  We often receive calls late on in proceedings; whereas if the public were more aware of the process and assessment criteria well in advance, the painful and costly appeal process could be avoided.  Don’t leave it until it is too late.  Speak to a specialist at an early stage and take advice at the earliest opportunity.

Paul Gill is a registered mental health nurse and specialist adviser and is based at Sydney Mitchell’s Shirley office. He has been involved in dealing with continuing health care since 2009 when the new legislation and guidance came into effect and has worked on both sides of the fence so understands the complexities involved.

*Source: Age UK Later Life update 4 December 2014- Home and Care - The combined care market value is estimated to be worth £22.2 billion, of which £13.4 billion is attributable to residential care and £8.8 billion to non-residential care - Care of Elderly People Market Survey 2012/13, Laing and Buisson, 2013 and Community Care Statistics table P2f 1c NHS information Centre 2013.

If you would like help or guidance with any Continuing Health Care matters, please speak to Tracy Creed or Paul Gill on 0121 746 3300, email or complete our online enquiry form and we will be only too pleased to help you with this complex area.

"The Interest Swap" - "The Claim" - "The Hedge" - "The Gag Clause" and "The Bank Mis-Selling"

No not the headline plot of a new episode of 'The Bill' but the key terms in a new wave of litigation, post PPI, facing Banks and other lenders as a consequence of the Financial Services finding that the banks have again been mis-selling.

In 2006 to 2008 Banks often made it a requirement of borrowing that the borrower enter into an Interest Swap Derivative Agreement.

The principle of the Agreement was that interest rates would be swapped to mitigate any rise in interest rates payable on the loan agreement within certain parameters.

Often the agreements were extremely complicated, technical and provided for extensive breakage costs in the event that the borrower wished to exit the Swap. 

It would not be unusual for breakage costs to be in the ten’s of thousands, if not hundred’s of thousands of pounds, if indeed there was a break clause at all.

Richard Cooper an Associate at Sydney Mitchell said

We are acting for a number of clients who were mis-sold an Interest Rate Swap often as a condition of lending.

We are finding that in many instances the Bank did not advise our clients of the risks associated with the Swap.  

Indeed, in some instances we are finding that the banks misrepresented the nature of the Swap, and may have breached the Financial Services Conduct of Business Services.

If you consider that you have been mis-sold an Interest Swap Agreement, then please refer to our dedicated Mis-sold Interest Rate SWAP Claims page. You can also contact Richard Cooper or Kam Majevadia on 0121 746 3352 for an informal chat to see whether we may be able to help you seek redress from your Bank on a NO WIN NO FEE basis.

Alternatively, contact us using our online enquiry form.

Sydney Mitchell Threshers out off-licence sales

Sydney Mitchell has been appointed by the administrators of First Quench Retailing Limited to deal with the disposal of properties nationwide.

First Quench, which operated a number of well-known off-licence brands, including Threshers and Wine Rack, went into administration in October 2009. Richard Fleming, Mick McLoughlin and Ian Corfield of KPMG, the appointed administrators, subsequently instructed Sydney Mitchell as one of only two firms to deal with the sale of the First Quench portfolio.

Acting for the administrators, Sydney Mitchell is the only English firm outside London to be involved in the realisation of assets. The team is lead by Kamal Majevadia, Insolvency specialist and associate Simon Jobson, Commercial Property specialist.

Sydney Mitchell anticipate that they will deal with up to 150 stores nationwide, subject to receipt of offers

Commenting on the instruction, Kamal said, "it is a major coup for the firm to be acting on this matter. We are often seen as a more regional firm, but this instruction is a real opportunity for us to prove our ability to facilitate high profile work on a national level."

Sydney Mitchell helps save jobs at two midland casinos

Sydney Mitchell has helped save 120 jobs by finalising the acquisition of two casinos in the region.

The Castle casino in Wolverhampton and the Rubicon in Dudley both went into administration in March of this year. With the assistance of Sydney Mitchell both have now been acquired by casino chain Casino 36.

Casino 36, which currently has a casino in the North West of England, has been looking to expand by acquiring new sites. With the appropriate expertise in order to manage the two casinos, the take over made perfect sense.

After working with Sydney Mitchell on a number of business matters Casino 36 turned to the firm to assist them with this transaction.

Acting on behalf of Casino 36 were the commercial and insolvency teams at Sydney Mitchell. John Irving and Kam Majevadia managed and negotiated the successful and swift purchase of the two sites.

"It was imperative that the transactions were performed quickly in order to secure the jobs for the staff at the two casinos and to deal with the regulatory issues. The deal was turned around and completed in just over a fortnight" says John Irving, Partner at Sydney Mitchell.

"As unfortunate as it was for the Rubicon and the Castle casinos to run into difficulties, being able to help Casino 36 in the take over has helped soften the blow and it has meant that the 120 employees over the two sites still have their positions coming up to Christmas" says John.

Insolvency increase as green shoots appear

Despite talk of 'green shoots' of economic recovery and an improving market, the Insolvency team at Sydney Mitchell are expecting a rise in Insolvency cases heading their way.

Already insolvency statistics show that there is a 39.1% increase from last year in company insolvency's. This includes administrations, compulsory liquidations and creditors voluntary liquidations. Individual insolvency's are also on the increase with a rise of 27.4% from last year. This figure includes bankruptcies, IVAs (Individual Voluntary Arrangements) and DROs (Debt Relief Orders).

"Despite the tentative confidence we appear to be hearing from commentators, we are still seeing a continued lack of demand and confidence in the market place" says Kam Majevadia, Partner and head of the insolvency team at Sydney Mitchell.

"Companies have had support from lenders and HMRC through the troubled times but this support is not indefinite. As the economy improves it is not surprising that lenders and HMRC are starting to impose tighter deadlines for increased regular payments. Because of this, companies face even greater pressure on their cash flow and this will result, ultimately, in more companies being faced with insolvency. They will need the expertise of an insolvency lawyer to guide them through the complex insolvency legislation and to help them to avoid the inevitable pitfalls."

In order to meet the increasing demand from their clients Sydney Mitchell have appointed Grace Strawford to join the insolvency team. Grace, a qualified solicitor, has been with Sydney Mitchell since 2005 and has been taken into the department on a permanent basis after being seconded to assist with the high levels of work currently coming in and discovering a real interest in the work. Grace has a broad range of experience which makes her an ideal candidate for dealing with insolvency work.

"For companies facing insolvency it can seem that they are losing everything" says Kam. "Although Insolvency has serious implications, in some cases it can be used to provide debt relief for insolvent companies and individuals, helping them to make a fresh start and review their financial position."

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