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Brodies Annual Review 2005 Annual Review Annual Review

Brodies Annual Review 2005

15 Atholl Crescent, Edinburgh EH3 8HA Telephone: +44 (0) 131 228 3777 Fax: +44 (0) 131 228 3878 E-mail: bill.drummond@brodies.co.uk www.brodies.co.uk


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Foreword

Our first year as a Limited Liability Partnership has involved a transition. We are all now “members� of Brodies LLP, but the essence of our business and our partnership culture remain the same. Central to our business is providing the best possible service to our clients and we strongly believe that this is best achieved by working together as a team.

This widespread growth is evidenced in attracting top-rated lawyers from around the UK, hiring the brightest graduates from our Scottish Law Schools, increasing client instructions from our home market (and those referred from the City of London) and delivering for clients in jurisdictions as far apart as Bergen and Bangladesh.

LLP brings with it an operating transparency that aids good governance while ensuring that effective risk management is pertinent to our daily commercial dealings. In business planning terms I am pleased that we have managed this change without losing forward momentum. The end of our business year also marked the end of one three-year plan, and the start of another, throughout which we have continued to grow.

We are managing the trick of achieving real business growth year-on-year and delighting more clients into the bargain. Quality is of course the watchword, in our people, our counsel and our service delivery. I hope you find evidence in this review that our clients’ needs are at the forefront of our minds and that we share their commercial ambitions in every sector that is key to the growth of the Scottish economy.

JOYCE CULLEN Chairman


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Brodies LLP Annual Review 2005

Review

The past year has been a strong one for our firm as a business and, indeed, for Scottish business as a whole, though our leading competitors seem determined to grow away from Scotland and not from within the country. By design, 2005 sees us as the largest commercial law firm operating exclusively from a Scottish base. In the UK Top 100 listings those few Scottish firms which are clearly above us in income terms, are all chasing growth from square footage in the Square Mile. This is not our strategy. We are resolutely Scottish with an international perspective and delivery capability. Practising Scots Law for the most part, we work with London, US and other international law firms in our jurisdiction and use our cross-border talents only when there is an identifiable client need. Work in other jurisdictions has increased again this year but has always linked directly to furthering a client’s agenda.

Illustrating this, throughout this review you will find evidence of our lawyers delivering for clients in the home market and as far afield as their specialist expertise takes them in meeting and exceeding client expectations. A key client research programme which commenced in the year under review has validated our approach and we are confident that we will maintain the uninterrupted business growth we have posted in each of the last six years. Our people are central to our business and we are pleased to have promoted public law specialist Christine O’Neill to partner in the year under review. The Scottish Parliament is our national legislature and having the resident expertise to draft primary legislation and provide client advocacy in Committee is highly valued. Once again the firm ranked highly in the top legal directories in a number of practice areas, with many of our lawyers commended “leaders in their field”. The year also saw the appointment of five new associates in addition to numerous promotions across the firm as our lawyers develop their skills and experience.


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It is a tight labour market for top-quality lawyers and recruiting, rewarding and developing our legal resource is always a lead agenda item for our board.

Our focus on those businesses with a major stakeholding in the property sector continues to bear fruit. Our total commitment to clients operating in that sector is further reinforced.

To better serve our clients we completed three significant housekeeping changes last year. We combined our property expertise into a single department with more than 50 lawyers on the team. Our top-rated employment unit, previously part of our litigation team, has become an independent department with full representation on our operational board. Our private client team has benefited from an important piece of market positioning research that has led directly to an influx of new clients with identifiable trusts, tax, wills and executry requirements.

In the past year we have developed fully into the top-quality, client-focused commercial practice we have been working towards, with rated expertise in corporate, banking and finance, IT, employment, litigation, property and private client law.

And as this review goes to print we have received a major influx of new talent with 4 new partners and their commercial property teams joining us in November 2005 from Fyfe Ireland.

Objectively we have grown to become the market leaders in Scotland for Scottish jurisdictional work while presenting a clear option to the market for major transactional work. The market sees the change and our shortlisting in the Legal Business Awards 2005 as ‘UK Regional Firm of the Year’ is testimony to this.

BILL DRUMMOND Managing Partner


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Brodies LLP Annual Review 2005

Performance

“Brodies continues to go from strength to strength.” THE LEGAL 500 2005

Our financial performance in the past year caps a 6th successive year of turnover and profit growth. The firm posted turnover growth averaging 16% and profit growth averaging 19% throughout the period 2000 to 2005. In the year to 30th April 2005 turnover was up 10.8% to £18.33m (€27.3m*), from £16.55m (€24.6m*), and profit was slightly ahead at £6.76m (€10.05m*), up from £6.74m (€10.02m*) – the 5th year in a row that saw revenue growth in excess of 10%. Profit per equity partner also rose to £241,000, (€355,000*) up from £239,000 (€352,000*) last year. These results were achieved during a period of significant investment in property, people, IT and client services. An additional 686 sq m (7,380 sq ft) of office space was added at our Atholl Crescent, Edinburgh address. A major IT upgrade was undertaken in the year and the successful outsourcing of a range of facilities and processing personnel was achieved through Edinburghbased firm, Docuserve.

Headcount at the year-end stood at 250 (+20 outsourced support) made up of 33 partners, 112 associates, assistants and other fee earners, 4 senior professional management and over 90 administrative support staff. The business generated a positive cash flow of £789,000 (€1.2m*) in the year under review to give a closing position of £1,146,000 (€1.7m*). Abbreviated Profit and Loss, Balance Sheet and Cash Flow schedules feature as an appendix to this review. Deloitte & Touche LLP were appointed as auditors for our inaugural year of reporting as a Limited Liability Partnership.

* Conversions are at October 2005


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Clients

Brodies concentrates its legal resources in Scotland to best serve the needs of clients in the home market, cross-border and worldwide. Presenting a snapshot of some of the work we have done with clients in the past year is the most powerful indicator we know of why your business should work with us. 6 Heart of Midlothian plc 9 Credit Suisse First Boston 11 Zara 13 BAA Scotland 14 Cairn Energy PLC and Sykes Global Services Limited (EMEA) 17 Buredi and Bishop Loch 18 North Sea Clients 21 Prestbury Investment Holdings Ltd and Topland Group of Companies 22 Pan Am Liquidation Trust 25 Family Law 26 Social Responsibility 28 Accounts 31 Business Unit Heads


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Brodies LLP Annual Review 2005

Heart of Midlothian plc

“It was important for us to find legal advisers who could cope with a high profile deal and manage complex banking and people issues at the same time. Brodies has delivered on all three.” SERGEJUS FEDOTOVAS Non Executive Director, Heart of Midlothian plc

The record shows Scotland v Lithuania in four UEFA European Championship Qualifiers: won 2 at Hampden, lost 1 in Kaunas and drawn 1 in Vilnius. A bond of friendship developed between the two countries and the rumours started flying around Scottish football that Lithuanian banker and entrepreneur, Vladimir Romanov, was looking to invest in the Scottish Premier League. Hearts, arguably Edinburgh’s leading club, were the eventual target. From an initial referral by Berwin Leighton Paisner, Brodies’ corporate team was instructed to advise on the acquisition of shares from two of the major shareholders of Heart of Midlothian plc and prepare the necessary banking documentation to refinance a major tranche of the Edinburgh club’s mounting debt. The deals, transacted in the year under review, left Mr Romanov the principal shareholder in Hearts with a 29.9% stake. Total deal value was £19m (€28m*), including share acquisitions of £1.4m (€2.1m*) and £17.6m (€25.9m*) in debt restructuring. Mr Romanov’s bankers, Ukio Bankas, Lithuania’s fifth largest commercial bank, is now the club’s principal lender.

A critical element of the transaction, in which Brodies lawyers were instrumental, was the cancellation of a £20.5m (€30.3m*) deal with a residential property developer, that would have seen Hearts ground-share at the home of Scottish rugby, Murrayfield Stadium. Deeply unpopular with Hearts supporters, the previous board’s decision to sell off Tynecastle Stadium was overwhelmingly rejected at an EGM. Brodies lawyers continue to advise Mr Romanov and Ukio Bankas and work closely with them on all employment matters. Ukio Bankas is to be the Hearts shirt sponsor for season 2005/6, in a one-year deal, and has announced plans to open a representative office in Edinburgh to act as a financial bridge between the UK and Eastern Europe. In addition to his company’s shareholding in Hearts, Vladimir Romanov sponsors his hometown side, Lithuanian champions FBK Kaunas and FC MTZ-RIPO Minsk in Belarus.


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Brodies has significant experience in working with major sports businesses. The firm acquired the Dundonald Golf Course for Arizona-based The Lyle Anderson Company Inc. to be a sister course for Loch Lomond Golf Club, home of the Barclays Scottish Open. The firm has also previously acted in several major championship course projects.


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Brodies’ banking team is currently advising in some significant property securitisation and warehouse transactions involving Scottish assets. In retail product development our advice relates to the launch of products in Scotland and the UK.

Brodies LLP Annual Review 2005


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Credit Suisse First Boston

Brodies lawyers were involved in the largest ever Sterling issue commercial mortgage backed securitisation (CMBS) at the end of the year under review. Lead advisers on the transaction, Freshfields Bruckhaus Deringer, instructed Brodies to advise CSFB and The Royal Bank of Scotland plc on all Scottish aspects of the The Mall Fund refinancing of £1.06bn (€1.56bn*) of bank debt. The successful refinancing is set to increase returns to the fund by circa £7m (€10m*) per annum. The Mall Fund collateral, valued at more than £2.35bn (€3.47bn*), comprises 22 shopping centres in the UK. The real estate fund is managed by Morley Fund Management and Capital & Regional. CSFB acted as lead manager and sole bookrunner on The Mall Fund transaction, with RBS adding a £300m (€444m*) capital expenditure and acquisition facility. Brodies’ banking team worked in detail on the securitisation of the Scottish assets, The Mall Howgate in Falkirk and The Mall Trinity on Union Street in Aberdeen. With 80 retail units between them, the Scottish assets were valued at £150m (€222m*).

The resultant issue benefited from a AAA rating by all three of the major rating agencies and was well received by institutional investors. Structures that turn future cashflow into tradable securities have grown in popularity since the 1990s. The range extends from the standard to the unusual. The banking team has been involved in a wide variety of tradable securities including: future mortgage, commercial loans, electrical equipment lease receipts, car dealership receivables, NHS prescription receivables and vehicle leasing. Issuance in the European securitisation market 1 hit a record high in 2004 for the 6th straight year. Growth of 12.1% is recorded to €243.6bn (£164.5bn*) from €217.1bn (£146.7bn*) in 2003. The ESF predicts issuance will increase to €255bn (£172.3bn) in 2005. The CMBS European volume grew significantly in 2004, totalling €15.2bn (£10.3bn*), a 36.9% increase on the previous year and an indicator of the strength of commercial real estate markets. New issues of securitised debt in the UK totalled €105.3bn (£71.1bn*) in 2004, up 38.5% from €76bn (£51bn*) issued in 2003. Collateralised securities in the UK accounted for 43.2% of total European securitised issuance in 2004, compared to 35% in 2003.

1

European Securitisation Form (Data Report Winter 2005)


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Brodies LLP Annual Review 2005

“In Brodies we have found a country partner who understands the key role the store plays in our business and its advice matches the best we have received around the world.” JAVIER MONTEOLIVA DIAZ Head of Legal, Inditex

Zara, the largest retail chain in the Inditex group of eight retail formats, has grown in its 30 year history from a single outlet in A Coruna (Spain), to a 700-store network in 54 countries worldwide. Brodies’ retail property law specialists helped introduce the Zara format to Scotland, securing key sites on Edinburgh’s Princes Street and at Centre West in East Kilbride. The year under review witnessed a high level of activity with Zara, characterised by “continuous product renovation”, more than doubling its Scottish footprint. Two new sites were acquired in the West of Scotland, one at the Glasgow Fort retail park at junction 10 on the M8 and the other on Buchanan Street, Glasgow’s prime city centre retail area. A third was acquired at the Eastgate Centre in the heart of highland capital, Inverness. Meeting the Zara site specification at Eastgate provided a complex legal challenge as the acquisition and redevelopment requirement spanned 5 mall units on 2 levels.

Zara pays particular attention to the design of its stores, its shop windows and interior décor and locates them in the best sites of major shopping districts. The store is the key element in the Zara business model, a space conceived to allow customers to discover fashion concepts and where information is gathered on a continuous basis, adapting the offer to changing customer demands. A creative team of more than 200, in a highly vertically integrated business process, ensures that new fashion articles reach Zara stores twice a week. In 2004, Zara opened 97 new stores and turnover reached €3,819.6m (£2,580.5m*). Further store openings are planned in Scotland and throughout the UK. Zara parent company, Inditex, has a market capitalisation in excess of €12,000m (£8,100m*) and in the year to 31 January 2005 reported a consolidated turnover of €5,670m (£3,831m*) and a net profit of €628m (£424m*).


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Zara

Brodies’ retail property team is rated the largest and strongest in Scotland and includes Inditex format Zara and other leading brands including O2 UK Limited, Vision Express Ltd, Levi Strauss (UK) Ltd, Farmfoods Ltd, Crabtree & Evelyn and Stead & Simpson Ltd. The team won instructions from 15 new retail organisations last year including Foot Locker, Bank Fashion Ltd, Christies 99p Stores and New Heights.


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Brodies is well versed in the workings of the Scottish rail network and in 2004 successfully re-let the Scotrail franchise on behalf of the Strategic Rail Authority and the Scottish Executive. The franchise award, valued at £1.9bn (€2.8bn*), is believed to be the Executive’s largest single financial commitment.

Brodies LLP Annual Review 2005


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BAA Scotland

BAA Scotland is part of the world’s leading airport company that owns and operates three Scottish Airports – Edinburgh, Glasgow and Aberdeen. Brodies is instructed by BAA Scotland to advise on planning and public law matters and, in the year under review, has given evidence on BAA’s behalf before a Committee of the Scottish Parliament, established to consider a proposed Tram Link to Edinburgh Airport. Additionally, Glasgow and Edinburgh airports are key stakeholders in separate plans for new rail links, both of which require legislation and consent from the Scottish Parliament. Private Bill Promoters for the proposed rail links, Transport Initiatives Edinburgh and Strathclyde Passenger Transport, will bring forward draft legislation to the Parliament in the Winter of 2005. A Private Bill Committee for each project, made up of MSPs with no constituency interest, then begins the process of scrutinising the proposals laid before them.

The Bills are each subject to a 60-day objection period before General Principles are considered and a report with recommendations produced for the Parliament. After debate the Parliament has to decide if it agrees with the Bill’s General Principles in order for it to pass to a Consideration Stage. Objectors can be called to give evidence at the Consideration Stage and amendments to the Bill considered from Committee Members, the Bill’s Promoters and third parties. Clear of this stage the Bill passes to the Scottish Parliament for debate, including any late amendments. Agreement to the Bill in Parliament then requires Royal Assent before it becomes an Act of the Scottish Parliament. Brodies lawyers have represented BAA Scotland’s interests throughout the pre-parliamentary phase on both Private Bills.


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Brodies LLP Annual Review 2005

Cairn Energy PLC and Sykes Global Services Limited (EMEA)

“We continue to be impressed by the support and service we receive from the staff at Brodies. They are also able to provide us with the clarity, pragmatism and responsiveness we need on a day to day basis and do so in a friendly and down to earth way.” GEORGE FOWLER Group HR Manager, Cairn Energy PLC

Brodies’ employment unit continues to broaden its reach in Scotland and in other jurisdictions around the world. In the year under review, Brodies has partnered independent public oil & gas exploration and production company, Cairn Energy PLC, on a number of HR operational matters impacting on local employees as well as on expatriate contractors based in India and Bangladesh. A prior review of Cairn’s UK employment contracts and policies, carried out by dual qualified Brodies employment specialists, greatly assisted this process. Focused on South-East Asian energy markets, Cairn saw a significant increase in its operations during 2004 and 2005. The company drilled more than twice as many wells in India than in the previous year, while stepping up both seismic and exploration activity in Rajasthan. Cairn has made 12 discoveries in Rajasthan including the Mangala Field (the largest find by any company in India for 22 years) which has established a world-class position in the region for Cairn. Headquartered in Edinburgh, Cairn has bases in Dhaka in Bangladesh and in Barmer, Chennai, Jodphur and New Delhi.

Sykes EMEA operates 16 wholly-owned Customer Support Centres and 3 integrated fulfilment facilities across Europe, the Middle East and Africa delivering local, regional, pan-European and offshore end-to-end Customer Support Solutions for many of the world’s best known brand names. Brodies’ employment and corporate units provide advice to Sykes’ UK entities for both domestic and pan-European issues. Counsel has involved real estate, corporate governance and general employment law advice including trans-member state internal TUPE transfers. Additionally Brodies has played a key role in instructing locally recognised specialists in foreign jurisdictions to assist the process and co-ordinate the multi-jurisdictional advice on the cross-border application of TUPE. In the EMEA region Sykes is represented in Finland, Germany, Hungary, Ireland, Italy, The Netherlands, Slovakia, South Africa, Spain, Sweden and the UK. Nasdaq listed Sykes (SYKE) is a global corporation with over 16,000 employees, servicing the world’s leaders in technology, communication and financial industries.


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“We deliver targeted, responsive and innovative customer support solutions to our clients and we see the same approach to our business from Brodies.” DAVID GRIMES Director, Legal Affairs – EMEA Sykes Global Services Limited

Brodies was shortlisted for Employment Team of the Year at the prestigious Lawyer Awards 2004, recognising work with the industry-leading Human Resources function at the Royal Bank of Scotland Group plc.


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Brodies LLP Annual Review 2005

“This is an important development for Dean Village that would have been lost to the area without the specialist support of the Brodies planning team.” ANDREW BURRELL Bell’s Mills Ltd

During the review period Brodies’ planing team undertook 47 days of inquiry / hearing appearance work. This included a team of 7 solicitors appearing for Inverclyde and Dundee Councils at their local plan inquiries, which were held contemporaneously at opposite ends of the country. This shows the depth of experience within the firm which can be called upon by clients.


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Buredi and Bishop Loch

At the end of the year under review Bell’s Mills Ltd – a consortium made up of Buredi, the property development joint venture of The Burrell Company and EDI Group, and house builders Bishop Loch – was granted planning permission for a residential development in Edinburgh’s Dean Village. This followed a public inquiry at which Brodies’ planning specialists led a team of expert witnesses. The remains of a water-powered mill will be retained to form an integral part and important feature of a development of 24 new apartments, built in three separate blocks and overlooking the Water of Leith. This is a rare example of a successful planning appeal, particularly given the sensitive nature of the site and its surroundings. Planning permission had previously been granted for an extension to the Menzies Belford Hotel (formerly the Dragonara), on the Bell’s Mill site, but Edinburgh Councillors rejected the Buredi Bishop Loch proposal against the recommendation of planning officers. Grounds for refusal made a formidable list: impact on the conservation area and listed buildings, the World Heritage Site,

the character and appearance of the area, the amenity and recreational value of the Water of Leith and its Walkway, the wildlife and the loss of open space. The Scottish Executive Reporter who determined the appeal found that the design process had been thorough, involving close co-operation between developer and relevant Council officials in line with the Scottish Executive Designing Places policy statement. Furthermore the design proposal (blocks of flats) was found to be more in keeping with the industrial history of the locality than the Council’s counter of 2 storey dwelling houses. The Reporter also agreed with the proposal for riverside planting to frame and filter views of the development rather than attempting to screen it. Exceptionally, the Reporter also upheld the developer’s claim for partial expenses, finding that the Council had behaved unreasonably in objecting to the development on wildlife grounds, as there was no evidence to support the importance of the site in the wider wildlife corridor. Work at Bell’s Mill is scheduled to begin on site during 2005 with the first properties due to be released for sale in early 2006.


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Brodies LLP Annual Review 2005

North Sea Clients

Brodies lawyers have been active in the year under review working with fishing, fish farming, shipping and oil and gas clients with significant interests in the North Sea. The addition of specialist contentious shipping expertise at partner level during the year has further established a leadership position in shipping and transport law. Increasingly instructions have been forthcoming from our North Sea near neighbour and European Economic Area member, Norway. “Shipping is Norway and Norway is shipping” is the phrase coined by the country’s former Minister of Trade and Industry, Ansgar Gabrielsen. Norway is Europe’s largest maritime nation and controls one of the top four largest fleets in the world – 1,659 ships of 43.9 million dead weight tonnes in 2003. With only 0.1% of the world’s population and 1% of world trade, Norway controls 13% of the global fleet. In the year under review Brodies’ shipping and banking specialists acted as Scottish counsel to DnB Nor ASA, on a number of shipping related matters. This included the financing of the acquisition by Solstad Offshore UK Limited – a subsidiary of major Norwegian shipping group Solstad Offshore ASA – of four platform supply and anchor handling vessels engaged in North Sea operations. The firm was instructed by leading Norwegian law firm Wikborg Rein & Co.

Euromoney Magazine recently named DnB Nor “Best Bank in Norway” and DnB Markets “Best Equity House in Norway”. Solstad Offshore ASA operates 32 offshore vessels, divided equally between North Sea and worldwide operations. The company, headquartered in its founding port of Skudeneshavn, has divisional offices in Aberdeen, Scotland and Rio de Janeiro, Brazil. Other shipping matters in the year included contracts variation work on a fleet of six motor tankers, financing arrangements on tugs and fishing vessels and disposals and chartering agreements on fish farming well boats. Work during the year for client Pentex Oil UK Ltd involved the disposal of several North Sea assets including a 9% stake in the Balmoral Field and its associated Floating Production Vessel, additional producing properties in the Stirling and Glamis Fields in the Central North Sea and dormant exploration acreage in the Maureen Field.


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Brodies’ banking practice has been involved in more than 300 deals in the past year, with a total value of over £3.73bn (€5.52bn*). Additional partners were added in private equity and shipping finance specialisms.


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Brodies’ commercial property expertise was drawn together into a single department in the year under review with all rural, retail, investment, development, planning and construction specialists now in one 50-lawyer team.

Brodies LLP Annual Review 2005


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Prestbury Investment Holdings Ltd and Topland Group of Companies

“Winning the best sale-and-leaseback arrangements requires slick legal back up and in Brodies we’re always confident that’s what we’ll get.” NICK LESLAU Chairman and CEO, Prestbury Investment Holdings Ltd

Brodies' commercial property team participated in several important sale-and-leaseback deals in the year under review. Two significant transactions on behalf of Prestbury Investment Holdings saw Brodies handle all Scottish aspects of the sale-and-leaseback of 220 pubs in the Spirit Group portfolio and of 135 of Travelodge’s properties. The Spirit Group deal, valued at approximately £500m (€740m*), leaves the UK’s leading independent managed pub operator with operational control of the outlets and cash to reduce debt. Its UK estate comprises more than 2,000 pubs including market-leading concepts Two For One, Wacky Warehouse, Chef & Brewer, Qs and Bar Room Bar. Several landmark pubs in Edinburgh featured in the 30-year term sale-and-leaseback arrangement, including The Barony Bar in Broughton Street, Milnes on Hanover Street and Ryries at Haymarket. The deal partnered Prestbury with West Coast Capital and Bank of Scotland. Brodies advised Prestbury Hotels Ltd on a sale-and-leaseback of the 135 properties in the Travelodge chain. The newly formed Prestbury Hotels company is a joint venture by Nick Leslau’s Prestbury Investment Holdings,

Tom Hunter’s West Coast Capital and Bank of Scotland Joint Ventures. The deal saw Prestbury Hotels acquire the freeholds for approximately £600m (€889m*) to lease back over periods ranging from 25 to 35 years. Travelodge, styled as the UK’s only low-cost hotel chain, intends to accelerate the rollout of its low-cost model with the cash generated in the deal. Nick Leslau and Tom Hunter have transacted over £2bn (€3bn*) of property joint ventures in a three-year relationship. In a separate hotel sector transaction, Brodies advised Topland Group on the Scottish aspects of a £185m (€274m*) sale-and-leaseback deal on six Thistle Hotels in Edinburgh and London. Topland, best known for its large scale saleand-leaseback arrangements with retailers Tesco and Marks and Spencer, entered the hotel market for the first time with the Thistle transaction. The portfolio, let on 30-year leases, comprises 1,209 rooms and forms part of the assets of the Thistle Hotels Group.


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Brodies LLP Annual Review 2005

Pan Am Liquidation Trust

“In the pursuit of justice, on behalf of Pan Am, Brodies guided us to a significant result in the Scottish courts.” PAUL RENDICH Pan Am

Brodies’ commercial litigation team acted on behalf of Pan Am in winning a significant share of an out of court settlement from the Government of Libya at the end of the year under review. Instructed by the New York office of St Louis Missouri-based law firm, Bryan Cave LLP, the case for damages on behalf of the Pan Am Liquidation Trust was pursued in the Scottish civil courts.

The Court of Session action was further delayed by al-Megrahi’s unsuccessful appeal against conviction. It has been reported that prior to the settlement of the civil case, the bereaved families of Pan Am Flight 103 received compensation from the Libyan Government in a deal reportedly brokered by Prime Minister Tony Blair in talks with Libyan leader Colonel Maummar Gaddafi.

The case alleged that the Libyan Government had responsibility for the bomb on Pan Am Flight 103, which brought down the aircraft on the small Scottish town of Lockerbie in 1988, with the loss of 270 lives.

Brodies was pleased to be entrusted to act in this complex international litigation involving representatives and negotiations in various countries.

The civil action raised in 1993 was deferred during the trial of former Libyan secret service agent Abdel Baset al-Megrahi, who was subsequently sentenced to life imprisonment in the special Scottish Court in the Netherlands.


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Brodies has one of the largest teams of commercial litigators in Scotland and is rated as the pre-eminent firm by legal directories. It is regularly instructed on challenging work by the “magic circle� of City firms, international practices and corporate counsel worldwide.


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Brodies’ family law team’s trust and tax advice is estimated to have saved clients £36m (€53m*) in 2004.

Brodies LLP Annual Review 2005


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Family Law

A visit to the National Gallery in London remains instructive on family law matters, more than 250 years after William Hogarth painting “The Marriage Settlement”, part of a series of satirical moralising engravings about the upper echelons of society. In the picture The Earl of Squander discusses the marriage of his son to the daughter of a wealthy merchant. The lawyer, Silvertongue, is seen counselling the young woman but by the 6th engraving in Hogarth’s “Marriage a la Mode” series the ill-advised union ends in disaster. The trend for partnership formation and marriage in Europe (EU-15) is for fewer and later marriages, more remarriages, increased cohabitation and a higher risk of divorce. In the UK, marriages are at the European mean, down from 8 per 1,000 population in 1970 to 5 per 1,000 population in 2001. However UK divorce rates are significantly higher than the EU-15 mean. 23% of couples who married in 1960 divorced, rising to 42% of the 1984 cohort 1. In Scotland the number of divorces in 2004 was 11,227, some 299 more than 2003 but down from the 1985 peak of 13,337 2. According to the 2001 Census there were 287,236 divorced people living in Scotland. Brodies’ family law specialists are recognised leaders in the field of mitigating the effects of relationship breakdown on community property arrangements. Business owners advised in the year under review have been counselled to issue preference shares in divorce settlements.

1

Eurostat Yearbook 2003; 87.3

2

General Register Office for Scotland, Annual Report 2005

As part of a package of maintenance payments the shares attract dividend income tax of 10% instead of higher rate income tax. Landowners have been advised on the merits of holding land in Trust where income diverts to the Trust, deferring a capital gain at 40% which is particularly appropriate for land with unrealised development potential. Grandparents have been advised on the means of protecting lifetime gifts for a nominated spouse and children only in the event of marriage breakdown. Pre and Postnuptial agreements have been prepared for clients. They can be an effective way of protecting either pre-marital assets or future assets that are likely to be acquired as part of an Inheritance tax planning exercise. The Scottish Courts are very reluctant to interfere with a well drafted Pre or Postnuptial agreement. As Scotland becomes wealthier, Pre and Postnuptial agreements become relevant for more and more people. Clients with defined residence in Scotland but who also live and work in other jurisdictions have been advised on the substantial financial benefits that can arise from divorcing in Scotland. The House of Lords ruling in the case of White -v- White in October 2000 has shaped the decision making process for several clients who have been advised to pursue divorce proceeding in the Scottish Courts. English judges are obliged to apply the yardstick of equality in deciding the division of assets in a company where spouses work together, regardless of whether the shares are deemed to be matrimonial property. In Scotland the courts are free to take a more pragmatic view.


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Brodies LLP Annual Review 2005

Social Responsibility

2005 was the first in a three-year sponsorship for Brodies of the famous Edinburgh Festival Fringe poster competition. Aimed at involving the school children of Scotland in the creation of the Festival’s iconic image of the year, the poster also becomes the must-buy postcard, t-shirt, mug and fridge magnet souvenir of the Fringe. A long-established feature of The Fringe, the competition draws entries from over 100 schools in three age groups. More than £2,000 of prize money is incorporated into the sponsorship and contributed works are exhibited prominently in the city. The winning entry and Fringe poster of the year, reproduced in over 500,000 Fringe programmes and distributed worldwide, was painted by tenyear-old Corrie Drummond of St Fergus Primary School in Dundee. Corrie collected the top individual prize of £250 and won £750 and the Fringe Poster Competition Trophy for her school.

Previous Fringe posters have been spotted in arts-conscious households worldwide and one even turned up in Nicole Kidman’s apartment in the Hollywood movie “The Interpreter”. Brodies staff who fundraise for good causes, nationally and in their own communities, are encouraged to seek funding support from the firm and in the year under review more than £5,000 (€7,400m*) was gifted by this route to charitable organisations. In a corporate capacity the firm supports the work of CAB Scotland.


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In a new phase of work for the proposed Airdrie – Bathgate Rail Link Project a major consultation exercise is being carried out. As part of this consultation, the firm is supporting Public Relations students at Queen Margaret University College by providing them with practical work experience. The students have questioned residents and other parties to clarify ownership and find out who might be affected by the project. Queen Margaret University College has provided enthusiastic support for the project and both the students and University agree that this has been a great learning experience on a high profile public sector project.


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Brodies LLP Annual Review 2005

Accounts

2005 ÂŁ000

Turnover Operating expenses Operating profit Brodies LLP Profit and Loss Account For the year ended 30 April 2005

Net interest

18,335 (11,579) 6,756 4

2004 unaudited ÂŁ000 16,553 (9,801) 6,752 (14)

Profit for the financial year available for division among members

6,760

6,738


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£000

2004 unaudited £000

769

397

10,235

9,971 357

2005

Fixed Assets

Tangible assets Current Assets

Debtors Cash at bank and in hand

1,146

Brodies LLP Balance Sheet

(2,174)

10,328 (1,647)

Net current assets

9,207

8,681

Total assets less current liabilities

9,976

9,078

11,381 Creditors: amounts falling due within one year

Creditors: amounts falling due within one year

(172)

Provisions for liabilities and charges Loans and other debts due to members

(386)

Net assets

(6,804)

– (321) (5,939)

2,614

2,818

2,250 364

2,457 361

2,614

2,818

6,804 2,614

5,939 2,818

9,418

8,757

Members’ other interests

Members’ capital Other reserves

Total Members’ interests

Loans and other debts due to members Members’ other interests

As at 30 April 2005


Brodies LLP Annual Review 2005

30

Accounts (continued)

2005 £000

Net cash inflow from operating activities Returns on investments and servicing of finance Capital expenditure and financial investment Transactions with members and former members

7,307 4 (772) (6,044)

2004 unaudited £000 6,482 (14) (241) (5,923)

Brodies LLP Cash Flow Statement For the year ended 30 April 2005

Net cash inflow before financing

495

Financing

294

304 –

Increase in cash during the year

789

304


31

Business Unit Heads

CHARLES SMITH Corporate charles.smith@brodies.co.uk

HUGH STEVENS Private Client hugh.stevens@brodies.co.uk

JOAN CRADDEN Employment joan.cradden@brodies.co.uk

DENIS GARRITY Property denis.garrity@brodies.co.uk

NEIL COLLAR Litigation neil.collar@brodies.co.uk


32

Brodies LLP Annual Review 2005

Heart of Midlothian plc: photography courtesy of SNS Group

Credit Suisse First Boston: “Mall Howgate, Falkirk” photography by Whitedog

Zara: image courtesy of Inditex

BAA Scotland: “Edinburgh Airport Rail Link” image courtesy of Media House

Cairn Energy PLC: “Rajasthan, India” photography courtesy of Cairn Energy PLC

Buredi and Bishop Loch: “Bells Mill” image courtesy of Bells Mills Ltd

North Sea Clients: photography by Corbis

Prestbury Investment Holdings Ltd: “Barony Bar, Edinburgh” photography by Whitedog

Pan Am Liquidation Trust: photography by Corbis

Family Law: “The Marriage Settlement” painting by William Hogarth, image courtesy of The National Gallery

Social Responsibility: “Fringe Poster Image 2005” painting by Corrie Drummond, image courtesy of the Edinburgh Festival Fringe


Retreeve text and cover papers now carry the Forest Stewardship Council (FSC) logo A minimum of 40% FSC certified fibre and 20% de-inked post-consumer waste All virgin fibre is made from elemental chlorine free pulp Certificate No: TT-COC-1822 FSC Trademark Š 1996 Forest Stewardship Council A.C. FSC accredited certification means that the forest is managed according to strict environmental, social and economic standards


Brodies Annual Review 2005 Annual Review Annual Review

Brodies Annual Review 2005

15 Atholl Crescent, Edinburgh EH3 8HA Telephone: +44 (0) 131 228 3777 Fax: +44 (0) 131 228 3878 E-mail: bill.drummond@brodies.co.uk www.brodies.co.uk


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