We are pleased to have successfully represented one of the appellants in the Court of Appeal case of LA Micro Group (UK) Ltd & Anor v LA Micro Group, Inc & Ors [2021] EWCA Civ 1429 as part of what the Court described as “a history of hard-fought litigation”.

This case highlights the importance of clarity and formal legal documentation when considering or undertaking a commercial venture, whoever this is with.

The proceedings concerned a dispute over the beneficial ownership of shares in a UK company.

The matter had been addressed previously in both the UK and US. There were no less than three High Court judgments involving the parties, going back as far as 2015, which the Court of Appeal took into account in its judgment. Evidence given in these prior proceedings had been contradictory, not just as between the parties, but also with witnesses giving inconsistent versions of events.

Our client was one of the appellants in the appellate proceedings, arguing various grounds of appeal. These included:

1. Estoppel by conduct (in light of the Respondents’ change of position from their stance previously adopted). This ground of appeal was unsuccessful, given that the appeal judges did not find this point had been directly in issue in the earlier proceedings and were not able to say with confidence the extent to which the previous judge relied upon that individual’s evidence or credibility on this point; and
2. That the original ground upon which the trial judge had initially found for the Respondents was not sustainable, given the knowledge of the parties and belief at the time as to the ownership of the shares. Although the Court of Appeal agreed that the judgment could not stand on the original ground, it reached this conclusion via a slightly different route, namely querying whether the relevant party was able to disclaim an interest it had accepted many years previously.

The Respondents argued that:

1. The Appellant ought to have contended its position in respect of the beneficial interest in the company in previous proceedings and that this was an attempt to attack one of the previous judgments. The Court of Appeal was not persuaded by the merits-based test of this argument or that trial judges in earlier proceedings had given a final decision which the appellants were now seeking to challenge.
2. The parties had, in 2010, created a specifically enforceable agreement resulting in a trust. Alternatively, the parties’ change of position in 2010 had the effect of bringing the previously agreement contractual arrangement between the individuals to an end. The Court of Appeal held these issues must be referred back to the trial judge for determination.
3. Due to the time that had elapsed, the facts of the case made it unconscionable for the Appellant to assert a beneficial interest in the company (although it was acknowledged that Schofield Sweeney’s client had previously made efforts to do so).
4. That the Appellant had represented the surrender of the beneficial interest in the company in 2010, on which the other parties had relied and which would result in a detriment if the Appellant was then allowed to go back on this representation. The Court of Appeal found that this was a matter to refer back to the trial judge.

The appeal was therefore allowed, and parts of the trial judge’s order were set aside. Other parts were remitted back to the trial judge. A link to the judgment is available at https://www.bailii.org/ew/cases/EWCA/Civ/2021/1429.html

This case highlights how contentious business arrangements can become.

The individuals had originally been business partners and friends, conducting their business very informally. The business commenced in 2001 and then expanded in 2004 before two of the business partners fell out in early 2010. Sadly, when the usual formalities have not been observed, and these types of relationships break down, the Court is left to determine which individual’s versions of events is the most compelling, often sometime later when hindsight or other considerations may colour recollections.

Therefore, it is essential when considering or undertaking a commercial venture – whoever this is with – to ensure that there is certainty and clarity between the parties from the outset and a contemporaneous record of key decisions.

Seeking legal advice early on will protect you and your business.
Get in touch today to find out how we can assist.

Email enquiries@schofieldsweeney.co.uk or call us on 0300 124 0406