Failure to Follow Agreed Schedule Not Ground for Damages
Many people have experienced the frustration of having builders who turn up, partially complete the work they have been contracted to do and then seemingly lose interest, with the result that the original expectations as regards timing of the work go out of the window.

One would expect that if a contract is silent on completion dates there would be an obligation on the building firm involved to carry out its work diligently and in a regular manner.

Recently, a dispute on this point arose between a building firm and a subcontractor.
It concerned a contract for groundworks. Alongside the contract, an 'activity schedule' had been prepared, which it was accepted was not legally binding. The groundworks lagged well behind the target dates set out in the activity schedule. The builder sought to withhold part of the payments due under the contract as damages for losses it had suffered due to the delay, arguing that the subcontractor had an implied obligation to proceed 'regularly and diligently' with the works.

However, in the absence of a contractual schedule, the court would not imply into the contract a term that was not necessary to make the contract 'work'. The contract stipulated that in the event that it was completed late, damages would be payable. That was enforceable, but an implied clause regarding meeting milestones along the way was not.

The important lesson to be learned here is that if you are commissioning building work and need intermediate targets to be hit (rather then just an agreed final completion date), make sure these are put in the contract.

Take Care on Business Disposals
Business owners will be aware that entrepreneur's relief operates to reduce the Capital Gains Tax on qualifying business assets and that the availability of the relief can be crucial in obtaining a low-tax exit when a family business is sold.

However, as with all reliefs, HM Revenue and Customs (HMRC) insist that the qualifying criteria are met. One of the important traps facing people expecting to obtain entrepreneur's relief is that if the disposal is a disposal of assets, rather than a business or definable part of a business, the relief is not available.

A recent case showed the approach HMRC may take in some cases. It involved a food distribution business which was built up over the years. Eventually, part of the business, including the goodwill and trade marks, was sold to one of the former customers of the business.

HMRC unsuccessfully attacked the vendor's claim for entrepreneur's relief, arguing that the sale constituted only the sale of assets, not of the business.

If you are considering selling your business, especially if you are considering selling only part of it and retaining part, make sure you take professional advice early and certainly before you take any irrevocable action. The best approach is to ensure that the deal is structured in a way that makes it unassailable.

When it is Time for the Young Ones to Take Over
In any family business, when the owners wish to retire and pass the business on to the next generation, as opposed to selling it, there are many aspects to consider.

In general, planning for this eventuality cannot start soon enough as the earlier such planning starts, the more options may be available.

The factors that will be most relevant for tax purposes are likely to be the availability or not of entrepreneur's relief, which, if available, will reduce the effective rate of Capital Gains Tax (CGT) on the increase in value of the business to 10 per cent. One advantage of this is that the business is passed on at its 'full value', which means that a subsequent sale will be based on that value, not a discounted 'tax value'.

However, if there is a need to make the transfer without a tax liability, the business may be able to be transferred making a claim for business asset hold-over relief. The practical effect of this is that the new owner takes the business at the original owner's CGT base cost – which will normally leave a considerable potential gain.

A third possibility is to retain ownership of the business and pass it on in your will. A transfer to your spouse or civil partner will not be a transfer for Inheritance Tax (IHT) purposes and specific reliefs for IHT exist for business asset transfers.

More elaborate solutions might involve the granting of share options, piecemeal transfers or the use of trusts.

As always, there is a need to balance what might be most effective for tax purposes with what is practical.

All forms of business tax planning need to be carried out with great care as there are many pitfalls, and compliance with the regulations set down for each relief is essential.

Lump Sum Option for Small Pension Plans
HM Revenue and Customs (HMRC) have announced changes to pensions rules to allow those aged 60 or over to take a lump sum from personal pensions with a value of £2,000 or less.

Although pension plans are designed to provide an income during retirement, it is generally possible to take up to 25 per cent of the value of a pension fund as a tax-free lump sum, with the rest of the fund being used to provide a regular income. Since 2006, however, those whose total pension savings do not exceed one per cent of the Lifetime Allowance have had the option of taking a much larger percentage of the plan as a lump sum (an option known as 'trivial commutation'). The Lifetime Allowance is currently £1.8 million, so this option is currently available to those with £18,000 or less in pension savings. The limit will remain at £18,000 in future, regardless of changes in the Lifetime Allowance.

HMRC have now announced that, from 6 April 2012, those aged 60 or over will be able to take personal pensions worth £2,000 or less as a lump sum, regardless of the value of their other pension savings. This move is intended to help those who have pension plans containing small amounts but who cannot make use of the trivial commutation rules, either because their total pension funds amount to more than £18,000 or because they have already made use of the rules in respect of another pension.

A maximum of two pension plans may be paid out as lump sums in this way. 25 per cent of each lump sum will be tax-free, with the remainder taxed at the taxpayer's marginal rate of tax.

Companies Take Note – Dividends Can Be Proceeds of Crime
Problems with doing 'clean' business in some jurisdictions are almost insurmountable, yet the Bribery Act 2010 is clear that offering inducements can easily amount to unlawful activity.

It may be thought that where such activities are carried on by a subsidiary, the risk of penalty stays within the subsidiary, so if a contract is undertaken using a subsidiary company, the profits can be made there and passed up to the holding company by way of dividends.

However, the approach of the Serious Fraud Office (SFO) in a recent case should leave no one in any doubt that, where it is worthwhile, the SFO is likely to seek a confiscation order over the dividends as being the 'proceeds of crime'. In the case in point, the SFO has claimed more than £130,000 in dividends received by the holding company of an engineering firm.

SFO spokesman Richard Alderman has issued a stern warning to shareholders who have the ability to influence the behaviour of the companies in which they invest that, even if they are unaware of any inappropriate behaviour, the SFO is prepared to take civil action against them to recover income received that is the proceeds of crime and has warned investors – particularly institutional investors – that they must 'satisfy themselves with the business practices of the companies they invest in'.

Oral Contract Claim Fails
There are not many people who would recommend doing the lottery as a good path to success, but we regularly see instances of disputes going to court where the outcome is so uncertain as to make the proceedings tantamount to a lottery.

Nowhere is this more obvious than when the dispute involves an oral contract. A recent case illustrates this well.

It involved a company that provided catering services and events management. It agreed to provide its services to the owners of a venue and a draft contract was produced but never signed. When the events management company had an internal reorganisation, the contract was switched to a new company under the control of one of the directors of the former company. A draft contract was discussed again and the two businesses carried on as before. However, the events management company's director thought they had agreed a two-year minimum term, whereas the owners of the venue believed they had agreed a two-year contract terminable on giving three months' notice.

The draft contract contained a clause requiring that three months' written notice should be given to terminate it. When the venue owners decided to terminate the arrangement, they did so without notice and a dispute arose. They argued that the events management company had breached the contract to such an extent that it was repudiated and that, in any event, it could be terminated with three months' notice.

The events management company argued that the contract was for a fixed term of two years without any option for early termination.

The court ruled that there had been no breach of contract by the events management company and, whilst there had been a contract made for the provision of events management for two years, there was nothing within the contract that was incompatible with having a three-month notice period. Accordingly, the events management company was entitled to damages, but only for three months' worth of lost profits.

The case ended up in the Court of Appeal, which upheld the original decision.

Contractual certainty is almost impossible where contracts, or variations to them, have been agreed orally. If you are creating or amending contractual relations, make sure the terms are clearly agreed and enforceable.

'I Didn't Know What I Was Signing' is a Valid Defence
A company director who was misled into signing a guarantee over a lease, when he thought he was merely witnessing his fellow director's signature, has escaped liability under the guarantee.

Joshua Yardley signed the lease guarantee, over a 35-year lease on a property in Nottingham, after being asked by a fellow director to 'pop in for five minutes'. He was shown the last page of the document, which had been signed by the other director, and was asked to sign it.

When the company failed, the landlords sought payment of the rent of £32,500 per year. Mr Yardley claimed that he had no idea that the document was a lease and that by signing it he was ostensibly guaranteeing payment of the rent.

The landlords argued that even if the director did not know that it was a guarantee, he should still be bound by it because they had no way of knowing whether or not he was unaware of the nature of the document he signed.

The court was unimpressed with the landlords' reasoning. They knew the company was in difficulties (hence requesting the guarantees by the directors) and had failed to take steps to satisfy themselves that Mr Yardley had acknowledged that he had guaranteed performance of the lease.

Mr Yardley was ruled to have no obligation under the purported guarantee.

The lesson to be learned is that it is important to make sure that when documents are executed, there is a clear paper trail showing that all signatories are clearly aware of the commitments they are making.

Functionality Not Protected in Computer Programs
Computer programs have been at the centre of many legal disputes. Although the program itself is subject to the laws of copyright, creating a program that does what another program does is not a breach of copyright.

The reason for this is that copyright law does not protect ideas, but the expression of ideas in a transmittable form. In the case of a computer program, the code itself is copyright, but the 'idea behind it' is not.

A user manual for a program is also copyright.

Recently, a case came to court which tested the limits of this approach. It concerned a company that had created a computer program in a different programming language that emulated the look and feel of another program as well as its functionality.

The High Court referred aspects of the dispute to the Court of Justice of the European Union, which confirmed that no infringement of the intellectual property of the creator of the first program had occurred.

The practical lesson to be learned is that it is difficult or impossible to protect the functional aspects of a computer program, so if another company is intent on targeting the market with the same sort of product, a commercial arrangement with the competitor may be a better solution than fighting a case based on copyright infringement and losing. A licensing agreement would provide you with an income stream and would allow the competitor to avoid the large up-front cost of developing and testing its own software.

Undisclosed Arrangement Between Friends Scuppers IVA
When a man was worried that his creditors would not approve his proposals for an Individual Voluntary Arrangement (IVA), he took innovative steps to ensure that when the meeting of creditors was held a majority of them voted for it.

An IVA is a plan submitted to creditors that allows a person to pay off his or her debts over time, normally five years. The advantage of an IVA for the debtor is that they are not made bankrupt. The IVA proposals must be voted on and accepted by the creditors to be effective.

The solution adopted was for a friend of the man to 'buy' a debt due to a third party, so the friend became the creditor. He then added his vote to the 'yes' votes for the IVA. The arrangement was not disclosed to the other creditors. For the debtor, it achieved his desired end of avoiding bankruptcy and the investigation of his conduct that would have gone with it.

When the arrangement was discovered, the other creditors were unhappy and took the matter to court. The Court of Appeal agreed that the man's friend had the right to acquire the debt due and to vote on the proposal. However, since the assignment of the debt was not a genuine commercial arrangement, had not been carried out on genuinely commercial terms and the pair had not been open and transparent about it, the Court ruled that the circumstances justified the revocation of the IVA.

Competition – New Market Investigation
The aggregates, cement and ready-mixed concrete industries are the latest to come under the spotlight of the Competition Commission. The Office of Fair Trading (OFT) has identified a number of concerns, not least of which is that five companies control 90 per cent of the cement market, 70 per cent of the ready-mixed concrete market and 75 per cent of the aggregates market.

The OFT is concerned that the concentration of market share in so few hands, plus the high level of investment required to enter the market, may well act to erode competitiveness.

The OFT has always taken a particular interest in competition in industries in the construction sector. Many of its prosecutions have been of building and construction firms. Substantial fines can be levied for breaches of competition law.

Data Protection Breaches – Recent Cases
In a recent case, Plymouth Hospital NHS Trust was ordered to pay compensation to a patient after one of its employees unlawfully gained access to the man's medical records. The nurse who accessed the data was the man's partner at the time. The patient claimed that the breach of the Data Protection Act 1998 (DPA) and the way his subsequent complaint regarding the matter was handled had made worse a pre-existing paranoid personality disorder and prevented him from working. He was awarded damages of £12,500 for exacerbation of his pre-existing medical condition and £4,800 for loss of earnings.

In a second case, a former health worker at the Royal Liverpool University Hospital pleaded guilty to unlawfully obtaining patient information by accessing the medical records of five members of her ex-husband's family so that she could obtain their new telephone numbers.

The matter came to light when a man contacted the hospital after receiving nuisance calls which he suspected had been made by his former daughter-in-law. He had previously changed his phone number following unwanted calls from her and was immediately concerned that there had been a breach of patient confidentiality. Checks by the hospital revealed that none of the patients whose details had been compromised were at any time under the woman's care and she had no work-related reasons to access their records. She had accessed the information for her own personal gain without the consent of her employer and was fined £500 for breach of the DPA and also ordered to pay £1,000 towards prosecution costs and a £15 victim surcharge.

Meanwhile, the European Commission has announced proposals for significant reform of data protection legislation. The Information Commissioner's initial response to the proposals can be found at http://www.ico.gov.uk/news/latest_news/2012/statement-initial-response-new-data-protection-regulation-proposals-25012012.aspx.

Insolvency and TUPE
Whilst the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) operate to protect the employment law rights of employees when there is a relevant transfer of a business or part of a business, Regulation 8(7) provides that where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner, the transfer provisions of TUPE do not apply. In such circumstances, employees do not automatically transfer to the new owner and any dismissals are not automatically unfair.
In an important decision on this issue, the Court of Appeal has ruled (Key2Law (Surrey) LLP v De'Antiquis) that this exception does not apply to administration proceedings under Schedule B1 of the Insolvency Act 1986.

Ms De'Antiquis was made redundant from her job as a solicitor a few days before the firm she worked for, Drummonds Kirkwood LLP (DK), went into administration. The administrators subsequently entered into a management contract with Key2Law (Surrey) LLP under which the part of the business in which Ms De'Antiquis had worked was transferred to it. Ms De'Antiquis brought a claim for unfair dismissal against Key2Law on the ground that there had been a transfer of liabilities under TUPE. Key2Law argued, however, that the facts of the case meant that the exception should apply. As DK was in administration, it was subject to 'analogous insolvency proceedings' instituted with a view to the liquidation of its assets, within the meaning of Regulation 8(7).

The Court of Appeal held that an administration is not outside the TUPE rules because it cannot be said to have been 'instituted with a view to liquidation' of the company's assets. The primary statutory objective of an administrator when appointed is to rescue the company as a going concern, even though this may subsequently prove to be impossible. Accordingly, the Court held that a transfer of liabilities under TUPE will take place where a company is placed into administration and the business is subsequently transferred. The Court agreed with the Employment Appeal Tribunal that a fact-based approach (as was advocated in the 2009 case of Oakland v Wellswood (Yorkshire) Ltd.) whereby the decision as to whether the TUPE provisions apply will depend on the intention of the administrator regarding the transfer of the insolvent business, is inappropriate in such circumstances. What is required is an 'absolute' approach to the provisions. Such an approach has the merit of achieving legal certainty, since all those involved will know where they stand.

Subject to any appeal, this decision means that the employment rights of employees will be protected when a company is sold following a 'pre-pack' administration. Ensure that your decision is made after consideration of all the relevant factors.

ACAS Guidance for Employers on the Olympic Games
With less than six months to go before the London 2012 Olympic Games commence on 27 July 2012, the Advisory, Conciliation and Arbitration Service (ACAS) has begun publishing guidance for employers on some of the issues that might arise. For example, an employee may wish to take time off work to attend or may have been selected as one of the volunteer helpers or 'games makers' at the Olympic or Paralympic Games. Others may wish to work flexibly in order to watch specific events. It is important for employers to have a clear policy in place to handle likely requests and to communicate this to staff to avoid potential misunderstandings and unfairness.
The Olympic Games end on 12 August and the Paralympic Games are being held between 29 August and 9 September. As well as the usual annual sporting events, the finals of the UEFA European Football Championship, which takes place every four years, are being hosted by Poland and the Ukraine between 8 June and 1 July 2012, so it is set to be a busy summer for sports fans!
The ACAS guidance can be found at http://www.acas.org.uk/index.aspx?articleid=3392.

Accident Reporting Changes
From 6 April 2012, the requirements under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995 (RIDDOR) will change, which should reduce substantially the number of 'reportable' incidents.

From that date, a reportable incident will be one which causes incapacity of seven days or more, instead of three days as at present. In the context of RIDDOR, incapacity means absence or the inability to do work that a person would be reasonably expected to do as part of their normal work. In addition, the current requirement that a reportable incident is reported within seven days is being eased: after 6 April, the reporting deadline will be 15 days after the incident. For injuries that involve shorter absences, a record in the accident book will be sufficient.

The new guidelines can be found at http://www.hse.gov.uk/pubns/priced/l73.pdf.

Estate Agent Fined After Contractor Killed in Fall
The Health and Safety Executive (HSE) has fined a firm of estate agents after a contractor who was working for them was killed when he fell from a roof.

Roger Jary, 79, was a contractor for Morris, Marshall & Poole (MMP), a firm of estate agents with offices in Mid-Wales and Shropshire. He was carrying out minor repairs to a bungalow in Welshpool, which was managed by MMP on behalf of the landlord, when the accident happened. A plastic roof panel gave way as he attempted to cross it and he fell to the ground two metres below, suffering fatal injuries.

The HSE conducted an investigation and found that MMP had failed to ensure that the repair work was properly planned and organised or that Mr Jary was competent to perform it. A prosecution ensued and MMP pleaded guilty to breaching Section 3(1) of the Health and Safety at Work etc. Act 1974. The firm was fined £75,000 and ordered to pay costs of more than £11,000.

HSE inspector Chris Wilcox said, "Roger Jary might be alive today if simple safety measures had been put in place. Morris, Marshall & Poole had a duty to ensure the safety of those they employed – whether working directly for them or not.

"If your business is managing properties then you must ensure that anyone you engage to maintain those properties is competent and carries out their work safely to ensure their safety and that of others."

Businesses have a responsibility to protect the health and safety of those working for them, which includes contractors as well as employees. A detailed risk assessment should be carried out and steps taken to remove or reduce any health and safety risks identified.