Henmans commercial August/September 2010

Legal updates

Employment: New compensation limits come into force on 1 February 2011

The changes are:

• the limit on the amount of a week's pay for the purposes of calculating statutory redundancy payments and the basic award for unfair dismissal will increase from £380 to £400;
• the maximum compensatory award for unfair dismissal rises from £65,300 to £68,400; 
• therefore the maximum unfair dismissal award (basic plus compensatory) is £80,400;
• guarantee pay (the minimum paid for any complete day that an employee is laid-off work) increases from the rate of £21.20 a day to  £22.20 a day; and
• the minimum basic award in cases where the dismissal was unfair by virtue of health and safety, employee representative, trade union, or occupational pension trustee reasons will increase from £4,700 to  £5,000.

The changes apply to a dismissal where the effective date of dismissal is on or after 1 February 2011.

The following compensation limits remain unchanged:

• there remains no limit for the amount that can be awarded for unfair dismissal on grounds of certain health and safety and whistle blowing cases; and
• there is no limit to the amount that can be awarded for discrimination claims.

Contact James Simpson, of the Employment Team, for employment advice on 01865 781193.

Commercial Property: Landlord's consent to lease assignment

When a landlord's consent is needed for a tenant to assign or sublet a lease then the landlord must give written notice of its decision to grant or refuse consent within a 'reasonable time' (Landlord and Tenant Act 1988).

What constitutes a 'reasonable time' for the landlord to respond will vary with each case, but the trend has been to decrease the time in which landlords have to respond.

The case of Go West Limited v Spigarolo and another (2003) EWCA Civ 17 decided that a 'reasonable time' must be measured in weeks rather than days.

The case of Blockbuster Entertainment Limited v Barnsdale Properties Limited (2003) EWHC 2912 concluded that the landlord should have given consent within seven days from receipt of all the information. The case did however involve information being fed to the landlord over a period of time, and the application was effectively with the landlord for three weeks.

A landlord cannot delay and must make its decision promptly once armed with all of the information required, but what if the tenant's request is insufficiently detailed?

In Royal Bank of Scotland v Victoria Street (No.3) Limited (2008) EWHC 3052 it was decided that the extent of the landlord's duty is simply to consider the information before it. If there is insufficient information for the landlord to decide the application reasonably, then the landlord is entitled to refuse consent, provided it states its reasons in writing, and promptly.

This seems a fair approach - there is no limit to the number of applications that a tenant can make. On the other hand, the landlord is under a duty to respond positively or negatively within a 'reasonable time'.

This serves as a strong warning to any landlord: do not delay when faced with a tenant's application to assign or sublet a lease.

For general advice on property matters contact Lesley Pollock of the Commercial Property Team on 01865 781159.

IP: Digital Economy Act 2010 to be reviewed

The Digital Economy Act (the "Act") was passed through Parliament at the last minute before last year's general election in May.  Amongst other things, it required Internet Service Providers ("ISPs") to take action against people suspected of illegally sharing files.  ISPs were obliged to write to users sharing files illegally and to create a blacklist of people who continued to do so. Ultimately such offenders could have their connections cut off.  The Act represents a change in the normal approach that the law takes to ISPs.  The E-Commerce Directive provides ISPs with a defence against liability where the ISP is acting as a conduit or is providing caching or hosting services and does not have any input into or control over the material involved.

BT and TalkTalk joined forces to challenge the Act, as they were unhappy about the speed and way in which the Act was passed as well as the consequences for them and their customers.  Even innocent customers would be affected as they too would be monitored. 

As a result, BT and TalkTalk have been granted the right to apply for a judicial review. The High Court held on 10 November that a judge should consider whether the Act is justifiable and legal, especially in the light of the provisions of the E-Commerce Directive. The review of the Act will be heard in February 2011, in which the judge could force the Government to change certain parts of the Act or indeed make the Government scrap it altogether.

For IP-related matters, contact Malcolm Sadler of the Corporate/IP Team on 01865 781208.

Commercial: Protection against waiver of rights and variations in contracts

It is very common to find clauses in commercial contracts that are intended to control the situation when the parties do not act as they should according to the contract.  When termination is not an option, clauses which try to regulate the position include waiver and variation clauses.

Waiver clauses

A waiver involves a party giving up its rights under the contract after the other party fails to fulfil its obligation under the contract, such as not delivering on time, or not providing the precise goods or service as described in the contract.  The innocent party's rights might be waived explicitly by entering into a separate deed or contract.  Or they may be waived if the innocent party elects not to terminate the contract, but to accept the new position, or acts in such a way that suggests that it has accepted the position and will not terminate the contract. 

A waiver clause aims to protect the innocent party from being treated as having waived its rights to terminate the contract through its actions or by appearing to have elected to accept the change when it has not actually done so. Unfortunately, a waiver clause in a contract is helpful but is not guaranteed to work the recent case of Tele2 International Card Company and others v Post Office Limited (2009) EWCA Civ 9 demonstrated this.  The Post Office had a right to terminate the contract, but allowed the contract to continue for 12 months.  The Court held that the Post Office could not keep its right to terminate and at the same time allow the contract to continue.  The waiver clause did not stop the Post Office's conduct from amounting to a waiver of its right to terminate the contract.

Variation clauses

A variation is the change of a contract term by agreement between both parties. A variation clause aims to control how and when a variation takes place.  Generally, it will try to prevent a variation occurring through a verbal exchange and will specify how a variation should be structured, such as, for example, in writing signed by both parties. 

Again, however, simply including the clause is not a guarantee that it will always apply.  In I-Way Limited and another v World Online Telecom Limited (2004) EWHC 244, the Court held that a variation clause might not prevent a verbal exchange varying a contract, especially if the actions of a party or both parties suggested that the variation had been accepted.

These two types of clause show that it is difficult to regulate changes in contracts and terms simply by relying on inserted clauses.  The parties need to be aware of their rights under the contract and they need to take steps to follow the structures and processes set out in the contract.  A contract should be treated as a live document and referred to repeatedly rather than being signed, filed and forgotten.  Great care should be taken to keep in control of contracts and to be aware of the rights each party has under them.

For information and advice on how to stay in control of your contracts and avoid problems in future, please contact Rachel McCullough, corporate team on 01865 781202.

Corporate & Dispute Resolution:  Are your pricing methods misleading?

A recent study by the Office of Fair Trading (OFT), has found that certain pricing techniques, when used in a misleading way, can result in consumers making purchasing decisions that they would not have otherwise made, or to spend more than they need to.

The OFT looked at a number of pricing techniques and concluded that the following methods were the most likely to mislead consumers:

• "Drip Pricing" - where price increments, such as taxes, card charges and delivery charges are added during the buying process; 
• Time Limited Offer, such as "ends at 12 o'clock today";
• "Baiting" - where the trader has only a small proportion of stock available at the offer price.
  

A range of other factors will also be taken into consideration when the OFT assesses whether to take enforcement action, such as: the frequency of the purchase, the cost of the item, the size of the market and the likely harm to the consumer.  The consumer's expectations are relevant too.  For example, is a consumer aware of the addition of delivery charges or 2 for 1 ("BOGOF") offers?  Enforcement action is only likely where the practice is being used to mislead the customer.

There are certain things that sellers can do to show that they are not trying to mislead their customers. If drip pricing is used, all compulsory charges must be included in the original price quoted.  If this has been done and it can be argued that there is a genuine benefit to customers (because the drip pricing allows the consumer to choose certain additions that best suit their needs), then it is unlikely that any enforcement action will be taken by the OFT. 

The full results from the market study were published in December 2010 and are available on the OFT's website: http://www.oft.gov.uk/news-and-updates/press/2010/124-10

For further information and guidance on issues or disputes relating to competition, please contact Rachel McCullough, of the Corporate Team on 01865 781202 or Andrew Crocombe, of the Dispute Resolution Team on 01865 781059.

Employment: Limitations on annual leave accrued during sickness absence

The case of Khan v Martin McColl (ET/1702926/2009) will provide some relief to employers as it demonstrates that the costs of annual leave accrual during sickness absence can, in some situations, be limited or avoided.

Mr Khan went on long term sick leave in May 2008 until his resignation in August 2009.  He had six weeks’ unused leave in the 2008 holiday year (“2008 leave”) and his entire annual leave allowance was unused in 2009 (“2009 leave”).  On termination of his employment, Martin McColl paid him in lieu of his 2009 leave.  Mr Khan brought a claim for unlawful deductions from wages on the basis that his employer had failed to pay him in lieu of his 2008 leave. 

The Employment Tribunal held that payment of Mr Khan’s 2009 leave had broken the chain of deductions for the purposes of bringing an unlawful deduction from wages claim.  Under section 13 Employment Rights Act 1996 (“ERA”), a claim can be made for a series of deductions and the three month time limit will not begin to run until the last deduction in a series of deductions.  Payment of the 2009 leave meant that Mr Khan’s last deduction was in 2008.  He was therefore outside the three month time limit prescribed by the ERA.

Mr Khan also claimed that he was entitled to be paid in respect of the 2008 leave under the principles established by the ECJ in Stringer and others v Revenue and Customs ([2009] IRLR 214) – in particular, that if employees are denied holiday during sickness absence, their unused annual leave will roll forward to the next leave year and, if not taken by the time employment terminates, must be paid in lieu.

The Employment Tribunal disagreed.  It found the fact that Mr Khan had not asked to take his 2008 leave meant that he had not been “denied” his leave within the definition of Stringer.  Had he asked for leave but had then been prevented from taking it due to sickness absence, he could have brought a claim (Shah v First West Yorkshire Limited (ET/1809311/09)). 

Although the Employment Tribunal’s decision is not binding on higher courts, the ruling is going to be of interest to employers keen to limit their liability under both the ERA and Stringer.  However, it is not clear whether the request for holiday must be made prior to the sickness absence for the employee to bring a successful claim (as in Shah) or whether the employee must simply make the request whilst on long-term sick leave, knowing that they cannot take it and in the knowledge that it will be rolled forward, potentially until they leave employment.

Contact James Simpson, employment team, for employment advice on 01865 781193.

Commercial Property: Timing of Landlord’s Intention to Re-develop

Where a tenant occupies premises under a lease falling within Part II of the Landlord & Tenant Act 1954 (the 1954 Act) then at the end of the lease term the tenant will usually have an automatic right to renew the tenancy.  However the landlord can oppose any renewal, but only on specific statutory grounds contained in Section 30 of the 1954 Act.  

One of the grounds available to a landlord to oppose a lease renewal is the redevelopment ground contained in section 30(1)(f) of the 1954 Act: where the landlord requires possession of the premises because it intends to demolish or reconstruct the property or carry out substantial construction work.  There has been uncertainty as to the timing of when the landlord must have in his mind a fixed and settled intention to redevelop and be able to prove this intention.  

In the recent case of Somerfield Stores Limited v Spring (Sutton Coldfield) Limited (2010), a tenant of a supermarket served a notice requesting a new tenancy which was opposed by the landlord relying on the redevelopment ground.  The tenant applied for summary judgment dismissing the landlord’s ground of opposition.  The tenant failed in its application for summary judgment and appealed.  The High Court dismissed the appeal and determined that the requisite intention had to be shown by reference to the date of the substantive trial of the landlord’s ground of opposition and not at the date of the summary judgment hearing.  

This decision at long last provides landlords with certainty on the issue and will no doubt reduce the attempts by tenants to apply for summary judgments so as to bring forward the date when the landlord can be required to prove his intent.  

Henmans is able to advise you at the time of lease renewal, if you are a landlord or a tenant.  

For general advice on property matters contact Lesley Pollock in the commercial property team 01865 781159.

Dispute Resolution: Is your data safe?

Whilst many companies go to great lengths to ensure that any computers that are sold or donated at the end of their business life are wiped clean of any data, a new threat has emerged in the form of the humble photocopier.

With more and more companies, organisations and individuals now using combined printers, photocopiers and fax machines, these machines have become more sophisticated and now utilise hard drives to store faxes and documents.  Companies and organisations are often unaware of the existence of these hard drives or can overlook them when disposing of office machines or when they return machines to their supplier.  A failure to wipe these hard discs professionally may lead to the unintended transfer of sensitive or confidential data to third parties.  A national newspaper recently purchased several second hand photocopiers and managed to obtain copies of NATO briefing papers and aircraft technical drawings which had been copied by the previous owner and which remain stored on the hard disc.  All that would have been required to prevent this was some freely available software from the internet and a little technical knowledge.

Any breaches of the Data Protection Act could have serious implications for companies and their employees.  Accordingly, it is important to review your data handling policies and maintain a register of office machines which contain hidden storage devices and whose disposal could breach data protections laws if sold on or returned without being properly cleaned.

Henmans can provide guidance to ensure that you or your organisation are compliant with data protection laws.

For advice on property disputes, contact Katherine Gregory in the dispute resolution team 01865 781 056.

Commercial: The Office of Fair Trading takes action against misleading websites

A recent ruling by the Office of Fair Trading (OFT) highlights that business websites are coming under increasing scrutiny.

Five online traders have been selling European Health Insurance Cards (EHICs) to consumers.  The cards allow UK residents to obtain state-funded medical care in other EU countries and are in fact available free of charge through the NHS website.  The websites concerned did not make it clear that they were not part of the NHS nor that consumers could obtain the cards free of charge from the NHS.  The OFT has ruled that the traders breached the Consumer Protection from Unfair Trading Regulations 2008.  Their websites’ appearance was misleading as it was likely to influence a consumer into making a transaction that they might not otherwise have made.  They had misled consumers in their failure to clarify that their websites were not part of the official NHS website although they used domain names designed to sound official and their websites used similar branding to the EHIC branding. 

Three of the online traders have given undertakings not to partake in deceptive selling practices in the future.  Should they breach their undertakings, the OFT may resort to court action and apply for an enforcement order to prevent the traders trading online.

The other traders either voluntarily ceased trading or were forced to close down their websites.

If your business trades with consumers online, and concludes contracts electronically, you must comply with the Consumer Protection from Unfair Trading Regulations 2008 and the E-commerce Regulations.  The Regulations have been in force for some time but this recent action by the OFT may herald a period of increased scrutiny. 

For advice on the steps you should take to ensure compliance with the current regime, please contact Rachel McCullough, corporate team – 01865 781202.

Forthcoming Henmans events

• Thursday 16 September: A further BSG seminar is being held by our corporate team. This will be on ‘Greasing palms – an assessment of the scope of the Bribery Act’. This will be held at 1pm at our offices, with a light lunch beforehand at 12.30. To register your attendance, please contact seminars@henmansllp.co.uk.

The past month at Henmans

• We had a summer break in August from our seminars, but they will be held regularly again from now until December.
• On 2 September we held an employment seminar on ‘Changing terms & conditions of employment’.