MD Law has succeeded in a legal battle in the High Court which reinforces the importance of setting up a business correctly with accurate written legal documentation about ownership and shares, rather than undocumented oral agreements.
After a two-week trial, involving eight witnesses and two accounting experts, Charles Morrison, sitting as a Deputy Judge in the High Court, ruled in favour of the Defendants in Sukwinder Singh v Makhan Bains and G B Retail Ltd (GBRL), rejecting Mr Singh’s claim to a 50% share in GBRL.
Barrister Tom Beasley successfully represented Mr Bains and GBRL in the case, instructed by experienced commercial litigator Keith Hague of MD Law, after Mr Singh claimed he was entitled to half the shares in GBRL, rather than just a profit share of a business partnership, through a previous verbal agreement.
The Court heard that after having met socially becoming friends and deciding to go into business together, after a successful period of trading the atmosphere changed and the business partnership and friendship ceased.
Mr Singh argued that when he agreed to go into business with Mr Bains it was on a “50/50” basis; everything was to be equal; the assets they owned and the profits they earned, would be shared equally. This extended to the shareholding in the companies that were incorporated as platforms for their various cash and carry, convenience stores, off-licence and fish and chip shop businesses.
He argued as far he was concerned there had been an express agreement that his endeavours would be rewarded with a shareholding in the company established as GBRL.
Mr Bains recalled a conversation in 2014 in which he had agreed to go into business together with Mr Singh who could run a predecessor to GBRL together, but only on the basis that Singh would take a 50% share of the net profits as an employee.
He said it was never agreed Singh would be allotted, or would ever become entitled to, any shares or ownership interest in the businesses or the associated companies, and it was certainly the case that Singh was not to be given an equity interest in GBRL.
Keith, who has more than 20 years’ legal expertise in litigation including shareholder/director disputes, partnerships disputes and professional negligence claims, said: “This claim highlights the importance of recording business agreements in writing.
“Whilst oral agreements are enforceable, new business partners should set clear terms from the outset and, in the majority of situations, it is sensible to involve professional advisors in the drafting of such agreements.”
The judgment included a useful review of a number of areas of the law involving: the circumstances in which the existence of an oral contract can be assessed by reference to evidence that post-dates its formation; the basis upon which without prejudice privilege can be asserted over potentially relevant evidence and how it might be waived during litigation; and when a case might be rejected because a party has failed to discharge the burden of proof, rather than because the court prefers another party’s version of events.
The Broomhall-based boutique firm MD Law, which was set up 10 years ago by Matthew Dixon and now employs 20 staff, acts for businesses and individuals on corporate law, business recovery, insolvency, litigation, commercial property, healthcare and employment law matters.
For further information on MD Law services call 0114 299 4890 or email info@mdlaw.co.uk
