December 2011 News Articles
Employment law reforms aim to ease burden on businesses
The Government is planning radical changes to employment law to provide a fairer balance between reducing costs to business at the same time as protecting the rights of employees.
The proposals are in response to public consultations, including the Red Tape Challenge, in which people were invited to suggest regulations that could be scrapped.
The changes include an overhaul of employment tribunals in the hope of saving employers £40m a year, and reviewing whether the 90-day minimum consultation period for collective redundancies is restricting businesses and should be reduced.
In response to the suggestion that dismissal laws are too onerous for small businesses, the Government will launch a call for evidence on two proposals.
Firstly, it will seek views on whether to introduce compensated no fault dismissal for micro firms, with fewer than 10 employees.
Secondly, it will look at ways to slim down existing dismissal processes and how they might be simplified. This could include working with the Advisory, Conciliation and Arbitration Service (ACAS) to make changes to their Code, or providing supplementary guidance for small businesses.
There will also be a call for evidence on the consultation rules for collective redundancies and whether the current 90-day minimum period for more than 100 redundancies can be reduced.
The Ministry of Justice will shortly publish a consultation on the introduction of fees for anyone wishing to take a claim to an employment tribunal. The proposals will transfer the cost burden from taxpayers to users of the system and encourage claimants to consider seriously the validity of their claim.
The consultation will seek views on two options. The first proposes a system that involves payment of an initial fee to lodge a claim, and another fee to take that claim to hearing.
The second option proposes introducing a £30,000 threshold, so those seeking an award above this level will pay more to bring a claim.
A total of 159 employment regulations were examined in the Red Tape Challenge.
More than 70 of those regulations are now to be merged, simplified or scrapped. The Government says it will:
- publish a call for evidence on proposals to simplify the Transfer of Undertakings (Protection of Employment) - TUPE - rules which many businesses say are too complex and bureaucratic.
- close a whistleblowing case law loophole which allows employees to blow the whistle about their own personal work contract.
- merge 17 National Minimum Wage regulations into one set which will simplify the current regime, making it easier for employers to navigate the law, to complement the work the Low Pay Commission is doing on how best to streamline the system.
- consult in the spring to streamline the current regulatory regime for the recruitment sector.
- create a universally portable CRB check that can be viewed by employers instantly online, from early 2013. These policy changes are being led by the Home Office.
The government insists the proposals are not intended to provide employers with an easy ride. Business Secretary Vince Cable said: “Let me be clear: we are not re-balancing employment law simply in the direction of employers.
“Our proposals strike an appropriate balance and we are keeping the necessary protections already in place to protect employees. Our proposals are not - emphatically not – an attempt to give businesses an easy ride at the expense of their staff. Nor have we made a cynical choice to favour flexibility over fairness.”
We shall keep clients informed of developments. In the meantime, please contact us if you would like more information about the issues raised in this article or any aspect of employment law.
Directors disqualified after failing to keep company records
Two directors of a car dealership have been disqualified for eight years after failing to keep adequate records for their company, which was experiencing trading difficulties.
The company was placed in administration in 2009 with an estimated deficiency of £1.3m. It was then investigated by the Insolvency Service which was unable to find any of the cars listed on the company’s books.
The case went to Crewe County Court, which found that the directors had failed to ensure that the company maintained, preserved or delivered adequate accounting records. They had also failed to satisfactorily account for the disposal of the company’s stock and sales.
The court also found that the directors had caused the company to enter into transactions which were to the detriment of its creditors when they knew, or ought to have known, that the company was insolvent.
The case highlights the risks directors face when trying to save a struggling company. As soon as a company becomes insolvent, directors have a legal duty to protect the interests of creditors. When formal insolvency procedures get underway, the behaviour of directors over the previous few years could come under investigation.
They could be disqualified if it’s found that they continued entering into contracts or accepting credit after they knew or should have known there was no reasonable chance of avoiding insolvent liquidation. The court could then order them to use their personal assets to help settle the company’s debts.
Many directors find it difficult to recognise or accept the point at which they become insolvent so they should seek professional help as soon as problems start to emerge.
Directors also have a legal responsibility to take action if they discover that other directors are acting fraudulently or dealing inappropriately with company funds. Failure to do so could render them liable for subsequent losses.
Please contact us if you would like more information about the issues raised in this article.
Could you make a profit pursuing late payers?
The stakes have never been higher for businesses when it comes to dealing with the problem of late and non-payment of invoices.
Record numbers of firms are going out of business every day. Their demise is often caused by their inability to recover money owed to them. Thankfully, there are many options available when it comes to dealing with debtors.
If handled properly, firms can turn credit control into a profit making operation by recovering unpaid money in a way that earns more than enough to cover the cost of pursuing bad payers.
For example, businesses are entitled to levy a statutory late payment fee and charge punitive interest if invoices are not paid on time. If this doesn’t make the debtor pay, it may be necessary to issue a ‘court order for questioning’ against the company secretary.
This is often enough to prompt many late payers into action but for those who still refuse to budge, there are various legal options available.
However, firms should think carefully before agreeing to Individual Voluntary Arrangements as they can break down after only a few payments. Be wary too of debt management companies which may try to persuade you to accept less than you are owed.
Many firms, especially smaller ones eager to hold on to customers, have been reluctant to take action in the past.
However, attitudes have hardened during the economic downturn with more and more companies refusing to allow bad debt to threaten their business. The best approach is to get good legal advice and act quickly.
Please contact us if you would like more information about credit control and debt collection.
Common sense should apply when interpreting business contracts
Business “common sense” should be applied when interpreting and applying commercial contracts, the Supreme Court has ruled.
Delivering the ruling, Lord Clarke said: “If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.”
The issue arose in the case of six separate companies that had each contracted to buy a ship for $33m from a Korean manufacturer. Payment was to be in instalments and each company was provided with a refund guarantee by a Korean bank.
The shipbuilder went out of business before the ships were completed so the companies sought to recover their money under the guarantee. A dispute then arose as to the meaning of a phrase in the bond which stated that the bank would pay the buyers “all the sums due to you under the contract”.
The bank insisted that this did not include all of the money that the buyers had paid out. The case went all the way to the Supreme Court, which has now ruled in favour of the buyers.
Lord Clarke said that the language in a contract “would often have more than one potential meaning”.
He then added: “One would naturally expect the parties to agree (and the buyer’s financiers to insist) that in the event, for example, of the insolvency of the builders, the buyers should have security for the repayment of the pre-delivery instalments which they paid.
“The buyer’s construction is to be preferred because it is consistent with the commercial purpose of the bonds in a way which the bank’s construction is not”.”
Please contact us if you would like more information about contract law or any of the issues raised in this article.
£400m and mortgage indemnity scheme to boost home building
Ministers have announced plans to boost the construction industry and help people to buy a new home.
The two key measures are a £400m ‘Get Britain Building’ fund and a scheme in which the Government will provide indemnity for mortgages of up to 95% of the value of new houses.
The Prime Minister, David Cameron, described the twin strategy as “radical and unashamedly ambitious”.
The indemnity scheme will be launched next Spring and is expected to help 100,000 new buyers get on the property ladder. It will ensure the provision of 95% loan to value mortgages for new build properties.
A Government statement said: “Under the scheme house builders will deposit 3.5% of the sale price in an indemnity fund for each home sold through the scheme for seven years. Interest is payable on the money.
“The Government will provide a guarantee of 5.5% of the property value that can be called on if any losses by defaulting buyers exceed the developer's 3.5%.”
The Get Britain Building fund will provide £400m of development finance to enable builders to restart projects that have planning permission but have stalled due to cash flow problems.
There are currently 133,000 partially built houses that have not progressed over the last year. The Government is publishing a prospectus outlining the details of the scheme and inviting bids from developers.
We shall keep clients informed of developments.
Make sure you know the boundaries when buying property
When buying a home or a parcel of land it’s essential to make sure you know where the boundaries lay.
This is not as simple as it may appear, especially when provisions made in previous transfers of the property have an effect.
A recent case before the Court of Appeal highlighted the problems that can arise.
It involved a couple who bought a property that bordered a park. There were two potential boundaries to their land. One was a wire fence and the other was a hedge about six yards further out.
The couple maintained that the hedge was the boundary. This would give them a significantly larger plot.
However, the Land Registry adjudicator and a judge both ruled that the fence was the true boundary.
This was because it was a condition of an earlier sale that the fence should be in stock proof condition before the transfer could proceed. This strongly indicated that the fence was the correct boundary and the title plan should be altered to reflect that.
That decision has been upheld by the Court of Appeal.
The case illustrates the need to thoroughly check all the legal detail relating to a property before buying as it may not be possible to rectify mistakes afterwards.
Please contact us if you would like more information about the issues raised in this article or any aspect of buying or selling a property.
Will writing and estate administration ‘open to abuse’
People risk losing their life savings if they allow unregulated will writers to take control of their money and property, the Law Society has warned.
There could also be major problems if consumers allow unregulated practitioners to draw up lasting powers of attorney.
The society raised its concerns in response to the Legal Services Board’s call for evidence into will writing, estate administration and probate activities.
The problem is that anyone can set up in business as a will writer, even though they have no qualifications, no insurance and are not regulated in any way. Solicitors, on the other hand, have to be highly qualified and must abide by a strict code imposed by the Solicitors Regulation Authority.
The society is calling for all will writers to be regulated and has been running a campaign to warn people of the dangers of using unqualified practitioners.
The President of the Law Society, John Wotton, said: “Anyone, particularly people looking to commit fraud, can create a website that looks professional and has many testimonial recommendations. There is currently no regulation or monitoring in place to ensure that administrators do not misappropriate a client’s estate assets.
“There are significant risks involved in allowing unqualified and unregulated will writers to have full control of an estate's assets. The estate administrator is responsible for important tasks which can be easily open to abuse and safeguards need to be put in place to protect the testator's estate from unscrupulous behaviour.
“We believe that regulation of will writing is the only appropriate means of protecting the consumer and we support the recommendation that will writing should become a reserved activity.
“However, we also believe that the preparation and lodging of a power of attorney and estate administration services should also become a reserved activity to ensure consumers are adequately protected. It is vital to ensure that consumers are protected from unscrupulous will writers whose only intention is to defraud the consumer by pressuring the consumer to name them as their attorney.
“We are also very concerned about the lack of succession planning for unregulated will providers who may become insolvent or close their business. At present, there is no safety net in place to protect a client's will and file, if an unregulated business ceases trading.
“By contrast, if a law firm closes down the Solicitors Regulation Authority can intervene and ensure the safety of all wills and files for clients of a solicitor.
“People who are preparing a will should engage a solicitor who can make sure that the will is legally watertight and advise on complex financial issues such as inheritance tax and trusts planning. Solicitors are all trained and regulated and are required to have adequate insurance to protect the public.”
Please contact us if you would like more information about the issues raised in this article or any matters relating to wills, trusts and lasting powers of attorney.
Cohabiting couple end their 20-year legal dispute over home
A couple who separated 20 years ago have finally settled a dispute over the home they used to share.
The case may be highly unusual but it illustrates the stress and heartache that can arise when cohabiting couples don’t have written agreements in place outlining how their property should be divided if their relationship breaks down.
Leonard Kernott and Patricia Jones bought a bungalow in joint names in 1985. They later separated and Ms Jones remained in the property with the couple’s two children. She paid the mortgage on her own for 13 years.
However, the bungalow remained in both their names and when the youngest child reached the age of 18, Mr Kernott asked for it to be sold so he could take out his share. The couple disagreed as to what that share should be so the matter went to court.
A judge awarded Mr Kernott just 10% of the value because he had lived there for a shorter period than Ms Jones. That decision was overturned by the Court of Appeal which ordered a 50-50 split because the property was still in joint names.
The case then went to the Supreme Court which reinstated the original judge’s decision to split the property 90-10 in favour of Ms Jones. That final ruling from the highest court in the land means Mr Kernott will receive about £90,000 less than if the proceeds had been split equally.
The case shows that the law is not clear on these issues and courts can arrive at very different decisions when considering the same facts.
The problem was that the couple had no formal agreement about how their assets should be shared if their relationship broke down. If they had drawn up a simple living together agreement, all those years of stressful court appearances could have been avoided.
Cohabiting couples should act now to protect themselves against bitter legal battles if their relationship breaks down.
Please contact us if you would like more information about cohabitation agreements or any aspect of family law.