Machins Solicitors
Victoria Street
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LU1 2BS

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July Business Client Web Articles

Stories included

• Equality Bill could make employers reveal pay structures
• Accountancy firm wins appeal to strike out £88m negligence claim
• UK retains right for people to work more than 48 hours a week
• Buy to let rises above the credit storm
• OFT approves estate agents redress scheme
• Companies to be named and shamed for hiring illegal workers
• New guide to speeding up planning partnerships
• Manufacturer takes legal action to protect its trademark

Equality Bill could make employers reveal pay structures

The Government plans to create more equality in the workplace by obliging employers to disclose their salary structures so any unjustified discrepancies in pay rates for men and women will become apparent.

It also wants to create more diversity in the workplace by allowing positive discrimination in favour of women and ethnic minorities.

The measures will be part of the new Equality Bill which will be published later this year. The Bill is designed to streamline the law relating to equality and in doing so will replace nine other major pieces of legislation such as the Equal Pay Act, the 2006 Equality Act and the Disability Discrimination Act.

The Equality Minister Harriet Harman outlined some of the main points to be covered in the new Bill in a statement to the House of Commons. She said it is impossible to tackle discrimination when it is hidden so she wants to encourage more openness. “So, just as every school has to publish their exam results, I want employers to report on key equality matters, like gender pay. This will put the spotlight on pay unfairness which we all know goes on but which stays swept under the carpet.”

She said 80% of people are employed in the private sector where the pay gap is double that of the public sector. The Government will now concentrate on how to oblige the private sector to close that gap. For example, it will use the fact that 30% of all companies do £160billion worth of business with the public sector.

Ministers will consider how public procurement can be used to deliver transparency and change. The implication is that unless companies can show that they have equality policies in place then they may not be able to compete for public sector contracts.

Ms Harman outlined four other measures. “The Equality Bill will outlaw clauses in employment contracts which prohibit employees disclosing their pay to each other. Where an employer has been found to have unlawfully discriminated, we will provide for the Employment Tribunal to be able to make a recommendation applying not just to the successful complainant but to everyone in that workplace.

“The Equality and Human Rights Commission will conduct inquiries under its legal powers into sectors where most progress needs to be made – starting with the financial services sector. And through a new kite-mark system, we will challenge companies to report on equality.”

The Bill will also promote equality in other areas by outlawing “age discrimination in the provision of goods and services” and by providing greater legal protection for the disabled in the workplace.

Ms Harman said: “We need to make further progress on fairness. That’s why we will legislate to give more scope for employers, if they want to increase the number of women or black or Asian employees – to take positive action.”

It means employers will be allowed to use positive discrimination when choosing between two equally qualified candidates to ensure a more diverse workplace if particular groups such as women or ethnic minorities are under-represented. The law will also allow positive discrimination in favour of men if the circumstances call for it. For example, a school which employs mainly women teachers may be able to discriminate in favour of a man to redress the balance.

The Government will publish another paper within the next few months setting out the proposals in further detail. We shall keep clients informed of developments.

Accountancy firm wins appeal to strike out £88m negligence claim

An accountancy firm has won its appeal against a court decision refusing to strike out an £88m claim against it for professional negligence.

This “astounding claim” in the words of Lord Justice Mummery involved a company called Stone & Rolls Ltd and the chartered accountants, Moore Stephens, who acted as its auditors.

The basis of the Stone Rolls case as put before the Court of Appeal was that Moore Stephens failed to uncover the dishonest behaviour of Mr Zvonko Stojevic, who effectively acted as the sole directing mind and will of the company.

The court was told that Mr Stojevic used the company to perpetrate frauds on banks which enabled him to channel money to himself and others. A Czech bank eventually sued and was awarded substantial damages against both the company and Mr Stojevic.

The company was unable to pay and went into liquidation. A claim for damages was then brought by the company through its liquidators. The claim for US $174m – approximately £88m – was against the accountants for their alleged negligence in failing to detect the deceits during the audits.

The accountants denied negligence and argued that the claim should be struck out because the company was effectively asking them to indemnify it against liabilities incurred by its own fraud. It said such a claim was barred by the long established legal principle that anyone involved in illegal actions cannot then claim damages arising out of those illegal actions.

The judge at the original hearing declined to strike out the claim so the accountants took the case to the Court of Appeal which has now ruled in their favour. Lord Justice Mummery said: “Mr Stojevic and his company together defrauded the bank. To suggest that the corporate creature used by Mr Stojevic as the vehicle for the fraud was the victim of the fraud committed by him with it turns the world upside down. There is no prospect of establishing at trial that the company was the victim of the fraud.”

He said the accountants could not be held liable for what happened. “As a general rule a fraudster, individual or corporate, is legally liable for the losses that flow directly from the fraud and cannot blame such losses on the negligence of another person, such as the victim or whoever.”

“Does common sense matter? Yes. It is contrary to all common sense to uphold a claim that would confer direct or indirect benefits on the corporate vehicle, which was used to commit the fraud and was not the victim of it, and the fraudulent driver of the fraudulent vehicle.”

UK retains right for people to work more than 48 hours a week

The UK has retained its right to opt out of the EU Working Time Directive which limits the working week to 48 hours.

The Government made the announcement after reaching an agreement on both the Working Time Directive and the Agency Workers Directive at the EU Employment Council.

Under the compromise arrangement, workers will continue to be able to work more than 48 hours a week but will be subject to a cap of an average of 60 hours per week.

As another part of the compromise, agency workers will have to wait 12 weeks before they receive the same rights as full time employees. The EU had wanted the UK to grant equal rights from the first day of employment but this had proved unacceptable to the British Government.

Business Secretary John Hutton said: "This agreement means that people remain free to earn overtime and businesses can cope during busy times.

"The agreement on agency working will give a fair deal for agency workers and prevent unfair undercutting of permanent staff while retaining important flexibility for businesses to hire staff for short-term seasonal contracts or key busy times."

Buy to let rises above the credit storm

Buy to let is one of the few areas of the economy to defy the downturn caused by the credit crunch and all the indicators suggest that it is actually benefiting.

The Royal Institution of Chartered Surveyors reported a 29% increase in instructions from people wanting to let property in the first quarter of the year. That was in stark contrast to a 2% fall in the previous quarter.

The reasons for the turnaround are quite straightforward. House sales may have fallen but people still need somewhere to live and so they turn to rented accommodation.

The Association of Residential Letting Agents (ARLA) reports that demand for rented accommodation is outstripping supply in many areas. A survey of its members showed that 39% of agents say there are more tenants looking for accommodation than there are properties to house them.

In turn, more people are looking to the private rented sector as a good investment. Many sellers who can’t get the prices they want for their properties are choosing to let instead, some as a long term investment and some as a short term measure while they wait for mortgage lenders to offer better deals to potential buyers so the housing market can start to rise again. In the meantime, they can look forward to taking advantage of rising rental yields.

Investors already involved in buy to let are also standing firm and looking for increased returns in coming years. ARLA recently reported that 90% of investment landlords had no intention of selling their properties even if house prices continued to fall. Most of them see buy to let as a long term investment and many see it as part of their pension provision.

Many investors are just as active and busy as ever as they respond to changing market conditions. Some are taking advantage of the drop in house prices to add to their portfolios. Some properties are being sold below market value so the vendor can avoid repossession.

Of course, while buy to let is holding firm in an uncertain economic climate, it is not without its pitfalls. Investors need to be careful where they place their money and make sure they choose the right properties in the right areas to suit their needs. They should also remember that there are numerous legal requirements landlords have to meet such as obtaining licences for some houses in multiple occupation, fulfilling all their obligations to tenants and entering into tenancy deposit schemes.

All landlords run the risk of sometimes having to deal with problem tenants. Some may fail to keep up with the rent or not treat your property as well as they should. In these circumstances you may need to take legal advice so you can take action to recover rent arrears or to recover your property from bad tenants when necessary.

As the figures show, buy to let remains an attractive proposition for both small and large investors as long as they are prepared to plan carefully and follow the correct legal procedures at all times.

OFT approves estate agents redress scheme

A redress scheme is being set up to allow consumers to refer complaints about estate agents to an ombudsman.

The Office of Fair Trading (OFT) has already given approval to the Ombudsman for Estate Agents Company Ltd to set up a redress scheme under the Consumer Estate Agents and Redress Act 2007. Two other applications to run estate agent redress schemes are also being considered.

An OFT statement said: “Once it becomes compulsory for all estate agents to join an approved scheme, buyers and sellers of residential property will be able to refer complaints concerning members of the scheme to an ombudsman to be determined.

“The ombudsman will have the power to make a range of awards, including requiring a member to pay compensation. The ombudsman's decision is binding on the estate agent, although a complainant can choose to reject the decision and pursue their complaint through the courts.

“The OEA's approved redress scheme will be a free service to complainants.”

It’s expected that all estate agents will be required to join an approved redress scheme by 1st October this year.

Companies to be named and shamed for hiring illegal workers

Companies that employ illegal migrant workers are to be named and shamed as part of the Government’s continuing campaign to control immigration.

It’s part of a new initiative by the Home Office which will involve reorganising 7,500 UK Border Agency (UKBA) officers and staff into more than 70 Local Immigration Teams. They will work alongside the police to tackle the different forms of immigration crime at local level.

The Government’s plans are set out in a document entitled, Enforcing the Deal. Businesses that flout the rules will be targeted jointly by the UKBA and Her Majesty’s Revenue and Customs who will share intelligence about offenders. One of their priorities will be to carry out 5,000 operations in 2008/09 to identify and penalise organisations such as businesses, colleges and facilitators who break the law.

UKBA will publish the names of businesses found to be employing illegal workers.

Companies already face fines of up to £10,000 for each illegal worker. By May this year, 137 businesses had been issued with Notices of Potential Liability amounting to almost half a million pounds. There were only 11 successful prosecutions throughout the whole of last year under the previous system.

Any business employing migrant workers needs to ensure they comply with Points Based System (PBS) for controlling immigration which was introduced in February. Failure to comply could result in large fines and the embarrassment of having the company named and shamed.

New guide to speeding up planning partnerships

The Government has published a new guide to help speed up planning partnerships between developers and councils.

The guide, drawn up by the Department for Communities and Local Government, sets out what should be done within voluntary Planning Performance Agreements (PPAs) between authorities and developers dealing with complex planning applications.

The aim is to reduce the number of problems and streamline the planning system. The PPAs commit both parties to a framework containing milestones such as an agreed timetable to replace the standard 13 week target for reaching a decision.

A statement from the department says: “All PPAs that meet agreed timetables will be excluded from the standard 13 week decision threshold meaning developers no longer have to worry about target disincentives.”

The agreements should also “clarify in advance what level of evidence, resources and community engagement are required, and ensure that all relevant aspects such as sustainability assessments and design standards are properly considered.”

Planning Minister, Iain Wright said: "The pressures on housing supply and the challenges faced by those involved in delivering high quality, sustainable development continue to increase.

"We are committed to improving the planning processes which is why we introduced Planning Performance Agreements. They make a real difference to bringing forward quality new development through better project management."

Manufacturer takes legal action to protect its trademark

A manufacturing company has successfully taken legal action to protect its trademark against infringements by another firm with a similar name.

ALM Manufacturing had registered ALM in respect of household goods which it made and sold. It then discovered that another company was advertising household and garden products under the name ALM Imports and Exports Ltd.

None of the goods sold by this second company were marked as ALM but its letterheads and business cards did display the name ALM in one way or another.

ALM Manufacturing applied for a summary judgment to prevent the second company using the trademark. The second company defended the case saying that none of its products carried the brand name ALM and so therefore there was no infringement of trademark. It also said it never used the letters ALM alone but always added Imports and Exports.

In addition it said that it had never heard of ALM Manufacturing and so even if it did infringe the trademark, it was entirely innocent in doing so.

The court, however, rejected this defence. It held that whether or not the infringement was intentional was irrelevant. The main issue was whether or not an infringement had taken place. The second company had used ALM prominently on its literature and so in the court’s view it had no realistic prospect of defending a claim brought against it for infringement. Summary judgment was therefore granted in favour of ALM Manufacturing.

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