Corrie and Bankruptcy Law

In this latest episode of a Corrie widower’s law blog, I’m going to say a little about bankruptcy law.

This week everyone’s favourite hard man builder, Owen Armstrong, has been doing some debt collecting. He called on the wife of a customer, Valerie Phelan, at her nail bar. He had apparently done some work at the premises when it was the husband’s travel agents’ shop. The nail bar owner had great pleasure in fobbing off our Owen, but he was not to be deterred.

In the next scene in this story line, he doorstepped Pat Phelan at his luxurious house, demanding payment for his £4k of invoices. The answer he got was a simple “Sorry mate, I’ve been declared bankrupt. I wish I could pay but I’ve got nothing.” It transpired that the nail bar premises and the obviously large house are all in the wife’s name.

So on the back of this episode, it seems the easiest way to run a small business is to run up a load of business debts, transfer every asset into a spouse’s name and go bankrupt. Easy.

Whilst we are obviously being led to expect some, shall we say, unconventional debt recovery techniques from Owen, the boring lawyer’s approach is to question the transfers of assets into the spouse’s name. It should come as no surprise that the law has cottoned on to that basic trick (see the cross heading Wrongdoing by the bankrupt before and after bankruptcy in the Insolvency Act 1986, Part IX, Chap VI), so a simple way to start getting redress might be to contact the Official Receiver (named on the bankruptcy order being flourished by Pat Phelan in Owen’s face), who has a statutory duty to investigate the affairs of the bankrupt. If Owen didn’t catch who the Official Receiver is on the order, he can always contract the Manchester Official Receiver’s office.

Not that I think Owen will – that wouldn’t make for an interesting story line, would it?

PS

As a contract lawyer, I’d point out that if you are in a small business, include a so-called Romalpa clause in your terms and conditions, so that you can get back anything you have sold prior to full payment (see this old post on Romalpa). As a law student, I advised a friend of a friend who supplied stadium speaker systems, who had a Romalpa clause, to get immediately into his truck and recover his equipment from a venue, as he’d been tipped off that his defaulting customer was about to go into involuntary liquidation. If he hadn’t done so, he would have risked become an unsecured creditor, eventually getting back a fraction of what he was owed, instead of recovering his expensive speakers.

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Corrie and Surrogacy Law

Tina McIntyre (Michelle Keegan) has just given birth, prematurely, to a baby boy. She is a gestational (or total) surrogate mother – she is not the biological mother of the baby, nor is she married to the father.

However, all is not well in Coronation Street. The baby’s genetic parents, Gary Windass (Mikey North) and Izzy Armstrong (Cherylee Houston), are having serious relationship problems, which have surfaced when it was revealed Gary had made a pass at Tina.

*SPOILER ALERT* There is a possibility that Tina will refuse to hand over the baby to Gary and Izzy.

As a Corrie Widower, I only know all this because I’ve been dragged into the discussion of surrogacy law and parental rights. So, here is my legal analysis.

The Surrogacy Arrangements Act 1985 (section 1(2)(a)) states that “a woman who carries a child is to be treated for this purpose as beginning to carry the child at the time of the insemination, or of the placing in her of an embryo, of an egg in the process of fertilisation or of sperm and eggs, as the case may be, which results in her carrying the child.” The legal result is that it is the gestational mother, NOT the genetic mother, who is treated as the mother of the child.

So the baby is Tina’s.

Secondly, under the Surrogacy Arrangements Act 1985, no-one can enforce a surrogacy arrangement (section 1A). Tina can therefore quite legally walk away from the arrangements she has with the Windass family.

I don’t know enough of the back-story to be able to say whether Gary is already the baby’s legal as well as genetic father. It is possible for a sperm donor to be the legal father of a baby, but consent and notice are required (see Human Embryology and Fertilisation Act 2008 – Meaning of “father” at sections 35-41).

Izzy’s and Gary’s only method of obtaining legal parental status would be to seek a parental court order (section 54 of the 2008 Act). It is important to note that the parental court order would make the baby the legal child of the TWO applicants – spot the potential plot line development there. Other than that qualification, Izzy and Gary meet the other conditions of section 54.

A court would also have to be sure that Tina had “freely, and with full understanding of what is involved, agreed unconditionally to the making of the order” (section 54(6)). Plenty of room for plot twists there, too. Also, any financial arrangement between Owen Windass and Tina should not fall within the ban on money or other benefits changing hands for the parental order, or must be approved by the court (section 54(8)).

Lastly, in considering any application, the baby’s welfare is the court’s paramount consideration when considering whether or not to make a parental order: see Re X and Y (children-foreign surrogacy) [2011] EWHC 3147 (Fam).

The Corrie Salon Feud

Some will remember the actress Sue Nicholls as either Miss Joan Greengross, Reginald Perrin’s secretary and fantasy lover, or as Nadia Popov in the excellent Rentaghost. However, all Corrie fans will know that she plays Audrey Roberts, who is currently in a battle with her grandson David Platt (Jack Shepherd) over ownership of a hair salon at No 2, Coronation Street.

Audrey subsequently suffered a heart attack, brought on in part by the stress of dealing with her feud with David over the ownership of what was formerly her hair salon. She had earlier signed over her interest in the salon to David, as she intended to elope with Lewis Archer (Nigel Havers) and to buy a hotel in Greece. She now wants the salon back.

How could Audrey have legally protected herself? This is a difficult question to answer, as obviously the salon story line has not included many legal facts to be able to determine what is going on.

It would seem that the freehold in 2, Coronation Street is held by David and Kylie Platt (Paula Lane), signed over by Audrey when she wished to show faith in David and his future (Audrey supported David’s marriage to Kylie, where many did not). If this is correct, then the first obvious point is that Audrey could have protected herself by granting David and Kylie a lease, rather than sell or transfer the freehold. The lease could have contained a number of restrictions concerning the business, such as the name of the property – that would have at least prevented Audrey having to tear down the “under new management” sign, for which she has been arrested for criminal damage. However, the main issue is, of course, the hairdressing business.

There is no information on the legal status of the salon business operating under the name “Audrey’s”. If Audrey Roberts operated as a sole trader, then she still has the business, but is simply locked out of the Coronation Street premises. The dispute then has to concentrate on how the freehold or other property interest was transferred by Audrey to David and Kylie. If this was freely signed over by Audrey, then she would appear to have little redress.

However, there is at least some suggestion that Audrey, David and Kylie were operating as a partnership. In the absence of any partnership agreement, this relationship must be analysed within the terms of the Partnership Act 1890. The Act states that a partnership exists merely when persons carry on “a business in common with a view of profit”. A partnership does not need any agreement or other formalities to exist. Ownership of relevant property is a factor in determining the existence of a partnership, but it is not the sole or conclusive factor. It can be argued that even though the freehold in the salon was signed over to David and Kylie, there was an implied licence for the partnership to continue operating out of No 2, so Audrey cannot be locked out. The 1890 Act does contain provisions concerning partnership property. It may be even be possible to argue that the freehold of No 2 is partnership property.

The purpose of the 1890 Act is to set out some default provisions for such partnerships, eg a legal presumption that all profits (and losses) are shared equally between the partners. The important point for Audrey is that under the 1890 Act, no partner can be expelled from the partnership by a majority of partners, unless those partners have an power expressly set out in an agreement to do so. Assuming that there is no partnership agreement between Audrey, David and Kylie, it would seem Audrey may have a claim under the 1890 Act. However, this would be complicated by her opening another salon in Mary Taylor’s motor home – a partner is not permitted under the Act to compete with the partnership. If a partner does set up a competing business, the partner must account for and pay over all profits made from the competing business.

It seems that Audrey’s original faith in David was misplaced. As with many family business arrangements, the lack of formal paperwork has come back to bite them. Sadly, it is another case of the saving of legal costs by not taking initial legal advice and having a proper partnership agreement (or shareholders’ agreement, if a limited company was involved) drafted proving to be a false economy.

[This was written for a newspaper, prior to Audrey’s heart attack. It got spiked, so you get to ‘enjoy’ it here instead.]