Business Brief: June 2018

Welcome to the June 2018 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 advance 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 435900.

This month's articles:

Management company entitled to refuse permission for a dog

Leases often include a ‘no pets allowed’ provision – at least not without the consent of the landlord. However, how and whether such provisions can be enforced or challenged will depend on the facts of each case. Recently, the High Court found that a management company acted reasonably when it refused permission for a leaseholder to have a dog in their flat.

In this particular instance the leaseholder requested permission to have a dog and was refused. Nevertheless the leaseholder moved into the flat with the dog and then faced an application for an injunction from the management company, who sought a court order requiring the dog to be removed. The court held that the management company had a reasonable policy which had been implemented fairly in the circumstances as the management company had taken into account the views of the majority of the tenants in the block. It is of note that the management company advised the leaseholder that it would consider any special circumstances that may apply e.g. the need for a guide dog.

For further information please contact Cathy Allen.

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Break notice held invalid

Break notices can be tricky to get right. There are usually strict formalities that need to be complied with. The High Court recently held that a break notice served on behalf of an assignee of a registered lease was not valid. In this case there had been a lawful assignment of the lease, however the assignee had not yet been registered as the proprietor of the leasehold title. There was an express obligation on the assignee to register his interest in the title and failing to do that meant that he was not entitled to serve a break notice. This case may seem harsh but in fact there is no new law that comes from it. The court took into consideration the general position that it is the legal tenant that has powers and rights under a lease and until that tenant is registered as the legal registered proprietor (where required) it will not be entitled to serve tenant notices such as break notices. Whilst each case is based on its facts it is a useful reminder of the existing law and the need to be careful and precise when it comes to serving break notices.

For further information please contact Daniela Catuara.

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The lease of a ground floor maisonette was held not to include the subsoil

The High Court has given judgment in favour of a freeholder in a case where a leaseholder had obtained planning permission to make a cellar a habitable space. To do so involved digging down into the subsoil beneath. The leaseholder’s lease covered the ground floor and cellar but did not expressly include the subsoil. The freeholder opposed the leaseholder’s plans on the basis that the lease did not expressly include the subsoil and neither was there an implied term. The court found that whilst there is authority as to an implied inclusion of the airspace and subsoil in leasehold property they did not apply here. The court looked at the precise wording of what the demise included i.e. what was being leased and looked at surrounding clauses and held that the subsoil was not included and therefore the freeholder was perfectly entitled to either allow or refuse the extension the leaseholder sought to build in its cellar, and if it allowed the extension it was free to dictate on what terms the leaseholder was permitted to proceed.

For further information please contact Nicolas Wickens.

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Commercial property lease – landlord’s reasonable consent to assign

In a recent Court of Appeal decision a landlord who refused a commercial tenant’s request to assign a lease to a potential assignee was found to have acted reasonably. In this case the clause in the lease provided that the landlord could withhold consent where it was reasonable to do so. In this particular case the landlord had a number of reasons for refusing consent, some of which were found to be valid and good and some of which were not. Even though some of the reasons were found to be bad, the landlord’s decision was still found to be reasonable. In these cases it is for the landlord to prove that it gave consent within a reasonable time and that its refusal of consent was reasonable.

For further information please contact Hannah Bambury.

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There can be an implied duty of good faith

Generally, there is no principle or duty of good faith in English law in the context of commercial dealings. However, a recent High Court case has implied a duty of good faith into a joint venture agreement. Each case will always depend on its facts but in this case the parties had committed to collaborating on a long-term basis where their interests were interlinked. In the circumstances the implication of a duty of good faith in the contract was essential to give effect to the parties’ reasonable expectations under the agreement. The court did make it clear in giving this judgment that it was not broadening the ability of the court to imply such a duty.

For further information please contact Mark Williams.

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GDPR now in force – employment ramifications

The General Data Protection Regulation (GDPR) came into force on 25 May 2018. This brought about a number of changes for businesses including employers. In particular, employment contracts should seek to justify employee consent where it is given in a clause allowing the employer to collect and process employee information, for example, in relation to workplace monitoring. Employers also need to ensure that their systems allow them to comply with the new rules giving employees the right to be forgotten (known as the right of erasure) and a right of rectification.

For further information please contact Paul Maynard.

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Employee’s comments on Facebook led to dismissal

An employment tribunal has decided that an employee who made derogatory comments about her employer on Facebook was fairly dismissed.

In this case the employee had worked for her employer for 17 years and she had no previous disciplinary issues. However, she made some comments on Facebook which included describing her role as a ‘general dogsbody’. She also referred to her place of work as ‘that bloody place’ and said that she would need to ‘hurry up and sue them’. This was a case where the employer had a clear social media policy in place which prevented these sorts of comments from being made. The policy also pointed out that even if a person’s privacy settings were such that comments made were private it was still possible for the comments to be copied and shared. The policy also stated that disciplinary action could be taken in the event that the policy was breached, which could lead to dismissal. In this case the tribunal considered the employee’s actions to be a breach of the policy and that the employer’s actions in dismissing the employee were fair. Dismissal of the employee would not have been a realistic option for the employer had it not been for the existence of a robust and effective social media policy.

For further information please contact Paul Maynard.

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Landlord breached tenant’s right to quiet enjoyment of commercial premises

The High Court has found in favour of a commercial tenant in a case where it sought compensation against its landlord for a breach of its right to quiet enjoyment. In this case the landlord carried out extensive works to the building excluding the tenant’s premises (a basement gallery). Despite the fact that the landlord had included a clause in the lease which provided it with a right to ‘alter or repair’ the building even if the gallery and its use or enjoyment was materially affected, the court found that the clause was not sufficient to prevent the landlord’s actions from being a breach of this important right. This was decided based on the landlord’s behaviour, whose actions when exercising its rights were not considered to be reasonable.

It is perhaps quite an unusual case in that the tenant had shown that it had not suffered any loss as a result of the works carried out, which involved high levels of noise and imposing scaffolding that obscured the gallery. In fact, the evidence showed that the tenant’s sales rose. Nevertheless the court awarded the tenant damages of 20% of the rent for the premises from when the work started until the work was completed. In this case the court noted a relevant factor was that the landlord had been particularly inconsiderate and not taken into account or considered the tenant’s concerns as it should have done. The court highlighted some practical points for landlords to take away from this case in general, which include:

  1. a) Informing the tenant of the works in advance with as much notice as possible (preferably before the tender stage);
  2. b) It should discuss arrangements with the tenants to minimise any disturbance such as the design of the scaffolding and plans for noisy work;
  3. c) Scaffolding should not obstruct the tenant’s access to its premises;
  4. d) The appearance of the tenant’s exterior façade should be maintained as much as possible;
  5. e) It should take care to avoid deliveries obstructing the tenant’s access to its premises;
  6. f) It should seek to limit the hours for noisy works and give the tenant notice of these works;
  7. g) It should keep the tenant regularly informed – responsibility for which should not be delegated to a builder; and
  8. h) It should consider a rent concession – particularly where problems arise.

For further information please contact Jeremy Laws.

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Restrictive covenants – the meaning of the words ‘interested in’

Employment contracts often contain restrictive covenants preventing employees from being ‘concerned or interested in’ any competing business for a period of a certain number of months (usually six or 12) from termination of their employment. The Court of Appeal has held that the words ‘interested in’ means the employee cannot hold any shares in a publicly quoted company that competed with the employee’s former employer. However, the court considered that this made the covenant too wide and was therefore void. The court refused to delete the words ‘interested in’ which would have otherwise made the clause valid.

The case illustrates the need to have suitably limited covenants that only go as far as necessary to protect a legitimate business interest.

For further information please contact Paul Maynard.

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Employer’s suspension of an employee found to be a repudiatory breach of contract

An employer who suspended a teacher was found to have repudiated the contract of employment, such that there was found to be a constructive dismissal.

In this particular case the teacher, although experienced, had no particular experience in dealing with disruptive pupils. She had asked for help in dealing with them but no meaningful help had been provided. When allegations were made concerning her rough handling of pupils she was suspended pending investigation. She considered herself to be effectively dismissed (known as constructive dismissal) as the employer’s actions in suspending her breached the implied term of mutual trust and confidence.

It highlights the fact that suspension is not a neutral act but a detrimental one and it also highlights the importance of employers considering all possible options and not simply making a knee-jerk reaction in suspending an employee pending investigation.

For further information please contact Paul Maynard.

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Notice of a claim under a share purchase agreement was inadequate

The Court of Appeal has recently held that a notice served under a share purchase agreement was invalid, essentially for being too vague. The relevant provision of the contract required a notice to set out the ‘reasonable details of the claim (including the grounds on which it is based and the purchaser’s good faith estimate of the amount of the claim)’. The notice which was served was fairly general and it was found not to be specific enough, rendering it invalid. The court found that the word ‘grounds’ in this context meant that the legal basis for the claim needed to be expressly set out with reference to particular warranties.

The case acts as a reminder that it is important to comply strictly with notification requirements set out in a contract. It is also good guidance to follow where there is similar contract wording in that specific clauses need to be referenced even if the contract does not expressly say so.

For more information please contact Jeremy Laws.

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Disclaimer and copyright notice

This service is provided free of charge for information purposes only. The information and opinions contained in this bulletin are not necessarily comprehensive and do not purport to give professional advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this service.

© Gaby Hardwicke June 2018

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