In Brief – July 2014
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Breaking up is hard to do
The Mannai [1] case in 1997 made it clear that substantial compliance with a break […]
The Mannai [1] case in 1997 made it clear that substantial compliance with a break notice was not sufficient, both the formal and the substantial elements must be adhered to. Mannai involved a break notice which included an incorrect date. In fact, the break notice was held to be valid because there was no express requirement to specify a date, so the wrong one did not invalidate the notice.
That was not the case in the recent decision, Friends Life Limited v Siemens Hearing Instruments Limited [2]. Here the break clause stipulated that the notice “must be expressed to be given under section 24(2) of the Landlord and Tenant Act 1954 [the Act].” The requirement is a historic one where it was once considered possible for a tenant to break a lease and then seek a new one on more favourable terms under section 26 of the Act. Expressing the break notice to be under section 24(2) prevented that, but the court cases in the 1990s put an end to the practice as well, leading the High Court in Friends Life to consider it was not strictly necessary and should not render the break notice invalid. The Court of Appeal disagreed. The requirement was that the notice “must be expressed” to be under section 24(2) and failure to follow clear express stipulations, however redundant or unnecessary, rendered the notice invalid.
So, tenants, get your coloured paper ready! Friends Life encourages landlords to inspect the minutiae of the break clause and notice to assess its validity. In recent years, tenants have been in an increasingly stronger bargaining position, but landlords need not allow any wriggle room for a break notice that omits any (non essential or otherwise excusable) express requirement.
Another case in front of the Court of Appeal just a few short weeks after the Friends Life decision, allowed the Court to support it renewed pro-landlord approach.
In Marks and Spencer plc v BNP Paribas [3] the tenant exercised the break clause to terminate the lease early and sought a refund of the payments it had made in advance which related to the period after the break date [4].
Prior to this case, it was accepted law that a tenant would only be entitled to a refund of rent paid in advance which related to the post-break period if there was an express term to that end in the lease. The tenant argued in BNP Paribas that, as a point of principle, a tenant should only pay under a lease for that which he actually receives, and as such the lease should be construed to include an implied term entitling the tenant to a refund. The High Court agreed with that argument. Fortunately for landlords, the Court of Appeal did not.
The case itself was a classic implied terms dispute and both courts applied the rules to the facts; what would a reasonable person have understood the parties’ intentions to be, given the background knowledge reasonably available to the parties at the time they entered into the contract? They came to different conclusions, however. The Court of Appeal decided that, against the relevant background, the lease would not reasonably be understood to include a term that entitled the tenant to a refund of the rent it had been paid in advance. The parties would have understood that if the rent was paid in advance, there would be rent attributable to the period beyond the break date that the tenant had no benefit of. If the parties had intended for the rent to be repaid to the tenant, an express clause to that effect would have been included. In short, there is no general principle that the tenant should only pay for what he receives.
The Court of Appeal has reasserted the widely accepted view that in the absence of an express provision, the tenant should not be repaid for rent paid in advance past the break date. The High Court decision threw the approach into confusion, but its decision was based on specific facts and the Court of Appeal has drawn a line under it.
Two recent decisions heralding a swing in favour of the landlord. For more advice, contact Martin McKeague.
[1] Mannai Investments Co Limited v Eagle Star Life Assurance [1997] AC 749
[2] [2014] EWCA Civ 382
[3] Marks and Spencer plc v BNP Paribas Securities Trust Company (Jersey) Limited and another [2014] EWCA Civ 603
[5] Including rent, service charge, car parking charges and insurance charges. The High court decided on the service charge; the Court of Appeal was required to deal with the rent and other payments

Consumer Contracts Regulations
The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (the Regulations) came into force […]
The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (the Regulations) came into force on 13 June 2014. They place obligations on traders requiring inclusion of certain terms in consumer contracts and provision of particular pre-contract information. The Regulations also impose amended cancellation periods.
What contracts are affected?
The Regulations apply to distance, off-premises and on-premises contracts made on or after 13 June 2014, although not all parts of the Regulations apply to each type of contract. The Regulations take effect alongside the Consumer Rights (Payment Surcharges) Regulations 2012 (the Surcharges Regulations 2012) and they replace the Consumer Protection (Distance Selling) Regulations 2000 and the Cancellation of Contracts made in a Consumer’s Home or Place of Work Regulations 2008 (albeit these latter provisions still apply to contracts made before 13 June 2014).
The Regulations only apply to contracts between traders and consumers. While the ‘trader’ definition remains similar to before, ‘consumer’ is now defined as an individual acting for purposes which are wholly or mainly outside that individual’s business, trade or profession, which means that a consumer may still receive protection where their dealings with a trader involve a mixture of business and personal.
What are the key changes?
Pre-contract information
- The Regulations outline pre-contract information that must be provided. Notably, they introduce an extended list of pre-contract information for distance and off-premises contracts, including that a model cancellation form must be provided where the consumer has a right to cancel.
- Where this information is not provided, the trader will commit a criminal offence and could be fined.
Cancellation and returns
- The Regulations give consumers an extended ‘cooling-off’ period for distance and off-premises contracts. Consumers now have 14 days from receipt of the goods to cancel the contract (previously they had seven working days from receipt of the goods). For service contracts, consumers have 14 days from the day the contract was entered into. Therefore, the trader should not begin the supply of a service before the end of the cancellation period unless the consumer has made an express request and acknowledged that they will lose the right to cancel once the contract has been fully performed.
- The cancellation period is extended to 12 months if the trader has not provided appropriate pre-contract information. This 12-month period can be reduced to 14 days once the failure is corrected.
- Goods should be delivered without undue delay, which should be within (not more than) 30 days unless the consumer agrees otherwise.
- The rules regarding refunds are altered, including the opportunity for customers to obtain a refund earlier than the date that the trader receives the goods back by showing evidence of return. Consumers can be required to return goods within 14 days of cancelling the contract.
Payments
- Express consent must be obtained from consumers where extra payments will be charged in addition to the price paid for goods/services.
- A consumer will not be liable to pay any costs of which they were not informed before entering into the contract.
- For distance and off-premises contracts, traders must make clear the point at which proceeding with an online transaction will result in payment being taken.
- Traders are now restricted in the fees they may charge for use of certain payment methods (as provided for under the Surcharges Regulations).
‘Extras’
- Calls to consumer helplines must be charged at basic rather than premium rate.
- Digital content, such as music downloads, are regarded as a different type of transaction, so traders must meet additional requirements.
Are there any exemptions or exclusions?
The list of contracts to which the Regulations do not apply has been extended to include contracts for medical products and contracts costing the consumer not more than £42. The Regulations do not apply to contracts to the extent they cover certain subject matter, including renting accommodation for residential use and package travel. They also do not apply to milkmen and other traders who supply foodstuffs/beverages/other goods for household consumption by undertaking frequent and regular rounds to a consumer’s home, residence or workplace.
There are certain exclusions from cancellation that are largely down to interpretation. For example, the right of cancellation does not apply where the goods are made to the consumer’s specification or are clearly personalised, nor to sealed goods that are not suitable for return for health protection or hygiene reasons, if they are unsealed after delivery. There is not yet any case law to assist in interpretation, but the Department for Business Innovation and Skills has published Implementing Guidance to help traders.
How to make the changes
Organisations with standard consumer contracts, including terms and conditions for website transactions, should ensure all their documentation complies with the new provisions.
It is important for anyone who trades with consumers to consider whether their business is subject to consumer protection legislation, as the consequences of getting it wrong could be severe. For more advice contact our Regulatory Team.

Do you need a copyright licence?
It was reported last year that Brighton and Hove Council had agreed to pay the […]
It was reported last year that Brighton and Hove Council had agreed to pay the Copyright Licensing Agency (CLA) an undisclosed sum in respect of retrospective licence fees and legal costs. This has prompted a significant increase in the number of Councils applying for a copyright licence – according to the CLA, 46 local authorities have obtained a copyright licence in the 12 months since the disclosure of the Brighton and Hove case.
Copyright protects the form of expression of ideas. Its purpose is to reward authors of original works where independent effort has been expended by the author in their creation. In essence, copyright prevents those works from being copied without the owner’s consent. Whilst there are copyright exceptions in UK law, these are not extensive and their scope is not always clear. In particular, there is a “fair dealing” exception which permits the reproduction of material for the purposes of non-commercial research or private study, for criticism or review or for the reporting of current events, but the reproduction must be genuinely and fairly used for the stated purpose and must be accompanied by a sufficient acknowledgement.
Because of its uncertain parameters, relying on the “fair dealing” exception is risky. As is reliance upon staff to comply with a “no copying policy”. It is reported that in the Brighton and Hove case, the Council did not consider that it was at risk of infringing copyright because it operated a “no copying policy”. The CLA was apparently able to produce evidence that the policy was not working and copying was taking place.
The CLA acts on behalf of authors, artists and publishers of books, journals, magazines and periodicals (including digital publications) by issuing licences and ensuring copyright compliance. The Newspaper Licensing Agency performs a similar function for national and regional newspapers. The CLA issues blanket licences to organisations on an annual basis in return for an annual fee. This permits:
- photocopying or scanning from books, journals or magazines
- copying or printing articles from a website or other digital content
- emailing copies of articles or extracts from publications
- storing copies of articles or extracts on the organisation’s intranet.
The licence avoids the need to request permission each time a reproduction of a copyright work needs to be made. It also includes an indemnity from the CLA for all copying done within the terms of the licence.
The CLA operates three different types of licence aimed at the public sector:
- Public Administration Licence – for local authorities, public bodies, central government departments and agencies (excluding the NHS)
- NHS Licences – for NHS trusts and health authorities
- Library Licence – for walk-in users at public libraries.
The precise terms of each licence will need to be checked, for instance, the extent to which the copying and re-use of content from digital publications is permitted varies from licence to licence. In particular, copies can usually be made of up to a chapter, an entire article or 5 per cent of the publication, whichever is the greater, although this should be checked along with the licence terms regarding photographs, illustrations and figures. These will usually be able to be copied where they are included in the body of the extract or article.
The CLA’s compliance arm, Copywatch, has been notably proactive in its pursuit of local authorities that it perceives to be non-compliant. Indeed its homepage sets the tone with the banner, “Investigating councils without a licence” and by providing a link for whistleblowers to contact them.
According to the CLA, whilst Councils have been applying for licences in the wake of the Brighton and Hove case, there are still 130 Councils in the UK operating without a copyright licence. It is not credible that these Councils are not, at some point, taking photocopies of copyright material. Those Councils are at risk of substantial financial penalties and reputational damage if they continue to operate without a licence.
If you would like to discuss this in more detail, please contact Alan Harper.

Greater certainty ahead for owners of listed buildings
The Act has made various amendments to the Planning (Listed Building and Conservation Areas) Act […]
The Act has made various amendments to the Planning (Listed Building and Conservation Areas) Act 1990, with the effect of introducing the new concepts of:
- listed buildings (LB) heritage partnership agreements (HPAs);
- LB consent orders;
- local LB consent orders; and
- certificates of lawfulness of proposed works (CLPW) to listed buildings LB.
The legislation has come into force in a piecemeal fashion, with the recently-introduced Planning (Listed Buildings and Conservation Areas) (Heritage Partnership Agreements) Regulations 2014 now providing a clear procedure to be followed in the making of HPAs. So what is an HPA? What does it mean in practice? And what purpose does a CLPW serve in light of this?
HPAs involve a relevant local planning authority making an agreement with the owner of a LB (or part thereof) so that LB consent for the carrying out of specified works to alter or extend the building are already granted, provided any conditions attached to the consent are complied with. While an HPA cannot grant consent for demolition of a listed building, it can also:
- describe and outline works that would or would not be seen to affect the LB’s character;
- provide for the building’s preservation, maintenance and carrying out of specified work on it;
- make suitable arrangements for public access and provision of accompanying facilities;
restrict use of or access to the LB; - prevent certain specified actions being undertaken in relation to the building; and
- ensure the Secretary of State, English Heritage or the local authority make agreed payments towards the cost of any works required or as consideration for obligations and/or restrictions faced by a party to the HPA.
An HPA must follow a particular format. So the Agreement should:
- be in writing;
- specify intervals at which the parties will review the HPA’s terms;
- include termination and variation provisions, depending on what the parties decide; and
- may relate to more than one LB.
The local planning authority are likely to take responsibility for an HPA in most situations, but they can incorporate a number of other entities into the HPA besides the owner (that is, the freeholder or a tenant with no less than seven years remaining) – be this English Heritage, any person with an interest in the building, the occupier, the manager, or a party with appropriate specialist knowledge. The preparatory measures required are relatively extensive. For instance, the local planning authority must prepare a statement of reasons detailing the likely effect of the proposed works, providing a reasoned justification for them, and detailing any conditions it feels may be appropriate. In addition, the authority should consult with English Heritage in advance where certain properties are involved; publicise and make all relevant documents available for public inspection; and notify and provide a copy to English Heritage when the HPA is finally made.
It is important to note that, as well as not being able to grant consent for demolition, the specified works will still need any other relevant permission – such as planning permission. Nonetheless, an HPA will mean owners no longer need to make repeated applications for LB consent where they wish to undertake certain alterations in accordance with the specified conditions.
HPAs come alongside introduction of the new concept of local LB consent orders, by which a local authority can prepare an order (subject to compliance with all the appropriate procedures) so alterations or extensions are permitted where they are to specific types of LBs or LBs in a specific area. Both measures are designed to simplify and speed up the process of obtaining LB consent, as part of the Government’s ongoing attempts to remove unnecessary administrative burdens and minimise planning ‘red tape’. Owners and developers of LBs will in turn enjoy greater certainty with the introduction of CLPWs. Since 6 April 2014, it has become possible to make an application to the local planning authority to establish whether a proposed alteration or extension to a LB requires LB consent or not. Once satisfied that the proposed works do not affect the property’s character as a building of special architectural or historic interest, the authority can issue a CLPW. The onus here is on the applicant to ensure submission of a valid application, with all the required plans, drawings and statements. However, where a CLPW is refused or the authority fails to determine the application within the six-week timeframe following receipt, a right of appeal exists. This parallels the right existing under the Town and Country Planning Act 1990 in relation to certificates of lawful use or development.
Alongside the usual online information existing as part of the National Planning Practice Guidance, English Heritage has recently issued an advice note on drawing-up HPAs. In turn, it aims to publish example agreements by April 2015 as part of its ‘Constructive Conservation’ series. For more information and advice on the best approach to adopt as the owner or developer of a LB, contact the Planning and Environment team at Walker Morris.

Immigration changes from 16 May 2014 – what do employers need to know?
Overview On 16 May 2014: the maximum civil penalty for employing an illegal worker increased […]
Overview
On 16 May 2014:
- the maximum civil penalty for employing an illegal worker increased from £10,000 to £20,000
- a new statutory code of practice on preventing illegal working came into effect
- a new statutory code of practice on avoiding unlawful discrimination while preventing illegal working came into effect.
The Civil Penalty
- Negligently employing an illegal worker carries civil liability. The maximum civil penalty is now £20,000.
- Knowingly employing an illegal worker is a criminal offence carrying a penalty of up to two years’ imprisonment and/or an unlimited fine.
- The level of civil penalty will depend on whether the employer is committing an offence for the first time or whether it has committed an offence within the previous three years. The new code of practice sets out a ‘consideration framework’ and ‘penalty calculator’, which explain how different factors are likely to lead to different tariffs.
- An employer is excused from paying a civil penalty if it can show that it complied with the prescribed requirements for checking right to work documents before the employment began.
- A partial right to work check will no longer be a mitigating factor when calculating the civil penalty for employing an illegal worker.
- The following may be used as mitigating factors:
– it is a first offence
– the employer reported suspected illegality
– the employer co-operated with a Home Office investigation
– the employer has effective document checking practices in place.
The Code of Practice on preventing illegal working
The new statutory code of practice on preventing illegal working replaces an existing code and will apply where the person was employed on or after 29 February 2008 and the breach occurred on or after 16 May 2014 (if the breach occurred before that date, the old code applies).
Key points to note from the code of practice are:
- the code sets out guidance on the factors that will be considered by the Home Office when determining a civil penalty for employing an illegal worker (as referred to under ‘The Civil Penalty’ above)
- the range of documents that is acceptable for the purposes of right to work checks has been reduced. Travel documents, work permits and general Home Office letters have been removed from the list
- one major change relates to the requirement to check documents for those with a temporary right to work in the UK. Previously, in respect of such workers, employers had been required to check the employee’s documents before they started employment and to repeat the check every 12 months. The new code confirms that the requirement to repeat the check will be linked to the expiry of the right to work document. In other words, the requirement on employers to check the documents every 12 months has been removed. This will greatly reduce the administrative burden on employers
- students from overseas are usually granted Tier 4 student permission to study in the UK. Depending on when the permission was granted and the course they are undertaking, they may have the right to work in the UK (this is usually limited to 10-20 hours per week during term time and full time during vacations, provided the student is not employed in a full-time, permanent role). The new code will require employers to request and retain a copy of the student timetable showing evidence of the student’s academic and vacation times as additional evidence that the student is not working in breach of their permission
the code provides that an employer will have a “grace period” of 60 days to carry out up to date right to work checks following a TUPE transfer. This is an increase from 28 days under the previous code of practice.
The Code of Practice on avoiding unlawful discrimination while preventing illegal working
This code of practice does what it says on the can – it explains how to avoid race discrimination when complying with the duty to carry out pre-employment immigration checks. Key points to note are:
- if an employer only carries out right to work checks on people who they believe are not British citizens (for example, on the basis of the person’s colour, accent, race, ethnic or national origins) this could amount to unlawful race discrimination under the Equality Act 2010
- it goes without saying that many people from ethnic minorities are British citizens and many non-British citizens are entitled to work in the UK. Employers should not assume that someone does not have the right to work in the UK without evidence
- employers should therefore obtain right to work documents for all prospective workers thus demonstrating a consistent, transparent and non-discriminatory recruitment process
- the provisions of the Equality Act apply to all employers regardless of size and resources. No allowances will be made by the Employment Tribunal in a race discrimination claim for employers who, for example, discriminated because they were unaware of the law or because they did not have an HR function to guide them
- it is likely to be unlawful discrimination to treat someone less favourably or give them less favourable terms of employment because they have time-limited permission to be in the UK
it is likely to be unlawful discrimination to treat someone less favourably because of an assumption that their overseas qualifications or experience are inferior to qualifications or experience gained in the UK. - if a prospective worker cannot produce right to work documents the employer should not assume they are living or working illegally in the UK. The employer should try to keep the job open as long as is reasonably possible to allow the individual time to demonstrate their right to work but is not required to do so if they need someone to start urgently.
- employers should ensure they carry out effective equal opportunities monitoring during their recruitment processes.
Bear in mind that where an employer is found to have committed an act of unlawful race discrimination the Public Procurement Regulations 2006 provide that Public Authorities may disqualify them from entering into public procurement contracts.
Conclusion
All employers, without exception, have a legal duty to prevent illegal working. The Immigration, Asylum and Nationality Act 2006 sets out a complex framework for employers to follow when recruiting and employing staff. It can be very costly to fall foul of the requirements and can affect the employer’s ability to sponsor migrants who come to the UK to work in the future. It is therefore worth taking the time to make sure your organisation is operating in line with the legal framework and the new codes of practice.
It is especially important for those employers who have taken on new staff following a TUPE transfer to ensure that renewed right to work checks are carried out within the requisite 60-day period.
Walker Morris Solicitors regularly advise employers on the legal requirements in this area and on business immigration matters generally. We would be happy to help with any queries. Please contact Shabana Muneer.

Liability of a parent company for the employees of a subsidiary
In the 2012 case of Chandler v Cape plc [1], the Court of Appeal held […]
In the 2012 case of Chandler v Cape plc [1], the Court of Appeal held that a parent company owed a direct duty of care to an employee of a subsidiary who contracted asbestosis through exposure to asbestos dust. This was the first reported case to reach the Superior Courts of a parent company being held liable to an employee of a subsidiary on tort law principles. How widely that decision would be applied remained to be seen, however, with parent companies, particularly in high risk industries such as manufacturing of heavy machinery, on notice that they may be imposed with a duty of care to advise their subsidiaries on steps that need to be taken to safeguard their employees’ safety.
A second case addressing this question has now been answered by the Court of Appeal [2].
In this case, Mr Thompson had been employed by two companies which were acquired by a subsidiary of the defendant. Mr Thompson developed pleural thickening as a result of his exposure to asbestos dust. As his employer did not carry liability insurance and would be unable to meet any award of damages he instituted proceedings against the defendant. At first instance, the court held that the parent, by appointing a director of the subsidiary employer with responsibility for managing health and safety at the depot where Mr Thompson worked, had assumed a duty of care to the employees of the subsidiary. The parent appealed.
The Court of Appeal allowed the appeal. It held that in running the day-to-day operation of the subsidiary the new director was not acting on behalf of the parent. Rather, he was acting as a director of the subsidiary, the company to whom he owed his fiduciary duties as a director. This makes sense. A director appointed by a parent may, depending on the terms of his appointment, owe some obligations to the appointing company, but this will not detract from his or her fiduciary, and now under the Companies Act 2006, statutory, duties to the subsidiary. In this case there was no evidence of any relationship between the new director and the parent company beyond his inferred nomination by the parent as a director of the subsidiary.
The Court referred to its decision in Chandler v Cape where it had stated that the key question was “whether what the parent company did amounted to taking on a direct duty to the subsidiary’s employees” and found that the facts in this case were very different from those in Chandler v Cape, leading to a different outcome. The Court explained that co-ordination of operations between members of the same group was just that and it was incumbent upon the claimant to go further and show that the parent company had assumed a duty of care to the employees of the subsidiary. In this case, it appeared that the parent company did not conduct any business other than the holding of shares in the subsidiaries. The Court suggested that the claimant needed to show that, because of its superior knowledge or expertise, the parent company was better placed to protect the employees of the subsidiary from risk of injury and, further, that it would be fair, because of that superior knowledge or expertise, for the subsidiary to rely upon the parent to protect its employees. The fact that the subsidiary and parent shared the use of resources did not mean that they ceased in any way to be distinct corporate entities.
Directors and shareholders of parent companies will welcome this decision which shows that the burden of showing the assumption of a duty of care to the employees of a subsidiary is a high one. It is clear that each case will be determined in accordance with its own facts but this case shows that the appointment of a nominee director and the shared use of resources will not, without more, establish the existence of a duty of care.
[1] [2012] EWCA Civ 525
[2] Thomson v Renwick Group Plc [2014] EWCA Civ 635
[3] [1990] 2 AC 605

Martin Retail Group Limited v Crawley Borough Council: the Competition Act 1998 ‘lands’ a council with a problem
Background The Central London County Court has, in the first reported case on the subject […]
Background
The Central London County Court has, in the first reported case on the subject [1], ruled that a restriction on use in a lease breaches the Chapter I prohibition of the Competition Act 1998 (the Act).
Section 2 of the Act prohibits certain anti-competitive agreements (the Chapter I prohibition). By virtue of the Competition Act 1998 (Land Agreements Exclusion and Revocation) Order 2004 (the Exclusion Order) land agreements were originally excluded from the application of the Chapter I prohibition; however, the Exclusion Order was revoked on 6 April 2011[2]. Since the revocation of the Exclusion Order all new and existing agreements which create, alter, transfer or terminate an interest in land may, depending on the circumstances, fall within the scope of the Chapter I prohibition. Infringing the Chapter I prohibition has serious consequences and agreements which breach it will be rendered void and unenforceable unless certain exemption criteria, set out in section 9 of the Act, can be met.
The Office of Fair Trading, in order to assist companies in assessing their agreements for compatibility with competition law, published detailed guidance on the subject, which has since been adopted by the Competition and Markets Authority (CMA). This guidance contains specific commentary on many commonly occurring restrictions in land agreements and also details on the regulator’s enforcement priorities with regard to such agreements.
Facts
In 2001 Crawley Borough Council (the Council) granted to Martin Retail Group Limited (Martin) a 10-year lease of shop premises at Furnace Parade, Crawley. In the lease, Martin covenanted not to use the shop other than for the retail trade of newsagents and tobacconist and for the sale of confectionery, stationery, books, toys, records, fancy goods and greeting cards.
Martin’s store was one of eleven on Furnace Parade and formed part of a letting scheme run by the Council covering the parade. Each lease of premises within the parade contained a user clause restricting the use of the relevant premises to a certain trade or business and one of the other stores in the parade, Premier Furnace Green Supermarket, was already run as a grocery store.
On the expiry of its lease in 2011 Martin sought to agree a new lease, however, a dispute arose as to the terms of the user clause in the new lease. The Council wanted to restrict the use in a similar manner as in the 2001 lease, however, Martin wanted to extend the user provision in order to permit the use of the shop as a convenience store, selling groceries, spirits and household goods.
The resulting dispute as to the terms of the user clause was referred to the Country Court with Martin claiming that the proposed user clause breached the Chapter I prohibition.
Judgment
At a trial of the preliminary issue, the Council, for reasons not explained in the judgment, conceded that the proposed user clause would breach the Chapter I prohibition. The only issue therefore remaining to be decided was whether the clause could take the benefit of any of the exemptions under section 9(1) of the Act. In order to satisfy the criteria the arrangement in question must:
- contribute to improving production or distribution or to promoting technical or economic progress;
- allow consumers a fair share of the resulting benefit;
- not impose restrictions beyond those indispensable to attainment of objectives; and
- not afford the parties the possibility of eliminating competition in respect of a substantial part of the products in question.
The judge concluded that the burden of proving that the conditions for exemption were satisfied lay with the Council as the party seeking to claim the benefit and in order to prove that those conditions apply they would need to adduce sufficient admissible evidence of the relevant facts. In relation to the evidence provided the judge commented that the witness evidence was, for the most part, opinion rather than evidence of the facts. In addition the witnesses were employees of the parties, rendering their opinions less than independent. Furthermore little weight could be attributed to the evidence from local residents and traders provided in the form of correspondence and petitions as some of this evidence was hearsay and there were concerns as to reliability and a lack of impartiality.
Addressing each of the criteria in turn the judge concluded as follows:
- Contributes to improving production or distribution or to promoting technical or economic progress – The judge rejected the argument that by ensuring the parade contained a range of different stores efficiency benefits could be obtained by customers. There was no evidence to support the Council’s assertion that improvements were derived from their letting scheme. Instead, the judge accepted Martin’s view that the proposed user clause and letting scheme as a whole lead to a distribution model determined by the Council rather than by the market itself.
- Allows consumers a fair share of the resulting benefit – Whilst in theory by ensuring diversity in retailers occupying the parade this leads to a wider range of goods available and therefore is of benefit to the community, the evidence did not necessarily show that the letting scheme actually had this result. Furthermore it seemed unlikely that any discernable price benefit resulted from the arrangements in place. On the evidence placed before him, the judge was not satisfied that the community would benefit either from the restrictions in the proposed user clause or the letting scheme as a whole.
- Does not impose restrictions beyond those indispensable to attainment of objectives – The judge concluded that the Council’s letting scheme was disproportionate to the results it achieved. Insufficient evidence was provided to prove that the restrictions were necessary and in their absence small traders would not be attracted to the parade.
- Does not afford the parties the possibility of eliminating competition in respect of a substantial part of the products in question – The view was formed that the relevant geographical market for the purpose of this condition was likely to be convenience stores within a relatively short walking distance from the parade (being the distance a local resident might be prepared to walk from the parade to shop at another store). The judge concluded that the proposed user clause did provide a means of eliminating competition in convenience goods on the parade and within the relevant geographical market.
As a result of these findings it was held that the proposed user clause, within the context of the letting scheme, breached the Chapter I prohibition and was not exempt under section 9(1) of the Act.
WM Comment
Notable in its absence from the judgment was a detailed analysis of the relevant geographical market. The evidence heard was limited and in light of the Council’s admission that the user clause was prima facie anti-competitive it was not necessary for the court to give in-depth consideration to the relevant product or geographical market for the purpose of assessing whether the Chapter I prohibition was breached.
As compared to the standards of the CMA, Competition Appeal Tribunal or the Chancery Division of the High Court, where competition disputes are more commonly heard, the consideration given to the relevant market was scant at best. The case contains none of the detailed analysis that is the norm in relation to litigation involving competition law arguments. It is, however, unlikely that the CMA would have been able to assess the case given the stage that negotiations on the lease had reached and commencing the proceedings in court quite probably led to a faster resolution to the dispute.
The outcome of this case turned on its specific facts and the fact that the Council conceded the breach of the Chapter I prohibition. The case does, however, highlight the importance of accurate evidence in competition law cases. It is likely that the court may have been more willing to consider the Council’s arguments on the application of the exemption criteria had the evidence that had been presented been more robust. As the Council’s letting scheme was not the subject of a written policy there was nothing presented to the court to back up the Council’s argument that the scheme was required to ensure a diverse tenant mix. Landlords would therefore be well advised to ensure that tenant mix policies and their perceived benefits are properly documented.
Interestingly, the judge in the case did comment that if a scheme such as this was being set up from scratch with restrictions being put in place to ensure that an anchor tenant occupied one of the units and to support that tenant until its business became more stable then the outcome of the case may have been different.
Notwithstanding the fact that the case may be of limited application in the future, bearing in mind the lack of court precedents regarding the interaction of competition law and land agreements the judgment is still likely to be of interest to both landlords and tenants.
[1] Martin Retail Group Limited v Crawley Borough Council [2013] EW Misc. 32 (CC)
[2] By the Competition Act 1998 (Land Agreements Exclusion Revocation) Order 2010.

Time to be reasonable: engage with your opponent
A decision in a recent case further exhorts disputing parties and their lawyers to treat […]
A decision in a recent case further exhorts disputing parties and their lawyers to treat seriously any request to take part in alternative dispute resolution (ADR). Following its repeated and unreasonable refusal to engage in mediation, the defendant in Phillip Garritt-Critchley & others v Andrew Ronnan & Solarpower PV Ltd [2014] (PGF) was ordered to pay the claimant’s costs on an indemnity basis.
This decision follows on from the PGF case [1] earlier this year, in which the court decided that ignoring a request to participate in ADR such as mediation amounted to unreasonable behaviour. (See: Prevaricate at your Peril.)
It remains the case that a court cannot force an unwilling party to mediate – but those who refuse unreasonably will find themselves penalised in costs. It’s time to be reasonable. Even if you think you have a cast iron case and believe your relationship with the other party to be beyond repair, you must seriously consider – and engage in – ADR.
The facts
The parties disagreed about whether there was an agreement for certain shares to be issued. From the outset, the claimant made clear that it was willing to try an appropriate form of ADR. The defendant’s refusals throughout the proceedings were fairly consistent: the claimant’s initial offer in the letter before claim was refused ‘at that stage’; in the allocation questionnaire, mediation was rejected on the grounds that the parties were too far apart; and, when pressed for reasons, the defendant explained they were confident in their claim and believed (therefore) that refusal to mediate was reasonable.
The claimant continued to make further requests to mediate throughout the proceedings which were all refused.
In giving directions for trial, the district judge recorded that mediation was appropriate for the dispute and required the refusing party to file a witness statement explaining the refusal in a sealed envelope 21 days before trial (which the defendant did).
As the trial date approached, the claimant made a Part 36 offer to accept £10,000 for their claim from the defendant plus their costs to date. This offer expired without acceptance. The defendant then counter-offered with a Part 36 offer requiring the claimant to discontinue and pay the defendant’s costs. The claimant did not accept but reiterated its willingness to negotiate. The defendant again refused and the 4-day trial went ahead. However, before judgment was given, the defendant accepted the claimant’s Part 36 offer out of time.
Subsequently, the claimant successfully applied for its costs to be dealt with on an indemnity basis on the grounds of the defendant’s repeated unreasonable refusals to mediate.
Guidance on what to consider when deciding whether to mediate
The court’s views on the defendant’s arguments and evidence is instructive for those weighing up whether to mediate or carry on to trial:
- the defendant’s refusal to mediate based on their confident approach to the proceedings and their robust view of their chances of success was the wrong approach. This was a fairly typical action about whether the parties had made a binding agreement. The decision could have gone either way based as it was on the factual evidence and the credibility of the witnesses and there was a risk analysis to be done by the parties to assess their chances of success. The claim was therefore eminently suitable for mediation;
- once the issue of liability was decided, there could have been various possible outcomes on quantum which could have been very usefully considered in a mediation;
- applying the decision in Halsey [2], (which sets out the criteria to be considered when deciding whether to mediate), most cases will be suitable for mediation. The defendant’s reasons did not fall within the few exceptions where mediation would not be appropriate: there was no point of law to review; it was not an unusual case for which a binding precedent would be useful; and relief such as an injunction was not needed for the protection of one of the parties;
- believing you have a strong case is no justification for refusing mediation [3]. The court thought the defendant’s “extreme confidence” unrealistic and besides, if they were that confident, surely they would have applied for summary judgment;
- believing your settlement position is too far apart from the other is no reason to refuse ADR. How do you know until you talk to each other? If it becomes apparent at the mediation that you are too far apart, the mediator will soon tell you;
- the parties’ dislike and mistrust of each other was irrelevant: mediators are trained to handle high and negative emotions in a way that can lead to settlement;
- the defendant’s reliance on the PGF case in arguing that it had responded to the mediation offers promptly and explained their position was misplaced given that their reasons were misconceived and their response unreasonable;
- the defendant’s approach in weighing up the value of the claimant’s offer as against the cost of the mediation (rather than the trial) was wrong.
The decision reiterates the court’s strong support for ADR. Serious consideration of ADR is now an essential step in resolving a dispute. If you, like the defendant in this case, are tipped off by the court that your case is suitable for mediation, be very cautious about rejecting it.
For more information on how to approach ADR, you might want to read our note on How to deal with settlement approaches in the early stages of a dispute.
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[1] PGF II SA v OMFS Company 1 Ltd
[2] Halsey v Milton Keynes General NHS Trust
[3] Hurst v Leeming [2001] EWHC 1051 (Ch)
For further information, please see our briefing on ADR and unreasonable refusal: The rule and an unexpected exception.