Welcome to the October 2011 edition of the Gaby Hardwicke Business Brief. We publish the Business Brief regularly and it contains information on important legal developments, forthcoming legislation and other items of interest to you and your business. Our aim is to update you on the most important issues in the shortest possible time and to give you advanced warning of regulation, with advice on how to minimise its impact.

We hope that you find this newsletter useful. If you have any comments or suggestions, please email us or call David Getty on 01323 435955.

Company directors must ensure that they act in accordance with the company's articles of association when appointing administrators. The High Court has recently set aside an out-of-court appointment of administrators to a company that was made by the company's directors without the express authority of a board resolution.

The directors had failed to comply with the company's articles of association when making the appointment, because they failed to hold a legitimate board meeting or to act with unanimity. The directors lacked authority to appoint administrators to the company and the resulting appointment was consequently invalid.

In another recent case, the High Court confirmed that it could not hear an application for an administration order because the company lacked the necessary authorisation under its articles.

For more information please contact Jeremy Laws.

A recent High Court decision has implications for businesses that impose minimum contract terms and early termination charges on consumers (defined as those dealing in a non-business capacity).

The court found that certain standard terms in a company's gym membership contracts were unfair and contravened consumer protection legislation. The offending terms imposed minimum membership periods on members and early termination charges, which required members who terminated early to pay subscription fees for the entirety of the minimum membership period with no discount for early payment, or a discount of no more than 5%.

Businesses that use these types of contracts should review their standard terms and business practices to ensure they comply with consumer protection legislation.

For more information please contact Gemma Ritchie.

The European Court of Justice recently held that, where defective consumer goods were installed by the consumer before the defect became apparent, the seller must either remove the defective goods and install the replacement goods itself at its own cost, or bear the cost of removing and installing the replacement goods. This will apply even if the seller did not install the goods in the first place.

If replacement is the only remedy, a seller cannot refuse to replace the defective goods because the cost of removal and reinstallation would be disproportionate, considering the value of the non-defective goods and the significance of the defect.

Businesses are encouraged to review their existing terms and conditions for the supply of consumer goods to ensure these do not require a consumer to pay for any removal or reinstallation of defective consumer goods that have been installed.

For more information please contact Tristan Mutimer.

Research by the Office of Fair Trading (OFT) suggests many small businesses have a poor understanding of competition law. The survey found that about 30% of businesses with up to four employees claim to know nothing about competition law, compared to 10% of medium and large businesses.

Recent OFT guidance has emphasised that small businesses are not exempted from the need to comply with competition law and that practices such as price fixing and information exchange could be considered cartel activity and therefore illegal whatever the size of the business. Several other forms of agreement could also be deemed as co-operation and therefore prohibited if the objective is to reduce competition. These include:

• Joint purchasing agreements
• Specialisation Agreements (where competitors agree to specialise in the production of certain goods)
• Joint sales
• Joint advertising.

For more information please contact Mark Williams.

The buyer of a business will usually wish to prevent the seller from establishing a company that competes with their newly acquired business. Sellers may be required to give restrictive covenants in the purchase agreement which, for example, prevent them from soliciting existing customers of the newly acquired business for a specified period. Individuals acquiring new businesses should make sure any restrictive covenants in the purchase agreement adequately protect their interests.

Potential purchasers should also be aware of the limits to an action for breach of a restrictive covenant. In a recent High Court case, the seller of an accountancy business was held to have breached a non-solicitation clause in the purchase agreement. While working for the buyer, the seller actively solicited clients for a rival firm from the buyer's client base. The judgment sum of £31,875 was only a fraction of what was being contested: the ownership of £1 million of goodwill, and the reputations of numerous individuals and firms of accountants.

For more information please contact Mark Williams.

Two recent employment tribunal decisions highlight the importance of a business having a properly drafted policy on the use of social media.

In the first, the tribunal found that a pub manager was fairly dismissed for gross misconduct after she made inappropriate comments on Facebook about two of her customers, who had verbally abused and threatened her. The manager was found to be in breach of the employer's email and internet policy, which specifically referred to employees' use of social media (including Facebook) while at work.

In the second, the tribunal held that an employee was dismissed fairly for sending an offensive email from his home computer to his colleague's home computer. No privacy was attached to the email as it was a chain email asking recipients to pass it on. The employer was entitled to treat his actions as gross misconduct justifying the dismissal.

Businesses should adopt a social media policy and provide training to employees on the appropriate use of social media.

For more information please contact Jo Oliver.

Employees are only entitled to a reasonable amount of unpaid time off in the following situations:

• to provide assistance if a dependant falls ill, gives birth, is injured or assaulted (an illness or injury does not have to be serious or life threatening to be covered)
• to make care arrangements for the provision of care for a dependant who is ill or injured (for example, taking a sick child to stay with relatives)
• if a dependant dies
• to deal with the unexpected disruption, termination or breakdown of arrangements for the care of a dependant
• to deal with an unexpected incident involving a child during school hours.

The right to unpaid time off in any other circumstances is entirely within the discretion of the employer, although consistency is essential to avoid the risk of a claim for discrimination.

For more information please contact Paul Maynard.

A decision in the Employment Appeal Tribunal (EAT) underlines the difficulties that businesses can face when dealing with a redundancy situation involving an employee on maternity leave. The EAT held that a law firm discriminated against a male lawyer on the ground of his sex when, in a redundancy selection exercise, it inflated the score of a female colleague who was on maternity leave.

Businesses should not assume that 'giving the benefit of the doubt' to an employee on maternity leave is the safest option in terms of claim avoidance. They should assess the possible ways in which the disadvantages of a maternity absence can be mitigated, rather than automatically favour the female employee above others, as by doing so they may inadvertently be discriminating against male colleagues.

For more information please contact Paul Maynard.

A decision in the patents county court illustrates how passing off can be committed by small localised businesses.

The parties in this case were two tree-surgery businesses, based about 10 miles apart trading as Redwood Tree Services Limited (the claimant) and Redwood Tree Surgeons. The judge found that the claimant's business had a small, highly localised goodwill. Although the two businesses had co-existed for over six years, the judge also held that passing off occurred when one of the traders began trading in the other’s geographical area. The judge imposed an injunction on the defendant which prevented it trading in a number of nearby postcodes.

For more information please contact Jeremy Laws.

Trade marks · Copyright · E-commerce

deg@gabyhardwicke.co.uk

Business Sales & Purchases · Company Law · Corporate Finance · Commercial Agreements

mew@gabyhardwicke.co.uk

Commercial Agreements

gcr@gabyhardwicke.co.uk

Commercial Property · Trade marks

jmf@gabyhardwicke.co.uk

Commercial Property

rsg@gabyhardwicke.co.uk

Commercial Property

nrw@gabyhardwicke.co.uk

Commercial Property

jpe@gabyhardwicke.co.uk

Commercial Property

ho@gabyhardwicke.co.uk

Commercial Property

cle@gabyhardwicke.co.uk

Employment Law

pcm@gabyhardwicke.co.uk

Employment Law

jlo@gabyhardwicke.co.uk

Commercial Disputes

jpl@gabyhardwicke.co.uk

Commercial Disputes

hct@gabyhardwicke.co.uk