InvestingLegal

An Interesting, but minor, legal dispute

I thought I would share a negative aspect of investment. The investment below has gone very well and the founder now wishes to sell his company for a decent return, however he has unwisely decided to withhold profits and has misunderstood the repercussions that will have.

The Background:

A few years ago, I helped a friend by buying a commercial property which could be adapted for his companies purpose. He arranged to take joint ownership in exchange for a debt note from me. After much prevaricating, he chose not to convert the building, but instead use it as offices.

Since then, the business has grown slowly and he now has the chance to sell the company and so wishes to dispose of the building.

That’s great, I have supported his company with hundreds of thousands of pounds of loans, investment and bank guarantee’s, so I was amenable to allowing him to exit all of his liabilities to me in exchange for a fair share of his profits.

Up to this point, we have had a strong working relationship with me offering many hours of council on a weekly basis and giving my time and money freely.

Then things changed, he saw the building as a liability and wanted to sell it at a small loss. That in itself is not a problem as the money he would make from the sale of his company would more than compensate both of us. I was expecting to be compensated for the lack of investment in the building along with a bonus for allowing an early exit, oh and I forgot to mention that I had not taken an income from the property since its inception to allow the money to be reinvested into the building conversion.

Aye, theres the rub; he decided that the sale of the company was for him to profit alone and that I should take a loss on the property as an independent unrelated asset. This was not the first time he had looked to profit from my goodwill without return. He had borrowed some money from me some time ago to lend out to a friend in order to make a quick buck. The deal fell through, but he is managing to pay back my money, minus the promised interest. Then one day, he let slip that a secondary deal had been in place, which, if the deal fell through, he and his friend would take control of the deeds of a large private residence. The sale of this would earn huge profit. This I was not privy too, nor was I intended to benefit despite it being my money they were using.

As kismet has it, the deed turned out to be toxic, so the deal never prospered. From that day onwards, he has failed to secure my continued goodwill.

So, now, he has decided that we had a verbal contract which allows him to sell the building at any time and has instructed his solicitor instigate this. Meanwhile, he forgot we have a written contract preventing a sale. I won’t include the solicitors letter as it would be prejudicial, but I will publish my response, which is below, censored to protect relevant parties.

I hope you find this useful, as a lesson in honesty and loyalty.
Without Prejudice

In the spirit of open communication, I am replying to both your parties involved.

Dear  xxxxxxx,

Let’s not be too formal and see if we can help each other in resolving any issues between yourselves, your client, myself and my organisation.

You have intrigued me by your haphazard attempts at communication and unusual postal protocols. Please understand I wouldn’t normally involve myself with such matters, and it is rare that I feel moved to help opposing council, but your unusual actions have brought out my compassionate side.

I have, to date, been advised of at least two hand delivered letters you sent residents in the village. I presume there are others! I don’t take kindly to external parties being inconvenienced. I would advise against this type of action in the future.

You are aware of the Land registry, its records are public and can be used, amongst other things, to identify the owner of a property. While the land registry alone cannot be used to identify a persons primary residence, there are many services out there that perform this function using readily available public records. Can I ask you to use such a service in the future before sending random unsolicited correspondence.

Let’s get down to the matter in hand. I am informed that your letter makes mention of a verbal contract made between your client and myself. I can assure you there is no such verbal contract. There is however a written contract. I am reassured your client has not managed to retain a copy. If he had, he would be aware of the primary clause which prevents either party selling the property without both parties consent. This avails until the contract end date in November 2027, at which time the clause changes allowing either party to undertake a sale.

So let me clarify my position for your client. I have no interest in selling. I have no interest in acquiring your clients share, which under the terms of the contract, currently forms part of the charge I have against him. However, if your client wishes to dispose of the property on the open market, I would give the matter consideration providing he can make it financially beneficial for me to do so.

On a personal note, I am surprised by your clients disregard for his reliance on my continued goodwill. I have minimal objection in his attempt to break a contract. My objection is his attempt to make advantage at my expense.

I understand you state in your correspondence that I have failed to respond to your client. This is untrue, in fact, I have been in very active communication with your client. I forwarded a copy of your previous email to your client along with my comments, available options and the current state of his debt. I sent this email to your client on June 2nd, 2015 at 10:51am. To date, he has failed to respond.

You can also refer to emails to your client on the following dates and times that are related to the matter in hand:
22nd April 2014, 08:55
21st April 2014, 14:33
16th April 2014, 17:24
Along with 8 other correspondences that I will not waste time detailing.

In these I offered a meeting to discuss his situation. He failed to respond to my offer and failed to attend the meeting.

I am informed your client may wish to attempt to force a sale of the property if no agreement is reached. I hope you have advised your client of his inability to do so. In case you are uncertain, may I offer up some evidence. The property ******** is derelict and has been so for 20 years. If you research its background, you will identify my assured position relating to the disputed property. This example is offered quite apart from any separate contractual obligations.

To provide further assistance to your client, he will be unaware there are two further charges arising from the failure to fulfil conditions included in the contract. I have to date not pursued these outstanding items. But as a result of your clients actions, I would be amenable to collecting these debts through activation of the charge. He may wish to respond to my communications if he wishes to prevent this from happening.

For your benefit. Over my long association with your client, I have had opportunity to observe his business practises and in respect to legal matters, his conduct to date has frequently been inappropriate and ill advised. As previous council I have had to advise him against many courses of action and have observed his frequent lack of disclosure to council. I hope you can provide the guidance and stability your client requires in pursuing his business interests, which as his investor and creditor, I share.

On a final humorous, yet disappointing matter; I understand the hand delivered letters are dated the 8th June and give 14 days from the date of the letter to respond. I hope I need not point out the your deadline expired two days before the letters were sent. I hope, therefore, we can all seek to attain the highest professional standards in resolving this matter?

For your information, my deadline for response is a very reasonable 12pm, Friday, 26th November 2027.

I would be amenable to arrange a meeting if your client is able to formulate a beneficial proposition within the allotted time. You are both welcome to attend my offices at Lincoln’s Inn Fields which I presume would be the most convenient location for you both.

Could I also ask that you restrict any communications to normal office hours as a sign of courtesy. Thank you.

Yours

 

 

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