Solicitor Surrey - Morrisons Solicitors - Articles

REMOVAL OF A CHILD FROM THE JURISDICTION

2010-06-03T14:59:00.001+01:00

What happens to children when a relationship breaks down and one parent wants to relocate abroad and take the children with them – permanently?

Without the written consent of all parties with Parental Responsibility for the child (generally that means just the parents) an application to court must be made for leave to remove the children from the jurisdiction of England and Wales.

In 2001 the Court of Appeal case of Payne v Payne determined how the courts should consider any such application. Any application to the court must be decided with careful reference, by the Court, to the “welfare checklist” (s1 Children Act 1989) which is a fairly rigorous list of criteria, having at its core the “best interests of the child”, that must be met before any order can be made.

Additionally, Payne v Payne directs the court to consider (in addition to the welfare of the child being paramount): whether the application is genuine and not derived from some ulterior motive (such as restricting or preventing contact with the non resident parent), whether the application is realistic & based on well-researched & investigated practical proposals (where are they planning on living, are there good schools and educational facilities? Good medical care and other provisions for the child?), how the child's relationships with the parent ‘left behind’ and their family will be affected, any detriment to the child and their future relationship with the 'left behind' parent if the application is granted and finally the impact of a refusal on the Applicant either as a single parent or as a new spouse.

In practical terms, the power currently resides with the person wanting to relocate which has historically usually been the mother, who has to furnish the court with the information they require to meet the requirements listed above. The onus is then on the ‘left-behind’ parent to demonstrate to the court that the proposals are unworkable and not in the best interests of the child. Some would consider this a more onerous task.

Despite the fact that there should be no presumption in favour of the Applicant the approach by the courts has been criticised as being weighted in favour of the person wishing to relocate, prioritising the interests of the relocating parent over and above that of the left behind parents. This surely must be more so in a world where families are changing with both parents having a more active role in the day to day care of the child and shared care arrangement being increasingly the norm.

So where are we now?

In the recent 2010 case of Re D (Children), Lord Justice Wall commented in terms that are widely read as extremely encouraging for future cases that this area is ready for review (but that that was not the case where it was appropriate to start that process).

So the position is that we are stuck with the principles of Payne v Payne until a case goes to court which forces the kind of review that Lord Justice Wall predicted.

If you are considering relocating or want advice on challenging plans to relocate please call Louise Pearce on 01737 854599 or email louise.pearce@morrlaw.com who will be able guide you in the right direction.

Launch of ‘fit notes’ in April 2010

2010-06-01T14:46:00.002+01:00

In April ‘fit notes’ (proper name ‘Statement of Fitness for Work’) were introduced in place of GPs’ sick notes. They will be available in paper or electronic format and will focus more on what the individual can do, rather than simply stating their incapacity. The idea is to provide employers with information, where appropriate, as to what duties an employee can undertake and what support should be provided.

The new form will require the GP to state that the employee is either unfit for work or that he/she may be fit for some work taking into account the following options (which are set out as a tick list):

A phased return to work;
Altered hours;
Amended duties;
Workplace adaptations

The GP will also have to indicate how long any adjustments are likely to need to be in place and explain the functional effect of the employee's condition. There is also a "comments" box which GPs will be encouraged to complete for complex conditions (which may have been caused or aggravated by work) or where guidance is needed from an occupational health professional.

The maximum duration a medical statement can be issued for has been reduced from 6 to 3 months during the first 6 months of a health condition.

As GPs are likely to have limited knowledge of an employee’s workplace and what their job entails their recommendations are intended to encourage discussions between employer and employee to work out exactly what adjustments can be made to enable the person to return to work. Although the new fit note may represent a shift in emphasis by focussing on what an employee can do, rather than what they can't, employers are still responsible for providing a safe workplace for staff. Therefore they will still have to consider all the circumstances including the employee's duties, the nature of their illness or injury and the GP’s comments before allowing an employee to return to work. In certain cases, employers may also want to get an independent medical report before making that decision.

The aim of fit notes is to help employees stay in work and to reduce the number of employees whose illness or injury means they descend into long term absence. They may facilitate an earlier, and perhaps phased, return to work with help and support from the employer.

The guidance issued by the then Labour Government states that the GP advice in the fit note is not binding and it is up to the employer how they act on the advice. It states that if an employer does not understand the advice on the fit note, they should discuss it with the employee in question, and if the matter is not resolved, they can then contact the GP for clarification. Employers are not obliged to comply with GPs’ recommendations but should be aware in particular of the potential relevance of the Disability Discrimination Act 1995 (DDA). If an employee is disabled for the purposes of the DDA there may be a legal duty to make reasonable adjustments to the employee’s duties, working methods etc to alleviate any disadvantage the employee is under because of their disability. A GP’s recommendation on a fit note may give details of such a proposed adjustment and prudent employers will give these due consideration.

Time will tell as to whether the introduction of fit notes will make any useful difference to the way employers manage sickness absence. However, the change should be welcome news for employers if GPs provide more information about employees’ conditions and their ability to work even with adjustments.

We recommend that early advice is sought where attendance issues are becoming a problem especially where the employer is considering dismissal and/or where the DDA may be an issue. For more information please contact David Seals on 01737 854573 or at david.seals@morrlaw.com.

PROBATE DIRECT - SAVING YOU STRESS, TIME AND MONEY

2010-06-01T14:44:00.002+01:00

Unsurprisingly, a recent survey found that nearly two thirds of Britons found the death of a family member or friend one of the most stressful events in their lifetime.

This stress is often exacerbated when those same people are faced with the burden of administering the friend or family member’s estate. At this time of bereavement the last thing people want to be faced with is fighting their way through complex tax forms and paperwork. On average, with a Will, it can take 6 to 12 months to administer an estate. Many can take much longer, particularly when assets have to be sold such as the deceased’s home.

The same survey also revealed that the second most stressful time in a person’s life is when they are faced with financial difficulties. In the present climate, this is something that is ever present in many people’s minds.

At Morrisons Solicitors we recognise those stresses and are proud to launch our new online service, Probate Direct. We know that every penny counts so it is a fixed fee service costing only £300 plus VAT.

We know that clients do not want to be burdened with lots of paperwork and our team of qualified lawyers can obtain the Grant of Probate without the need for them to complete complex tax forms or attend the Probate Registry. In fact, they do not even need to visit our office – we can complete the whole process online.

Please visit http://www.probatedirect.net/ or http://www.morrlaw.com/ for more information.

THE 2010 BUDGET – UPDATE

The current inheritance tax threshold is £325,000 for 2009/10. The last Government had set out in a previous Budget that the threshold would rise to £350,000 for 2010/11. Due to the current financial climate and reduction in tax revenue for the Government, that plan has been scrapped. It is not likely to be addressed in the forthcoming emergency Budget on 22 June 2010.

Alistair Darling, the then Chancellor, said: “I do not believe that raising this allowance can be a priority, given the impact of the downturn on the country’s finances.”

The current threshold of £325,000 is likely to remain unchanged for the next four years.

Capital Gains Tax (CGT) is high on the agenda for reform in the forthcoming Budget. There has been much speculation in the press as to what those reforms may involve and it is very much a case of watch this space.

This highlights the need for people to review their wills, trusts and financial affairs on a regular basis. Labour’s last Budget may come as a disappointment to many hoping for a £25,000 rise in the inheritance tax threshold in April 2010. More than ever before it is important to undertake planning for the future to ensure that your estate is passed to your family in the most tax efficient way possible.

If you would like further advice on how the 2010 or Emergency Budget may affect you or for more information on wills, trusts and estate planning contact Rebecca Fisher on 020 8971 1037 or email rebecca.fisher@morrlaw.com

From Our Personal Injury Department …

2010-06-01T14:42:00.001+01:00

Holiday Claims

With the approach of summer, many people will be looking forward to their holidays.

But what happens if someone has an accident and is injured in a hotel or villa abroad?

If the holiday is a “package holiday” as defined by the Package Tours Regulations 1992, it is possible to bring a claim against the Package Tour Operator if the holiday was arranged in the UK.

The liability of the Tour Operator is set out in Section 15 of the Regulations.

15(1) The other party to the contract is liable to the consumer for the proper performance of the obligations under the contract irrespective of whether such obligations are to be performed by that other party or by other suppliers of services …

This means that if a holidaymaker on a package holiday trips on a protruding flagstone outside a hotel and breaks her hip, she can bring a claim in the UK against the Package Tour Operator and does not need to bring a claim using a foreign lawyer.

However, the Courts have ruled in a number of cases that the standards to be applied are local standards and not UK standards. So if someone is injured falling on slippery flooring tiles, the test will be whether those tiles complied with the standards of that country and not with British standards. This will involve instructing a local health and safety expert or lawyer or both.

In many cases it may not be necessary to involve experts because the “failure to perform the contract or the improper performance of the contract” is clearly negligent such as the protruding flagstone in the example given.

It is worth mentioning that the holiday does not have to be taken outside the UK for the regulations to apply.

If a holiday is booked directly with a hotel or villa owner abroad (or in the UK) it is unlikely to be covered by the regulations.

Our personal injury department has considerable experience in this type of claim and can act for clients on a “no-win, no-fee” basis or under a pre-existing policy of insurance with a guarantee that you will recover 100% of your damages.

If we can be of any assistance with these or any other personal injury claims please contact Peregrine Lavington on 0208 971 1041 or email peregrine.lavington@morrlaw.com

Property Prices - Where Next?

2010-06-01T14:37:00.002+01:00

Against many commentators’ expectations, last year saw something of a recovery in house prices.

According to the Land Registry House Price index, Surrey House Prices reached an average high of £311,733 in March 2008. This was some months after the Northern Rock crisis in September 2007 which fuelled the financial crisis (although it was not until a year later that Lehman Brothers collapsed in September 2008). However Land Registry Prices are recorded on completion which is some months after the price is first negotiated so lag behind the market.

The lowest average prices recorded by the Land Registry were in June 2009 when the average price in Surrey was £258,960. Since then prices have risen month on month and in March 2010 (the last month currently available) the average price was £289,781.

Most commentators attribute the rise in 2009 to a lack of property on the market combined with a pool of cash rich buyers and the availability of low interest rates. Although mortgage lenders have been somewhat more cautious than in the past, money has been made available to them by the government and they have been keen to lend on low risk deals although first time buyers have experienced difficulty.

The beginning of the year got off to a slow start due to adverse weather conditions. Fewer properties came onto the market. This led to some rather optimistic pricing by sellers. Some agents have indicated this was partly due to competition for instructions between agents. Most agents know that the instruction is likely to go to the agent who values highest thus creating pressure to overvalue and “talk the price down later.”

The National Association of Estate Agents (NAEA) reported a fall in the number of buyers registering in February with only 258 people registering, which is the lowest number for a year and was down from 291 in January. However much of the country was again affected by snow in February as well as the arrival of Christmas credit card bills. At the beginning of the year the SDLT starting rate went back down to £125,000. However the average number of sales agreed by NAEA agents in February rose to 6.8 per office as against 5.7 in January.

Rightmove say there was a .1% rise in values over March. This is the lowest they have ever recorded for March. However they say the price increase in February of 3.4% was more substantial than usual which may partly account for a lower March figure. However the Halifax showed a loss of -1.5% and Nationwide showed a reduction of -1% for February so these figures are debatable and cause some to fear a further down turn – what’s known as a W shaped recovery.

However Rightmove report that March saw a dramatic increase in houses on the market. March is traditionally a good month for both new instructions and price increases. Rightmove say that in March there has been a 17.4% increase in houses on the market over February and more than a third more than March last year. However the number of new instructions this March was still 26% down on the average pre credit crunch levels of 2005-2008. Rightmove also say that the average time to sell a property reduced from 84 days to 63 day during March.

Over April Rightmove say that Sellers have increased prices on average by 2.6% (3.7% in the South East) and in May by an average of 0.7% and May has seen the highest weekly figure for new sellers since June 2008 although the spring market has been patchy. They say that the number of properties coming onto the market is recovering to levels last seen in September 2008 (before the Lehman brothers collapse). Buyer level has not kept pace so stock levels have increased over the country. However this does tend to happen in the spring. Prices are up but so is supply and it remains to be seen whether the increase will be sustained. For desirable properties or locations there is strong demand and good prices are being achieved.

This year will also be an election year. Research by the London Central Portfolio, based on Land Registry figures, shows that property transactions tend to fall ahead of an election and raise again soon after. In the three months prior to the 2005 election prices only rose 0.8% but then rose 5.2% in the following quarter.

SDLT changes were announced in the March Budget. First time buyers (i.e. those who have not owned or partly owned a house anywhere in the world) will not pay SDLT on houses costing up to £250,000 provided they intend to occupy it as their main home. The purchase must complete before 25.3.2012. On properties worth over 1 million the SDLT rate will increase to 5% from 6th April 2011. These changes will undoubtedly have an affect on the market (assuming the new government do not announce further changes).

Simon Rubinsohn of the RICS was quoted as predicting an increase in the first 3-6 months of the year followed by a period of stabilization particularly if interest rates rise at the end of the year. The Halifax was predicting a period of both rises and falls month on month with not much change by the end of the year.

Ray Burrell of the National Institute of Economic and Social Research has been quoted as saying that prices are overvalued relative to fundamentals. Many economists predict that with high unemployment, low wage growth, possible interest rate rises and supply outstripping demand, prices may fall again.

While the number of mortgages available since the onset of the credit crunch has risen, Lenders are said to be facing a funding crisis which could mean they scale back. The FSA is said to be considering increasing the amount of capital banks hold in relation to total lending. The National Institute for Economic and Social Research estimates that this could prompt banks to increase mortgage rates by 0.3 to 0.9% (as holding more capital and liquid assets puts up their costs).

Although lending criteria have loosened a little since the onset of the crunch, they still remain tight and keenly priced mortgages are limited. This is a particularly difficulty for first time buyers.

Markets are notoriously difficult to predict. Against the expectations of many, the market rose last year. House price rises create a feel good factor for home owners but create problems for those entering the market or indeed those wishing to trade up.

The SDLT changes mentioned above will have an affect on the market. Those wishing to buy at over £1 million will should think about doing so early as they will face much higher SDLT. Sellers with houses worth just over £1 million should also think about selling. SDLT is charged on the whole price so a house worth £1,000,000 will be charged £30,000 tax and a house worth £1,000,001 will be charged just over £50,000. This means that buyers will want to negotiate on price for those houses worth a little over £1,000,000.

First time buyers of properties worth up to £250,000 should also think about buying now to take advantage of the SDLT holiday. Whilst some commentators are predicting a fall in prices in the short term, this is far from certain and there is reckoned to be significant pent up demand in the market which will lead to increases in the long term. Also interest rates will ultimately rise and there is now a relatively good supply of property on the market.

The Sunday Times on 4th April also suggested those looking to trade up should consider doing so now. The falls in the market mean that the rungs in the ladder are not as great and for those with significant equity there are good mortgage deals around. Savills estimate that across England and Wales the price differential between semi-detached and detached properties was 68% last year and 80% in 2000. In addition it is predicted that the supply will increase as those seeking to buy over £1,000,000 seek to sell their properties.

If you wish to see how house prices in your area have changed please visit http://www1.landregistry.gov.uk/houseprices/ and click on House Price Check. This will take you to the Land Registry price index. The Land Registry record all sales so their website is the most comprehensive.

For more information please contact Peter Mills on 01483 215353 or email peter.mills@morrlaw.com

Managing Disputes with shareholders

2010-06-01T14:27:00.001+01:00

Many new businesses are started based on a firm friendship or mutual professional respect between the founder directors and shareholders. Unfortunately the dynamics of businesses and relationships change and this, or the addition of new stakeholders in the business, can erode even the best working relationship creating a shareholder dispute and damaging the business which has been built up over years.

Shareholder Disputes

A shareholder dispute could take many forms. The majority shareholders could look to remove one shareholder as a director and employee, taking away their rights to be involved in the running of the company, or they could simply apply their majority voting rights to make a decision which the minority does not believe is in their best interests or those of the company.

Although the majority can usually rely on their legal rights to direct the company, it would be open to the aggrieved shareholder to dispute the decision on several grounds:

Bringing a tribunal claim relating to dismissal as an employee
Claiming that the majority have acted in a manner unfairly prejudicial to their interests as a minority shareholder under the Companies Act 2006
Alleging that the majority have failed to fulfil their statutory duties and responsibilities as directors

At the very least this will have an impact on the shareholders and the company in terms of lost focus and in meeting legal costs. At worst it could lead to the company being wound up or one party being ordered to buy out the others’ shares.

A little planning goes a long way

More often than not, there are no winners from a shareholder dispute, but with some planning and thought at the earliest stage of the company’s life, many of the disputes can either be avoided or carefully managed.

With some sound advice and a little planning at the start of the relationship (or indeed as it matures) a shareholders agreement can address many of the common issues shareholders may encounter. It puts in place, in advance, steps agreed by the parties to deal with the problems should they arise at some point in the future.

Common Areas of Dispute

As a shareholder you should be honest and ask yourself some questions.

Who has day to day control of the business – are all shareholders to be directors, or will one or more have a working majority?
If the company is owned and controlled equally by two shareholders, what happens in the case of a deadlock (i.e. if you cannot agree on an issue)?
If there are minority shareholders, should there be any decisions requiring their consent?
If you wanted to sell your shares who would buy them and how much would they pay?
How would you feel about the equity of your company being diluted by your shares being sold to someone currently outside the business?
If you have an offer to sell your business, how would you as the majority shareholder get the minority share holders to sell, or conversely as a minority shareholder what protection would you have in that situation?

Can any shareholder be forced to sell their shares, for example if they are no longer able to actively work for the company? If so, how are their shares valued?

It may well be that you are confident that solutions can always be found and in a positive working relationship many decisions can be reached by compromise, but when things have turned sour, this “team working” approach often disappears out of the window. This is where you need to plan in advance.

How does a Shareholder Agreement work?

As highlighted above, there tend to be a number of potential areas of dispute that occur between shareholders.

Broadly speaking it is common for shareholders to consider the following types of protection:

Shareholder consents required on important issues
Provisions relating to exits and share valuations
Provision for the removal of directors
Deadlock provisions in the event that the board and shareholders are split
Restrictions on the authority to issue new shares

Measures for the resolution of disputes by independent experts or by other alternative dispute resolution (for example mediation or arbitration)

Alongside a shareholders’ agreement, it is also sensible to consider a review of the company’s articles of association to ensure that the two work together.

Cross Options and Life Insurance

It is also important to consider what would happen if one of the key shareholders were to die. Should their shares pass to their family, or would it be more important to allow the remaining shareholders to buy the shares at an agreed value?

If the buy-out option is preferred, we can advise on putting in place life insurance polices which can fund the purchase of the deceased shareholder’s interest by the survivor, avoiding dilution and retaining control. It is important that this is structured carefully to avoid triggering an inheritance tax charge.

Next Steps

The best way to deal with problems is to anticipate them and plan ahead as far as possible and this is where the shareholder agreement can come to the fore. Hopefully you’ll draw one up, put it in a drawer and forget it forever, but should the worst happen, the initial investment and time spent can pay huge dividends in terms of resolving business threatening disagreements.

For an informal chat please call Peter Savage on 01737 854548 or email peter.savage@morrlaw.com

Do I really need a Solicitor to administer an estate?

2010-02-15T12:59:00.001Z

Practice Director, Gill Hynard, poses the question to Private Client Partner, Mark Walker.

Mark: I would certainly always discuss matters with a solicitor specialising in Wills and Estates. I recently helped a client to save £30,000 in tax as a result of a conversation about his mother’s estate (which he thought he had completed himself). Luckily he spoke to me just in time.

Gill: Are there any other benefits in an early discussion?

Mark: First, I find clients can be tremendously reassured by a little practical guidance and encouragement to help with the numerous small questions which understandably arise just after a death. Secondly, suitably re-assured, it is valuable for a bereaved executor to have a calm assessment of the tasks and considerations that lie ahead.

Gill: What do Executors need to consider then?

Mark: They need to consider the following:-

Who should be acting

Usually only one of the named executors need act, and you could appoint an attorney to act for you. This can be helpful if executors live far away or are otherwise committed elsewhere.

Whether a long or a shorter Inheritance Tax (“IHT”) form needs to be completed

Although it is usually the shorter form in estates under £325,000 (or £1 million for widow(er)s), the rules are more elaborate. Once this is known, an executor can also be advised what information needs to be obtained and what type of valuations HM Revenue and Customs (“HMRC”) might expect. Establishing the correct IHT return form required at an early stage can save a great deal of work later.

Whether this is an estate where Capital Gains Tax liabilities are likely?

If so it is important to consider whether Capital Gains Tax savings can be made. This can still be an issue in estates where only the shorter IHT form needs completion. I recently helped such a “simple” estate save £10,000 when the shares gained in value.

Whether the executor can complete the IHT return themselves

If the longer IHT form in particular is required the executors need to ensure that they really understand it and can be sure that they will present it in the most beneficial manner.

Whether the amount of IHT paid can be reduced at a later stage

If IHT is actually payable, might this be an estate where the amount initially payable can later be reduced – and how would I know? If the value of assets falls during the course of an administration you could claw back IHT due or paid – if you adhere to deadlines and know how best to apply the rules.

Whether there is an opportunity to claim an income tax refund

This can usually be claimed for the deceased’s lifetime affairs. It may also be possible to mitigate income tax for a widow(er).

Whether the executor can comply with the Revenue reporting requirements for estates

HMRC will need to be notified of income received and “gains” made after the death and tax returns made (or excused where appropriate). Beneficiaries will also each need to receive a “Certificate” showing their share of any income and gains from the estate for their own tax affairs.

Whether the executor can I prepare estate accounts?

Comprehensive Estate Accounts will need to be kept for the beneficiaries sharing in the residue.

Whether the executor will be personally at financial risk

There can be penalties from HM Revenue & Customs where assets are not reported (mistakenly as well as dishonestly). Worse, an executor can become responsible for paying late discovered liabilities or for distributions to the “wrong” beneficiaries. We can help to mitigate these risks.

Gill: How could a distribution be made to the “wrong” beneficiaries?

Mark: Sometimes that might be a failure to accurately ascertain a relationship where the deceased dies without a Will. Bankruptcy of a beneficiary can also be problematic. I recently assisted with a sad case in which a distribution had been made to a thoroughly respectable nephew who had been made bankrupt, and had not notified the executor. The Trustee in Bankruptcy was entitled to the nephew’s inheritance and the executors were at risk for the shortfall and the Court costs

Gill: What about straightforward cases?

Mark: Most of the cases that we have already discussed appeared straightforward, but problems arose as the estates were being administered. Even where problems do not arise, executors often miss the opportunity to make tax savings if they do not take proper advice.

What I find most appeals to an executor is to be able decide, on an informed basis, what level of work they are comfortable with doing themselves. We can help with anything beyond this, and executors find that this is a burden lifted. The technical assistance helps too – to reassure and protect the executors and often to save tax for the benefit of all. We are happy to help with as much or as little as you wish.

There are cases where an executor might just need help to get a Grant of Representation and we have an excellent link http://www.morrlaw.com/Services-For-You/grant-of-probate-surrey.aspx

Gill: What about professional costs?

Mark: An estimate can be given following an initial discussion. Solicitors’ costs are subject to professional regulation. An advantage in employing Morrisons is that (unlike banks and many other firms) we do not make a charge based on the value of an estate. Often the costs can be offset by tax savings, but even where they are not, the gain is certainly in the reassurance, protection and general help that we offer.

For more information please contact Mark Walker on 01483 215011 or mark.walker@morrlaw.com

Ten years of Limited Liability Partnerships

2010-02-15T12:57:00.000Z

This year sees the 10th anniversary of the concept of the UK Limited Liability Partnership (LLP) since its introduction under the Limited Liability Partnership Act 2000. Its adoption by accountants, lawyers and surveyors in place of a traditional partnership has been widespread, but is it the right business structure for your business?

The LLP was initially designed to provide the same protection from liability to professional service firms, as has long been available for limited companies - particularly the large firms of accountants and lawyers who could not usually incorporate their businesses as companies. Indeed adoption of the new structure has been strong amongst these professions, with Morrisons converting in 2006.

The LLP was created as a hybrid between two well established business structures – a partnership and a limited company. Like a company it allows a corporate entity to be created and to trade in its own name, with the liability of its owners (strictly referred to as the ‘members’) to be limited to a defined amount of capital. Meanwhile the flexibility of a traditional partnership to agree management structures and profit sharing can be retained.

Importantly, unlike a company, the LLP is also ‘tax transparent’ – it is not itself subject to corporation tax but its profits are instead passed directly through to the members to pay individually.

For a business currently trading as a partnership, the benefits of converting to an LLP are therefore clear. Other businesses however may also be able to take advantage of the flexibility of adopting an LLP structure, with two key areas for consideration examined below.

Commission Structures and Collaboration:

In the past many businesses have looked to adopt a company structure with several classes of share ‘(usually denonimated by letters (‘A’ Shares’, ‘B Shares… and so referred to as alphabet shares’). The intention is to create variable profit shares by the setting of different levels of dividend for each shareholder dependent upon their individual performance.

This may be the case to reflect senior employees’ and director-shareholders’ success, or commission-based remuneration (often the case for example in recruitment businesses).

There are certainly tax advantages to be gained for employers and employees through the payment of dividends rather than commissions or bonuses, not least in avoiding the need to pay national insurance contributions on this element of the pay. However in recent years this has been a tax avoidance target and specific legislation may now mean that national insurance will be deemed to be due on these dividends.

Adopting an LLP structure and admitting the ‘alphabet’ shareholders as members (who are automatically self employed) would prevent the relevant members from being classed as employees and allow the distribution of profit to be made with no payment of employer’s national insurance contributions. With the LLP also paying no corporation tax, there are clear benefits to the ultimate owners which, for the time being at least, are unlikely to be challenged by a tax inspection.

Investments and Joint Ventures

The LLP has also been widely used in place of the traditional company as a special purpose vehicle (SPV) for property and other investments. Although this can be part of a complex fund structure, it is also suitable for many smaller and one-off group investments. Similarly an LLP can be incorporated as the operating body for a joint venture.

There are two principal advantages over a company. The first, again, is the tax position, with each investor or joint venture party being taxed individually on their share of the profit, with no tax on the LLP itself (where a company would pay corporation tax). This is particularly advantageous if the investors themselves pay a low rate of tax.

The second is the flexibility and privacy of an LLP. Where the profit sharing structure of a company must be publically filed at Companies House, an LLP agreement is an entirely private document between the members and can remain so. Although the names of the members must be declared, the powers, rights and obligations of each party can remain largely confidential.

Time to Switch?

While there are advantages in some circumstances to an LLP structure, it is not time to sound the death knell for the company, or even the traditional partnership, which will always have their place in business structures.

LLPs are generally not suitable for non-profit making organisations (as their stated aim is to be incorporated for the purpose of carrying on a business with a view to profit). They also cannot be floated on a stock exchange.

While there are fewer public filings for an LLP compared to a company, a partnership is entirely free from these obligations. Consequently some partnerships have chosen not to incorporate to avoid the need to publicly disclose their members accounts, particularly larger firms who would be required to file full audited accounts showing their full profit (or loss!) and balance sheet.

Finally, even ten years on from its invention, the LLP remains a new concept – after all limited companies were largely created by Joint Stock Companies Act in 1844! As a newer structure, there is still an ongoing period of uncertainty surrounding LLPs; this can lead to slower processes for example in tendering for work and borrowing. Similarly on exit, the sale of an LLP (or of one persons membership in an LLP can be harder to achieve than the conventional sale of shares).

If you do think that the LLP might be a suitable model for your business or new venture, we can advise on its use and assist with the incorporation and members’ agreement to ensure that the best structure is created for your needs.

For more information and a no obligation discussion please contact Peter Savage, Associate Solicitor in the Company Commercial team on 01737 854548 or peter.savage@morrlaw.com.

Commercial landlords: Rent Arrears

2010-02-15T12:52:00.000Z

The value of offices, retail space and warehouses has fallen by around 45pc since the onset of the credit crisis in 2007. The sector's demise has played a major role in the woes being endured by Britain's biggest banks. The recent growth in the economy may be evidence that things may be turning a corner but with small business tenants still experiencing severe financial difficulties there is no cause for celebration for existing Commercial Landlords yet.

The Litigation Department offers assistance to our Commercial Landlord’s in circumstances where a tenant fails to pay the rent due under a lease. Each situation is different and if you’re owed rent then a thorough review of all the options open to a Landlord can be carried out by our Litigation Department. This does not mean that all cases will proceed to court action. In some cases, the best option could be doing nothing at all but the receipt of advice shall put you in possession of all the options when deciding on the way forward. Landlord’s faced with these circumstances should be encouraged to seek thorough and complete advice in all cases.

We offer support to our Landlords in the following:

Distrain for the rent against certain goods belonging to the tenant at the premises
Sue for the rent via court action
Forfeit the lease, either by court action or by peaceable re-entry (modern leases will nearly always have an express forfeiture provision)
Payment of rent from administrators
Pursuing guarantors

If the tenant has failed to pay the rent because it is (or may shortly become) insolvent, the
landlord’s freedom to distrain, sue or forfeit may be circumscribed by the Insolvency Act 1986 so quick and affirmative action is what is needed.

For further information please contact Kellie Williams-Jauvel on 020 8971 1031 or at kwj@morrlaw.com

Highlights of the Employment Year 2009

2010-02-15T12:48:00.002Z

There were much awaited rulings delivered as well as changes in key employment laws and plans released for the forthcoming year. Here are our top five highlights:-

1. "Building a society for all ages" – the Government has launched a strategy document to review the default retirement age of 65. The current Regulations provide that an employer may fairly dismiss employees who are over the age of 65 by reason of retirement. However, groups such as the National Council for Ageing (who have brought a judicial review of the default retirement age) have campaigned for its abolition. The Government had pledged to review the default retirement age in 2011 and this was widely expected to lead to its abolition, but this review will now be brought forward in response to the "change in economic circumstances" since the introduction of the provision. The consultation closed on 12 October 2009 and we expect to hear further on the results in 2010.

2. Holidaying after sickness - The Working Time Regulations clearly provide that a worker who has not taken their full statutory holiday entitlement during a leave year cannot be paid in lieu, unless they leave, nor carry forward any of the first four weeks of leave not taken. So, can employers draw a line under this year's annual leave entitlements and move on to next year? Well, according to the European Court of Justice (ECJ) in three landmark cases for 2009 - the answer is…No.

The interrelation of holidays and sickness absence was clarified in the following high profile ECJ decisions; the key points to note are:

Stringer and Others v Her Majesty's Revenue and Customs – held: workers on long-term sick leave are entitled to take paid statutory holiday leave while on sick leave
Schultz-Hoff v Deutsche Rentenversicherung Bund C – held: where a worker has been prevented from taking their annual leave due to sickness, they must be allowed to take that leave when they return in a new leave year, or receive payment on termination
Pereda v Madrid Movilidad SA – held: a worker who is sick during a period of scheduled statutory holiday has the right to reschedule the holiday for a later date and, if necessary, to roll over that holiday to the following leave year.

It is clear that following these decisions, employers could be facing significant bills if employees on long-term sick leave start claiming holiday entitlement, or holiday pay, in respect of years gone by.

3. Equality? The Equality Bill, expected to come into force by autumn 2010, is set to replace nine discrimination laws and more than 100 other measures with one single Act to make it easier for employers and employees to understand their legal rights and obligations. The Bill aims to ensure everyone has a fair chance in life and also deals with the issue of the gender pay gap. It will require public sector employers with more than a specified number of employees to report on the gender pay gap. The original provision was for those with more than 250 employees to provide this information but a reduction in the number to 100 has also been mooted. Organisations with more than the agreed number of employees will be ‘encouraged’ to volunteer information on the average hourly pay of male and female workers. If by 2013 it is clear that a voluntary reporting system has been ineffective in narrowing the gender pay gap, legislation will be brought forward to force disclosure. The Bill will also ban secrecy clauses which currently prevent staff from disclosing their salaries to colleagues. Larger employers should consider carrying out an audit sooner rather than later and to ensure that any pay discrepancies are remedied so as to reduce the risk of equal pay claims.

4. Equal rights for agency workers – The Temporary Agency Workers Directive must be implemented into domestic law by 5 December 2011. The key requirements of the Directive are that basic working and employment conditions for assigned temporary workers are no less favourable than if they had been recruited direct by the hirer. This covers remuneration, paid holiday, working hours, overtime, maternity and anti-discrimination provisions and, arguably, pension contributions.

The UK Government has agreed that there should be a 12-week qualifying period for this right.
It is estimated that it will cost the private sector alone an extra £1.5bn to take on temporary staff after December 2011.

5 Acas Code – On 6 April 2009 the Employment Act 2008 changed the way that disciplinary and grievance matters were handled by replacing the statutory dismissal, disciplinary and grievance procedures (SDGPs) with a new Acas Code of Practice on discipline and grievance (the Code). The Key points to note are:

Failure to follow the Code does not make a dismissal automatically unfair (as had previously been the case under the SDGPs)
Tribunals will have a discretionary power to adjust awards by up to 25%, if they consider that an employer’s or employee’s failure to comply with the Code was unreasonable
The Code does not apply to redundancy and expiry of fixed term contract dismissals

A failure to follow the Code will not, in itself, make a person liable to proceedings. However, a tribunal will take the Code into account in deciding relevant cases.

For further information please contact Sofia Syed on 01483 215358 or at sofia.syed@morrlaw.com or another member of the employment law team.

FAMILY LAWYERS TURNED PRIVATE INVESTIGATORS

2010-02-15T12:39:00.001Z

For many people embarking on proceedings to resolve the financial matters arising from the breakdown of their marriage (known as “ancillary relief” proceedings), there is a real concern that their estranged spouse may try to conceal the full extent of their finances in order to frustrate the process and the overall financial settlement. This is despite their knowledge that both parties are under a duty to the court to provide full and frank disclosure of their means. The trust is gone.

It is therefore not uncommon for one party to examine, copy, or even retain the other’s private documents to learn more about their financial position, with the hope of revealing something that has yet to be or may not be disclosed. Such self-help was recognised in the case of Hildebrand in 1992. This case established the principle that Family Courts will not penalise the taking, copying and immediate return of original documents found “lying around”, provided no force is used to obtain those documents.

But to what extent does the Hildebrand principle conflict with general common law in our modern age of data protection and human rights, where confidentiality and privacy are paramount?

This was recently tested by the famous chef and restaurateur Marco Pierre White who in 2008 brought a case against his ex wife and her solicitors, Withers, for “damages for breach of confidence and privacy, misuse of private information and wrongful interference with property”. But what had they done?

Mr White alleged that his Wife had intercepted and taken 42 of his documents to include a P&O contract and a personal letter from his young daughter from a previous relationship, Letty. The documents were taken after alleged threats from Mr White that his Wife “would not get a penny from him if they were to separate”, that he would “leave the country” and that he “owned nothing and sold everything for £1”. (Statements which Mr White strongly denied, but are heard all too often in ancillary relief proceedings). Mr White asserted that his Wife’s removal of documents was on the advice of her solicitor Mr Dearle which was denied by both Mrs White and her solicitors. Interestingly the claim against the Wife was subsequently discontinued.

The case was heard before Mr Justice Eady on 19th November 2008 who struck it out on the basis that there was no cause of action. (A small sigh of relief for Family Lawyers who then awaited the appeal!)

The appeal then followed and was heard on 23rd June 2009. Lord Justice Ward held that not only had documents been intercepted (against the principle established in Hildebrand) but they had also been retained for some months by the Wife’s solicitors. Of particular concern was the letter from Letty which had nothing to do with the financial proceedings and which Lord Justice Ward concluded was a “touching and almost heartbreaking letter to a father expressing her love for him and her wish to see more of him” - a letter which “was not only intercepted but was also withheld …denying Mr White the opportunity to respond to his daughter’s cry for help”. Lord Justice Ward also concluded that self-help was not a good defence neither would public interest or legitimate justification suffice.

Potentially, this case has huge implications for both lawyers and clients who want to turn spy to ensure that full financial disclosure is given and the right settlement is reached as a result. The outcome of the trial is therefore eagerly awaited in the hope that lawyers and clients alike will receive clear guidance on what can and cannot legitimately be done.

In the modern age there are not just hard copy documents so what is the position for electronic documents? Following the case of L-v- L in 2007 the Hildebrand principle was not deemed to apply to the Wife removing and copying the contents of the hard drive of the Husband’s laptop computer. It was decided in this case that the Wife should not benefit from her unlawful conduct. Whilst this was only an interim hearing and therefore not binding on subsequent decisions this principle was in fact affirmed by Lord Justice Ward in the case of White –v- Withers (above).

So far, the lessons to be learned appear to be:-
Not to intercept or use force to obtain documents;
To return all documents on request (whilst copies can be retained);
Not to retain the original, and to ensure that originals are returned promptly after copying - possibly within a period of two clear working days;
All documents copied should also be disclosed to the opposition on request and during the course of proceedings.

But even if the principles in Hildebrand are followed this may not prevent a claim being brought against solicitors or their clients and clarification of the appropriate course of action is eagerly awaited by all- particularly solicitors!

Are these self-help remedies the only means of discovering hidden financial information? The simple answer is no. The court can make an order for disclosure in the normal course of ancillary relief proceedings. There are also broad injunctive powers which the court has and specific powers to preserve property and documents. These need to be carefully considered if self-help methods under Hildebrand are not to be a defence in the future and some appreciable damage has been caused by the action of legitimately obtaining and copying documents.

Great care must be taken when embarking on ancillary relief proceedings and using self-help methods to assist financial disclosure. If the principles are not followed or forgotten, expensive and unexpected consequences may follow. As for the nature of those consequences, we await the final judgement in the case of White.

Whether you are embarking on divorce and ancillary relief proceedings, or any other form of family litigation (variations of maintenance, capitalising payments, disputes over school fees payments, or any other such applications), or know someone who is, our Family Team at Morrisons can assist.

We will help you with what you can and cannot do to ensure that full and frank financial disclosure is provided to help you achieve the correct financial settlement for you.

For more information please contact Louise Pearce on 01737 854599 or louise.pearce@morrlaw.com

Commercial Real Estate Update

2010-02-15T12:33:00.002Z

Going Once… Change to Auction Conditions

On 23 September 2009, the Royal Institute of Chartered Surveyors (“RICS”) launched the third edition of the Common Auction Conditions (available at ww.rics.org/commonauctionconditions). The RICS revised the auction conditions with the following principles in mind:

A fair balance between seller and buyer and acknowledging that the seller will want to control the main sale terms;
To ensure that auctioneer’s catalogues and websites show all of the terms and conditions of the auction i.e. to avoid reference to multiple documents which contain various other terms;
All terms to be in clear plain English;
The creation of an industry standard which is accessible and attractive to both buyers and sellers; and
A requirement for general conditions specific to a particular auctioneer to be clearly highlighted.

The revised auction conditions are the result of a consultation and feedback process intended to make auctions fairer. We have summarised just a handful of the main changes to the conditions below.

Reserve Price .Vs. Guide Price
Part of the focus was on the reserve price and guide price dichotomy. The conditions now highlight that the guide price applies as at the time that it is given by the seller and therefore any bids made on the basis of an old guide price are made at the bidder’s own risk.

Consumer Protection and Fraud

The Fraud Act 2006, the Business Protection from Misleading Marketing Regulations 2008 and the Consumer Protection from Unfair Trading Regulations 2008 all play a part in auctions. The aim is to ultimately protect the bidder in its capacity as the consumer at the auction. However, the seller is also sufficiently protected, for example, if a guide price is published immediately before the auction and is less than the reserve price, an auctioneer could be found to have acted fraudulently in the event that the auctioneer proceeds knowing the seller would not want to sell at that price.

As a result of the changes, the Office of Fair Trading (“OFT”) can also be called upon to review an auctioneer’s conduct. Although the conditions are not binding, they are seen to be an industry standard and it would be in an auctioneer’s interests to comply with them fully to avoid action from the OFT.

Existing Tenancies
The conditions also deal with the circumstances where there is a tenant in occupation of the freehold being sold. The conditions assume that vacant possession will be given on completion unless the special conditions expressly disclose an existing tenancy at the property. With regards to arrears due under any existing leases at the property, it was previously the case that the purchaser would also pay all the arrears due to the seller and then seek to recover them from the tenant. It is now the case that the buyer must only pay the seller for the arrears which are specifically disclosed in the special conditions.

Insurance

Traditionally, and as is still the case under the Special Commercial Property Conditions, the buyer takes responsibility for insuring the property from the date of exchange. Under the revised auction conditions, this risk remains with the seller until the date of completion. This change seems logical as it is almost always the case that the seller will retain its insurance policy until completion in any event. However, the seller must disclose the details of the insurance to the buyer and must note the buyer’s interest on the policy. It may be the case that the buyer will have to reimburse the seller for the cost of maintaining the insurance policy for the period between exchange and completion.

Conclusion
The increased emphasis on consumer protection has meant that the conditions are now fairer and more balanced than they previously were. An unjust act or condition during an auction can be reported to the OFT and unfair auction terms can in some cases be ruled as invalid. For those previously adverse to buying or selling at auction, this might be the dawn of a new era.

For further information contact Nirav Patel on 020 8971 1042 or email nirav.patel@morrlaw.com

Lasting Powers of Attorney Update

2009-11-25T14:08:00.003Z

On 1 October 2009 the Office of the Public Guardian introduced redesigned Lasting Power of Attorney forms. The original forms published in 2007 can still be used until 31 March 2011 but if so an LPA prepared on the old form must be signed and completed by 31 March 2011.

Lasting Powers of Attorney (LPAs) were introduced on 1 October 2007. They replaced Enduring Powers of Attorney which could not be created after 30 September 2007 but which continue in effect if properly made. An LPA allows a person to appoint an attorney or attorneys to make decisions on his or her behalf and the arrangement can continue even if the person who has made the LPA (the donor) has become mentally incapable of managing his or her affairs.

There are two types of LPAs:

A Property and Financial Affairs LPA which gives your attorney authority to deal with your property and financial matters;
A Health and Welfare LPA which gives your attorney authority to make decisions about your health and welfare on your behalf, but only when you lack mental capacity to do so yourself. This can include decisions relating to your healthcare and medical treatment, decisions about where you live and day to day decisions about your personal welfare such as your diet, dress and daily routine. The power could also extend, if you wish, to giving your attorney authority to give or refuse consent to life-sustaining treatment on your behalf.

When Lasting Powers of Attorney were introduced on 1 October 2007 (replacing Enduring Powers of Attorney) the published forms were 25 pages long. I and other members of Solicitors for the Elderly were concerned at the length and complexity of the documents, particularly as far as our older clients were concerned. I have come across situations where clients decided not to proceed with drawing up a Lasting Power of Attorney as they were put off by the length and complexity of the document. We were therefore pleased to note that the new forms published for use as from 1 October 2009 run to 11 pages only. However the document is still far longer than an Enduring Power of Attorney which, prior to October 2007, could have been prepared in as little as four pages.

Safeguards against abuse

As an important safeguard against abuse, one of the requirements of making a valid LPA (of either type) is for the document to be signed by an independent person who can confirm that:-

The donor understands the purpose of the LPA and the scope of the authority conferred under it.
No fraud or undue pressure is being used to induce the donor to create the LPA.
There is nothing else which would prevent the LPA from being created by completion of the form.

There are two types of Certificate Provider:

A person who has known the donor for at least 2 years and as more than an acquaintance (a panel has to be completed by the Certificate Provider explaining their personal knowledge of the donor); or
Someone with relevant professional skills, e.g. a GP or solicitor or possibly a medical specialist such as a consultant specialising in geriatric care.

The new LPA form makes clear to a Certificate Provider that “if someone challenges this LPA, you may need to explain how you formed your opinion”.

Whilst it is possible to obtain forms and draw up an LPA without professional advice, if we as solicitors draw up an LPA for you, we will have made a careful attendance note and will ensure that you are able to give independent instructions and you are not being coerced into signing the document. As a precaution, the solicitor or other fee earner involved will usually have taken instructions from you without other family members being present. This could be very important in the future if the LPA were challenged on registration– either on the basis that the form had not been understood properly or in the event of a family dispute.

If you are in good health and clearly able to understand the document then a solicitor from Morrisons would be able to act as the Certificate Provider. If you were in failing health and particularly if suffering any mental confusion, we would recommend that your GP or medical consultant should sign the certificate.

Registration of the LPA with the Office of the Public Guardian

It is important to note that an LPA cannot be used until it has been registered with the Office of the Public Guardian. We can advise you further on the registration process.

What happens if you have not made an LPA (or valid Enduring Power of Attorney prior to 1 October 2007)?

If you lack capacity to make a financial decision then it may be necessary for an application to be made to the Court for an appropriate order, such as appointing another person to make decisions on your behalf. The person appointed is now known as a Deputy. This is both costly and time consuming.

Many care and treatment decisions can be made on your behalf without the need for a Court application. However you can avoid potential difficulties and disputes by making a Health and Welfare LPA; a Health and Welfare LPA can be particularly useful in the case of a degenerative illness which may lead to mental incapacity since day to day decisions involving your personal welfare and communication with doctors and carers can be made on your behalf by your attorney.

If you would like to make an LPA or require further advice, please contact Jane Forbat on 01737 854522 or email jane.forbat@morrlaw.com or Mark Walker on 01483 215011 or email mark.walker@morrlaw.com.

Children at Christmas

2009-11-25T14:06:00.003Z

With Christmas approaching thoughts are now turning to spending time with family members and enjoying the festive period together. Where parents have separated it is often a challenge for both parties to agree where children are to be, at what time, and for how long. It can be a particularly difficult time for the children themselves with loyalties divided and a sense of not wishing to let a parent down.

If agreement cannot be reached between parties, then one option maybe to apply to the Court to have specific dates, times and venues defined by the Court so that all parties have a clearly defined timetable to work from over the festive period and beyond.

While it is often the case that such an Order will contain specific dates, times and venues it is helpful if both parties can build in an unwritten flexibility to these arrangements, which may change due to illness or other reasons. The balance to be struck is between the certainty that set times bring and the ability to alter arrangements at short notice, because life is unpredictable.

While the Court will consider the child’s own wishes and feelings in the light of his or her age and understanding, the guiding principle of the Court is that an Order should be made in the best interests of the child.

The option of applying for definition of contact is also open to grandparents and other relatives once they have leave of the Court to do so.

The law continues to encourage parents to sensibly arrange contact times by consent with the interests and welfare of the child at heart, but where this is difficult, for whatever reason, we in the Family Department at Morrisons have the experience and sensitivity to guide an Applicant through the process and avoid the problems that can arise at this time year.

For more information please contact Andrew Perryman on 01483 215359 or email andrew.perryman @morrlaw.com.

Developments regarding Holiday Pay and Sickness

2009-11-25T14:01:00.003Z

In this article we look at recent developments covering employees’ holiday entitlement

EU law provides that workers are entitled to at least 4 weeks paid annual leave. This right is conferred in the UK by the Working Time Regulations 1998 (WTR) which entitle workers to 5.6 weeks’ paid holiday per year (ie 1.6 weeks more than the basic EU right). The WTR specifically provides that at least the first 4 weeks leave must be taken in the current holiday year, so cannot be carried forward to the next.

HMRC v Stringer and others considered whether employees on long term sick leave were entitled to take paid leave during their sickness absence. It also looked at the time limits for bringing claims. In Pereda v Madrid Movilidad SA the European Court of Justice (ECJ) considered whether employees who are sick during scheduled annual leave should be allowed to take the holiday on another occasion.

HMRC v Stringer and others
Earlier this year, following a House of Lords referral, the ECJ decided that the right to paid annual leave arises from the very first day of employment until termination. Therefore, workers continue to accrue annual leave during periods of sickness absence and that it is for each EU member state to determine whether annual leave can actually be taken during sickness absence. If a member state does not allow this workers must be permitted to carry over the accrued leave to subsequent years.

When the case returned to the House of Lords, HMRC conceded, and the House of Lords implicitly agreed, that following the ECJ’s decision the WTR must be interpreted as allowing annual leave to be taken during sick leave where a worker is off sick for the remainder of the holiday year since the WTR expressly prevented the basic 4 weeks annual leave entitlement being carried over to the following holiday year.

There was still one outstanding issue for the House of Lords to rule on when the case was remitted back to it in the summer: whether or not claims in relation to statutory holiday pay can be brought as a claim for unlawful deductions from wages under the Employment Rights Act 1996 (ERA) or whether they have to be brought under the provisions of the WTR. The importance of this lies in the time limits applicable to each claim. Under the ERA, claimants are required to bring a claim within three months of a deduction, or of the last in a series of deductions. This is more favourable than claims under the WTR, which must be brought within three months of each failure to pay in respect of the worker’s holiday entitlement.

The House of Lords decided that statutory holiday pay falls within the definition of “wages” and therefore such claims can be brought under the unlawful deduction provisions of the ERA. This means that claimants who have repeatedly been denied the right to be paid in respect of holiday during sick leave can bring one claim in respect of the series of refusals. The effect of this is that employee claims for unpaid leave can in theory go back years with potentially costly results for an employer who had not paid adequate holiday pay over a number of years.

Pereda v Madrid Movilidad SA

In Pereda the ECJ decided that where a worker is sick during a period of pre-planned annual leave annual leave must be granted for a different period and if the worker is prevented from taking it during the current holiday year it can be carried forward to the next one.

Unfortunately, it is not clear whether this right applies to the minimum 4 weeks provided by EU law or whether it would extend to the full 5.6 weeks leave provided under the WTR. The WTR specify that no more than eight days can be carried forward into the next leave year. Therefore, this leaves a grey area in the law until the WTR is amended or a case comes before the British courts to clarify the situation.

Significantly, because Pereda is an ECJ case it can only be relied upon by public sector workers for the time being. This would change if, as stated above, the government decides to amend the WTR to bring it into line with the ECJ ruling.

Pereda concerned a worker who fell sick prior to going on holiday but the ECJ did not make a distinction between a worker falling sick prior to taking annual leave and falling sick during annual leave. It is therefore arguable that this case is not authority for the proposition that employees who fall sick during their annual holiday are entitled to extra days off in lieu. That said, it is difficult to see why the same rationale cannot be applied to such cases. This would be a potentially unwelcome development for employers if employees start to report in sick during their period of leave perhaps when they are abroad when it would be easier for non-genuine illness to be concealed.

Summary

Statutory holiday will continue to accrue during sick leave even if the worker is not present for the entire holiday year
Workers can exercise their right to take holiday (and therefore be paid) during a period of extended sick leave
(Currently for public sector workers only at the moment) workers who fall sick during a period of previously scheduled annual leave have the right to take that leave at another time
On termination but not during employment, workers have the right to be paid in respect of accrued but untaken holiday entitlement
A failure by the employer to allow the worker to either take the leave, or be paid in lieu on termination, can be pursued as a claim for unlawful deduction of wages.

Advice for employers:
Review sickness and absence policies

Introducing specific procedures for employees to follow when sick during a period of annual leave may minimise the risk of abuse by employees. For example, requiring employees to present a doctor’s certificate and making it clear that a decision to reinstate annual leave is at the manager’s discretion.

Review the situation for employees on long-term sick leave

Previously, employees on long term sick leave could be retained for little cost. However, indefinite accrual of statutory holiday pay changes this position. Consider what steps can be taken to actively manage the employee’s absence from an early stage. This will involve holding regular meetings with the employee as part of a capability process and, more often than not, obtaining a medical report. Where it is established that an employee will not, or is unlikely to, be able to return to work within a reasonable timescale, take steps to terminate the employment, rather than continuing the employment indefinitely. If the decision is taken to terminate employees on long-term sick leave, care must be taken to avoid successful unfair dismissal and/or disability discrimination claims. If the employee has a disability under the Disability Discrimination Act 1995 (DDA) - which is often the case with employees on long-term sick leave - then thought must be given, amongst other things, to whether reasonable adjustments under the DDA could be made to help the employee return to work or continue performing his role or an alternative role rather than terminating employment.
As with any dismissal case you should always seek legal advice before terminating employment.

For further advice please contact Heather Smith on 01737 854574 or at heather.smith@morrlaw.com.

Terms and Conditions: The Battle of the Forms

2009-11-25T13:54:00.002Z

It is often said that litigation rates rise in recessions. As insolvencies mount and commercial deals turn sour disputes that might not be worth fighting in the profitable times rapidly become strategically significant to companies and individuals seeking to protect the assets they have.

It is therefore vital to ensure you and your company are protected against this increased risk of claims. One simple step you can take is to make sure your contracts are correctly created and drafted by taking care to be properly advised on the contracts you form and the terms upon which they are based.

Standard Terms and Conditions
It is increasingly common in all areas of business for companies to have their own standard terms of sale and purchase. Problems arise when the parties involved in a transaction both want to impose their own standard terms as each party’s terms will be more favourable to them. The inevitable question therefore arises - which terms will prevail? In the legal world this is known as the “battle of the forms”.

The term may sound dramatic but the consequences of unwittingly accepting the other party’s terms in a contract can be significantly detrimental to you or your company. For example a seller’s standard terms, if accepted as the terms of the contract, may include a “price escalation clause” meaning that on delivery they would be entitled to increase the price previously agreed. On the flip side, in our experience, we have found many companies have simply adapted terms from another company and are unwittingly using largely unenforceable clauses. This of course is only usually discovered when a problem arises – that is when it is too late.

The approach taken by the courts has been that the “last shot fired” prevails. The party that sends the last document containing a set of standard conditions fires the last shot and therefore wins the battle. You need to be careful as you can accept the other side’s terms simply by starting to perform your obligations under the contract.

Tactics
There are several practical approaches to adopt in order to avoid costly disputes arising:

1. Negotiation: Discuss the terms of contract directly with the other party and agree any variations in writing thus allowing you to both negotiate and agree terms and conditions that are not biased towards one party. One advantage of this is that you can limit your liability further because you are no longer dealing on one party’s standard terms of business. The main disadvantage to this option is the time and expense involved which is effectively what standard terms seek to avoid. If you choose this route it would also be prudent to seek legal advice in order to put you in good stead for negotiations.

2. Prevailing clause: Each party may include a clause that stipulates the contract is subject to their own standard terms and conditions to the exclusion of all other terms including any terms or conditions which the other party purports to apply under any other document.
Such a clause is generally considered to be ineffective, despite this you will find it incorporated in many standard terms, essentially for “bluff value”!

3. Last Shot Doctrine: You could refrain from raising the issue of terms with the other party and simply attempt to ensure that your terms appear on the last document passing between the parties before the performance of the contract therefore “firing the last shot”. As a result, your terms will be incorporated without amendment – obviously very favourable to you.
You will need to be very aware of what is passing between parties – even a stamp on the delivery which states “received on the buyer’s conditions” could constitute a counter offer and mean the Buyer’s terms have prevailed.

It would not be sufficient to only have your terms on your invoice as this commonly passes after the contract has already been formed, however you may do this in addition to the pre-contract documentation so that in regular transactions with another party the terms may well be found to prevail as the customer has become aware of the terms through a course of dealings.

Next Steps
Having standard terms and conditions may help to avoid costly disputes when things go wrong. These terms could be printed on the back of all pre-contractual documentation i.e. tenders, quotations, acknowledgment forms, delivery notes, with a statement on the face of the document that the contract is made on the terms printed on the reverse. You must then ensure that your terms are the last to pass between the parties prior to the contract being concluded.

Professionally drafted terms and conditions should be regarded as an investment. They can both protect your business and assist in maintaining good commercial relations through well structured contracts.

At Morrisons we have a team of commercial solicitors who would be happy to provide advice on all your commercial needs. We have assisted with a variety of organisations both large and small to ensure their standard terms and conditions meet the specific needs of their business.

For help with your terms and conditions, any standard form contract or a supply agreement not on standard terms please contact Natalie Wood on 01737 854544.

The Equality Bill

2009-09-07T10:32:00.001+01:00

The Equality Bill is a landmark legislative proposal which is currently in the Committee Stage and is due to reach the House of Lords at the beginning of October 2009. Subject to the approval of both Houses, the Bill should receive Royal Assent in the Spring of 2010, which means that the new law could start coming into force by October 2010.

The Equality Bill has two main purposes, to harmonise discrimination law and to strengthen the law to support progress on equality.

The Bill succeeds in unifying a myriad of discrimination strands under one structure, and aims to adopt a plain English approach in order to make discrimination and equal pay law easier to understand.

At the heart of the Bill is the Government’s commitment to making society a fairer place by strengthening the legislation covering employment, goods and service and public bodies.

In the main the Bill restates much of the substance of existing law, however, it does also contain a number of new rights and obligations and plugs quite a few gaps by applying the same level of protection across most of the strands.

Whilst the Bill has in the main been welcomed, there have been grumblings of discontent in some quarters. These have tended to focus on the way in which the Government proposes to deal with gender pay gap issues or issues relating to positive ‘action’ or as some see it ‘positive discrimination’.

The Government has in the past repeatedly stressed its commitment to tackling the gender pay gap problem, however, on viewing the Bill a number of bodies have expressed dismay that plans to encourage voluntary reporting of pay differentials by private sector employers are too weak and that compulsory pay audits should have been introduced immediately rather than in 2013. Others, however, take the opposite stance and are alarmed that further down the track the Government could require private sector employers with 250 or more employees to publish gender pay gap information. It is argued that this would be misleading and open to misinterpretation which could in turn lead to more equal pay cases being brought to the Employment Tribunal regardless of whether those claims had any real prospects of success.

Somewhat controversially the Bill will allow employers to take ‘positive action’ when hiring in order to ensure a more even representation of society in their workforce. If this legislation is introduced as it stands, this ability of employers to take positive action will almost certainly be a litigation area with white, male employees (the most likely group of ‘victims’) claiming that they were in fact better qualified than a member of a minority group appointed to a job. The employer is likely to encounter problems in communicating to the workforce how positive action – which is about eliminating entrenched societal disadvantage – works, and that this is not the same as positive discrimination, which will remain unlawful under the Bill, if enacted.

The Bill attempts to do all of the above in non-technical ‘plain English’, so that ordinary people have a greater awareness of their rights and responsibilities. Whether this is achieved is another matter, since the law will still be just as complicated despite the Bill’s plain English approach. The legislation may appear superficially easier to comprehend but the tricky concepts underpinning simpler words and the legal decisions on long-standing principles have not (sadly) been drafted out of existence.

For more information please contact Louisa Newton on 01737 854574 or email louisa.newton@morrlaw.com.

Retention of Title Clauses

2009-09-04T08:46:00.000+01:00

Don’t just give it away – Retention of Title Clauses

When you enter into a contract for the supply of goods it is the usual rule of law (with very limited exceptions) that title (i.e. ownership) to those goods passes to the purchaser at the time of delivery. Should you offer credit terms whereby the cash for the goods is payable after delivery then your business could well catch a nasty case of ‘bad credit flu’ should your purchaser become reticent in making payment on the credit terms agreed, or worst still, become insolvent.

Due to the nature of sale of goods contracts, in the event of non-payment, the only remedy left is for you to sue the buyer through the courts for payment of your invoices. Court action may result in a judgment in your favour but not necessarily money in your pocket. If the buyer becomes insolvent, the goods sold would become part of the buyer’s general assets and be used/sold by an Insolvency Practitioner for the benefit of all of the buyer’s creditors – leaving you with a ’percentage in the pound’ payment (if you’re lucky) that you so often hear about; not to mention a couple of rounds in the ring with an Insolvency Practitioner in attempting to recapture the goods if you believe they are still on site. Whilst those processes can sometimes be a necessary evil the outlook may not be as bleak, as including a simple Retention of Title Clause in your contract of sale may be all the Tamiflu you need.

A “Retention of Title Clause” is a clause that allows you to retain ownership over the goods supplied until such time as certain conditions are met, thus providing you with a form of security against the buyer's default or insolvency. The typical condition to be met is that payment of the goods be received by you in full before ownership in the goods passes to anyone else. Delivery can still take place as normal but the practical effect of a Retention of Title Clause is that if you are not paid you can go on site and collect the goods and move on. Moreover, a Retention of Title Clause can keep your goods out of the sights of an Insolvency Practitioner.

It is an essential requirement that the goods remain identifiable and there are a number of clauses which are relevant to retain title to goods which will assist you in tracing monetary proceeds, ensuring goods are safe and insured whilst out of your physical possession and clause(s) allowing you to enter, seize and resell the goods in the event of non payment.

At Morrisons we are able to assist not only with the drafting of Retention of Title Clauses but also their swift and robust enforcement. Whilst the seller’s rights are being addressed, if necessary, we are able to move quickly to immediately prevent any further dealing or movement of goods subject to Retention of Title Clauses. We can obtain access to premises to facilitate the collection of goods or require their immediate delivery up. As a firm, we pride ourselves in offering this service to our business clients and have recently secured the timely return of goods worth over £300,000 to their rightful owner.

For more information please contact Kellie Williams-Jauvel on 0208 971 1031 or email kwj@morrlaw.com.

NRB Trust Pitfalls

2009-09-04T08:45:00.002+01:00

Executors and Trustees Beware

Prior to the pre-Budget statement on 9 October 2007 announcing the transferable nil-rate band rules, many couples had included nil-rate band discretionary trusts in their Wills. This was one of the most basic forms of estate planning to reduce inheritance tax. The trust took advantage of the nil-rate band on first death and arrangements of that nature had been used for many years without challenge from the Revenue.

The rules announced by the Chancellor in October 2007 stated that any part of the nil-rate band unused on the first death could be added to the nil-rate band available to the survivor with an additional increase to reflect any change in the nil-rate band between the first and second death. This applies even if the first death occurred before 9 October 2007.

You may think that because of this the role of the discretionary trust is redundant in inheritance tax planning. There are several reasons why this is not the case but there is no doubt that the overall benefit of discretionary trusts in wills has been substantially reduced.

People may find themselves in the situation where their husband, wife or civil partner has died and their will contains a discretionary trust. An increasing number are obtaining probate without seeking specialist advice and transferring all the assets to the surviving spouse or civil partner thinking that because of the new transferable nil-rate band rules, the existence of the trust can be ignored.

If the discretionary trust has not been properly wound up then it remains in existence. The trustees of the trust can bring an action against the executors to have assets in the estate up to the nil-rate band transferred to them. If the trustees do not pursue their rights against the executors they may be in breach of trust. This applies even if the executors and trustees are the same people.

In addition to opening the executors and trustees to a potential claim, inaction may also result in inadvertently destroying any effective estate planning. The Revenue is likely to determine that on the first death the nil-rate band was utilised because the will contained a gift of that amount to a discretionary trust, even if assets were not transferred to the trustees. As a result of this the surviving spouse or civil partner will not benefit from the transferable nil-rate band and the family may then find themselves in the worst position. Any prudent tax planning that the couple put in place will have been ignored and the executors of the surviving spouse will not be able to rely on the transferable nil-rate band rules.

If you have a discretionary trust in your Will then you should seek advice on whether or not to retain the trust. If you have lost your spouse or civil partner since 9 October 2007 and they have a discretionary trust in their will it is important that you seek legal advice as soon as possible.

For more information please contact Rebecca Fisher on 0208 971 1037 or email rebecca.fisher@morrlaw.com.

Maintenance Payments

2009-09-04T08:43:00.001+01:00

FAMILY LAW:
THE QUEST FOR FREEDOM FROM SPOUSAL MAINTENANCE PAYMENTS

For many people, a financial settlement symbolises the final chapter in a divorce. However, for those who continue to pay or receive maintenance, the financial relationship with their former spouse can drag on for many years after the divorce – a situation that is not always welcome!

But did you know that it is possible to end or vary spousal maintenance payments at any time? (Not so children’s maintenance which cannot easily be ended – but which is outside the scope of this article.)

Beware, however, the intricacies of this field of law and need to formally change any existing court order when any maintenance arrangements change: if that is forgotten, expensive and unexpected consequences may follow!

Capitalising maintenance:
It is often possible to pay a one off lump sum in place of ongoing maintenance payments (“capitalising” the maintenance). This is often done at the time of the divorce settlement but can also be done at any time subsequently, under section 31 of the Matrimonial Causes Act 1973.

Capitalisation is often welcomed by both parties, breaking the financial connection between them and enabling both to move forward with their lives.

For many, they never have to be in contact with their ex-spouse again.

For others, it paves the way to a more friendly relationship, with the pressure of the financial issues once standing between them now removed.

It may have been impossible to raise the lump sum needed to capitalise a maintenance claim at the time of the divorce, but become possible at a later stage. For example, the payer (usually the ex-Husband) may receive new financial resources, eg from an inheritance, an insurance payment, or even borrowings from a new partner (anxious to break ties with “the ex”!). In some cases it is done by raising borrowings, as some people prefer to have a financial relationship with a lending institution rather than their ex-spouse.

Simple termination of maintenance:
This happens more frequently than one might imagine: maintenance just ends, with no payment in return.

Sometimes it happens automatically, eg if the agreed term of a maintenance order expires. Some court orders allow for pensions to be shared and in return, maintenance might end automatically on retirement. Others might end the payments when the children leave home, assuming a parent can then go out to work and become self-supporting. Other such automatic terminations may be built into maintenance orders based on what is felt to be fair at the time of the divorce.

Negotiating terminating events can of course be difficult, since we all lack that invaluable crystal ball that might make negotiations in this area work best for us!

Another automatic trigger to end maintenance is the re-marriage of the recipient spouse.

Maintenance can end on the recipient’s cohabitation, but that is not automatic (eg, if she cohabits with a “man of straw”). It can make for interesting litigation.

A simple termination of maintenance is often triggered by a dramatic change of one of the party’s fortunes: an inheritance might be received so that, arguably, maintenance is no longer needed – or even a lottery win. The recipient might complete a training course and start work, or get a big pay-rise. Alternatively, the paying party might suffer a redundancy or illness which might mean that maintenance is no longer a realistic option.

Circumstances change and these changes are often entirely unpredictable.

If agreement cannot be reached following a significant change of financial fortunes, an application can be made to court, and if there is no genuine need for the maintenance any more, or no ability to make the payments, it will probably succeed.

Varying the amount of maintenance payable:
The recent case of Hvorostovky v Hvorostovsky [2009], widely reported in our national press, drew attention to the increasing numbers of variation applications currently facing our courts.

In this case, the parties divorced in 2001 and agreement was then reached for the Husband to pay maintenance to the wife at the rate of £98,150 p/a.

In 2008 the ex-wife applied to court for increased maintenance because she had learned that her husband had received a substantial increase in his salary (which had apparently risen from £552,000 to £1.86 million!). The judge increased maintenance payments to £120,000 per year.

The wife appealed these figures once again, arguing that £120,000 was “too low”. She won. The appeal court ordered a maintenance increase to £140,000 per year for her.

Interestingly, the court did not make a proportionate increase: the Husband’s income had more than tripled but his maintenance obligation only rose by about 50%. It is important to note that maintenance is based on the recipient’s needs, as well as the payer’s ability to pay.

Some might say that any increase in the payments, particularly to a level of £140,000p/a, some 8 years after a divorce, is just too much. Others might say it should have been more.

These issues are very subjective and the ongoing financial dependency can bring ongoing conflict and fierce litigation. Many wives, initially delighted at a maintenance order in their favour, come to view it as something of a poison chalice.

Capitalising maintenance payments breaks financial ties with an ex-spouse and is often viewed as desirable by both parties, providing protection from such variation claims and giving financial freedom.

Changing Capital Settlements
Essentially, the rule is that maintenance is always variable, but capital orders are not.

However - what if your business collapses the day after the settlement is approved by the court, or your ex-spouse inherits a fortune?
What if you discover that your ex has lied about his or her assets and is worth much more than you thought when you agreed the settlement?
Is there anything that can be done?

Capital orders can indeed be set aside and the whole case started afresh, but only rarely. Most successful set aside applications have taken place where it is apparent that there has been dishonesty and assets were somehow hidden.

Under the case of Barder, a settlement can be set aside if a dramatic subsequent event occurs (as discussed in our April 2009 Newsletter “Risk taker Myerson twists on 19 and gets a 3”). However, it must be unforeseeable and it must be significant. Courts rarely permit such orders and the credit crunch is definitely not viewed as a good reason.

Where finances change, therefore, most family lawyers will favour a maintenance variation, as there is much more scope for such applications.

So, whether you wish to apply for capitalisation, a simple termination, or an upward or downward variation, our Family Team at Morrisons can assist.

We will help you to secure a court order, by agreement or by litigation, which may protect you against future financial claims from your former spouse.

For more information please contact Stephanie Calthrop-Owen on 01737 854503 or sco@morrlaw.com

The Turning Tide for Commercial Tenants: How to work the economic downturn to your advantage in lease negotiations

2009-09-04T08:40:00.000+01:00

Weathering the Storm

The recession continues, with the news giving daily reports of established retail tenants going into administration and high street stores closing as a result. Hardly surprisingly, potential new tenants who in our previously buoyant economy would have been either considering starting a new enterprise or re-locating their existing business to better premises, are choosing to either stay put or to postpone their new business ventures until the storm passes. Certainly for many this is the safest approach to coping with the difficulties the current economic situation presents, but for some tenants who do see opportunities to relocate or expand at the present time, this recession may present the perfect opportunity for tenants to shift the balance in what has up until now been a Landlord’s market and for tenants to use this recession to call the shots in lease negotiations.

A “Tenant’s Market”

Tenants should remember that for every tenant who is wary of signing up to a new lease in the present economy, there is a landlord with a vacant property who is desperate for a tenant to take it off his hands. In the same way that the residential property market is now a “buyer’s market”, the recession has arguably also created a “tenant’s market” in the negotiation of commercial leases. For example, a landlord who finds himself with a tenant who has gone into administration or become bankrupt, not only has to jump through the many hoops dictated by insolvency legislation but, usually without warning, also finds himself with a vacant commercial property which is worthless whilst it remains unoccupied. In fact, with recent changes to the levels of business rates relief which a landlord is able to enjoy and the potential increase in business rates themselves, the vacant unit is soon likely to become a heavy financial burden for a landlord in the current economic conditions. For many landlords, having any tenant in occupation, even on lease terms which a landlord would previously have refused outright as a matter of course, is better than no tenant at all. It is this atmosphere of uncertainty amongst commercial landlords which an enterprising tenant should consider exploiting.

Agreeing Terms

Agreeing clear heads of terms at the outset has always been important but until now landlords, and particularly large institutional investment landlords, would market a property on their “Standard Terms”. Potential tenants would be told by the landlord’s agent that no amendments to these standard terms would be accepted and tenants who could see the potential which that particular property had to offer the success of their business, had little choice but to sign up.

The introduction of The Code for Leasing Business Premises in England and Wales 2007 (Business Lease Code) in 2007, intended to redress the balance in negotiations but given that the code has always been voluntary, landlords have rarely been swayed by tenants’ argument that they are entitled to a lease which is code compliant.

However times have now changed, and a tenant has nothing to lose by proposing more favourable terms to a landlord who would previously have refused to even negotiate and moved on to the next tenant eager to sign up. So which terms should a tenant seek to negotiate? The Lease Code is a good starting point for any tenant but the main priority for a tenant in these uncertain times is obviously to ensure they have as much flexibility as possible and are exposed to minimal potential financial liability. Whilst not an exhaustive list, the lease terms which a tenant may consider looking to negotiate are as follows:

Term Length
Up until a decade or so ago, a lease for a term of twenty years would often be considered standard for both landlords and tenants. The landlord would have the certainty of the rental income and the commercial tenant would take occupation with every intention of building up the business and goodwill at the property on a long term basis. Since then, shopping centres and out of town retail estates have taken over the traditional high street of local shops and tenants have come to learn, often at their cost, that no business can be certain of trading in twenty years time. It is therefore already common place for commercial leases to be for a term of less than ten years and often only three to five years, and well advised tenants should be seeking a term which they could still cope with if they are forced to close the business but still liable for the rent payments. Tenants can no longer assume that they will be able to sell their lease and move on, as finding a buyer for your lease may prove impossible in these market conditions.

Break Clause
To have the best of both worlds, it is worth seeking to negotiate a break clause with the landlord, which would give the tenant the option to bring the lease to an end before the expiry of the lease term. The most flexible break clause for a tenant would be a rolling break (meaning the tenant could exercise it at any time) but a fixed break clause (for example exercisable in the third and sixth year of the term) would give a tenant some comfort that they are not too heavily tied to the lease. There are still traps for tenants when agreeing break clauses and this is a particular area on which legal advice should be sought. The exercise of a break clause is strictly construed by the Courts which means that any notice period and stipulation in the lease as to the form of notice must be strictly observed by the tenant. Also a tenant should be wary of agreeing any pre-conditions to the exercise of the break clause. An unscrupulous landlord may agree to a break clause but only if it is on the condition that there is no breach of the tenant’s covenants in the lease at the break date. On the face of it, this may seem a perfectly reasonable request but tenants should not forget that this pre-condition would include breaches which are out of the tenant’s control or very minor breaches which have not been noticed by the tenant (and therefore not rectified) immediately prior to the break date. Therefore if there was such a breach, the tenant would have lost that right to break and, if it is a fixed break date, the tenant will have to wait until the next break date or expiry of the term, to unburden himself of the lease.

Protection of the Landlord and Tenant Act 1954
Although to many tenants a shorter lease term gives the flexibility they need, some tenants may be wary because, whilst there presently seems to be no end in sight to the current recession, the economy may have improved in three years time. A tenant with a short lease may find that they want to renew but find the landlord refusing because he already has a new tenant lined up to take a new lease on a higher rent and better terms for the landlord. To protect themselves from such a scenario, tenants should seek to ensure that their leases are within the security of tenure provisions of the Landlord and Tenant Act 1954. This means that at the end of the term they can only be required to vacate by the Landlord if the Landlord can prove that certain statutory grounds apply. In any case, a strict court procedure must be followed and unless the Landlord can prove one of these grounds, the tenant has a de facto right to a new lease on similar terms. In certain circumstances where the tenant is required to vacate, the tenant may be entitled to compensation. Tenants should seek legal advice both before the lease is entered into and in good time before the expiry of the term to ensure that they are benefitting from the protection afforded by this Act.

Rent payment
Leases have historically been drafted to charge rent quarterly on the usual quarter days. This has enabled Landlord’s to manage large portfolios of properties where rents are all due on the same date and where arrears can be easily identified and dealt with promptly. However, even established tenants who are well known high street names (for example, Robert Dyas and Thorntons) are now asking landlords for the right to pay rent monthly to ease cash flow difficulties. Many landlords are reluctantly agreeing to this because they are aware that by refusing, they risk pushing the tenant into early administration. Tenants who are taking new leases should therefore also consider asking for rent to be payable monthly, or on whatever basis would best suit the cash flow of their business.

Repair
Who is responsible for the repair of a property has always been a point of dispute between landlords and tenants, not only at the outset in negotiations but also throughout the term and after the expiry of the term when a schedule of dilapidations is often contested. It has generally been accepted that commercial leases will be full repairing and insuring unless they are for a short term or the landlord accepts a reduced repairing liability, if for example the property is in substantial disrepair at the date of the lease. However, the Lease Code encourages the use of a schedule of condition to set out quite clearly what the tenant will and will not be responsible for. A lease by reference to a schedule of condition would usually simply state that the tenant will not be obliged to put the property in any better state than as evidenced by the schedule of condition. However, the parties should both consider the nature of the property being let, in order to negotiate what exactly a tenant should and should not be responsible for, for example air conditioning units, boilers and other fixtures which could cause significant expenditure for the tenant.

Conclusion

This article has only touched upon some of the terms which could limit a tenant’s liability under a commercial lease and obviously any tenant will benefit significantly from seeking professional advice both from a commercial surveyor and a commercial property solicitor from the outset of the transaction. However, hopefully this article will provide potential tenants with some guidance on how to gain the best lease terms in these difficult times and to view the recession as presenting a potential opportunity for tenants in the commercial property market.

For more information please contact Robert Satiro 0208 971 1024 or rs@morrlaw.com or Hugh Campbell on 01737 854550 or hugh.campbell@morrlaw.com.

Using ‘Length of service’ in Redundancy Selection

2009-06-17T14:45:00.002+01:00

Since the age regulations came into force in October 2006 it has been unlawful to treat employees differently because of their age unless such treatment can be objectively justified.

One area where this has important implications is where an employer uses ‘length of service’ as the sole criterion or one of several criteria in a redundancy selection exercise. The problem for employers has been that the use of ‘length of service’ as a criterion is potentially indirect age discrimination and therefore possibly unlawful under the regulations.

Indirect age discrimination occurs where a ‘provision, criterion or practice’ used by an employer, in this case the use of ‘length of service’ as a redundancy selection criterion, places an employee or group of employees of a certain age group at a particular disadvantage compared to other employees not of that age group. Where an employer uses ‘length of service’ as a criterion then younger workers may argue that this disadvantages them as, due to their age, they have not had the opportunity to accrue length of service equivalent to their older colleagues.

In Rolls Royce v Unite the Union [2009] the Court of Appeal dealt specifically with the question of whether length of service could lawfully be used as a redundancy selection criterion. In this case a collective agreement existed which provided that redundancies would be dealt with by using a matrix selection process which included various criteria including ‘length of service’. The employer wanted to avoid using this criteria as it felt that its then business needs would not be well served by selecting staff using ‘length of service’ as one of the criteria.

Prior to the employer’s appeal to the Court of Appeal the High Court had held in this case that:

using ‘length of service’ as a criterion was objectively justified and therefore not unlawful under the regulations;
length of service is likely to be a fair indicator of both loyalty and experience which were qualities that might not be fully taken into account were length of service not included as a criterion;
the criterion of length of service respects the loyalty and experience of the older workforce and protects the older employees from being put into the labour market at a time when they are particularly likely to find alternative employment hard to get.

The Court of Appeal largely agreed finding that use of ‘length of service’ as one of several criteria in a redundancy selection was allowable. Significantly, the High Court (with the Court of Appeal agreeing) found that if ‘length of service’ was used by the employer as the only criterion in a redundancy exercise (i.e. applying ‘last in, first out’ (LIFO)) then this might be objectionable under the regulations.

What should you do?

The Unite case shows that employers can confidently continue to use ‘length of service’ as a selection criterion in a redundancy exercise provided that it is used as one of a range of criteria applied to the employees in the redundancy selection pool.

Use of LIFO as the sole redundancy selection criteria may still be permissible in particular cases but employers should seek expert employment law advice before adopting this. Furthermore, as this is just one aspect of the law relating to redundancy, employers should be cautious and seek expert advice when planning and implementing any redundancy dismissals.

For further advice contact David Seals on 01737 854573 or at david.seals@morrlaw.com.

Where there’s (not) a Will

2009-06-16T15:55:00.002+01:00

Jane Forbat explored in the last newsletter the reasons for disputed wills. This month I shall look at the consequences of not having a will.

Figures released by the National Consumer Council suggest that 27 million adults in England & Wales do not have a Will. That amounts to 64% of the population that are leaving it to the laws of intestacy to determine how their assets (also known as their ‘estate’) will be dealt with on death.

The intestacy rules set out who among your family will receive what from your estate. If you die leaving a surviving spouse/civil partner and children or other close relatives and the estate is of sufficient value, the surviving spouse or civil partner will receive your personal effects and a fixed net sum, referred to as the statutory legacy.

Since the rules came into force in 1925, until this year the amount of the statutory legacy had only increased seven times, the last in 1993. At that time the statutory legacy was set at £125,000 where the deceased left a spouse and children and £200,000 where the deceased left a spouse and no children.

The Ministry of Justice announced with effect from 1 February 2009, the statutory legacy, where there are surviving spouses or civil partners and children, has been increased to £250,000. Where there is a surviving spouse or civil partner and no children then the amount increased to £450,000. The recent changes to the intestacy rules are to be welcomed. The increase brings it in-line with the rise in property prices and the overall increase in the value of an average estate. According to the Government’s own research up to 3,600 surviving spouses/civil partners a year were at risk of being forced to sell the family home to meet the claims on the deceased’s estate of other family members entitled on intestacy.

Some common traps for the unwary

· It is often wrongly assumed that in the absence of a will, your estate passes to your surviving spouse/civil partner. This is not necessarily the case. If you do not have a will your estate will be distributed according to the table below.

· If you are not married or in a civil partnership, the person living with you (“cohabitee”) has no automatic right to inherit your estate. In fact, he or she will inherit nothing under the intestacy rules.

· If your marriage breaks down or you separate but do not divorce, your spouse (husband or wife) may inherit all or some of the estate.

· If you do not have a will it may be left to the court to appoint guardians of children under 18. If you have a will you can stipulate who the guardians are to be and if necessary, make financial provision for them.

· If a transfer of your assets exceeds £325,000 (the nil rate band for 2009/10) the amount over and above that may attract inheritance tax at 40%.

· Upon marriage – your will is automatically revoked unless it contains provisions to the contrary.

· Not all intestacies arise because someone did not write a will. Commonly, the will may fail to deal with all of the estate or the will was not validly made because the person making it did not have sufficient mental capacity to know what they were signing or the legal requirements for signing and witnessing the will were not complied with.

The Matrimonial Home

If you own your family home with your spouse/civil partner and hold it as joint tenants at the time of your death, your spouse/civil partner will automatically become the sole owner of the property. Therefore, property held as joint tenants will pass outside the rules of intestacy. Details of how you own your property can be obtained from the Land Registry.

If your family home is held by you and your spouse/civil partner as tenants in common at the time of death, your spouse/civil partner will only be entitled to their share of the property (usually 50%). Your share will form part of the estate. Therefore, depending on the value of the property, there is a risk that your spouse/civil partner may not be able to continue to live in the property after your death.

If the family home is held by you alone at the time of death, the entire property will form part of the estate and will be distributed according to the rules. Again, there is no guarantee that your spouse/civil partner will be able to continue to live in the property.

Beneficiaries

If surviving relatives are not easily identifiable, it may be necessary to employ the services of a professional tracing company. The expense for this will be borne by the estate and can cost many thousands of pounds. The amount of money available for distribution to the beneficiaries will be reduced and the money that is left may be distributed to distant relatives not known to you.

Dealing with an estate in the absence of a will can prove extremely distressing for the family. It is a time consuming, expensive and stressful process. In some cases it has a lasting effect on the family because of damage to relationships.

You will see that under the laws of intestacy your estate can only pass to your relatives. The only way you can define to whom it passes and in what proportions, is through a will.

It is therefore important that you review your will regularly (at least every 5 years) and if you have any concerns about your will, you consult a solicitor.

Surviving relatives	Where surviving spouse or civil partner	Where no surviving spouse or civil partner
Children or remoter descendants	Spouse/civil partner will take: 1. your personal possessions 2. £250,000 cash or equivalent 3. a right to use and enjoy half of the remaining estate for their lifetime. On their death, this half share in the estate will pass to your children equally The children will take: 1. the remaining half of the estate equally If a child dies before you, the share that he/she would have taken will pass to any children that he/she may have	All your estate will pass to your children equally, with any share of a child who has died before you passing to his/her children equally
Parent(s), and you have no children or remoter descendants	Spouse/civil partner will take: 1. your personal possessions 2. £450,000 cash or equivalent 3. half of the remainder of the estate entirely Parent(s) will take: 1. the remaining half of the estate entirely (equally if both of them survive you)	All your estate will pass to your parents, equally if both of them survive you
Full brothers and sisters (including their children)	Spouse/civil partner will take: 1. your personal possessions 2. £450,000 cash or equivalent 3. half of the remainder of the estate entirely Brothers and sisters will take: 1. the other half of the remainder of the estate entirely and equally If a brother or sister dies before you, the share that would have passed to that individual will go to their children instead (i.e. to your niece or nephew)	All to your brothers and sisters in equal shares (or to the children of the brother or sister if they have died before you)
Half brothers and sisters (including their children)	All to your surviving spouse/civil partner	All to your half brothers and sisters in equal shares (or to their children as above)
Grandparents	All to your surviving spouse/civil partner	All to your grandparents (equally if both survive you)
Full uncles or aunts (i.e. the brothers and sisters of a parent, including their children)	All to your surviving spouse/civil partner	All to your uncles and aunts equally (or to their children as above)
Half uncles and aunts (i.e. the half-brothers and half-sisters of a parent, including their children)	All to your surviving spouse/civil partner	All to your half uncles and aunts equally (or to their children as above)
No surviving relatives	All to your surviving spouse/civil partner	All to the Crown (i.e. to the Government)

For more information please contact Rebecca Fisher on 020 8971 1037 or email rebecca.fisher@morrlaw.com

Family Proceedings on trial

2009-06-16T15:26:00.002+01:00

Following a decision made in December 2008 by Lord Chancellor Jack Straw, since April of this year all Family Courts have now been open for the media to report such matters as divorce, children matters and care proceedings.

The decision to open up the Courts to the scrutiny of the press was based on an idea that greater knowledge of the system would bring about greater trust and transparency, in an area of law renowned for being shrouded in secrecy. This need is balanced against the need to maintain the confidentiality of parties involved in litigation matters, and the juggling act of seeking greater transparency while maintaining privacy has certainly polarised opinion.

The Ministry of Justice came to the conclusion that ‘’….we must increase the volume of information available about the Family Courts…but a right of access to proceedings cannot mean an untrammelled right to report anything and in any manner regardless of its impact on the children involved’’. As the practicalities of the new rules becomes reality, individual Courts have the power to restrict both attendance of the press and what can be reported, but in the initial stages court staff complained about the lack of clarity, and there still appears to be widespread confusion in respect of the rules in practice. Specific Judges have been allocated the task of dealing with these issues.

Fears have been voiced by the Children and Family Court Advisory Support Service (CAFCASS) who state that these changes present a risk of professionals being unfairly named and shamed by the press. CAFCASS state there is considerable unease about the fact that the changes could lead to harassment from those involved in proceedings and threats to the safety of Family Court Professionals.

These fears are strengthened by the fact that because of the need to maintain privacy, the press will not get to see relevant court paperwork, and may therefore be misinformed having to rely on non-specific oral submissions made in court which may see the real story skewed out of all context.

There are also fears that this new transparency will lead to divorcing couples using the threat of publicity to blackmail each other. Where a case involves sensitive information one party may use it to extort the maximum financial settlement on a threat of making this information available to the media.

While some see the new rules as beneficial, leading to more cases being settled out of Court, others fear that without the weight of threat of litigation, because of the fear of publicity, some parties’ cases will be unfairly compromised.

While initially there was a rush of press interest in being able to peek behind the Family Court veil, most believe that as time passes reports will largely be restricted to celebrity divorces, leaving the vast majority of family proceedings unscrutinised for lack of a catchy story.

Others see wide scrutiny of the Family Courts as only beneficial. It has been claimed that social workers, psychologists, judges and medical experts are all guilty of failing to adequately self regulate themselves, and that in practice their decisions are only available to be properly examined by the higher courts. The testimony of these and other professionals will now potentially receive appraisal from the press and be open to further comment once the “anonymised” details are in the public domain.

Only time will tell whether the fine balance between promoting trust and transparency and maintaining privacy can be struck effectively to keep all sides content.

For more information please contact Andrew Perryman on 01483 215359 or email andrew.perryman@morrlaw.com.

Greener Leases

2009-06-16T15:16:00.007+01:00

It is probably not surprising that in a world where everyone is increasingly concerned about the environment, that the property industry is thinking about issues of sustainability of existing and new buildings, the need to accelerate the reduction in carbon dioxide emissions for those existing buildings and the carbon footprint of new buildings. As a consequence, thought is being applied to how leases can be made “greener”.

The property industry is now confronted by the Government’s climate change agenda and the property industry is leading the call for Green Leases and this is probably due to a number of factors:

Increasingly stringent building regulations;
Property owners under pressure to improve the energy performance of their buildings as a result of the introduction of EPC’s;
Occupiers having their own social responsibility policies which need to be demonstrated and applied in the management of their property;
Fund managers being increasingly obliged to make investment decisions which have regard to sustainability;
Company directors being obliged under the Companies Act 2006 to have regard “to the impact of the company’s operations on the community and the environment”; and
Perhaps most tellingly, the property industry getting ahead of anticipated legislative change.

So what will this entail and what changes need to be made to achieve a green lease? In its simplest form such changes could consist of a number of additional clauses in your new lease.

This could comprise any one of the following:

Obligations between the landlord and tenant governing the tenant’s use of, and the landlord’s improvements to, a building;
Rent review incorporating energy efficiency measures;
Requirements on assignment or underletting for the assignee or sub-tenant to covenant with the landlord to comply with any landlord’s environmental policy for a building;
Requirements for tenant’s works to meet certain standards of energy efficiency including, for example, insulation and ventilation;
Inclusion of an adjustment system for service charge contributions which may incentivise tenants to meet specific energy efficiency targets;
Requirements for the landlord to keep in good and efficient working order all plants such as air-conditioning systems and boilers to ensure optimal energy use;
Requirements for the landlord to apply principles of good environmental practice in providing building management;
Requirements for the landlord to ensure that its contractors are using environmentally friendly products, when practical, in delivering building related services.

The green lease may well extend, amongst other things, to include the implementation of periodic audits of energy consumption, water consumption and the amount of waste generated and re-cycled, the consideration of the installation of renewable energy and low carbon technology where operationally possible, the improvement of the environmental efficiency of buildings and the inclusion of other sustainability initiatives.

The adoption of these new greener obligations in leases are not going to happen overnight but it may be the case on the grant of a new lease or on lease renewal that landlords and tenants start to consider the real need to make at least some of these changes going forward. Clearly Rome was not built in a day and both landlords’ and tenants’ attitudes to such changes are likely to evolve over time in meeting the challenges of the green agenda. This is, however, a topical issue, one that will increasingly be important to the sustainable environment debate and no doubt such changes will be driven by public policy considerations and legislative pressure in the future, so watch this space.

Hugh Campbell has recently joined Morrisons from Osborne Clarke in London and is developing the commercial property practice in the Woking and Redhill offices. Hugh has particular expertise in property investment, development and corporate real estate. If you have any queries or property issues that you wish to discuss, please do not hesitate to contact him on 01737 854 550 or email hugh.campbell@morrlaw.com