How to do business with friends

By Jonathan Goldberg, July 23, 2009

Brian from Knightsbridge writes:
For over 41 years my wife and I have worked together in a small but highly profitable family business. Last year we received an offer to sell out to a conglomerate, which seemed too good to refuse. Our chartered accountant, who has been a family friend since school, played an active role throughout the many months of difficult negotiations. He prepared all the financial statements and sat with us in many of the business meetings with the buyers. It is only fair to say that we relied heavily on his business acumen.

There was a point when the buyers refused to pay above a ceiling figure which would have been unacceptable to us, but eventually and only after angry negotiations they upped their offer by 30 per cent and the deal was finally sealed. The accountant has charged us monthly bills throughout on an hourly basis which we have paid meticulously, but now he is requesting “a success fee” of three per cent of this 30 per cent uplift. This would amount to tens of thousands of pounds.

When my wife queried it he reminded her that some years ago I had said I would be willing to sell for the lower figure, whereas he says the higher figure achieved was largely due to his efforts. Even though there is some truth in this we feel very uncomfortable with his request and wonder if we are legally or even morally obliged to pay it.

Brian, we lawyers “do not do” moral issues, and there is an excellent “Ask the Rabbi” column in this very newspaper. So far as your legal obligation is concerned however, I think your accountant friend does not have a leg to stand on. He could only demand this extra fee if he had clearly stipulated it from the outset and if you had accepted it. The general rule of contract is that the court will enforce the payment terms agreed explicitly or implicitly between the parties, which in this case must mean the hourly rate he has been charging you over the period. Only when remuneration terms have not been agreed expressly or implicitly in advance, but it was nonetheless obviously intended by both sides that this reward should be paid, will the court itself step in to decide what the services were worth. That is not your case. Moreover if you were ever to push it so far, his professional body would be unlikely to view with favour an arrangement which seems to involve a conflict of interest, since a professional adviser should be advising you impartially without any suggestion of a personal profit motive.

In short, from a legal viewpoint this is a “chutzpah” and you can refuse to pay it. If I were to make an exception to my general rule about never giving moral advice, I would simply suggest that when doing business with friends or family in future, the moral is always to get it in writing beforehand.

Lucy from Leeds writes:
I live in a quiet family neighbourhood which is bounded by a busy shopping street. Due to the current recession, a greengrocer’s has gone out of business and a sign in the window now informs us that an application is to be made to license a lap-dancing establishment on the premises. There are several good schools in the area and there is a bus stop nearby at which the children congregate. Can we do anything to prevent this?

Lucy, the Licensing Act 2003 gives you a full opportunity to protest against granting this licence. Nowadays such applications are decided by the licensing sub-committee of the local council. The council’s website is likely to include full details of the application including the proposed opening hours, the exact nature of the activity and what measures the owners propose to take to limit damaging effects on the local community.
There is strength in numbers, and you really need to organise a group of fellow residents to make representations against the application. This can be done by letter or email to the council’s licensing officer, but to be more effective you really should attend and speak at the public meeting of the sub-committee at the town hall which will consider this application. The councillors are duty bound to take into account all such views from local residents.

Note, however, that you cannot protest on moral grounds alone. The statutory grounds of objection are limited to the prevention of crime and disorder, public nuisance, protecting children, and ensuring public safety. The presence of children in this location is obviously an important factor in your favour. These establishments are notoriously big money-spinners and it is likely the owners will hire top legal guns to present their licensing application.

If funds permit you should hire your own solicitors and counsel to oppose. There have been many examples where well organised local opposition has indeed succeeded.
Do not take this situation lightly. The presence of such an establishment has adversely affected the quality of life — not to say the property values — in many a good neighbourhood.

The above is not formal legal advice and is strictly without liability. Readers should consult a lawyer on any matter concerning them. All questions will be treated anonymously and all names changed.

Jonathan Goldberg QC is a leading lawyer practising at Ely Place Chambers in London

Last updated: 12:02pm, July 23 2009