Corporate finance update - February 2011 

Deal News

Taylor&Emmet’s corporate team recently advised on a management buyout of Linston Limited by two of its senior employees, Mark Edwards and Patrick Smout.

Peter Crawford managed the transaction with assistance from colleagues in Taylor & Emmet’s employment and commercial property teams.

Peter said: “Despite the complex nature of Linston’s business, this management buy-out progressed smoothly, enabling us to reach a satisfactory conclusion in a short timeframe.  It has been a pleasure to act for Patrick and Mark.  I am confident that Linston will thrive under their guidance going forward.”

Metallurgical and chemical processing specialist, Linston, operates from headquarters in Wickersley, Rotherham and a large production plant in Wirksworth, near Matlock, Derbyshire.  The firm has a 37 year pedigree and a workforce of 25.

Mark Edwards added:  “Taylor & Emmet’s expertise and attention to detail has played an important part in our successful acquisition of Linston and we thank Peter and his colleagues for their professionalism.”

Briefcase News

Can a chain of emails constitute a valid guarantee?

In Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd the High Court considered whether an email chain could constitute a guarantee despite statute stating that guarantees must be signed.

Section 4 of the Statute of Frauds 1677 requires that a guarantee must be in writing and signed by the guarantor.  Alternatively there should be either a memorandum or note of the agreement and that must be signed by the guarantor.  In the case of emails, ‘signature’ has been interpreted to include an electronic signature if there is also evidence of an intention to contract.   

Salgaocar Mining Industries PVT Ltd (“Salgaocar”) were negotiating with Golden Ocean Group Ltd (“Golden”) to charter a vessel which Golden owned.  The charter contract would actually be entered into by Trustworth Pte Ltd (“Trustworth”) on behalf of Salgaocar, but Salgaocar would fully guarantee the contract.   

When Trustworth refused to take delivery of the vessel Golden brought a claim against Solgaocar under the ‘guarantee’ for approximately $54 million dollars.  There was no final form agreement which was signed by the parties, but only an exchange of emails covering the main terms, including reference to Salgaocar guaranteeing the contract.

Salgaocar argued that the guarantee was incomplete as there was no final signed agreement incorporating the key terms.  Even if the emails were held to be electronically ‘signed’ they were disjointed and not sufficient to establish a guarantee (i.e. there was no evidence of intention to contract).
  
The court held that Golden had an arguable claim and allowed the case to proceed to trial.  The emails were sufficient to constitute a contract and were signed by the electronically printed signature of the person who sent them.    

Although this case is yet to be decided at trial, it is a warning that negotiations over email (even those marked ‘subject to contract’) could create a valid guarantee, even without a final document being signed at the end of the negotiations. 

Ensuring price review clauses are effective

In Amberley (UK) Ltd v West Sussex County Council the Court of Appeal held that a price review clause did not give a care home owner the right to increase the fees it charged. 

Amberley Limited (“Amberley”) was responsible for managing a care home and West Sussex County Council (“Council”) paid the fees for 16 of the residents at the home.  The contract between them stated that:

“The level of fees is subject to review as costs increase”.

Between 2002 and 2008 Amberley increased the care home’s fees from £341 per week to £445 per week.  Amberley claimed the increase covered the raised costs of providing care to the residents, and that the Council was obliged to pay the fees as the contract provided for the fees to be reviewed.

The court held that although it was open to the parties to include a clause in the contract which allowed one party to unilaterally vary the contract to the detriment of the other, as it was an unusual clause unambiguous wording would be required. 

While the clause stated there would be a review of the fees, it did not state that Amberley had the right to unilaterally increase the fees, and then enforce that increase on the Council.

Although this case relates to care home fees, it has a wide application.  Any long term supply agreements for services or goods normally contain price review clauses, and these must be drafted and negotiated carefully to ensure that they are clear and specific enough to actually be enforceable.