Costs Spiral When Fight Prolonged
When legal fees of £105 million were claimed in respect of a claim for injury to more than 30,000 people resulting from the dumping of toxic materials that was settled for £30 million, the dispute was inevitably going to drag on. The claim for legal costs was the largest in history.

After the legal fees claim was slashed in the High Court, the costs ruling was appealed to the Court of Appeal. The original claim included a 100 per cent 'uplift' because the litigation was conducted on a 'no win, no fee' basis. An insurance premium to fund legal fees in the event that the action was unsuccessful was also part of the claim and amounted to more than £9 million.

The Court largely accepted the validity of the costs claimed, which had been contested on an item-by-item basis – despite there being more than 50,000 items of claim. However, the uplift was cut from 100 per cent to 58 per cent.

The key lesson to be learned is the wisdom of admitting liability early in proceedings where it is going to be conceded later: in this case, the admission of liability was delayed considerably after the claim was brought. This meant that a very extensive evidence-gathering exercise was commenced, as evidence had to be produced to support every individual claim.

Had the defendant admitted liability before this was done, costs of tens of millions of pounds would have been saved.

Tenant Pays Price for Incomplete Paperwork
The wisdom of making sure that agreements are finalised in good time and not left hanging in abeyance is illustrated by a recent case.

It involved a local authority and a shopkeeper tenant who ran a convenience store.

The tenant wished to take a lease on the adjoining premises, which were also owned by the local authority, and heads of agreement were prepared setting out the proposed terms of the new tenancy, which would include both premises.

The lease was on terms favourable to the tenant as she would have to undertake considerable expenditure on the new premises.

The conveyance of the lease was, for various reasons, never completed, although the tenant pressed on with the expenditure to bring the new premises up to the required standard.

Several years later, the local authority sold the freehold of the property. The new owner wished to renegotiate the lease terms with the tenant on the basis that it was not bound by her agreement with the council because agreements relating to land are required to be in writing and signed by the parties to the agreement.

The tenant claimed that the new owner was prevented from renegotiating the terms because she had acted in accordance with the (incomplete) agreement to her detriment (this is called the 'principle of estoppel') and therefore should be allowed to complete the lease on the agreed terms. The landlord, she argued, had waived its right to require her to complete the documentation.

However, in the absence of any formal waiver of its rights by the previous landlord, the Court of Appeal ruled that it had not waived its rights and the new landlord was not bound by the purported lease nor estopped from seeking a renegotiated lease.

It is a risk to undertake expenditure on premises until the legal position is finalised. In this case, the tenant, having funded the enhancement expenditure, may well end up paying a higher rent because of her own investment.

Adjudicator's Decision Not Violation of Natural Justice
When an adjudicator in a construction dispute gives a ruling, the decision can only be appealed on a limited number of grounds. One of these is 'breach of natural justice', which means that the adjudicator's decision is so obviously flawed that natural justice would be offended if it were allowed to stand.

It is, unsurprisingly, difficult to win an appeal on these grounds and a recent case saw the court reject such an appeal. One of the interesting aspects of the ruling was that the court was careful to point out that the failure by the adjudicator to consider and address a substantive defence would be a breach of natural justice, whereas failure to consider and address an aspect of the defence would not.

Facts Determine if Adjudicator's Decision Must be Revisited
When the construction of a village hall did not proceed as planned, the commissioning town council and the builders fell into dispute regarding a number of issues.

As a result, the builders issued a notice of adjudication to obtain an adjudicator's decision on the sum due to them (plus interest) and a ruling on when the sum should be paid.

The builders subsequently notified the adjudicator that there were other areas of dispute. However, the adjudicator proceeded on the basis of the information before him and rendered his decision. The builders challenged this on the ground that it did not deal with all the disputed issues.

The matter then went to court. The court agreed that in principle a dispute could be transformed into something different from what it was when it started, or that matters could arise in addition to those initially considered and in some circumstances it would not be possible for these to be disputed separately. However, in this case this had not happened and the adjudicator's decision should stand.

If you are becoming embroiled in a construction dispute, we can advise you on how to improve your chances of a speedy and equitable resolution.

Court Refuses HMRC Right of Appeal in Tax Avoidance Case
The Supreme Court has denied HM Revenue and Customs (HMRC) the right of appeal in a tax case involving a series of transactions that were carried out for no commercial purpose but which led to a tax saving by the taxpayer.

The decision represents a blow for HMRC, who are seeking to establish that a general anti-abuse rule (GAAR) should apply, which would allow them to ignore transactions with no commercial purpose where this would increase the tax payable.

The Court of Appeal had ruled that the essential reason for the refusal was that whilst the transactions had no commercial impact, 'they were genuine legal events with real legal effects'. Accordingly, said Mummery LJ, "The court cannot, as a matter of construction, deprive those events of their fiscal effects under ICTA (the Income and Corporation Taxes Act 1988) because they were self-cancelling events that were commercially unreal and were inserted for a tax avoidance purpose in the pre-ordained programme…"

There was no disagreement that the impact on the taxpaying public was regrettable, and the decision will no doubt increase the pressure for a GAAR to be introduced for the UK tax system. A committee chaired by Graham Aaronson QC has produced a feasibility study on how this could best be achieved. He recommends the introduction of a narrowly focused, rather than a broad spectrum, GAAR as the best way of targeting tax avoidance without affecting responsible tax planning. In his view, a narrowly focused GAAR would:

• deter abusive tax avoidance schemes;
• contribute to providing a more level playing field for business;
• reduce legal uncertainty around tax avoidance schemes;
• help build trust between taxpayers and HMRC; and
• offer opportunities to simplify the tax system.

The Government will consider the report in detail and respond fully in the 2012 Budget, setting out plans for further consultation if necessary. No mention of a GAAR was made in the Chancellor's Autumn Statement, however.

Court Acts to Protect Majority Shareholder
When the directors of a small company fall out, things can get difficult: when they are also the sole shareholders, the result is usually an impasse. In a recent case, this happened and the director who was the majority shareholder went to court in order to force the removal of another director. The second director held more than 25 per cent of the shares in the company, which meant that a resolution could not be passed to remove him.

The majority shareholder was faced with a position in which he could not remove the other shareholding director or a third director who had 'sided' with him (but who held no shares) because a quorate board meeting could not, in practice, be held. The other two directors therefore ran the business without reference to the majority shareholder.

He had to go to court to obtain permission to hold a board meeting with a quorum of one (i.e. alone), so that he could pass a resolution to call an extraordinary general meeting in order to remove the other directors (by a vote of the shareholders).

Internal squabbles in companies are often very difficult and require delicate negotiation if court proceedings are to be avoided.

Commerciality the Key in Contract Interpretation
When a dispute arises concerning the meaning of a contract term that is capable of being interpreted in more than one way, the resolution is normally to be found in the interpretation which is most consistent with common business practice and sense.

Unclear wording of a contract involving bonds bought to guarantee contract performance or prevent losses arising from non-performance meant that a dispute wended its way to the Supreme Court, which took the view that the purpose of the arrangement for the purchaser of the bond must have included the circumstances which gave rise to the claim against the seller of the bond. There would be little commercial point in the transaction if it did not.

Accordingly, the application of common sense overrode the technical deficiencies in the wording.

Although it is clearly better to have contracts that are clearly worded, it is a relief to have the assurance that the courts will take a common-sense approach when to do otherwise would produce an uncommercial result.

Overall Impression Crucial in Design Right
Design rights are not the same as copyright, but are valuable intellectual property assets nonetheless. Consider the traditional Coca-Cola bottle, which instantly conveys the brand image to the consumer.

Accordingly, companies are highly protective of their design rights and a registered design is protected in the UK for a period of 25 years.

However, the protection of a design does not mean that a similar design is incapable of being used. For example, it would be impossible to construct a jet engine which looked significantly different from another one. This principle was one of the reasons the Court of Appeal recently ruled that vacuum cleaner manufacturer Dyson's design rights were not infringed by a similar-looking model made by Vax.

The nub of the issue, however, was whether the two designs of vacuum cleaner gave a different overall impression to the 'informed user'. The Court found that the distinctiveness of the Dyson and Vax designs was clear enough and the fact that they share some common features of shape and a transparent collector bin would not be sufficient to create confusion in the mind of an informed user as to which is which. It is the overall impression that is crucial.

Directors Who Misled Creditor Personally Liable
When a supplier to a marquee company was not paid for goods it had supplied, the directors told the supplier that the company was waiting for an insurance claim to be settled, after which payments would be made as usual.

In reality, there was no insurance claim pending. A director of the marquee company then claimed that it was being sold. The supplier was then told that when the sale went through, the creditors would be paid.

When the supplier remained unpaid, it not only claimed against the marquee company but also sought damages from the two directors.

The supplier argued that both of the representations made to it were false and that it relied on them to its detriment, because it had, as a result, not issued proceedings earlier. In particular, it had not exercised its rights under a retention of title clause.

The judge ruled that the first representation was made falsely and the second was made recklessly because it was made without regard to whether the company could or could not pay its creditors. The supplier had suffered as a result because it had relied on the representations. The actions of the directors had dissuaded the supplier from repossessing its goods or suing for the outstanding sums due to it.

Accordingly, the directors had committed a deceit on the supplier and were personally liable to it for the sum it would have been able to recover under its retention of title clause.
The directors appealed, arguing (in effect) that the law prevents guarantees being actionable unless they are in writing. However, the Court of Appeal accepted that this rule did not apply because there was no question of further credit being offered. In this case, the misrepresentations related to the continuation of outstanding debts and dissuading the creditor from taking action to collect them.

OFT Rejects Predatory Pricing Claim
When a company engages in below-cost pricing or other 'predatory' practices, the Office of Fair Trading (OFT) is often called upon to investigate. Where anti-competitive practice is confirmed, the fines can be substantial, especially when the supplier is in a dominant position in the market.

However, a recent investigation shows how difficult it can be to prove the existence of predatory practices.

It concerned a company engaged in the supply of diagnostic testing services for veterinary practices. The following practices engaged in by the company were the subject of a complaint to the OFT:

• The supply of equipment to vets at a discount if they agreed to use its services;
• The supply of free or heavily discounted equipment to vets who spent a minimum amount each month on materials needed to use the equipment; and
• The supply of discounted testing services on a bundle of tests which included tests supplied by the company.

After a year's investigation, the OFT concluded that the company's conduct was such that it was unlikely to impair effective competition in the market and that there were therefore no grounds on which it should take action.

The OFT's decision is carefully presented and substantial, and serves as a useful guide to the approach it will take if these sorts of practices are adopted to win or maintain market share. It can be found at http://oft.gov.uk/OFTwork/competition-act-and-cartels/ca98/closure/veterinary-diagnostics/.

Former Gambling Worker Pleads Guilty to Data Protection Breach
According to the Information Commissioner, Christopher Graham, the unlawful trade in personal information is 'unfortunately still a thriving and lucrative activity'.

Under the Data Protection Act 1998 (DPA), the theft of personal data is a criminal offence punishable by a fine of up to £5,000 in a Magistrates' Court or an unlimited fine in the Crown Court.

A former gambling industry worker who unlawfully obtained and sold personal data relating to more than 65,000 online bingo players has pleaded guilty to committing three offences under Section 55 of the DPA, following an investigation by the Information Commissioner's Office (ICO).

Marc Ben-Ezra obtained the data whilst working in Israel. After he moved to London, he sold it as a way of paying off his gambling debts. He was traced when Cashcade Ltd., which provides marketing services for the Foxy Bingo brand and is the data controller, became aware that customer data, not including bank details, had been offered for sale and passed the details of its own investigation to the ICO.

Mr Ben-Ezra was given a three-year conditional discharge and ordered to pay £1,700 to Cashcade Ltd. as well as £830.80 costs.

To deter the unlawful trade in personal information, the ICO has requested that the Government exercise the power available to it under the Criminal Justice and Immigration Act 2008 to introduce a wider range of penalties for unlawfully obtaining or disclosing personal data.

Dismissal for Comments on Facebook Unfair
A recent case (Whitham v Club 24 Ltd. t/a Ventura) sheds further light on how an employer should respond if an employee makes derogatory remarks concerning the workplace on a social networking site.

Mrs Whitham worked as a team leader at Club 24 Ltd., which provides customer services for the Volkswagen group. The workforce comprises employees of Club 24 and of Volkswagen.

After a hard day at work, Mrs Whitham posted as her status on Facebook, "I think I work in a nursery and I do not mean working with plants." Then, in response to a post from a colleague, put, "Don't worry, takes a lot for the bastards to grind me down." A former employee of Club 24 then wrote, "Ya, work with a lot of planks though," to which Mrs Whitham replied, "2 true." At the time, she had around 50 Facebook friends and only they would have been able to view her comments.

When her line manager found out about the comments, from two of her Facebook 'friends' who were also work colleagues, he commenced disciplinary proceedings and Mrs Whitham was subsequently dismissed. The company's main reason for doing so was the fact that her comments had put its reputation at risk and could have harmed its relationship with Volkswagen.

The Employment Tribunal (ET) ruled the dismissal unfair. It judged the comments to be relatively mild and held that dismissing the employee fell outside the band of reasonable responses open to the employer in the circumstances. No mention had been made by Mrs Whitham of Volkswagen, nor was any evidence produced to show that Club 24's relationship with its important client had been harmed in any way. The ET also criticised the employer for failing to consider demotion of Mrs Whitham as an alternative to dismissal.

A company social media policy is a must. Employees must be in no doubt as to the terms of the policy and the punishment that will ensue in the event of a breach. Make it clear what will be regarded as a breach of confidentiality and give clear examples of behaviour that will be regarded as gross misconduct. If an employee has infringed the policy, do not act too hastily. Investigate thoroughly and weigh up the possible consequences of the employee's actions. Were they just feeling fed up and merely letting off steam, as the ET found was the case here, or do the comments cause actual damage to the reputation of your business?

Immigration and Work – Policy Changes Bite
For businesspeople from outside the EU who do not have a commercial sponsor, coming to work in the UK is becoming more difficult as the Government's policy to cut net immigration bites.

The UK Border Agency has reformed its guidance on Tier 1 and Tier 2 under the 'points-based' system of immigration and is limiting the number of Tier 2 immigrants to a total of fewer than 2,000 per month.

The permanent right to remain under Tier 2 is also being made more difficult to achieve.

The exception lies for immigrants who qualify as entrepreneurs or investors, for whom the hurdles to permanent settlement have been somewhat reduced. To qualify, however, an entrepreneur must prove that they have been responsible for job creation and an investor must show an ability to invest £1 million. In addition, 1,000 places are being made available under Tier 1 for people of exceptional talent.

If you are considering making use of non-EU citizens in your business, take advice.

Disability Discrimination – Reasonable Adjustments and Their Prospect of Success
When deciding whether or not an adjustment intended to remove a disadvantage faced by a disabled employee is reasonable, one of the factors that should be taken into account is how effective it will be. In Leeds Teaching Hospital NHS Trust v Foster, the Employment Appeal Tribunal (EAT) held that where there is a real prospect of an adjustment removing the disadvantage, that would make it reasonable. However, that does not mean that a less than real prospect would not be sufficient to make the adjustment a reasonable one.

Paul Foster worked as a senior security inspector for Leeds Teaching Hospital NHS Trust. In 2006, his relationship with his line manager broke down, and by October that year he was unable to work as a result of stress. He raised a grievance alleging that he had been bullied and harassed by his manager, but the Trust was slow to deal with this. In June 2007, a doctor in the occupational health department advised that Mr Foster's stress was the result of problems at work and his return would not be possible until these had been resolved. In September 2007, Mr Foster was told that his grievance was dismissed. The Trust's stance throughout was that this resolved the bullying issue and that Mr Foster's grievance and his ill-health were entirely separate issues.

In January 2008, it seemed possible that Mr Foster could be redeployed to a different department and the doctor confirmed that he was ready to return to work. However, the possibility failed to materialise. Mr Foster was offered one of two posts in the security department and was told that redeployment was not an option. His position was that a return to work in the security department was not possible as the problem that had caused his stress still existed. The Trust recommended that he be dismissed if his ill-health prevented him from taking up either of the two posts offered. In the event, however, a decision was taken in June of that year to put Mr Foster on the redeployment register for three months to see if suitable alternative employment became available. An opportunity did arise, but ill-health prevented Mr Foster from pursuing it.

By the end of September 2008, the manager at the heart of Mr Foster's grievance had left and the doctor believed a phased return to work in the security department would be possible. In the event, this did not happen. Mr Foster had concerns he wished to discuss but was told that he would have to raise a fresh grievance. By November 2008, the doctor advised that Mr Foster was unfit for work and his situation was unlikely to change in the foreseeable future. In February 2009, he was dismissed. This decision was upheld at an internal appeal hearing in October 2009, although the appeal panel did find that there had been a 'failure to manage the sickness absence' and that the Trust's attempt to separate this from the investigation of Mr Foster's grievance had been fatally flawed.

Mr Foster brought claims of disability discrimination and unfair dismissal. The Employment Tribunal (ET) found that the Trust had failed to make a reasonable adjustment in not putting Mr Foster on the redeployment register in January 2008. Had it done so, there was a real prospect of him returning to work. Furthermore, it upheld his claim of unfair dismissal on the ground that no reasonable employer would have rigidly separated consideration of Mr Foster's absence from work from the reasons for his absence. The Trust appealed and lost in respect of both claims.

With regard to an employer's duty to make reasonable adjustments, the EAT went on to say that there was, in fact, no need for the ET to go as far as to find that there would have been a 'good or real prospect' of Mr Foster being redeployed, had he been placed on the redeployment register between January and June 2008, for the adjustment to be considered reasonable. It would have been sufficient had it found that there would have been 'just a prospect' of that occurring.

Contractor Fined Over Worker's Death
A Trafford firm has been fined £145,000 after an employee fell through a fragile warehouse roof onto a concrete floor and subsequently died from his injuries.

The incident occurred in 2007, when Alan Kerwin, 32, was working a Saturday shift at an industrial estate in Ashton-under-Lyne. He was on a glass roof replacing a skylight when he placed his weight on the cement surrounding the glass. The cement shattered and Mr Kerwin fell through the gap and sustained several serious injuries, including a fractured skull. He developed post-traumatic epilepsy as a result of his injuries and was never able to return to work. He died from an epileptic seizure in April 2009.

A Health and Safety Executive (HSE) investigation found that Mr Kerwin's employer, J Mills (Contractors) Ltd., had failed to carry out a risk assessment or to put any safety measures in place to protect him. The company was prosecuted by the HSE and admitted breaching Section 2(1) of the Health and Safety at Work etc. Act 1974.

The court heard that one week before the accident, Mr Kerwin's manager had been given advice by the HSE on how to protect employees working on fragile roofs, but this advice was not acted upon.

The company was ordered to pay £7,700 in prosecution costs in addition to the fine.

Falls from height remain the biggest cause of workplace deaths and one of the main causes of serious injury. In 2009/10, more than 4,000 workers suffered a major injury as a result of a fall from height at work and 12 were killed.

The HSE has guidance on preventing falls from height in the workplace, which is available at http://www.hse.gov.uk/falls/.