|
|
|
|---|---|---|
 |
|
General
Without Prejudice - Be Safe, Not Sorry
People who are used to negotiations of the more adversarial sort will be familiar with receiving correspondence marked 'without prejudice'. This is shorthand for denying the recipient the right to use the contents of the correspondence as evidence in court. The use of 'without prejudice' is a commonplace way to help negotiate settlements without giving away one's position in law. When this is done, the correspondence is said to be 'privileged'.
Case law is well established which allows correspondence which has not been marked 'without prejudice' or 'WP' to be treated as 'without prejudice' correspondence where it is clear that it is part of the process of negotiation aimed at achieving a settlement.
However, a recent case shows the wisdom of taking a more 'belt and braces' approach by making sure that all correspondence intended to be 'without prejudice' is marked as such. The case involved the settlement of reinsurance claims between insurers, including the reinsurance arm of European insurance giant Axa. Axa sent two letters which were not marked 'WP', because it needed to record its position for an interested third party which was not directly party to the negotiations. The court considered that these were 'open letters' which were not privileged.
The moral of the story is that if you create correspondence which you wish to ensure cannot be used as evidence, make sure it is appropriately marked.
Bogus Expense Claims Cost £151m
According to a study by Software Europe, employee claims for expenses are often inflated, especially for mileage and subsistence costs. Duplication of claims is also rife. In total, the survey concludes that five per cent of all claims are faked, costing UK employers over £150m annually.
Property
Unreasonable Action Spells Defeat
A decision in a recent case involving a building dispute has yet again emphasised that the court expects persons in dispute to act reasonably.
The case involved a claimant, Mr McGlinn, who sued for damages a firm of architects and a firm of builders which had been involved in building a house on Jersey for him.
The house was in the course of construction when Mr McGlinn, who believed the property to be badly designed and constructed, demanded that it be demolished and rebuilt, relying on expert advice to support his decision. He considered that the cost of rectifying the defects would be greater than that of demolition and rebuilding. He had the house demolished and then sued the architects, who were responsible for the original design and for supervising the building project, and the builders who built it.
The first issue concerned the responsibilities of the architects being sued. The court could not accept that their responsibility extended so far as to ensure the production of a perfect building, so they could not be liable for missing some examples of defective work. However, the inspection programme adopted by the architects was considered to be too rigid and the inspections done at too infrequent intervals. The court ruled that some of the defects claimed were not the responsibility of the architects and it rejected some of the claims altogether.
In the court's view, Mr McGlinn's demolition of the property was an excessive reaction. Firstly, much of his criticism of the property had been aesthetic and did not concern the structural soundness of the building. Secondly, the claims accepted as valid by the court were not of themselves sufficient to justify the demolition and rebuilding of the property. The cost of rectification of the defects was less than the cost of rebuilding the property. The fact that Mr McGlinn had taken expert advice did not make his approach reasonable. He was entitled only to receive compensation for the cost of rectifying the defects judged to be the responsibility of the defendants.
Tenancy Deposit Protection
Landlords are reminded that provisions contained in the Housing Act 2004 come into force on 6 April 2007 which mean that a landlord or letting agent can no longer take a deposit in respect of an assured shorthold tenancy unless the money is covered by a Tenancy Deposit Protection Scheme.
The new law is intended to safeguard tenants' deposits and facilitate the resolution of any disputes arising in connection with such deposits at the end of the tenancy.
All landlords and letting agents must deal with deposits in accordance with an authorised Custodial Scheme or Insurance-Based Scheme. Failure to do so can result in a court order to pay the tenant an amount equivalent to three times the deposit. Also, a landlord who fails to deal with deposit money correctly will not be able to regain possession of the property using the usual 'notice only grounds' for possession.
Tax
One in Five Taxpayers Pays Wrong Amount
According to the National Audit Office (NAO), almost six million taxpayers paid an incorrect amount of tax last year. PAYE glitches were the major cause of the problem. These led to approximately £1/2bn in overpayments and £1bn in underpayments.
However, the most damning statistic relates to tax credits. In 2003/04, these were overpaid by between £1.1 and £1.3bn, a figure which the NAO notes was 'unacceptably high' and which it considers unlikely to be bettered when statistics for later years are available.
It is always worth checking that your tax payments and PAYE code are correct. A number of simple tax calculators can be found at http://www.digita.com/taxcentral/home/employment/payslipcalculator/default.asp. If you find that your tax liability is significantly different from that predicted by a calculator, it is worth taking professional advice.
IP
Brand Value Defeats Trade Mark Application
Magnetic media giant TDK recently succeeded in an action to protect its trademark from use for clothing and footwear, showing that protection of a well-known trade name will be extended where the brand name is well enough known for its use in a different context to be misleading to consumers.
Although TDK trades in the magnetic media market, its brand has been widely advertised internationally for more than three decades and it engages in sponsorship of sporting and other events as part of its marketing strategy. It owns the TDK trademark, which is classified under class 9 (recording materials).
In the view of the Court of First Instance it was therefore reasonable for a consumer to assume that the company had licensed its trademark for use by the clothing and footwear company which sought to register the TDK brand for its own use under class 25 (clothing, footwear and headwear). The application for registration of the trademark in class 25 was therefore refused.
The ruling illustrates one benefit of investing in brand names by widespread promotion. Had the TDK brand not been very well known, it is likely that the application for trademark registration in a different category would have been successful.
The End of the Patent Office
On 2 April 2007, the Patent Office changed its name to the UK Intellectual Property Office (UKIPO). The purpose of the change is to make it clear that UKIPO deals with all forms of intellectual property registration and not just patent applications.
Company Law
Companies Act 2006
The Companies Act 2006, which received the Royal Assent in November last year, is the largest Act ever introduced in England and Wales and it is therefore no surprise that it is being implemented in sections rather than all at once.
The implementation of the Act will commence in October 2007, with the balance of the legislation coming into force in April 2008 and October 2008.
For the smaller company, one of the most interesting changes introduced by the Act is that a statutory basis has been developed under which a shareholder will be able to bring an action on behalf of all the members holding the same class of share. No longer will it be necessary to prove a 'fraud on the minority' in such cases - the action can be brought if warranted by an 'actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director'.
The claim can proceed if there is a prima facie case for it and it satisfies two criteria:
• That a person who is acting in accordance with the director's (now statutory) duty to promote the success of the company would continue the claim; and
• The act or omission which is the subject matter of the claim is not authorised or ratified by the company.
If these criteria are not met, such a claim will be rejected at the first instance. However, the ability to bring an action as a result of negligence should sound warning bells for executive and non-executive directors alike.
On a more positive note, private companies will no longer be prohibited from providing financial assistance for the purchase of their own shares. This will come as a welcome change for the owner-managers of many small companies. The ability to provide financial assistance to a prospective purchaser of shares may assist in their exit strategies on retirement.
The Companies Act 2006 will have a profound effect on the way many, if not most, companies are governed. In particular, the new model articles of association will become the default articles of association for new companies. These should be a big improvement over the current 'Table A' articles. It may well make sense for many privately owned companies to replace their current articles with the new form.
Contract and Competition
Non-Competition Clause Upheld
Non-competition clauses in employment contracts, which seek to prevent ex-employees from competing with their former employers for a specified period, have traditionally been a difficult area of law. The courts have struck down many such clauses in the past. However, a properly worded and well considered non-competition clause can prove effective, as an insurance broker has found.
Huw Farr was the managing director of an insurance brokerage, Farr plc. He left his former firm and brought a claim for constructive dismissal. He also requested that the non-competition clause in his contract of employment be ruled unenforceable because it was an unreasonable restraint of trade.
The Court of Appeal held that Mr Farr's role was such that he would have come into possession of information which was capable of being protected by the clause (i.e. 'trade secrets'). The fact that it was extremely difficult to know what information he had acquired in his former employment which might be properly regarded as confidential did not invalidate the clause.
Where employees are in possession of critical business information, putting a non-competition clause in their contract of employment has much to commend it.
Insolvency
Court Flexible on Insolvency Procedures
The failure of the Farepak hamper business in late 2006 was one of the most widely-publicised insolvencies of the year. The subsequent administration of the company has been a procedural nightmare, as there are over 100,000 creditors.
In this case the court has shown a willingness to be flexible with regard to the statutory requirements of the Insolvency Act 1986 in order to stop the whole process getting bogged down. One of the problems with the Farepak insolvency was that there was no reliable customer database in existence which could be used to identify the many creditors. Furthermore, the cost of circularising more than 100,000 creditors, mainly owed small amounts, would be prohibitive.
In this case the court agreed that the notices of appointment of the administrator could be passed to the creditors through the 26,000 Farepak agents who had serviced their accounts. The court also allowed the creditors' meeting to be held by correspondence, which was unusual but sensible as Wembley stadium was not finished at the time!
Licensing
Licensing - Bad News
A report put before the House of Commons has recommended that local authorities increase their charges for licences by seven per cent for 2007/8 in order to balance their books: currently the administration cost of the licensing system exceeds the income from licences.
At the same time, a consultation document has been launched which contains proposals to limit the provision of gambling in premises which hold alcohol licences. The proposals would:
• prohibit children and young persons from participation;
• limit gambling to 'equal chance' games (such as cribbage or poker) between customers;
• prohibit 'casino' games such as blackjack and roulette;
• set stakes and prizes at low levels - for example, stakes would be a maximum of £5 in pubs and £10 in clubs for games of poker;
• prohibit the operator from taking a share from money staked or won or charging participation fees (including membership subscription fees);
• set daily and weekly limits on stakes to ensure that such gambling remains a 'low stakes, low scale activity'; and
• allow games to be played only on one set of premises.
Further information can be found on the website of the Department for Culture, Media and Sport at http://www.culture.gov.uk/Reference_library/Press_notices/archive_2007/dcms011_07.htm
IT
Limits of Software Copyright Protection Confirmed
The Court of Appeal has confirmed that software which emulates another program is not an infringement of that program, even if it looks similar and is similar to use, provided that it does not copy the other program's code or graphics.
The decision arose when a maker of arcade games, which had created a video game based on the game of pool, sued another firm for copyright infringement when it marketed similar games.
The nub of the decision is that it confirms the position that copyright does not subsist in the ideas which underlie the development of software but in the software itself.
In law, ideas cannot be patented. It is the practical application of the idea which is eligible for protection and this copyright decision is an illustration of the same principle.
Employment Law
Abolition of Workplace Dispute Resolution Procedures
As part of the Department of Trade and Industry's initiative to simplify employment law, the Secretary of State for Trade and Industry, Alistair Darling, is overseeing a 'root and branch review' of the statutory dispute resolution procedures.
The Employment Act 2002 (Dispute Resolution) Regulations 2004 came into force in October 2004 and require employers and employees to operate statutory minimum disciplinary, dismissal and grievance procedures. The legislation aimed to give those involved the chance to settle complaints without recourse to litigation and the Government estimated that the procedures would result in a reduction in the number of tribunal claims of between 34,000 and 37,000 a year. However, to date the legislation seems to have had little impact on the number of claims and the procedures have been widely criticised for being poorly drafted and overly complex.
A recent survey by the Chartered Institute of Personnel and Development reported that 29 per cent of employers believe that disputes are less likely to be resolved informally since the introduction of the legislation and 42 per cent of employers are now more likely to seek legal advice to make sure they do not fall foul of the law.
Firstly, Mr Darling commissioned an independent review of the options for simplifying and improving all aspects of employment dispute resolution, in order to make the system work better for employers and employees. This found that there was an overwhelming consensus that whilst the intentions of the 2004 legislation were sound, it had failed to produce the desired policy outcome. It recommended, amongst other things, that the statutory dispute resolution procedures be repealed and replaced with non-prescriptive guidelines on grievances, discipline and dismissal.
A consultation has now been launched inviting comments on the consequential effects which might arise from such a change and covering a series of wide-ranging questions. This asks if there should be:
- a new, swift approach for dealing with straightforward claims, without the need for employment tribunal hearings;
- a reformed tribunal system, with simplified processes and timings;
- an invitation to the CBI, TUC and other representative organisations to produce guidelines aimed at encouraging and promoting the early resolution of disputes in the workplace;
- incentives for employers to make reasonable attempts to resolve a dispute early; and
- a redesigned application process to tribunals so that potential claimants access the system through a new advice service and receive advice on alternatives when doing so.
The consultation document is available at http://www.dti.gov.uk/consultations/page38508.html
The consultation closes on 20 June 2007.
New Minimum Wage Rates Announced
The Government has announced increases in the national minimum wage rates in line with the recommendations of the Low Pay Commission. These will apply from October 2007.
The adult national minimum wage will rise from £5.35 to £5.52 an hour. The minimum rate for 18- to 21-year-olds will increase from £4.45 to £4.60 an hour and for 16- to 17-year-olds the rate will be £3.40 an hour instead of £3.30.
The Employers Forum on Age has warned the Government that paying 18- to 21-year-olds less simply because of their age could constitute age discrimination and is lobbying for this to change.
Statutory Maternity, Paternity and Adoption Pay
From 1 April 2007, the standard rate for Statutory Maternity Pay increased from £108.85 to £112.75 per week (or 90 per cent of average weekly earnings if this figure is less). The Social Security Benefits Up-rating Order 2007 also applies the same rates to Maternity Allowance, Statutory Paternity Pay and Statutory Adoption Pay.
Amendments to the Work and Families Act make changes to the maternity rights of employees with children born or placed for adoption on or after 1 April 2007. See the Department of Trade and Industry website at http://www.dti.gov.uk/employment/workandfamilies/index.html for further information.
Health and Safety
Risk Assessment Responsibility Limitations
Failure to undertake risk assessments is a frequent factor in the finding that an employer is to blame for injury at work and it is advisable to assess the risks of any recurring processes or activities considered to present risks to those carrying them out or to others. However, the absence of a risk assessment does not necessarily make the employer liable if an injury results in a claim for compensation for personal injury, as two recent cases illustrate.
In the first case, an employee who was injured when trying to move a heavy bench failed in his attempt to have his employer found liable for the injury. The employer had not carried out a risk assessment in spite of knowing that moving the bench posed risks. In that regard the employer was in breach of its statutory duty under the Mechanical Handling Operations Regulations 1992. However, the accident which was the subject of the claim was judged not to have arisen as a result of a failure on the part of the employer but because the employee had attempted to move the heavy bench unaided.
In a second case, an electrician who unwisely decided to stay at the top of a high ladder when it was temporarily not 'footed' also failed to establish that his employer's failure to carry out a risk assessment made the employer liable when the electrician fell and injured himself. In this case, the ladder in question was at the premises of a customer of the firm and the man using the ladder had many years' experience of working at height and was well aware that ladders should be footed in order to reduce the risk of falls. The court also seemed sympathetic to the argument that if the employer company had to visit each customer and carry out a risk assessment of each activity, there would be duplication of work and it would make the business uneconomic. The employer was therefore found not liable for the injury.
Employers faced with personal injury claims from employees can take comfort from these cases, which show that where employees act in a way that clearly puts them at risk, the absence of a risk assessment by the employer for the activity is not necessarily fatal to defending the claim. Where employees fail to exercise common sense or ignore their own experience and training, they will carry all or part of the liability for the accident.
Mobile Phone Penalties Increased
From 27 February 2007, the penalty for using a mobile phone whilst driving has been increased to £60 and three penalty points will be added to the licence of the driver involved.
The new law makes it an offence to cause or permit a driver to use a hand-held phone while driving. This will catch employers as it will be an offence to permit staff to use a mobile phone when driving and to require them to be available to take calls while driving on company business. Employers who have not already done so should take immediate advice on how best to introduce a 'no-mobiles' policy for people driving when at work.
According to the Royal Society for the Prevention of Accidents, employers would be 'unwise to respond (to the new law) by supplying their staff with hands-free kits. Even if the use of these while driving does not contravene the specific ban on hand-held phones, employers could fall foul of health and safety laws if an investigation determined the use of the phone contributed to an accident'.
More recently, a driver who was spotted eating a sandwich whilst driving was fined and received three penalty points.
PREVIOUS NEWSLETTERS
MARCH 2007 Budget Summary
NOVEMBER 2006
PRESTON-ROUSE 
COMPANY
6 Gray's Inn Square, Gray's Inn, London WC1R 5AX
DX 65 London/Chancery Lane
email judith@preston-rouse.com & michael@preston-rouse.com
For more information please contact:
Judith Preston-Rouse or Nicola Manning or Michael Vann
telephone 020 7404 9725 facsimile 020 7404 9731