In March 2011 the government published a consultation paper Solving disputes in the county courts: creating a simpler, quicker and more proportionate system. A consultation on reforming civil justice in England and Wales. It set out and sought views on proposed reforms including changes to the financial limits for claims in the High Court and automatic referral to mediation in certain claims.

The government’s has just published its response, following the consultation process, agreeing to changes in the system in four main areas.  The overall aims are to deliver a justice system that prevents escalation of disputes to court, where courts offer more efficient and quicker services if needed, where judgments can be enforced fairly and where costs are borne fairly.  Amy Gates summarises the main changes.

Alternative dispute resolution

• Initially it is likely that claims up to £5,000 will be referred automatically to mediation (the new financial limit being £10,000). The aim is to extend this to all small claims in the longer term.

• It is also proposed that parties to low-value small claims cases should be allowed to decide whether the claim is determined on paper provided the judge agrees.

Structural reforms

• It is proposed that a single county court will be established to operate as a single national entity, allowing claims to be handled electronically and then allocated across neighbouring courts.

• Equity claims will be allowed to be commenced in the county court if the financial limit is under £350,000 (£30,000 is the current limit). Non-personal injury claims will no longer be allowed to be commenced in the High Court if the financial limit is below £100,000 (£25,000 is the current limit).

• The power to grant freezing orders may be extended to certain circuit judges in the county courts.

• Certain specialist proceedings will be removed from the jurisdiction of the county courts and will be placed under exclusive jurisdiction of the High Court.

• High Court judges will be able to sit as judges in the county court if necessary.

Debt recovery and enforcement

• It is intended that procedures for obtaining third party debt orders and charging orders will be streamlined.

• The aim is to implement certain provisions of the Tribunals, Courts and Enforcement Act 2007 so that charging orders will be allowed where instalment orders are in place and there will be a minimum threshold of £1,000 in respect of applications for orders for sale where the debt is under the Consumer Credit Act 1974.

Preventing costs escalation

• The aim is to extend the system of fixed recoverable costs and increase the financial limit for the fixed-cost simplified claims procedure for road traffic accident claims to £25,000. Similar schemes may be introduced for public liability and employers’ claims and possibly even low-value clinical negligence claims. 

• The financial threshold for small claims will rise from £5,000 to £10,000 initially and then possibly to £15,000. Judges will be able to refer business disputes worth over £10,000 to the small claims track without the consent of the parties. They will also be able to refer more complex cases with a value below £10,000 to the fast track. There is no intention to increase the fast track financial threshold, which is currently £25,000.

 It is too early to know when the proposed changes are likely to come into effect but we will keep you posted. 

The limits for awards made by employment tribunals go up from 1 February. Key increases include:

• limit on the amount of a week’s pay (for calculating eg statutory redundancy payments and the basic award for unfair dismissal) goes up from £400 to £430
• maximum compensatory award for unfair dismissal goes up from £68,400 to £72,300
• guarantee pay increases (for calculating lay-off payments) goes up from £22.20 a day to £23.50 a day
• minimum basic award for unfair dismissal (where the dismissal is for health and safety, trade union membership/activities, employee representative or occupational pension trustee reasons) goes up from £5,000 to £5,300.

The new rates apply where the event giving rise to award/payment occurs on or after 1 February 2012.  

This means that for unfair dismissal claims, the new rates will apply to all dismissals where the date of termination is either on or after 1 February 2012. 

For dismissals before 1 February, the old limits will still apply, regardless of the date on which compensation is awarded.

Partner and accredited mediator Nick Cox was one of the 200 delegates at the ADR Group annual conference in Oxford this week.

The star attraction of this year’s conference was the legendary Professor Robert Mnookin of Harvard University, acknowledged as one of the world's leading authorities on mediation and author of Bargaining with the Devil:  When to negotiate; when to fight.

Delegates heard about the significant advantages of mediation as a process for resolving domestic and cross-border disputes and of the role of the mediator in the USA where, in several states, mediation is a compulsory pre-litigation step.

Also addressing the conference was Slovenian Justice Minister Ales Zalar, who has been responsible for introducing mediation to Slovenia’s legal system. He explained that it is now being adopted at an early stage by many commercial concerns. He urged contracting parties to consider a pre-litigation mediation clause in their contracts – a step that would assist in preserving relationships rather than the total breakdown that occurs when the battle lines of litigation are drawn.

Nick Cox said: “I came away with a host of fresh ideas and a renewed enthusiasm for mediation, which I have always seen as a viable and vital alternative to conventional litigation.

“The process, which is voluntary, is a confidential and flexible forum in which parties can air their grievances and seek a mutually beneficial solution. I firmly believe it should be considered sooner rather than later in most disputes.”

Nick Cox is an ADR Group-accredited mediator.

Now and again a buyer will acquire land or property by buying the shares of the company that owns it, rather than buying the land itself. One reason buyers may do this is to take advantage of the sizeable savings on stamp duty.

However, estate agents need to take account of the possibility that such arrangements could undermine their commission agreements.

In the recent case of Estafnous v London & Leeds Business Centres Ltd [2011], an agent lost out on commission of around £2 million after such a transaction took place.

It had been agreed that if Mr Estafnous introduced a potential buyer for a particular property, LLBC would pay him commission of around of £2million when  ‘a purchase of the property’ was completed.

Estafnous did, indeed, introduce a potential buyer, a Mr Kapoor, but after a period of negotiations, the plan changed. Instead of buying the property itself, Mr Kapoor would now purchase the company that owned a lease on the property.  

When the share sale completed, Mr Estafnous went ahead and claimed his  £2 million commission.  LLBC refused to pay, arguing that since the property had not been sold, Estafnous was not entitled to anything.

The question for the Court of Appeal was whether the commission agreement applied only to a sale of the property (ie a legal transfer of the long leasehold interest in the property), or whether it also covered the sale of the company.

Estafnous accepted that the agreement only provided expressly for commission on a sale of the property.  However he argued that it should cover a share sale since the end result was the same, in that Kapoor acquired control of the property.

The Court of Appeal disagreed. The agreement was clear, they said, and there was no room for additional terms to be implied. If the parties to the agreement intended something to happen, then it should have been clearly stated within the agreement. 

Protect your commission

As far as estate agents are concerned, to ensure that entitlement to commission is not put at risk following the decision in this case, we recommend that your standard terms and conditions are reviewed without delay. If you would like assistance with updating these to provide for any changes in the structure of a transaction, please contact any of the lawyers in our commercial property team. 

Businesses in Gloucestershire should be on the alert for the latest wheeze – cold calls offering so-called ‘expertise’ with a new EU ‘cookies’ law.

The warning comes from Patrick Peake, who works in our company/commercial team. Patrick said: “We know that businesses in this area have been getting unsolicited calls from companies offering to help them comply with the new law for a fee.
 
“The only problem is that no one seems to know what the law actually entails … so how to comply with it is anyone’s guess. Businesses would do well to avoid shelling out on a service which may not do what it promises to do.”
 
The law in question is the EU Cookies Directive. Its basic premise is that websites will now need to gain the user’s consent to store cookies on their device.
 
Mike Johnson, a director at Fusion Design, our website provider, explained: “The fact is that most sites store cookies of some sort. For example, Google Analytics uses at least three cookies on your browser to allow it to track your passage through a site. Nearly all e-commerce stores use a cookie to allow the website to record your purchase.
 
“The EU directive, which aims to restrict the use of cookies, is a classic example of muddled and confused thinking. It proved so difficult to implement that it has been given a year’s grace. We are keeping an eye on developments and will be advising our website clients accordingly to ensure that they stay on the right side of the law as and when it changes.”
 
Patrick Peake said: “Any cold caller offering to help you comply with the cookies directive is most likely to be taking advantage of the uncertainty of the new law. If businesses are in doubt, they should contact their legal or IT providers for advice rather than spending money on speculative and questionable service.

Until the mid 1990s, if you had had an accident you would probably ask around and approach a local solicitor who was experienced in these claims – much the same as if you wanted a doctor, a dentist or any other professional.
 
As professionals, we looked after our clients, secure in the knowledge that if we did a good job for them, we would be paid a reasonable fee.
 
Greed has now got in the way of professionalism, with claims management companies and insurers at one end of the business raking in referral fees and, at the other end, large personal injury practices - some might say factories - shelling out money to buy the claims, with a sharper eye on the fees they will earn rather than on the client’s best interests.
 
Referral fees add no value to the system, they damage the profession and reduce the level of service the client should expect and lawyers should provide. In this brave new world of ‘Tesco law’, without professionalism we will just be another retailer.
 
Take the high ground. Stamp out referral fees, make them illegal and the system will work properly - as it used to.

Nick Richardson represents victims of clinical negligence and all types of accidental injury, ranging from a claim against a multinational following a serious accident on a North Sea oil platform to claims against rail companies in connection with a major rail crash. He is a long-time member of the Law Society's Personal Injury Panel and an APIL senior litigator. 

The use of side letters in commercial transactions is common. Ancillary to a contract, a side letter is used to clarify, supplement or vary the original agreement. The key question is whether or not it is in fact a legally binding contract.

The recent case of Barbudev v Eurocom Cable Management Bulgaria EOOD & Others highlights the need to ensure that the side letter is not simply ‘an agreement to agree’.

The case concerned a company sale, where it was agreed that the seller, Mr Barbudev, would have shares in the buyer’s newly-merged company.  Because the terms of Mr Barbudev's investment could not be agreed before the sale was completed, the parties entered into a side letter.

Several years on, the company was sold but Mr Barbudev's investment agreement had still not been signed. The court had to decide whether the side letter constituted a legally enforceable contract.

Intention to create legal relations

In Barbudev, the High Court confirmed that whether the parties have decided to create legal relations depends not on their subjective opinions but on ‘a consideration of what was communicated between them by words or conduct, and whether that leads objectively to the appropriate conclusion’. Additionally, there has always been a strong presumption by the courts that parties to commercial transactions intend to create legal relations.

Certainty

There are two components to this requirement: certainty of language; and whether the document is sufficiently complete. Where certainty of language is an issue, courts limit themselves to interpreting a contract and not making one.

Consideration

It is important to remember that, to be binding, a side letter must, like all contracts, be supported by consideration (unless made by a deed). Two key principles have emerged from side letter case law. The first is that that consideration must move from the promise (that is, the person who seeks to enforce the promise), although it need not move to the promisor. Secondly, past consideration is no consideration, so completed obligations will not be regarded as consideration. This could be relevant when a side letter is used to vary an existing arrangement. However, the courts look at the entirety of a whole transaction which means that side letters can form part of a larger deal.

When drafting a side letter, care should be given to ensure that the document is legally binding. This can be done by explicit wording to that effect as well as including legal boiler plating and incorporating previous contractual terms. Where doubts exist as to consideration, the letter should be executed as a deed. 

The European court of justice ruled in October that it is legal for individuals to buy TV decoder cards from foreign broadcasters.

In the long-awaited judgment in the joined cases of Football Association Premier League and Others v QC Leisure and Others and in Karen Murphy v Media Protection Services Limited the court ruled that licences between a broadcaster and a rights-owner preventing free movement of the decoder cards within the EU were contrary to EU competition law.

Basically, these form of licence agreements should not prevent broadcasters from providing services (cross-border), as that would constitute a territorial restriction and eliminate competition between broadcasters.

The English courts are still to decide on the effect of this, but it should mean that satellite decoder cards from other EU countries will be lawfully available for sale in the UK.

This could result in a major change in the way that programmes are licensed in the EU through the use of pan-EU licences rather than licences being granted on a country-by-country basis.

The likely impact on sports in the UK has been widely reported by the press, given that many sports clubs rely on the income from the present arrangements. The everyday impact on businesses and consumers will depend on how much cheaper the decoder cards are than the UK equivalent. 

Under the Late Payment of Commercial Debts (Interest) Act 1998, all businesses have a statutory right to interest on late payments of debts under business-to-business contracts for the supply of goods or services.

A creditor is entitled to claim interest from the debtor, at 8 per cent above the Bank of England base rate, from the date when the debt becomes due. If no payment due date is specified in the contract, then the default period is 30 days.

Rates for calculating interest are called reference rates and are fixed for six-month periods. The Bank of England base rate on 31 December is used as the reference rate for debts becoming overdue between 1 January and 30 June of the following year. The rate in force on 30 June is used from 1 July to 31 December.

Creditors are  also entitled to charge a one-off sum to compensate for the cost of recovering the debt. This is set at £40 for debts up to £1,000, £70 for debts up to £10,000 and £100 for debts above £10,000.

If the contract contains an express term providing for interest on late payments then the Act will not apply and the creditor can only charge the contractual interest rate, usually 3-4 per cent above a bank’s base rate.

If on the other hand there is no express term in the contract, interest and compensation may be claimed under the Act. It would however be prudent for a creditor to include an express term providing for interest on late payments and also to preserve, by express provision, an alternative right to recover interest under the Act. This is a far more attractive option for the creditor as the statutory rate may be much higher than the contractual rate.

In the recent case of Lucasfilms Limited and others v Ainsworth and another, Mr Ainsworth, who lives in England, had been selling ‘Star Wars’ helmets and armour. Unimpressed, the film company decided to wage war and brought copyright and trade mark infringement proceedings in America. A US judgment against Ainsworth included an award of $10m for infringement.

But Lucasfilms’ forces proved to be less strong outside the US. The English courts declined to enforce the American judgment. Lucasfilms pushed on with the case. It was referred to the Supreme Court, which upheld the lower English court’s decision. The stormtrooper helmets could not be considered as ‘sculptures’ under English law that protects intellectual property rights (IPR).

The media reporting of the case has tended to reflect the film’s storyline (‘underdog’ defendant overcomes ‘big’ claimant). But from a legal perspective there is a more interesting and significant point.

As the decision shows, the English courts have judicial authority in cases involving US copyright infringement claims because there is no longer legislation preventing this. It is notable that, among other things, the modern trend is in favour of enforcement of foreign IPR. The Court referred to European law, which only assigned exclusive jurisdiction to the country where the IPR originated in certain circumstances, which did not apply in this case.

This could have a considerable implication for future IPR litigation, since it would allow claims for foreign copyright infringement to be dealt with by the English court and when the defendant has a sufficient connection to this jurisdiction, the force may well be with us!

Click to download our fact sheets A basic guide to intellectual property rights and Intellectual property disputes

Franchisees benefit from exploiting the franchised brand and they should act to uphold the brand’s reputation.  Equally, franchisors must ensure that their franchise agreements provide them with adequate recourse in the event a rogue franchisee acts in a way that may damage the brand. 

The case of MMP v Antal 2011 highlights the importance of ensuring adequate provisions are in the franchise agreement, and that termination procedures are carried out correctly.

MMP (the franchisee) entered into a franchise agreement with Antal (the franchisor). An employee of MMP accessed information that was then used for improper purposes and Antal’s management feared damage to their brand. They terminated the agreement on the grounds that MMP had breached a ‘substantial term’ of the agreement not to ‘affect adversely (Antal’s) name, trade marks or other intellectual property’. 

The court ruled that Antal had not brought enough evidence to show that the brand had been damaged. Antal had therefore wrongfully terminated the agreement. Although the court accepted that Antal's fears of brand damage were genuine, this was not sufficient reason to terminate under the agreement as it was drafted.

Practically, it may be quite difficult to establish actual damage caused to a brand. Indeed, in this case, despite establishing the improper use of the information, the court was not satisfied that these actions necessarily caused damage. Since Antal had unlawfully terminated the agreement, they were liable to pay some damages to MMP.  

Franchisors should carefully consider the terms of their agreements and ensure that these grant them the flexibility to take appropriate action to protect their brand. The outcome of this case may have been very different had there been provisions in the franchise agreement to enable Antal to terminate where they had a ‘reasonable belief’ that MMP had damaged the brand name.