North West WIN Annual Update - PowerPoint PPT Presentation


Title: 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
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Title: 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
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