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Max Lowry
Max Lowry, Advocate
Category: Law
Satisfied Customers: 1457
Experience:  LLB, 10 years post qualification experience
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Hello, We have been informed that our business partners

Customer Question

Hello,

We have been informed that our business partners and invetsors wish to sue us over the business plan that we prepared 18 months ago. The investors have put more money in than they thought they would have to. we at no point requested the additional monies more so the Financial Diredctor is also the Investor. One key point is that we should open a retail business to compliment the overall business which we stated unless that happened the model was unachievable. The retail unit was not opened as the Investors did not have the money to. We warranted the business plan to the tune of £50k max liability. Can yhey sue for more as they put £1m into the business rather than the anticipated 250K. As i said though we never frog marched them to the bank!

Also if they come for me can i transfer all assest to the wife?

Any help would be great?

Thanks
Submitted: 3 years ago.
Category: Law
Expert:  Max Lowry replied 3 years ago.

Max Lowry :

Hi, welcome to Just Answer. I will help you with your question.

Max Lowry :

If the maximum extent of the warranty given is £50,000, then it's not possible to sue you for more than that simply because they put more money in afterwards.

Max Lowry :

That's the whole point of limiting your warranties in this way.

Max Lowry :

Were your agreements/warranty documents drafted by solicitors?

Customer:

yes they were drafted by a lawyer and i was very careful not to promise too much. the construction industry has had a very bad time and projects delayed but now the business is taking off

Max Lowry :

Okay, then you should be okay - obviously, it depends on the drafting of the agreement, but if this was done professionally, you should be fine. If not, and something went wrong with the drafting, you'd have the solicitors on the hook for a negligence claim anyway.

Max Lowry :

But, I do wonder ...

Max Lowry :

Does warranting the business plan mean that you are actually liable here simply by more money being needed to be put in? There might have been unexpected circumstances giving rise to the need to inject more money (which wasn't requested here anyway), but that doesn't necessarily mean there was anything wrong with the business plan.

Customer:

i do want to force there hand and they are a wealthy family. i have been told to counter claim? is there mileage in this? if they loose and all we have done is defended, can we claim for all costs and the like?

Customer:

finall how easy is it to transfer assests to the wife? Thanks

Max Lowry :

What would your counter-claim be for?

Customer:

not reaching the business plan profits due to not recieving the investment to open the retail centre? i wouldnt necessarily wish to sue, but it would seem odd just to defend without possible benefit if we defended the claim.

Max Lowry :

I think a defence is probably more the way this would go, as I don't immediately see the counter-claim.

Max Lowry :

On your other point ...

Max Lowry :

How easy to transfer your assets to the wife?

Max Lowry :

I'm guessing she wasn't party to the warranty docs then?

Customer:

no she wasnt , she is not a director of the business.

Max Lowry :

OKay. The problem with this is that there is a right for a creditor to challenge the transfer of assets to your wife where it can be shown that the purpose of the transfer was to defraud creditors, i.e. put the assets beyond the reach of creditors.

Customer:

my view is this is a tactic to offset the £50K they owe me.

Max Lowry :

There is no time limit either for this - you could transfer now, and a creditor could apply 20 years later on.

Max Lowry :

Ah ... I see.... This is often seen in cases of deferred consideration.

Max Lowry :

Is this what you have?

Max Lowry :

They were due to pay you under the same agreement?

Customer:

I am not sure, my legal knowledge is limited? i think its all tactical as there are numerous issues. The FD who is an investor as not given us any managment accounts despite requesting for a long period so we have been unsure of the financila position and i have requested expert advice but they refuse. He is not an accountant. I think i have enough info? On a positive they said they would bring projects to us ( as developers) but there projects have not come off due to the economy. Thats why i think we have a good defence in that the business plan cannot be warranted. we alos did not promise any schemes or give false information, other than what they see as unreastic figures. if the projects had come off then the business plan would of been achievable- thanks for your help.

Max Lowry :

Okay, I see your point on the limit of the warranty, but it depends on the drafting of the document, and your solicitors that drew this up should be able to quickly identify its scope for you and tell you whether your view holds water. Anyway, you're welcome for today's help, and if you need anything in the future, just give me a shout, and I'll gladly help you out with this.

Customer:

yes they were due to pay me under the same agreement.

Max Lowry :

Yes, well, it's not unusual to see people trying to wriggle out of paying by using this kind of approach.

Max Lowry :

It's going to come down to the agreement that you have/the exact wording of the warranties you have given. In principle, I agree with the points you make and that these could mean that there is no claim against you and that you're entitled to the money from them due to you. But, put your mind at rest, and see the solicitor that acted for you when the agreement was done, as they will be able to advise on its specific terms which will be important to this dispute.

Customer:

I will do that many Thanks Max.

Max Lowry, Advocate
Category: Law
Satisfied Customers: 1457
Experience: LLB, 10 years post qualification experience
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