October Legal Alert

legal alert

This month: 


Case law: Tribunal limits extent to which HR can advise in disciplinary proceedings, including decisions to dismiss

Employers should ensure Human Resources (HR) personnel do not comment on issues such as credibility and culpability when supporting managers who are conducting investigations, making decisions to dismiss and other disciplinary functions.

In a recent case, a manager was appointed to investigate alleged misconduct by an employee in relation to expenses and use of hire cars. Initial drafts of his report showed he accepted the employee's explanation. However, the employer's HR department subsequently became involved, commenting on issues such as the employee's credibility. The manager's final report was radically more critical, and the employee was eventually dismissed. The employee claimed unfair dismissal.

The Employment Appeal Tribunal (EAT) ruled that an employee in disciplinary proceedings is entitled to expect that decisions about issues such as credibility and culpability will be decided by the person appointed to conduct the investigation, without being 'lobbied' on such issues by anyone else, whether within or outside the organisation.

The EAT said a dismissing or investigating officer could seek guidance (eg from HR), but only on matters of law and procedure, and to ensure "all necessary matters have been addressed and achieve clarity". It also said employees should be given notice of any changes in the case against them so they can deal with them.

The matter was remitted back to the Employment Tribunal.

Operative date

  • Now


  • Employers should ensure HR personnel do not comment on issues such as credibility and culpability, but restrict themselves to advice on law, procedure and appropriate sanctions, when supporting managers who are conducting investigations, making decisions to dismiss and other disciplinary functions.

Case law: Ramphal v Department for Transport UKEAT/0352/14/DA


New legislation: Retailers must comply with significant new consumer rights laws from 1 October

Retailers should review their terms of business, and other customer documents such as notices, policies and licences, to ensure compliance with significant new consumer rights laws.  They must also give appropriate training and monitor staff in light of the new laws.

Retailers, including online retailers, must comply with major new consumer rights law affecting contracts for the sale and supply of goods, services, and digital content entered into after 1 October.

For example, the new law:

  • Gives consumer rights to people buying for a mixture of business and personal reasons
  • Extends the quality criteria applied to goods under consumer rights law to digital content
  • Introduces additional requirements to make certain contract terms clear and prominent before consumers enter into a contract
  • Strengthens consumers' rights if they reject faulty goods (they have different remedies depending on how long it takes them to reject the goods)
  • Gives them new remedies if services are defective
  • Makes anything said to consumers during the sale process about a trader or the service they are buying, contractually binding in certain circumstances
  • Extends the list of contract terms that may be treated as unfair by the courts (the 'grey list')

Operative date

  • Now


  • Retailers should:
    • Review their terms of business, and other customer documents such as notices, policies and licences, to ensure they comply with the new law
    • Train and monitor staff to ensure compliance


Case law: Suppliers to other businesses should review standard terms for reasonableness

Suppliers selling to other businesses on their standard terms should review those terms to ensure they are reasonable, particularly if selling to smaller businesses with unequal bargaining power, following a recent ruling.

Under the Unfair Contract Terms Act 1977, businesses contracting with each other on one party's standard terms of business can only exclude or restrict liability for breach of the contract to the extent the relevant contract term is reasonable. The 1977 Act sets out a (non-exhaustive) list of factors relevant in deciding whether a term is reasonable.

In this case, a company agreed to supply laminated sheets to a customer on the company's standard terms of business. Those terms excluded or restricted liability in four different ways. The sheets were defective, although this was only discovered after they had been fitted.

When the defect was discovered, the customer claimed compensation for breach of contract. The company claimed that the exclusions and restrictions in its standard terms applied, so it was not liable to pay the customer the compensation claimed.

The court examined each set of exclusions or restrictions and decided none were reasonable; and the customer was entitled to full compensation. Some of the reasons were:

  • Exclusion of liability for the quality, or fitness for purposes, of the sheets was not mitigated by alternative warranties as to quality
  • There was unequal bargaining power – the company had a much higher turnover then the retailer – so there was limited scope for negotiation
  • The goods were standard, rather than made to the customer's specific order, so there was no agreed specification
  • The three-day period given to the customer to inspect the goods and assess whether they were defective was too short in the circumstances, and the consequences of not doing so was too serious to be reasonable
  • Both parties knew that the sheets were to be bonded into panels, so that limiting liability to the cost of the sheets rather than the cost of replacing the final panels, and a blanket exclusion of liability for loss of profits, third party costs, etc, were both unreasonable

Operative date

  • Now


  • Suppliers selling to other businesses on their standard terms should review those terms to ensure they are reasonable, particularly where the supplier is selling to smaller businesses with unequal bargaining power

Case ref: Saint Gobain Building Distribution Limited (t/a International Decorative Surfaces) v Hillmead Joinery (Swindon) Limited [2015] EWHC B7 (TCC)


New legislation: More new rules for residential landlords

Landlords under Assured Shorthold Tenancies (ASTs) must provide new information when granting tenancies, and plan for next year's new tax rules which could affect their profits.

From 1 October 2015, landlords entering into ASTs must provide their new tenants with:

  • An Energy Performance Certificate (EPC)
  • A gas safety certificate, if the property has gas
  • A copy of How to rent: the checklist for renting in England (a government guide), either as a hard copy or by emailing an electronic version (although there is no need to resend the guide if it is subsequently updated, or on renewal of the tenancy)

In addition, tax changes being phased in over the next four years will reduce the amount of mortgage interest buy-to-let landlords can set off against rent received when calculating their taxable income. The changes will also end the 10% 'wear and tear' allowance.  Both changes will affect many landlords' profits.

These changes are in addition to landlords' existing obligations to:

  • Protect a tenant's deposit using one of three prescribed schemes, and give the tenant access to information about how the scheme being used to protect their deposit works
  • Check the immigration status of prospective tenants
  • Comply with new rules on the timing and format of the section 21 notice used to end ASTs without having to give any reason, and requiring them to satisfy certain pre-conditions before they can give such a notice

Operative date

  • Now


  • Landlords of ASTs should implement the new rules for providing information and documentation to new AST tenants, and plan for next year's tax changes.


Case law: Court clarifies correct test when deciding whether employee has been treated unfavourably because of a disability

Employers will welcome clarification of the legal test to apply when deciding whether a dismissal amounts to unfavourable treatment of an employee arising from their disability.

An employee on sick leave because of a serious lung condition was able to attend interviews for another job, and attend a course abroad, but could not attend an appointment with his Clinical Director. This was because the impact of his condition on his ability to carry out day-to-day activities fluctuated. His employer wrongly assumed he had deliberately refused to attend the appointment and dismissed him.

The Employment Tribunal (ET) ruled that this amounted to unfavourable treatment arising from his disability. The Employment Appeal Tribunal said that the ET had not applied the right test: the correct test was whether there had been two separate, causative steps:

  • That there was a 'something' that was the consequence of a disability
  • That the alleged unfavourable treatment of the employee was because of that particular 'something'

Operative date

  • Now


  • Employers should ensure they apply the correct test of whether a dismissal amounts to unfavourable treatment of an employee arising from their disability before deciding to dismiss the employee

Case law: Basildon & Thurrock NHS Foundation Trust v Weerasinghe UKEAT/0397/14/RN


Case law: Court gives guidance on when trade mark can be revoked for lack of 'genuine use'

Trade mark owners should ensure they are making 'genuine use' of their marks, or risk their trade marks being revoked.  This requires taking into account the nature of their products and business - particularly if they are only using them in one country and particularly if financial difficulties affect sales.

Trade mark owners will welcome a legal ruling clarifying what amounts to 'genuine use' of a registered trade mark.  Failure to make genuine use of the mark for five years can mean it could be revoked.

Following a number of legal rulings, a mark must usually be used continuously and in at least two countries, before there is genuine use. The burden is on the trade mark owner to prove there has been genuine use.

In a recent dispute, an Italian company applied to register a European Community trade mark. An existing business, which had already registered both a Community trade mark and a UK trade mark, objected. The Italian company argued that the existing business had not made genuine use of its trade mark. In particular, it said that the mark had not been used continuously because the owner had been insolvent for part of the five-year period, which had resulted in a dip in sales. It also argued that the mark had only been used in the UK, rather than two countries usually required to show genuine use.

The European Union General Court ruled that use of a mark did not always need to be continuous. In this case, the business sold very expensive sports cars. Production was therefore limited – cars were usually only made to order. The court therefore decided that evidence of actual sales was irrelevant – it was sufficient that the cars were being marketed for the greater part of the five years. It ruled that in the circumstances, the mark had been used for a sufficiently substantial part of the five-year period, despite the insolvency.

The Court also decided that in the circumstances, the usual 'two counties' rule did not apply. Use within the UK only was enough to amount to genuine use in this case.

Operative date

  • Now


  • Trade mark owners should ensure they are making 'genuine use' of their trade marks, given the nature of their products and business - particularly if they are only using them in one country, and/or if financial difficulties affect sales.  Otherwise they risk their trade marks being revoked.

Case law: TVR Automotive Ltd v OHIM (T-398/13)


Case law: Court clarifies when dismissal arises out of disability for discrimination purposes

Employers dismissing an employee in the belief they are faking illness should beware of a direct disability discrimination claim if the employee is actually disabled, even if their belief is genuine.  The dismissal, while not directly caused by the disability, may still be 'something arising in consequence of' it.

An employee was dismissed after her employer genuinely but mistakenly decided she was faking her illness. She claimed direct disability discrimination.  Direct disability discrimination takes place if an employer treats an employee with a disability less favourably:

  • because of something arising in consequence of the employee's disability, and
  • the employer:
    • cannot show that the treatment is a proportionate means of achieving a legitimate aim
    • knows, or could reasonably be expected to know, that the disabled person has a disability

The Employment Tribunal (ET) found that the employee was in fact disabled, but the reason for the dismissal was not the disability but the employer's genuine belief that the employee was faking her illness. The disability was merely part of the background circumstances, not the cause. The unfavourable treatment was not therefore 'because of something arising in consequence of the disability', and was not discriminatory.

The Employment Appeal Tribunal (EAT) disagreed, ruling that the ET was wrong to assume the employee's disability had to have been the direct cause of the dismissal. It also said that the ET's decision to differentiate between disability as the cause of an action and as a 'background circumstance' left out the possibility of discrimination because either the disability:

  • was a significant influence on the unfavourable treatment, or
  • was not the main or the sole cause but was nonetheless an effective cause of the unfavourable treatment

The EAT also said the ET's enquiry into the motivation for the dismissal was evidence the ET required 'too stringent a causal link between the [employee's] disability and the unfavourable treatment'.

The case was remitted back to the ET to reconsider whether the dismissal arose out of the disability and whether the other elements of disability discrimination applied.

Operative date

  • Now


  • Employers dismissing an employee in the mistaken belief they are faking illness should beware of direct disability discrimination claims if the employee is actually disabled.  This is the case even if their belief is genuine, as the dismissal (while not directly caused by the disability) may still be 'something arising in consequence of' it

Case ref: Hall v Chief Constable of West Yorkshire Police UKEAT/0057/15/LA


Case law: Organisations face uncertainty as to when and whether to comply with subject access requests under data protection law

Organisations face lack of clarity as to when they are legally required to provide individuals with information the organisation holds on them if requested, particularly if the individuals are making requests to gather evidence to use in a dispute. This uncertainty follows a High Court ruling.

Data protection law gives individuals a right to ask an organisation for any personal data it holds on them, provided the data are held in a 'relevant filing system', and subject to certain other safeguards. Such requests are called 'subject access requests'. The test of whether manual records amount to a relevant filing system is whether they are 'of sufficient sophistication to provide the same or similar ready accessibility as a computerised filing system'.

A woman and her two children, who were in a dispute with the trustees of a foreign trust, made subject access requests to a firm of UK solicitors advising the trust. The firm claimed exemption on grounds the data:

  • Was protected by legal professional privilege
  • Was held on hard copy documents filed in loose leaf form, with other uncategorised and unrelated documents, in storage boxes, and was not therefore held in a relevant filing system
  • Required 'disproportionate effort' to unearth

The High Court agreed on all counts. It said that it was not reasonable or proportionate for the firm to have to deploy the skilled lawyers required to make the necessary costly and time-consuming search among 30 years of records to find the relevant information, and decide which parts were protected and which were not.

It is very rare for courts to apply the 'disproportionate effort' rule but the Court in this case was heavily influenced by one aspect of the case: the principal aim of the relevant law is to allow individuals to make sure information held on them is accurate. In this instance, however, the court found that the sole aim of the request was to flush out information the woman and her children might be able to use against the trust in their legal dispute. The Court said using the right to make a data subject access request for these purposes amounted to an abuse of that right, and refused to order the firm to comply with the request.

However, this is at odds with guidance from the Information Commissioner's Office (the body which polices data protection law) which says that organisations cannot refuse to comply with a subject access request because the requester is contemplating or has already begun legal proceedings. The applicants have been given permission to appeal, and the Court of Appeal could overturn the High Court ruling.

For the present, organisations receiving subject access requests against a background of potential or actual legal proceedings should consider taking legal advice on whether or not to comply.

Operative date

  • Now


  • Organisations receiving subject access requests from individuals against the background of a potential or actual legal dispute should be aware there is uncertainty in this area, and consider taking legal advice if they are unsure whether or not to comply.

Case ref: Dawson-Damer & Ors v Taylor Wessing LLP & Ors [2015] EWHC 2366


New legislation: UK nationals owning property in the EU should review Wills following new EU regulations

UK nationals owning property abroad should review their UK and/or foreign Wills in case they no longer have their intended effect, following new EU regulations.  The new regulations govern which country's succession laws apply to their foreign property when they die.

If an individual owns property in more than one country it can be extremely difficult to determine which country's law applies on their death, particularly in circumstances where there is a dispute. UK and foreign Wills have to be drafted very carefully to take account of each relevant country's rules.

To help solve this problem, countries in the EU can now sign up to new regulations known as 'Brussels IV'.  Broadly speaking, when an EU national dies, the country where they lived will have jurisdiction, and the succession law of that country will apply under the regulations.  However, an individual can state in their Will that English law is to apply to their estate in the EU, including land and property.

While the UK has not signed up to the new regulations, almost every other European Union member country is expected to apply the new rules.  This means the regulations could still affect UK nationals who:

  • own property located in a state which is in a Brussels IV state
  • are nationals of a Brussels IV member state, and/or
  • are resident in a Brussels IV member state

The regulations could also affect the Wills of foreign nationals living in the UK.

Operative date

  • Now


  • UK nationals who own property in a Brussels IV state should review their UK Will, or consider making one if they have not yet done so, as well as any Wills made in that state, to ensure they still achieve what was intended when they were drafted


Case law: Court applies natural meaning of words in commercial agreement, despite uncommercial result

The words of a commercial agreement should be interpreted according to their natural meaning, even if the outcome is uncommercial, the Court of Appeal has ruled.  In this case, the buyer and seller were arguing over the meaning of a business sale agreement they had entered into.

The agreement was to sell a business, and it contained a clause under which the seller agreed to indemnify the buyer if certain events occurred. The buyer made a claim under the indemnity clause. However, the court said that the clear words of the agreement meant the indemnity did not cover the buyer in the circumstances - even though this meant the indemnity was uncommercial for the buyer.

This ruling followed a recent Supreme Court decision that clear, unambiguous words in an agreement should not be overturned merely because they are not commercially sensible – even if the outcome is commercially disastrous.

Previously, contractual parties have successfully argued that words which produced an uncommercial outcome could not have been intended by the parties when they entered into the agreement and, in some cases, the courts had interpreted such agreements to make commercial sense of them.

The principles to apply when interpreting commercial contract clauses include:

  • The aim of the court in construing a commercial contract is to ascertain objectively the aim of the parties
  • For this purpose, the court must put itself in the position of a reasonable person in possession of all background information reasonably available to the parties at the time the contract was entered into
  • When unambiguous, ordinary language has been used in a contract, the court will normally give effect to that language. It will not rewrite a bad bargain, or change what was agreed just because it was imprudent – or even if the outcome is disastrous
  • When there are two possible interpretations, the court will prefer that which made the most commercial sense at the time. However, commercial common sense and surrounding circumstances should not be used to reduce the importance of the words used

These principles show that the clearer the wording in an agreement, the less likely it will be interpreted differently because it is 'uncommercial'.  Only if the words are ambiguous will the courts then look to commercial common sense to work out what the parties intended them to mean.

Operative date

  • Now


  • Businesses entering into commercial contracts should be aware of how the courts will interpret them in the event of a legal dispute and draft them clearly to avoid uncertainty

Case ref: Wood v Sureterm Direct Ltd & Capita Insurance Services Ltd [2015] EWCA Civ 839


New legislation: New timetable for company law changes in the Small Business, Enterprise and Employment Act (SBEEA)

Limited companies should review their preparations for company law changes introduced under the SBEEA following government changes to the timetable.  The changes include delays to the introduction of the new statutory register of Persons with Significant Control (PSCs).

Company law changes in the SBEEA are being introduced in tranches, but the Government has recently changed the timetable.

One significant – and welcome - change is that the requirements for virtually every UK limited company to identify PSCs over the company, to maintain a statutory register of PSCs (or the legal entities through which they exercise control), and notify PSC details to Companies House, have been deferred.

The requirement to identify PSCs has been moved from January 2016 to April 2016. The obligation to start notifying Companies House of PSC details has been moved from January 2016 to June 2016.

However, companies with large or complex shareholdings, or which have entered into agreements (for example, with investors, or lenders) under which control of the company could change in the event of default, are well advised to start identifying potential PSCs already and, if PSCs wish to remain anonymous, to change current arrangements.

Provisions that will still come into force from October 2015 are:

  • partial suppression of directors' dates of birth on the public register (excluding the day of birth)
  • reducing the time taken to strike companies from the Companies Index, and
  • replacement of the requirement for a 'consent to act' signature from new directors and secretaries when they are appointed, replacing it with a new consent procedure

Operative date

  • Now


  • Limited companies should ensure they have plans in place to identify PSCs, create the necessary statutory registers and notify Companies House of their details, in good time to comply with the new deadlines, and that they comply with the new rules in force from October 2015.


Case law: Employees with mere 'administrative connection' to a business unit may not be protected by TUPE rules

Employers involved in a TUPE transfer of a service provided by a particular 'grouping' of employees should identify whether members of the grouping, including any absent from work, continue to participate in its economic activity.  If they merely have an 'administrative connection' with it, they may not be protected by TUPE rules.

An employee was off sick for more than five years and appeared unlikely to return to work. He initially received benefits from the employer's PHI scheme, then discretionary sick pay. While he was off he was still recorded as attached to a particular unit of the business.

The unit was then transferred to a new employer and the TUPE rules applied to the transfer. These rules are designed to protect employees in certain circumstances –preserving their jobs and terms and conditions of employment – when a service they are involved in providing is transferred from their current employer to a new one. However, the TUPE rules only protect employees who are part of the 'organised grouping of employees' which 'has as its principal purpose the carrying out of the activities concerned on behalf of the client'.

The issue arose as to whether the sick employee was part of the organised grouping of employees transferred to the new employer. If not, he was not protected under the rules.

The Employment Appeal Tribunal (EAT) said that an employee who is off work 'will generally require some level of participation or, in the case of temporary absence, an expectation of future participation in carrying-out the relevant activities on behalf of the client' before they can be treated as assigned to the relevant organised grouping of employees.

It contrasted the employee's situation (being off on long-term sick leave with little prospect of returning) with an employee temporarily absent on maternity leave, whose absence is far more likely to be temporary. It also said that a mere 'administrative connection' with a grouping of employees – for example, where a person is assigned to a grouping for pastoral or mentoring purposes only - was also unlikely to be sufficient unless the person also participated in the grouping's economic activity.

The absent employee was not therefore protected by the TUPE rules.

Operative date

  • Now


  • Employers involved in a TUPE transfer of a service provided by a particular 'grouping' of employees should ensure they identify whether members of the grouping, including any who are absent from work, continue to participate in its economic activity or merely have an 'administrative connection' with it, as only the former are protected by TUPE rules.

Case ref: BT Managed Services Ltd v Edwards & Anor [2015] UKEAT 0241_14_0209


New legislation: Retailers should assess the business impact of proposals to relax Sunday opening laws

Retailers should consider the potential business impact of longer Sunday opening hours proposed for larger stores, including the implications on turnover, potential extra costs, and the legal implications.

The Chancellor has announced plans to devolve decisions on Sunday opening times to local level. This could result in local removal of the rule banning shops with a floor larger than 280 square metres from opening for more than six hours on Sundays (with exceptions, including pharmacies, petrol stations and motorway services).

We await responses to a recent consultation on the proposals (the consultation closed in September). In the meantime, both larger shops and their smaller competitors who are currently allowed to open for more than six hours on Sunday, should consider how this could impact on their business, and what measures they should take if the rules are relaxed for larger businesses. Online retailers may also consider whether this will affect their businesses by changing shopping behaviour.

Retailers should take into account that there may be conditions imposed under their planning consents which will still prevent them from opening for longer hours on Sundays.

There will also be employment law implications for shops wishing to extend opening hours on Sundays. Changes to employment contracts may be required – and employees are entitled to refuse to work on Sundays. There is also a risk of religious discrimination claims if Sunday working is imposed.

Shops with leases in shopping centres should consider whether longer opening hours may affect service charges – for example, security and lighting costs are likely to increase. For tenants whose rent varies according to turnover, increased turnover could mean higher rents.

Practically, longer opening hours may affect where larger retailers position their stores, and will require a review of every process throughout the business, including issues such as the supply chain, warehousing, stock control and delivery.

Operative date

  • Tba


  • Retailers should consider the potential impact on their business of longer opening hours for larger stores on Sunday, including whether it could increase or reduce turnover, create potential extra costs, and the legal implications, following the Chancellor's summer budget.

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Members seeking prompt advice on employment, company or commercial law can contact our legal helpline, Directors' Law Express, on 0870 241 3478, up to 25 times a year.

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