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MAY 2007


The Equality Act (Sexual Orientation) Regulations

Discrimination on grounds of sexual orientation is already prohibited in relation to employment and vocational training. The Equality Act (Sexual Orientation) Regulations 2007, which came into force on 30 April 2007, provide protection for individuals from discrimination on grounds of sexual orientation in the provision of goods, facilities, services, education, the disposal and management of premises and the exercise of public functions.

Sexual orientation is defined as an individual’s sexual orientation towards people of the same sex, people of the opposite sex or people of both sexes. Protection therefore applies to everyone – lesbians, gay men, heterosexuals or bisexuals.

The Regulations prohibit direct and indirect discrimination and cover:

• victimisation - less favourable treatment of an individual because they have complained of discrimination under the Regulations;

• discriminatory advertisements - publishing an advertisement, or causing an advertisement to be published, which indicates an intention to discriminate unlawfully under the Regulations;

• instructions to discriminate - instructing someone to discriminate or causing them to discriminate unlawfully under the Regulations, for example by offering a financial inducement;

• discriminatory practices - adopting or maintaining a practice likely to result in unlawful discrimination under the Regulations; and

• validity of contracts - contractual terms that result from or would result in unlawful discrimination will be void.

Employers should note that for the purposes of the Regulations, anything done by someone in the course of their employment will be treated as done by the employer also, whether or not the employer knows about or approves of the act. In such circumstances an employer will have to prove that such steps as were ‘reasonably practicable’ were taken to prevent the employee from doing the act, or acts of that kind, in the course of his or her employment.

General

Management Time Claim Succeeds Despite No Contemporaneous Record
It has long been part of the received wisdom when dealing with claims for breach of contract that where a claim for the value of lost management time is being added to the sum claimed for loss of profit, there has to be evidence for the time spent (in the form of time records) as well as of the value of that time.

Recently, however, the Technology and Construction Court has accepted that a schedule of time spent by a company director in dealing with a construction defect was acceptable as evidence, in spite of the fact that the record was created retrospectively and not as the time was actually being spent.

The case involved a building with a defective foundation, which required the claimant to buy in services which caused loss of profit. The claim for the cost of the outsourced work was reduced to take account of the likely cost of doing that work in house.

The Court accepted the retrospective record but, considering such records to be less reliable than contemporaneous records, applied a 20 per cent reduction in the value of the claim for time lost.

It is always better to have a contemporaneous time record where such costs are being claimed, as well as a clear analysis of any loss of profit.

Property

Leases – New Code of Practice
A new code of practice for commercial leases has been released following a long consultation exercise involving landlords and other interested parties.

The code makes a number of changes to the substance and detail of current practice. These include:

• a simplified approach to the exercising of break clauses by tenants;

• sub-letting of the whole premises to be normally completed without the requirement for financial guarantees by the existing tenant;

• a more flexible approach to rent reviews, rather than just 'upward only' reviews;

• the requirement for landlords to provide best estimates of service charges; and

• the requirement that tenants’ repairing obligations should be appropriate considering the terms of the lease.

The Code for Leasing Business Premises in England and Wales 2007 can be found at
http://www.leasingbusinesspremises.co.uk/downloads/lbp_booklet.pdf.

Is the JCT Valid?
The House of Lords recently had to consider whether the contractual terms in the JCT standard building contract (1998) are compliant with the provisions of the Construction Act. It was the first case of its kind.

A company called Melville Dundas Ltd. was acting as a contractor to construction giant Wimpey and issued demands for stage payments in the normal way. After making one such demand (in relation to which Wimpey did not make a withholding notice), Melville Dundas became insolvent and Wimpey terminated the contract and did not make the payment.

The relevant section of the JCT standard form agreement allows a developer to terminate a contract with a contractor in the event of the contractor’s insolvency and to withhold payments. In effect, it limits the developer’s liability to the contractor to the value of work done and is designed to protect the position of the developer should there be additional costs, with regard to the completion of the work, which would otherwise have to be claimed against the insolvent contractor.

Melville Dundas argued that the relevant section of the JCT agreement was invalid under the Construction Act because it took away its right to receive the payment despite a valid withholding notice not having been issued by Wimpey.

The Lords, in a 3-2 split decision, agreed with Wimpey’s contention that the payment was validly withheld.

It is not clear whether this decision would apply in the absence of the insolvency of the contractor. In the normal run of events, once the date for issuing a withholding notice has passed, the stage payment will be due. Any matter arising after that date would normally be adjusted for in the next payment.

If you are having difficulties with payments in a construction contract, contact us for advice.

Energy Performance Certificates
Builders and developers of commercial properties are reminded that the Energy Performance of Buildings Directive will apply to commercial buildings from 6 April 2008. The Directive will require energy performance certificates (EPCs) to be prepared for all buildings which are to be subject to sale or rent, if they have a floor area over 500 square metres.

New buildings will require an EPC before the certificate of completion will be issued. Where buildings are to be sold or let, the EPC must be made available to prospective purchasers or tenants.

Tax

When Tax Dodging Becomes Financial Crime
HM Revenue and Customs (HMRC) are taking an increasingly tough stance on tax evaders and have recently won a case in the Court of Appeal which establishes that in appropriate circumstances gaining money by cheating HMRC (‘tax evasion’) can constitute money laundering.

The case involved a legitimate trade (i.e. there was no overtly criminal activity) set up as a money-exchange business. The business arranged transfers of money to and from Pakistan. The owners of the business committed various acts of false accounting to conceal cash transactions totalling nearly £6m. One of the owners also had a grocery business and under-declared the profits of that business, transferring the undeclared sum to Pakistan. The amount involved was £200,000. He argued that the money was not criminal property, because it was derived from a legitimate trading activity.

The Court of Appeal judged that the Proceeds of Crime Act 2002 (PoCA) had to be construed to include sums which derived from cheating HMRC. Accordingly, the sum of £200,000 was the proceeds of crime and as such was potentially subject to confiscation under Ss 6 and 7 of the PoCA.

What this case shows is that where HMRC prove the offence of ‘Cheating the Revenue’, the tax which has been evaded can represent the proceeds of crime and be subject to confiscation. The confiscation would presumably be in addition to any penalty which may be levied under the tax law. For tax evaders, the clear message is that HMRC are getting tough.

IP

Implied Consent Exhausts Trademark Rights
A recent case should remind owners of trade mark rights to think carefully if they supply goods which are subsequently parallel imported into markets in which their rights are subject to exclusive distribution agreements.

In the EU, the law protects the owners of trade mark rights against parallel imports (also called grey imports). The Trade Mark Directive allows trade mark owners the exclusive right to use their registered marks in the course of trade. However, where consent is given by the owner of the trade mark for the ‘grey’ goods to be placed on the European market, that right is extinguished.

The case involved a small consignment of Cuban cigars, which was confiscated by the Customs at the airport as counterfeit. The cigars were not counterfeit, but were cigars sold in Cuba for export under an arrangement the trade mark owner had with a local Cuban wholesaler. The Court of Appeal decided that the trading arrangements between the owner of the brand and the wholesaler were such that the importer had unequivocally demonstrated that the trade mark proprietor had impliedly renounced any intention to enforce its exclusive rights.

Company Law

Post Office Acts to Limit Potential Damage from Company Disclosure
The debate regarding the ever-increasing level of financial disclosure required to be made by companies reached a new level recently when the Post Office acted to limit the potential damage caused by ever-weightier financial reports.

The damage under consideration was not that which might be caused by excessive disclosure, but rather that which might befall postmen who have to carry the weighty annual reports. The Post Office acted when faced with HSBC bank’s massive 454 page tome which weighs nearly 1.5kg. The assessment of the risk involved in carrying the reports has led to a limit being placed on the number of them which Post Office employees are required to carry on their delivery rounds.

Contract Law

Acceptance of Repair Means Acceptance of Goods
The sale of goods by traders is covered by the Sale of Goods Act 1979, which requires that the goods sold must be as described, of satisfactory quality and fit for purpose. If these criteria are not met, the buyer has the right to reject them. However, the trader might offer to replace or repair the goods.

Recently, the House of Lords heard an appeal from the Scottish Court of Session which required it to consider the position in which a trader delivered defective goods to the customer, who then agreed that they should be repaired. The question that arose was whether the customer could then reject the repaired goods.

J&H Ritchie Ltd. had purchased a combination seed drill and harrow from Lloyd Ltd. When it was made ready for use by Ritchie, it was immediately obvious that the harrow was not working properly as it had excessive vibration. Ritchie stopped using the harrow and contacted Lloyd, who agreed to repair the machinery. Having collected the machinery and diagnosed the problem – two missing bearings – Lloyd ordered the parts and, when these arrived, it repaired the machine and informed Ritchie that it was ready for collection. This process took some weeks. Lloyd did not tell Ritchie the nature of the problem when requested to do so, merely replying that the equipment was repaired and that the repair had made the equipment as good as new.

Unhappy with this response, Ritchie rejected the machinery. Lloyd commenced legal proceedings, arguing that Ritchie was bound by law to accept the repaired machinery.

Although Lord Brown was critical of Lloyd for their lack of candidness regarding the nature of the problem, in the view of the Lords, where a buyer receives goods which are defective and the defect is clear to buyer and seller, there is an implied duty on the part of the buyer to accept the goods and pay for them once the necessary repairs have been carried out. In the words of Lord Hope, “A buyer who…allows the seller to incur the expense of repair is under an implied obligation to accept and pay for the goods once the repair has been carried out.”

This judgment has clear implications for purchasers of goods who find them to be defective. If they agree to have the goods repaired, the right to reject the goods will normally be lost.

Competition Law

OFT Inspection Powers
The UK has always had its own ideas about the right way to implement EU regulations. One of its more thought-provoking approaches has been to place consumer protection law under the remit of the Office of Fair Trading (OFT). This causes some raised eyebrows, not because the OFT is not a sensible authority to deal with consumer protection issues, but because the powers that are reserved for OFT inspectors are considerably greater than you might think.

Most of us think of the OFT as dealing with ‘big issues’ in competition, such as reports on anti-competitive or unfair practices. However, the OFT is responsible for the enforcement of a whole range of competition matters.

The OFT has indicated that it has no intention of being a champion of individuals who feel aggrieved with a supplier. It is, however, quite willing to act where there is a general case for the protection of consumers at large. In the latter case, the OFT is likely to undertake an investigation once it is satisfied that a prima facie case exists that there is anti-competitive or unfair behaviour. It is the range of powers which have been given to the OFT to use in the course of its investigations which might well give pause for thought.

These include:

• the right to enter premises and inspect them without a warrant;

• the right to demand that documents are produced and explained to its inspectors (and to demand responses in writing);

• the right to seize documents and goods with or without a warrant; and

• the right to carry out a search of premises if in possession of a warrant.

The OFT is empowered to bring in anyone it reasonably thinks might be able to assist it with its enquiries and all that is required for it to exercise its powers is a 'reasonable suspicion' that competition law has been broken or is likely to be.

It is a criminal offence to fail to cooperate with or to obstruct an officer of the OFT in the exercise of his or her legal duties.

Normally, two days’ written notice of an inspection will be given. However, even if no notice is given, the OFT’s guidelines provide that an inspection will not normally be commenced, goods will not normally be removed, nor will a caution be given until legal advisers are present, unless this will cause undue delay. However, where notice of the inspection has been given or the business has in-house legal advisers, the inspection will commence as soon as the formalities of provision of identification etc. have occurred.

Insolvency

Insolvencies Tumble in 2007
The number of corporate failures has fallen sharply in the first three months of the year, according to Experian. 430 fewer corporate failures have occurred this year compared with the same period in 2006.

However, 2006 set a record for corporate failures, with over 20,000 insolvencies in the year, so the number of businesses going to the wall is still substantial.

The decline in insolvencies by sector was, for the most part, evenly spread with most industries showing falls in the numbers of businesses instituting insolvency proceedings. However, there was a substantial rise in insolvencies (almost 15 per cent) in the leisure and hotels sector.

It remains to be seen what the effect of anticipated further increases in interest rates will be. With large numbers of recent takeover deals being underpinned by substantial borrowings, the possibility that failure rates may rise again should not be discounted.

Licensing

Under-Age Sales – Warning for Licensees
Licensees are warned to be particularly vigilant as it has been revealed that
Police Force Crime Reduction Units have been given extra resources to enable them to target a number of licensed premises in their areas for repeat visits to check up on under-age drinking. The blitz is intended to last from early May until July and will use the well-known ‘test purchase’ approach.

Premises which are targeted will be visited three times and those found to have broken the law on each occasion face prosecution for persistently selling alcohol to under-age persons. This carries a maximum fine of £10,000 and a possible suspension of the licence for up to three months, at the discretion of the magistrates.

In addition, the police may use their powers in such circumstances to issue a notice prohibiting sales of alcohol, for a maximum period of 48 hours, on dates specified in the order.

IT

Internet Use in the Workplace
There are many ways in which a business can be damaged if it fails to protect its data or does not have policies in place to ensure correct use of the Internet facilities at work. However, a recent survey has revealed that British businesses are failing to take seriously the need to protect themselves and employees from potentially damaging Internet use in the office.

More than 30 per cent of those taking part said that they do not have an acceptable use policy (AUP) for accessing the Internet at work. Of those who do, 94 per cent said they had not read it recently. Only a small percentage of AUPs cover Instant Messaging and Web mail. Furthermore, ‘blogging’ hardly registers at all as a banned Internet activity.

It is important to have an Internet use policy in place and to make sure that employees understand and adhere to it. The policy should be kept up-to-date to reflect current trends and make clear the penalties for failing to abide by it. We can assist you in drawing up an AUP specific to the needs of your business.

Employers are advised, however, to take care over any interference with regard to employees’ permitted private use of workplace communication systems. A college employee was recently awarded €3,000 damages plus legal costs after the European Court of Human Rights ruled (Copland v UK) that the monitoring of her telephone, email and Internet use was a breach of her right to a private life and correspondence under the European Convention on Human Rights.

Employees should be notified if their communications are to be monitored and the employer must have a sound basis for doing so. Such monitoring must also comply with the principles of the Data Protection Act 1998.

Environment

WEEE – Marking of Goods
Since 1 April 2007, producers of electrical goods have been required to mark them in accordance with the Waste Electrical and Electronic Equipment (WEEE) Regulations 2006.

The appropriate mark, which features a crossed out wheelie bin, must be affixed to all electrical and electronic apparatus put on the market after that date. This will help separate WEEE from other waste goods. The producer’s mark and a date code must also appear.

For further information, see http://www.netregs.gov.uk/netregs/legislation/380525/473094/?lang=_e.

Employment Law

National Minimum Wage – New Guidance on Accommodation Offset
Under national minimum wage legislation, the provision of accommodation by the employer is the only benefit in kind that can count towards a worker’s national minimum wage pay.

In response to findings by the Low Pay Commission and in the light of the Court of Appeal’s decision in the case of Leisure Employment Services Ltd. v HM Revenue and Customs, the Department of Trade and Industry has issued new guidance on the use of the national minimum wage accommodation offset.

The guidance includes a list of circumstances in which the employer will be considered to be providing accommodation and examples of different wage calculations depending on a variety of scenarios. It also explains how to treat absences from work and contains a section on Frequently Asked Questions. It can be downloaded at http://www.dti.gov.uk/files/file38769.pdf.

EOC Guidance on Managing Pregnant Women and Parents
Following a two-year investigation into pregnancy discrimination, the Equal Opportunities Commission (EOC) has launched a web-based toolkit to assist employers in managing pregnancy, maternity and parenthood in the workplace. This gives guidance on the rights and responsibilities of employers and employees and contains practical advice and examples. The toolkit is available at http://www.eoc.org.uk/default.aspx?page=19177.

Health and Safety

The Smoking Ban
The legislation banning all smoking at work comes into force on 1 July 2007. It applies to all enclosed public spaces and workplaces, with only a very few limited exceptions. The ban also extends to work vehicles not used exclusively by one person. Employers will no longer be able to operate a policy of having most working areas smoke-free with a designated smoking room for those who do wish to light up. Any employer who has not yet taken steps to implement the ban should act now.

No-Smoking Signs in Premises
When the ban starts, at least one no-smoking sign must be displayed, in a prominent position, at each entrance to smoke-free premises. Signs must be at least A5 size, display the no-smoking symbol and contain, in characters that can be easily read by persons using the entrance, the words ‘No smoking. It is against the law to smoke in these premises’. Any person with management responsibilities for a smoke-free vehicle must ensure that at least one sign which displays the no-smoking symbol is displayed in a prominent position in each compartment of the vehicle.

The Government has produced official guidance on the new law together with sample signs. If you haven’t received a copy, the guidance and the sample signage can be ordered or downloaded from http://www.smokefreeengland.co.uk/resources/.

The Advisory, Conciliation and Arbitration Service (ACAS) has also published useful guidance on this topic, which includes a checklist of items to consider when drawing up your policy on smoking at work. The guidance suggests that this should include:

• an introduction stating the reasons for the policy – for example: 'This policy has been developed in consultation with workers and their representatives to help provide a healthy, safe and comfortable environment';

• a statement that the policy complies with the relevant legislation;

• a statement that the policy applies to workers at all levels;

• the names of the individuals responsible for implementing and maintaining the policy (usually a named manager is given overall responsibility with day-to-day responsibility resting with supervisors and line managers);

• information about arrangements for smokers – for example, smoking outside the premises;

• details of how a breach of the smoking restrictions will be dealt with; and

• a statement that the policy applies to all visitors and customers.

Employers should review their disciplinary rules and procedures to ensure that these cover any breach of the no-smoking policy and the likely sanctions.

For further information, see http://www.acas.org.uk/index.aspx?articleid=696.

ACAS has also provided guidance, in question and answer format, concerning issues such as whether or not employers have to provide outside smoking facilities and what to do if visitors to your premises insist on smoking. This can be found at http://www.acas.org.uk/index.aspx?articleid=1262.

Asbestos – Site Clearance Certificates
Businesses are reminded that as from 6 April 2007, regulation 20(4) of the Control of Asbestos Regulations 2006 requires that anyone who certifies that premises are safe for re-occupation following asbestos work must be accredited.
Those issuing a site-clearance certificate must be accredited by an appropriate accreditation body as competent to carry out such work. The site clearance certificate requires that premises where licensable asbestos work has been carried out have been thoroughly cleaned and are safe for re-occupation. In order to demonstrate competence, those carrying out the work must conform with the specified requirements in two international standards - ISO 17020 and ISO 17025.
For further information, see http://www.hse.gov.uk/press/2007/e07015.htm.


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PRESTON-ROUSE COMPANY
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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