Here we have it: An Audience with Steve Parkin & Tony Mannix, interviewed by David Parkin – hosted by Front Row Legal.
For those of you who may have missed it, or even for those that attended and would like to revisit; please take a moment to watch the seminar held by us on 24 February 2021. Once again, many thanks for those that attended and to those that made it a success!
Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base. frontrowlegal.com
Click here to read our blog in The Wedding Guide UK where Partner Richard Cramer discusses the challenges that suppliers in the wedding industry are currently faced with.
Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base. frontrowlegal.com
Richard Cramer discusses Manu Tuilagi's rejection of his new Leicester contract in the Daily Express here.
Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base. frontrowlegal.com
To say that it has been a difficult time for business owners as a result of Covid-19 would be an understatement. Whilst some businesses have found new ways to stay afloat, other businesses have sadly suffered serious losses due to Covid-19, whether this be financial losses, trading losses or even loss of customers. In some extreme cases, all three apply.
In cases like this, both individuals and businesses have the choice to take out what is known as a business interruption insurance policy. These policies help to mitigate circumstances and cover any loss of revenue or profit. They can also be taken out to cover any non-physical damage. Instances include the closure of a premise, denial of access or in relation to a contagious disease. However, it should be noted that it is quite rare for businesses to take this approach.
With this in mind, the question remains: “to what extent will BI policies apply in the context of Covid-19?”
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What does the Financial Conduct Authority intend to do?
In April of this year, the FCA had stated that most BI policies would not cover for losses related to Covid-19. This, however, was revisited in June where the FCA published details of a test case it has lodged against eight insurers before the High Court.
The FCA have stated that BI policies are generally complex and can cause uncertainty depending on the type of policy that has been taken out and the specific wording within the policy. This can cause frustration among customers who believe they have a valid claim only to be rejected by their insurer. With more and more cases cropping up, it is the intention of the FCA to liaise with the High Court to resolve the issues arising from BI policies.
The FCA’s key objective is to achieve “maximum clarity for the maximum number of policyholders”.
Richard Cramer, managing partner at Front Row Legal, has been following the case closely. Having kept up to date with the FCA’s blogs on BI policies, Cramer believes that the FCA are playing their part in addressing the relevant issues stated above. This is especially noted in the FCA’s “Finalised Guidance”, a publication for firms who need further assistance when it comes to making a claim or complaint against an insurer. Cramer was also impressed with the number of submissions the FCA received from policyholders and other stakeholders relating to the scope of the test (roughly 270 submissions) as this shows the FCA’s seriousness in the matter.
When it comes to the aspect of Covid-19, the FCA would like the courts to not only focus on the policy wording but also ask other fundamental questions: Can Covid-19 be classed as an infectious and contagious disease"? Did the virus occur in the 'vicinity' of an insured premises? And what hurdles will the insured party need to overcome if this is the case?
Along with the wording of the sample policies, the courts will also need to consider the interpretation of any relevant clauses as a whole. Cramer suggests looking closely at any "trend and variation" clauses. These clauses tend to appear in a lot of BI policies. This is essentially where an insurer has the power to reduce the amount payable due to factors affecting its ability to trade. Given the last few months have included social distancing and economic uncertainty, a thorough analysis of these clauses will prove useful to many customers.
Furthermore, the FCA are cooperating with insurers and looking to agree a timeline of key events. This will include looking at when Covid-19 first arrived in the UK, the impact it has had on businesses and any virus related regulations which have come into force.
Next steps
Overall, the test case as it stands looks promising, with Cramer believing the FCA have a strong case on their hands. It will, however, take a good number of months before we see any significant outcome. In the meantime, the FCA will continue to engage with policy holders and insurance intermediaries throughout the test case process.
Should the FCA succeed in their claim, this could mean a considerable amount of money to be paid to affected customers. At this point in time, the FCA are preparing their Reply which is to be filed on the 3rd July. Once all relevant skeleton arguments and replies have been served, an 8 day court hearing should take place in late July.
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For more information on the FCA’s test case and further updates, please visit the following websites:
Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base. frontrowlegal.com
The arrival of Covid-19 has inevitably affected every company on the map, from large corporations to small business owners. In this uncertain time, companies are currently looking for new and different ways to thrive whilst also trying not to lose money in the process. With financial strains being put on almost every company, it is predicted that an economic recession is on its way.
The UK government has recently published the Corporate Insolvency and Governance Bill (CGIB), a bill designed to not only rescue companies who are suffering from major financial strains but also provide further protection from creditors.
It can be argued that the UK's Enterprise Act 2002, the initial way of helping companies through the liquidation and administration process, was not as helpful in achieving an accurate financial outcome for companies. It focused more on selling a company's assets rather than saving the entirety of the company itself. For this reason, critics argue that reform was much needed and long overdue.
The new CGIB can be broken down in the following key parts:
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Company Moratorium
The CGIB introduces a new moratorium procedure of 20 business days to allow for insolvent businesses or businesses on the brink of insolvency to restructure. This gives companies extra time to figure out how best to move forward with their company. This can be extended at the permission of creditors or the court.
This type of moratorium is similar in nature to any previous ‘moratorium' schemes put into place under English law. The difference this time is that a licensed insolvency practitioner or ‘monitor’ will be involved. The practitioner has the role of monitoring the company and also gives added protection from any creditors. Their duties, however, are limited in that they can only help with certain aspects such as approving of sales assets or any further security over a company's assets. The moratorium does come with limited exceptions and the following requirements:
Restructuring Plan
Along with the moratorium, a company facing financial difficulties will also be able to create a new restructuring plan. This is based upon the "scheme of arrangement"; a procedure that has been available under the Companies Act 2006. A plan to restructure allows for companies to weigh out their options and look at any alternatives to rescue the company.
The plan differs in that it will introduce a "cross-class cramdown" meaning that dissenting creditors are bound to the plan. This means that a company can compromise its financial and equity structure without the fear of going into administration. Once finalised, this will then go to the courts who will have the final say in approving the plan if it can be shown the plan is "just and equitable". This can be approved even if one or more classes don't vote in favour of the plan.
Companies House filing
When filing the relevant documents to Companies House, the CGIB has allowed the Secretary of
State to make further extensions on deadlines, provided that the extended period:
AGMs and GMs
Given the circumstances of the virus, the CGIB also allows for companies to hold Annual General Meetings or General Meetings by other means. This applies even where their constitution would not permit it. Both shareholder and directors are safeguarded from liability during this time, particularly regarding measures that require shareholder votes.
Winding up petitions
Usually when creditors are owed more than £750 by an insolvent company, they will petition to the courts to force the company to pay this amount; also known as a winding up petition. As there is likely to be a lot of unpaid creditors in the time of Covid-19, the bill introduces a safety net for directors.
Creditors who will be tempted to threaten a wind-up a company to collect their owed debt will not be able to do so from 27 April to 30 June 2020. In the meantime, directors should still follow their duties to creditors. Should directors be found in breach of their duties, even during this time, liquidators and administrators can still bring a claim against a director.
Termination Clauses
For some companies that require suppliers to supply goods, supplying could increase over time as a result of Covid-19. If a supplier discovers that the company they work with is on the brink of insolvency, they may stop or threaten to put a stop to future supplying. In fact, in some supplier contracts, this is often expressly stipulated and allows a supplier to take this action.
With the introduction of the CGIB, suppliers will not be able to stop supplying if and when it suits them. Even if this is stated in their respective contracts, the bill says that a supplier cannot rely on this or amend the terms of the contract where the supplies are paid for. Should hardship arise for the supplier to meet demands, they may apply to the court who can terminate on this ground.
Wrongful Trading
The introduction of the bill suspends the use of wrongful trading temporarily between 1 March to 30 June 2020. By suspending these types of provisions, this means that for this time period, liquidators and administrations will not be able to bring claims for wrongful trading. During this time, the courts will assume that a director will not be responsible if their financial position goes down.
This does not necessarily mean that directors are free of their responsibilities but rather, it gives them a bit of leniency and they should continue to maintain their financial activity and be mindful of any next steps. Furthermore, if a creditor has reasonable grounds to believe that Covid-19 has not had a financial impact on the debtor or the debtor would have been unable to pay its debts in the absence of Covid-19, then this can be an exception.
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An overview of how sports have been affected by Covid-19 and how they are handling their finances :
Football
Covid-19 has also raised many questions as to the status of football where many clubs are left in limbo as to what could happen in the next few weeks or months. Phil Hodgkinson, Huddersfield Town Chairman, believes that the worst-case scenario could see 50 or 60 clubs going bust if there is no proper financial framework put in place.
Having first hand experience with various clubs in the league, Hodgkinson states that there are a number of clubs who are still trading because they are deferring wages and creditors are still waiting to be paid. He goes on to say that even if the season goes ahead and is played behind closed doors, no fans means no income. Roughly £7m to £10m will be lost in normal revenue and that the claw-back for TV is roughly between £10m to £30m.
He believes that the future of football is the main issue that needs to be tackled, specifically how the football pyramid can continue without any incoming revenue. Hodgkinson suggests that reducing a player’s wages, whilst not ideal, could be a possible solution. In the meantime, Hodgkinson has written a letter to the EFL but has not yet received a proper response.
Rugby
Building upon Phil Hodgkinson’s comments regarding players taking a pay cut, this is also a worry in the rugby world. Whether or not a player plays for a higher or lower league club, there is a financial uncertainty when it comes to a player’s wages and how much each player is worth. The Castleford Tigers, a club that competes in the Super League, gives a good example of this. Jon Wells, the director of Rugby at Castleford, states that there will be a “significant levelling-down exercise in rugby league finances” and asks “is a £100,000 player now worth £80,000? Is an £80,000 player now worth £72,000?”. When it comes to spectators, Castleford is a small town so the club relies heavily on the number of attendees to help with their finances.
When it comes to rugby in the UK, we have been told that the Rugby Football League (RFL) recently secured a £16m loan to help with its finances. The RFL has intimate knowledge of each club’s business models which means that finances should be distributed fairly amongst each club.
The 2020 Six Nations, due to be completed in October and November this year, is planned to be played behind closed doors. However, should this be postponed to 2021, the loss of income could amount to £107m. Bill Sweeney, chief executive of the Rugby Football Union, states that should this occur, this would be catastrophic and they would require more government bailout.
Cricket
In a similar vein to football and rugby, cricket is looking to resume on 1 July at the earliest date where there is a plan for games to be played behind closed doors. Again, with no spectators, there will be no income. However, should cricket not be played at all this summer, the sport could be losing up to a staggering £380m as a worst-case scenario according to Tom Harrison, the chief executive of the England & Wales Cricket Board (ECB).
It is said that this is a more serious problem when we look at cricket at the grass-roots level which is estimated at a potential loss of £32m. In addition, The Hundred, a new competition that was set to launch on 17 July promised more income and spectator participation. As this date is fast approaching, it may not commence as a result of the virus. As for women's cricket, this is more uncertain as there is a possibility it will be sacrificed in order to save men's cricket which is seen as more lucrative. Clare Connor, ECB’s managing director of women’s cricket said that it would be devastating if there was no international women's cricket taking place this summer but if playing less women's cricket will help safeguard the sport's long-term future then it is "probably a hit we might have to take” and that there is a "financial necessity" that rests on the international men's matches.
In order to help with finances, we have been told that centrally contract men’s and women's players have volunteered to take a three month pay cut. Pay cuts were also taken from existing working staff and furloughed staff who work for ECB.
How can the CGIB help sports?
In instances like this, the CGIB should be able to assist both professional and semi-professional sports, particularly lower league clubs that have been hit financially hard by Covid-19. When it comes to having a proper discussion regarding revenue, all clubs could certainly benefit from both a 20-business day moratorium and restructuring plan which will give them time to rethink and re-evaluate. Club managers and owners should also bear in mind any time restrictions that the bill presents. Some of the measures set out in the CGIB are temporary and will only be available until the end of June 2020. This includes winding up petitions and wrongful trading. If clubs intend to rely on these measures, the time to act is now rather than later.
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For more information on the Corporate Insolvency and Governance Bill and the latest on sporting matters in the UK, please visit the following websites:
Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base. frontrowlegal.com
Take a read here on how Partner of Front Row Legal, Robina Hussein discusses how a career in law seemed like the right fit and how she got to where she is today.
Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base. frontrowlegal.com
In the line of employment, confidentiality plays a major role for many companies. Within a number of employment contracts, you will most likely come across confidentiality clauses which ensure that employees keep certain company information private. However, in other types of agreements, confidentiality can be a bit of a grey area. One example is confidentiality in a COT3 agreement.
A COT3 is an agreement which helps settle existing or potential claims at the Employment Tribunal. Within a COT3, an ACAS conciliation officer helps both an employer and employee agree and record terms of a settlement. It is considered a legally binding document.
In some COT3 cases, a breach in confidentiality can sometimes make an employer believe they are entitled to stop making payments to their employee. Though this may seem like a way out for an employer, this approach is not favourable. Duchy Farm Kennels v Steels is a case that explores this idea further.
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Case
Mr Steels, a former employee of Duchy Farm Kennels (DFK), was under a COT3 agreement. Within the agreement, DFK agreed to pay Mr Steels a sum of £15,500 in 47 weekly instalments. There was also a confidentiality clause where Mr Steels was bound to keep the terms of the agreement confidential and not disclose this to a third party.
When it was discovered that Mr Steels had breached his confidentiality clause, DFK subsequently put a stop to any remaining payments. Mr Steels sued DFK for this and took the case to the County Court on the basis that any outstanding sums were no longer recoverable under contract law. The court held that DFK was not in a position to stop payments, regardless if the confidentiality clause was breached. The reason was because the breach was of an ‘intermediate’ or ‘innominate’ term of agreement rather than a ‘condition’ of the contract.
DFK appealed to the High Court. They brought up two routes:
Looking closely at the COT3, the High Court upheld the decision of the County Court, concluding that the confidentiality clause was an ‘intermediate’ term rather than a ‘condition’. They also held that Mr Steel’s disclosure of information to the third party was a not so serious breach as it did not result in any commercial issues for DFK. Overall, this type of breach would not have given DFK the right to stop payments.
The appeal was dismissed.
What does this case teach us and how can we apply this to the world of sports?
This case teaches us the careful need to draft confidentiality clauses, especially where confidentiality is seen as very beneficial to the employer. It also shows us what consequences could arise if it is drafted generically and not expressed as a ‘condition’.
As Front Row Legal specialises in all areas of sports law, this case can also be applied in a sports and business context. For example, sports coaches spend a lot of time building a working relationship with players and this means an exchange of confidential information, whether it’s personal information about a player or the club they play for. Both parties will need to establish what information is deemed ‘confidential’. Any sports employers and employees currently under a COT3 agreement or looking to enter into this type of agreement can learn from the case of Mr Steels and DFK, particularly in terms of confidentiality clauses and how they are drafted.
For more information on COT3 agreements and Duchy Fam Kennels v Steels, please visit the following websites:
- https://www.bailii.org/ew/cases/EWHC/QB/2020/1208.html
Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base. frontrowlegal.com
For many companies and organisations around the world, Covid-19 has compelled them to reshape, rebrand or restructure. Directors are starting to look at new avenues to take to ensure that their business stays afloat. Unfortunately, as some companies are feeling the sting of insolvency or closing down as a result of the virus, some directors may use this time to exploit opportunities for themselves. Whilst this could help them reap the short-term benefits, in certain circumstances, they may be in breach of their fiduciary duties if they are not careful with their next steps.
These issues were determined in Keystone Healthcare Ltd and another v Parr and others [2018] EWHC 1509 (Ch) in which Front Row Legal acted for Keystone. It was ruled that Mr Parr had breached his duty, as a fiduciary, to report his own wrongdoing to Keystone concerning payroll and invoice frauds against the company. This resulted in Keystone suffering loss. It was further ruled that Medipro, the third defendant company, in undertaking a competing business was liable for dishonestly assisting Mr Parr in relation to his breaches of fiduciary duty.
Within this blog, we will also be taking a closer look at the more recent case of Davies v Ford & Another [2020].
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Case Background
Mr Davies was the owner of Greenbox Recycling Limited (GBR). Mr Ford and Mr Monks were the company's directors. Both Ford and Monks had come together to create a similar recycling company named Greenbox Recycling (Kent) Limited (GBRK). GBRK conducted business in Ashford where GBR had previously operated. The original GBR was eventually struck off and dissolved later that year. GBRK continued in operation and grew into a success.
Mr Davies took Mr Ford and Mr Monks to court and argued that they breached their fiduciary duties as directors, specifically under s175 Companies Act 2006 which states:
"A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company”
Mr Davies had stated that Ford and Monks had pursued their own interests ahead of the company's, putting themselves in a position of "irreconcilable conflict". Monks had then argued that no conflict of interest or breach had taken place as GBR was close to insolvency and that his and Ford’s actions were to save the company.
Decision
It was held that Monks had in fact breached s175 Companies Act 2006 and that he was undoubtedly placed in a position of conflict. Monks had taken steps to benefit GBRK including acquiring a lease of the Ashford site and conducting business there. Two important points to mention is that a) it was immaterial that GBR would not have been able to exploit any business opportunities and b) it was irrelevant why GBR was unable to take up future business opportunities because of any alleged insolvency issues.
Whilst similar cases have been seen by the courts, it does reinforce how the seriousness of a director's duties. In addition, a director exploiting a business opportunity for the benefit of themselves will not be a valid defence should their particular case go to litigation.
What can this teach us about the relationship between business and sports during Covid-19?
As Front Row Legal specialises in all aspect of sports law, the same principle applies to its stakeholders, whether you are a sports agent, sports club director or stadium owner. In fact, it could be even more tempting as a director to take exploit a business opportunity as there is still uncertainty looming in the realm of sports, particularly that of the Premier League and other major sporting events to take place later this year.
It is worth noting that a breach in fiduciary duty does not just regard section 175 but can regard any of the fiduciary duties that fall under Companies Act 2006:
Whether you are a director yourself or are planning to make a decision with fellow directors, big or small, it will be necessary to think about your actions and how it could be interpreted as a breach of fiduciary duty.
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For more information on the cases of Keystone and Davies and a list of duties under Companies Act 2006, please visit the following websites:
Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base. frontrowlegal.com
In the first of our series ‘Covid-19 Legal Surgery’ we focus on wedding cancellations.
It’s becoming more and more the norm to see stories like these hitting the headlines, brides and grooms across the country in battles with wedding venues charging thousands of pounds in cancellation and postponement fees for weddings that can’t go ahead due to Covid-19 lockdown. Is that even legal?
Our senior partner, Richard Cramer, gives an insight into his first hand experience of dealing with such matters when he was faced with the cancellation of his eldest daughter’s wedding which was due to take place on 29 March 2020.
“What I was able to do through legal knowledge and skill was achieve an overall satisfactory outcome resulting in all contracts being rolled over to a postponed wedding later in the year.”
It goes without saying that wedding contracts and wedding insurance policies need to be carefully analysed. One wrong move could leave you in a much worse position with little recourse.
It’s important to remember that it’s not just venue contracts but also associated suppliers whether it’s caterers, photographers, band, florists, make-up artist and hairdressers, hotel bookings and of course travel arrangements for guests and the like. Each contract will need careful examination on the terms that it was entered into.
Litigation is always the last resort, we actively encourage ADR to bring about a satisfactory resolution, more so in these testing times.
We are happy to provide an initial advice on a fixed fee of £85 plus VAT to cover one hours’ worth of work dealing purely with the contractual issues. Simply call Richard on 07850 943 892 or email richard@frontrowlegal.com.
In line with our commitment to you, dependent on the advice, we again would be looking towards a fixed fee arrangement in order to raise issues with the wedding suppliers/wedding insurer.
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Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base. frontrowlegal.com
https://researchbriefings.files.parliament.uk/documents/CBP-8880/CBP-8880.pdf
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Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base. frontrowlegal.com
Click here to read the guest blog by Nicole Kitching on how Covid-19 is affecting the Premier League.
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Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base. frontrowlegal.com
Since 1983, I have spent most of my legal career involved in Litigation / Dispute Resolution. Without any doubt the landscape has changed considerably but yesterday’s disastrous decision for the Government gave me food for thought:
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Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base. frontrowlegal.com
