Commercial Client Articles ~ Summer 2006


Age Discrimination – Are You Ready?
There are currently 20 million people aged 50 and over in the UK and the figure is expected to reach 27 million by 2030.
On 1 October 2006, the Employment Equality (Age) Regulations come into effect. This new legislation makes it unlawful to discriminate on the grounds of age in employment and vocational training, unless this can be objectively justified. It prohibits direct discrimination, indirect discrimination, harassment and victimisation on age grounds.
Specifically, the Regulations will:
  • introduce a national default retirement age of 65 (to be reviewed in 2011). Compulsory retirement below 65 will be unlawful, except where retirement at a younger age can be objectively justified;
  • remove the current upper age limit for unfair dismissal and redundancy rights;
  • introduce a duty for employers to consider an employee’s request to continue working beyond the normal retirement age; and
  • impose a requirement that employers give written notification to employees at least six months in advance of their intended date of retirement and notify them of their right to request to continue working.
However, the new legislation will also have far reaching effects on many aspects of employment. The Advisory, Conciliation and Arbitration Service has published useful guidance for employers on the new Regulations. This covers the following areas:
  • recruitment, selection and promotion;
  • training;
  • pay, benefits and other conditions;
  • bullying and harassment; and
  • retirement.
The guidance recommends that employers have an age profile of their workforce to enable them to determine whether remedial action is necessary, such as planning for a number of retirements due to take place around the same time, rectifying an obvious age imbalance in the workforce or ensuring that equal access is given to training and other opportunities. The guidance can be found at
Employers are responsible for the actions of their employees so if you need to bring about a culture change in your organisation, the time to act is now. Policies and procedures should expressly prohibit all forms of discrimination on the grounds of age. Staff should be in no doubt that harassment on the grounds of age will not be tolerated. There will be no upper limit to the compensation payable if an employer is found guilty under the new legislation.
The new laws may well mean that behaviour currently tolerated within the workplace could in future give rise to a discrimination claim by an employee. We strongly advise any employer who has not yet done so to draw up an age equality policy. In doing so, it is sensible to consult with your workforce or their representatives. Make sure all staff are aware of the policy and provide any training necessary for its implementation. If you would like assistance in reviewing your employment rules and procedures, including those relating to recruitment, retirement and staff benefits, to ensure that these comply with the Regulations, please contact <<CONTACT DETAILS>>.
Are You AIMing High?

When it was founded, the Alternative Investment Market (AIM) was an innovative attempt to make it possible for smaller companies to take themselves to the market, allowing expansion and providing a way for owners to realise the value of their investment without resorting to a trade sale. It has been highly successful, with AIM flotations in 2005 averaging nearly ten a week.
The potential financial and tax advantages of an AIM listing are substantial and there are non-pecuniary advantages as well, such as facilitating the transfer of the ownership of the business and involving staff in its ownership. There may also be enhanced status (or ‘brand value’) as a result of the listing.
There are also, however, some disadvantages. The flotation process itself is very demanding of senior management time and the process comes with a massive price tag – costs of £1/2m are not unknown. Secondly, the corporate governance and reporting regime is considerably more stringent than that which applies to unlisted companies. However, the process of planning the flotation is a valuable one, as during it the company will have to undertake a very thorough review of its procedures, contractual arrangements and strategy – areas which are often neglected for long periods as being ‘non-urgent’.
If you are considering an AIM listing, need help with your exit or business strategy or just think it is about time you had advice on the legal aspects of your operations and procedures, contact <<CONTACT DETAILS>>.
Be Careful With Contract Terms
A recent Scottish case provides a reminder that in any contract, it is advisable to spell out (preferably in words of one syllable) the meaning of any terms in the contract which might otherwise subsequently be the subject of dispute.
The case involved the Port of Dundee, which was holding in its warehouse two cargoes of wood pulp shipped by the Finnish wood products giant, Stora Enso. Whilst the goods were in storage a fire broke out, which destroyed the consignment. Stora claimed against the Port, which argued that it did not have any liability on the basis that Stora no longer had title to the consignment, which had been shipped on a ‘CIP’ (Carriage and Insurance Paid) basis.
The terms of the standard form of contract under which the wood pulp was supplied stated that the title to the consignment would not pass from Stora Enso until the whole sum due under the contract was paid. The question which applied was whether the use of the term ‘CIP’ on the sales invoice overrode terms agreed under the Sale of Goods Act 1979, which allows parties to agree expressly when the title (and thus the risk in the goods) passes from seller to buyer.
Under the international law that covers a CIP contract, the seller pays the cost of conveying the goods to their destination and the buyer assumes the commercial risk in the goods (i.e. the insurance risk) once that has been done. The Port argued that in this case, CIP meant just that – Stora had supplied the goods, title had passed and thus they could no longer sue, since they did not own the goods.
In this case, in the view of the seller and the ultimate purchaser, the risk in the goods passed to the purchaser only when they had been paid for and put on the purchaser’s lorry. The Court of Session agreed that in this instance, CIP meant that the seller and buyer were agreeing that the seller should pay for the goods up to the point of delivery only. The CIP clause was, in effect, just a means of setting the price for the consignment. Since the General Trade Rules for Wood Pulp were agreed to apply, and those rules were quite unequivocal that title in the goods would only pass when they had been paid for, the title still rested with Stora. Accordingly, Stora could sue.
“The ultimate purpose of this case was undoubtedly to see which organisation’s insurers would meet the tab for the loss,” says <<CONTACT DETAILS>>. “However, it does make the point well that it is always better to make sure that any terms incorporated in contracts are clear and consistent. In this case the use of the term CIP threw doubt on whether a standard term applied.”
If you require advice on any contractual matter, contact us.
Confiscation Order Needs Evidence
The law allows HM Revenue and Customs (HMRC) to confiscate assets used in the commission of crimes and nowhere is this right more frequently exercised than in the seizure of motor vehicles used to transport contraband.
Recently, a Polish haulier sought to have his lorry restored to him after it had been confiscated. The circumstances were that he had been carrying a cargo of steel girders into the UK and at the port of entry it was discovered that the steel had been arranged to hide a cargo of nearly 2 million cigarettes. These, and his lorry, were confiscated. The driver of the lorry was arrested, but HMRC brought no charges against him as they had insufficient evidence that he was involved in the smuggling operation.
The lorry driver requested the return of his lorry, but his request was refused on review by HMRC’s review officer, who was unsatisfied that he was unconnected with the crime as he had no return load and the economics of the trip made it unprofitable. He was also unhappy with the driver’s assertion that he was to be contacted when in the UK and told where to deliver his load.
The Tribunal did not accept HMRC’s arguments. Furthermore, HMRC failed to produce the original documents relating to the reasons for the seizure or for the review decision, as they are required to do if seeking to rely on them. The Tribunal saw no evidence of wrongdoing on the part of the driver and directed that a further review be carried out.
Consent to Receive E-mail Not Unlimited
When the owner of a computer consents to receive e-mail from a sender, it is not an unlimited consent. Recently, the Court upheld an appeal by the Director of Public Prosecutions that an employee of a company who had implied consent to e-mail it and who then subjected the company to an e-mail ‘bombing’ attack (where a huge volume of e-mail is directed at the server and which is normally designed to overwhelm the recipient’s system) could be guilty of an offence under the Computer Misuse Act 1990 (CMA). In this case the man had sent over ½ million e-mails to his employer’s firm. In the first instance, the Magistrates’ Court had ruled that there was no case to answer.
The appeal was successful on the basis that the e-mail campaign was an ‘unauthorised modification of the contents’ of the computer, which is an offence under section 3 of the CMA. The employee will accordingly have to return to the Magistrates’ Court and enter a plea against the charge.
Directors’ Duties to be Expanded
One of the less well-reported changes to directors’ duties, which will be introduced when the Company Law Reform Bill becomes law in 2007, is the obligation put upon the directors to promote the success of the company for the good of the shareholders as a whole.
This implies that the appropriate standard of conduct for a director will be one which balances long- and short-term interests but, more particularly, there are certain factors which directors will be required to consider when working towards what is termed ‘enlightened shareholder value’.
These include a positive obligation to consider the interests of those outside the company, such as suppliers and customers, to consider the environmental impact of the company’s operations and to consider the impact on employees of decisions.
Although the obligation is not absolute – each of the above must be considered to the extent which is ‘reasonably practicable’ – there is little doubt that the overall intention is to increase the degree to which directors are accountable for the consequences of their decisions. In effect, the regulations mean a subtle redefinition of the concept of ‘good faith’.
The Bill also moves the goalposts somewhat as regards the duty of directors to avoid a conflict of interest with the company and extends the duty of disclosure of interests in transactions.
Directors of companies will need to consider the impact of the new law and how it will affect them and the governance of their company.
Dyson Wins Copying Case
Qualtex, a spare parts manufacturer which copied parts for Dyson vacuum cleaners and sold them as spares, has lost its case that the parts did not infringe Dyson’s design rights. Original parts do not benefit from full protection provided the replacement part meets two rules.
The first is the ‘must fit’ rule, which means that the non-original replacement part must be designed to fit where the original part belonged if that is necessary for its function to be performed. Clearly, if this were not the case, it would be impossible for anyone other than the original designer to market a spare part.
The second rule is that protection is not given if the design of the spare part is dependent on the appearance of another article (the ‘must match’ rule). The problem was, however, that the spare parts made by Qualtex looked almost exactly like the often brightly coloured Dyson parts. In the view of the Court of Appeal, there was no logic to the position that the exact appearance was an essential part of the design as a whole, and the Qualtex product looked too similar to the Dyson product to benefit from the ‘must match’ exemption. Dyson was given an injunction to prevent Qualtex from marketing some parts and will be awarded a financial settlement with regard to some others.
If the Qualtex parts had been differently coloured, it would not have been an infringement of Dyson’s rights. The conclusion which can be drawn from this is that the courts will interpret the rules narrowly in seeking to protect the rights of designers.
The case also provided guidance on when design protection (which is for a limited period only) is deemed to start.
E-mail Brings Benefit in Kind
One possible side-effect of the Chancellor of the Exchequer’s decision in last March’s Budget to remove the tax exemption on computers supplied to employees is that employees who use office computers for sending personal e-mails could face a benefit-in-kind (BIK) charge on the private use of the computer, unless this is ‘not significant’. The HM Revenue and Customs (HMRC) Budget Note (BN 30) says that the charge will apply to ‘employees who are loaned a computer… for private use by their employer’. However, it now seems that HMRC may interpret such a ‘loan’ to include any private use of a work-based computer.
This issue is causing considerable consternation, as it is widely known that most employees do send and receive personal e-mails at work and furthermore the regime which would need to be put into place to police such usage might cause considerable irritation to employees. It has also been suggested that such surveillance would have to be carried out meticulously in order not to infringe the employees’ right to privacy under the Human Rights Act.
The BIK charge will be calculated by charging tax on 20 per cent of the value of the item provided annually. For example, a £1,000 computer would generate a BIK of £200 annually, giving tax payable for a higher-rate (40 per cent) taxpayer of £80. National Insurance is also paid on taxable BIKs. It is said that the HMRC helpline has confirmed that the measure will only apply to computers first loaned to employees after 6 April 2006, but it would be unwise to rely on this.
The Treasury was reported to be backtracking on the position and it has been suggested that there will be no BIK if the computer is required for work. How this fits with the guidance given by HMRC remains to be seen and it is to be hoped that these issues are resolved soon.
Employed or Self-Employed? Ask the Taxman
There are big differences between the tax treatment of the employed and the self-employed. PAYE applies to the former and not the latter, which means that payments to an employee carry employer’s national insurance contributions (NICs). Payments to an employee also have income tax and employee’s NICs deducted at source and the regime by which employees can obtain tax relief for expenditure incurred in earning their income is far stricter than that which applies to the self-employed. It is not surprising, therefore, that businesses and HM Revenue and Customs (HMRC) often take differing views as to whether a person is employed or self-employed.
The penalties for getting such judgments wrong can be severe. In general, if the following questions can be answered ‘yes’, the person is likely to be self-employed:
  • Is the payment made for doing the job rather than for the hours worked?
  • Does the person doing the job decide how it is to be done, who will do it and when it is to be done?
  • Does the person doing the job supply their own tools?
  • Does the person doing the job do similar work for other customers?
  • Does the person doing the job carry commercial risk (i.e. if the job is not done properly, will they have to rectify it for no further payment)?
In a bid to reduce the number of disputes regarding employment status, HMRC have launched a web page to help guide decisions on whether a person is employed or self-employed. The guidance involves answering a number of ‘yes or no’ questions and these are the same questions that PAYE inspectors will use when reviewing payments made. The website is at
Fire Safety Reform Guidance
With current fire safety law contained in over 70 different pieces of legislation, business managers in England and Wales will welcome the Government’s decision to reform the legislation to make it simpler and more accessible.
The Regulatory Reform (Fire Safety) Order is scheduled to come into force on 1 October 2006. The reforms aim to improve fire safety by making it the responsibility of the employer or 'responsible person', who will be required to assess the risks of fire and take steps to reduce or remove them. Under the reforms, which also replace the 1971 Fire Prevention Act, businesses will no longer need a fire certificate – although fire and rescue authorities will still continue to inspect premises and ensure adequate fire precautions are in place.
The Office of the Deputy Prime Minister (ODPM) has published free general guidance on the reforms, entitled ‘A Short Guide to Making Your Premises Safe From Fire’. This emphasises that the fire risk assessment should pay particular attention to those at special risk, such as people who work alone or in isolated areas, children, parents with babies and disabled people. It must include consideration of any dangerous substance likely to be on the premises. Businesses employing five or more people must record the significant findings of the assessment. The guidance can be ordered or downloaded from
In addition, the ODPM is producing a series of 11 guides, offering fire safety advice for different types of premises, some of which are now available at
Good News for Theatres as Court Rules Against VAT Man
The income from the sale of theatre tickets is exempt from VAT. Normally, when a ‘supply’ in VAT terms is exempt from VAT, the related input VAT is not recoverable. Where supplies are ‘mixed’ – comprising both VATable and exempt supplies, VAT on the costs incurred is recoverable in part.
It had been thought that since theatres derive the large majority of their income from ticket sales, they could not recover any of the related input VAT.
Recently, however, one theatre successfully argued in the High Court that the input VAT on a payment made to a production company for the right to show a performance was partly recoverable, because the cost was not solely related to the ticket sales income.
As a result, theatres will in future be able to recover an appropriate proportion of the input VAT on such expenses, unless HM Revenue and Customs successfully appeal the decision. Theatres which have failed to recover VAT in such circumstances in the past will also be able to submit claims to do so, within the normal time limits (which are themselves under scrutiny in the courts).
Holidays – Pay in Lieu
The European Court of Justice (ECJ) has ruled that the practice whereby an employer provides pay in lieu of minimum paid holiday leave not taken is unlawful, even if the holiday year in question has expired and the allowance was carried forward to the next year.
Reference was made to the ECJ in the course of proceedings in the Dutch courts as to whether the practice was contrary to article 7(2) of the Working Time Directive.
The Netherlands government had argued that where an employee has not made use of his or her minimum leave entitlement in one year, that entitlement does not count as part of the minimum entitlement to paid leave for the following year, as this will have its own separate minimum entitlement. Therefore, compensation could be provided in respect of the unused entitlement from a previous year.
The ECJ was of the view that the harmonisation of the laws on working time across the European Union is intended to guarantee better protection of the health and safety of workers by ensuring that they are entitled to paid annual leave and adequate work breaks. The possibility of receiving compensation in lieu of the minimum period of annual leave carried forward could provide an incentive for workers not to take their holiday and this would be incompatible with the objectives of the Directive.
It is only where the employment relationship is terminated that article 7(2) allows payment in respect of holiday not taken.
Ideas Are Not Copyright
The ‘Da Vinci Code’ legal case may have filled the newspapers while it was ongoing, but to a lawyer, it was a remarkable case more for the fact that it was being fought at all than for the legal points.
To prove an allegation of this nature, in this case that Dan Brown had plagiarised the work of Richard Leigh and Michael Baigent, requires a very substantial amount of evidence. Typically it must be shown that there is a considerable amount of ‘borrowing’ of text, plot or chronology (i.e. general story line) for such an argument to be successful. The mere borrowing of ideas is insufficient to support a claim for damages.
The issue turns, in effect, on whether the claimant can show that the author alleged to have copied the claimant’s work did not do independent research (i.e. use other sources), but relied on copying the claimant’s work. In this case the allegation was that Brown had copied the ‘central theme’ of their work, ‘The Holy Blood and the Holy Grail’. Since the central theme of that book is ambiguous, they proposed fifteen features of the theme, which were identified as being copied. However, the judge had difficulty in identifying several of these themes in either book. In addition, the main problem with Mr Baigent and Mr Leigh’s case was that the basic plot of ‘The Da Vinci Code’ was based on an idea that was in the public domain, having been the subject of several books. It was therefore almost impossible for them to show that Mr Brown had copied their material.
The judge refused leave to appeal.
Copyright exists to protect material from being copied. It does not act to prevent the borrowing and adaptation of ideas.
Intellectual Property Latest
When a business is sold, the sale will normally include all the assets including the goodwill and any trade marks. When the business trades under a person’s name, this can mean that the founder of the business loses the right to use their own name for future business activities. Recently, fashion designer Elizabeth Emanuel sought to prevent the registration of the trade mark ‘Elizabeth Emanuel’. She had sold the right to use her name to the company which bought her business.
Her argument was that the trade mark could confuse or deceive customers into believing that the company’s clothes were designed by her. The European Court of Justice concluded that her name was not of such a nature to deceive the public about the quality or origin of the company’s products. She could not therefore prevent the company’s application for a trade mark in her name.
Somewhat more surprisingly, Apple Corps, the company set up by the Beatles, lost its case against Apple Computer, in which it sought to prevent the computer company from using the apple logo in connection with its ‘i-tunes’ business. The two companies had had an agreement under which Apple Corps could use the apple logo in its ‘record business’, which covered current and future recordings of music. Apple Computer was not to use the logo in connection with ‘physical media delivering pre-recorded content’.
In the view of the court, Apple Computer’s use of the apple logo was not to do with physical media, but a service by which data (music) was transferred. This decision is almost certain to be appealed.
Is Your Website Disability-Friendly?
The British Standards Institution has published (at £30) new guidance on making sure that your website is disability-friendly. Under the Disability Discrimination Act, it is unlawful for a service provider to discriminate against disabled persons by failing to make available to them any service which it provides to other members of the public. Also, a service provider has to take reasonable steps to change a practice which makes it unreasonably difficult for disabled people to make use of its services.
You can give your website the ‘once over’ for free using a service called Watchfire, which will highlight non-compliances and other issues (such as spelling errors). Further information can be found at
If you wish to have your website reviewed by disabled people, the Usability Exchange offers such a service and this is available at This service is not free.
Licensing – Cumulative Impact Policy Lawful
The right of a Council to refuse an application to extend the opening hours of a pub because of the cumulative effect of extended opening hours was recently confirmed by the courts.
The JD Wetherspoon chain had claimed that Guildford Borough Council could not refuse its application to extend the opening hours of its pub in the town based on a cumulative impact policy. The Council argued that the policy was designed to deal with the issues arising when there are a large number of licensed premises in an area. Its policy was that it would consider such applications in the light of representations received about the cumulative impact on the licensing objectives.
Faced with an application from Wetherspoon which amounted to a material variation in the licence terms, the Council could apply its policy and refuse the application.
Light at the End of the Tunnel for Offshore Companies?
It used to be a jest among tax professionals that a very good way to find out about the (then) Inland Revenue’s Special Compliance Office (the Revenue’s ‘Sweeny’) was to have a lot of dealings with companies incorporated in tax havens.
The ‘Controlled Foreign Companies’ (CFC) legislation seeks to make companies which are controlled by UK residents liable to tax in the UK if their ‘central management and control’ is exercised by persons who are themselves resident in the UK.
The legislation was put into effect to prevent the avoidance of UK tax by using offshore companies to hold profits tax free which would otherwise be taxed in the UK. The CFC law is only applied when the offshore country is one of those listed by HM Revenue and Customs (HMRC) as being a low-tax area.
One way the tax charge resulting from the use of a CFC can be avoided is to follow an ‘acceptable distribution policy’, which means paying to UK persons a dividend equal to at least 90 per cent of the company’s profits. The rationale for this is that if the dividends are taxable in the UK, there is no significant avoidance of UK tax.
The definition of a CFC has been considered to be wide enough to catch a foreign company with a foreign board of directors who act on the instructions of UK residents. Recently, this interpretation was challenged by a couple who used a complicated tax planning arrangement to shelter capital gains by carrying out a sale agreement for shares in a UK company using a British Virgin Islands (BVI) company, which sold the shares on to a Dutch one. They had incorporated the BVI company only to carry out the transaction. The board meetings and documentation had been completed in the Netherlands. HMRC argued that the profit on the sale of the shares was subject to the CFC regime. The Court of Appeal thought otherwise. Since the documentation and board resolutions were taken in the Netherlands and there was no evidence that the decisions of the directors of the Dutch company had been ‘usurped’, the Court concluded that the central management and control of the company selling the shares was in Holland, not the UK.
“Although it looks like this decision widens the scope for offshore tax planning, it is to be expected that HMRC will take the case to the House of Lords,” says <<CONTACT DETAILS>> “and they are likely to seek a change in the law if unsuccessful there.”
Limitation Runs From When You Know Negligence is Possible
Where negligent advice is given, the general rule under the 1980 Limitation Act regarding beginning proceedings for damages for professional negligence is that the action has to be started within six years of the damage occurring, or, if later, within three years of knowledge of the facts constituting the essence of the complaint of negligence.
Earlier this year a firm of accountants, which was being sued for negligence, caused the House of Lords to clarify what this means. The suit revolved around an agricultural machinery company which had been bought by a client of the firm in 1994. The client was advised by the firm on the acquisition and subsequently. He injected large amounts of money into the company but, despite that, it failed in 1998. In 1999, the client began to question the quality of the advice he had been given and in 2001 issued a writ for damages against the firm with regard to the advice given on the 1994 acquisition.
The accountants claimed that the action could not be brought as more than three years had passed since ‘the earliest date upon which the plaintiff… had… the knowledge required for bringing an action for damages in respect of the relevant damage’.
The claimant argued that he did not know more than three years before issuing his writ that the damage was attributable in whole or in part to the firm’s negligence.
The accountants were successful. In the view of the Lords, the claimant had been in possession of the material facts regarding the advice when the advice was given. He also knew that there was a possibility that he would lose money if the advice was negligently given. The relevant time to ‘start the clock running’ for the purposes of the Limitation Act, therefore, was not when he first knew he might have a claim for damages but when he knew enough to justify beginning to look at the possibility that the advice given was defective. The investigation into the quality of the advice did not begin until 1999 – too late for the 1994 advice to be actionable.
Says <<CONTACT DETAILS>>, “The moral of this story is to act as soon as possible if you think that investment or other advice you have received may be negligent and not to wait until you are certain that it is. The fact that you may not know the advice given was negligent is not relevant for the purpose of the limitation period, so get a second opinion as soon as possible.”
Making Good is Not Making Perfect
Virtually all leases contain a dilapidations clause to the effect that at the end of the lease the tenant will leave the property in a reasonably good state of repair.   However, what constitutes a reasonably good state of repair is often a matter of opinion which can lead to dispute.
Recently, a case came to court involving just such a dispute. The tenants of a property had experienced problems with the roof, which was of the corrugated asbestos sheet type. The tenants had the roof surveyed and were advised that it could be put into a good enough state of repair to last for a further decade by undertaking works to patch it and to replace certain of the asbestos sheets and fixings. As an alternative, a more comprehensive series of works could be undertaken which would make the roof good for 40 years, but at a much higher cost.
As the lease had only three years to run, the tenants entered into discussions with the landlord regarding the options, but these did not amount to anything, so the tenants proceeded with the less expensive scheme of repairs.
At the end of the lease, the tenants vacated the premises and the landlord replaced the roof, claiming a total of over £120,000 under the dilapidations clause.
The dispute went to court and consideration was given to the question as to whether a covenant which required a tenant to ‘well and substantially’ repair the premises meant that the patched repair undertaken by the tenants was sufficient under the lease.
The court’s conclusions were:
·         a covenant expressed in these terms does not require a tenant to put the premises back into a state of perfect repair – the appropriate standard is that of an occupier judging the premises for the purposes of its intended use;
·         the test must consider the incoming tenant’s view from the point of view of taking a lease on the same terms as the lease under consideration;
·         replacement is only a requirement if repair is not a feasible option; and
·         where the tenant has a choice of repair methods to use, it cannot be criticised for using the cheapest method.
Accordingly, the landlord’s claim against the tenants failed. Had the landlord negotiated with the tenants, it is likely that they would have made a contribution to the cost of the re-roofing. This would have led to a substantial saving for the landlord compared with bearing the whole cost of re-roofing the property and then losing in court.
We can assist in helping to ensure that negotiations with landlords or tenants reach a conclusion that is satisfactory to all.
Memory Stick Menace
The Department of Trade and Industry has warned that memory sticks constitute a potentially grave threat to businesses as they enable employees to download and remove sensitive data. Often there is little or no attempt made to control the practice. When such data are being carried, the risk of loss of data to the company is significant.
According to recent figures from the Information Security Breaches Survey, less than ten per cent of companies encrypt the data stored on data sticks or portable flash drives.
The report followed a proposal from the European Commission that the minimum fine for intellectual property (IP) offences be increased to 100,000 euros. The proposals are aimed at IP counterfeiters and recommend that infringements of IP rights on a commercial scale should be treated as criminal offences. These will be subject to a minimum sentence of four years’ imprisonment where the crime is committed under the aegis of a criminal organisation or results in a significant health and safety risk. Also, in such cases the minimum fine would be 300,000 euros.
The proposals would allow member states of the European Union to provide harsher penalties if they wish.
Outsourcing the Processing of Personal Information – New Guidance
The Information Commissioner’s Office has issued a good practice note giving guidance on how to comply with the Data Protection Act 1998 (DPA) when you outsource the processing of personal information, such as your payroll function or customer mailing information.
If you use an outside organisation to process personal information on your behalf, you remain responsible for the processing and will be liable for any breaches of the DPA. The Act requires that you take the appropriate technical and organisational measures to protect the information being processed whether this takes place in-house or whether someone else does it for you. In order to decide what measures are needed, the following should be taken into account:
  • what sort of information is being processed?
  • what harm might result from its misuse?
  • what technology is available to ensure the appropriate level of security?
  • what would be the cost of providing this level of security?
The guidance stresses that if you employ another organisation to process personal information for you, you must select one that you believe will carry out the work in a secure manner. Ongoing checks should be made to ensure that this is the case. Wherever the organisation is based, you must have a written contract with them. This should state that the personal data can only be used and disclosed in line with your instructions and that appropriate security measures must be taken.
If you are using an organisation based outside the European Economic Area, make sure the contract is enforceable in that country.
In summary, the good practice recommendations if you want to outsource the processing of personal data to an outside organisation are:
  • select a reputable organisation offering suitable guarantees as to their ability to ensure the security of the data;
  • make sure the contract is enforceable;
  • make sure the appropriate security measures are in place;
  • make sure that the organisation makes appropriate checks on its staff;
  • audit the organisation regularly to make sure it is up to standard;
  • require the organisation to report any breaches of security or other problems; and
  • put in place procedures that allow you to act appropriately if a problem is reported.
The guidance can be found at
Planning Gain Supplement Update
Increases in property prices led the Government some time ago to consider a new tax (more accurately, the reintroduction of the old Development Land Tax (DLT) – which was abolished many years ago – in a repackaged form) to levy a tax on the ‘planning gains’ which accrue to properties.
The proposed new tax, called Planning Gain Supplement (PGS) was mooted in 2005, but rather surprisingly not mentioned in Chancellor Gordon Brown’s March 2006 Budget speech. Despite not being in the Budget, it is still firmly on the agenda and could be brought in as early as 2008.
The basic idea of the tax is that someone who owns property for which they obtain planning permission will be taxed on the uplift in value that the planning permission produces. It is proposed that a proportion of the tax is passed back to the authority granting the planning permission so that the community will benefit from the permissions granted. It is likely that local authorities will use the windfall income to relieve their stretched capital budgets.
One practical effect of the introduction of PGS for landowners is that property prices for developable land may well be depressed as developers seek to mitigate the impact of the tax. Another is that as the implementation date nears, getting planning decisions from authorities may become more difficult and take longer. There will also have to be a tax relief regime similar to that which operated under the DLT to give tax relief against Capital Gains Tax for PGS suffered.
Interestingly, it is suggested that residential planning permissions (other than mere home improvements) will be caught by PGS and that the tax will bite if developers with existing permissions do minor site development works – normally done to keep planning permissions ‘live’.
PGS is currently the subject of an extensive consultation process between the Government and interested bodies. It is not yet known when more details of how PGS will work will be made public, although the autumn pre-Budget statement looks a likely bet. However, if you have property which might benefit from planning permission, it is worth thinking about what you should do in anticipation of PGS.
If you would like to discuss how PGS might affect your plans or need advice on any commercial property matter, contact <<CONTACT DETAILS>>.
Restrictive Covenants on the Way Back?
Restrictive covenants in employment contracts have taken a bit of a battering in the courts of late, but recently they seem to be making something of a comeback. In a recent case, a firm of solicitors sought to prevent, by way of an injunction, a former employee from approaching its clients and from practising within a radius of six miles of her former office for a period of a year. The ex-employee, who was a commercial property lawyer, claimed that the two clauses were too widely drawn to be effective. In particular the ‘non-dealing’ clause prevented her from contacting any clients of her former firm, not just those with whom she had previously dealt.
In the case of the geographical restriction, the employee was successful – the clause was deemed to be more restrictive than was necessary to protect the interests of her former employer. Many of the businesses in that area were not clients and were not likely to become clients of her former firm. Indeed, some had been clients of the firm but were clients no longer.
In the case of the restriction on approaching the firm’s clients, the firm was on better ground. The ex-employee argued that some of the firm’s clients would have left and it was unfair to prohibit her from approaching them and also that the clause was too wide because it prevented her from approaching clients regarding classes of work which were not within her specialism. The court rejected both of these arguments. In their view, that clause had certainty as to its area of application and was fair protection with regard to the restriction it placed on her and the period of time for which it was operable.
Restrictive covenants which are too widely drawn will be thrown out by the court but, properly worded, they can provide a valuable protection for your business.
Contact <<CONTACT DETAILS>> for advice on all contractual matters.
What Information is Free Under the Freedom of Information Act?
One continually hears of embarrassing statistics and other information coming to the attention of the public because of a request being made under the Freedom of Information Act 2000 (FOIA). However, the Act does not apply to all information held by the various governmental and other public bodies.
Here is a brief guide to the limits on the information that is obtainable under the FOIA.
To make a request under the FOIA, it is not necessary to follow any specific procedure nor to mention the Act, nor indeed does the identity of the enquirer need to be disclosed. It is advisable, however, to make the request as specific as possible. The public authority must respond to the enquiry within 20 days.
There is certain information that will not be provided, however. You will not get:
·         information that cannot be disclosed without causing a breach of confidence;
·         information that is legally privileged, provided withholding it is in the public interest; and
·         other information if it is regarded as being in the public interest to keep it confidential.
In making its decision, the public body will need to bear in mind its responsibility to make its decision-making as transparent and easily understood by the public as possible. Where an application is refused on public interest grounds, an explanation must be given. Such decisions can be appealed to the Information Commissioner. Note that a confidentiality clause in an agreement with a public body may be unenforceable if disclosure of the information to which it relates can be considered to be in the public interest.
In practical terms this means that businesses supplying public bodies which seek to retain confidentiality over documents should:
·         try to ensure that the public body agrees to advise them if a disclosure request is made which will include documents they have supplied or information referring to them;
·         require the public body to return or destroy any information which is no longer needed; and
·         make it clear to the public body that sensitive documents are regarded by the business as non-disclosable under the FOIA and mark documents ‘confidential’.
For advice on the implications of the FOIA on your business, or on any other data protection issues, please contact <<CONTACT DETAILS>>.
In Brief
Fraud Must be Excluded Under Guarantee
A guarantor to a commercial debtor who did not exclude in the guarantee document liability in the event of being misled by the debtor could not disclaim liability under the guarantee on that basis, according to a recent ruling of the High Court.
In the case in question the guarantor company sought to avoid paying £1.2m under a commercial guarantee on the basis that it had been deceived by the company whose debt it had guaranteed. Had the guarantor wished to exclude such a liability, it should have been dealt with in the guarantee agreement.
The guarantor’s attempt to avoid liability on the basis that the persons who brought the claim under it were not signatories to the deed of guarantee was likewise rejected by the Court.
How IT Capable is Your Business?
Microsoft has teamed up with the Harvard Business School to offer a free IT assessment tool. Based on a methodology involving a study of 600 companies, the assessment tool rates the IT capabilities of your business in the following areas: sales and marketing; finance; operations; employee productivity and collaboration; and IT infrastructure.
It is free and can be accessed at
Intellectual Property – Design Registration Simplification
The Government is proposing to simplify the process by which applications to register industrial designs are made. The proposal is that the UK Designs Registry will no longer challenge applications for lack of novelty or original character. However, design applications will have to be published and may be challenged later under these heads. Also, it will be possible to submit several applications for registrations together, paying only one fee. There will also be provisions to restore registered designs if the original owner of them can show their non-renewal was inadvertent.
Please contact <<CONTACT DETAILS>> for advice on all trade mark and intellectual property matters.
Most Attractive Name?

Albert Steptoe would have smiled if he had read the results of a recent survey, which discovered that the most attractive names for businesses are those which contain a surname, especially those that include the words ‘and Son’. In the study by Yellow Pages, which polled 2,600 shoppers, 42 per cent said they liked ‘family’ names best. Around 20 per cent stated a preference for firms with a regional flavour.
It would appear a Rose and Son may smell sweeter than a Rose!
Staff Bonuses for Reporting Software Piracy

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