DX: 723015 Stockton 10
Tel: 01642 610 300
Fax: 01642 610 330
Company Reg. No: OC302638
Registered in England and Wales
The Endeavour Partnership LLP is regulated by the Solicitors' Regulation Authority. To access the Authority's rules, please go to www.guide.lawsociety.org.uk
Most businesses fail because of poor cash flow and not because of poor sales. Every time that your business supplies goods or services on credit there is a financial risk to your business. There are a number of practical steps that businesses can take to reduce the risk of incurring bad debts.
It is very important that you have in place terms and conditions which set out the basis upon which you are selling your goods or services and that your terms are incorporated into the contract. They must be drawn to the attention of the other party at the outset and not simply on your invoices which is too late. Disputes (and non-payment of your invoices) can be avoided by having carefully drafted terms in place. Your terms of business should include terms which govern the following-price, payment, delivery, the right to charge interest on late payment, standards of quality, time limits for rejecting goods/making a claim and limitation of your liability to the customer.
All your staff should be made aware of the terms of business and must not make any statements to your customers which conflict with your written terms.
Of course, knowing your customer and whether your customer is creditworthy is fundamental. Credit reference agencies provide credit reports on companies and other businesses some of which can be very detailed including a credit rating for the company concerned.
There are a number of online providers of credit reports which promise constantly updated financial data. Companies House holds a substantial amount of publicly available information about companies but the information may be out of date. You should also carry out a search of the Register of Judgments Orders and Fines to find out whether there have been any judgments registered against your customer which will give you a good indication as to whether your customer will pay you.
After carrying out checks, you should then set an appropriate credit limit for each customer. You should ensure that all staff (and in particular sales staff) are made aware of the limit and not given discretion to vary these without prior authorisation. Credit limits should, of course, be enforced.
Guarantees whether from a director of your customer company, third party or from the customer's bank provide additional security should a customer become insolvent.
You should consider when supplying high value goods or services asking the customer for a significant deposit before releasing goods or providing services. Normal credit terms for the customer should then be given on the balance.
It is also worth checking your customer's payment record with some of their other suppliers (known as trade references).
Finally, you can seek to insure yourself against the possible default and insolvency of your customers which is known as credit insurance.
The above basic steps will go a long way in helping you to manage your cash flow better and reduce the risk of bad debtors.
The High Court has held (PennWell Publishing (UK) Limited v Isles and others) that a list of contacts maintained in Microsoft Outlook on an employer's computer system belonged to the employer. This was the case even though the list included personal contacts and business contacts made by the employee prior to joining the employer.
When Mr Isles joined PennWell, he brought with him a list of work and personal contacts. At some point, he transferred the contacts on to his employer's outlook email system and maintained it from there. He also added new journalistic and other business contacts made whilst employed by PennWell. Before he left his employment, he took a copy of the contact list for his future use.
The High Court had to determine whether the contact list belonged to PennWell or to Mr Isles or to both of them. It held that where an address list is contained in Outlook or a similar programme which is part of the employer's email system and backed up by the employer, that list belongs to the employer. It could not therefore be copied or removed in its entirety by employees for use outside their employment or after their employment ends.
The High Court recognised that many employees would not be aware of this fact and recommended that employers should devise and publish an email policy making the position clear.
Although PennWell had an email policy which stated that employees should only use the email system for business purposes, the Court found that it had not been adequately communicated to Mr Isles. In those circumstances, although the whole contact list belonged to the employer, Mr Isles would have been entitled to remove private family contacts, to copy key journalistic contacts which could properly be described as his personal sources whenever those contacts were made and to copy any information put on from his own previous resources. He was not entitled to copy or remove details of any other business contacts.
Employers should take note of the Court's recommendation in this case that they should have email policies which have been properly communicated to staff and which clearly identify what information is considered to belong to the employer as a result of it being stored on the employer's computer systems.
Litigation is inevitable in the commercial world. It can absorb enormous amounts of management and staff time. Clients frequently ask, "Can we recover something for the time we have spent on this case?" The answer now appears to be yes and the decisions in Aerospace Publishing Limited v. Thames Water Utilities Limited [2007] EWCA Civ 3 and Bridge UK.Com Limited (T/A Bridge Communications) v. Abbey Pynford Plc [2007] EWHC 728 (TCC) have clarified how to maximise the possibility of doing so.
Aerospace Publishing
In July 2001, Aerospace’s premises were flooded when a water main belonging to Thames Water burst. As a part of its claim for damages, Aerospace claimed for the cost of the payments it had made to staff for work which they had done as a result of the flood. It argued that, but for the flood, the employees in question would have been engaged in other, income generating, activities.
On Appeal, the Court concluded that a claimant seeking to recover the value of wasted, or diverted, staff time must prove:
· that its staff have been diverted from their normal activities;
· the extent of that diversion; and
· that the diversion has caused significant disruption to the business.
Bridge UK.Com Limited
Bridge’s claim arose out of the delayed commissioning of a commercial printing press. The claim included £7,680.00 in respect of management time incurred by a Mr Ruck in dealing with the problems caused.
The evidence to support this element of the claim was contained in a schedule exhibited to Mr Ruck’s witness statement which set out the time he had spent on these issues between August 2002 and April 2003. In his statement, Mr Ruck explained that he had calculated these times retrospectively by looking through various documents. The Court found that, in the absence of records, this was a valid method of calculation. However, in so doing, the Judge stated that:
"Such an assessment is an approximation of the hours spent and may over-estimate or underestimate the actual time which would have been recorded at the time."
As a result, the Judge discounted the number of hours sought by 20%. This discount could have been avoided had contemporaneous records been kept.
Practice points
Ensure that all staff who deal with disputes record:
1. the amount of time they spent dealing with a matter
2. what they did
3. what they would have been doing otherwise
4. Keep accurate records of all additional payments made to staff as a result of an incident
5. Record how decisions to deploy resources were taken so that these can be justified at a later date (if necessary)
Exactly what obligations does a business have to a consumer when it comes to unwanted gifts?
The basic consumer rights are set out in the Sale of Goods Act 1979 (and supporting legislation), and essentially provide that a business must sell goods to a consumer that are of satisfactory quality, fit for their purpose and as described. These are the basic “statutory rights”, and although will be adequate for consumers in most circumstances, the one scenario they do not account for is where the consumer simply has a change of heart. However, in the interests of maintaining good customer relations, many businesses will offer a refund or replacement without much hassle, even though not technically obliged to do so.
Consumer protection also extends to mail order, telephone and internet shopping, through the Distance Selling Regulations (DSRs), which give. They give consumers an unconditional right to cancel an order or return goods where they simply change their mind, provided a decision to do so is made in writing. The seven-day period begins the day after goods are received. Under the DSRs, businesses also have further obligations towards consumers, in that they must provide certain information about, for example, the business itself or the goods/services being provided.
In summary, consumers are well protected by the law, whether goods are bought face-to-face or though other means. In any event, businesses need to make sure all legal requirements for all transactions with consumers are adhered to.
For further information, please visit the Office of Fair Trading website on www.oft.gov.uk, or contact David Hunter on 01642 610 300.
The new Employment Equality (Age) Regulations came into force on 1st Oct 2006, making it illegal to discriminate on the basis of age in the employment field. They also contain important provisions affecting retirement. This article deals with the retirement provisions.
Firstly there is a new standard retirement age of 65. Whilst not impossible, it is now extremely difficult for an employer to be able to justify retiring any employee at an earlier age.
Secondly a statutory procedure must be followed when compulsorily retiring an employee at or above age 65.
The Regulations also introduce an employee's right to request to continue working beyond 65.
Briefly, employees with an intended retirement date after 1st April 2007 must be given 6-12 mths notice of the date of their retirement date, along with a written statement informing them of their right to request to continue working.
It is not unfair to dismiss an employee who has reached 65 for reasons of retirement However the employer must follow the procedure which encompasses notifying the employee of their right to request and if they do so request, to hold a meeting with to discuss the situation. The employer must then consider the request carefully, and if refusing needs to justify the decision to retire. A flowchart of the statutory procedure is set out below.
Employers are therefore urged to review retirement policies, as the new regulations will have a major effect in this area.
For further information please contact a member of Endeavour Partnership's Employment Department.
Note - The above is a very brief summary of some of the effects of the Regulations and should not be relied upon in the place of specific legal advice.
On the 14th September 2006 the Property Litigation Association released a revised protocol for ‘claims for damages in relation to the physical state of commercial property at the end of a lease’ (the dilapidations protocol)’. This replaces the 2002 dilapidations protocol and is expected to be adopted as a formal pre-action protocol under the Civil Procedure Rules in due course.
The principal revisions in the new protocol concern:
(1) The Scope of its application
The 2002 protocol dealt principally with repair obligations while the new protocol deals with claims for damages of all aspects of the physical state of commercial property at the end of a lease. This can include for example, the redecoration or reinstatement of a property where alterations have been made, when there is a legal liability to remedy or undertake that work.
(2) The Fair Assessment of the Landlord’s loss
Consideration should be made to ensure the Landlord’s claim is restricted to loss rather than the cost of work to remedy the breach, as they are not necessarily the same. The claim therefore should not include items that are likely to be superseded by the landlords work or their intention for the property.
(3) Clearer guidance as to the process and timescale pre action
The new protocol gives guidance as to the appropriate steps at each stage pre-action. These steps can briefly be summarised as follows:
(a) Service of Schedule of Dilapidations: what the landlord considers to be breached, the work required to remedy the situation and the landlord’s costings.
(b) Service of claim (with assessment of loss by a surveyor, which should normally be served within 56 days of the end of a lease): substantiates the monetary sum the landlord is claiming as damages in respect of the breach and for any other losses claimed e.g. for loss of rent, profit or fees.
(c) Tenants Response (normally should be within 56 days from the service of claim).
(d) Without prejudice negotiations (preferably on site, should normally be within 28 days of tenant’s response.)
(e) Stocktake: narrowing of issues in dispute by parties and consideration of the evidence the court is likely to require to decide these issues before proceedings are started.
(f) Formal Diminution Valuation and Quantification of the Claim prior to the Issue of Proceedings: Landlord provides the tenant with a detailed breakdown of remaining issues and consequential loss either in a formal diminution valuation or an account of actual expenditure or a combination of both. A formal diminution valuation for these purposes is a valuation showing the diminution in the landlord’s reversionary interest in the property due to the tenant’s breach. If the tenant relies on a defence on the basis of diminution, they should serve their diminution valuation on the landlord normally within 56 days of the landlord formally quantifying their claim.
(g) Court Proceedings
(4) Consideration of ADR
Throughout the process the protocol provides that due consideration should be given to whether some sort of other Alternative Dispute Resolution would be more suitable than litigation. The court may require evidence of adequate consideration from both parties.
The Royal Institute of Chartered Surveyors are to give further guidance as practical considerations in the protocols application shortly however, in the meantime practitioners will be minded to adopt the revisions with the courts likely to apply punitive orders for costs in instances of non compliance even prior to its expected adoption under the CPR.
The full text of the protocol can be found at www.pla.org.uk/dilapidations_protocol.html
As you will have heard, the Employment Equality (Age) Regulations 2006 came into force on 1 October 2006, bringing far reaching consequences for employers.
The Regulations outlaw discrimination on the grounds of age within the workplace unless this can be justified. Direct, indirect age discrimination, harassment and victimisation are all now prohibited.
The following are examples of some now prohibited acts:-
1. Requiring applicants to be "over 30" or "young" (direct discrimination)
2. Requiring applicants to be "recent graduates" (indirect discrimination - although a recent graduate may be mature, most recent graduates are in their early 20's)
3. Requiring "10 years experience" for a post (indirectly discriminates against younger workers)
4. Giving a bonus after 6 years service (potentially disadvantages younger workers but it is likely that these long service awards will be justified on the basis of staff retention or rewarding loyalty)
5. Calling a colleague "an old biddy" or "wet behind the ears" (harassment)
6. Penalising someone who brings a claim of age discrimination or helps someone to do so (victimisation).
7. Compulsorily retiring employees below 65 (this will only be justified in exceptional cases).
Discrimination is only permissible if it can be objectively justified, including
1. health, welfare and safety
2. economic reasons such as rewarding/encouraging loyalty;
3. particular training requirements;
Employers should therefore consider carefully (and in case of a challenge, keep a written record of) the reasons for disadvantaging older or younger workers.
In addition, and most importantly, the Regulations require employers to follow a statutory procedure whenever an employee approaches retirement. This is dealt with in Part 2 of this guide.
For further information please contact Endeavour Partnership's Employment Department.
Note - The above is a very brief summary of some of the effects of the Regulations and should not be relied upon in the place of specific legal advice.
Before 1 September 2003, it was well known that great care had to be taken when issuing/transferring shares to employees.
If shares are issued/transferred to employees at a price which is below market value (whatever that may be) the employee will be liable to income tax and NI contributions on the value of the benefit received, even if, at the time the shares were issued, it was thought that they were being issued/transferred at market value. If, however, it is intended to issue/transfer shares to employees at less than market value, it is important that the tax cost is ascertained and provided for.
Otherwise the employee could find him/herself in the unenviable position of having received shares (with no immediate prospect of turning them into cash) and having to find the cash out of taxed income to pay the, sometimes considerable, tax bill arising out of the issue/transfer.
ITEPA
Even greater care has now to be taken since the coming into force, on 1 September 2003, of the Income Tax (Earnings and Pensions) Act 2003 ("ITEPA").
The provisions of ITEPA apply to 'employment-related' shares (and certain other securities) if, at the time of acquisition, they are 'restricted shares' (or a 'restricted interest in shares').
It is particularly important to note that ITEPA expressly provides that its provisions, in relation to 'employment-related' shares, apply equally to directors and secretaries of companies as well as employees.
Employment-related shares
'Employment-related shares' are shares (or interest in shares) acquired by a person by virtue of a right or opportunity made available by reason of the employment (present, past or prospective) of that or any other person.
Any right or opportunity made available by a person's employer, or by a person 'connected' with a person's employer, is treated as made available by reason of the employment of that person, except where the right or opportunity is given in the normal course of his domestic, family or personal relationships, for example, in the case of gifts by parents to children.
There are detailed provisions used to determine whether or not a person will be regarded as so closely involved (i.e. 'connected') with others that they will either be regarded as the same person or that transactions between them will be treated differently than transactions between strangers.
Restricted Shares
Employment-related shares are 'restricted shares' (or a 'restricted interest in shares') if there is a contract, agreement, arrangement or condition that imposes any of the three types of restriction listed below and the market value of the shares or interest (determined as for capital gains purposes) is less than it otherwise would have been.
The types of restriction covered are:
(a) any provision for the transfer, reversion or forfeiture of the shares if certain circumstances arise or do not arise, such that the holder will cease to be beneficially entitled to them and will not be entitled to receive an amount at least equal to their unfettered market value;
(b) any restriction (not within (a) above) on the freedom of the holder to dispose of the shares (or to retain the proceeds if they are sold) or on his right to retain the shares or proceeds or on any right conferred by the shares themselves;
(c) any provision (not within (a) or (b) above) whereby the disposal or retention of the shares, or the exercise of a right conferred by them, may result in a disadvantage to the holder or (if different) the employee or a connected person of either.
However, none of the following is sufficient in itself to confer 'restricted shares' status on employment-related shares:
Charge to tax
If a chargeable event occurs in relation to restricted shares, there is a charge to income tax under ITEPA on the employee for the tax year in which it occurs.
Any of the following is a chargeable event:
(a) the employment-related shares ceasing to be restricted shares (or a restricted interest in shares) without their having been disposed of to a person who is not an 'associated person';
(b) the variation or removal of any restriction without the employment-related shares having been disposed of to a person who is not an associated person and without their ceasing to be restricted shares (or a restricted interest in shares);
(c) the disposal for consideration of the employment-related shares (or any interest in them) by an 'associated person' otherwise than to another associated person at a time when they are still restricted shares (or a restricted interest in shares).
An 'associated person' includes the person who acquired the shares in question, the employee, and any person who is 'connected' with or is a member of the same household as the person who acquired the shares in question or the employee.
Example:
Good & Co. Limited issue 1,200 ordinary shares of £1 each to Dave who is a director of Good & Co. Limited and whose marginal rate of tax is 40%.
The unrestricted value of each share, at the time of issue, is £8.00. However, Dave enters into an agreement that, if he ceases to be a director or employee of Good & Co. Limited, for whatever reason, he will offer up his shares for the same price that he paid for them. It is assumed, for illustrative purposes only, that the value of the shares, subject to this restriction, is £6.00, a reduction of 25% on the unrestricted value.
As Dave paid nothing for the shares, he will have a tax bill of (A) £2,880.00 ((1200 x £6.00) x 40%) on the initial benefit of receiving the shares (at a restricted value) for free. At this point, Dave has paid tax on 75% of the unrestricted value of his shares.
Just over two years later, Good & Co. Limited is sold at a price equivalent to £24 per share. When Dave sells his shares the restriction (that he will offer up his shares for the same price that he paid for them if he ceases to be a director or employee of Good & Co. Limited) will be automatically lifted, giving rise to an income tax charge under ITEPA on the remaining 25% of the unrestricted value of his shares.
However, as the value of the shares is now £24, Dave will be charged to tax under ITEPA on £6.00 (i.e. 25% of £24.00) giving rise to a further tax charge of (B) £2880 ((1200 x £6.00) x 40%).
Dave will also be taxed, for capital gains tax purposes, on the gain made on the remaining 75% of the value of his shares. Assuming that Dave has the benefit of full taper relief but ignoring the possible availability of annual exemptions and reliefs, this will give rise to a potential CGT liability of (C) £1440 ((1200 x (£18.00 - £6.00) x 10%)
Elections
It is however possible, for the employer and the employee to jointly elect to disapply or moderate the provisions of ITEPA. However, for any such election to be effective, it must be made within 14 days of the acquisition, or in some cases, of subsequent chargeable events.
Example:
If, in the above example, Dave (and Good & Co. Limited) had elected to disregard the effect of the restriction (that Dave will offer up his shares for the same price that he paid for them if he ceases to be a director or employee of Good & Co. Limited) on the value of his shares, the tax bill would have been as follows.
On issue of the shares Dave would have had a tax bill of (D) £3,840 ((1200 x £8.00) x 40%)
On the disposal of the company, Dave would not suffer any further charge to tax under ITEPA (as he elected to disregard the effect on the value of his shares attributable to the restriction) but would be charged to capital gains tax on the whole of the gain arising, giving rise to a potential capital gains tax charge (on the same assumptions as above) of (E) £1,920.00 ((1200 x £24.00 - £8.00)) x 10%)
In the above example, Dave would have suffered a total tax charge of £7,200 (A + B + C), if he did not elect and a tax charge of £5,760 (D + E), if he did elect.
If, however, the value of the shares went down, Dave would probably have been worse off, in tax terms, by making an election to disregard the effect on the value of his shares attributable to the restriction.
Whether or not to elect (and on what basis) is something that can only be determined on a case-by-case basis after careful consideration of the potential tax consequences arising out of electing/not electing,
For any further information regarding this topic or if you have any queries, plese contact Paul Bury at p.bury@endeavourpartnership.com
As scientists regularly report on the cost of ‘human progress and development’ to our planet, we are increasingly encouraged to take personal responsibility for our environment for the sake of future generations. We are being urged to learn how to use the earth’s natural resources without damaging them and ‘sustainable development’ is now central to the environmental policies of international governments. Companies around the world are being encouraged to take corporate responsibility for their actions which impact on the environment and to develop strategies for the prevention of risk of environmental damage or face criminal prosecution and/or civil action.
The European directive “Environmental Liability Directive” (2004/35/CE – 21 April 2004), yet to be implemented in the UK, introduces the “Polluter Pays Principle”, whereby the polluter may face strict or fault/negligence-based liability for damage to species and natural habitats, or damage to waters and land contamination which poses a significant threat to human health.
Under the Directive the ‘operator’ (person operating/controlling the occupational activity) must inform the competent authority of any imminent threat of damage and take all practicable steps to control any pollution incident. With the focus on prevention and restoring ‘environmental damage’, where land is found to be contaminated, the polluter must take remedial action (or, where the polluter is not traceable, or is bankrupt or deceased, the owner or occupier of the contaminated site, or potentially even the polluter’s lender will be held liable instead!).
Under the Environmental Protection Act 1990 regulating authorities such as the Environment Agency already have special powers to impose remedial liability on polluters in relation to contaminated land, water pollution and biodiversity, so the directive is likely to mean tighter regulation, which in turn “should” lead to businesses from taking environmental risks - time will tell!
Since October 2004, employers have been required to follow statutory procedures for handling employee grievances. The statutory grievance procedure is designed to ensure that any complaints an employee has with their employer can be discussed and resolved without recourse to the Employment Tribunal.
The statutory procedure starts when an employee sets out their grievance in writing and sends it to their employer. The employer then must arrange a meeting to discuss the employee’s complaint and follow the rest of the statutory procedure, including offering the right to be accompanied and a right of appeal.
Failure to do so will render an employer liable for an increase in compensation awarded of between 10-50% in any resulting successful Tribunal claim. It is therefore critical that an employer acts on receiving a grievance.
Identifying a grievance however can prove very difficult. Emerging case law has shown that the courts are willing to interpret “grievance in writing” very widely. An employee does not have to refer to invoking a grievance procedure, nor even to mention the word “grievance”! A letter will stand as a grievance if it merely evidences some disagreement with the employer. It could be contained in a resignation letter, inferred from an employee’s request for flexible working or even from a letter sent on the employee’s behalf.
On a safety first basis therefore, employers should treat any written indication of dispute made by an employee regarding their employment as initiating the statutory grievance procedure.
Waste - what is the law?
The Hazardous Waste (England & Wales) Regulations 2005 (in force from 16th July 2005) now regulate the disposal and storage of hazardous waste.
What is the aim of the Regulations?
The main aim of the regulations is to reduce the impact of all types of waste on the environment by reducing the amounts of waste produced by businesses and ensuring safe management of any waste produced. Businesses must now take positive action to ensure they are fully compliant with the new law.
If businesses do not do so they face criminal sanctions. On conconviction those responsible for the business will face heavy fines and ,possibly, imprisonment.
Who do they affect?
The regulations affect any business that produces 'hazardous' waste. The definition of what is 'hazardous is far wider than it has been. Many more businesses than previously will be caught; including many which would never have considered themselves to be producers of waste let alone 'hazardous' waste.
Business with premises will therefore need to comply with the Regulations if they produce any such waste in quantities in excess of 200 kilograms in any 12 month period. In practical terms this can amount to 10 small televisions or computer monitors, 14 lead acid batteries or 500 fluorescent tubes. Accordingly it can be seen that many commercial premises will fall within in the scope of the Regulations.
If a business premises does not produce 200kg of waste within any 12 month period, it will be exempt from the regulations, however full records of waste produced should still be maintained.
What is Waste?
The Regulations cover traditional types of hazardous waste such as asbestos, heavy metals and solvents, but there are now also include new types of waste; items used in the everyday course of business such as computer screens, lead batteries, fluorescent tubes and even disposable cameras.
To see exactly which materials now constitute hazardous waste, look at the European Waste Catalogue on the following website:
<http://europa.eu.int/eur-lex/en/consleg/pdf/2000/en_2000D0532_do_001.pdf>. The catalogue categorises waste by business type/activity.
What action as a business am I required to take?
The Regulations state that where hazardous waste is produced at, or removed from any premises other than 'exempt' premises the premises must be notified to the Environment Agency. This means that any business producing hazardous waste has a legal duty to register with the Agency. Each premises registered will be given a unique registration number known as the 'premises code'.
Registration involves registering the premises to the Environment Agency which can be done either online for a fee of £18, by e-mail for a fee of £23 or by telephone, or in writing for a fee of £28.
In addition the Regulations require all businesses to keep a documentary record of the 'waste chain', including the production, storage and disposal. Such records will detail the quantity, nature, origin, destination, and treatment of the waste even if notification by the particular business in not required under the Regulations.
All records should be kept for a period of up to 3 years.
Failure to Comply and Enforcement
Failure to comply with the Regulations including requirements of registration are punishable by way of summary conviction in the magistrates' courts. Successful prosecutions brought by the Environment Agency can result in fines of up to £5,000.000 and up to 2 years imprisonment. Larger fines can be imposed in cases that are considered to be serious enough to warrant a crown court trial.
Even if notification and registration of premises is not compulsory in the case of a particular business, the keeping of documentary records is a requirement of all businesses and failure to comply is an offence.
More information relating to the Hazardous Waste Regulations can be found on the Environment Agency website at http://www.environment-agency .gov.uk
If you require any further information on the above, please contact Jamie Brown either on 01642 610318 or at j.brown@endeavourpartnership.com
On 10 March 2005 easymobile.com was launched by entrepreneur Stelios Haji-loannou as an extension of his Easy Group of companies. Its aim was to provide consumers with a no frills service based on a mix of ‘quality, service and attractive prices’. However, the effect it had was more significant with rival mobile companies than with its consumer base.
Firstly, Orange sued over easymobile’s use of the colour Orange.
Secondly, Virgin Mobile made allegations that easymobile’s promise of no hidden charges misled customers because, they alleged, hidden ‘extras’ were often included in bills. Easymobile dismissed this as a ‘panic reaction’ to a new consumer service.
And finally (or at least finally at the time of writing) in a court action only just finalised this month, The Carphone Warehouse began operating a website, significantly on the same day as Easymobile.com, called Easiermobile.com. Even more antagonising to easyGroup was the slogan used to promote the website, which read “The Carphone Warehouse doesn’t try to run airlines, it sells mobile phones.” Finishing the statement with “How easy is that.”
easyGroup decided to take legal action and commenced a cybersquatting claim through the World Intellectual Property Organisation (WIPO). easyGroup argued, amongst others:-
1. That easiermobile was confusingly similar to easymobile both phonetically, visually and conceptually. Replacing ‘easy’ with ‘easier’ was an attempt to take advantage of internet users who were trying to reach the EasyGroup’s website.
2. Carphone Warehouse had no legitimate interest in the domain name even the actual new mobile service ran by Carphone Warehouse is run under the brand name ‘fresh’ and not easiermobile.
3. The domain name was registered in bad faith. Carphone Warehouse had even registered the keywords ‘easyMobile’ and ‘easiermobile’ on Google and Yahoo in a further attempt to redirect internet users.
In response The Carphone Warehouse argued, amongst others:-
1. easyGroup has never registered easymobile as a trade mark, nor are they allowed to monopolise the descriptive and generic words ‘easy’ and ‘mobile’.
2. easymobile cannot be said to be a well known mark since it related to a service that was only launched in March 2005.
3. The reference to airlines is a legitimate form of comparative advertising.
4. The fact that the domain name was registered on the same day easymobile was launched was simply an ‘honest mistake’ and they denied all knowledge of the planned launch.
5. There would not be any likelihood of confusion between the two names on the web.
The WIPO ruled that easyGroup did have trademark rights and goodwill in easymobile, particularly in light of the other easyGroup companies and how well known they are, indeed once the easymobile business was launched customers quickly associated it with the easyGroup. The WIPO accepted that the words ‘easy’ and ‘mobile’ were generic when used separately, however, when they are combined they become a figurative design with a secondary meaning which overrides their generic nature. Additionally, the two domain names where found to be sufficiently similar, commenting that the only difference lies in 3 letters (“ier”).
Finally the WIPO also ruled that The Carphone Warehouse did not have a legitimate interest in the domain name and it was created solely for the purposes of competition and serves only to redirect customers away from easyGroup’s site. They commented that the reference to airlines was “an obvious mocking referral to [easyGroup] and its famous Easyjet business”.
Consequently it followed that The Carphone Warehouse had registered the domain name in bad faith, purely for the purpose of disrupting the business of a competitor and it was therefore ordered that the transfer the domain to easyGroup.
In victory easyMobile.com CEO stated “We are very happy WIPO has ordered CPW to hand over the domain and that there will be one less thing to confuse British mobile users. Even though its laughable the way CPW is going to extremes to defend their market share, it points to the more serious issue that British mobile users in both obvious and less obvious ways suffer from the many convoluted practises of many players in the market.”
We will wait to see whether any other legal actions follow.
As many readers of this article are aware, directors of companies are subject to an array of duties imposed by statutes, regulations and case law – i.e. decisions in individual court cases over the years, some of which are over 70 years old. It can be very overwhelming at times, particularly to SME's and as a result those who become directors may do so without fully understanding their obligations.
Thankfully, the DTI has recognised this as a problem and have taken the view that consolidating and clarifying the duties of directors would make it easier for them to understand their responsibilities owed to their companies.
On 17 March 2005 the DTI published a 'White Paper' consultation document "Company Law Reform" setting out the Government's proposals. Overall, the proposals are aimed at substantially changing company law by simplifying and modernising in a way which would still encourage enterprise, make the law easier to understand and more flexible, promote shareholder engagement and long term investment culture. It is within this document that the proposals aimed at directors can be found. The following is intended as a brief outline of the proposed legislation which could affect you and your business:-
Proposals have been made to lay down a statutory statement of directors duties intended to replace existing company law and equitable rules. The duty is owed to the company with the company only being able to enforce and will apply to all people acting as directors, including shadow directors.
Directors will have a duty to promote the success of the company for the benefit of members as a whole and in doing so they will be expressly required to take a balanced view of the implications of decisions over time and foster effective relationships with employees, customers, suppliers and the community. This has been called, rather grandly, "enlightened shareholder value" and it is hoped it will foster and drive long term company performance, competitiveness, wealth and welfare for all.
The statement aims to address what happens when there is a conflict of interest between a director's duty to the company and his/her personal interest/duties to other.
In summary, the individual duties will be:-
The Government aims to publish this statutory statement in plain English so that it is widely accessible and understood. However, they also comment that they want the statement to reflect and respond to the change in business needs and therefore intend to leave scope for the courts to interpret and develop its provisions. How helpful this will be in the long run remains to be seen as case law could once again overlay the legislation.
The DTI have recognised that the Companies Act regulation of conflict of interests has developed in a complex and fragmented way.
Although they do not intend to appeal this legislation the overall structure will be simplified. For example, the Bill will make clear the circumstances in which the board may authorise a matter which would otherwise be a conflict of interest. Secondly, the bill will repeal existing provisions deemed unnecessary for example; Companies will now be able to make loans to directors with shareholders consent. Thirdly, existing loopholes will be removed e.g. directors service contracts will now be made available for inspection by shareholders or a payment of a fee. Finally, any existing provisions which are unclear or incomplete will be clarified.
The Government have sensibly recognised that there is a balance needed between the requirement for a firm and a robust law which deals fairly when things go wrong and the need to encourage a diverse pool of high quality individuals who are willing to take on the role of a company director. As a result of extensive discussions the Government have implemented the most significant changes to the law on director's liability for nearly eight years.
The Companies (Audit, Investigations and Community Enterprises) Act 2004, which came into force on 6 April 2005, has the effect that companies now have the ability to indemnify directors against most liabilities owed to third parties and can now pay directors legal costs up front, although subject to them having to be repaid if he/she is subsequently convicted in any criminal proceedings or civil proceedings brought by the company.
There are two major proposed amendments.
Firstly, at present one of the flexibilities of British company law is that it allows all legal persons, which includes other companies, to be company directors. This has led to it being abused by people who want to conceal who is controlling a company. As an attempt to restrict this type of fraud the Government proposes that at least one director must be a natural person who should be an individual who can if necessary be held to account.
Secondly, currently there are no minimum age restrictions on who can act as a director. However the bill will introduce a minimum age of 16. Any existing directors under 16 with service contracts providing for the payment of compensation or damages on termination will be restricted/will not be triggered unless the service contract was entered into before the date on which the provisions were announced in the white paper.
At the other end of the scale the restrictions placed on directors over 70 will be removed.
The White Paper in its entirety is extensive and also includes provisions, which are beyond the discussion here, for:-
Although some of these proposals have already been drafted into clauses and can be found in the White Paper ultimately the proposals will go before Parliament in the form of the Company Law Reform Bill. The DTI are still consulting and would like comments by 10 June 2005. The aim is then to table a bill as soon as parliamentary time permits.
An explanatory note on the Company Law Reform White Paper is available on the DTI website at http://www.dti.gov.uk/cld/review.htm
The full copy of the White Paper is available at: http://www.dti.gov.uk/cld/WhitePaper.htm
Additionally, the DTI had published a summary for small businesses available at: http://www.dti.gov.uk/cld/Comp_Law_Reform_bookmark.pdf
If you would like any further information on how the proposed changes will affect you, or on any other area of company law, please contact our Corporate & Commercial Department.
On 1 October 2004 the Disability Discrimination Act 1995 introduced new duties for those who provide services to the public. The new duties will require them to make reasonable adjustments to the physical environment of their premises. Here is a brief guide to the new law, setting out provider’s responsibilities and flagging up areas that may need to be changed.
The provisions of the Disability Discrimination Act 1995 have been progressively phased in since December 1996. Overall the Act imposes a duty not to treat disabled people less favourably than others. Part III is the latest part of the legislation to be brought, taking effect from 1 October 2004. It places a continuing duty on those offering services to members of the public to make reasonable adjustments to features of their premises so that they are accessible to disabled people.
It will apply if you are a ‘service provider’. This means those who allow members of the public access to premises are caught by the provisions, for example, retail outlets, bars, libraries, banks, garages and hotels will all have to conform (this list is by no means exhaustive).
Ultimately, the duty rests on the service provider and not the property owner. If you are a tenant you will be responsible for your individual premises. Your lease should make it clear who is responsible for alterations. However, if your lease does not have such a provision the Act provides that leases will be deemed to contain a provision that enables tenants to apply for consent for adjustments and the landlord will not be able unreasonably to refuse or to impose unreasonable conditions.
If you are the landlord in a multi-let building you will almost certainly be classed as the service provider for the common parts and therefore you will be responsible for any necessary alterations. Again, it will depend on the terms of the lease whether the costs of these works will be recoverable through the service charge.
What is reasonable will depend upon the size of your business. The test is what is reasonable in the circumstances and items such as the type of services offered, effectiveness and practicality of altering the premises, financial cost and disruption should be looked at. You may have to adjust the design or layout of the building and access ways may need to be changed. In addition, bear in mind that the Act doesn’t just cover wheelchair users but also the physically impaired, visually impaired, those with hearing difficulties, reduced dexterity, learning difficulties and those with mental health problems.
You should also bear in mind whether planning permission, listing building consent or building regulation approval is required.
Although there is no statutory enforcing body, individuals can make claims against you, most likely with the backing of a disability rights group. Ultimately, you could be taken to a tribunal or have a civil case brought against you and damages awarded if your non-compliance is not justified. On a more commercial footing it is worth bearing in mind that buildings failing to comply with the new regulations are unlikely to attract potential tenants or purchasers who are service providers.
If you require any further information or advice on your responsibilities please contact one of our Commercial Property team.
Since 1 October 2004 all employers have had to operate a disciplinary, dismissal and grievance procedure which complies with statutory minimum standards.
This means that, in cases where an employee is to be dismissed (whether for misconduct, incapacity, redundancy, end of a fixed term contract) the basic procedure must be followed.
It also applies when you are applying a disciplinary penalty of more than a warning (for example suspension, fine, demotion) Surprisingly, however, it does not apply if you are just issuing a disciplinary warning against an employee.
The new rules encompass three simple steps - Statement, Meeting and Appeal – see below. They also apply general requirements such as timings of meetings should be reasonable and steps need to be taken without unreasonable delay. This unfortunately leaves much room for interpretation and uncertainty as all will depend on an individual Tribunal's view.
The consequences of failing to follow these are substantial. If an employer dismisses an employee without having first completed the statutory procedure it will be an automatically unfair dismissal (ie no defence will be available even if the employee has committed an act of gross misconduct). Not only that - an Employment Tribunal must in most circumstances increase to the compensation payable to the employee by between 10 and 50%.
Employers should not forget that employees are entitled to be accompanied by a work colleague or trade union rep of their choice at disciplinary/dismissal meetings.
Further one should not overlook general principles of fairness (eg following ACAS's Code of Practice) and the employer's own contractual procedures in applying the disciplinary/dismissal process.
Summary of the Standard Disciplinary and Dismissal Procedure
General requirements
Commercial Litigation lawyers deal with all manner of civil disputes, almost always involving companies and business matters. It is a feature of civil litigation that there is a long paper trail – this can be contrasted with criminal litigation, burglars after all don’t normally set out business plans or enter into long correspondence and emails about the burglaries!
And one of the modern features of civil litigation is the paper trail has actually increased. The ability to email and photocopy means that there is more paper. The requirements of Banks, Auditors and Accountants for audit documents, business plans, applications for loans etc etc mean that, more than at any other time before, there is going to be paper, held somewhere, dealing with transactions which are in dispute.
It is a sad fact of business life that most businesses are actually fairly poor at keeping their paper records. Correspondence gets lost. Emails don’t get sorted properly. And, most frustratingly of all, when the paper can be found it is often unreferenced, undated, or in the wrong date order. It all takes a great deal of sorting out.
One very good tip to clients involved in potential litigation is for the clients themselves to spend the necessary number of hours trying to track down the paperwork and assembling it into some sort of order.
An awful lot of cases, indeed the overwhelming majority, “prove themselves”. Once you can get the paperwork right, present it to the prospective defendant, usually they can see that the game is up and they come to some sort of arrangement. If that doesn’t do the trick there can be a discussion between lawyers and clients and if that doesn’t do the trick then, these days, there will often be a formal Mediation. This is a process which is entirely non-binding and voluntary, and where an independent person, usually a senior solicitor, sits in the middle of the dispute and tries to wring a settlement out of the two warring parties. Despite the apparent toothlessness of the procedure, it does work in most cases.
But, if all else fails, it is the job of the litigation lawyer to take the matter to court. And having the paper work at least gives the client a head start.
