North West WIN Annual Update

1
North West WIN Annual Update

• Liverpool

18 April 2013
2
North West WIN Annual Update

• Welcome Andrew Roberts

18 April 2013
3
TUPE AND EMPLOYMENT ISSUES UPDATE 2013 EMPLOYMENT

• Rachel Power

4
TUPE Current issues (1)

• Erosion of service provision change mechanism
• Enterprise Management Services Ltd v Connect-Up
  Ltd and others 2012 IRLR 190 (EAT)
• Johnson v Campbell and another UKEAT/0041/12
• Argyll Coastal Services Ltd v Stirling and others
  UKEATS/0012/11
• Hunter v McCarrick UKEAT/0617/11

5
TUPE Current issues (2)

• Which employees transfer?
• Eddie Stobart Limited v Moreman and others
• Argyll
• Seawell Limited v Ceva Freight (UK) Limited

6
TUPE - Consultation on proposed changes

• Consultation 17 January 11 April 2013
• Proposals include
• repeal of "service provision change" provisions
• removal of obligation to provide employee
  liability information
• amending the meaning of "entailing changes in the
  workforce" (part of the ETO defence) to cover
  changes in location of the workforce
• dual consultation
• Legislation expected October 2013 onwards
• Contractual protection key to address uncertainty

7
Employment Tribunal Reform - Fees

• Implementation in Summer 2013?
• Employment Tribunal fees
• Issue and hearing fees
• Level 1 low value claims for sums due on
  termination (e.g. unpaid wages and PILONs)
• Level 2 all other claims (including unfair
  dismissal, discrimination, equal pay and
  whistleblowing)
• Application specific fees
• EAT fees
• Remission scheme

8
Employment Tribunal Reform Procedures

• Changes to the Tribunal procedure rules
• Implementation in Summer 2013?
• Key changes
• Rejection of claim and response
• "Sift" stage
• Costs awards above 20,000 no longer need to be
  referred to the court for assessment
• Presenting a response 5pm deadlines
• Preliminary hearings to consider both case
  management and preliminary issues

9
Employment Tribunal Reform Enterprise and
Regulatory Reform Bill

• Implementation from Summer 2013 onwards
• Key changes in the context of Employment Tribunal
  reform include
• Compulsory pre-claim ACAS conciliation
• Protected settlement conversations for ordinary
  unfair dismissal claims
• Settlement Agreements statutory code of
  practice and guidance
• Change to compensation award cap in unfair
  dismissal claims
• capped at the lower of 1 year's pay and existing
  limit
• Abolish discrimination questionnaires

10
Changes to collective redundancy consultation

• Changes to collective redundancy consultation
  obligations
• Implemented 6 April 2013
• 90 day minimum consultation period before the
  first redundancy can take effect is reduced to 45
  days where 100 or more employees are affected
• Employees on fixed term contracts which have
  reached their termination point will be excluded
  from collective redundancy consultation
  obligations
• New ACAS non statutory code of practice

11
OPPORTUNITIES AND RISKSCORPORATE RESTRUCTURING

• Christopher Roberts

12
Expertise

• Summary Profile
• Christopher joined DLA Piper in 2002 as a trainee
  solicitor, qualifying into the firm's
  restructuring team in 2004.
• Christopher specialises in non-contentious
  aspects of corporate recovery, restructuring,
  turnaround and insolvency including advising upon
  administrations, receiverships and liquidations.
• Other aspects dealt with include advising
  directors upon their duties and responsibilities
  in relation to companies facing financial
  difficulties and acting for purchasers of
  businesses from insolvent companies.
• Expertise
• All aspects of non-contentious insolvency and
  restructuring including business and asset sales,
  real estate transactions, landlord and tenant
  issues, advice on security issues, advising main
  clearing banks, invoice discounters and factors
  and insolvency practitioners.
• Major Transactions
• Administrations of MusicZone, Wine Cellar,
  Passion for Perfume, Weatherseal Windows, Total
  Fitness and Stanleybet UK Investments/Stanleybet
  Overseas Investments.

13
Aim and Focus

• Aim of update
• To highlight certain circumstances where
  corporate restructuring and/or insolvency
  procedures may be used to benefit your company's
  business.
• To reduce concerns surrounding corporate
  restructuring and insolvency
• Focus of update
• Acquisition of a company's shares followed by a
  CVA
• Sale of a company's business and assets through
  an Administration process
• Avoiding TUPE liabilities
• ROT claims and identifying goods
• Risk of over-reliance on a single supplier in the
  current economic climate

14
Acquisition of shares followed by a CVA

• CVA (Creditors voluntary arrangement) - process
  whereby a company proposes an arrangement to its
  creditors to reorganise its liabilities
• Enables a buyer to purchase a company and drop
  the loss making parts whilst leaving the good
  parts untouched and intact
• Successful, well publicised CVA's include JJB
  Sports, Focus DIY, Blacks Leisure, Barratts Shoes
  and Flannels

15
Acquisition of shares followed by a CVA cont

• DLA Piper was the first firm to bring this
  product to the market
• Our first client to successfully utilise the
  product acquired the shares in a group of
  companies holding over 500 retail units and in
  doing so acquired the benefit of very significant
  tax losses which were available to be set off
  against the future profits of the post CVA
  profitable business
• Advantages
• Preservation of tax losses
• Less business disruption
• Reduces overall liabilities
• Avoids the stigma of insolvency?

16
Sale of a companys business and assets out of
Administration

• If a CVA is not workable, an asset sale may be a
  potential alternative
• However, risk of an asset sale being challenged
  as a TUV in a subsequent insolvency and vendor
  unable to fulfil its obligations under the SPA
• An asset sale out of an insolvency procedure,
  e.g. Administration, may be more desirable for
  vendors and purchasers
• Preserve goodwill and no break in trading where
  the sale is pre-packaged
• Cherry pick assets without the company's
  liabilities (except for TUPE liabilities)
  though be wary of commercial reality lack of
  supply credit going forward and may need to pay
  sweetner to suppliers
• Limit the risk of the sale being challenged and
  subsequently unravelled as TUV

17
Avoiding TUPE liability on a business purchase

• The Transfer of Undertakings (Protection of
  Employment) Regulations 2006 ("TUPE") apply when
  purchasing a solvent business or a business from
  an administrator
• All employees automatically transfer plus
  purchaser may also be liable for potential
  protective awards
• However, employees do not automatically transfer
  in a sale by a liquidator

18
Retention of title "club"

• When supplying goods to customers, supply
  contracts normally contain ROT clauses
• If a supplier is unable to identify its goods
  from an insolvent customers stock, then the
  suppliers ROT clause will not normally be
  effective
• Admixture of goods
• BUT the supplier may be able to defeat an
  admixture defence if it can prove that it
  supplied generic stock/raw material to the
  customer

19
Risk of over-reliance on a supplier

• As a result of the current economic climate,
  suppliers have been forced to reduce prices in
  order to combat competition
• Increasing shift to low stock, just in time
  models of supply
• Many suppliers now rely on volume ordering and
  customers have reduced their amount of suppliers
  to increase efficiency
• Insolvency of one link in the supply chain can
  create a domino effect of insolvencies up and
  down the chain
• eg the administration of Woolworths led to the
  insolvency of Zavvi

20
Risk of over-reliance on a supplier cont

• Insolvency practitioners may seek ransom payments
  from customers of an insolvent supplier
• eg the Land Rover and UPF case
• KPMG threatened to stop supply unless Land Rover
  paid it 46 million.
• Land Rover ultimately paid 15m to 20m for UPFs
  debt to replace UPFs receivers to ensure UPF
  continued to supply essential parts to Land Rover
  

21
Early warning signs of a suppliers insolvency

• Warning Signs
• Missed deliveries
• Requests for deposits and up-front payments
• Unexpected rise in prices or attempts to
  renegotiate pricing or terms
• Reduction in credit insurance cover
• County court judgments and winding-up petitions
  DLA Piper can conduct these searches for you
• Questions to ask the supplier
• Have you moved from quarterly to monthly rents?
• Have you agreed a time to pay agreement with
  HMRC?

22
Protect yourself

• Methods of dealing with a supplier's insolvency
• Protect yourself by building up stock levels and
  consider having more than one supplier for key
  supplies
• If a supplier becomes insolvent, customers may
  have to consider acquiring the supplier's
  business to avoid costly renegotiation of supply
  terms or having to make ransom payments to the
  insolvency practitioner

23
Key Messages

• Key Messages
• There are ways to purchase distressed businesses
  and assets in a financially efficient way
• A vendor can make the sale of a subsidiary
  business more attractive to the market
• If you are a supplier of generic stock or raw
  material, you may still be able to recover your
  goods from an insolvent supplier even if you are
  unable to identify your specific goods
• Be vigilant of supplier distress and protect
  yourself from ransom demands and other business
  disruption

24
North West WIN Annual UpdateHOT TOPICS IN THE
CONSTRUCTION AND ENERGY SECTOR

• Ian Wood and Jim Pinsent

25
Overview one major new case!

• The Walter Lilly Case
• Walter Lilly Company Ltd v Giles Patrick Mackay
  and others

26
Overview

• Defining case in last 12 months in both
  construction and engineering
• Extension of time and concurrent delay
• Global claims
• Privilege
• Settlement

27
Background

• Mr Mackay's quest to build the perfect house
• Ended with legal costs liability in excess of 9
  million
• Litigation
• "Very old fashioned because it has involved full
  blooded conflict between the parties in which
  there seems to have been little, no or belated
  room for compromise"
• Worth a read for Mr Mackay's comments

28
Simple facts

• Traditional contract with Walter Lilly as main
  contractor
• Fixed completion date with extension of time
  mechanism for employer risk events
• Liquidated damages for culpable delay
• Time and cost overrun liquidated damages applied

29
Concurrent delay

• Long standing question of who gets benefit of
  concurrent delay
• Is contractor entitled to extension of time?
• Traditional in England yes Henry Boot v
  Malmaison
• Scotland City Inn v Shepherd no. Necessary to
  apportion relevant delay period between factors
  causing delay
• Walter Lilly resolves confusion

30
Global claims

• What are Global Claims?
• Traditionally scorned by employers and courts
• Aikenhead J
• "there is nothing in principle 'wrong' with a
  'total' or 'global' claim"
• Claims will no longer fail on basis of single
  issue not pleaded or proved or which is proved to
  be the fault of contractor

31
Privilege

• Claims consultant appointed to provide
  "contractual and adjudication advice"
• Application of
• legal advice privilege
• litigation privilege
• Neither privilege applies to correspondence and
  legal advice from claims consultants or non
  practising solicitors or barristers

32
Settlement agreement and third parties

• Settlement between Party A and Party B
• What can Party B recover from culpable third
  party?
• Siemens v Supershield upheld
• Question of reasonableness determined by strength
  of claim, whether legal advice obtained,
  consequences of litigation and benefits of
  settling
• Practical issues

33
North West WIN Annual UpdateTAX

• Stephen Jones

34
Patent Box 1

• Reduced rate of 10 for companies within the
  charge to UK corporation tax who exploit patents
  and/or certain other botanical and medical
  innovations
• Companies must opt into the regime for it to
  apply and the relief is to be phased in between 1
  April 2013 and 1 April 2017
• The reduced rate of corporation tax is applied to
  a proportion of the company's profits derived
  from
• sales of products incorporating the patented
  technology
• licensing and selling patent rights themselves
• other use of such right sin the course of a
  trade (e.g. in providing services)
• compensation for infringement of patent rights

35
Patent Box 2

• The company must have an "exclusive" licence over
  the qualifying IP in one or more countries or
  territories.
• The company must have been involved significantly
  in the creation or development of the qualifying
  IP, or of a product or process that incorporates
  it.
• There are special rules for groups aimed at
  preventing relief where the IP was developed
  outside the group (e.g. where a company that
  developed the IP is subsequently acquired by
  another company), unless certain further activity
  is carried out within the group or an additional
  "active ownership" condition is satisfied.
• Patent box profits are calculated according to a
  standard formula (see next slide) or a "streaming
  method"

36
Patent Box 3
37
Patent Box 4

• Patent Box Practice Points for In-House Lawyers
• The ownership of patent rights and other
  qualifying IP will affect the availability of
  relief
• whether a company opts into the patent box may
  depend upon whether it is making profits or
  losses
• this and other factors may influence a decision
  whether or not to move IP around the group
• the effect of litigation settlements and
  licensing arrangements will be relevant for
  determining whether the company has an
  "exclusive" right enabling it to claim relief
• it may be beneficial to bring qualifying IP into
  the UK and to relocate development here.

38
Statutory Residence Test 1

• Statutory Residence Test ("SRT") is contained in
  schedule 43 of the Finance Bill and replaces the
  previous mix of case law and HMRC practice
  (HMRC's approach was set out in HMRC6) for tax
  years 2013-14 onwards
• SRT
• if automatic non-residence test is satisfied, the
  individual is not resident
• if the automatic residence test is satisfied, the
  individual is resident
• where neither of these applies the individual is
  resident if he or she has "sufficient ties" with
  the UK, which test depends on "connecting
  factors" and days spent in the UK the more
  "connecting factors" the fewer days are required
  to make a person resident

39
Statutory Residence Test 2

• Automatic Non-Residence always takes precedence

Test Days in UK
UK resident in one or more of 3 previous tax years lt 16 (and did not die here!)
UK resident for none of previous 3 tax years lt 46
Sufficient overseas work with no significant breaks (complex formula) lt 31 days in UK where more than three hours' work done and lt 91 days spent in UK
Two other automatic tests apply in the event of
death
40
Statutory Residence Test 3

• Automatic Residence next test to apply

Test Days in UK
Present in UK for 183 days in tax year No additional "days" test
"Home" in the UK Spends sufficient days in that home and satisfies requirements in relation to overseas home (if any) complex rules
Sufficient UK hours of work with no significant breaks Complex rules here too!
A fourth automatic test applies in the event of
death
41
Statutory Residence Test 4

• "Sufficient Ties" where resident in one or more
  of previous three tax years

Days spent in the UK Minimum number of ties
Greater than 15 but not more than 45 4
More than 45 but not more than 90 3
More than 90 but not more than 120 2
More than 120 1
42
Statutory Residence Test 5

• "Sufficient Ties" where not resident any of
  previous three tax years

Days spent in the UK Minimum number of ties
More than 45 but not more than 90 4
More than 90 but not more than 120 3
More than 120 2
43
Statutory Residence Test 5
The "UK ties"
"Family"- "relevant relationship" with another person resident in the UK
"Accommodation" a "place to live" in the UK for at least 91 days and spends at least one night there
"Work" at least 40 days working for at least three hours on each such day in the UK
"90-day tie" spends more than 90 days in the UK in the preceding tax year, the tax year preceding that year or both
"country" tie (only applies if resident for one or more of previous three tea years) meets the "midnight test" for the greatest number of days in the UK (compared to each other country)
44
Statutory Residence Test 6

• The rules are complex and the slides above are an
  over-simplification!
• SRT Practical Points for In-House Lawyers
• Patterns of work for multi-state employees may
  change
• Old contracts and methods of working may need to
  be reconsidered
• There will be a constant need to take tax advice
  on the impact of detailed personal and employment
  circumstances
• Double taxation relief rules still apply

45
General Anti-Abuse Rule

• The General Anti-Abuse Rule (GAAR) will apply to
  income tax, corporation tax, capital gains tax,
  inheritance tax, petroleum revenue tax and stamp
  duty land tax (it is later to be extended to NIC)
• The GAAR will provide for the counteraction of
  tax advantages arising from tax arrangements that
  are "abusive"
• Counteraction must first be notified by a
  designated HMRC officer and, unless having
  considered representations made by the taxpayer a
  designated HMRC officer decides that
  counteraction ought not to apply, the
  arrangements must be referred to an "Advisory
  Panel" to be established by the Commissioners for
  HMRC for the purpose, for its opinion.

46
General Anti-Abuse Rule

• "Tax arrangements are abusive if they are
  arrangements the entering into or carrying out of
  which cannot reasonably be regarded as a
  reasonable course of action in relation to the
  relevant tax provisions, having regard to all the
  circumstances including
• (a) whether the substantive results of the
  arrangements are consistent with any principles
  on which those provisions are based (whether
  express or implied) and the policy objectives of
  those provisions,
• (b) whether the means of achieving those results
  involves one or more contrived or abnormal steps,
  and
• (c) whether the arrangements are intended to
  exploit any shortcomings in those provisions"

47
General Anti-Abuse Rule

• Statute will set out examples of arrangements
  that are to be considered "abusive"
• they result in an amount of income, profits or
  gains for tax purposes that is significantly less
  than the amount for economic purposes
• they result in deductions or losses of an amount
  for tax purposes that is significantly greater
  than the amount for economic purposes
• they result in a claim for the repayment or
  crediting of tax (including foreign tax) that has
  not been, and is unlikely to be, paid.
• Practical Point for In House Lawyers difficult
  dividing line between "abusive" and non-abusive
  structures scrutiny required

48
Miscellaneous Points to Remember

• Entrepreneur's relief for shares acquired under
  an enterprise management incentive scheme
  always consider EMI if you qualify.
• VAT and acquisition costs following BAA v-
  HMRC 2013 EWCA Civ 112 taxpayer lost its
  claim to recover input tax on incurred on
  professional fees invoiced to a company which
  acquired it and subsequently became a member of
  its VAT group the case underscores the need for
  a holding company to have an "economic activity",
  to make ,or to intend to make, supplies in the
  course of a business.
• VAT Robinson Family Limited v- HMRC 2012
  UKFTT 360(TC) grant of a long lease subject to
  sub-leases can be a TOGC if value of reversion is
  minimal.

49
North West WIN Annual UpdateINTELLECTUAL PROPERTY

• Dominic McKean

50
Contents

• Apple v Samsung - who is winning the war?
• The new European Unified Patent system - what
  will it mean for you?
• The Internet's New Wild West - an update on who's
  applying for new gTLDs and why
• Is using your Community trade mark in just one
  Member State enough to keep it safe from attack?

51
Apple v Samsung

• In the UK, Apple sued for infringement of its
  RCD.
• Apple alleged that the Samsung Galaxy tablets had
  copied its design.
• The court found that there were certain
  similarities
• the front
• the fact neither had indicator lights or buttons
  and
• the thinness enhancing effect of the sides.

52
Apple v Samsung

• However, there were two major differences which
  meant that the Samsung tablets did not infringe
  Apple's registered design
• The most important difference between the Samsung
  tablets and the Apple design was the thinness of
  the Galaxy tablets
• The next most significant difference was the
  detailing on the back of each of the tablets.

"They do not have the same understated and
extreme simplicity which is possessed by the
Apple design, they are not as cool, and so the
overall impression produced is different".
53
Apple v Samsung

• In the US it was a different story. Apple sued
  Samsung for infringement of three patents
• US Patent No. 7,469,381 relating to "list
  scrolling and document translation, scaling and
  rotation on a touch-screen display"
• US Patent No. 7,844,915 relating to an
  "application for programming interfaces for
  scrolling operations" (zooming, bounce-back on
  scrolling, etc) and
• US Patent No. 7,864,163 relating to a "method for
  displaying at least a portion of a structured
  electronic document",
• as well as four design patents, including the
  '889 design patent which claimed the "the
  ornamental design for an electronic device" with
  depictions of the rounded cornered tablet.

54
Apple v Samsung

• Samsung counterclaimed for infringement of six of
  its own patents.
• After a three week trial, a Californian jury gave
  its verdict
• Samsung had infringed all Apple's patents and
  design patents, except the famous '889 design
  patent and
• Apple had not infringed any of Samsung's patents.
• And the jury awarded Apple damages of

The '889 design patent
55
Apple v Samsung

• 1.05 billion
• The fourth largest jury award in a patent case
  everthough the Judge has ordered for a new jury
  trial to re-examine 450 million of the damages
  Apple was awarded.

56
European unified patent system

• On February 19, 24 members of the 27 European
  Union signed a unified patent court agreement in
  Brussels.
• Efficient patent protection in Europe is a
  cost-intensive procedure.
• Overall, the acquisition of patent protection in
  all 27 EU member states, costs around 36,000 EUR.
• Considerably more expensive, even for only the
  major countries, than it is in economically
  competing jurisdictions such as the US or China.

57
European unified patent system

• Single European patent seeks to boost the
  innovative capacity of European industry thanks
  to streamlining previously bureaucratic
  procedures and decreasing costs.
• Only Spain and Italy, feeling linguistically
  disadvantaged, refused to consent.
• The new unified patent will
• be cheaper and more effective than current
  systems in protecting the inventions of
  individuals and firms
• provide automatic unitary patent protection in
  all 25 participating member states, cutting costs
  for EU firms
• cost just 4,725 when the new system is up to
  speed, according to the European Commission.

58
European unified patent system

• Not everyone is as optimistic as journalists and
  politicians, however.
• May be less costly to obtain, IF you want
  protection in more than 5 or 6 states, which few
  patentees do.
• Likely to be a lot more costly and risky to
  litigate a UP because (1) complex litigation
  regime with different languages involved, and (2)
  all your eggs will be in one basket!
• In view of this, industry and practitioners are
  generally highly sceptical as to whether the
  UP/UPC system will really be better in practice.
• In principle however it certainly is a good idea
  and so we must make sure it works!

59
New gTLDs

• The new generic Top-Level Domain Program was
  developed by ICANN to increase competition and
  choice in the domain name space (and ICANN just
  made 350 million in the process!)
• There are roughly two dozen gTLDs now (.com,
  .org, .net, etc), but soon, there will be
  hundreds nearly 2,000 have been applied for.
• Not a universally popular move by ICANN a group
  of over 100 major international business
  associations and companies campaigned against
  itbut it's happening!

60
New gTLDs

• Google announced that it was targeting gTLDs such
  as .google, .youtube, and .lol, to name a few
  at a cost of 185,000 per domain which totalled
  up to more than 18.6 million.
• Amazon is Google's biggest competitor, with both
  companies bidding on 21 of the same domains,
  including .search, .play, and .drive.
• Microsoft also put in two applications that
  Google has also applied for .docs and .live.
• So why are they applying?

61
New gTLDs

• The new gTLD create opportunities for company
  specific or sector specific gTLDs.
• They could be a way to increase brand profile -
  but some notable brand owners have recently
  withdrawn (eg Heinz and General Motors).
• They may allow better security, eg KPMG.
• They may help in the fight against online
  counterfeiters "if it doesnt end in .brand,
  it's not real"!
• But speculators are also applying for generic
  names, betting that the new gTLDs may be the
  Internets next big gold mine as they get the
  right to sell 2nd level domain names.

62
New gTLDs

• One new company called Donuts was set up with
  100m of venture capital and has applied for 307
  separate gTLDs at a cost of nearly 57 million.
• Behind the new speculators (and Amazon and
  Google) other companies are also applying for
  multiple gTLDs. LOreal applied for 15 separate
  domains, including .hair, .makeup, and .beauty.
• Apple applied for just one (.apple, of course).

63
New gTLDs - What do you need to do?

• The "Trademark Clearinghouse" opened its doors
  on 26 March 2013 and right holders can file
  evidence of their trade marks.
• Sunrise period trade mark holders who have
  registered with the Clearinghouse will be given
  30 days to register second level domain names
  matching their trade marks before they are
  offered to the public for registration.
• For 60 days after the end of the Sunrise periods,
  the new gTLD registry must notify trade mark
  owners who registered with the Clearinghouse if a
  third party attempts to register a second level
  domain identical to their trade mark and they
  have the right to object.

64
New gTLDs - What do you need to do?

• But to take advantage of the sunrise periods, the
  trade mark holder must provide a signed
  declaration of use and a single sample to prove
  use
• Clearinghouse fees to file a single trade mark
  are 145 for one year, 435 for 3 years, and 725
  for 5 years but it could be a lot cheaper than
  trying to get it back from a third party.

65
Community trade marks

• The Advocate-General's Opinion has recently been
  issued in Case C-149/11 Leno Merken v Hagelkruis
  Beheer B.V.
• Better known as the ONEL/OMEL case.
• The case is about the requirement for "genuine
  use" of a Community Trade Mark.
• A CTM which has not been put "to genuine use in
  the Community in connection with the goods or
  services in respect of which it is registered"
  within five years following registration
• is subject to revocation and
• cannot be relied on as an earlier trade mark
  right when opposing a later filed CTM.

66
Community trade marks

• So what constitutes "genuine use in the
  Community"?
• In particular, what of a trade mark which was
  only put to use in one of the twenty-seven EU
  member countries - is this genuine use?
• The four questions referred to the CJEU in this
  case were
• Is use in one country always enough?
• If not, is it never enough?
• If it is never enough, what is needed?
• Should the assessment of genuine use in the
  Community be done in the abstract, without
  reference to the borders of the territory of the
  individual Member States?

67
Community trade marks

• Decision
• Article 15(1) of the Community trade mark
  Regulation must be interpreted as meaning that
• use of a Community trade mark within the borders
  of a single Member State is not, of itself,
  necessarily sufficient to constitute genuine use
  of that trade mark but
• it is possible that, when account is taken of all
  relevant facts, use of a Community trade mark
  within an area corresponding with the territory
  of a single Member State will constitute genuine
  use in the Community.

68
Community trade marks

• Genuine use in the Community within the meaning
  of Article 15(1) is therefore use that, when
  account is taken of the particular
  characteristics of the relevant market, is
  sufficient to maintain or create market share in
  that market for the goods and services covered by
  the Community trade mark.
• Has the A-G dodged the question, or is his
  proposed answer the pragmatic solution needed by
  CTM owners and their advisors?

69
Coffee Break
18 April 2013
70
North West WIN Annual UpdateCOMMERCIAL

• Peter Brook

71
Overview - lots of new cases!

• Endeavours
• Ampurius Nu Homes v Telford Homes
• Liability
• Kudos Catering v Manchester Central Convention
  Complex
• Material Breach, Termination and Affirmation
• The Trademark Licensing Co Ltd v Leofelis SA
• Good Faith
• Compass Group UK Ireland Limited v Mid Essex
  Hospital Services NHS Trust
• Yam Seng Pte Ltd v International Trade Corp
  Limited
• The Late Payment of Commercial Debts Regulations
  2013

72
Endeavours - Ampurius Nu Homes v Telford Homes
(2012)

• "Telford will use its reasonable endeavours to
  procure completion of the Works by the Target
  Date or as soon as reasonably possible
  thereafter"
• The credit crunch intervened and Telford was
  unable to obtain sufficient funding, suspended
  work and claimed this was not a breach provided
  it had used reasonable endeavours to obtain
  funding but had been unable to do so
• Held
• Lack of funding was not a defence
• Reasonable endeavours was designed to cover
  physical conduct of the work e.g. inclement
  weather and shortage of materials
• The subjective difficulty that Telford
  experienced in raising funding was irrelevant

73
Endeavours

• An "endeavours" obligation will not always impose
  the same level of obligation from one contract to
  another
• Reasonable does not require the action if it
  disadvantages the party only one reasonable
  course is required, not all reasonable courses
• Best Onerous but not absolute take all steps a
  prudent, determined and reasonable party is
  acting in its own interests and desiring to
  achieve the result may impose an obligation to
  invest or run risk of failure but not require
  risk of bankruptcy
• All reasonable compromise between best and
  reasonable (closer to best) use endeavours until
  all reasonable alternatives are exhausted
• Conclusion be clear about the objective to be
  achieved and list steps to be taken?

74
Liability Kudos Catering v Manchester Central
Convention Complex (2013)
5 year catering contract ended 2 years early.
Both claimed repudiatory breach. Kudos claimed
1.3m of lost profit

• 18.6 Indemnity and Insurance
• "MCCC shall have no liability whatsoever for any
  loss of goodwill, business, revenue or profits,
  anticipated savings or wasted expenditure."

75
Liability Kudos Catering v Manchester Central
Convention Complex (2013)
CoA held loss of profits was not excluded.
Need to consider the wider context and parties
commercial intentions.

• Kudos would have earned profit. If upheld then
  the clause could deprive Kudos of any sanction
  for MCCC's breach of contract, reducing the
  contract to an unenforceable statement of intent
• MCCC had not put forward a commercial
  justification for such a wide exclusion of
  liability. CoA concluded there was none, and that
  a literal interpretation of clause 18.6 would be
  contrary to business common sense
• Held that the clause applied only to MCCC's
  liability for defective performance, not for a
  refusal to perform

76
Liability Lessons

• Lessons?
• Give a remedy for material breaches
• Explain why a clause is drafted in a particular
  way
• Flag onerous provisions e.g. use correct headings
• Cover liability on repudiation expressly

77
Material Breach, Termination and Affirmation

• Repudiatory breach is the breach of contract
  sufficiently material to allow the innocent party
  to treat the contract as at an end and claim
  damages
• If A relies on B's alleged repudiatory breach and
  terminates, and the basis for termination turns
  out to be untrue, the non-terminating party may
  itself sue for wrongful termination
• After acquired knowledge of a (different)
  repudiatory breach can be used to justify the
  termination (Boston Deep Sea Fishing case)
• What about damages?

78
The Trademark Licencing Co Ltd v Leofelis SA
(2012)

• Use of the Lonsdale brand in Europe, exclusive
  licence granted but Lonsdale licenced another
  person in Germany
• While a party can use after acquired knowledge of
  a repudiatory breach to justify the termination,
  they cannot use the same repudiatory breach as a
  ground for claiming damages
• Where terminating party unaware of the
  repudiatory breach and termination would have
  happened in any event, terminating party not
  entitled to profit from the decision to terminate
  by some later emergence of fact
• Ensure repudiatory breach has occurred before
  taking steps to terminate a contract
• Loss can only be claimed if it flows from the
  breach that the party had knowledge of

79
Good faith an implied duty?

• Background
• Traditional hostility towards an implied doctrine
  of good faith
• Many civil law jurisdictions, and more recently
  Canada, Australia and the US recognise a general
  duty to act in good

• faith when forming and performing commercial
  contracts
• Scots law recognises a broad principle of good
  faith and fair dealing
• EU legislation has increased significance of the
  concept of good faith in English Law
• Are we moving towards English courts applying an
  implied duty of good faith to English contract
  law in certain circumstances?

80
Mid Essex NHGS v Compass Group (trading as
Medirest) 2013

• Hospital FM Outsourcing Agreement
• Payment mechanism based on performance
• Financial deductions
• 84,450 out of date chocolate mousse
• 96,060 3 day old bagels
• 46,320 out of date ketchup sachets
• Express obligation to "co-operate with each
  other in good faithand take all reasonable
  action as is necessary forthe Trustor any
  Beneficiary e.g. patients to derive the full
  benefit of the Contract".
• An implied term that the Trust would not exercise
  its discretion to award itself payment deductions
  or service failure points arbitrarily,
  capriciously or in an irrational manner?

81
Compass Take away points

• The express obligation in this context to
  co-operate in good faith means "work together
  honestly endeavouring to achieve the two stated
  purposes"
• While discretions involving absolute contractual
  rights are unlikely to be subject to an implied
  term of the type at issue, those involving an
  assessment or a choice as to the range of options
  in which the interests of both parties are
  relevant, are likely to be
• Although you may be able to expressly exclude the
  implied term, Jackson LJ warned that doing so
  would be "extremely difficult"

82
Yam Seng PTE Ltd v International Trade Corp Ltd
(2013)

• Exclusive distribution agreement to YS
• YS terminated for ITC's repudiatory breach
• failure to supply product
• beach of exclusive territorial grant
• provision of false information
• YS pleaded an implied term in the agreement that
  parties would deal with each other in good faith
• Held D was in breach of contract and 2 breaches
  were repudiatory in nature, justifying
  termination by YS

83
An implied term (obiter Leggatt J)?

• Judge acknowledges existence of such an implied
  term in certain contracts (employment/partnership)
  
• No general duty of good faith under English law
• No difficulty in implying such a duty based on
  the presumed intentions of the parties
• context sensitive
• "Relational contracts" joint venture agreements,
  franchise agreements and long term distribution
  agreements may require a high degree of
  communication, cooperation and predictable
  performance based on mutual trust and confidence
  and expectations of loyalty which
  areimplicit.. and necessary to give business
  efficacy to the arrangements"
• Question of fact to be decided on a case by case
  basis

84
The Late Payment of Commercial Debts Regulations
2013 ("2013 Regulations")

• The 2013 Regulations came into force on 16 March
  2013 and resulted in amendments to the Late
  Payment of Commercial Debts (Interest) Act 1998
  ("Late Payment Act")
• Changes to sections 4 and 5A of the Late Payment
  Act
• Contracts concluded before 16 March 2013 will be
  excluded from the amended provisions
• Debtors will be forced to pay interest and
  reimburse reasonable recovery costs of the
  creditor, if they do not pay for goods and
  services on time

85
The Late Payment of Commercial Debts Regulations
2013 ("2013 Regulations")
Business to Business contracts Business to Business contracts
Contract is silent on payment terms Payment must be made within 30 days of the later of receipt of invoice receipt of goods or services verifying acceptance of the goods or services
Contract contains express payment terms Parties can agree payment up to 60 days from the later of receipt of invoice receipt of goods or services verifying acceptance of the goods or services This 60 day period can be extended so long as it is in writing and not "grossly unfair". Grossly unfair all circumstances considered in particular deviation from good commercial practice and contrary to good faith and fair dealing the nature of the goods and services another objective reason
86
The Late Payment of Commercial Debts Regulations
2013 ("2013 Regulations")
Business to Public Authority contracts Business to Public Authority contracts
Contract is silent on payment terms Payment must be made within 30 days of the later of receipt of invoice receipt of goods or services verifying acceptance of the goods or services
Contract contains express payment terms Parties can agree payment up to 30 days from the later of receipt of invoice receipt of goods or services verifying acceptance of the goods or services No possibility to extend this period
87
The Late Payment of Commercial Debts Regulations
2013 ("2013 Regulations")

• Verification process introduced maximum period
  of up to 30 days for a purchaser to confirm that
  goods or services conform with the contract
• Statutory interest rate Unchanged - Bank of
  England reference rate plus at least 8
• Compensation for recovery costs In addition to
  fixed sums that were previously available (40,
  70 or 100 depending on the size of the debt) to
  compensate for the cost of recovering a debt, as
  a result of the 2013 Regulations the supplier is
  also entitled to the reasonable costs of
  recovering the debt that are not met by the fixed
  sum
• The rights for a supplier under the Late Payment
  Act are not compulsory it does not have to
  claim interest

88
AN OVERVIEW OF THE JACKSON REFORMS LITIGATION

• Andrew Roberts

89
Introduction

• Implementation of the recommendations of Lord
  Justice Jackson
• Majority of the reforms became effective on 1
  April 2013
• Main focus on funding of litigation and control
  of costs
• More robust case management
• More haste, less speed?
• Ignore the new rules at your peril!

90
Key areas of change

• Funding
• Damages-based agreements (DBAs)
• Conditional fee agreements (CFAs) and
  after-the-event insurance (ATE)
• Costs Management
• Proportionality
• Case Management
• Disclosure
• Expert evidence
• Witness statements
• Part 36

91
The underlying framework

• The Legal Aid, Sentencing and Punishment of
  Offenders Act 2012
• The Legal Aid, Sentencing and Punishment of
  Offenders Act 2012 (Commencement No 5 and Saving
  Provision) Order 2013 (SI 2013/77)
• The Legal Aid, Sentencing and Punishment of
  Offenders Act 2012 (Commencement No 2 and
  Specification of Commencement Date) Order 2012
  (SI 2012/2412)
• The Civil Procedure (Amendment) Rules 2013 (SI
  2013/262)
• The Civil Procedure (Amendment No 2) Rules 2013
  (SI 2013/515)

92
The underlying framework continued

• 60th update to the Civil Procedure Rules
  Practice Direction amendments
• 61st update to the Civil Procedure Rules
  Practice Direction amendments
• The Offers to Settle in Civil Proceedings Order
  2013(SI 2013/93)
• The Damages-Based Agreements Regulations 2013(SI
  2013/609)
• The Conditional Fee Agreements Order 2013 (SI
  2013/689)

93
Funding damages-based agreements (DBAs)

• Permitted in England Wales from 1 April 2013
• Lawyers conducting litigation in return for a
  share of the sums recovered
• If claim is unsuccessful, the lawyer is not paid
• Subject to a 50 cap (lower for personal injury
  claims (25))
• Different requirements for employment cases
• Claimant retains potential liability for the
  other side's costs
• Status of "hybrid" DBAs?

94
Funding conditional fee agreements (CFAs) and
after-the-event insurance (ATE)

• For funding arrangements entered into on or after
  1 April 2013, CFA success fees and ATE premiums
  no longer recoverable from the losing party
• CFA success fees and ATE premiums still
  recoverable where payable under funding
  arrangements entered into prior to 1 April 2013

95
Costs management

• New costs management rules apply to all
  multi-track cases commenced on or after 1 April
  2013 (CPR 3.12 3.18)
• Exceptions and exemptions
• Commercial Court
• Claims in the Chancery Division, Technology
  Construction Court and Mercantile Court which
  exceed 2 million
• Requirement to file and exchange budgets in a
  prescribed form (Precedent H)

96
Costs management continued

• Budgets generally to be of the estimated costs of
  the entire action
• Budgets to be filed and served at an early stage
• Costs management orders (CMOs)
• Budgets to be reviewed regularly and revised as
  matter progresses
• In assessing recoverable costs, the court will
  not depart from a party's agreed or approved
  budget without good reason

97
Proportionality

• Revised overriding objective this is now to
  enable the court "to deal with cases justly and
  at proportionate cost" (CPR 1.1)
• For cases commenced on or after 1 April 2013,
  where costs are to be assessed on the standard
  basis, only costs that are proportionate to the
  matters in issue will be allowed
• To be proportionate, costs must bear a reasonable
  relationship to
• the sums in issue in the proceedings
• the value of any non-monetary relief in issue
• the complexity of the litigation
• any additional work caused by the conduct of the
  paying party
• any wider factors e.g. reputation or public
  importance

98
Proportionality continued

• Costs that are held to be disproportionate may be
  disallowed or reduced even if reasonably and/ or
  necessarily incurred!
• Proportionality will apply throughout the life of
  the case and not just at the end

99
Case management

• Implementation of the overriding objective by the
  Court now extends to "enforcing compliance with
  rules, practice directions and orders" (CPR
  1.2(f))- expect a more robust approach to case
  management!
• Move towards managing cases earlier
• Notice of Proposed Allocation
• Directions Questionnaire
• New model Standard Directions for multi-track
  claims (CPR 29)
• Court has power to contact the parties to monitor
  compliance with directions (CPR 3.1(8))
• Tightening up of rules relating to relief from
  sanctions (CPR 3.9)

100
Disclosure

• Revised CPR 31.5 impacts upon multi-track cases
• No longer a presumption in favour of standard
  disclosure move to a more tailored approach
• Mandatory disclosure report (Form N263)
• Mandatory requirement to discuss and seek to
  agree the approach to disclosure with the other
  side
• New 'menu' of disclosure options (CPR 31.5(7))
  including
• dispensing with disclosure altogether
• limiting disclosure to documents on which the
  parties rely
• disclosure on an issue by issue basis
• "train of enquiry" disclosure
• standard disclosure

101
Expert evidence

• From 1 April 2013, to obtain permission to adduce
  expert evidence a party must now
• identify issues to be addressed by the expert
  evidence
• provide an estimate of the costs of the proposed
  expert evidence
• Court now has power to direct that experts give
  their evidence concurrently ("hot-tubbing") PD
  35, paragraph 11

102
Witness statements

• From 1 April 2013, the court has express powers
  to manage witness evidence (CPR 32) and can
• identify or limit the issues to be covered by
  witness evidence
• identify those witnesses allowed to give evidence
• limit the length or direct the format of witness
  statements

103
Part 36

• Additional sanction introduced for defendants who
  fail to beat a claimant's Part 36 offer
• Applies to Part 36 offers made by claimants on or
  after 1 April 2013
• Unless the court considers it unjust, the
  claimant will be entitled to an additional amount
  calculated as a percentage of the damages or
  costs awarded
• Sliding scale 10 of any amount awarded up to
  500,000 and 5 of any amount awarded above
  500,000 up to 1 million
• Maximum additional amount 75,000

104
Summary

• Increased emphasis on getting to grips with cases
  at the outset (front-end loading)
• Greater need for proper planning of litigation
• Importance of budgets
• Expect little latitude if breach rules or orders!

105
North West WIN Annual UpdateREGULATORY

• John Gollaglee

106
Health and SafetyFee for InterventionCorporate
Manslaughter
107
Fee for Intervention (HSE)

• Cost recovery for previously free advice provided
  by Health and Safety Inspectors
• In force October 2012
• Only applies to premises regulated by the Health
  and Safety Executive (not local authority or
  environmental health officer regulated premises)
• Current hourly rate is 124 (no VAT charged)

• Purpose
• Designed to make those who breach health and
  safety legislation pay for the costs of
  correcting their breach

108
Fee for Intervention (HSE) (2)

• Application
• Applies to almost all businesses and same hourly
  rate charged irrespective of size
• Costs split where multi-dutyholder intervention
  occurs
• Scope
• Costs charged in respect of
• carrying out visits
• writing notification of contraventions (including
  improvement and prohibition notices and preparing
  reports)
• taking statements
• getting specialist input for complex issues and
• office work in support of the above

109
The material breach test

• Fee for Intervention can only be charged where
  the HSE Inspector believes there has been a
  "material breach" of the legislation.
• "A material breach is where you have broken a
  health and safety law and the inspector judges
  that this is serious enough for them to notify
  you in writing"

110
An 'appeal'?

• It is possible to 'appeal' against a Fee for
  Intervention invoice
• Level One 'query' (within 21 days)
• Invoice is reviewed by an HSE Senior Manager
  (independent of the line management which
  generated the invoice)
• Level Two 'dispute' (within 21 days of the reply
  to the 'query')
• Invoice is reviewed by a panel of HSE Staff and
  an independent representative.
• All HSE costs incurred in handling the dispute
  must be met by the duty holder, unless the
  dispute is upheld.

111
Fee for Intervention Prosecutions

• Is there a problem created by paying a Fee for
  Intervention invoice?
• Does payment of Fee for Intervention invoice
  constitute acceptance of a "material breach"?
• Does acceptance of a "material breach" preclude
  an effective trial in due course?

112
Corporate Manslaughter where are we now?

• Past prosecutions
• Cotswold Geotechnical (Holdings) - 385,000
• MW Farms - 187,500
• Lion Steel Limited - 480,000
• Note Sentencing Council Guidelines state that a
  fine of 500,000 is usually the starting (lowest)
  point for the court
• Current prosecutions
• PS JE Ward
• MNS Mining Limited
• Mobile Sweepers (Reading) Limited
• The future?

113
Corporate Crime and investigationsDefence legal
costsBribery Act 2010
114
Recovery of Legal Defence Costs abolished

• The change
• Rules on Defence Costs Orders amended
• Schedule 7 to the Legal Aid, Sentencing and
  Punishment of Offenders Act 2012
• In force October 2012
• The impact
• In any criminal proceedings involving a defendant
  company commenced after 01 October 2012, any
  defence costs order made cannot include legal
  costs incurred by a company (unless proceedings
  are in the Supreme Court).
• The response
• The importance of adequate legal defence costs
  insurance and nomination
• Or, a 'fighting fund'

115
Bribery Act 2010

• In force since July 2011
• Enforcement Activity
• not a single corporate prosecution
• two prosecutions of individuals
• prosecutors have continued to consider and
  finalise bribery and corruption investigations
  involving facts that pre-date the Bribery Act
• Under the Surface
• Civil Settlements Rolls Royce and others
• result of internal investigations
• significant impact on MA activity

116
North West WIN Annual UpdateREAL ESTATE

• Martin Griffiths

117
General Overview

• There have been no significant changes in
  legislation in relation to Real Estate over the
  last 12 months
• That is not unusual as Real Estate does not have
  a fast moving framework and is not subject to
  significant European Intervention
• The case law in this area reflects the economic
  climate

118
The termination of leases by tenant break option

• In the current market tenants want flexibility
  and shorter lease terms and/or break options in
  their leases
• Break options are not an absolute right to
  terminate a lease
• Break options often contain certain conditions
  which need to be met to ensure the break option
  is correctly exercised
• Tenants need to be careful about the conditions
  on a break option
• Landlords may have an opportunity to frustrate
  the break option by reason of the conditions

119
Typical conditions attached to a break option

• The service of written notice
• There are no arrears of the annual rent payable
• There are no arrears of other financial payments
  under the lease (including interest)
• The payment of a premium
• Vacant possession of the premises
• Material / substantial / complete performance of
  the terms of the lease
• The courts strictly apply all of these
  requirements

120
Example of case law

• Canonical UK Ltd v TST Millbank LLC 2012
• The tenant did not calculate correctly the level
  of premium. The court held the lease continues
• PCE Investors Ltd v Cancer Research UK 2012
• The break option was conditional on the payment
  of rent. The tenant failed to pay the full
  quarter on the final payment. There was no
  apportionment clause so the lease continues
• Gemini Bass Ltd v Parsons 2012
• Break option held to be personal to a tenant and
  not passed on the assignment of the lease
• NYK Logistics (UK) Ltd v Ibrend Estates BV 2011
• The tenant did not get out of the premises in
  time and there was a breach of the obligation to
  give vacant possession
• Avocet Industrial Estate LLP v Merol Limited
  2011
• The tenant failed to pay the sum of 130 in
  default interest

121
Rent payable as an expense of an administration

• There are a significant number of administration
  orders being made particularly in the retail
  sector
• Landlords are concerned over the administration
  process being abused to gain a rent free period
• Most leases provide for the annual rent to be
  paid quarterly in advance on the quarter days.
  This is an obligation to pay the whole quarter on
  that day, not apportioned on a day by day basis
• For an administrator to be liable to pay rent as
  an expense of the administration the
  administrator must be trading or using the
  Premises on the actual quarter day. (Goldacre
  (Offices) Ltd v Nortel Networks UK Ltd 2009)
• If administrators are appointed one day after the
  quarter day they effectively get 3 months rent
  free
• The Game Administration. The administrators were
  appointed on 26 March 2012 and obtained 3 months
  effective rent free. This is now challenged by a
  group of landlords. It is expected to go to the
  Court of Appeal by the end of the year

122
CORPORATE UPDATEMAKING THE DEAL HAPPEN

• Liz Clark

123
Heads of Terms

• What's the deal
• Keep it simple
• Highlight major issues up front
• Exclusivity
• Timetable
• Your moral barometer

124
Sale and Purchase Agreement

• Areas of tension
• Warranties and indemnities
• Warrantors' liability, basis of recovery
• Limitations on liability