http://www.healdlaw.com/en-gb© 2013 Heald SolicitorsHeald Solicitorshttp://www.healdlaw.com/news-199-Buy-to-Let-Purchaser-Loses-Case-against-Negligent-Valuer.aspxA recent decision of the Court of Appeal shows that a buy-to-let purchaser cannot safely rely on a valuation carried out on the mortgagee's behalf. In [b]Scullion v Bank of Scotland PLC (trading as Colleys)[/b], S was a buy-to-let purchaser of a flat. The valuers (a firm of surveyors that eventually became part of the Bank of Scotland) gave what was clearly negligent advice, advising that the flat could be let for £2,000 per month. In fact, it proved impossible to obtain more than £1,050 per month. S won in the High Court, the Judge relying on principles derived from previous cases to the effect that a purchaser of a relatively modest house as a residence is entitled to rely on a valuation carried out for the bank or building society. However, the Court of Appeal allowed the Bank's appeal. In the Court's view, the present case was very different. In the case of home purchases, the evidence had been that around 90% of prospective owner-occupiers did not commission a separate survey of the property, and relied instead on the mortgage valuation; the financial constraints of home purchase were recognised as a major factor in this. No such evidence had been produced in respect of buy-to-let purchases. In the Court's view, it was likely that those who were entering the property market purely as investors would both be likely to have sufficient resources to commission a separate survey, and would in general be more financially sophisticated. Further, they would probably need specialist advice on the likely rental value and letting prospects of the property. S appealed to the Supreme Court. However, the appeal was withdrawn at the very last minute - on the morning on which the appeal was due to be heard. This means that the Court of Appeal's decision must be taken as accurately stating the law. Some may consider the Court of Appeal's decision in this case rather harsh and, indeed, the Court expressed some sympathy for S, who it felt had been badly let down by his professional advisers. However, the Court's ruling confirms that the home purchase cases are the exception rather than the rule. Any buy-to-let purchaser who decides to proceed without obtaining his own survey or valuation needs to understand that he does so at his own risk. He is unlikely to have any remedy against a surveyor or valuer instructed on the mortgagee's behalf. To find out more, contact Martin Banham-Hall or Caroline Wilton. 21 May 2013 07:09:51http://www.healdlaw.com/news-198-Government-Consults-on-the-Treatment-of-Pub-Tenants.aspxOn 22nd April 2013, the Department for Business, Innovation and Skills published a Consultation Paper on proposals for regulating the relationship between the larger pub companies and their tenants. The Consultation Paper raises concerns over the unfair treatment of pub tenants and suggests that self-regulation by the pub trade has not done enough to improve the position of such tenants. It seeks views on proposals to ensure that tenants are treated fairly and that those tenants subject to a beer tie should be no worse off than a tenant without such a tie. The Consultation Paper contains a number of proposals in respect of beer and gaming machine ties but it does not address competition issues. [b][/b] The Consultation Paper proposes a formal Statutory Code for pub companies with more than 500 pubs. This would regulate the relationship they have with all of their pub tenants (not just those subject to a beer tie). The Consultation Paper set out a draft version of the proposed Code. This would be enforced by an Adjudicator having the following functions: . An arbitration function empowering the Adjudicator to set open market rents for pubs, thereby ensuring that the rent has been calculated fairly; . An investigatory function enabling the Adjudicator to undertake investigations where there were reasonable grounds for suspecting that a pub company was in breach of the Code. The consultation closes on 14th June 2013. To find out more, please contact Caroline Wilton. 10 May 2013 08:42:48http://www.healdlaw.com/news-197-Bahrain-ratifies-the-Hague-Apostille-Convention-1961.aspxBahrain has ratified the Hague Apostille Convention of 1961 Apostille to take effect on 31 December 2013 from which date only an apostille from Foreign and Commonwealth Office is required and not consular legalisation at the Bahrain Embassy in London. This will save time and money for businesses and individuals who have dealings in Bahrain.. 25 April 2013 11:35:49http://www.healdlaw.com/news-196-High-Court-Quashes-Milton-Keynes-Wind-Turbine-Policy.aspxThe High Court has recently ruled that Milton Keynes Council's Policy on Wind Turbines was unlawful. In July 2012, MKC introduced a new Supplementary Planning Document (SPD) that required the positioning of wind turbines over 25 metres in height to be at least 350 metres from residential dwellings. This increased to over one kilometre for turbines higher than 100 metres. In September 2012, RWE Npower Renewables Ltd. (RWE) asserted that the SPD conflicted with both MKC's own existing planning policies on wind energy - particularly its Local Plan - and with government policy. When MKC refused to withdraw the SPD, RWE applied to the High Court for judicial review. The High Court upheld RWE's claim on the minimum distances from residential dwellings point. It rejected other grounds of challenge - for example, guidance in the SPD specifying separation distances between turbines and footpaths or bridleways. The Court was not sure MKC would have adopted an SPD containing that guidance alone, without the residential separation distances, and felt that it was not in a position to "edit" the SPD. Instead, it quashed the whole SPD. The Court has given MKC permission to appeal. Meanwhile, each side has sought to cast this decision in a light favourable to its position. RWE announced that it welcomed "the clarity the Court has brought to this matter" and that it believes that "this will help both the wind industry and local authorities in determining appropriate policies for the siting of commercial wind farms". Conversely, Andrew Geary, MKC's leader, claimed a partial victory with regard to the Court's decision confirming the legality of the separation distances from footpaths and bridleways. He has been quoted in the local press as saying that a development planning document will be drawn up to change the Local Plan. The Judge drily observed that wind turbines generate passionate argument as well as energy. He stressed that the case was not about wind energy policy, or the merits or demerits of the SPD. Rather, it was about its legality. The Court said MKC could not use an SPD, which does not involve wider consultation or examination in public, effectively to change its existing Local Plan, which does. Another problem in this area is that there is a certain tension at the heart of Government policy. On the one hand, the National Planning Policy Framework has a presumption in favour of sustainable development. On the other, changes introduced by the Localism Act 2011 were designed to give local authorities more flexibility in relation to their local plans. All in all, it seems fairly safe to predict further litigation over wind turbines as the courts attempt to square this particular circle. To find out more, please contact Martin Banham-Hall or Caroline Wilton. 24 April 2013 09:35:43http://www.healdlaw.com/news-195-Redundancy-Selection-Criteria---Employer-Gets-It-Wrong.aspxEmployers may be forgiven if they sometimes feel that they are in a no-win situation. Over the years, there have been a number of cases where a redundancy dismissal was ruled to be unfair because the criteria used to select the particular employee for redundancy had been unduly subjective: - for example, where selection had been based on a manager's personal assessment of the employee's strengths and weaknesses. In a recent case, however, the Employment Appeal Tribunal (EAT) upheld an Employment Tribunal decision that two employees had been unfairly dismissal because the selection criteria had been too objective. In [b]Mental Health Care (UK) Ltd. v. Biluan[/b], MCA operated a small residential home for patients with mental health learning disabilities. The employees were employed as a nurse and a support worker respectively. In 2010, following a redundancy exercise, they were made redundant. Selection for redundancy had been on the basis of a marked assessment by reference to three criteria: - namely, (i) a competency assessment; (ii) disciplinary record; and (iii) sickness absence record. The employees were selected strictly according to their scores in that assessment, which were carried out by outside HR consultants. MCA admitted that the results had been "surprising" in that they had led to employees being selected who were considered to be good workers by their managers. However, it defended the selection on the basis that it had been wholly objective. The Employment Tribunal upheld the employees' claims for unfair dismissal. Although it had some reservations about the Employment Tribunal's reasoning, the EAT has now confirmed that decision. MCA had chosen an elaborate and human resources-driven method of selection more appropriate for recruitment purposes, and thereby deprived itself of the benefit of input from managers and others who had actually known the staff in question, and which, by its very elaborateness, had been difficult to apply consistently. This decision is a useful reminder of the need, when selecting employees for redundancy, to use selection criteria which are both fair and appropriate. It can be quite easy to lose sight of the wood for the trees in such cases and forget what is surely the object of the exercise: - namely, that the employer retains the most able employees but, at the same time, treats all employees potentially liable to be selected in a fair way. The case also demonstrates the need for caution when using outside consultants. At least so far as the employees are concerned, the buck will stop with the employer. It may be possible for the employer to pursue a claim against, say, HR consultants who advise the use of inappropriate selection criteria, but the result is likely to be messy and costly litigation. We have had many years' experience advising on redundancy exercises. To find out more, please contact Nick Crook or Gareth Pobjoy. 22 April 2013 10:27:58http://www.healdlaw.com/news-194-Franchise-Agreements---High-Court-Upholds-Post-Termination-Restrictions.aspxIn a recent decision that will be welcomed by franchisors, the High Court ruled that provisions in a franchise agreement that restricted the franchisee's activities after termination of the agreement were enforceable. In [b]PSG Franchising Ltd. v. Lydia Darby Ltd.[/b], PSG appointed Lydia Darby as its franchisee for a property search business in the Milton Keynes area in May 2006. The agreement contained restrictive covenants prohibiting Lydia Darby from: . For a period of one year after termination of the agreement being engaged in any business which provides any services which competed with any of the services provided by the Company or any of its franchisees within the Territory (the Non-Compete Restriction); or . For the purpose of selling any services which are the same as or similar to any of the Services (as defined) soliciting for business from any person who during the period of 1 year prior to termination was a customer of the business that had been carried on by Lydia Darby under the agreement (the Non-Solicitation Restriction). Initially the agreement was for a fixed term of five years. When the agreement expired, the parties continued their relationship for a further year and a half. Eventually, the relationship was terminated by mutual agreement. When PSG subsequently learned that the Lydia Darby was operating a business in competition with PSG it applied to the court for an injunction enforcing the restrictive covenants against Lydia Darby. The High Court granted an injunction, notwithstanding various, rather technical, arguments put forward by Lydia Darby. One such argument concerned the words "within the Territory" in the Non-Compete Restriction. There was a degree of ambiguity as it was not entirely clear whether those words related to the location of a business operated by Lydia Darby or the location of the services provided by any such business. LD argued that, properly interpreted, the Non-Compete Restriction stopped it providing services anywhere in the UK. The Judge disagreed. Lydia Darby also argued that the Non-Solicitation Restriction stopped her competing with new services only introduced by PSG after termination of the agreement and, accordingly, was unreasonably wide and unenforceable. The Judge accepted Lydia Darby's basic argument. However, observing that "the Services" was limited to property search services and that the Non-Solicitation Restriction would only catch new services that were introduced during one year after termination, the Judge ruled that the Non-Solicitation Restriction in fact afforded reasonable protection of PSG's legitimate interests. There seems to be little doubt that the High Court's decision in this case is helpful to franchisors. Over the years, the courts have varied in their approach to restrictive covenants in commercial agreements. At times they have adopted a strictly legalistic approach, giving the benefit of any doubt to the franchisee, employee or other person potentially bound by the relevant covenant. In this case, the Judge adopted what many will see as a more commercially realistic approach. That said, any franchisor, employer or other person seeking to impose restrictive covenants in a commercial agreement should always maximise the chances of the covenants' enforceability by ensuring that they are drafted as tightly and clearly as possible. To find out more, please contact Nick Crook. 17 April 2013 09:28:31http://www.healdlaw.com/news-193-Residential-Service-Charge-Consultations---The-Supreme-Court-to-the-Rescue.aspxIn a decision that will be greeted with relief by many landlords, the Supreme Court has ruled that a landlord [b]was[/b] entitled to enforce the payment of residential service charges despite having failed comply fully with the rules under which the relevant tenants must be consulted before major repair works etc are carried out. These rules apply to service charges payable under long leases of residential premises. They set out detailed requirements as to consultation which a landlord must adopt before carrying out major works. A landlord who fails to comply with the rules will not be able to recover more than £250 from each tenant in respect of such works. However, the Leasehold Valuation Tribunal has power to dispense with the consultation requirements if it is satisfied that it is reasonable to do so. In [b]Daejan Investments Ltd. v. Benson[/b], Daejan owned the freehold of a block of shops and flats. It gave notice to the flat tenants that it intended to carry out major works amounting to just under £280,000. However, it failed to fully comply with the consultation rules. Upholding earlier tribunal decisions, the Court of Appeal ruled that Daejan should not be excused its failure to comply with the rules. This meant that Daejan could recover no more than £1,250 (£250 from each of the five tenants). This was so even though, at an early stage in the proceedings, Daejan had offered to reduce the amount of its claim by £50,000. The Supreme Court has now allowed Daejan's appeal, subject to the costs of the works being reduced by £50,000 and to Daejan paying the tenants' reasonable tribunal costs. The Court ruled that the underlying purpose of the consultation rules is to protect tenants in relation to service charges. There is no freestanding right to be consulted. The key issue was whether or not the tenants had suffered any relevant prejudice. The Court also confirmed that the Leasehold Valuation Tribunal can grant a dispensation from the requirement to consult subject to conditions: - for example, a condition that the landlord pays the tenants' tribunal costs or that it accepts a reduction in the amount of its claim. So, in this instance, the Supreme Court was prepared to pull Daejan's chestnuts out of the fire. However, there is still no guarantee that a Leasehold Valuation Tribunal will grant a dispensation excusing non-compliance with the consultation rules. Even if it does so, the landlord can expect to face having to foot the bill for the tenants' tribunal costs. It may also be forced to accept a reduction in the amount of its claim. The moral of the tale is that there is really no substitute for a landlord ensuring that it jumps through the hoops set up by the consultation rules. Failure to do so can prove very costly in terms of time, money and general hassle. To find out more, contact Caroline Wilton or Martin Banham-Hall.15 April 2013 09:59:38http://www.healdlaw.com/news-192-Business-Property-Relief---HMRC-Wins-Holiday-Let-Appeal.aspxAt the end of 2011, taxpayers and their advisers had cause to celebrate. To the surprise of some experts working in the field, a tax tribunal ruled that 100% Business Property Relief (BPR) applied to a cottage that formed part of a person's estates which had been used for holiday lets. This meant that no inheritance tax was payable on the cottage. Unfortunately, however, the victory was short-lived. A higher tribunal has now allowed HMRC's appeal, ruling that the cottage was not covered by BPR. [b]Some Background[/b] The basic principles are as follows: . On a person's death, inheritance tax is charged on his or her estate at the rate of 40% in so far as the estate exceeds £325,000. Between them, a married couple or civil partners can leave £650,000 free of inheritance tax. . BPR is available for business assets. These include the business assets of a sole trader, an interest in a partnership and shares in certain kinds of company. Depending on the type of asset, BPR may be as much as 100%. . However, BPR is not available for a business or company engaged wholly or mainly making or holding investments. The line between "proper" business assets and investments is notoriously difficult to draw. [b]The Pawson Case[/b] Mrs Pawson owned and let a cottage to holiday makers. When she died, HMRC ruled that the cottage was not covered by BPR. Mrs Pawson's executors appealed to the First-Tier Tribunal. There were two issues. First, was there a business? The Tribunal ruled that there was. The letting of the cottage had been a serious undertaking, there had been a reasonable continuity in the operation, the activity had had a measure of substance (judged by its profitability). Secondly, the Tribunal had to consider whether the business was merely one of holding an investment. It ruled that it was not, basing its ruling on the level of services Mrs Pawson had provided. Amongst other things, these included the cleaning of premises before each letting, the and supplying and change) of clean bed linen and the provision of utilities (e.g. gas and electricity) and ensuring that the hot water was turned on before visitors arrived. On its appeal to the Upper Tribunal, HMRC no longer disputed that there was a business but it still maintained that the business merely consisted of holding an investment. The Upper Tribunal upheld the appeal, ruling that the First-Tier Had reached a conclusion had not been entitled to reach. In its view, the services provided had all been of a relatively standard nature, aimed at maximising the income which the family could obtain from the short term holiday letting of the cottage. There was nothing to distinguish it from any other actively managed letting business of a holiday property. In the Tribunal's view, the business was mainly of an investment nature. It was recently announced that Mrs Pawson's executors has established a fighting fund to fund a further appeal to the Court of Appeal. Meanwhile, the Upper Tribunal's decision will come as a disappointment to many taxpayers and their advisers. The services which Mrs Pawson had provided were of a fairly extensive nature. The case certainly appears to strengthen HMRC's hand in denying BPR in similar situations. Looking at the wider context, the Coalition Government recently announced that the inheritance tax nil rate band - already frozen at £325,000 until 2015 - will remain frozen at that level until 2019 in order to fund the planned changes to social care funding. Inheritance tax looks set to become an issue for an increasing number of families. We will probably see more arguments between HMRC and taxpayers over the availability of BPR. To find out more about inheritance tax and Business Property Relief, please contact Esther Marchant. 05 March 2013 11:09:18http://www.healdlaw.com/news-191-Escape-of-Fire---No-Liability-in-Absence-of-Negligence.aspxThe recent decision of the Court of Appeal in [b]Stannard (t/a Wyvern Tyres) v Gore[/b] reinforces the importance of a business ensuring that its premises are adequately insured against fire. It confirms that if a fire spreads from A's property to B's property, in normal circumstances A will not be liable to B unless it can be shown that A has been guilty of negligence. [b]The Rule in Rylands v Fletcher[/b] Under the rule in Rylands v Fletcher, a landowner is strictly liable for things escaping from his land. In Rylands v Fletcher - a case dating from the mid-nineteenth century - the defendant mill-owner had constructed a small reservoir on his land. Through no fault of his, the water escaped from the reservoir and flooded Rylands' mine. Rylands sued Fletcher. The House of Lords ruled that, having caused the water to artificially accumulate on his land, Fletcher was strictly liable for the consequences of its escape. Over the years, the courts have periodically confirmed that the rule in Rylands v Fletcher remains part of the law. However, they have generally taken a restrictive approach to the rule - emphasising that a landowner will only be strictly liable where his use of his land was "non-natural". That concept has been interpreted narrowly in the context of modern circumstances. In one case, it was even suggested that use as a munitions factory might count as a "natural" use of land! [b]The Stannard Case[/b] Stannard operated a business supplying and fitting tyres from a unit on a trading estate. Gore's premises were behind Stannard's. At the rear of its premises, Stannard kept around 3,000 tyres. One evening, a fire broke out on Stannard's premises. Fuelled by the ignition of the tyres, it soon spread to Gore's premises. Gore sued Stannard in the County Court. Rejecting Gore's negligence claim, the Judge concluded that the fire had been caused by Stannard's electrical system, and that there was no evidence that Stannard had failed to exercise reasonable care. He therefore dismissed the negligence claim. However, he ruled that Stannard was strictly liable to Gore under the rule in Rylands v Fletcher. The Court of Appeal allowed Stannard's appeal. The Court accepted that, in an appropriate case, the rule in Rylands v Fletcher might apply to damage caused by fire. However, such cases are likely to be very rare because: [b]*[/b] It is the "thing" brought onto the land which must escape - not the fire which is started or increased by the "thing"; [b]*[/b] Liability may well might be limited to cases where the fire is started deliberately or negligently by the landowner or by some for whom he was responsible; and [b]*[/b] In any event, starting a fire on your land might be an ordinary use of the land. In the Stannard case, the 'thing' brought onto the premises was the large stock of tyres. Tyres as such are not exceptionally dangerous. The tyres had not escaped. In any event, keeping a stock of tyres on the premises of a tyre-fitting business - even a very large stock - was not an extraordinary or unusual use of the premises. It followed that Stannard was not strictly liable under the rule in Rylands v Fletcher. If you would like to know more, please contact Martin Banham-Hall or Caroline Wilton.14 January 2013 12:34:17http://www.healdlaw.com/news-190-DIY-Will-error-ends-in-the-High-Court.aspxDo you need a lawyer to make a Will? The short answer is - no, you don't. There is nothing to stop anyone using, for example, one of the standard Will forms that are available. Most people think that what they need is a "simple Will", and it is perhaps tempting to think that consulting a lawyer is a waste of money. However, the recent case of [b]Spurling v. Broadhurst[/b] provides a graphic example of how easily things can go wrong. In that case, the confusion caused by a misplaced comma ended up having to be resolved by the High Court. The testator, a Mr. Gibbons, died leaving no children or other family. However, he had been particularly close to two families and acted as godfather to a number of the children and grandchildren of the families. Mr. Gibbons left a handwritten Will. After providing for the payment of debts and taxes etc, this gave the whole of Mr. Gibbons' estate: "... to Veronica Broadhurst, Ann Foden, the living grandchildren of Veronica Broadhurst, and David Spurling in equal shares.". The main problem concerned the comma following the second reference to Veronica Broadhurst. Firstly, it was not clear whether the gift was to David Spurling or his living grandchildren. Secondly, there was ambiguity as to how the estate was to be divided up. For example, one possible reading was that it should be divided as follows: - one quarter to Veronica Broadhurst; - one quarter to Ann Foden; - one quarter to be divided between the grandchildren of Veronica Broadhurst; - one quarter to be divided between the grandchildren of David Spurling The Executors of the Will took the view that the gift could be read in at least four different ways. In the end, they felt that they had no option but to refer the matter to the High Court. The Judge ruled that, in his view, the evidence showed that Mr Gibbons had been equally close to both families and that he probably intended to treat them equally. He interpreted the gift as a gift to David Spurling's living grandchildren. Finally, he ruled that Veronica Broadhurst, Ann Foden and the eleven grandchildren were entitled to an equal one-thirteenth share of the estate. So, the matter was finally resolved - not, however, without a trip to the High Court, with all the expense, hassle and stress that that entails. In fact, the family should probably consider itself fortunate that the matter has been resolved without further cost and delay. The Judge was not entirely happy with the way in which the case had been handled. All the beneficiaries (or the parents of the child beneficiaries) had indicated that they would go with whatever the Court ruled and only the Executors had been legally represented. The Judge accepted that that had been done for the sensible reason of avoiding unnecessary costs. However, some of the beneficiaries were under 18. In such cases, the children are normally separately represented. The Judge was in two minds as to whether he should adjourn the case to allow that to happen. In the end, he satisfied himself that he was in a position to deal with the case fairly. However, the Court would probably be reluctant to adopt such a flexible approach when confronted with a more complex or contentious case. To find out more about making a Will, please contact Esther Marchant. 14 December 2012 12:02:32http://www.healdlaw.com/news-189-Employer-overreacts-to-Facebook-postings-.aspxIn the recent case of Smith v. Trafford Housing Trust, the High Court ruled that the Trust had acted unlawfully when it demoted a Christian employee who, in his own time, posted his views about gay marriage on his Facebook wall. Mr Smith recovered the princely sum of £98. Mr Smith was employed by the Trust in a managerial post on an annual salary of £35,000. He was a practising Christian and occasional lay preacher. One Sunday morning, he read a news article on the BBC news website headed: 'Gay church 'marriages' set to get the go-ahead'. Thinking that the article would interest his friends, Mr Smith posted a link to the article on his Facebook wall together with the comment, under his name: 'an equality too far'. The comment generated a number of responses from Mr Smith's work colleagues. When one of those colleagues posted the question: 'Does this mean you don't approve?' Mr Smith's response was: 'no not really, I don't understand why people who have no faith and don't believe in Christ would want to get hitched in church the bible is quite specific that marriage is for men and women if the state wants to offer civil marriage to same sex then that is up to the state; but the state shouldn't impose it's rules on places of faith and conscience'. When Mr Smith's comments came to the Trust's attention, it took a very dim view of the matter. After disciplinary proceedings, Mr Smith was told that he had been guilty of gross misconduct for which he deserved to be dismissed. However, remembering that the quality of mercy was not strained, the Trust decided merely to demote Mr Smith to a non-managerial position with the Trust. Over a period, Mr Smith's salary was reduced to £21,400. Under his employment contract, the Trust was only entitled to demote Mr Smith if he was guilty of misconduct. Not surprisingly, Mr Smith took umbrage. He sued for breach of contract and won. The Judge ruled: . No reasonable reader of Mr Smith's Facebook wall could have rationally concluded that his two postings about gay marriage in church had been made on the Trust's behalf. The comments had not, and could not have, brought the Trust into disrepute. . The prohibition on the promotion of the political and religious views in the Trust's Code of Conduct had not extended to the comments posted on Mr Smith's Facebook wall. . Viewed objectively, the postings had not been judgmental, disrespectful or liable to cause upset or offence. . Mr Smith's demotion, in breach of his contract of employment, amounted to a wrongful dismissal. So, why did Mr Smith only recover £98? The law maintains a clear distinction between breach of contract and unfair dismissal claims. As a matter of contract law, the Trust would have been acting fully within its rights had it given Mr Smith 12 weeks' notice and offered to reemploy him in the demoted position. It followed that Mr Smith could only recover the difference between his old and new salaries which he would have received during the notice period, had he been given notice. However, it seems that Mr Smith's main concern was vindicating his reputation. If money had been his first priority, he may have been better advised to bring an unfair dismissal claim and argue that the fundamental change in the terms of his employment in breach of contract had in fact amounted to a dismissal. Where does this decision leave employers? Does it mean that an employer may never taken disciplinary action against an employee for things said or done on the Net outside work hours? No. As the Judge made clear, each case will depend on its facts. It is easy to see that an employer might well be justified in taking action in respect of comments made in an employee's own time that relate, for example, to the employer or the employee's work colleagues. Nonetheless, the message seems to be that this is an area in which an employer should proceed with considerable caution. For expert advice on all employment law matters, please contact Nick Crook or Gareth Pobjoy. 13 December 2012 11:44:21http://www.healdlaw.com/news-188-Employee-Restrictive-Covenants---Employer-Almost-Falls-at-First-Hurdle.aspxEmployers often want to include restrictive covenants in an employee's contract limiting what the employee may or may not do after termination of the employment. Disputes over such restrictive covenants regularly end up in court. Normally, the argument centres on the reasonableness of the restrictions - whether in terms of the activities or geographical area covered or the period for which the restrictions are imposed after termination. However, in a recent case the employee raised a more fundamental argument. In [b]FW Farnsworth Ltd. v. Lacy[/b], in 2003 Mr Lacy was employed by Farnsworth's parent company, Northern Foods Ltd. He worked at Farnsworth's, first as a technical graduate and then as a quality assurance manager. The contract of employment he signed with Northern Foods in 2003 contained no post termination restrictive covenants. In April 2009, Mr Lacy was formally promoted to site technical manager, having acted up in that capacity for several months previously. Five months later, Mr Lacy was sent a new contract containing post termination restrictive covenants. Mr Lacy neither signed the contract nor raised any objections to it with Northern Foods. After briefly looking through the contract he filed it in his desk drawer. The new contract provided additional benefits not available to Mr Lacy under the 2003 contract - namely, access to a better pension scheme and the right to apply for private medical insurance cover for both Mr Lacy and his family. Mr Lacy subsequently availed himself of both benefits. In March 2012, Mr Lacy resigned to join a competitor of Northern Foods. Northern Foods brought proceedings in the High Court to enforce the restrictive covenants. The High Court ruled in favour of Northern Foods. The Judge rejected Mr Lacy's argument that, because he had never signed the 2009 contract, he was not bound by the restrictive covenants. Mr Lacy's application for the benefits not previously available to him - in particular, the enhanced private medical insurance cover - without any form of protest or reservation, had been "an unequivocal act referable only to his having accepted all the terms of the 2009 contract from the date of that application". The Court granted Northern Foods an interim - i.e. temporary - injunction enforcing the restrictive covenants. However, the case will now have to go to trial on the issue of reasonableness. If the case ultimately goes against Northern Foods, it may find itself have to compensate Mr Lacy in respect of the grant of an interim injunction which should never have been granted. Northern Foods should probably consider itself fortunate. The Judge was not very impressed by the way it had presented its case. It had only put forward one witness to give evidence on its behalf - someone who currently worked in Northern Foods' HR Department. Whilst the Judge had no reason to question her honesty, she had not been with Northern Foods at the relevant time and was not in a position to speak directly as to the relevant events. The moral of the tale seems clear. When an employee is issued with a new contract, making sure that the contract is signed by the employee may seem like a tedious bit of housekeeping. However, as this case shows, a failure to dot the "I"s and cross the "T"s in legal terms may prove to be a costly mistake in terms of both time and money. If you would like to know more, please contact Nick Crook or Gareth Pobjoy. 10 December 2012 09:19:32http://www.healdlaw.com/news-187-Property-Development-and-Third-Party-Rights---Muscle-and-Money-Don-t-Always-Triumph.aspxIn property development, time invariably equals money. A developer is often tempted to press on with a project before reaching agreement with those having rights over the property - for example, rights of way or rights to lights or to park - in the belief that that at the end of the day money talks and everyone has his price. However, a recent case shows - not for the first time - the risks involved in a developer adopting such a gung-ho attitude. In [b]Kettel v. Bloomfold Ltd.[/b], the claimants were eight tenants in a block of flats in the East End of London. Under their leases, each tenant had the exclusive right to use a designated parking space. The landlord, Bloomfold, wanted to build on the parking spaces. It fenced them off, asserting that it was entitled to require the tenants to accept alternative spaces. The tenants applied for an injunction to stop Bloomfold building over the parking spaces. The tenants won in the High Court. In the Judge's view Bloomfold was simply wrong. The leases did not give it the right to require the tenants to accept alternative spaces. As a back-up position, Bloomfold argued that even if it had infringed the tenants' rights, the court should not grant an injunction. A court will not normally grant an injunction if it takes the view that the claimant can be adequately compensated by an award of damages. Bloomfold's argument did not cut much ice with the Judge. He described Bloomfold's actions as having been "high-handed". This was not a case of a trivial infringement. Bloomfold had totally deprived the tenants of their rights to use the spaces. Furthermore, Bloomfold's own expert had valued the right to use a space granted by each lease at about £20,000. Finally, for good measure, the Judge indicated that had he been persuaded not to grant an injunction, he would have made a hefty award of damages - no less than £517,000 divided between the eight tenants. Two points can be made about this case. Firstly, it shows yet again the dangers of going at things half-cock and not taking appropriate steps to deal with third party rights. A developer who fails to do so may find himself being force to halt a development half completed. Secondly, and specifically with regard to parking rights, everything will depend on the terms of the lease or other document that creates the right in question. Leases granting the right to use a parking space often give the landlord the right to nominate an alternative space - such rights can easily be included when a new lease is being granted. There really is no substitute for checking the relevant documents carefully. Failure to do so may turn out to be very much a false economy. We have many years' experience of dealing with such matters. If you would like to know more, please contact Caroline Wilton or Martin Banham-Hall. 15 October 2012 13:59:53http://www.healdlaw.com/news-186-EAT-Upholds-Re-Engagement-Order-Following-TUPE-Related-Dismissal.aspxIn the recent case of [b]Manchester College v Hazel[/b], the Employment Appeal Tribunal (EAT) upheld an order requiring an employer to re-engage two employees following a TUPE-related dismissal at their old rate of pay. Background - Reinstatement / Re-Engagement Orders When a tribunal makes a finding of unfair dismissal it must, if the employee requests, consider making a reinstatement order or a re-engagement order. A reinstatement order requires the employer to reinstate the employee on the same terms and conditions with no loss of back pay. A re-engagement order requires the employer to re-engage the claimant, on such terms as the tribunal decides, in a comparable job. Reinstatement and re-engagement orders are extremely rare in practice. Tribunals usually award compensation instead. The Manchester College case In August 2009 the two claimants, together with 1,500 other employees, were transferred under TUPE to the College when it took over a contract for providing offender learning at a prison. The College proposed making about 200 employees redundant and changing the terms of employment of the remaining staff. In due course, the claimants were told that they were not at risk of redundancy. They were offered alternative employment on new contracts which involved, among other things, a pay cut of 13.2% and 18.5% respectively. Understandably, the claimants were not impressed. When they refused to accept the new terms they were dismissed. The College then offered to re-employ the claimants on the new contracts. They accepted that offer and returned to work. However, the claimants sued for unfair dismissal and sought, among other things, reinstatement on their old employment terms. The Employment Tribunal upheld the claims. Ruling that reinstatement was not practicable, the Tribunal took the unusual step of ordering the College to re-engage the claimants based on the new terms and conditions apart from the claimant's salaries. The salaries were restored to their previous levels but then frozen until the new pay scale caught up. The College appealed to the EAT. On the re-engagement issue, the EAT noted that this was an unusual case where, at the time of the re-engagement order, the claimants were already working for the College on the new terms. This meant that there was less scope for an argument that re-engagement was not practicable. Arguments about loss of trust and confidence, the passage of time, and water under the bridge - often raised when there is an application for reinstatement or re-engagement - did not apply here. The EAT rejected the College's argument that it was in some way perverse of the tribunal to find that reinstatement was not, but re-engagement was, practicable. The Significance of this Case It is difficult to gauge the significance of this case. It will be interesting to see, firstly, whether the College appeals further to the Court of Appeal and, secondly, whether other tribunals hearing TUPE case will follow the approach taken in this case. It is perhaps worth remembering that the College was a substantial employer, only two employees were seeking re-instatement /re-engagement and, in fact, the College had already voluntarily re-engaged the claimants on the new terms. However, at the very least, this case does introduce yet another layer of uncertainty for the transferee under a TUPE transfer. If you would like to know more, please contact Nick Crook or Gareth Pobjoy. 04 October 2012 09:36:43http://www.healdlaw.com/news-185-Landlord-s-Failure-to-Comply-With-Lease-Gives-Tenant-Windfall.aspxIn a recent case, a landlord who had failed to insure the property in the joint names of the landlord and the tenant, as required by the lease, was left unable to recover the insurance rent payable under the lease. The issue of insurance in joint names may sound a highly technical point. However, such insurance can confer real benefits on a tenant. It means that he will be notified before the policy lapses. Any insurance money will be paid out jointly to the landlord and the tenant. This will give the tenant some control over the spending of the insurance money and, consequently, over the reinstatement of the premises. Insuring in joint names also avoids problems if the landlord goes bust before reinstatement is completed. Finally, insurance in joint names prevents any risk of the insurer bringing claims against the tenant in relation to damage caused or contributed to by the tenant. In [b]Green v 180 Archway Road Management Co Ltd[/b], the lease was quite clear. The landlord was obliged to insure in joint names. The landlord argued that it was sufficient that the tenant's interest had been covered by a "general interest" clause in the insurance policy. The Leasehold Valuation Tribunal that first heard the case accepted the argument but the Upper Tribunal disagreed and allowed the tenant's appeal. The landlord had simply failed to do what the lease had required it to do. As a consequence, the landlord could not recover the insurance rent. Although the Tribunal accepted that the landlord was a responsible landlord and that the tenant had not suffered any discernible loss as a result of the failure to insure in joint names, it did not agree that such a breach would always be unimportant. It pointed out that had the landlord's interest in the premises been transferred to a less responsible person, the "general interest" clause would have afforded the tenant significantly less protection than insurance in joint names. This case illustrates, once again, an important general point. Over the years, Parliament has increasingly intervened - particularly in the case of residential leases - to lay down the parties' rights and obligations in statute, often irrespective of what the parties may have agreed. However, the basic position remains that the parties' rights and obligations will be as set out in the lease. In most cases, all a court or tribunal can do is to ascertain the true meaning of the lease. Once it has done that, it has no overarching power to look at the situation as a whole and impose a generally "fair" solution. The moral of the tale is: Always read the lease carefully. If you are in any doubt as to its meaning, you should seek proper legal advice on the matter. Getting such things wrong can prove very costly. We have had many years' experience in advising on such matters. To find out more, please contact Martin Banham-Hall or Caroline Wilton. 04 October 2012 09:34:45http://www.healdlaw.com/news-184-On-Line-Contracts---Providing-Information-By-Hyperlink-Will-Not-Do.aspxSuppose, for a moment, there was a general legal requirement that before entering into a contract with a consumer, a business must provide him or her with specified information. It seems self-evident that if a business sends a properly-addressed letter to the consumer setting out the required information, it will have complied with the law. What if the consumer declines to open the letter but, instead, immediately files it in the wastepaper basket? Most people would surely agree that it should make no difference that the consumer is required to take an active step - i.e. to open the letter. The information would still have been provided to the consumer. You might be forgiven for assuming that similar principles would apply to online contracts. However, a recent ruling by the European Court of Justice (ECJ) shows that such an assumption is wrong. The case concerned the Distance Selling Directive. The Directive was implemented into UK law by the Consumer Protection (Distance Selling) Regulations 2000. However, the case concerned the equivalent Austrian law. Content Services Ltd operated a website selling software on a subscription basis. On sign-up, consumers had to tick a box confirming that they accepted Content Services' terms and conditions and that they waived their right of withdrawal from the contract (a right conferred by the Distance Selling Directive). Certain information which the Directive obliged Content Services to provide to consumers - in particular about the consumers' right of withdrawal - was only accessible via a link on the sign-up page. After signing up, the consumer was sent an email with a further link to the information required under the Distance Selling Directive. An Austrian consumer protection body brought a complaint in the Austrian courts, alleging that Content Services had failed to comply with the requirements of the Distance Selling Directive. The matter was referred to the ECJ. The ECJ ruled against Content Services for two reasons. Firstly, the ECJ noted that the Distance Selling Directive states that the consumer must receive the relevant information. In the ECJ's view, the use of the term "receive" implies that the consumer should not be required to take any active steps - for example, clicking on a link - to obtain the information. Secondly, the Directive requires that the information must be supplied to the consumer in a "durable medium". This implies a format that is functionally equivalent to a paper format. In other words it should: . Allow the consumer to store the information which has been addressed to him personally. . Ensure that its content is not altered. . Ensure that the information is accessible for an adequate period. . Allow the consumer to reproduce the information unchanged. This confirms the Office of Fair Trading's guidance that the provision of information on a website is not sufficient for the purposes of the Distance Selling Regulations. Businesses engaged in selling to consumers on-line should ensure that the required information is fully set out either in an email sent prior to or on delivery, or on a delivery note sent with the goods. To find out more, please contact Simon Daw or Nick Crook. 04 October 2012 09:33:30http://www.healdlaw.com/news-183-High-Court-Upholds-Negligence-Claim-against--Innocent--Directors.aspxWhen a company goes bust owing large amounts of money, a liquidator may well pursue the Directors for breaches of their fiduciary duties to the company - such as the duty not to make a secret profit from being a Director and the duty not to misappropriate the company's property. Although the Companies Act 2006 states that a Director must exercise reasonable care, skill and diligence in carrying out his duties, negligence claims against Directors are comparatively rare. However, where one Director has breached his fiduciary duties to the company, an action in negligence may be a way of pinning liability on his fellow Directors, on the basis that they could and should have taken steps to put a stop to what was going on. Take, for example, the recent case of [b]Weavering Capital (UK) Ltd. v. Peterson[/b]. Weavering operated a hedge fund. It went bust owing hundreds of millions of dollars to investors. The liquidator brought claims against a number of Weavering's directors (including a husband and wife). The Court found much of the documentation produced for investors had been nothing more than a sham. It ruled that the husband (the driving force behind the company) had breached his fiduciary duties to Weavering and was personally liable for the tort - civil wrong - of deceit. Of greater interest, perhaps, were the negligence claims brought against the other Directors. The wife was an experienced trader with significant knowledge of complex financial matters. Her defence was that she had played a limited role in Weavering's affairs and that she had been entitled to assume that the other Directors were managing the hedge fund correctly. She argued that there had been no "red flag" to alert her to the difficulties. This line did not wash with the Court. The evidence showed that the wife had discussed and approved of Weavering's trading strategy and read its accounts, and had known that Weavering was undertaking significant obligations even though it had no substantial assets of its own. In the Court's view, the wife could and should have brought Weavering's trading strategy to an end. The Court also found another Director D - whom the court found had been over-promoted and out of his depth - was liable in negligence. It ruled that, amongst other things, D had failed to acquire a sufficient knowledge and understanding of Weavering's business or to satisfy himself in respect of the details and propriety of the financial arrangements being entered into by Weavering. This decision is a salutary reminder that acting as a Director entails undertaking serious legal responsibilities. Anyone tempted to regard appointment as a Director as no more than a lucrative sinecure and who thinks that he does not need to concern himself too much with the details of the company's activities should think again. If it all goes pear-shaped, he may find himself facing significant liabilities - particularly if the real villain of the piece has disappeared into thin air. To find out more, please contact David Dees or Nick Crook. 03 September 2012 08:57:19http://www.healdlaw.com/news-182-Company-Fined--480-000-in-Corporate-Manslaughter-Case.aspxIn July 2012 in the second corporate manslaughter case to be brought in England - the third in the UK - Lion Steel Ltd was fined £480,000 following a guilty plea. Lion Steel was also ordered to pay £64,000 prosecution costs. The Sentencing Guidelines relating to corporate manslaughter state that a fine will seldom be less than £500,000. However, in this case the Judge imposed a lesser fine in light of Lion Steel's guilty plea and the danger that a larger fine might imperil Lion Steel's business and the jobs of its remaining staff. He ordered Lion Steel to pay the fine in four annual instalments to allow it time to take out loans secured against its premises. The charge followed the death of an employee who fell through a roof when endeavouring to carry out repairs. Originally, three of the company directors had been charged with common law manslaughter and with offences under the Health and Safety at Work Act 1974. Lion Steel was also charged under the 1974 Act. The charges against the directors were dropped in return for Lion Steel pleading guilty to corporate manslaughter. This case is a further reminder that, in addition to the terrible human costs involved, a fatal accident can have extremely serious legal and financial implications for a company's business and reputation. It should be remembered that a fine for a criminal offence will not be covered by insurance. To find out more, please contact Caroline Wilton or Simon Daw. 28 August 2012 09:25:31http://www.healdlaw.com/news-181-Good-News-for-Occupiers---High-Court-Rules-that-Rate-Avoidance-Scheme-Works.aspxIn these hard-pressed times, many landlords and businesses with unwanted commercial property on their hands will welcome a recent High Court decision concerning empty rates relief. In [b]Makro Properties Ltd v Nuneaton and Bedworth Borough Council[/b], the High Court ruled that the temporary storage of documents in a warehouse counted as actual occupation for the purposes of business rates liability sufficient to reset the clock. This meant that when that occupation ended, the landlord of the premises could make a new claim for rates relief. In the case of shops and offices, empty rates relief is available where premises are unoccupied for a continuous period not exceeding three months. In the case of industrial and warehouse property, relief is available for a period up to six months. Periods of occupation of less than six weeks are ignored and do not stop the three / six month period running. In the Makro case, MPL owned the freehold of a 13,000 square metre retail warehouse. A company in the Makro group, MSSWL, used the warehouse for a period of just over six weeks to store sixteen pallets of documents at the warehouse. The pallets occupied just 0.2% of the floor space of the warehouse. The magistrates' court ruled that MSSWL's occupation of the warehouse had not amounted to actual occupation for rating purposes. In the court's view, the storage of the pallets had not truly been for MSSWL's benefit. Rather, its sole purpose had been to secure a further period of empty rates relief for MPL. The High Court took a different view. The Court observed that MSSWL had been under a legal obligation to retain the relevant documents. It followed that their storage was of real practical benefit to MSSWL. The Judge acknowledged that his ruling meant that a scheme to avoid paying tax had succeeded. Ratepayers can, and do, organise matters to avoid paying rates. The Judge emphasised that the Court was not a court of morals. If the outcome was unacceptable, it was up to Parliament to change the law. The future for rates on empty commercial property is somewhat unclear. The Government may decide to tighten the law in light of the decision in the Makro case but that is perhaps unlikely. In fact, movement in the opposite direction seems more likely. There has been considerable lobbying in recent years from the business community for a change in the empty rates regime. Chancellor George Osborne has agreed to look again at the issue, and has asked MPs to form a working group to come up with alternatives. In the meantime, landlords need to bear in mind that the empty rates relief rules are complex. Proper legal advice beforehand as to the requirements that must be satisfied will maximise the chances of making a claim for empty rates relief. If you would like to know more, please contact Martin Banham-Hall or Caroline Wilton. 21 August 2012 11:23:36http://www.healdlaw.com/news-180-Residential-Tenancies---Rent-Demands---Managing-Agents--Address-Will-Not-Do.aspxUntil now, it has been common practice for landlords of residential premises to issue rent and service charge Demands that only include their Managing Agent's address. However, a Tribunal has recently ruled that such a Demand is invalid. In [b]Beitov Properties Ltd v Elliston Bentley Martin[/b], BP issued a claim for service charge arrears under a lease. A Leasehold Valuation Tribunal found that the sums demanded were reasonable and should have been payable. However, the Tribunal ruled there had not been a valid Demand. This was because it failed to state the landlord's name and address, as required by Section 47 of the Landlord and Tenant Act 1987. Accordingly, the claim had to be dismissed. This decision has now been confirmed by the Upper Tribunal - broadly equivalent to the High Court. Two observations: . It is important to appreciate that the requirement to state the landlord's name and address in Rent Demands is separate and distinct from the landlord's obligation to notify the tenant of an address - [i]any [/i]address - in England and Wales at which the tenant may serve notices (including notices in court proceedings) on the landlord. . What if a Demand omits the landlord's name and address? Any proceedings brought on the basis of such a Demand will be dismissed. At best, the landlord will be forced to go back to square one and issue a new Demand, with the attendant waste of time and money that that will involve. At worst, the landlord may end up losing the right to recover service charge arrears altogether. The general rule is that a service charge payable under a residential lease is only recoverable if it is demanded from the tenant within eighteen months of the relevant costs being incurred (as an alternative, however, it is sufficient if within eighteen months the tenant is warned that the relevant costs have been incurred and that he will subsequently be required to contribute to them as part of the service charge). To find out more, please contact Martin Banham-Hall or Caroline Wilton. 30 July 2012 07:49:20http://www.healdlaw.com/news-179-Record-Fine-Imposed-on-NHS-Trust-for-Data-Protection-Breach.aspxThe Information Commissioner's Office (ICO) recently announced that a civil monetary penalty of £325,000 had been imposed on Brighton and Sussex University Hospitals NHS Trust, following a serious breach of the Data Protection Act 1998. The case highlights the need for businesses to exercise great vigilance when disposing of obsolete IT equipment. The fine is the highest imposed by the ICO since it was granted the power to impose civil penalties in April 2010. It follows the discovery of highly sensitive personal data belonging to tens of thousands of patients and staff - including some relating to HIV and Genitourinary Medicine patients - and documents containing staff details such as National Insurance numbers, home addresses, ward and hospital IDs, and information referring to criminal convictions and suspected offences. The data was found on hard drives sold on an Internet auction site in October and November 2010. The data breach occurred when an individual engaged by the NHS Trust's IT service provider, tasked to destroy approximately 1,000 hard drives, instead removed them from the Trust's premises and offered them for sale. The ICO has stated that this record fine "reflects the gravity and scale of the data breach". However, the Trust has indicated that it does not have the necessary funds to pay the penalty and will appeal. Together with a reported appeal against a fine imposed on another NHS Trust, this will be the first time the First-tier Tribunal (Information Rights) has had to deal with an appeal against a fine imposed by the ICO under the civil penalties regime. It is hard not to feel some sympathy for the NHS Trust in this case and wonder if the ICO's ire has failed to find its proper target. You might have expected that the buck would stop with the Trust's IT service provider, which was presumably responsible for engaging the individual who was, ultimately, the villain of the piece. The Trust could probably find many much better ways of using its resources than paying data protection fines. If you would like to know more, please contact Nick Crook or David Dees. 16 July 2012 11:47:22http://www.healdlaw.com/news-178-Online-Term-Did-Not-Bind-Consumer.aspxThe High Court has recently ruled that a term in a spread betting bookmaker's website Terms and Conditions, by which the consumer was to be taken as having authorised all trades made under his account without exception or limitation, was unenforceable against the consumer. This was because there was no contract between the parties. For good measure, the Judge also indicated that, had there been a contract, he would in any case have ruled that the term was unenforceable under the Unfair Terms in Consumer Contracts Regulations 1999. In [b]Spreadex Limited v Cochrane[/b], Cochrane registered with Spreadex's spread betting website. In registering, Cochrane set a password and filled out various personal details. On completion of registration, he was asked to click on "View" to read Spreadex's Customer Agreement and then click on "Agree" to signify that he agreed to the terms of the Customer Agreement. The latter included the following Clause 10.3: "Your password must be declared, together with your account number, when you wish to access your account. You will be deemed to have authorised all trading under your account number...". Whilst visiting his girlfriend and her young son, Cochrane logged on to his account and made some trades. He then left his girlfriend's house. Two days later he was contacted by Spreadex and, to his horror, was told that his account was in debit by £50,000. Cochrane immediately instructed Spreadex to close his open positions and tried to find out what had happened. He alleged that his girlfriend's child had used the account after he had left. Spreadex rejected Cochrane's claims and demanded immediate payment. The very next day, it commenced proceedings for summary judgment to recover the debt. The case was fought on the basis that Cochrane's version of events was true (he had a number of witnesses to back him up). Dismissing the claim the Judge ruled as follows: . There was no contract between Spreadex and Cochrane. Unless it is contained in a Deed, a bare promise - for example, to pay money - is unenforceable. For there to be an enforceable contract, each party must promise to do or not to do something or - to use lawyers' jargon - each must give consideration. In this case, Spreadex argued that it had provided consideration by granting access to the website. However this was rejected by the Judge because Spreadex had expressly reserved the right to remove or reduce the service under the Customer Agreement. . Even if there had been a contract between Spreadex and Cochrane, the term would have been unfair under the 1999 Regulations - and therefore unenforceable - because: . The term represented a significant imbalance in the parties' rights and obligations. Under the Customer Agreement, Spreadex had no obligations and Cochrane had no rights, yet the term made D liable for any trade on the account whether or not authorised by him. . The term applied to all scenarios, without exception or limitation. It would apply to where an account was hacked (though this was unlikely) or, as had happened here, a child had accessed the account without authorisation. . The term was both difficult to find and understand. The Customer Agreement contained 49 pages of closely printed text. In the Judge's view, it would have "come close to a miracle" if Cochrane had read the term, let alone appreciated its implications. What conclusions can be drawn from this case? The decision on the consideration point may cause a few legal eyebrows to twitch. It will be interesting to see if Spreadex pursues an appeal. The Judge was perhaps on firmer ground on the unfairness point. If you operate a website, you may want to consider the following points: . If a term is onerous or unusual in some way, do not tuck it away in lengthy terms and conditions. You may want to have a summary of all key terms in a prominent position where it is likely to attract the consumer's attention. . It may be dangerous to simply rely on a contractual term for protection. You may want to consider what technical safety measures could be incorporated into your website, such as automatic log-outs, a requirement to re-input passwords to make purchases of a large amount, warnings on the website to log-out, or a cap on daily spend, in order to limit the extent to which customers can run up liabilities for substantial sums without realising it. To find out more, please contact Nick Crook or David Dees. 16 July 2012 11:45:03http://www.healdlaw.com/news-177-Mistake-in-Siting-Hoarding-Costs-Advertiser-Mega-Bucks.aspxA recent ruling by the Court of Appeal illustrates the bizarre outcome that can result from a rigid application of the letter of the law. The case left an advertiser being forced to pay many thousands of pounds to a local council after it inadvertently erected an advertising hoarding so that it encroached onto the council's land - a vacant site - by just 60 centimetres. In [b]Enfield LBC v. Outdoor Plus Ltd.[/b], in 2004 Outdoor Plus negotiated with a Mr Saul the right to erect an advertising hoarding on Mr Saul's land on the North Circular Road. For some unknown reason, the hoarding was erected so that it encroached, by some 60 centimetres, onto Enfield's land. In 2007, Outdoor Plus granted the exclusive right to use the hoarding to another company, J C Decaux Ltd. In 2004 and 2005, Enfield received a number of complaints about the hoarding from local residents. However, at that stage no-one - not even Enfield - realised that Enfield owned part of the land on which the hoarding had been erected. Eventually, Enfield woke up to that fact. After some argument, Outdoor Plus accepted that the hoarding encroached onto Enfield's land and had it moved. However Enfield - seeing pound signs - sued both Outdoor Plus and Decaux for damages for trespass in respect of the wrongful use of its land before the sign was removed. In the High Court, Enfield received short shrift. The Judge agreed that, technically, there had been a trespass. However, he only ordered Outdoor Plus and Decaux to pay nominal damages of £2 each. Further, he ordered Enfield to pay Outdoor Plus's and Decaux's costs on the more generous indemnity basis together with interest on those costs at 5% above base. The Judge's reasoning was that in such cases, the court has to determine the reasonable licence fee which would have been agreed had the landowner and the trespasser negotiated a licence allowing the trespasser to make use of the land. In the Judge's view, such negotiations would never have arisen in the real world. But for the mistake, Outdoor Plus would have simply erected the hoarding wholly on Mr Saul's land. Outdoor Plus had simply not derived any financial benefit from the trespass. Enfield successfully appealed. In the Court of Appeal's view, the Judge's approach had been fundamentally flawed. The trespass could not be ignored. According to the Court of Appeal, damages must be based on the pretence that Outdoor Plus would have paid a commercial fee for the use of Enfield's land, and a very hypothetical assessment (naturally, their Lordships never guess) what that would have been. Without giving a precise final figure, the Court indicated that the damages should be calculated the rate of £4,625 pa in respect of one licence period and £11,500 pa in respect of another. Most people's sympathies will probably be with Outdoor Plus and feel that Enfield has been extremely fortunate. In effect, it has obtained a windfall profit from Outdoor Plus's trivial mistake. The case is a salutary reminder that some property law rules are very hard-edged. The courts do not always have the power to decide cases on the basis of what is "just" or "fair" in a broader sense. Some may think that while we have a legal system in this country, it is not necessarily a system for doing justice. If you would like to know more, please contact Martin Banham-Hall or Caroline Wilton. 16 July 2012 11:41:42http://www.healdlaw.com/news-176-Court-of-Appeal-Confirms-Side-Letter-was-Unenforceable.aspxSide-letters can be tricky things. They are often seen as a way of bridging an otherwise unbridgeable impasse in negotiations. They can be a useful way of providing one, or both, of the parties with a degree of comfort over points of uncertainty. However, it needs to be appreciated that such letters may prove to have limited value if things turn litigious. In a recent case, Mr B had built up a successful cable television and internet company in Bulgaria. In 2005, together with the other owners of the business, he was negotiating the sale of the company to a consortium that included Warburg Pincus Group (Warburg). The buyers intended to merge the company's business with another business. An agreement was reached in principle that Mr B would have a 10% participation in the merged business. As drafted, the share purchase agreement contained a term that it could not be signed until Mr B signed the investment agreement. When it became clear that the investment agreement would not be ready in time, Warburg drafted, and Mr B signed, a side letter waiving the term as to the prior signing of the share purchase agreement. The side letter read to the effect that "in consideration for you agreeing to enter into the Proposed Transaction... the Purchaser... agrees that, as soon as reasonably practicable after the signing of the Agreement... we shall offer you the opportunity to invest in the Purchaser on terms to be agreed between us...". It subsequently became clear that Mr B would not be receiving shares in the new company. Unsurprisingly, Mr B was not happy. He sued for breach of contract. In the High Court, the claim failed on two grounds. The Judge ruled that the parties had not intended to create a legally binding relationship. Further, the agreement in the side-letter had, in any case, been no more than an unenforceable agreement to agree. Dismissing Mr B's appeal, the Court of Appeal ruled that the Judge had been wrong on the intention to create a binding relationship point, but right on the agreement to agree point. Being proved half-right was probably scant consolation for Mr B as he could only succeed if he won on both points. So, the moral of the tale is that side-letters need to be approached with caution. Parties negotiating a deal need to be very clear as to why a side-letter is being proposed and whether the intention is that it should be legally enforceable. If that is the intention, then its terms need to be negotiated with as much care as any other contract - preferably with legal advice. If you would like to know more, please contact Martin Banham-Hall or David Dees. 16 July 2012 08:18:50http://www.healdlaw.com/news-175-Cookies---Two-Cheers-for-ICO-s-U-Turn-on-Implied-Consent-.aspxThe Information Commissioner's Office (ICO) has published revised guidance on the new rules on the use of cookies which suggests that, contrary to previous guidance, users' implied consent to the setting of cookies may be sufficient to meet the requirements of the new rules. A cookie is a small text file which a website operator places on the hard disks of visitors to the site (often without their knowledge). Cookies collect information such as names, addresses, e-mail details, passwords and user preferences. As we recently reported, a year ago the Government introduced new rules on the use of cookies. There was an initial one-year grace period during which no enforcement action was taken so as to allow businesses an opportunity to make the changes required by the rules. That grace period ended on 26th May 2012. See further [link|http://healdlaw.com/news-173-New-Opt-Out-Rules-on-Cookies---Grace-Period-Ends.aspx|Grace Period Ends]. On the face of it the relaxation in the ICO's approach is good news for businesses. However, we would suggest a number of reasons as to why businesses may want to exercise caution before relying on the revised guidance: . The guidance suggests that implied consent may suffice in relation to the use of cookies in the context of the storage of information comprising non-sensitive personal data. Implied consent is unlikely to be sufficient in relation to sensitive personal data - for example, information relating to an individual's racial or ethnic origin, his political opinions or religious beliefs, whether he is a member of a trade union or his physical or mental health or sex life. . Context will be everything. To rely on implied consent, a website operator must be able to show that by, for example, moving from one web page to another or clicking on a particular button, the user is not only requesting content or services but is also consenting to the use of cookies. There must be a sufficient indication that there is a shared understanding of what is happening. In cases of doubt, the safest course will be to seek the user's explicit consent. . In issuing the guidance the ICO has somewhat gone out on a limb. It seems to have parted company with the majority of data protection regulators in other EU Member States, some of which have yet to implement the relevant Directive. This may lead to difficulties for UK website operators that place cookies on the equipment of non-UK EU citizens on the basis of implied consent. To find out more, please contact Nick Crook or Tina Middleton. 12 June 2012 12:02:46