Document A- For use in PART 1

From: Faisal Abdul

Sent: [today's date]

To: [you] Trainee solicitor

Subject: Client: Alice Jones, CleanCare

File No/Ref: FA/RA/1926/ja

Date: [ Today ]

A new client, Alice Jones has arranged a meeting for next week to discuss various issues in connection with a business venture, CleanCare, I would like you to attend that meeting and advise on these issues. Alice telephoned me today to give me some background before the meeting and to explain the issues which are concerning her.

Alice Jones is a chemist who is passionate about environmental issues. She is particularly concerned about the amount of toxic chemicals that are used in cleaning products and the plastic waste generated by the use of these products.

It is a very competitive market, but her idea was to create air fresheners and sanitiser sprays that contained only natural ingredients. These products would be supplied in glass spray bottles, similar to perfume bottles, which customers could keep and refill. The idea was to sell directly to customers online.

In September last year, Alice Jones, who is very comfortably off, gave up her job to work on the project. She persuaded her friend, Alexis Kalogeras, a horticulturalist, to join her. Initially, they set up a 'laboratory' in Alexis's garage. Alice invested 100,000, Alexis 20,000 to get the project off the ground. Alice sourced the chemical ingredients and Alexis worked on the scents and oils. By December last year, they had created a range of air fresheners, room diffusers and also pet deodoriser. The problem was knowing how to distribute and market the products. In February this year, Alexis's wife, Joy, who had been made redundant from her digital marketing job, agreed to join Alice and Alexis and help on a part-time basis with getting the product on the market. Joy also invested 10,000 into the business.

Alice was able to find a manufacturer of suitable glass bottles for the products and the refills, and the first products went onto the market in late March 2024. Their products have proved to be highly successful. The rose scented room deodoriser and the sage pet deodoriser went viral after being used by a global superstar and tweeted about. Within a few months, it became clear that the demand could no longer be met from the make-shift laboratory in Alexis's garage, and they were forced to look for bigger premises. In June this year they all agreed to purchase the freehold of a small industrial unit, where they have set up a bigger laboratory, with manufacturing and storage facilities and have purchased more sophisticated equipment.

The expansion of the business has clearly necessitated considerable investment. They took out a business loan of 450,000, some of this money (225,000) was used for the purchase of the premises, the rest for equipment. The property was registered in the names of all three of them.

They had been living off personal savings and had not taken any money out of the business to date. However, it seems that the effort and investment of all three into the business has been well rewarded. The recent management accounts show a healthy profit of 180,000, and it is clear that there is considerable potential for the business to expand further.

Alice, Alexis and Joy never formally agreed any terms of business. They have limited business experience, and apparently 'never thought about it'. They were mainly interested in getting the business set up and trading as quickly as possible, so that they could make some money. The only things that they have agreed on is the purchase of the industrial unit and equipment, the investment made, and that Joy could be part time.

Alice's concerns

Alice would like an explanation as to whether they are all in a partnership, which she hopes they are, because that was the idea, but she is worried that they have never put anything in writing. Also, Alice considers she should have a greater share of the profits as the business was her idea, and she seems to spend the most time running the business. So, she wants the final say in the running of the business and who should join the business in the future and when. She is also concerned about who would be responsible for liabilities of the business, in particular the loan of 450,000, very little of which has been paid off, if the demand for their products ever falls off. She is concerned about the ownership of the industrial unit should any of them leave the business.

Next steps

Before the meeting, I would like you to send me a memorandum summarising what your advice will be in the light of Alice's concerns and how these concerns could be addressed.

[Note that Alice does not want to incorporate the business at this stage.]

You are a trainee solicitor with ULaw Solicitors LLP (ULaws).

Part 1

Your supervising solicitor, Faisal Abdul has taken instructions from a new client, Alice Jones, in relation to a business venture which she set up this year with her friend, Alexis Kalogeras and his wife Joy.

Please read the attached email (Document A) from your supervising solicitor, and then draft a memorandum as instructed in his e-mail.

NB: You are required to set out your answer fully citing relevant authority where appropriate.