Sherrards Recruitment team help client with breach of restrictive covenant battle
The team issued High Court proceedings with an injunction hearing which was successful.
We were able to secure default judgment avoiding significant expenditure for ongoing legal proceedings for our client which they would have stood little to no prospects of recovering from the former employee.
Sherrards support New York law firm with a Commercial High Court Claim
The Court found that materials produced in the course of discovery (following an order in the States), could be used in an arbitration being held in London against Dreymoor Fertilisers Overseas PTE Ltd. Discovery had been obtained in order to assist the claimants in pursuing proceedings in multiple jurisdictions.
The judgment paved the way to allow the discovery to be put into evidence.
Click here for the full Judgment.
Sherrards advise European logistics company with an international boardroom dispute
One of the founders and principal shareholders sought to declare unilateral independence and break away from the company. They were in breach of all covenants, restraint of trade and the shareholder agreement, to set up a rival organisation and attempt to take over a number of the company’s overseas offices, staff and clients.
This led to High Court proceedings supported by injunctive relief on a global scale. The team were successful and the case was settled in our clients favour and their client base was protected.
Sherrards help London based recruitment agency recover unpaid fees
The matter proceeded to a final hearing and after some 18 months of litigation a Judgment was given in our client’s favour, resulting in them recovering not only the recruitment fee but also statutory compensation and contractual interest.
The team also resolved an important ‘passing off’ issue for the same client following a competitor setting up a recruitment company with a very similar name. The competitor was forced to change its name, website and materials within a week of our involvement.
The client was referred to the Recruitment team by their Recruitment Directors Lunch Club (RDLC) networking group. The successful outcome of this matter has been widely publicised via the RDLC network, resulting in further instructions and recognition from the group.
Supporting an International hotel group
The Sherrards Dispute Resolution department led by Paul Marmor were retained by an international hotel group that was facing a very aggressive claim by a British clearing bank, which was looking to enforce its guarantees and security over the hotel group and its assets in the UK.
We were able to successfully resist the claim and, indeed, to assist the hotel group in procuring refinancing on much more favourable terms.
A storm in a ‘cake’ cup
How often have we wandered into a bakery asking them to make a celebration cake, personalised to suit the occasion. Would you ever consider that such a request could give rise to 7 years of litigation, culminating in a recent decision by the European Court of Human Rights?
No, me neither.
But this is precisely what happened when Gareth Lee visited Ashers Bakery, a family run bakery in Belfast, with a request that they make him a cake with a picture of Bert and Ernie from Sesame Street and the slogan ‘Support Gay Marriage’. The bakery refused to fulfil the order because they felt it contravened their Christian beliefs.
Mr Lee, a gay rights activist, argued that by refusing to fulfil his order, the bakery had discriminated against him on grounds of his sexual orientation. Mr Lee, backed by the Equality Commission in Northern Ireland issued a claim for discrimination. He also argued that the refusal infringed his political beliefs because at the time he made the cake order, Northern Ireland did not legally recognise same sex marriages.
Ashers, backed by the Christian Institute in Northern Ireland, fought the case on the basis they maintained that they had not refused to fulfil the order because Mr Lee was gay, but because the order requested was contrary to their religious beliefs.
What followed was a series of hearings and appeals. At the initial hearing, the Court found in favour of Mr Lee and held that he had been discriminated against on the basis of his sexual orientation and his political beliefs. The Judge acknowledged that Ashers had “genuine and deeply held” religious views, but said their business was not above the law. The compensation to be paid to Mr Lee was £500.
Ashers appealed to the Court of Appeal but were unsuccessful.
They went one step further and appealed to the Supreme Court, the highest Court in the UK, in 2018. On this occasion, the Court ruled in favour of the bakery, effectively confirming that the owners of the bakery had to retain their rights to freedom of expression and religion.
Mr Lee then took his case to the European Court of Human Rights, but they ruled his case inadmissible, suggesting that not all avenues have been exhausted in the UK. It remains to be seen if Mr Lee will pursue this further.
It is a case that has divided opinion. You can see the respective positions, as Mr Lee understandably felt his rights and beliefs have been infringed, but likewise, the bakery felt that their rights and beliefs would equally have been infringed had they fulfilled the order. In such a case, how do you decide whose rights and beliefs should be given preference over the other? Does one of set of rights and beliefs have greater value over the other? Possibly, a material factor in this dispute may have been the fact that the bakery always argued that they were not refusing to serve Mr Lee because of his sexual orientation; rather it was just a refusal to fulfil that specific order.
And, in case you were wondering, another bakery agreed to make the exact cake that Ashers refused to make, so despite the outcome of the latest instalment of the litigation, it could be said that Mr Lee was still able to have his cake and was able to eat it!
Landlords or Retailers? Nobody’s a winner. Mike Lewis in ‘The Retailer’.
It’s no surprise the COVID-19 pandemic has had a significant impact on retailers and the sector as a whole. As many retailers were forced to close during both lockdowns, they have been unable to keep up with their rental payments, and as customers continue to self-isolate and stay at home footfall has been significantly lower.
On the flip side, landlords have struggled too with some not receiving payments from tenants, and the loss of protection following the implementation of the Coronavirus Act 2020 (the CA 2020) means they are unable to rely on contractual rights to forfeit commercial leases by peaceable entry, or by issuing court proceedings.
Click here for the full article in The Retailer (page 42) for an overview of the changes applied to the law due to Covid-19.
Back-dooring: An overview for recruiters
Back-dooring: As the pandemic continues to suffocate the economy, recruiters are facing an even tougher time when it comes to collecting payment of fees. Clients are exploiting any and every possible way to avoid having to part with money and the classic “back door” scenario is something that seems to be cropping up more than ever.
In simple terms, back-dooring is where a client takes on a candidate without accounting to the recruiter for its fee. It is more often than not accompanied by associated arguments that the candidate came to the client via another channel, independent of the recruiter. This tends to arise in permanent recruitment, but it does also arise in relation to contractors and candidates being taken on by third parties. For the purposes of this note we shall assume we are dealing with permanent recruitment but often the same principles apply to all forms of ‘back-dooring’.
Understandably, recruiters take huge exception to this practice. Often rightly so. Usually (although it’s fair to say not always – more on this later) the recruiter has committed significant time, effort and resources to finding the right candidate so why should the client reap the benefits of those efforts without having to pay? We have noticed a sharp rise in back-dooring cases in recent weeks, and it is clear that in many cases this is just an argument being deployed in the hope of negotiating a lower fee, but there are some cases that are more involved and which can lead to drawn-out, often costly, arguments and even litigation.
So what’s the deal?
It’s actually quite simple. There’s no “law of back-dooring”. It is a question of what you are contractually entitled to, whether that entitlement has arisen and, critically in the vast majority of cases, whether you were the “effective cause” of the candidate getting the job. Usually, it is the application of the effective cause doctrine that is the focus of disputes and where claims fall down (we return to this below).
Each case must be analysed on its own facts. That is a vitally important point. In other words, seldom are two cases the same and every time a backdoor situation arises it’s a question of carefully investigating the full circumstances to establish whether there is a basis for a claim.
The starting point, without exception, is to look at what the terms of the contract say (it is assumed for the purposes of this article that a contract has come into existence – contract formation is a topic in its own right and a complicated one at that). Most recruiters’ terms and conditions are in standard form, covering the essential bases: they deal with an introduction leading to an engagement, with the fee liability arising on “Engagement”. Always check the definitions: Usually there’s little argument as to whether there’s been an “Introduction”, but key in our experience is how “Engagement” is defined: sometimes it means acceptance of an offer, sometimes it’s on the candidate and client signing a contract, sometimes it’s when the candidate actually commences work.
Next, have those events been triggered? This is where the paper trail becomes so critically important. You will need to be able to produce good evidence that you introduced the candidate to the client; that you did so with the candidate’s consent and, importantly, that it was you and your efforts that led to the candidate being taken on. In the vast majority of cases – in our experience – the paper trail is there in the form of emails, text messages, WhatsApps, CRM-entries, and so forth. A good recruiter will have solid evidence of the dealings with the candidate and the client from the get-go; through interviews, salary negotiation, starting dates. Everything. If you don’t have this, or if there are gaps, they could be fatal. If all the ingredients are there, you can get your claim moving (what that entails is a topic for another day).
What commonly comes back from the client in response to the claim is that someone else introduced the candidate; often another recruiter, but we have seen it a lot in recent weeks and months where it is claimed that the candidate was introduced following an internal referral. In practice, it is impossible to evaluate the strength of the recruiter’s claim until these arguments are bottomed-out. That means your lawyer pressing the client very firmly not only for full details – who the alleged third party or internal referrer is, when they came on the scene, and so forth – but, critically, for disclosure of all documentation underlying those claims.
This is your opportunity to corner the non-paying client. A well-targeted, well-drafted claim for disclosure can be make or break. It is the key to the back door, so to speak. It is designed to flush-out the claim that some third party was responsible for the candidate being taken on, not you. If it’s just a try-on, the client’s response to the disclosure request will be telling: after all, if they have the documentation to prove their case, you would expect them to jump to hand it over so as to get you off their back. If they don’t, they usually refuse to engage with you.
The way to apply pressure to get this documentation is for your lawyers to threaten an application to the Court and to tell the client that, if they do not cooperate, the lawyers will make sure the Judge is told about it if and when you get before the Court. For various reasons, this threat doesn’t always carry a lot of weight but it’s in reality the only tool at your disposal short of just issuing Court proceedings.
As and when the disclosure comes in, it needs to be analysed very carefully. Is there another agent involved? When were they instructed? When was the candidate engaged? Have you been given all of the relevant material? Might there be anything missing? Are there suspicious circumstances? Last year we had a case where the client got angry that our recruiter client wouldn’t reduce its fee; we then found out that, a mere few days later, another agent had been instructed and, it was claimed, introduced the same candidate to the client – it stank and using the above disclosure approach we flushed it out for what it was – a cook-up – and recovered the recruiter’s fee in full, as well as all legal costs.
Again, each case must be taken on its own facts and it is paramount to evaluate all of the circumstances. There is a world of difference between a candidate being engaged a month after an introduction, versus 11 months later: the latter lends itself to a much more tricky fee claim, even if the recruiter’s terms contain the common “12-month ownership clause” (which, by the way, does not guarantee you protection). Equally, what was the extent of the recruiter’s involvement in the introduction and engagement? A recruiter who has done no more than forward a CV can expect to face a higher degree of resistance, especially if it was then many months before the candidate was taken on and there is evidence that another agent subsequently came on the scene. Where is the candidate now? Have they moved on? Can you get a statement from them? Some careful lateral thinking can prove invaluable to getting to the bottom of what has taken place and therefore improving your position.
Effective cause then needs to be considered. This, in our experience, is what the vast majority of back door cases turn on. The legal position is, unfortunately, not entirely clear and there are few recruitment cases on it (most of the cases relate to estate agency). What we do know is that, in the vast majority of cases, in essence the law requires:
- That the agent is the effective cause of the candidate being engaged;
- That the agent need not however, be the immediate effective cause, provided that there is sufficient connection between his act and the ultimate engagement of the candidate.
What this means in practice is not so easy to pin down, which is why this area of the law is unsatisfactory and in need of clarification. Hence why we say ‘each case on its own facts’ and it is a question of carefully scrutinising all aspects of a case to work out whether effective cause can be shown. This area of the law cries out for clarification because it would enable lawyers to advise recruiters with more certainty.
It is, at the same time, not impossible for the client to be liable for two recruitment fees in respect of the placement of the candidate. We have seen that happen before so it should not be assumed that if another recruiter is on the scene only one of them will earn a fee. Both could be entitled to payment.
There’s also scope for negotiation throughout: splitting the fee with the intervening recruiter is one potential solution, galling though it tends to be but often a better way forward than the prospect of an expensive legal battle. It is fair to say that a lot of the time the purpose of engaging in hostile correspondence is to create enough doubt and concern in the client’s mind so as to make litigation risky for them and therefore to elicit a settlement offer. Back door cases very rarely see a courtroom (which probably explains the lack of reported cases) because most of the time they settle. What that settlement consists of depends on all manner of factors, probably the most critical of which is the strengths and weaknesses of the parties’ respective positions, which again is the reason why it is so fundamental to establish from the outset what those strengths and weaknesses are.
In times like these, cash flow is critical. There is an enhanced drive from recruiters to pursue fees. But it is very rare that back door claims are resolved in short order; by their very nature they tend to take a while and that inevitably means the cost of the process is correspondingly higher than might be the case in a more straightforward debt claim scenario. Nevertheless, in our experience persistence is key: you need to show no let up. What must be conveyed is that you will not go away and that cost is not going to deter you from pursuing what is owed to you. That said, the present climate also means that many simply do not have the resources to commit to drawn-out legal disputes so it may be a fight you need to defer to when life gets back to something more resembling normality. That is usually no problem: you typically have six years to pursue your claim so waiting a bit if necessary, is an option.
Back door claims are rarely straightforward and almost never get resolved overnight. They require careful focus and a commitment from the recruiter, along with the benefit of experienced legal advisors. Usually only those who persevere tend to achieve a result they are content with, and the results can be both rewarding and critical to a recruiter’s income. But think too about the reputational risks of not chasing fees when they’re properly due; can you afford to do nothing?
Contact Barney for more information.
No terms, no matter
It remains best practice that you should always incorporate your terms and conditions of business into your dealings with clients, even though it is no longer a mandatory requirement to do so since Regulation 17 of the Conduct Regulations was revoked with effect from 8th May 2016.
But sometimes it doesn’t happen. Sometimes clients ask you to help them to find a candidate and you provide that assistance, but it all happens quickly, often via exchanges of emails, and there’s never a conversation about fees and terms of business. Is all lost if the client then engages the candidate you introduced? No, it isn’t.
The answer lies in what is known as “quantum meruit”. That is a fancy latin phrase bandied around by lawyers. It means “the amount he deserves” or “as much as he has earned”. Jargon aside, it allows for you to be paid a reasonable sum of money for services rendered to your client in circumstances where you have not specifically agreed a fee. It assists you in the very circumstances described above.
We see this more and more in recruitment cases, perhaps because of the prevalence of email and the tendency for business dealings to lack formality at times.
The typical “defence” raised by the client in response to a fee claim is “we never agreed terms”, but that doesn’t get them particularly far. If you can show that the client expressly or impliedly requested or freely accepted your services, you have the makings of a quantum meruit argument and can pursue your fee irrespective of the absence of agreed terms. Otherwise the client reaps the benefit of your services without having to pay a penny piece for it and that is unjust.
How much are you entitled to? Well, the law of quantum meruit entitles you to a reasonable sum. More often than not, that is equal to the market rate that applies for the services in question: so, typically the rate you would ordinarily have agreed had you had the discussion at the outset of your dealings with the client.
Always try and expressly agree the terms and conditions and basis on which you are dealing with your clients, because that brings a significant measure of certainty. But if you do not, cannot or simply omit to, all is not lost and you still have a basis for pursuing your fee. Contact Barney for more information.
Cultures in International Legal Negotiation
One relatively undisputed fact of negotiation, any negotiation in fact, is that an understanding of those you are negotiating with and vice-versa, will certainly extend your chances of reaching desirable outcomes for both parties, or in turn, reaching outcomes at all. For international disputes, an understanding of the opposing parties’ culture is important.
What is culture?
Before delving into a variety of the cultures faced on an international scale, it is important to establish what a culture actually is. In layman’s terms, culture is a group of people that share a similar set of beliefs, traditions or perspectives. Whilst not ingrained into flexible modern societies, cultural traditions can be used as a tool for distinguishing different groups of people. Societies may be becoming increasingly multicultural, adding another layer of complexity to a broader notion of cultures in international legal negotiation. However, without stereotyping, different approaches and traditions can be found across various cultures, influencing the practice of negotiation. It is important not to understate the danger of stereotyping on the topic of negotiation. An appreciation for cultural traditions and norms is key, however, whilst cultural definitions tend to apply to a large proportion of societies and populations, there are typically individuals or groups that break from said cultural norms. Regarding international legal negotiation, a focus on the individuals must not be forgotten in replace of cultural understanding. Instead, the two compliment each other. An understanding of both will aid negotiators during international disputes.
Whilst certainly multicultural demographically, there are several key elements to British culture that can help international legal negotiation. The UK is known for its etiquette, formality and politeness. An appreciation of all three certainly assists in negotiation. However, there are perhaps some more niche aspects to British culture that really come to fruition during negotiation. One of these is directness. Unlike the United States, in the UK not everything said is meant as such. Understatement and irony are typical in the UK. It is easy to be fooled by British statement, as taking it for meaning one thing, when in fact it implies another. For example, saying something as simple as ‘that’s interesting’ could imply a lack of responsiveness to the point, or a genuine interest. It is often hard to tell. This is where a focus on the individual really strengthens the negotiation. Tone and gestures are key to this. Tone in the United Kingdom is often low or subtle, and a change in such can be telling in a negotiation.
The United States is quite different regarding international legal negotiation, but perhaps less complex. One key element intwined in US culture is the role of negotiators. Negotiators are typically given authority to make decisions on the spot. In contrast, in hierarchical cultures negotiators are less conclusive at the time of negotiating, as they act as information gatherers for their superiors.
One other aspect of US culture is accountability. Agreements must be specific so there is accountability, leaving each side to be held accountable for what they do or don’t do. In other countries, more emphasis is placed on trust, expecting the other side to adhere to agreements made.
Pragmatism in the US is also key. The willingness to avoid time and expense can somewhat dictate negotiation. Straightforward dialogues are preferred within American culture. In America, the phrase ‘time is money’ is commonplace. This applies to legal negotiation and conducting it honestly and openly.
In stark contrast to the US, Japanese culture is very different in how it influences legal negotiation. In Japan, individuals may not have the same authority to make decisions, and often act as information gatherers for their superiors. This means that negotiation may take more time.
Another aspect to Japanese culture, not dissimilar to British negotiation, is that of politeness. The Japanese are arguably more concerned with being polite than most nations. This affects legal negotiation, as one might struggle to hear the word ‘no’. This in turn leads to another similarity between British and Japanese culture: the meaning of words. In Japan, ‘yes’ might simply be an expression of understanding as to what someone says, as suppose to an agreement to the point made. This perhaps leads back to an appreciation for individuals, as well as culture, when partaking in international legal negotiation. With the Japanese, be prepared to negotiate with teams of people, as collectivisation remains a crucial element of Japanese culture.
China is another country in which an approval process often leads to lengthier negotiations. Agreements often take more time for a variety of reasons. Patience is therefore key. Often, the Chinese want time to trust the opposition, and also find consensus in agreement. Great emphasis is placed on building trust in Chinese negotiation, and it is not to be understated.
Furthermore, like Japan and unlike Western cultures, much emphasis is placed on collectiveness. China is a hierarchical culture, emphasising a utilitarian approach. Emphasis is placed on the collective over the individual. This leads to lengthier negotiation, as less authority is given to individuals.
One final aspect to Chinese culture, to be taken into account during legal negotiation, is an appreciation for tradition. Chinese culture is entrenched in tradition, and some research or understanding of these traditions helps to ease the cultural barriers faced.
Italy provides an insight into another deeply traditional culture. It is certainly one of the most traditional within the West. Whilst Italy could be considered complex, as the culture within differs from the north to the south, there are some values that reign prevalent throughout the country. Firstly, perception is important to negotiation with Italians. More notably than other nations, well-dressed, presentable individuals are better regarded in Italy. A formidable appearance often translates to reliability within Italian circles. Reliability is crucial to Italians. A culture entwined in familial tradition and relationships, trust is an important aspect to negotiating. Indeed, this can lengthen the negotiating process, as Italians require time to develop this familiarity. The Italian legal system is less flexible than its European counterparts, and the traditions Italians abide by are important to recognise during negotiation.
During international legal negotiation, Brazilians illustrate a different cultural perspective to those already mentioned. Often, negotiation with Brazilians might appear informal. Brazilian culture promotes personability and friendliness, and this extends to the negotiating table, creating non-hostile atmospheres.
However, other Brazilian values are also crucial to consider during negotiation. Ethics, honesty and trustworthiness are key components of Brazilian society. Brazilians also place great emphasis upon transparency and punctuality. Adopting these values certainly strengthens a legal negotiator’s standing and position when negotiating with Brazilians.
India is another hierarchical culture, which often leads to lengthier negotiations. Patience again, is emphasised during negotiation. Decision-making is typically done at the top, and so like the other Asian countries discussed, negotiations can take more time before approved decisions are made. Indian culture also strongly promotes community values. When it comes to legal negotiation, emphasis is again placed on trust and personal relationships. Respect for your counterparts helps build this trust, and whilst it can take time, it is culturally significant in India, and in turn will ease potential tension within the legal negotiation.
Having provided an insight into several different cultures and their impact upon international legal negotiation, some key notions prevail. Crucially, understanding of your counterpart’s culture will aid legal negotiation, and this entails greater understanding than simply the history of the nation one might be dealing with. Aside from obvious language barriers within international negotiation, which do present challenges in themselves, different nations adopt different approaches to customs, strategy and practice. Trust is key to most negotiation. On an international scale, adopting or understanding different cultures helps to build this trust, to aid the negotiation as a whole.
About the authors
This article has been written by Maximilian Marmor and Paul Marmor of Sherrards, but does not reflect the views of the firm.