Commercial eNewsletter 1 Nov 2010


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Disability-Related Discrimination – New Act Restores Position
The core provisions of the Equality Act 2010 came into force on 1 October. The Act largely consolidates existing discrimination law, which had previously been found in a number of different pieces of legislation.
One of the changes made by the Act is to make it easier for a claimant to establish a case of ‘disability-related discrimination’, which was made more difficult following the decision in London Borough of Lewisham v Malcolm. In that case, the House of Lords ruled that a disabled tenant who was evicted from his flat for breach of the terms of his tenancy agreement (he had sub-let the flat in contravention of the lease terms) had not suffered discrimination despite the fact that he suffered from schizophrenia. The Court ruled that the Council, which was unaware of his condition, would have treated any other tenant the same way.
The Act replaces the concept of disability-related discrimination with a new protection from discrimination arising from disability. This means that a person discriminates against a disabled person if they treat them unfavourably because of something arising from, or in consequence of, their disability. In circumstances similar to those in Malcolm, a landlord would have to show that the treatment of a disabled tenant was a ‘proportionate means of achieving a legitimate aim’ in order to avoid being regarded as having discriminated against them. The Act does, however, provide a defence where the landlord can show that it did not know, and could not reasonably have been expected to know, that the tenant had a disability.
The Equality Act 2010 – Online Starter Guide
The Equality and Human Rights Commission has published an online starter guide on obligations under the Equality Act 2010, for use by those in the private, public and voluntary sectors. The core provisions of the Act came into force on 1 October 2010.
The guide has nine ‘bite-sized’ training modules which concentrate on essential features of the new legislation for employers and for service providers. It is available at
Small Businesses Gloomy Over Prospects
According to the latest economic report from the Institute of Chartered Accountants in England and Wales, micro-businesses do not share the optimism of mid-sized businesses over growth prospects for the next two years.
The survey found that only 56 per cent of micro-businesses thought their turnover would increase in the next two years. With muted growth prospects and almost all businesses claiming to be intending to increase profitability in the next year, it seems inevitable that the preferred route will be cost-cutting. That, in turn, is likely to create downward pressure on supplier prices.
In addition, 60 per cent or more of micro- and small businesses consider the UK regulatory system to be ‘not business friendly’, with employment law, tax, health and safety regulations, business tax and planning law coming in for particular criticism.
Contact us for advice on all aspects of business law.
No Valid Company Signature Invalidates Notice
A group of tenants who sought to acquire the freehold of the property they were leasing met with failure recently, after the Court of Appeal found that the notice served on their landlord was invalid because it was not correctly signed by one of the tenants.
The tenants wished to exercise their right of collective enfranchisement, under the Leasehold Reform, Housing and Urban Development Act 1993, and in 2007 they served a notice on their landlord under section 13 of the Act. Such a notice must be signed by ‘not less than half’ of the tenants – in this case there were seven tenants, and the notice had been signed by three individual tenants and one limited company tenant. The subject of the court case was whether or not the signature of one of the directors of the limited company, a Mr Hickey, amounted to a signature of the company.
Notices under section 13 must be signed ‘by each of the tenants, or […] by the tenant’, unlike most other notices under the Act which can be signed ‘by or on behalf of’ the tenants. As the company’s Articles of Association were not referred to by either party, the court considered the position under general law. The Companies Act 1989, which applied when the notice was served, states that a company can sign via the signature of either two directors or those of one director and the company secretary, or by affixing the company seal.
Overturning the decision of the lower court, the Court of Appeal held that, as the notice had been signed by just one director, the requirements of the Companies Act had not been complied with and the company’s signature was therefore invalid. This meant, in effect, that the notice served on the landlord was itself invalid, as it had not been signed by the requisite number of tenants.
Assured Tenancy Changes – Information for Landlords
On 1 October 2010, the threshold rent for the ‘assured tenancy’ regulations to apply to a property rose to £100,000 per year. The change affects both new and existing tenancies. The previous limit, which had remained unchanged for more than two decades, was £25,000.
An assured tenancy has rights which it has always been considered inappropriate to grant to tenants of luxury properties, but, with the passage of time, some large but ordinary properties fell into the ‘exclusion zone’ because the gross rents exceeded £25,000. Most assured tenancies will now be assured shorthold tenancies (ASTs).
The implications for landlords are:
  • Any deposit received under an AST after 1 October (including deposits in connection with renewals of tenancies) must be dealt with via one of the approved tenancy deposit protection schemes;
  • The form of notice to quit changes under an AST and the landlord is required to serve a minimum of two months’ notice on the tenant at the end of the term or at a break point in the lease, regardless of the lease terms; and
  • The tenant is also entitled to a minimum of six months’ tenure: even if the lease term is for a shorter period, a landlord cannot recover possession of the let property until the expiry of six months.
There are other significant changes which apply to ‘pre-1997’ common law tenancies (which will be few in number) and some disposals of tenanted properties.
Lastly, there is an ‘accelerated possession procedure’ which applies for ASTs and which will become more commonly available.
Further information can be found at
For advice on all aspects of landlord and tenant law, contact <<CONTACT DETAILS>>.
Loss of Light – Demolition Ordered
Loss of light can be a major irritation and the law provides two remedies where it occurs. The usual remedy is for the developer of the structure responsible for the loss of light to make a payment to the person whose property’s light is impaired. The other, less commonly used, remedy is for an injunction to be given which prevents the loss of light. This remedy is clearly highly disruptive to a development and is rarely used, unless by way of a prohibition of a development which has not already taken place.
However, an injunction can be ordered to remove the cause of the loss of light in certain circumstances. Normally, an injunction will only be granted where:
  • the injury to the rights of the adjoining property is not small;
  • the value of the injury to the rights is difficult to estimate in money or compensate for by the payment of money; and
  • the granting of an injunction would not be oppressive.
However, the court’s reluctance to use injunctive relief should not be relied upon by developers, as a recent case shows.
The case was not a straightforward application for injunctive relief against a developer, but was brought by the developer of an office block to confirm the legal position with regard to a legal challenge for ‘taking the light’ of an adjacent property.
The developer of the office block built it in the knowledge that the owner of an adjacent property (a grade two listed Victorian building) had threatened legal proceedings with regard to the top two floors of the office block. By the time the dispute reached court, the office block had already been built and part of the building which was the subject of the dispute had already been let.
The completion of the construction and letting by the developer proved to be a dangerous strategy, because the court considered that the criteria for granting injunctive relief were met. Instead of ordering the developer to pay a sum in compensation, the court ordered the demolition of the top two floors of the building, which the developer estimated would cost between £1 million and £2.5 million. The developer had budgeted £200,000 for settling the ‘loss of light’ claim.
An appeal seems more than likely.
The case is particularly worrisome for developers who do not make sure any such issues are dealt with before construction is finished. The order by the court that the top two floors of the building should be demolished will clearly have a much greater financial effect on the developer than an order not to build them in the first place would have done. It might have been thought that faced with the fait accompli of the building, the court would have considered a payment in compensation to be more appropriate than injunctive relief.
We can advise you on all aspects of property law.
Happy (NI) Holiday!
HM Revenue and Customs have now published a Technical Note confirming the terms that apply to the National Insurance (NI) ‘holiday’ for new businesses, introduced on 6 September 2010.
For the NI holiday to apply, the new business has to have been started after 22 June 2010 (Budget Day) and by 5 September 2013. Certain types of employment (e.g. nannies) do not qualify, nor do businesses which are in Greater London and the South East (see the Technical Note for precise details).
The NI holiday does not apply to employee contributions, but only to the employer’s contributions. It lasts for each employee for one year from the day on which they are first employed. The maximum NI that can be avoided is capped at £5,000 per employee.
The NI holiday will reduce the cost of employing new staff by approximately ten per cent, so is a factor to consider if you are thinking of setting up a new business.
For more details, see
Pension Tax Relief Restriction
The Government has announced that from April 2011, the maximum pension contribution which will attract full tax relief is being restricted to £50,000 per year and the lifetime allowance (LA) will be reduced to £1.5 million from April 2012.
Where a defined benefit scheme is in place, a multiple of 16 will apply, so an extra guaranteed pension of £3,125 per year will be regarded as the equivalent of a £50,000 contribution.
The Government has also promised to legislate to remove the tax benefits attaching to the use of a variety of tax-saving vehicles, such as employee benefit trusts.
Says <<CONTACT DETAILS>>, “If you have set up schemes which now require a review, or need advice on the next step to take following the proposals, contact us.”
IFAs – New VAT Guidance
Guidance has recently been published on the VAT treatment of the remuneration of Independent Financial Advisers (IFAs), following agreement between the Association of British Insurers and HM Revenue and Customs (HMRC).
The guidance confirms that VAT is only payable where the IFA provides advice, not where financial products are sold. Where an IFA’s client wants advice and buys a product, the IFA must determine which is the ‘predominant service’ and that will determine the VAT treatment.
Clearly there are a number of ‘grey areas’ in these supplies. However, attempting to split the two supplies for VAT purposes may not be effective: if what is supplied in fact is a single supply, then the correct VAT treatment will be to add VAT (or not) depending on which is the predominant element of the supply.
IFAs should ensure they are fully aware of the relevant rules in order to minimise the likelihood of a challenge from HMRC, who can assess any underpayments of VAT during the previous four years.
Guidance on the VAT Rate Change
As announced by the Chancellor of the Exchequer in the June 2010 Budget, the standard rate of VAT is set to rise to 20 per cent from 4 January 2011. HM Revenue and Customs have published guidance on the forthcoming change, which is available at
Contact <<CONTACT DETAILS>> for advice on any tax law matter.
Change of Circumstances Creates Misrepresentation
For a statement to be deceitful, it must be a statement claimed to be fact when the person making it does not believe it to be true (or has no belief either way as to its veracity) or is reckless as to its truth or falsity.
For a deceitful statement to give rise to a successful claim for damages, it is also necessary that the person to whom it is made relies on it and by virtue of relying on it suffers a detriment.
Recently, a case was brought for damages based in deceit when the statements made had originally not been untrue, but became so because circumstances changed before the relevant transaction was completed.
The court ruled that in such situations, there is a duty to inform the other party of the change in circumstances and that failing to do so created a fraudulent misrepresentation.
Says <<CONTACT DETAILS>>, “Recent decisions have emphasised the need for parties to contracts to inform the other side of relevant changes in circumstances. Merely acting in accordance with the facts as they were at the beginning may well not be enough to meet your obligations under a contract. For advice on all contractual matters, contact us.”
Intellectual Property
Digital Economy Act 2010 – Better Protection or Not?
The Digital Economy Act 2010 aims to combat the seeming tsunami of copyright infringement on the Internet.
In principle, the way the Act will do this is simple. When a copyright owner advises an Internet Service Provider (ISP) that a website it hosts is infringing the copyright owner’s copyright (which it does by filing a Copyright Infringement Report (CIR), the ISP will send a notification to the website owner and will warn them that it will retain the notification for 12 months. It will do the same if a second complaint is made.
There is a system for the provision of further information by the ISP to the copyright owner (normally, once a third CIR is lodged). The copyright owner can then obtain a court order requiring the ISP to identify the subscriber so that court proceedings can be launched.
The long stop is that a new maximum fine of £50,000 can be applied for some copyright infringement offences. ISPs which fail in their obligations under the Act can also face fines of up to £250,000.
Problems with the Act include:
  • It does not apply to all ISPs, only the largest ones;
  • The system for supplying the information to copyright owners whose copyright is being breached is long-winded and may limit the commercial value of a complaint;
  • The procedure will involve the copyright owner in costs which may not justify the making of a complaint; and
  • There appears to be little guarantee that the ISP will be able to identify the defaulting subscriber, if they wish to obscure their identity, or to act if the infringement of copyright stems from ‘free access’ points.
It remains to be seen how effective the Act will be. If you have, or anticipate having, problems with the protection of your intellectual property, we can advise you.
IP Court Costs Capped
In order to prevent smaller firms from being deterred from litigating claims over intellectual property rights because of the costs involved, the Ministry of Justice (MoJ) has announced that as from 1 October 2010 the limit of recoverable costs in an action in the Patents County Court is restricted to £50,000 on liability and £25,000 on an enquiry for damages.
Other measures have also been introduced which it is hoped will streamline the process and enable litigation to be handled at much lower cost.
The changes resulted from advice received by the MoJ from professionals in the field, who considered that small firms were unwilling to use the Court because of the potentially high costs.
If you have trade marks and brands to protect, contact <<CONTACT DETAILS>> for advice.
OFT and the Competition Commission to Merge
As part of its reform programme to save public money, whilst at the same time increasing the transparency and accountability of public bodies, the Government has announced plans to merge the Competition Commission and the competition functions of the Office of Fair Trading (OFT) in order to form a single competition and market authority.
The announcement states that the new body will be responsible for merger regulation, market investigations, cartel and antitrust cases and also a number of functions with respect to the regulated utilities.
The Government has also carried out a review of what it describes as the ‘bewildering array of public, private and voluntary bodies, sometimes duplicating each other in their efforts to inform, educate and advise consumers of their rights’. In order to streamline the sector-specific functions currently handling consumer complaints, the Government plans to transfer Consumer Focus, Consumer Direct and other consumer bodies to the Citizens Advice service, together with the consumer-related research and advocacy work currently undertaken by the OFT. Trading Standards will be responsible for the enforcement of almost all consumer law, with expert teams co-ordinating on a national basis where necessary.
The proposal will be published for consultation in early 2011. Whether or not the Government will take this opportunity to make other changes to competition law remains to be seen.
OFT Consultation on Competition Compliance Guidance
The Office of Fair Trading (OFT) has published for consultation two guidance documents that aim to help businesses and company directors comply with competition law.
The first document, How Your Business Can Achieve Compliance, has been developed for businesses and their advisers. It sets out the OFT’s recommended risk-based, four-step process for creating a culture of compliance within a business. The guidance includes a separate quick guide intended to meet the specific needs of small- to medium-sized enterprises, as well as setting out in more detail the practical compliance measures businesses might be able to take.
The second document, Company Directors and Competition Law, explains the level of understanding of competition law that company directors are expected to have and outlines the steps they should be taking to identify and prevent breaches of the law. This will be particularly useful for those who are responsible for the provision of competition law training to board members.
The draft guidance for company directors follows the recent publication of the OFT’s revised guidance on Director Disqualification Orders in competition law cases, which sets out how it intends to use the sanction to deter anti-competitive activity.
The consultation document for businesses can be found at and the consultation document for company directors at Responses must be made by 21 January 2011 with final versions of the guidance due to be published in spring 2011.
If you have concerns about any aspect of competition law, contact <<CONTACT DETAILS>>.
Under 18 ID Policy In Force
Licensees are reminded that it is now compulsory to ensure that an age verification policy is in place and that it applies to any person who appears to be under the age of 18 years. Any such person is to be required to produce, on request, identification which bears their photograph, date of birth and a holographic mark.
In some circumstances, the licence may contain a stipulation that an ID policy is in place for persons aged 21 or younger. In this case, anyone who appears to be under that age will be required to produce suitable identification.
It has also been reported that at least one council has started ‘test purchases’ designed to ensure compliance with the new regulation that small measures (125ml of wine, 25 or 35ml of spirits and ½ pint for beer, cider or lager) are available.
Contact <<CONTACT DETAILS>> for advice on any licensing matter.
Insolvent Company’s Insurer Must Pay Claim
A recent case concerned a processing plant, which supplied the claimant, a pet food manufacturer, with meat that was unfit for consumption. The pet food manufacturer mixed this with material from other suppliers, with the result that the whole of the meat was unfit for consumption.
The pet food manufacturer was unaware of the contamination and sold the meat in good faith to another firm, which was successful in a claim for compensation.
The pet food manufacturer then sued the supplier for damages arising under breach of contract. It was successful in its claim, but because it was a claim in contract, there was no ruling of negligence against the processing plant. The company operating the processing plant became insolvent, so the pet food manufacturer sought to recover damages from the supplier’s insurance company – the claim being a claim in tort (for damages due to a civil wrong).
The insurer denied liability on the ground that the insured’s liability arose under the law of contract and the policy contained an exclusion for liability arising under ‘any contract or agreement unless such liability would have arisen in the absence of such contract or agreement’.
The court considered that the claimant had suffered a loss which was one of the perils covered by the supplier’s insurance policy and the fact of the loss was demonstrated by the judgment. However, this was not determinative of the legal status of the loss under the policy as the insurer was not party to the judgment relating to the loss. The court ruled that the claimant could therefore ‘go behind’ the judgment to establish that the supplier was liable in tort as well as contract. The insurer could attempt to show, for example, that the loss was due to fraud or negligence not covered by the policy, but otherwise would be held liable if the risk was an insured risk.
Under the Third Parties (Rights Against Insurers) Act 2010, which is not yet in force, claimants against an insolvent person will have the right to claim directly against their insurer, which will enable the court to rule in one sitting regarding the liability of the insurer under the policy and to a third party claiming against the policy.
For advice on any insolvency issue, please contact <<CONTACT DETAILS>>.
Data Protection
ICO Consults on Data Sharing Code of Practice
The Information Commissioner’s Office (ICO) has launched a consultation on a new statutory code of practice on the sharing of personal data.
The draft code sets out a model of good practice for public, private and third sector organisations, and covers routine data sharing as well as one-off instances where a decision is made to release data to a third party.
Examples of situations where data sharing might occur include a group of retailers exchanging information about former employees who were dismissed for stealing, a school passing information about a child to a social services department, a group of insurance companies pooling data about people making claims, GPs sending a patient’s medical records to a hospital or a retailer passing customer details to a debt collection agency or to a courier service.
The code covers a number of areas including:
  • what factors an organisation must take into account when coming to a decision about whether to share personal data;
  • the point at which individuals should be told about their data being shared;
  • the security and staff training measures that must be put in place;
  • the rights of the individual to access their personal data; and
  • when it is not acceptable to share personal data.
The Information Commissioner, Christopher Graham, said, “Organisations that don’t understand what can and cannot be done legally are as likely to disadvantage their clients through excessive caution as they are by carelessness. But when things go wrong this can cause serious harm. We want citizens and consumers to be able to benefit from the responsible sharing of information, confident that their personal data is being handled responsibly and securely.”
The consultation on the code of practice on data sharing can be found at Consultation ends on 5 January 2011.
Contact <<CONTACT DETAILS>> for advice on any data protection issue.
Compromise Agreements and the Equality Act 2010  
A compromise agreement is a legally binding agreement by which an employee undertakes to refrain from instigating Employment Tribunal (ET) proceedings against his or her employer or, if proceedings have already commenced, to discontinue them in return for consideration. Compromise agreements were created by the Employment Rights Act 1996 and must comply with certain conditions, one of which is that for the agreement to be valid, it must expressly specify the cause of action being settled. In order to ensure that the employee fully understands which rights are being waived, the compromise agreement should list all potential claims.
On 1 October 2010, the core provisions of the Equality Act 2010 came into force. Employers are reminded that compromise agreements made after that date that are intended to settle discrimination and equal pay claims should specifically refer to claims under the Act as well as to the legislation it replaced with regard to periods of employment prior to that date.
A further condition is that for a compromise agreement to be valid, the employee must have received advice from a relevant independent adviser as to the terms and effect of the proposed agreement and, in particular, its effect on his or her ability to pursue a claim before the ET.
The wording of the Equality Act has raised some doubt as to who qualifies as a relevant independent adviser in relation to a compromise agreement over discrimination claims as the literal wording of the Act provides that an adviser who has acted for an employee with regard to the contract or complaint would not qualify as an independent adviser in respect of any compromise agreement reached. As it stands, this means that the employee’s own solicitor would not qualify, whereas previously only an adviser to the other party was excluded. This would seem to be a drafting error, as the explanatory notes accompanying the Act indicate that the relevant section is intended to replace provisions in previous legislation which had the same purpose.
This raises the possibility that an agreement compromising claims under the Act could be challenged as invalid and it is to be hoped that Parliament will clarify the position as soon as possible.
If you are contemplating entering into a compromise agreement, contact <<CONTACT DETAILS>> for advice.
Government Gives Go Ahead for Employment Legislation
The Government has announced that the Additional Paternity Leave Regulations 2010 will be introduced according to the timetable proposed by the previous Government. The Regulations will allow new parents greater flexibility as to how they make use of the statutory period of maternity leave.
The Regulations give new fathers the right to take additional pay and paternity leave during the second six months of their child’s life if the mother chooses to return to work with maternity leave outstanding and the father will have the main responsibility for caring for the child. Some of the father’s leave may be paid if it is taken during the mother’s 39-week maternity pay period. The period of leave must be continuous; the minimum allowed will be two weeks and the maximum 26 weeks. The changes will also apply to spouses, partners and civil partners of a child’s mother or of an adoptive parent who has elected to take adoption leave.
The new rights will apply to the parents of children due to be born on or after 3 April 2011.
In addition, the Agency Workers Regulations 2010, which implement EU Directive 2008/104/EC, will come into force in the UK on 1 October 2011 without any changes. The Government was considering making amendments to the Regulations in order to reduce the burden on employers. However, Employment Relations Minister Edward Davey has said that the Government’s ability to do so is constrained by the fact that the Regulations are based to a significant degree on an agreement brokered between the CBI and TUC by the previous Administration. This included specific agreement that agency workers in the UK will acquire the new rights once they have been in a given job for 12 weeks. After discussions with both bodies, it has not been possible to find a way forward that would be acceptable to both parties.
The Government has also announced its intention to bring forward ambitious proposals to create more flexible, family friendly workplaces. As a first step, from April 2011 the right to request flexible working will be extended to parents of children under the age of 18. At present, this right is available to parents of children aged under 17, parents of disabled children under 18 and carers of certain adults.
Contact <<CONTACT DETAILS>> for advice on any employment law matter.
Health and Safety
Lord Young’s Report on Health and Safety Published
Lord Young’s report on health and safety, entitled Common Sense – Common Safety, has now been published.
The report identifies numerous factors that currently combine to create an adverse climate for what it considers to be the proper application of health and safety, and sets out recommendations to free businesses from unnecessary bureaucratic burdens and the fear of having to pay out unjustified damages claims and legal fees. These include measures aimed at curbing the ‘compensation culture’ driven by legislation, which Lord Young sees as being at the root of the problem.
With regard to workplace health and safety laws, the report recognises that the cost of compliance differs significantly between smaller and larger firms, with the burden falling disproportionately on smaller employers. To this end, it recommends that:
  • The risk assessment procedure for low hazard workplaces, such as offices and shops, should be simplified. The Health and Safety Executive (HSE) should create simpler interactive risk assessments for such workplaces and make these available on its website;
  • The HSE should create periodic checklists that enable businesses operating in low hazard environments to check and record their compliance with the law, as well as online video demonstrations of best practice in form completion;
  • Employers should be exempt from having to carry out risk assessments for employees working from home in a low risk environment; and
  • Self-employed people working in low hazard businesses should be exempt from having to carry out risk assessments.
Lord Young also recommends that insurance companies actively reconsider the practice of routinely requiring businesses to employ health and safety consultants, as this creates an unnecessary burden and increases costs, without bringing any tangible business benefits.
In order to raise standards, the report recommends a new professional qualification requirement for all health and safety consultants, so that they are accredited by a professional body. Where businesses do choose to employ a consultant, it recommends that only qualified consultants who are included in a web-based directory be used.
As regards health and safety legislation, the HSE should produce a separate Code of Practice for small- and medium-sized businesses engaged in lower risk activities, and the current raft of health and safety regulations should be consolidated into a single set of accessible regulations. The report also recommends amending the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995 (RIDDOR) by extending to seven days the period before an injury or accident needs to be reported. In addition, the HSE should carry out a review of the operation of the RIDDOR in order to determine whether this is the best way of providing accurate statistics on workplace accidents.
The full report can be found at
For advice on any health and safety matter, please contact <<CONTACT DETAILS>>.
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