Commercial Client ~ Summer 2007


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, which agreed to repair it. Having collected the machine 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 it as good as new.
Unhappy with this response, Ritchie rejected the machine. Lloyd commenced legal proceedings, arguing that Ritchie was bound by law to accept the repaired goods.
Although Lord Brown was critical of Lloyd for its 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 them will normally be lost.
Contact <<CONTACT DETAILS>> for advice on any contractual matter.
Partner Note
J & H Ritchie Ltd. v Lloyd Ltd. (Scotland) [2007] UKHL 9. See
Cigarette Ban – What a Fag!
Publicans, restaurateurs and hoteliers may well be quietly thanking their lucky stars over the smoking ban, which commences in England on 1 July 2007. They will no longer have to meet the cost of cleaning ashtrays, clearing up cigarette butts and the more frequent cleaning of soft furnishings that smoking necessitates. However, just to prove every silver lining comes with a cloud, new legislation will allow local councils to require licensees to be responsible for cleaning the pavements adjacent to their premises for up to 100 metres.
If the local authority sees the amount of litter as constituting a nuisance, it will be able to issue a ‘Street Litter Control Notice’ to compel licensees to clean the street near their premises. Cigarette butts are seen as a particular problem with some kinds of pavement.
As a first step, the provision of adequate numbers of suitable litter bins in areas used by smokers must be a sensible precaution.
Partner Note
Reported in Licensed Trade eNews, 4 May 2007.
Danger Lurks in the Shadows
Companies are increasingly making use of non-executive directors and external advisors who are not formally appointed as directors to their board but who act, in effect, as directors of the company.
It is not always appreciated by non-executive appointees that where a person acts as a director – in the sense that their instructions or directions are normally acted upon by the company – they are for some purposes in the same legal position as ‘proper’ directors of the company. People in this position are known as ‘shadow directors’.
Unfortunately for such people, danger lurks in shadow directorships because the main way in which their position resembles that of actual directors is that they can share the civil liabilities of other directors in the event of a corporate insolvency. This may lead to them being required to contribute funds to pay creditors of the company if it becomes insolvent. They also face the possibility of being disqualified from acting as a director, by the Department of Trade and Industry, where their conduct warrants such a ruling.
If you are asked to be a non-executive director or to participate at the decision-making level of a company’s management as a consultant or advisor, take care – especially if the company is in financial difficulty.
Recently, a shadow director of a company was ordered to repay over £850,000 plus compound interest after the company with which he was involved went into insolvent liquidation.
“If you are operating at a senior level in a company and are in effect ‘part of the team’, you may be at risk, even though your name is not on the letterhead,” says <<CONTACT DETAILS>>. “Ignorance of one’s responsibilities is no defence.”
Directors who fail to take actions to protect the interests of shareholders or who behave improperly can face significant penalties. In another recent case, a director who was aware of a fraud being repeatedly committed by a fellow director was banned from acting as a director for twelve years. In a third case, a director who misused a company credit card, took company property for his own use and committed a number of other improper acts had his civil evidence referred to the Director of Public Prosecutions with a view to criminal proceedings being brought.
Partner Note
Primlake Ltd v Matthews Associates [2006] All ER (D) 395.
Reported in Accountancy, May 2007, p120.
Secretary of State for Trade and Industry v Gee and another [2007] EWNC 350.
Collidge v Freeport plc – reported in the Times, 27 May 2007. See
Director Counts Cost of Absence of Written Agreement
Directors often advance their own money into the companies they direct, either as seed-corn capital or to tide the company over cash flow shortages. Where the company subsequently becomes insolvent, such cash injections normally rank equally with other creditors and in that case should receive the same treatment as the debts due to creditors in general.
In such circumstances, a director who reimburses money they have advanced is creating a ‘preference’ over other creditors and may be ordered to repay the amounts withdrawn from the company.
Recently, a director of a pub company was ordered to repay £28,000, which he had loaned to the company when it was unprofitable and in financial difficulties and then taken out again when the pub was subsequently sold. He had also authorised a payment of £5,000 to his co-director. Three months later, the pub company commenced a company voluntary arrangement (CVA). The administrator supervising the CVA entered into negotiations to recover the amounts and discussions were held between the administrator and the director at which the director was asked if he would be prepared to settle the claim against him for between £5,000 and £10,000. He made an offer to repay £5,000, but no formal agreement was made. In the absence of an agreement, the administrator was given leave by the court to claim the entire sum that had been paid to the director in preference to the other creditors plus the £5,000 paid preferentially to his co-director.
Says <<CONTACT DETAILS>>, “Insolvencies typically involve a great deal of horse-trading and negotiation. Whilst it is important for directors of companies facing insolvency to make sure that their behaviour is proper, it is also important to make sure that any agreements with administrators, receivers or liquidators made during the administration of an insolvency are evidenced in writing.”
Partner Note
Re: Cityspan Ltd. [2007] All ER (D) 61. 4 April 2007. 
Doing Your Best Isn’t Reasonable
A recent decision of the commercial court confirms that doing your best isn’t reasonable – or, more correctly, that to make reasonable endeavours to do something is not the same as making your best endeavours to do it.
The case concerned a contractual dispute between two companies, one of which was buying a business from the other. The dispute involved the interpretation of the phrase ‘reasonable endeavours’ in relation to a contract, with a third company, which was to be transferred between the two companies following the sale.
The contract was not transferred and the vendor company brought a suit alleging that the purchaser had not met its obligations because it had not used reasonable steps to ensure the contract was transferred.
The court, however, considered that ‘reasonable endeavours’ did not mean that all reasonable courses of action had to be taken. If that were the case, there would be no difference between ‘reasonable endeavours’ and ‘best endeavours’, a term also used in legal agreements in some circumstances. In the court’s view, a ‘reasonable endeavours’ clause must be less stringent than a ‘best endeavours’ clause and such a term will normally be satisfied if a reasonable course is taken. The exception would be if the clause sets out specifically what steps should be taken, in which case compliance will only be achieved if all the specified steps are carried out.
Says <<CONTACT DETAILS>>, “If something is very important, the phrase to use is ‘best endeavours’, which will require a higher standard of effort on the part of the other party to the contract to ensure that the desired end is achieved.”
We can assist you in negotiating all commercial agreements.
Partner Note
Rhodia International Holdings Ltd. v Huntsman International LLC [2007] EWHC
292 (Comm). Reported in the Times, 6 April 2007.
Expired Disciplinary Warnings
A further case has illustrated that employers cannot place reliance on a disciplinary warning that has expired, either in disciplinary proceedings or to justify dismissal.
In Airbus UK Ltd. v Webb, the Employment Appeal Tribunal (EAT) has ruled that a Tribunal is ‘obliged, and not merely entitled, to ignore expired warnings’.
Mr Webb worked for Airbus as an aircraft fitter. In July 2004 he was dismissed for gross misconduct after he was found washing his car when he should have been working. He appealed against the decision to dismiss him and the disciplinary action was reduced to the lesser sanction of a final written warning which would remain on his record for 12 months.
Three weeks after the written warning expired, Mr Webb and four other employees were caught in the locker area, watching television, outside their normal break time. All five were found guilty of gross misconduct. Mr Webb was dismissed but the other four employees received final warnings because they had no prior disciplinary record.
Mr Webb claimed that he had been unfairly dismissed. The Employment Tribunal (ET) took into account the decision of the Scottish Court of Session in Diosynth Ltd. v Thomson in which the Court had ruled that the employee was entitled to assume that a similar warning meant what it said and that it would cease to have any effect after one year. The ET held that as Mr Webb would not have been dismissed had he not been given a previous warning, it followed that his dismissal was unfair.
Airbus appealed against the ET’s decision and lost. However, the EAT confessed to having some difficulty in deciding whether or not the ET is obliged to ignore past warnings that have expired, but judged on balance that it is. The EAT went on to suggest that although the ACAS Code of Practice on Disciplinary and Grievance Procedures suggests that final warnings should normally expire after 12 months, this need not always be the case. A longer time limit might be appropriate if the nature of the misconduct justifies it.
It is important to ensure that the time limits for disciplinary warnings fit the particular circumstances and that your policies and procedures allow you to issue an extended warning where this is deemed necessary. Contact <<CONTACT DETAILS>> for advice.
Partner Note
Airbus UK Ltd. v Webb.
If You Have Doubt – Watch Out
A company (or person) that receives funds which they know to have been misappropriated can be liable to repay those sums to their rightful owner. In effect, any sum received which is believed to be misappropriated is held on trust for the rightful owner.
A recent case in which this principle was contested saw an on-line betting firm ordered to repay over £9m to a company which had its funds plundered by an employee to finance his gambling habit.
It should also be noted that where it is ‘just and equitable’, the court could order a contribution towards the loss to be made by a company’s directors and/or auditors. However, the circumstances in which such an order would be made are likely to be rare.
If you are in receipt of funds which you have reason to believe might be improperly obtained or the proceeds of crime, take advice immediately.
Partner Note
Charter plc v City Index Ltd. [2007] 1 WLR 26. Reported in Accountancy, May 2007.
Implied Consent Exhausts Trade Mark Rights
“A recent case should remind owners of trade mark rights to think carefully if they allow goods to be parallel imported into markets in which their rights are subject to exclusive distribution agreements,” says <<CONTACT DETAILS>>.
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.
Contact <<CONTACT DETAILS>> for advice on any aspect of IP law.
Partner Note
Mastercigars Direct Limited v Hunters & Frankau Limited & others. [2007] EWCA Civ 176. See
Inducement to Break Contract Must be Deliberate
Where one person induces another to breach a contract, the other party to that contract may have the right to claim for damages against both the person who has committed the breach of the contract and the person who induced them to do so.
A company called Mainstream recently successfully sued two of its employees for breach of contract after they set up their own joint venture, with a Mr De Winter, and diverted development business away from their employer to the new business. Mr De Winter had supplied the finance for the new business. Mainstream then set about suing Mr De Winter for inducing its employees to breach their contracts with Mainstream.
There was no doubt that the breach of contract could not have occurred had Mr De Winter not supplied the necessary funding. However, the House of Lords found that Mr De Winter was not to blame. Recognising the potential for a conflict of interest between the employees and Mainstream, he had sought and received assurances from the employees that there was no conflict. They had maintained that there was no conflict because Mainstream had been offered the development site but had refused it. That was not the case, but Mr De Winter was unaware of that. It was also relevant that he had supported a similar development by the employees a year earlier to which Mainstream had no objection.
This case is important since it demonstrates that a claim for damages for inducing a breach of contract will only be successful where the breach is deliberate. To prove a case, it is necessary that there is a breach of contract, that the person procuring the breach knows they are procuring it and that the breach is an end in itself or is a means to an end.
In practice, this decision may well make the defence of ‘ignorance of the consequences’ easier to sustain in similar cases.
Partner Note
Mainstream Properties Limited (Appellants) v Young and others and another (Respondents). UKHL, 2 May 2007.
Insolvencies Tumble in 2007
The number of corporate failures fell 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 recent and 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.
If you face insolvency issues,<<CONTACT DETAILS>>can advise you.
Partner Note
Source – Experian, 16 April 2007. For full details see
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 at work. Uncontrolled Internet use presents a high level of risk to one’s business and this should not be underestimated. However, a recent survey has revealed that British businesses are failing to take seriously the need to protect themselves and their 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.
Says<<CONTACT DETAILS>>,“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 Euros in 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.
Contact <<CONTACT DETAILS>> for advice on any aspect of workplace electronic communications policies.
Partner Note
The survey was carried out by network content technology firm Chronicle Solutions.
Copland v UK. See
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 issue 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 even though Wimpey had not issued a valid withholding notice.
The Lords, in a 3-2 split decision, agreed with Wimpey’s contention that the payment was validly withheld.
If you are having difficulties with payments in a construction contract, contact us for advice.
Partner Note
Melville Dundas Ltd. (in receivership) and others (Respondents) v George Wimpey UK Ltd. and others (Appellants) [2007] UKHL 18.
Landlocked Land – Lords Confirm No Right of Access
The House of Lords has confirmed the 2006 decision of the Court of Appeal that when a piece of land is landlocked (i.e. has no right of access over adjoining land so cannot be lawfully accessed by its owner), there is no automatic right to have a right of way ‘of necessity’ over adjoining land.
The case involved land which was bounded to the East and to the West by private land. To the North and South it was bounded by a piece of land and a highway respectively. Both of the latter pieces of land had been sold to the predecessor of the local authority which now owned them. The landlocked land had been retained by the original owner and the conveyance of the adjoining land which was sold did not reserve any right of access over it.
When the landlocked land was subsequently sold, the company that bought it sought to obtain a ruling that it should be granted a right of way to its property over the land to the North, which would be necessary for the land to be developed. The local authority had previously indicated that planning permission for access to the highway would not be granted.
In the view of the Court of Appeal, at the time the land was sold there had been no common intention that there should be a right of access across the land to the North. Accordingly a right of way of necessity should not be granted. The Lords confirmed this decision.
“This case illustrates the importance of not making assumptions – especially over things as critical as access to land,” says <<CONTACT DETAILS>>. “You should always make sure that the essentials are in place before signing on the dotted line. Relying on the courts to put things right after the event is a very risky strategy.”
Partner Note
Adealon International Property Ltd. v Merton London Borough Council [2007] EWCA Civ 362.
Leases – New Code of Practice
A new code of practice for commercial leases has been issued 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
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 contemporaneous or near-contemporaneous time records) as well as of the value of that time.
Recently, however, the Technology and Construction Court 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.
Partner Note
Bridge UK.Com Ltd. v Abbey Pynford [2007] EWHC 728 TCC.
Mind Your IP
The UK Intellectual Property Office (previously known as the Patent Office) has launched a campaign to make small businesses aware of intellectual property (IP) issues, claiming that many firms lose out financially because they fail to protect their IP.
It has published two new information booklets offering advice to small firms. A free IP e-newsletter is also on offer. These can be obtained from the Intellectual Property Office website at
Says <<CONTACT DETAILS>>, “IP can be of enormous value in today’s economy and firms should take all necessary steps to protect it and to ensure their IP ownership cannot be questioned. If your business depends on unique processes, inventions, designs or technologies for its success, or you have invested in creating brands, contact us to see what steps can be taken to protect your IP assets.”
Partner Note
The information booklets offering advice to small firms and the free IP e-newsletter can be obtained from the Intellectual Property Office website at
National Minimum Wage – 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 recent 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
Contact <<CONTACT DETAILS>> if you would like advice to ensure your pay arrangements do not breach the national minimum wage legislation.
National Minimum Wage – New Rates
The Government has announced the increases in the national minimum wage rates which will apply from October 2007.

The adult national minimum wage will rise from £5.35 to £5.52 an hour. The minimum rate for 18- to 21-year-olds will increase from £4.45 to £4.60 an hour and for 16- to 17-year-olds the rate will be £3.40 an hour instead of £3.30.

The rate for the accommodation offset will increase from £29.05 per week (£4.15 per day) to £30.10 per week (£4.30 per day).
The next sector targeted for special attention by HM Revenue and Customs compliance units will be hotels, widening out next year to other areas of the hospitality industry.
Partner Note
The guidance can be downloaded at
See also
Leisure Employment Services Ltd. v HM Revenue and Customs. See
OFT Consults on More Effective Redress
The Office of Fair Trading (OFT) has issued a discussion paper, entitled ‘Private actions in competition law: Effective redress for consumers and business’, on how to make redress for consumers and businesses for breaches of competition law more effective.
The OFT is mindful that consumers, particularly small and medium-sized businesses, face a number of practical problems which make them reluctant to take private action to enforce their rights under the law. Businesses harmed by cartels and other anti–competitive practices should be better placed to recover their losses and address the competitive disadvantage they may have suffered from infringements. The OFT believes that a more effective system of redress for breaches of competition law will also promote greater compliance.
The consultation paper can be found at
Partner Note
The consultation paper, ‘Private actions in competition law: Effective redress for consumers and business’ can be found at
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 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 their 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.
Partner Note
See Enterprise Act 2002 (Amendment) Regulations 2006 and
Overworked Driver Wins Damages from Employer
A kitchen fitter, who was paralysed in an accident on the M1 after he lost control of the van he was driving, has been awarded substantial damages against his employer.
Michael Eyres was employed by a Bradford based company, Atkinsons Kitchens and Bedrooms Ltd. He was often required to work long hours.
On the day of the accident, Mr Eyres arrived at the factory at 3.30 am. At 4 am he and managing director Craig Atkinson set off to fit a kitchen in Wiltshire. Mr Atkinson drove but Mr Eyres did not sleep during the journey. The two men then proceeded to Devon to complete another job. It was 7 pm before they commenced the drive back to Bradford. Mr Eyres was content to drive even though he had not had any sleep all day and told Mr Atkinson that he was ‘knackered’.
On the journey home, Mr Eyres had conversations on his mobile phone and also made and received several text messages, although there was no clear evidence of such activity in the 20 minutes or so prior to the accident at 10.15 pm. There was, however, evidence that he had been driving at an average speed of 83.5 mph.
Mr Eyres had been awake continuously for around 19 hours when the accident happened. He braked suddenly and lost control of the van, which rolled twice before coming to a halt on the central reservation. He was not wearing a seatbelt and was thrown out of the vehicle and broke his back.
A witness saw no obvious signs from his driving that he had actually fallen asleep although expert evidence suggested that his lack of rest could have induced a momentary episode of ‘micro sleep’. Mr Eyres claimed to have no clear memory of events leading up to the accident.
Mr Eyres claimed that his employer was liable in negligence and/or for statutory breach of duty because it permitted him to drive after working excessively long hours without a proper break.
The issue before the High Court was whether the accident was caused by tiredness and falling asleep or by use of the mobile phone. The judge concluded that mobile phone use was the more probable explanation. The Court of Appeal overturned this decision however, finding that Mr Eyres had shown, on a balance of probabilities, that tiredness was the cause of the accident.
The damages awarded were reduced by a third on account of contributory negligence because Mr Eyres was not wearing his seatbelt at the time of the accident and must have realised that he was at risk of falling asleep.
Employers who insist on employees working long hours without a break may well put them at increased risk and could find themselves held liable for any resulting stress or injury. In addition, it is now an offence to cause or permit a driver to use a hand-held phone while driving so their use whilst driving on company business should be banned and any breach of this rule made a disciplinary offence.
If you would like advice on how health and safety law affects your business, please contact<<CONTACT DETAILS>>.
Partner Note
Eyres v Atkinsons Kitchens and Bedrooms Limited. See
Revenue Face Promotion Costs Defeat
It clearly irritates some tax inspectors in HM Revenue and Customs (HMRC) that business promotional expenditure can be in some way connected with an activity which is enjoyed by the management of the business. Such expenditure, when substantial, is frequently queried in tax investigations.
In a recent case, HMRC took a taxpayer who runs a coach business to task over promotional expenditure claimed in his accounts as a business expense. The coach operator had purchased a rally car which was painted in his business livery and which he used in rallying competitions, claiming the cost as a deduction from business profits.
HMRC attacked the deduction claim on the grounds that the expenditure was not ‘wholly and exclusively’ for the purposes of the business. The Special Commissioners, however, found that the purpose of the expenditure was the promotion of the business and the expenditure was therefore allowable.
It remains to be seen whether HMRC will appeal the decision, which on the face of it seems lenient. If not appealed, it represents a slight shifting of the goalposts, with regard to this type of expenditure, in favour of the taxpayer.
Partner Note
McQueen v Revenue and Customs [2007] UKSPC SPC00061.
The Equality Act (Sexual Orientation) Regulations
For some time now, discrimination on grounds of sexual orientation has been prohibited in relation to employment and vocational training. The Equality Act (Sexual Orientation) Regulations 2007, which came into force on 30 April 2007, now provide protection for individuals from discrimination on the 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 an employee 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.
If you would like advice on any aspect of the Equality Act (Sexual Orientation) Regulations 2007, please contact <<CONTACT DETAILS>>.
Partner Note
The Regulations can be found at
Web Criminals Use New Approach
Although the days of spam emails containing viruses are not past, the move over the years from amateur virus-writers to those motivated by commercial gain has been relentless. The purpose of most ‘malware’ (software such as Trojans, which are planted on a computer without the owner’s knowledge and which seek to obtain information or use the machine for their own purposes) written today is financial gain. Often this is some form of theft or fraud, which is made possible by successfully planting the illegitimate software in an insufficiently protected machine.
Having regularly updated anti-virus software, a good firewall and anti-spyware solutions must now be regarded as mandatory. However, as well as having good technical solutions, it is sensible to consider, in particular, limiting the websites you or your staff visit. Nowadays, the favourite way for a malware provider to gain access to PCs is to do so by injecting its code into a legitimate website in the hope that users of the website will download it without knowing they have. This is a huge problem, as is illustrated by the fact that Internet security specialists Sophos recently reported that in May 2007 they had identified 9,500 new infected web pages daily – an increase of more than 1,000 every day when compared with April. In total, 304,000 web pages hosting malicious code were identified in May.
The security threat presented by access to the Internet is significant. Businesses should ensure they have a high-quality technical solution to guard against potential attack, but in addition should consider their Internet usage policies and steps they could take to isolate critical or sensitive data.
Partner Note
Information from Sophos – see
WEEE – Take Back Scheme in Force
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.
From 1 July 2007, any distributor – i.e. a retailer or wholesaler – supplying new Electrical and Electronic Equipment (EEE) must play an active role in meeting the aims of the WEEE Regulations.
The WEEE Regulations apply to EEE which falls within the 10 product categories listed in the WEEE Directive. These are:
  1. Large household appliances;
  2. Small household appliances;
  3. &

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