Schedule 7: Special Measures Paragraph 7: Effect of special measures order on relevant contracts and legal proceedings Background
In the making of this provision, it is considered that it may be necessary for the Special Measures Manager to be able to take over contracts and liabilities of the Accountable Person, to enable it to effectively discharge the functions as set out in the special measure order. It allows them to recoup damages arising from breaches of contracts relating to the discharge of Part 4 functions, prior to a special measures order coming into effect and pursue third parties.
Example
The Special Measures Manager takes over a contract from the Accountable Person to pursue a claim against a third party in relation to contractual performance of services in relation to functions under Part 4 of the Act. The third party responds to the cause of action with a counter-claim. The counter-claim relates to the period prior to the special measures order coming into effect and is a contractual one against the Accountable Person in relation to its Part 4 functions. Nevertheless, the Special Measures Manager would need to pay any damages awarded to the third party against the Accountable Person, if the manager had taken over the contract subject to the counter-claim. Alternatively, if the manager’s own claim is successful, the counterclaim may offset any damages award in the manager’s claim. In either case, the Special Measures Manager would subsequently obtain reimbursement from the Accountable Person.