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Stuart J
Stuart J, Solicitor
Category: UK Law
Satisfied Customers: 22386
Experience:  PGD Law. 20 years legal profession, 6 as partner in High Street practice
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FAO ALEX W**They have entered an application

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FAO ALEX W**They have entered an application for relief from sanctions. They are also applying for the costs of the application. Can they do this, even though I simply told them that it was for the court to decide?I would like to put in my reasoning for taking issue with the fact that they did not properly serve the documents. I understand the format of the document I need to send to the court, but I just don't know the title. i.e. is it something like "Response to Application"?ThanksHoward
Submitted: 5 months ago.
Category: UK Law
Customer: replied 5 months ago.
Expert:  Stuart J replied 5 months ago.
Can we have the full background detail please?As much info as possible. Thanks
Customer: replied 5 months ago.
I am in the middle of a dispute that is at the point of serving witness statements.A short background:I was a franchisee of the Claimant. It should be noted that I was in fact trading within this industry for many years prior to owning a franchise of the claimant. The franchisor lured me over to them with promises of wealth and fortune, but then terminated my agreement based on a tiny breach that turned out to be false.Following termination of the agreement, I was under a one year covenant. An employee attempted to continue trading using the customer data. The Claimant took out an injunction and a delivery up order on both me and the employee and raised a claim for damages. The claim ended in a drop hands.The employee joined another business that had been trading for some time (not a ltd co.), but their turnover was minimal. Naturally, some of the customers migrated over to the business that the employee was working for. He also informed the claimant straight away that he was employed by that business. The Claimant did not raise issue with this fact, even though the employee was still within his one year post-termination covenant.Following the end of my covenant, I set up a limited company and started to trade once again in the same trade as I have done for years. The employee is now my co-director.The Claimant raised a second claim three years later, claiming that I retained customer data and used this data to start the company. They claim I gave the data to the employee. Their second claim is against me personally and the Ltd company that I trade under, but not against the employee personally. They are also claiming that I was using a copy of the computer system that was built in house. The value of this computer system (which is actually just a simple database) has been based on the wages of IT personnel at their head office (circa £250,000). I have stated that their valuation is far from reasonable. It is built on an old platform and could be replicated within a few weeks.I'm concerned that they may find links that would put the Ltd company in the firing line. They are attempting to find links between me and the passing of the data to the limited company.It should also be noted that neither of the directors have any assets or savings and therefore nothing to use to pay for counsel/advice or would not have the ability to pay any costs.Questions:1. Can they really base the value of the system on the wages of the IT personnel over a ten year period? There was very little development within this time.2. What are the implications (in relation to the claim) of shutting the company down and starting a new company? Can they just go after the directors personally if we did that? If we continued with the Ltd Co, then lost the case, can we shut it down then as to avoid paying any of the legal costs?3. If I am found personally liable, what will happen with regards ***** ***** their costs if I am unable to. Would they just force me in to bankruptcy?Thanks
Expert:  Stuart J replied 5 months ago.
The court can apply a whole load of sanctions and in particular for non-compliance with an order of the court. The two common sanctions after the claim to be struck out and costs to be awarded against the noncomplying party.It depends on why there was non-compliance as to whether there should actually be relief from sanctions or not. They will always ask for the costs of the application and whether they get the cost of the application would depend on the nature of the breach and the nature of your own application.Every example they are 1 day late serving documents and you apply for the claim to be struck out and the reason for the late serving of documents was a bereavement in the family, they will probably get the relief and could well get the costs of the application awarded against you if you had been advised of the reason for the delay went ahead anyway.However, I think there is something more fundamental here which you haven’t asked about and that is the financial wherewithal of the claimants who seem to be bringing a claim for a fantastic amount of money with little hope of succeeding and are probably doing so thinking that you will be so overwhelmed by their claim size that you will consider dropping the issue. You say they have no savings or assets so in circumstances like this, they have nothing to lose by simply pursuing unreasonable litigation which does not have a hope in hell’s chance of succeeding. All that would happen is that if they lost, the court would order costs against them and they would simply go bankrupt if you started to pursue them for any costs or order awarded against them by the court. What you might want to do therefore is consider making an application to court for the other side to give what are called “security for costs” which is a court order in circumstances like this whereby the litigant has to prove that they are good enough to pay any order the court imposes on them. If they can’t do that, they would have to pay money into court Now, this only applies if someone is a claimant because the financial wherewithal of a defendant is not relevant as far as the court is concerned, to someone who defends a claim, only to someone who brings one. So, they must either be the claimant for you to get security for costs or they must be a counterclaim and trying to defend your action by submitting an obscene amount of counterclaim. Does that answer the question? Can I answer any specific points arising from this? Please don’t forget to use the rating service to rate my answer service positively otherwise I get no credit for my time.It does not cost you anything but it helped me greatly.You may think thread closes after rating, but it does not, it remains open and if you want to ask for clarification of anything, we are still able to exchange emails. Kind regards.
Customer: replied 5 months ago.
Hi StuartThanks so much for your in depth answer and for giving me some further 'food-for-thought'.However, I am a little confused by your answer. Just to clarify, I am the Defendant and my limited Co. is the second Defendant. Neither of which have any assets or savings. The Claimant is my ex-franchisor and has a huge pot of money to spend on legal fees. The likliehood is, if I lose, there is now way in hell I would be able to pay their costs. Furthermore, my business has hardly anything in the way of assets and would be forced to wind up. I would therefore have to go personally bankrupt.I think they just want to make an example of me to their current franchisees. After all, I am now competing with their franchisees. They want to show that they will do anything to stop a terminated franchisee from continuing in the trade, even though it was the trade I have been in for most of my life.
Expert:  Stuart J replied 5 months ago.
Thank you. When you said that neither of the directors have any assets or savings, I assumed that you meant the claimants directors not yours. What I will tell you is that if this claim is against a limited company, the courts do not lightly allow directors to be sued personally “behind the corporate veil” otherwise, there would be no point in having limited liability. Normally, the court would only allow the directors to be sued personally if the directors had done something wrong almost to the point of being fraudulent. If they are pursuing any breach of covenant issue, it is most unlikely they would be able to enforce that beyond a 3 or 6 month period regardless of what the agreement says.

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