Recruitment Agency Fee Disputes: Recovering Third Party Introduction Fees

In this case, Sherrards were engaged to act on behalf of a recruitment agency that specialised in supplying finance professionals into various types of finance companies. The recruiter was engaged by a global private equity investment firm (“Company A”) to source a finance operations professional for them. The recruiter fulfilled the brief and sent several CVs to Company A, some of which resulted in interviews.

As sometimes happens, the recruiter did not hear further and received no indication from Company A as to whether any of the candidates had been successful. After following up with each of the candidates, it transpired in conversation with one of them that they had been hired into another company that appeared to be related to Company A. After some further investigation, it further transpired that the candidate had been hired into another company within Company A’s corporate group (“Company B”). Upon discovering this, the recruiter sought to recover its introduction fee from Company A. However, Company A maintained, for various reasons, that there had been no introduction within the meaning of the recruiter’s terms of business and that it was not liable for a fee (separately Company B was also asserting that there was no contract in place between it and the recruiter).

Following Sherrards’ instruction, we reviewed the terms of business and the chain of events, and it was unequivocal that there was a contract in place between Company A and the recruiter. However, what required further analysis was whether Company A was still liable for the introduction fee in circumstances where it had effected a Third Party Introduction?

In the event, fortunately the recruiter’s terms of business had appropriate wording to cover off this situation and we were able to confidently assert that Company A would be liable for the fee in full where they have effectively made an onward introduction and the prospective candidate had subsequently been hired.

Furthermore, in this case, as Company B was a holding company of Company A, this meant it was part of its corporate group structure. This provided a second line of attack to recover the fee, as Company B was defined as an “Associated Company” within the recruiter’s terms, meaning it was as if the introduction had been made directly to Company A. The recruiter was able to recover its fee in full, swiftly, and avoided court proceedings.

Action Point

The case serves as a useful for reminder to all recruiters that terms of business are organic documents that should be regularly reviewed and refreshed to ensure that they offer as much protection as possible, particularly in circumstances where a backdoor hire has taken place. Poorly drafted terms of business could be the difference between recovering a fee or not.

If you would like to know more, please contact Aaron Heslop for a no obligation discussion.

New Year, New Job? Don’t forget the restrictive covenants!

Moving job should be a straightforward matter, but more often than not employees either don’t have a copy of their most recent employment contract or, if they do have copy, don’t look at it for myriad reasons.

When an employee leaves, a good employer will typically arrange an exit interview with a leaver. This is an opportunity for the employer to run through a checklist of items that a leaver needs to deal with before they depart e.g. returning company property, handover of work. Employers should also use that meeting as an opportunity to remind a departing employee of their ongoing obligation of confidentiality and any restrictive covenants they are subject to. Collectively these obligations are commonly referred to as post-termination obligations.

However, so often when we are instructed, we discover that this has not happened, meaning that employee may be about to blithely embark on a new role with a direct competitor, may be setting up themselves in competition, may be contacting clients and contacts that are protected or contemplating poaching former colleagues. However, even if an exit interview does take place, an employee may have their own plans regardless.

Post-termination restrictions to watch out for

A well drafted employment contract will typically contain the following suite of post-termination restrictions:

  • Non-compete – these clauses are inserted to prevent the employee from working for a direct competitor of their employer. A well drafted clause will normally home in what is meant by a direct competitor. These clauses may even go further and say that an employee cannot set up on their own and work in competition. (Check out the government website for more details) 
  • Non-solicitation – a clause of this type will be included in the employment contract where the employer wishes to protect against its clients and contacts from being enticed away to work with the employee somewhere else.
  • Non-poaching – this clause is designed to deter the employee from encouraging their former colleagues to leave their employment.
  • Non-dealing – this restriction is sometimes inserted to widen the effect of the above covenants, so that a departing employee is prevented from soliciting or poaching, but also that they cannot even deal with / have contact with the people defined in those clauses.
  • Confidentiality – this is an ongoing restriction that carries on in perpetuity. If well drafted, the clause will contain a concise list of information that is considered to be confidential and should not be utilised in any way by the employee.

Action points for employers and employees

If you’re an employer, ensure you have an exit interview/meeting with a departing employee. Make it clear to them what restrictions are going to apply to them after they leave and confirm it in writing to the employee.

Review your existing employment contracts and check that they contain appropriate and properly drafted post-termination obligations.

If you’re an employee, familiarise yourself with the terms of your contract and understand what you can and cannot do after leaving employment. If you are unsure, you could either take pre-emptive legal advice or seek clarification from your employer. Ensure that any clarification is in writing, so you can rely on it later if needs be.

If you’re an employer and you’ve discovered that an employee has left and is now acting in breach of their contract or you’re an employee that’s now being pursued by your former employer, please contact Aaron Heslop for a no obligation discussion.

Furthermore, if you’re looking to review your existing employment contracts, we would recommend a discussion with our Employment Team.

Sherrards at the Paris International Bar Association: Report

Paul, as well as being the head of the firm’s litigation and dispute resolution department, is the co-vice chair of the IBA’s Law Firm Management Committee, which is one of the IBA’s leading sections made up of managing partners, senior partners and leading lights, as well as allied professionals from across the global legal profession.

Paul spoke at an LFMC session at the Paris IBA Conference on how law firms can convey their messaging publicly, on behalf of themselves and their clients, through social media, which included a stellar panel of Deborah Farone, a leading marketing strategy consultant, Olga Mach of LexisNexis, Helen Burness of Saltmarsh Marketing, and Sneha Ashtikar Roy of Jus Mundi.

Sophie, Sherrards’ Head of Marketing & Business Development, attended the first ever High-Tide conference, the IBA’s Marketing and Business development conference, which saw over 80 marketing professionals from across the world come together to discuss and debate a variety of legal marketing topics. Sophie took part in the fishbowl session, discussing how artificial intelligence can help as a tool in law firms’ messaging but that it needs to be managed if used by junior members of the team. 

The IBA is a leading voice in the global legal profession, as a networking organisation for lawyers, but it is also an important and very significant platform for extolling and promoting the rule of law, which has never been more relevant than it is today.

Sherrards are very much involved in and supportive of the IBA, which means that our clients, friends and contacts have access to professionals from across the world, frankly just about anywhere, whether it be through the IBA or our membership of the Alliott Global Alliance

For more information about our involvement in the IBA, or how we can help you through our international connectivity, please reach out to Paul Marmor on pdm@sherrards.com or +44 (0) 20 7478 9010 or Sophie Hudson on sophie.hudson@sherrards.com or +44 (0) 1727 832 830.

Break Clauses: Balancing Business Aspirations and Tenant Rights

Erin, a trainee solicitor in our Dispute Resolution team, explores the recent judgment in BMW (UK) Ltd v K Group Holdings Ltd highlighting the balancing act required in respect of a landlord’s business aspirations and a commercial tenant’s rights when negotiating break clauses in a lease.

Introduction

The realm of commercial leases is a complex landscape governed by legal provisions aimed at balancing the interests of both landlords and tenants.

One such provision that plays a pivotal role in commercial lease agreements is the break clause.

Break clauses in a commercial lease are provisions that allow either the tenant or the landlord to terminate the lease before its designated end date. These clauses offer flexibility within the lease agreement, allowing parties to adapt to changing circumstances or business needs.

However, a recent decision in the County Court highlighted the difficulties that landlords can face when seeking a break clause for their business needs in a renewal lease protected by Part II of the Landlord and Tenant Act 1954 (the Act).

BMW (UK) Ltd v K Group Holdings Ltd

The case concerned a car showroom in Mayfair, demised under four separate leases from the landlord, K Group Holdings Limited, to the tenant, BMW (UK) Limited.

These leases were subject to renewal proceedings under the Act and therefore, were to be granted on essentially the same terms as the previous leases.

The previous leases did not, however, contain a landlord break option. Accordingly, the onus was on the landlord to demonstrate the proposed terms were fair and reasonable and should be granted. 

If a break clause was to be included, the landlord accepted that it would have to prove a ground of opposition under s30(1) of the Act in order to exercise the break option.

HHJ Monty KC, in considering whether to grant a break clause, made it clear that the court must try and strike a balance “between granting a reasonable degree of security to the tenant on the one hand, and not preventing the landlord from recovering possession if one of the statutory grounds can be proved on the other”.

Section 30(1)(g) – Landlord’s intention to occupy the premises for the purpose of a business to be carried on by the landlord

The relevant ground in this case was ground (g), namely that on termination of the tenancy, the landlord intends to occupy the property for the purposes of a business to be carried on by the landlord.

The renewal leases themselves were unopposed and so it was for the landlord to prove that they would be able to establish ground (g) at some point in the future when exercising the break option. That is, the landlord needed to show a bona fide intention to operate the break clause if one was granted.

When giving evidence, the landlord agreed that a car business would be an entirely new business for K Group Holdings Ltd. It was further contended by the landlord’s witness that members of his family who controlled entities within the same group as the landlord were only a “little bit inclined to have a study and see the possibilities” of the electric car market. 

In this case, the landlord’s inadequate evidence and the effect the break clause would have on the tenant meant that the court found in favour of the tenant in refusing the inclusion of the landlord’s proposed break clause.

Practical considerations

This decision highlights the raising of the bar in respect of the landlord’s intention to exercise a break option, particularly where the landlord may have aspirations to start a new business venture or expand an existing one.

A landlord should ensure they can evidence a real intention that the operation of the break clause is more than a vague possibility. Therefore, evidence of any steps taken to progress the possibility of occupation for the purpose of a business would be worth documenting.

Although a complete and comprehensive business plan may not be required, the landlord should seek to substantiate any request for a break clause with supporting evidence detailing any “genuine and workable” intention to occupy the premises.

Sherrards’ Real Estate Litigation team

This article has been fact-checked and authorised by the Head of the Real Estate Litigation team, and Training Partner Michael Lewis. If you have any questions or thoughts, please reach out to him by clicking here.

Our Real Estate Litigation team can support you with an entrepreneurial, commercial and considered approach to break options to help you achieve your goals. Our specialist team can advise you on your options, including, where appropriate asking the court to determine the matter.

For advice and assistance, contact the Real Estate Litigation team at Sherrards.

Arbitration Case Report

The client/Defendant to the claim is a Central European company specialising in the production of aluminium profiles. 

A dispute arose between the parties arising out of the contract for the supply of aluminium billets, in respect of which the Claimant sought payment which the client was resisting, on the basis that the contract mechanism for determining price had not been followed and that the billets delivered were not of satisfactory quality, which caused it loss.

Karen Dobson, Partner at Sherrards, managed to negotiate an early settlement of the dispute, following the commencement of arbitration proceedings.

The settlement was very favourable to the client and resulted in it avoiding significant legal costs which would have been incurred in a fully-contested arbitration.

Plans to liberalise India’s Legal Services Market meets with mixed reactions

This has been an ongoing debate in this area for many years, and one that the firm is familiar with, having interacted with Indian law firms and business interests passing back and forth between the UK and India for some time. 

Paul Marmor, our Head of International Services and the Litigation & Dispute Resolution Department, was asked for his views on the changes to India’s legal service, which are set out in this article published by the International Bar Association, which sets the scene with input from a number of commentators including Paul, as to what may happen over the next few years: click here to read the article. 

For more information on our work relating to Indian concerns, please reach out to Paul and the International team on the details below.

Sherrards participates in global crypto conference

As technology continues to rapidly advance, the law must play catch up. Greg and Max participated in this panel discussion to offer their perspective on how digital assets such as cryptocurrencies have been received within the legal and regulatory framework of the English jurisdiction.

Greg Pooler, a Legal Director within Sherrards’ commercial disputes team, advises clients in relation to disputes involving digital assets as part of his commercial fraud and asset recovery practice.  Greg provided a comprehensive overview of the legal position under English law as to the treatment and classification of digital assets.

Greg observed that: “Like many of the other jurisdictions represented on the panel, there is currently no coherent legal architecture specific to digital assets in the English jurisdiction.”  Unless digital assets exhibited the characteristics of financial products that fell within the perimeter of pre-existing financial services regulation (and in practice few digital assets do so), the sector was largely unregulated and investors in digital assets were afforded very limited protection.  Notwithstanding these deficiencies from the legislative perspective, the common law has made significant strides in accommodating digital assets within the conceptual framework of English property law, albeit the decisions to date struggle to reconcile the characteristics of certain digital assets with the traditional categories of property that the law currently recognises.

Max Marmor, a member of the Commercial Property team where we see a cross over in this area in terms of real estate investment, reflected on several key cases that have been decided by the English High Court in recent years.  These cases have grappled with questions concerning the classification and treatment of digital assets and the legal remedies that are available to litigants seeking to assert their rights over, or entitlement to, such assets. According to Max: “The English High Court has shown itself to be pragmatic and responsive to the evolving crypto industry. Recent decisions suggest England can be the appropriate jurisdiction for claims that often lack centralisation.”

One case Max was keen to highlight to the conference audience in Mauritius and those tuning in online was the seminal decision of the High Court in AA v Persons Unknown [1] in which the Court for the first time recognised that Bitcoin should be classified as property,  entitling the applicant in that case to freezing injunction relief. Greg emphasised the significance of this decision and referred the panel to a recent 500-page Law Commission report on virtual assets containing the radical suggestion that English law should recognise a third category of property called “digital objects”. This would capture the nuanced and idiosyncratic nature of certain types of digital assets that the current property law framework is ill-equipped to deal with.

Benita Elisa, founder of Wakanda 4.0,  which organised the Cryptoverse Summit and who moderated the event added: “Hearing from this international panel really helped set the scene for our event we believe that Metaverse platforms have the potential to transform how, when and where companies interact with their customers, as extended reality platforms enable businesses to deliver new experiences and provide information in new ways.

Greg and Max were joined on the panel by other members of the Alliott Global Alliance (alliottglobal.com) led by Ashveen Gopee from Lex Frontier,  Mauritius; Diego Nunes from Estudio Nunes & Associados, Argentina; Audra White from Platt Cheema Richmond, USA;  Anthony Marrin from H.Y.Leung, Hong Kong;  Kenneth Muhangi from KTA Advocates, Uganda  and Songul Top from STA Legal, France. Each offered unique insights and expertise on their countries’ varying approaches to the crypto industry. 

The recording of the Cryptoverse Summit and the Alliott Global Alliance panel with Sherrards can be found here: https://www.youtube.com/watch?v=YdKXP0FvhC0&t=11877s&ab_channel=WakandaNews

Greg speaks 2:52.10 and Max is at 3:14.30.

[1] AA v Persons Unknown who demanded Bitcoin on 10th and 11th October 2019 and others [2019] EWHC 3556 (Comm)

 

 

 

The case of the stolen multi-million-pound yacht

The deceased was accused of professional negligence and being part of a conspiracy to defraud in relation to the sale and purchase of a multi-million-pound yacht.

The Sherrards Dispute Resolution and Fraud department successfully challenged the claim, which was rightfully dismissed.

There was no suggestion of any wrongdoing on the part of the deceased, whose reputation was and remains protected.

The team defended this multi-million-pound fraud matter.

To find out more, please contact Paul Marmor.