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Online fraud was a commonly reported news item last year, and we anticipate that this problem will continue to gain traction in 2020. We look back at a case from the Outer House of the Court of Session from late 2019, which illustrates the risks to employers and employees alike. Peebles Media Group Ltd against Patricia Reilly ([2019] CSOH 89).

What’s it about?

The pursuer, a Glasgow-based media group, raised a claim for damages against the defender, a former employee, for causing the company to lose £107,984.02 to a whaling fraud.

“Whaling” is a relatively new type of fraud. Many of us have heard the term “phishing”, which describes a fraudster sending messages out to a large group of people chosen at random, in an attempt to dupe as many as possible. Whaling is somewhat more sophisticated, with the fraudster targeting specific companies and personnel.

The defender was a credit controller at the pursuer company, who received emails appearing to be from her boss’ email address. The messages asked her to make substantial payments to a number of companies. Nothing about the emails aroused the defender’s suspicions, and she duly executed the payments. It was not part of her job to make payments, but both her boss and the employee who usually dealt with outgoing payments were on holiday. The fraudster, emboldened by the success of their first attempt, made further payment requests over a number of days. These requests were also complied with by the defender; whom, noticing that the company current account had insufficient funds, took it upon herself to transfer money from the invoicing account. The defender paid out a total of £193,000, of which the pursuer’s bank was able to recover approximately £85,000.

What were the legal arguments?

The pursuer felt that the emails were obviously fraudulent: the language, tone and errors in the messages should have raised the defender’s suspicions that the messages were not really from her boss. The pursuer argued that the defender had breached her contractual obligation to exercise reasonable care and skill, in making the payments without verifying that the requests were genuine. The defender strayed well beyond the limits of her authority by transferring funds from another company account without any instructions to do so.

The defender argued that no remedy was available to an employer for losses caused by an employee. Lord Summers considered the cases of Lister[1] and Janata Bank;[2] noting that it is indeed rare that an employer recovers damages from an employee. However, he found that that pursuer was entitled to damages if they could establish breach of contract.

Lord Summers was not convinced by the defender’s plea of contributory negligence, which was argued on the basis that she had not been trained to identify fraud.

What was the outcome?

Lord Summers sympathised with all of the involved parties; the business having lost a substantial amount of money and the defender having lost her job.

He did not agree with the pursuer that the emails were obviously fraudulent, and was not convinced that the defender had breached her contractual obligations in making the first set of payments to the fraudster. However, he did find that in transferring money from the company invoice account, she was in breach of her obligation of reasonable care and skill. The pursuer’s arguments ultimately fell down at the hurdles of causation and remoteness of loss. The defender had attempted to phone her boss after receiving the first of the emails, but was unable to get through because her boss was on holiday. Her boss being unreachable by phone, the only way for the defender to seek authority for the transfer of funds was via email. Had she asked for authority to transfer the funds from the person she believed was her boss, the fraudster would simply have encouraged the defender to go ahead, and the payments would still have been made. The pursuer had not established that if the defender had performed her duties correctly, the money would not have been lost.

What’s the impact?

Lord Summers’ judgement provides useful insight for employment law and professional negligence practitioners on the availability of damages for employers for loss caused by employees. The case also cautions us always to treat emails asking for money with suspicion, even when we believe they are from a sender we trust.


[1] Lister v Romford Ice and Cold Storage Co Ltd [1957] 2 W.L.R. 158

[2] Janata Bank v Ahmed [1981] 7 WLUK 83

We would like to update you on a number of new appointments over the past few months:

  • Zara Diloo has joined the firm as a Director in the Corporate team. Zara’s previous experience includes Dentons, D&W (now CMS) and in-house at a private equity fund.  She has a wealth of transactional experience in M&A and private equity work, including significant VC deal experience having acted for the likes of Scottish Equity Partners. 
  • Also joining the Corporate team as a Director is Tara Walsh. Tara joined us from CMS, where she worked in London for various investment funds and undertook a broad range of corporate legal services for them.  Tara will be based in Edinburgh and split her time between the London and Edinburgh Corporate teams. 
  • Calum Hamilton has joined the Corporate team as an Associate.  Calum trained at Sheppherd & Wedderburn and worked in their Corporate Finance team since qualifying in 2016. He has been exposed to private equity investment (including Scottish Enterprise deals), M&A, joint ventures, company re-structuring and general corporate governance matters.  
  • Gavin Smith has also joined the Corporate team as an Associate.  Gavin qualified in September on completion of his traineeship at Standard Life Aberdeen, the latter part of which was spent on secondment to the Corporate team at Burness Paull. 
  • We have agreed a strategic partnership arrangement with Ellis IP, where Dr Claudia Duffy and Dr Michael Ellis will be on hand as patent consultants to help on our transactions and deals.  Claudia and Michael are experienced European patent attorneys with a focus on advising entrepreneurial businesses throughout the UK. Please click here for further details.

You can view all our new appointments on our team page here.


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The lead up to the summer is always a busy time of year for the MBM Corporate Team and this year is no exception. Investment activity across our UK client base has remained steady but we’ve seen a particular increase in exits for some of our client companies as well a dramatic increase in the number of VC funds that are now coming together.

With recent news highlighting the withdrawal of the European Investment Fund from new British VC funds, an important cornerstone investor may be seen to be withdrawing from the market but we have seen family offices becoming an increasing prevalent source of cornerstone investment. For many years the Scottish Investment Bank has been a cornerstone investor in Scottish high growth companies and many private investor groups have come to rely heavily on the SIB always being there with a 50% match. Sadly the annual budget for SIB and its investment funds has been dramatically reduced by the Scottish government from April and private investors will now need to work harder to co-invest with each other on deals where SIB’s support can no longer be guaranteed. Given this news we are delighted to see Pentech close its second venture fund of £88m and JB Equity successfully raise £10m from The British Innovation Fund for Roslin Technologies Limited, the ground breaking joint venture they established. We are working on other new fund formation deals which have a target closing of June and July, so the overall outlook remains positive.

We can’t list all of the deals we have been involved with but we hope the deals which we have set out below help highlight what we have been up to and give you a flavour for some of the work that we regularly advise on. If you would like help on a deal or would like to discuss how you might structure one for you, then please feel free to get in touch with any of our corporate partners (Kenny Mumford, Michael Arnott, Tracey Ginn and Stuart Hendry) or your usual contact within the firm:

  • advising an online drinks delivery business on the sale of its shares as part of securing further investment;
  • advising JB Equity on its £10m fundraise from The British Innovation Fund for Roslin Technologies Limited;
  • advising Snap40 Limited on its £2.3m investment by members of Par Equity, SE and others over two tranches;
  • advising Oxford based instrumentation company on its £3m equity investment;
  • advising Particle Analytics on its circa £0.8m investment from Mercia, SIB, Par Equity and Old College Capital;
  • advising TRI Capital as part of its syndicated investment in Ryboquin alongside SIB and others totalling £1.2m;
  • advising Archangel on its seed investment in PhysioMedics;
  • acting for Newable (formerly Greater London Enterprise) in relation to a joint venture providing finance for SMEs;
  • acting for online men’s fashion retailer The Idle Man in relation to their last round of fundraising;
  • advising guarantors in a financial restructuring of the EasyHotel franchise in the Benelux countries;
  • advising Nash & Co Capital in connection with the issue of a loan note instrument for the group that owns the Sourced Market chain.

2017 is set to be another year where unexpected events continue to unfold before us. Trump has survived his first 100 days in office, the starting button has now been pressed on the Brexit process and we now await the outcome of our general election. What is next…? Will the future of the UK be “strong and stable” or “weak and wobbly”!? 

Supporting and developing the entrepreneurial ecosystem is a key ingredient of ensuring that innovative businesses can quickly grow and scale into international businesses with the prospect of growing a “strong and stable” economy. The ‘Engage Investment Exploit’ tech investment conference, which we have now supported for the fifth year running, is one of the most impressive events of its kind in the UK which showcases some of our most exciting companies of the future to numerous investors. It has become even bigger and better than previous years and we need to make sure that this event continues into 2018 and beyond and grows its international reach.  Duncan Logan was one of several inspirational speakers at EIE 2017 and he made the point that we need to work hard to make sure that our high growth companies are successful. As a former farmer he used the analogy that young lambs have a habit of trying hard to kill themselves and that without proper support and guidance many of our start-up companies are like young lambs!!  This is your Kitchener moment to think about what you can do to act as a guiding shepherd and help our entrepreneurial businesses to grow, scale and succeed!    

In the ‘iDeals’ section of this newsletter we have turned the spotlight on a number of deals which we have been involved with. These deals help highlight what several of our entrepreneurial businesses have been doing and we are delighted to have been given the opportunity to support them with their exciting plans and help make them happen. 

When we are not working on deals we do our best to run various initiatives and we were delighted to host a tech trade mission from Bavaria, an event on syndicated investments with Syndicate Room, an ‘extraordinary lives’ event featuring film producer and screenwriter Paul Pender, numerous US legal workshops and a Financial Conference with speakers like the CEO of Metro Bank.  We even managed to co-host a data security event along with the Cyber Academy less than one week after the WannaCry ransomware attacks!  Please read on to find out more about some of these events and the wish list of the German tech companies who visited us on the tech trade mission.  I can’t list every event but we are very grateful for everyone involved who has been kind enough to give up their time to help out. 

Please in particular note our article about data security and the far reaching data protection changes which will be introduced in less than 12 months. Detailed slides on these changes are available via a link within the article. In terms of crystal ball gazing I have also put separate proverbial ‘pen to paper’ about the smart use of data and why we could all be driving electric cars by 2025! As ever, my colleagues and I are happy to respond to any questions that you may have about how any of issues outlined in this newsletter may affect you. 

We look forward to continuing our journey with you, providing you with excellent specialist advice and thank you once again for your support. 

Best wishes,
Stuart Hendry, Senior Partner

T 0131 226 8203 & 0203 096 0113


Your product or service is ready to cross the Atlantic. The next step in your business plan is the successful implementation of your sales strategy to set up your brand in the U.S. What factors help make that a success?

  1. Timing - The right moment to develop internationally is not the same for all businesses, but in general your business should have a product or service which has some track record and is ready to be commercialised, and your business should have the financial resources to go global. Preparation and forward planning are key, including identifying your target customer base, finding the right person(s) to lead the U.S. operation and budgeting for the associated financial, time and travel costs.
  2. Staffing and Recruitment - Finding a good fit is essential. There are different approaches to building a U.S sales team:
  • Directly recruiting a local U.S. team – A U.S. team will have little or no knowledge of your business culture, working methods, or your product or service. They will have to quickly learn and assimilate that knowledge, while being managed from a distance with a time difference of 5+ hours.
  • Sending your U.K. Commercial Director to be the lead salesman. This may prove challenging as a U.K. expatriate may not be familiar with the U.S. market, the cultural difference or have the network to successfully target clients in the U.S.
  • An alternative scenario is for your U.K. CEO or senior executive to relocate to the U.S. for a couple of years to build a team in the U.S. This allows you to have someone with the business’s strategic vision on the ground as well as to surround your executive with specialised U.S. salesmen to penetrate the market. The CEO’s mission is then to recruit the right individuals to build an effective team.
  • Another approach is to join forces with a strategic partner in the U.S. market who could take the lead on product launch and commercialisation in the U.S. However, this approach may dilute your control of the U.S. strategy and operations.
  • When recruiting, bear in mind that the U.S. job market is typically more fluid than in the U.K. People tend to change jobs more frequently, employment is at-will and, particularly in the sales world, candidates are usually well prepared for interviews and very persuasive. Employee loyalty can be expensive. If you are unable to offer competitive salaries on the U.S. labour market, consider offering benefits such as U.K. holiday entitlement (which is typically more generous than the U.S.) and a U.S. stock option plan (which may be designed to mirror the U.K. plan).
  1. Distributor or Reseller – An alternative, less direct, approach to building your own sales team is to appoint U.S. based sales agents, distributors or resellers. This may also be an initial step before employing a team of your own.
  • Sales representatives or agents are independent contractors that market, advertise, promote and solicit sales on your business’s behalf.
  • Distributors are middlemen that purchase your goods for their own account with the intention of reselling them to others in the supply chain, such as other distributors, resellers such as retailers and end users such as consumers or companies. A reseller typically refers to a business that purchases goods from manufacturers or distributors with the intention of reselling them to end users for consumption or incorporation into another product.
  1. Offices?
  • Physical offices are not a priority in the initial stages of building your U.S. sales team. Rent for office premises can be expensive and you may wish to remain flexible to meet the needs of customers. Home working is common in the U.S., particularly in the more relaxed environment of start-ups and the sales team should expect to travel to meet prospective clients. If offices are a must in the initial stages, serviced offices or co-working spaces which offer meeting rooms are a good option.
  1. Recognising Cultural Differences
  • Marketing materials - Prepare “Americanized” collateral materials such as catalogues and flyers, using local business appropriate vocabulary. Similarly, your website should be up to date and reflect U.S. standards.
  • Network - An extensive network is essential to succeed in the U.S. Attend tradeshows and events organized in your industry to improve your business’s reach, update professional social networks and maintain a good brand image.
  • Titles - Titles matter in the U.S. Being introduced as a Sales VP will open more doors than being introduced as salesman.
  • Compliance – U.S. employment laws differ from those in the U.K., as do other areas such as IP, contract matters and taxes. Taking early advice can streamline operations and help avoid expensive mistakes.
  • Risk Management – As your business expands in the U.S., particularly at the stage of taking on employees, you should consider establishing a separate U.S. subsidiary for several reasons – to improve your profile with U.S. customers, for liability protection and to minimise the U.K. company’s tax “foot print” in the U.S. (For more information, see our US Transactions Blogs: We regularly advise clients on setting up operations in the U.S. and would be happy to discuss how this may work for your business.

The U.S. offers great opportunities for businesses; it is a large, diverse market. The success of your business in the U.S. may be optimized by careful forward planning and taking advice from those experienced in the market, identifying your U.S. sales strategy and customers, engaging the right team and adapting your business’s marketing materials, products or services for the U.S. market. Good luck!

Tracey Ginn

U.S. and U.K. Corporate Partner


Tel: 0131 226 8232

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