April Legal Alert

legal alert

This month: 

New legislation: Shared parental leave and pay

Employers with employees whose babies are born on or after 5 April must be prepared to deal with requests for shared parental leave and pay, under new shared parental leave laws.

In outline

Previously, eligible employed mothers could take up to 52 weeks’ statutory maternity leave and receive statutory maternity pay (or maternity allowance) for up to 39 weeks. They may still do so if they wish but, under new shared parental leave (SPL) laws, they may be eligible to share their parental leave with the baby’s father, or their partner, instead.

Under the new law, the mother of a baby born on or after 5 April must still take her initial two weeks (or four for factory workers) of statutory maternity leave. However, she can choose to end her entitlement to the remaining 50 weeks’ maternity leave early. In effect, she can bring forward the date on which her maternity leave will end, and share the remaining leave either with the baby’s father or (if they are different) husband, civil partner, or someone who lives with her in an ‘enduring family relationship’ who will share responsibility for the childcare. She and the father or spouse/partner can either be off work at the same time or take it in turns to have time off, provided the total time taken off is not more than the period jointly available to them.

SPL must be taken in blocks of one week, within 52 weeks of the birth. Unlike maternity leave, eligible employees can stop and start SPL, returning to work between each period of leave, provided each eligible parent does not take more than three periods of leave (unless their employer allows more).

Similar rules apply to employees who adopt on or after 5 April 2015, or whose children are born to a surrogate.

‘Additional paternity leave’, where a father could take up to six months’ leave if the mother returned to work, no longer exists. However, a father’s previous entitlement to two weeks’ ordinary paternity leave and pay continues.

Eligibility

For your employee to qualify for SPL:

  • He or she must have been continuously employed by you for 26 weeks up to and including the 15th week before the week in which the baby is due, and still be employed by you in the week before any SPL is due to start
  • He or she must share the main responsibility for the care of the child with the child’s father or with their spouse/partner
  • The father (or your employee’s partner) must meet an ‘employment and earnings test’: they must have been employed or self-employed in Great Britain for any 26 of the 66 weeks leading up to the week in which the child is due and have earned an average of £30 a week in any 13 of those 26 weeks

Procedures

There are detailed, complicated requirements for an employee to give notices to their employer within certain time limits, for example, of their entitlement to SPL, and when they intend to end their statutory maternity leave. The employer must also be given a declaration from the father or spouse/partner that:

  • they share the main responsibility for the child’s care
  • they meet the employment and earnings test, and
  • they consent to the employee taking the number of weeks of SPL specified in their notice of entitlement (although the employer does not have to check or confirm the information given by the father/spouse/partner)

In addition, the mother and/or father/spouse/partner (as appropriate be) must, at least eight weeks before the start of any relevant period of SPL, give a ‘period of leave notice’ requesting the SPL period(s) they wish to take.

Employees cannot generally go to work while on SPL but up to 20 ‘keep in touch’ days can be used to, for example, visit work or attend a work-related event.

Refusing requests

Employers cannot refuse requests for one continuous period of SPL, but they can refuse requests for separate periods to be taken at different times, and suggest alternative periods. An employee who does not agree the alternatives put forward can either take the total amount of leave they have asked for as one continuous period of leave, or withdraw their notice.

Returning to work

Employees returning to work after statutory leave of 26 weeks (or fewer) are entitled to their old job back. Where they have taken more than 26 weeks’ leave, they will be entitled to have their old job or, if this is not reasonably practicable, another job that is suitable and appropriate for them to do in the circumstances.

Shared parental leave pay (SPP)

SPP is payable for a maximum 37 weeks, payable at a flat weekly rate or, if lower, 90 per cent of the employee’s average weekly earnings. The eligibility rules for SPP are similar to those for SPL - although there is a different earnings test.

Employers with enhanced maternity pay schemes

Employers offering an occupational enhanced maternity scheme can decide whether they will also offer enhanced SPP. If they do not, there has been debate on whether an employee who is the father or the male partner of a mother in an enhanced scheme, but is not given enhanced pay when on SPL, could claim direct or indirect sex discrimination. However, a direct discrimination claim is likely to fail because the correct comparator would be a female partner of the mother, and she would not be entitled to enhanced pay when on SPL either. An employer faced with a claim for indirect sex discrimination would probably be able to claim it was a proportionate means of achieving a legitimate aim – ie it was objectively justified.

No entitlement to statutory maternity leave

There are special rules where the mother is not entitled to statutory maternity leave, but is entitled to statutory maternity pay (or maternity allowance).

The Department of Business, Innovation and Skills has launched a Technical Guide for employers, and an online calculator to help prospective parents work out their eligibility for SPL and pay entitlements. Acas has also published a Good Practice Guide for employers.

Operative date

  • 5 April 2015

Recommendation

Case law: Right to vary employee’s contract was unclear and ambiguous

Employers should ensure any power to vary an employee’s conditions unilaterally is express, unambiguous and lawful, or risk being unable to do so, following a recent legal ruling.

An employee’s letter of appointment said that “detailed particulars of conditions of service [in the HR manual] are subject to amendment; any significant changes affecting staff in general will be notified”.

The employer argued that this allowed it to vary the employee’s conditions of service unilaterally.

The Employment Appeal Tribunal (EAT) disagreed: the words ‘subject to amendment’ meant merely that conditions could be amended provided any amendment mechanism was followed and any significant changes were notified. The words did not themselves authorise unilateral variations, or specify the mechanism for making amendments.

Operative date

  • Now

Recommendation

  • Employers should ensure that any power to unilaterally vary an employee’s conditions is express, unambiguous and lawful.

Case ref: Norman and others v National Audit Office UKEAT/0276_14_1512

Case law: Court clarifies degree of investigation into gross misconduct required of employers

Employers faced with multiple instances of potential gross misconduct do not need to investigate every reason put forward by the employee for their conduct, provided their investigation as a whole is reasonable, and within the band of responses expected of a reasonable employer, the Court of Appeal has confirmed.

A worker required to visit clients by car claimed more than the suggested AA mileage for every journey he made when claiming his expenses. Some claims were significantly inflated: in one case he claimed 197 miles when the AA suggested the journey was 99 miles. When investigated he blamed a number of factors, such as parking problems, road works, etc.

The employer did not analyse, or ask for an explanation for every journey, as every single one was over the suggested AA mileage. It took the view that there could not be a legitimate reason for every single overstatement; the employee was guilty of gross misconduct - and dismissed him.

The employee claimed unfair dismissal on grounds the employer had not investigated the circumstances of every journey.

The Court of Appeal ruled that an employer’s investigation had to be reasonable in the circumstances, ie within the range of reasonable responses. In this case, it found that the employer’s investigation as a whole had been reasonable even though it had not investigated every reason for additional mileage put forward by the employee.

Operative date

  • Now

Recommendation

  • Employers faced with multiple instances of potential gross misconduct do not need to investigate every reason put forward by the employee, provided their investigation as a whole is reasonable, and within the band of responses expected of a reasonable employer.

Case ref: Shrestha v Genesis Housing Association Ltd [2015] EWCA Civ 94

New regulations: Landlords prepare for new energy efficiency regulations

Landlords of domestic and non-domestic private rented premises are preparing for new regulations requiring many of them to make energy efficiency improvements to their properties before they can continue to be rented out.

In England and Wales, by at least 1 April 2016, private landlords of domestic properties will have to consent to specific types of energy efficiency improvements their tenants want to carry out.

Then, by at least 1 April 2018, private landlords will be unable to rent out either domestic or non-domestic properties that have not achieved a specific energy rating (likely to be the 'E' rating).

The Government has issued draft regulations and intends to pass them (but not bring them into force yet) before the general election. 

Operative date

  • 1 April 2016 onwards

Recommendations

Case law: Wills made before 2007 should be reviewed following Court of Appeal ruling

Anyone who made a Will before 2007 which includes legacies calculated by reference to the inheritance tax nil-rate band should consider changing it, following a Court of Appeal ruling.

In 2001, a married woman (the testatrix) made a Will giving family members ‘such sum as is at the date of my death the amount of my unused nil-rate band for inheritance tax’, and the remainder to a charity. The nil-rate band is the inheritance tax threshold above which inheritance tax becomes chargeable on the estate of the deceased. At the time the Will was made, each person had their own nil-rate band for inheritance tax purposes.

However, in 2007 the law changed. It became possible for any unused part of a person’s ‘nil rate band’ to be transferred to their spouse or civil partner when they died so that, when the spouse or civil partner subsequently died, their nil-rate band was increased by the value of the unused 'nil rate band' of the person who pre-deceased them.

In this case, the testatrix’s husband died first and his entire nil-rate band was available to pass to her when she subsequently died. Executors have to make a specific election, known as a section 8A claim, in order to benefit from a transfer of a former spouse or partner’s nil-rate band. The testatrix’s executors duly made a section 8A claim.

The question arose whether the reference to ‘my’ unused nil-rate band in her Will meant only her own nil-rate band, before the addition of her late husband’s unused nil-rate band, or both her own nil-rate band and the unused nil-rate band passing on her husband’s death.

The charity argued the former, claiming it was therefore entitled to £355,805 from the estate. If it the charity was wrong it would only be entitled to £30,805. However, there was no evidence as to what the testatrix had intended.

The Court of Appeal ruled that ‘my’ nil-rate band meant both her own nil-rate band and her husband’s unused nil-rate band. The charity therefore only received £30,805. However, it did not find it an easy decision. For example:

  • It decided the testatrix did not have a specific amount in mind for her family when she made her Will. She knew that if the government changed the amount of the nil-rate band (as it does periodically), the amount going to her family would change too. She also knew that if the nil-rate band changed so it equalled or exceeded the value of her estate when she died, the charity could end up with nothing.
  • The Court decided that the fact her executors had made a section 8A claim supported the view that the reference to ‘my’ nil-rate band in her Will should be treated as including her husband’s unused nil-rate band too. This was because there were many instances where executors (or trustees of trusts set up by wills) gave executors/trustees discretion whether or not to do certain things which could affect beneficiaries’ entitlements under the Will (or trust). It had to assume that she would trust the executors to exercise their discretion in the way she would have wanted. However, the charity had argued that she could not have intended the amount her family and the charity received to depend on whether her executors made a section 8A claim or not. The court acknowledged this was a powerful argument
  • One of the appeal judges said the Will had to be considered as a whole. A Will-maker’s aim was usually to give as much to the family as possible without an inheritance tax liability arising. In this case it could be inferred that it was only when the amount that could be given tax-free to the family had been used up that the charity was intended to benefit. However, the charity argued this could mean a reference to ‘my’ unused nil-rate band would be interpreted differently, depending on who the beneficiaries were. What of a case where a sum equal to ‘my’ nil rate band was to go to adult children of a first marriage, and the remainder to a surviving spouse of a second marriage? In that case the inference may have been that the surviving spouse was to benefit over the children. Again, the charity had made a good point.

Operative date

  • Now

Recommendation

  • People who made a Will before 2007 which includes legacies calculated by reference to the nil-rate band should consider changing their Wills to make it clear whether this is intended to mean the Will-makers’ own nil-rate band, without the addition of that passed on from a deceased spouse or civil partner, or the two added together.

Case ref: Loring v Woodland Trust [2014] EWCA Civ 1314

Case law: Employer’s defective procedure can be victimisation even if proper procedure would produce same outcome

Employers faced with claims that a defective grievance (or other) procedure amounted to victimisation should be aware that if the outcome would have been the same if the procedure had not been defective, that does not excuse them from liability.

An employee claimed victimisation because of her employer’s defective handling of her grievance claim. In order for there to be victimisation there must have been a ‘detriment’ to the employee.

The Employment Tribunal found she had suffered no detriment because the defective procedure had made no difference to the outcome. However, the Court of Appeal disagreed and ruled that her sense of injustice could, in itself, be a detriment. The fact that remedying the defects in the procedure would not have changed the outcome of her grievance might affect the remedy she was awarded, but did not affect her employer’s liability for victimisation.

The Court commented that there would be ‘very few, if any, cases where less favourable treatment will be meted out and yet it will not result in a detriment’.

Operative date

  • Now

Recommendation

  • Employers faced with claims that a defective grievance procedure, or other procedure, amounted to victimisation should be aware that the fact the outcome would have been the same if the procedure had not been defective does not excuse them from liability.

Case ref: Deer v University of Oxford [2015] EWCA Civ 52

Case law: Ratepayers not normally entitled to rates reduction when refurbishing or improving

Property owners and managers carrying out ongoing works to refurbish and/or improve rateable premises will still have to pay rates as if the premises are in reasonable repair, unless there is evidence a reasonable landlord would consider repairs uneconomic, the Court of Appeal has ruled.

A ratepayer started to refurbish a building where one floor was unlet and empty. The plan was to divide it into three units and let each separately. The ratepayer stripped out the building and completely removed its electric, heat and air conditioning systems, then applied to reduce the rateable value to £1.

The Valuation Officer refused to agree, on the basis that the building was rateable as a building in ‘reasonable repair’.

The statutory assumption for rating valuation purposes is that a property being refurbished or improved is in ‘reasonable repair’, and rateable as such, unless a reasonable landlord would consider the repairs uneconomic.

The Court of Appeal found that the ratepayer could put the building back into repair (ie it could remedy any damage or deterioration caused by stripping it out). This meant the building was in reasonable repair for rating purposes: the ratepayer’s plans were irrelevant. There was no evidence a reasonable landlord would consider the repairs uneconomic.

The ruling implies that a building will be treated as in reasonable repair whatever ongoing works are being carried out unless, perhaps, it is actually being demolished or the works otherwise affect the building’s structure. This ruling overturns the Valuation Office Agency’s own guidance in its Rating Manual and is arguably contrary to the intention behind the legislation.

Operative date

  • Now

Recommendation

  • Ratepayers carrying out ongoing works on premises should consider whether they will still be treated as in reasonable repair. They normally will be treated as in reasonable repair, unless there is evidence a reasonable landlord would consider repairs uneconomic.

Case ref: Newbigin (VO) v S J & J Monk (a firm) [2015] EWCA C iv 78

Case law: Employers must get timing right on offer of ‘suitable alternative role’ to employees on maternity leave

Employers should offer women on maternity leave any available suitable alternative role as soon as they first notify her she is at risk of redundancy, even if the redundancy is because of a long-planned restructuring, according to a ruling of the Employment Appeal Tribunal.

An employee of 12 years’ standing went on maternity leave.  Her employer implemented a restructuring that it had started planning several years before, in which the employee’s role was combined with that of a male colleague. Both were told they were at risk of redundancy and interviewed for the new role. The male candidate was subsequently appointed. The employee was therefore made redundant on three months’ notice and she claimed automatic unfair dismissal and discrimination.

Under employment law, where a redundancy arises during an employee’s maternity leave, she must be offered a suitable alternative vacancy on no worse terms than before. If another employee is also at risk of redundancy the employee on maternity leave must be given priority.

The employer argued that the duty to offer a suitable alternative vacancy only arose once the restructuring had been carried out, not during it. However, the employee argued she should have been offered the new role as soon as it arose.

The EAT agreed with her: the employer’s argument undermined the intention of the law - which was to protect mothers on maternity leave. Employers must instead offer women on maternity leave any suitable alternative role as soon as their current role is redundant or potentially redundant.

Operative date

  • Now

Recommendation

  • Employers should offer women on maternity leave any available suitable alternative role as soon as they first notify her she is at risk of redundancy, even if the redundancy is because of a long-planned restructuring.
  • If there is another potential candidate for the role they should not carry out any selection process – her right to priority is absolute.

Case ref: Sefton Borough Council v Wainwright [2014] UKEAT 0168_14_1310

Case law: Tribunal clarifies when employer treated as knowing employee is disabled

Employers whose employee are off sick will welcome guidance on what amounts to a reasonable investigation into whether they are disabled so that disability discrimination law applies, particularly where the reason for absence is ‘stress’, following a recent Tribunal decision.

An employee of ten years’ standing was dismissed for poor and erratic timekeeping, and not following absence procedures. She claimed she was disabled – that she had a physical or mental impairment which had a substantial and long-term (which usually means 12 months) adverse effect on her ability to carry out normal day-to-day activities – and that her employer had failed to make reasonable adjustments for her, as required by law.

Her employer claimed it did not know she was disabled, so the duty to make reasonable adjustments did not apply.

The Employment Tribunal (ET) found she had shown symptoms of stress-related illness which met the criteria for disability, in the months before she was dismissed. However, she had given her employer different and apparently unconnected reasons for absences, and had often decided for herself whether and when she came to work. These issues made it difficult for the employer to identify the reasons for particular absences. In addition, an occupational health assessment had concluded she was not disabled, with letters from the employee’s GP supporting this.

The ET decided the employer could not have been expected to know she was disabled, and could not reasonably have done any more to investigate whether she was or not. However, the ET criticised the occupational health advice given. The employee appealed on that basis.

The Employment Appeal Tribunal (EAT) dismissed her appeal. It acknowledged that employers should not blindly accept occupational health reports but pointed to other evidence entitling the employer to decide she was not disabled – for example, the outcome of ‘return to work’ meetings, discussions and correspondence with her GP.

The EAT highlighted that stress is not itself an illness, but a way of describing some of the symptoms of anxiety and depression. This means identifying an underlying illness can be difficult for employers when an employee’s absences for stress are attributable to a number of different reasons.

Employers can refer to the Employment: Statutory Code of Practice on the Equality and Human Rights Commission website for help with this issue.

Operative date

  • Now

Recommendation

  • Employers must be alert to the possibility that an employee’s absence is due to disability and carry out reasonable investigations into their health.
  • Tribunals may take into account the difficulties in diagnosing the causes of stress when deciding whether investigations are reasonable.
  • However, employers should not rely absolutely on occupational health advice that a person is not disabled. They should consider it in the light of their overall knowledge of the employee and the circumstances.

Case ref: Donelien v Liberata UK Ltd [2014] UKEAT 0297_14_1612

New rules: Acas publishes revised Discipline and Grievance Code of Practice

Businesses will welcome a new Acas Code of Practice clarifying the circumstances in which an employee can be accompanied to disciplinary or grievance meetings.

Acas has published a revised version of its Discipline and Grievance Code of Practice, available free on its website. The changes clarify the circumstances in which workers have a right to be accompanied at disciplinary and grievance hearings, following recent legal rulings.

Acas also provides a non-statutory guide giving additional help on discipline and grievance issues.

Operative date

  • Now

Recommendation

Case law: Residential landlords can be liable for repairs to communal areas they do not own

A buy-to-let landlord has been held liable to inspect and repair communal areas in the building, even though he does not own them, as he has a right to use them under his lease.

A freeholder let a flat on a long lease to a head tenant. The head tenant let it to a sub-tenant under an assured shorthold tenancy. The sub-tenant’s assured shorthold tenancy required him to put his rubbish in the bin store at the property.

In the head tenant’s lease the freeholder covenanted to keep the communal areas in good repair, but under the lease, the freeholder was only liable if a tenant had given notice of a defect, giving the freeholder a reasonable opportunity to put it right.

While taking rubbish to the bin storage area, the sub-tenant tripped on uneven paving stones in the communal area injuring his knee. He claimed against his landlord (the head tenant).

Landlords of residential tenants with leases of less than seven years automatically have a legal obligation to keep the structure and exterior of the property in good repair. If the residential dwelling or flat is part of a larger building, the obligation extends to the parts of the building in which the landlord has an ‘interest or estate’.

In this case, the head lease only granted the head tenant a lease over his flat, not the communal areas.  The head tenant therefore argued that he was not obliged to make repairs to communal areas, as these were not part of the structure or exterior of his flat and he had no ‘interest or estate’ in those areas.

However, his lease also gave him a right of access to the pathway and bin store. The Court of Appeal ruled that this right to use those areas amounted to a legal easement, therefore, the head tenant had an ‘interest or estate’ in them. The obligation to keep the property in good repair extended to those communal areas.

The head tenant also argued that he should only be liable to repair defects if he had been given notice of them. The court ruled that this only applied if the defect was within the let property, so that the landlord would not normally be aware of it otherwise. Tenants did not have to give their landlord notice of defects if the defect was outside the rented property – for example, in a communal area - and could therefore be seen on an inspection of those areas by the landlord (or his letting agents).

Operative date

  • Now

Recommendation

  • Head tenants sub-letting units which form part of a building, who do not own communal areas at the property but who have a right to use them, should:
    • Ensure they or their letting agents carry out regular inspection of those communal areas, as they are liable to repair defects in them - even if they been given no notice of them, and even though the freeholder may be liable to repair such defects under the head lease.
    • Check the cover provided under any landlord’s buildings insurance taken out.

Case ref: Edwards v Kumarasamy [2015] EWCA Civ 20

Case law: Lack of written assignment of copyright leads to court

Companies commissioning creative work from agencies should ensure there is a written assignment of intellectual property rights to them, or risk claims that they still belong to the agency, following a High Court ruling.

Three friends started a new company. The company commissioned a design agency to work for them, offering it shares in the new company rather than cash payment. One clause in a draft contract between the company and the agency said the company would receive ‘full intellectual copyright of any work presented by [the agency] and then subsequently approved by [the company]’. A separate clause dealt with the award of shares to the agency. It said the shares were to be awarded in three separate tranches. The contract did not link the awards to any particular creative work by the agency. The contract was never signed but the parties accepted it was what had been agreed.

The agency later created a particular logo for the company, which it used on a highly successful product. The company registered it as a European Community trade mark (CTM).

Intellectual property (IP), including copyright, in a creative work commissioned from an agency by a client belongs to the agency even if (as is usual) the agency is paid or otherwise rewarded for its work, unless the agency assigns it in writing to the client, or where an assignment can be implied.

In this case, the agency went into liquidation before receiving any shares. Just before it was liquidated a third party took a written assignment of the copyright in the logo from the liquidators. The third party then claimed to be the copyright owner, arguing that as the draft contract between the company and the agency purporting to assign IP rights in the agency’s work to the company had never been signed, the IP in the logo had not been assigned to the company in writing. It applied to invalidate the company’s CTM on grounds it owned the copyright in the logo.

The High Court ruled there had been no written assignment of the IP in the logo because the contract had not been signed. It went on to find that, even if the contract had been signed, the relevant clause would not have been effective to assign copyright in the logo. It said the law only allows an assignment of future copyright if the copyright vests in the assignee ‘on the copyright coming into existence’. This happens automatically as soon as a work is created. But this contract specifically provided that assignment of IP rights in the agency’s work was conditional on the company’s approval of the designs, which would always be after the date copyright came into existence.

Fortunately for the company, however, the court found that both parties had intended the provisions in the contract to be binding and their subsequent conduct supported this. Even though the contract did not itself assign the IP in the logo, it gave the company a legal right to require the current owner to assign the IP rights in the logo to it.

The court rejected the third party’s argument that the assignment of the IP rights in the logo was intended to be conditional on the company awarding shares to the agency.

The court also ruled that, even if it had found the contract completely ineffective, it would have ruled that there had been an implied assignment. It was commercially unrealistic and improbable that the agency would have wanted to use the logo, either itself or for another client or that, given the importance of the logo to the company, that it would have agreed to take a licence to use the logo instead of an assignment.

However, the company could have avoided court altogether if it had signed an agreement containing an effective, non-conditional assignment of future copyright, effective as soon as the copyright came into existence.

Operative date

  • Now

Recommendation

  • Businesses commissioning creative work from an agency should ensure there is a written transfer (an ‘assignment’) of all intellectual property in the work, otherwise it will belong to the agency.
  • They should be particularly careful where the assignment relates to future copyright (copyright in works not yet created) as assignments of future copyright are ineffective if subject to further conditions after the copyright comes into existence.

Case ref: Fresh Trading Ltd v Deepend Fresh Recovery Ltd & Anor [2015] EWHC 52

Case law: Property buyer compensated following seller’s fraudulent misrepresentations

Sellers should take great care to answer buyers’ enquiries truthfully and accurately, and buyers should always consider having a full survey before exchanging contracts, following a recent ruling.

A buyer did not carry out a survey of a property that included kennels and a cattery before completion. Just before the sale the Environment Agency had told the seller to carry out work to stop waste overflowing onto a neighbour’s land. In fact, the works were ‘wholly inadequate’ and failed to stop the problem.

In the sale negotiations the seller made an untrue statement about the works in the pre-contract Property Information Form. He stated that there had been no discussions or negotiations with the Local Authority or neighbours about matters affecting the land. The High Court said the seller either knew this was untrue or did not believe it to be true, or was reckless as to whether it was true or not. The representation was therefore fraudulent.

The seller had also said the drainage problems had been dealt with when answering an enquiry about the works raised by the buyer’s solicitors. However, he did not disclose the history of the matter, or give details of the works carried out.

The court said the answers to the written enquiry amounted to a legally binding warranty that the problems were fixed, which later turned out to be untrue. It said that, even if the sellers had believed it was true when he answered the enquiry he should have disclosed the history of the matter and given details of the work. This would have allowed the buyers to investigate whether the works had been sufficient, and whether to proceed.

The seller argued that the contract for sale excluded liability for representations made, saying the buyer took the property in its physical state at the time contracts were exchanged. However, the High Court ruled that the contract did not exclude liability if the representations were fraudulent. It ordered the seller to pay compensation of £33,000 representing the court’s view of the diminution of value in the property because of the drainage problems. If the representations had not been fraudulent, the buyer may have been left with no remedy.

Operative date

  • Now

Recommendation

  • Sellers should ensure they take great care to answer enquiries from buyers truthfully and accurately. Buyers should always consider having a full survey before exchanging contracts.

Case ref: Morrell v Stewart [2015]

Case law: Registered design had ‘individual character’ even though it evolved from a previous design

Businesses wishing to register a design must ensure it is new and has an individual character, particularly when it has evolved from an earlier design, otherwise they risk registration being challenged.

A manufacturer of ice cream vans claimed a rival had infringed its registered design, which protected the shape of one of its van models. The design was based on a previous model, also manufactured by that manufacturer, so the rival challenged the registration of the current design on grounds it did not have the necessary ‘individual character’.

A design has an individual character if the overall impression it produces on the informed user differs from the overall impression produced on an informed user by a design previously made available to the public. An informed user is someone who:

  • Is particularly observant.
  • Has knowledge of designs of this sort and of the design features normally included in designs in this sector.
  • Is interested in the products concerned and shows a relatively high degree of attention when he uses them.
  • Conducts a direct comparison of the competing designs (unless there are specific circumstances or the devices have certain characteristics which make it impractical or uncommon to do so).

In this case, the High Court compared the manufacturer’s current design to the design of its previous van and found each design created a different overall impression on the informed user. The design therefore had individual character and was valid. It then ruled that the rival’s designs were obviously similar, despite some ‘minor differences’.

Operative date

  • Now

Recommendation

  • Businesses wishing to register a design must ensure it is new and has an individual character, even when compared to other designs created by the same business, or risk the registration being challenged later.

Case ref: Whitby Specialist Vehicles Ltd v Yorkshire Specialist Vehicles Ltd & Amer Rubani, Omar Rubani and Ghulam Rubani [2014] EWHC 4242

Case law: Employee can be protected by TUPE even though work transferred is under separate contracts with multiple clients

Businesses taking over work from existing contractors under separate contracts with multiple clients should consider whether TUPE may still apply to protect employees of the previous contractors, following an Employment Appeal Tribunal ruling.

A site maintenance manager worked for a company, Ottimo, which had been contracted to provide on-site property maintenance at various buildings. Each building was owned by a separate management company, and each management company had signed a separate contract with Ottimo for the services provided.

A number of the management companies then transferred the maintenance work under their contracts to a third party, Warwick. Ottimo dismissed the manager, who claimed that his employment should have transferred to Warwick under the TUPE rules.

The TUPE rules are designed to protect employees in certain circumstances – by preserving their jobs and their terms and conditions of employment – such as when there has been a ‘service provision change’. A service provision change includes when a contract awarded by a client to one contractor is re-assigned to a replacement contractor.

Warwick argued that because the employee’s work had been carried out for each client under a separate contract, each reassignment of work under each contract was a separate service provision change so TUPE did not apply to the totality of his work.

The Employment Tribunal (ET) agreed: while there may have been a service provision change in relation to each individual contract with each site ‘this must be a series of individual service provision changes. It is not permissible for a number of contracts with different clients to be added together to make one overall service provision change’.

However, the Employment Appeal Tribunal (EAT) disagreed. It ruled there was no reason in principle why the client had to be a single legal entity for TUPE to apply, provided the identity of the clients stayed the same, and they had all ‘evinced common intention’. While it was easier to show common intention if there had been one single ‘umbrella’ contract for the services, entered into by all of them, it was also possible for there to be a common intention - even though each had entered into a separate contract for the work. The EAT said: “The absence of one single contract would … not necessarily be fatal to the finding of some link - some commonality - between the clients in question, so as to allow the identification of intention for those purposes”.

The case was referred back to the ET to consider whether there had been a service provision change.

Operative date

  • Now

Recommendation

  • Business taking over work under separate contracts from multiple clients should consider whether TUPE still applies to protect employees of the previous contractor, because the clients have ‘evinced a common intention’.

Case ref: Ottimo Property Services Ltd v Duncan & Warwick Estate Properties Ltd UKEAT/0321/14/JOJ

New guidance: New toolkit launched to help businesses use intellectual property to raise finance

Businesses will benefit from a new IP Finance toolkit launched by the Intellectual Property Office (IPO). The toolkit will help businesses better understand the financial value of their intellectual property (IP), and make a stronger case when offering their IP as security to raise finance.

Aimed specifically at small businesses, the new toolkit is available on the Government’s website. The IPO says it has been developed to:

  • Help lenders and businesses talk the same language.
  • Encourage and guide businesses to document their IP assets ahead of any application for finance.
  • Help businesses to develop more effective IP management and commercialisation strategies.
  • Raise awareness of the wide variety of finance options available for IP-rich businesses.

Operative date

  • Now

Recommendation

New rules: Companies considering name changes following new rules

Many companies are considering whether to change their names following introduction of new, more liberal rules on which company names are allowed

A significant change is that the words ‘exports’, ‘group’, ‘holdings’, ‘imports’, ‘international’ and ‘services’ can now be included in a company name to distinguish it from another name. Previously, such words were ignored when deciding whether one name was the same as another, and therefore could not be registered. It is now possible for companies called AB limited, AB Exports Limited, AB Holdings Limited and AB Services Limited to co-exist.

Another change increases the list of ‘permitted characters’ that can be used in a company name. For example, German umlauts and French acute and grave accents are now allowed, which were prohibited under the old rules. Companies (for example, those with ‘cafe’ in their name) which were previously unable to use these characters may now wish to change their names to include them (for instance, in ‘café’).

The new rules also remove 26 words from the list of ‘sensitive’ words which could not previously be included in a company name without Companies House approval, including words such as ‘international’, ‘european’, ‘national’, ‘group’ and ‘holding’.  These words can now be included in a company name without having to be justified to Companies House.

Operative date

  • Now

Recommendation

  • Companies should consider whether they now wish to change their names to one they originally wanted but were unable to register under the previous rules.
  • Companies should also consider monitoring the companies index for names they would be unhappy to see registered, that were, but are no longer prohibited.

Case law: Contractual parties facing a repudiatory breach cannot always treat contract as continuing

Parties to a contract faced with a repudiatory breach by the other side could not affirm the contract and treat it as continuing, as they did not have a legitimate interest in doing so. They had to treat it as ended by the breach, the High Court has ruled.

A seller hired shipping containers from a shipper to transport cargo to a buyer. Under a ‘liquidated damages’ clause, the contract gave the shipper power to charge daily payments for every day the empty containers were not returned to it after delivery.

Liquidated damages clauses provide for payment of a fixed sum in the event of breach of a contract, in order to avoid protracted and expensive disputes about the amount of compensation payable.

The seller’s problem was that its buyer failed to collect the cargo, even though ownership had passed to it. The seller was therefore unable to unpack the containers and return them to the shipper. When it told the shipper this, the shipper started charging the daily rate. As the seller could not force the buyer to collect the cargo its liability to pay the daily rate was potentially unlimited.

The court said found that the seller had committed a ‘repudiatory breach’ of the contract when it told the shipper it could not return the containers. The legal test of whether there has been a repudiatory breach is whether, from the perspective of a reasonable person in the position of the innocent party, looking at all the circumstances, the contract breaker has shown a clear intention to abandon and altogether refuse to perform the contract.

If there has been a repudiatory breach the innocent party almost invariably has an option either to treat the breach as ending the contract, or affirm the contract so it continues. Previously, the courts have said the innocent party can make a decision in its own commercial interests and has no duty to take the other party’s interests into account.

However, very unusually the court said that in this case, the shipper could not affirm the contract as it had no legitimate interest in doing so. It had no option but to treat the breach as ending the contract. The ruling implies that an innocent party’s decision following a repudiatory breach whether to affirm or end the contract is subject to a duty to act in good faith.

Operative date

  • Now

Recommendation

  • Parties to a contract faced with a repudiatory breach by the other side should now consider whether they have a legitimate interest in affirming it because, if they don’t, they may not be able to do so and will have to treat the contract as ended by the repudiatory breach.

Case ref: MSC Mediterranean Shipping Company SA v Cottonex Anstalt [2015] EWHC 283

Case law: Former employee with history of legal disputes victimised when applying for job with old employer

Employers faced with applications for jobs by former employees with whom they previously had legal disputes must ensure they have a good, documented reason for not interviewing or appointing them, or withdrawing the job, or risk victimisation claims.

An employee (a doctor) resigned after a nine-year period of employment marked by various legal disputes with his employer. He unsuccessfully applied for a job with the same employer the following year and made a tribunal claim which was resolved through mediation. Very shortly after, the employer advertised another job and the former employee was the only applicant.

The employer’s HR department advised that he might bring a claim if not appointed. To reduce the chances of this they decided he should be interviewed by a panel that knew as little of his history as possible.

However, the job was then withdrawn and the interview did not go ahead. The employer said this was because a reorganisation removed the need for the job. However, the former employee claimed victimisation.  There is victimisation if an employer subjects an employee to a detriment because he or she has complained about discrimination.

The Employment Appeal Tribunal (EAT) decided he had been victimised. It ruled that the real reason for withdrawing the job had been the employer’s fear the employee would bring a claim if he was not appointed.

The employer’s liability for victimisation was unaffected by the fact that his employment history with the employer, and his performance in previous interviews, meant he would have had only a ten per cent chance of getting the job – although that did reduce the amount of compensation it was prepare to award him.

However, the EAT awarded him compensation of £5000 for injury to feelings because, as a doctor, his employment options outside this employer were limited. The victimisation was therefore particularly detrimental.

Operative date

  • Now

Recommendation

  • Employers faced with applications for jobs by employees with whom they have had previous legal disputes must ensure they have a good, documented reason for not interviewing or appointing them, or for withdrawing the job.

Case ref: Das v Ayrshire & Arran Health Board [2014] UKEAT 0021_14_2811

Case law: One employee can be an ‘organised grouping of employees’ for TUPE purposes

Employers planning for a ‘service provision change’ caught by TUPE rules should note that one employee can amount to an 'organised grouping of employees' for TUPE purposes and may be entitled to TUPE protection .

An employee claimed unfair dismissal. In order to show she had the necessary period of continuous service to make the claim, she had to show she had been part of valid TUPE transfers from various previous employers to the employer who was now dismissing her. If she could, she could include her previous employment as part of her period of continuous service.

The TUPE rules protect employees by transferring their jobs, on the same contractual terms, to a new employer in certain circumstances, including:

  • When a business or undertaking they work for is transferred from their current employer to a new one;
  • When there is a ‘service provision change’, such as:
    • When a business engages a contractor to do work previously done by its employees.
    • When work being carried out by a contractor is re-assigned to a replacement contractor.
    • When work being done by a contractor is brought in-house.

On a service provision change, the relevant employees must be an ‘organised grouping of employees’ which ‘has as its principal purpose the carrying out of the activities concerned on behalf of the client’ - and not just on a temporary basis.

In this case, there had been service provision changes but the employee was the only one carrying out the relevant work so there was doubt whether she could amount to an ‘organised grouping of employees’ on her own.

The Court of Appeal decided she could, and as her principal purpose was to carry out the activities to be transferred immediately before the transfer, and it was not a temporary arrangement, she was protected under TUPE. Her previous service could therefore be included when calculating her period of service for the purposes of her dismissal claim. Indeed, the EAT said specifically that her assignment to the relevant work had been a conscious decision by her employer, rather than ‘happenstance’.

Operative date

  • Now

Recommendation

  • Employers should ensure it is clear whether and which employees will amount to an organised grouping for TUPE purposes if a potential TUPE transfer is planned, taking into account that one employee may amount to an organised grouping.

Case ref: Rynda (UK) Ltd v Rhijnsburger [2015] EWCA Civ 75

Case law: Court clarifies when a testator’s promise before death overrides the Will

Individuals wishing to change their Wills should do so promptly, and not make promises to potential new beneficiaries in the meantime, or risk their wishes not being carried out when they die.

In 2010, a hotel owner asked her cousin to come and look after her, and run her hotel, as she had terminal cancer. In return, she promised her cousin she would inherit everything she owned when she died.

The hotel owner recognised this was a major upheaval for her cousin, who lived in Scotland and had a business of her own there, and insisted her cousin’s husband was consulted and was happy with the proposal.

In the event, the cousin spent nine months per year at the hotel over the next two years, looked after the hotel owner and did whatever was required at the hotel. Her husband visited at weekends and also undertook jobs at the hotel.

The hotel owner eventually died of her illness. On her death, the hotel was valued at around £584k, and her other assets were valued at around £458k.

In 1983, the hotel owner had made a Will leaving her residuary estate (ie what was left after making certain bequests) to the cousin and the cousin’s sister equally. She had given her solicitor instructions to change her will so the cousin would get everything, but did not manage to sign the new Will before she died.

The cousin therefore claimed she should receive the entire estate despite the terms of the 1983 Will. To succeed, she had to show:

  • A promise had been made to her by the hotel owner.
  • She had relied on it to her detriment.
  • That it would be unconscionable for her not to get what she was asking for, given the degree of detriment to her.

The cousin’s sister claimed that there had been no detriment. She argued that the cousin had received benefits, such as free board and lodging, which had been reward enough for her help and support. She argued that the cousin should be entitled to, say, £40k, but not the whole of the estate which was worth more than £1m.

The court disagreed, ruling that ‘detriment’ had to be judged in the round.  The support provided had been a substantial detriment as the cousin and her husband had substantially altered their entire lifestyle. They had to live apart from each other most of the time, and the cousin also had multiple sclerosis, dyslexia and eye problems, and had postponed having a hip replacement because she was looking after the hotel owner.

The court also found it significant that although they had, in fact, provided support for two years - for all they knew they might have had to carry on for years, and had been willing to do so. They had therefore both suffered physical and emotional strain.  The benefit of free board and lodging was not ‘any kind of meaningful compensation or countervailing benefit for the open-ended commitment they gave at the outset and to which they both adhered’.

It would, therefore, be unconscionable not to grant them the whole estate.

Operative date

  • Now

Recommendation

  • While the testatrix’s wishes were eventually carried out in this case, individual’s wishing to change their Wills should do so quickly, and not make promises to potential new beneficiaries in the meantime, or they risk their wishes not being carried out when they die, and unnecessary legal costs being incurred.

Case ref: Lothian v Dixon & Webb Claim No: 3LS30314


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