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In Brief – October 2015

In Brief – October 2015

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New little green book of employment law launched

Walker Morris launches second edition of its handy guide to the employment journey Knowing the […]

Walker Morris launches second edition of its handy guide to the employment journey

Knowing the law is one thing; applying it, in the right manner, is quite another. This statement is particularly pertinent for businesses given the ever-evolving and increasingly complex UK employment legislation.

That’s why Walker Morris has published the second edition of its handy little green book of employment law. It is designed to help businesses navigate their way through the employment law minefield, covering a full range of issues that develop during the life of the employment relationship; from recruitment and equality through to disputes, TUPE and dismissal.

This book aims to deal with the issues we see on a day-to-day basis, including what to do if things go wrong and outlines possible solutions, with each section containing a useful list of key tips.

It is available in the user-friendly, convenient, mobile formats of ibook and ebook in addition to the printed pocket-sized book.

To obtain your copy visit www.walkermorris.co.uk/lgbemployment

Andrew Rayment, employment partner at Walker Morris said:
“People make a business. Recruiting and retaining talented individuals is key to success, whatever the size of your organisation. Those employment relationships need to be nurtured, communicated and managed in an effective way. Our little green book helps employers to do just that. It deals with the fast changing employment law issues and advises how to handle them with sensitivity and a pragmatic approach.

When we released our first edition we were overwhelmed by its popularity. Since then the legal landscape has changed immeasurably and we produced a second edition in response to client demand.”

Of course our little green books can never be a substitute for professional legal advice but it’s a little piece of Walker Morris at your fingertips. To see our full series of little green books click here.

A new ‘living wage’ for over 25s from[...]

Official estimates state that around 6 million workers will see their pay boosted by the […]

Official estimates state that around 6 million workers will see their pay boosted by the new ‘living wage’ which will be introduced as an increase to the existing National Minimum Wage (NMW) for over 25s. This article outlines some of the key issues for employers to consider when preparing their business for the changes from 2016 onwards.

The ‘ripple effect’ on pay

The new NMW rates amount to a significant pay rise for many workers. The rise will not just affect workers’ pay itself – employer pension contributions, holiday pay, overtime, bonuses and any other payments or premiums calculated by reference to basic pay will also increase. However, some workers will be overall worse off due to the government’s reductions in tax credits.

Suggested action – Consider undertaking an impact assessment on pay and benefits in good time before April 2016. We recommend that you involve your legal advisors in any audit so that it is ‘privileged’ if you have any concerns about future pay disputes. Your unions and your employees cannot seek disclosure of a privileged audit.

Workforce flexibility

Higher payroll costs will require a more flexible workforce. You could consider options including lower base hour contracts or restructuring shift patterns and premiums. Savings might be made by staggering shift start and finish times to avoid or reduce shift premium bills and reviewing existing overtime pay.

Suggested action – Consider whether current contractual arrangements and shift patterns provide the right amount of flexibility for your business.

Always take legal advice if you are contemplating making changes to contracts of employment or contractual benefits. The cost and time involved in Tribunal claims can outweigh the financial benefits of a change. If you recognise a trade union or staff body, consider discussing the impact on your business of the increased payroll costs at an early stage.

Getting value for money from staff

Increasing costs mean that employers need to ensure that they are getting the best possible value from their staff. Performance management procedures need to work for your business and be implemented effectively by your managers.

At the same time, competition for quality staff is increasing and many employers are seeking to differentiate themselves by providing new and innovative reward and recognition programmes.

Suggested action – Now is a good time to revisit your business’ performance management and retention policies to ensure that the quality of your staff is high and that you retain your star performers.

Absorbing the costs

It is tempting to consider cutting existing employee benefits to absorb some of the new payroll costs. However, changes to contractual benefits without employees’ consent are likely to give rise to claims for breach of contract or unfair dismissal. It is less risky to reduce non-contractual perks such as ‘one off’ bonuses but always proceed with caution. Such perks can become implied contractual benefits if they are provided consistently over a period of time.

Suggested action – any changes to contractual terms will require consultation with employees and their representatives and changes affecting 20 or more staff may be caught by the collective consultation requirements. We can guide you through this process.

Redundancies

If your business’ margins are tight, you may have to consider restructuring your business or redundancies.

Suggested action –

If redundancies are anticipated, review your business’ existing redundancy procedures.
If collective redundancies involving 20 or more staff are envisaged, start laying the groundwork for collective consultation in good time before the process begins.

Walker Morris’s employment team has a wealth of experience in advising on these issues. Please contact David Smedley or Andrew Rayment whose contact details are below.

Are you ready for the new COMAH Regulations?

The Control of Major Accident Hazards (COMAH) Regulations 2015 (the Regulations) came into force on […]

The Control of Major Accident Hazards (COMAH) Regulations 2015 (the Regulations) came into force on 1 June 2015. The Regulations replace COMAH 1999 and represent the first major overhaul of the COMAH regime for 16 years, as well as bringing more businesses within its remit and imposing additional duties on existing duty-holders.

The Regulations implement the EU Seveso III Directive [1], which controls major on-shore hazards involving dangerous substances. Their objective is to prevent major accidents involving dangerous substances and to limit the effects of any such accidents that do occur, both on people and the wider environment.

The Regulations most obviously affect the chemicals and petrochemicals industries but also apply to other businesses and organisations handling, storing or using certain quantities of substances with hazardous classifications. Nuclear sites and explosives are covered. The Regulations are also applicable to neighbouring landowners, local authorities and emergency services.

There are a number of changes from COMAH 1999 which operators, emergency planners and other COMAH duty-holders need to be aware of. The principal changes are:

the list of substances covered by the Regulations has been updated and has been brought into line with the Classification, Labelling and Packaging Regulation 2008 (CLP). CLP is based on a global classification system for chemicals. This is a significant change, meaning existing site operators and duty-holders will need to revisit their inventories and reclassify accordingly
some definitions around substances and their uses have changed
transitional arrangements for safety reports have been included
members of a domino group will be required to co-operate with neighbouring sites and share relevant information (i.e. where there is an increase in risk or consequences of a major accident because of one or more of factors such as geographical position, proximity of establishments and inventories of dangerous substances)
enhanced requirements for public information, including a duty for lower-tier establishments to provide public information and for electronic access to up to date information
emergency planning and testing of the emergency plan now requires co-operation from designated authorities
there will be stronger requirements for the Competent Authority on inspection
local authorities are now required to inform people likely to be affected by major accidents.

Every site of a business needs to determine whether or not they fall within the scope of the Regulations and to notify (or re-notify) the Competent Authority by 1 June 2016. Upper-tier COMAH sites must prepare a safety report which demonstrates this. Existing COMAH sites that have safety reports due before 1 June 2016 are encouraged to write them in a way that is compliant with the Regulations.

We can help you do this by:

checking whether your COMAH status is likely to change, e.g. you move within or out of scope, or from lower to upper tier
considering what new information you may need to include in major accident prevention policies and off-site emergency plans
advising on how to provide the summary of public information that will be provided electronically
reviewing what you need to do to comply with the requirements and submissions of safety reports and advising, in particular, on what new information may be required.

Why COMAH is needed – and the consequences of non-compliance – was tragically borne out by a recent case. Total UK Limited has been fined £1.4 million following a major fire at an oil refinery in North Lincolnshire, which caused the death of a worker. An HSE investigation found that the fire was caused by an uncontrolled release of crude oil. The deceased was a contracted fitter who was working with a colleague beneath a distillation column that contained hot crude oil. When an item of equipment was opened, the oil escaped and, shortly afterwards, ignited.

Total pleaded guilty to breaching COMAH 1999.

Commenting on the fine the HSE emphasised that the accident could have been prevented had Total followed well-established principles of risk assessment. The task being undertaken was a simple but the magnitude of the risk was great. It should have been identified before the task was started and appropriate action taken to eliminate or control the risk.

The Walker Morris Regulatory and Compliance team offers a complete range of health and safety services, including drafting health and safety policies, delivering training, carrying out audits and, if the worst does happen, dealing with the consequences of an accident and subsequent prosecutions.

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[1] 2012/18/EU

Changes to the rules on unfair consumer terms

The Consumer Rights Act 2015 (the Act) consolidates and expands the law on unfair terms […]

The Consumer Rights Act 2015 (the Act) consolidates and expands the law on unfair terms in consumer contracts. Traders that supply goods, services or digital content to consumers should review their terms and conditions to ensure they are still fit for purpose when the Act’s provisions come into effect, expected to be 1 October 2015.

The general position under the Act on determining whether a term is unfair is similar to the current position under the Unfair Terms in Consumer Contracts Regulations 1999. A term will be unfair if “contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer”.

In determining whether a term is fair, account will be taken of the nature of the subject matter of the contract and also of all the circumstances existing when the term was agreed and of all of the other terms of the contract or any other contract on which it depends.

In addition, under the Act, a trader will remain unable to limit its liability for death or personal injury resulting from negligence and to restrict or exclude the protection given to consumers by the statutory implied terms related to the characteristics of the goods.

Which terms are covered?

Under the Act all terms – whether standard or negotiated – can be assessed for fairness (subject to the exemption for “core terms”). For the first time therefore individually negotiated terms will be capable of being assessed for fairness.

“Core” terms will be exempt from a fairness assessment. As currently, these are terms concerning the main subject matter of the contract and the price.

However, core terms can only benefit from the exemption where they are both transparent and prominent. Guidance published by the Competition and Markets Authority on 31 July 2015 states that prominence means the term must be “brought to the consumer’s attention in such a way that the average consumer would be aware of it”. The guidance makes the point that potentially surprising terms, particularly onerous terms or terms which are particularly difficult to understand, e.g. relating to complex pricing mechanisms, require enhanced prominence and that the average consumer cannot generally be expected to read the small print thoroughly.

In practice, suppliers should ensure that terms relating to subject matter and price are set out prominently, for example, at the start of the agreement. Traders should also consider adopting different levels of prominence depending on the risk of detriment to consumers of individual terms. This may necessitate a re-think about the whole structure of the terms and conditions.

The guidance also states that:

to benefit from the “main subject matter” exemption, the terms must describe the nature of the goods sold. Delivery arrangements, for example, would not be exempt
price setting terms can be assessed for fairness save to the extent that they relate to the appropriateness of the price, so the timing, method or variation of the payment may be scrutinised for fairness.

The guidance also emphasises that terms that have the effect or object of greylisted terms (as explained below) cannot benefit from the ‘core exemption’, for example terms granting a trader the unilateral right to vary the price or the definition of the goods.

Non-contractual notices and communications

The fairness requirement is extended to all communications to the consumer, not just contractual terms. Specifically, it applies to all “announcements, whether or not in writing, and any other communication or purported communication” which seeks to limit the supplier’s liability to the consumer, or otherwise relates to the respective rights and duties between the supplier and the consumer. This marks a departure from the current regime, which does not apply to non-contractual communications. So, for example, a notice on the supplier’s premises or website purporting to exclude or limit liability to the consumer, can be subject to a fairness assessment.

Greylisted terms

The Act retains the “grey list” used in the current regime but makes some additions. Examples of greylisted terms (and therefore at risk of being void and unenforceable):

a term the object or effect of which is that where the consumer decides not to proceed, the consumer must pay the trader a disproportionately high sum in compensation for services that have not been supplied.

– The guidance states that disproportionate termination fees will be open to challenge where they do not reflect any savings for a business that no longer has to provide the goods, services or digital content, any ability to mitigate its loss (e.g. by finding another customer), and any benefit of receiving early payment. Minimum “tie in” periods will be viewed with particular suspicion. This reflects the approach taken by the High Court in OFT v Ashbourne Management Services Ltd and Others [1]

a term the object or effect of which is that the trader may determine the characteristics of the subject matter of the contract after the consumer has become contractually bound

– Immaterial changes may be fair but wider variations may not be and the guidance suggests that in order to achieve fairness it may be necessary to give the consumer the right to cancel the contract, as well as explaining clearly the variation

price variation and determination clauses must enable the consumer to foresee clearly how the price will be varied and/or determined. Again, to achieve fairness it may be necessary to give the consumer the right to cancel
sliding scale cancellation charges may be acceptable so long as they are proportionate and represent a genuine pre-estimate of loss. Such a sliding scale also needs to be given appropriate prominence
excessive notice periods for consumer cancellation should be brought to the consumer’s attention before entry into the contract and the guidance states, inter alia, that the consumer must be sent a reminder at a reasonable time before the renewal takes effect which outlines the terms of the proposed renewal and the steps the consumer should take if he decides he does not want to renew the contract
terms conferring on the trader the right to vary will generally be at risk. In fixed-term contracts, terms that allow a trader to change what it supplies or the price at which it does so are particularly likely to be blacklisted
terms which purport to limit the trader’s obligations to honour pre-contractual commitments given by its agents (e.g. entire agreement clauses) are at risk
a trader’s right to assign without consent may be unfair.

The commencement of the Act’s provisions is almost upon us. If they have not done so already traders should review their existing terms, and other notices, to ensure compliance with the new regime.

Defining “building” in planning policy and the implications of Green Belt protection

The High Court has recently clarified the approach to be taken when interpreting ‘building’ for […]

The High Court has recently clarified the approach to be taken when interpreting ‘building’ for the purposes of the National Planning Policy Framework (the NPPF). In Tandridge District Council v Secretary of State for Communities and Local Government [1], it has now been acknowledged that ‘building’ can refer to either a singular or multiple structures on a site. This has important planning implications, particularly in relation to Green Belt policy.

Protection of Green Belt

Paragraphs 79 to 92 of the NPPF provide for protection of Green Belt land. Inappropriate development is regarded as harmful to the Green Belt and, thus, not to be approved except in “very special circumstances”. New development and buildings within the Green Belt are therefore generally inappropriate, unless they fall within a limited number of exceptions.

Exceptions are detailed in Paragraph 89 and include:

buildings for agriculture and forestry
provision of appropriate facilities for outdoor sport, outdoor recreation and for cemeteries, as long as the openness of the Green Belt is preserved and there is no conflict with the purposes of including land within it
the extension or alteration of a building, provided this does not result in disproportionate additions over and above the size of the original building
the replacement of a building, as long as the new building is in the same use and not materially larger than the one it replaces
limited infilling in villages and affordable housing for local community needs, following Local Plan policies
limited infilling or the partial / complete redevelopment of previously-developed sites (brownfield land) – whether redundant or in continuing use (excluding temporary buildings) – which would not have a greater impact on the openness of the Green Belt and the purpose of including land within it, when compared to the existing development.

Background

Against the initial decision of Tandridge District Council (the Council), in December 2014 a Planning Inspector granted permission for demolition of an existing three-bedroom dwelling-house, utility building, detached garage and a number of trees on land at Castleneau, Tatsfield, Surrey. Under the same consent, the applicant received permission to subsequently construct a replacement dwelling-house and driveway. In granting consent for the new dwelling, the Inspector acknowledged the site’s location in the Green Belt, but deemed the proposal to fall within the ‘replacement of a building’ exception within the NPPF.

The Council subsequently appealed the Inspector’s grant of permission, under section 288 of the Town and Country Planning Act 1990 (TCPA 1990). One of the Council’s arguments was that the Inspector had erred in law, having misinterpreted the NPPF exception. The exception had been used to allow replacement of a small group of existing buildings, rather than just one single building.

The Council contended that, as a matter of law, the policy meant a proposed new building could only be compared with an existing single building. There could not be comparison, when considering whether the replacement was “materially larger”, with a group of two or more buildings.

How has this been clarified by the High Court?

The High Court dismissed the appeal.

In considering this element of the Council’s challenge, the judge noted that ‘building’ has a distinct meaning in the planning context. In the recent case of Timmins [2], the Court of Appeal had applied this statutory definition in relation to Paragraph 89 of the NPPF. Hence, the High Court could follow suit.

In TCPA 1990 (section 336(1)), ‘building’ is defined as including “any structure or erection and any part of a building, as so defined, but does not include plant and machinery comprised in a building”. As a statutory term, ‘building’ is therefore to be viewed in light of the Interpretation Act 1978 (IA 1978). This provides that, unless there is proof of contrary intention, “words in the singular include the plural and words in the plural include the singular”.

In handing down judgment, the court found there was nothing to militate against ‘building’ being read in the plural (where appropriate) in the context of TCPA 1990. Although policy documents do not automatically fall under IA 1978, it gave indirect support to the view that the plural will be appropriate in certain situations when interpreting the NPPF. Deputy Judge Elvin QC stated: “I do not consider that ‘building’ should be read as excluding more than one building, providing as a matter of planning judgment they can sensibly be considered together in comparison with what is proposed to replace them”.

This view was apparently supported by the NPPF as a whole and the objectives of the Green Belt policy in particular. The judge reinforced that Green Belt policy aims to prevent urban sprawl by keeping land permanently open, with the essential characteristics of Green Belt being its openness and permanence. The five purposes of the Green Belt were restated (as per Paragraph 80 of the NPPF), as being:

to check the unrestricted sprawl of large built-up areas
to prevent neighbouring towns merging into each other
to assist in safeguarding the countryside from encroachment
to preserve historic town’s setting and special character
to aid urban regeneration, by encouraging recycling of derelict and other urban land.

Comment

The Tandridge case reinforces the importance of IA 1978 when interpreting even basic statutory definitions. Referencing key statues, such as TCPA 1990, also remains important when establishing and applying meaning in the planning context – both for interpretation of statutory words / phrases and policy documentation.

This is the third recent case examining the correct approach to Green Belt policy in the NPPF. In Redhill Aerodrome Ltd [3], the court examined what should be considered as part of the balancing exercise in determining whether “very special circumstances” exist – so as to allow otherwise inappropriate development in the Green Belt. Under NPPF, “very special circumstances” will not exist unless “the potential harm to the green belt by reason of inappropriateness, and any other harm [our emphasis], is clearly outweighed by other considerations”. The Court of Appeal held that “any other harm” is to include non-Green Belt harm.

In Timmins, the High Court’s decision was upheld in finding that there are limits to the exceptions contained within Paragraph 89 of the NPPF. A material change of use of the land from agricultural-use to a cemetery did not fall in any of the exceptions, with Paragraph 89 to be regarded as a closed list. The change to a cemetery was therefore not appropriate development. As a result, there had been misapplication of the “very special circumstances” test.

Policy changes

The focus on protecting Green Belt and open countryside more generally has been reinforced in a recent report: ‘Planning and travellers: proposed changes to planning policy and guidance’ (August 2015) (the Report). The Report clarifies the approach going forward following the previous Government’s consultation on planning for traveller sites in autumn 2014.

There is to be no specific, new guidance regarding the special protection to be given for open countryside when local planning authorities are considering traveller-site applications. However, the Report emphasises that the current Planning Policy for Traveller Sites (PPTS) must be read in conjunction with the NPPF.
A local authority’s inability to demonstrate an up-to-date five-year housing supply will continue to be a significant material consideration in planning decisions, essentially weighing in favour of permission being granted for traveller sites (as per PPTS Paragraph 25). However, this is no longer the case for land designated as Green Belt and other sensitive areas – where it will just be one of a number of material considerations. Paragraph 25 is to be amended accordingly.
Traveller communities’ unmet need and personal circumstances are unlikely to clearly outweigh harm to the Green Belt, and any other harm, so as to establish “very special circumstances”. The Government has clarified that this change applies equally to both settled and traveller communities.
To give greater protection to the countryside, Paragraph 23 of PPTS will be amended. It will now read: “Local planning authorities should very [our emphasis – new addition] strictly limit new traveller development in open countryside”.

For further information or advice on this case, its impact and Green Belt policy, contact the Planning & Environment team at Walker Morris LLP.

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[1] [2015] EWHC 2503 (Admin)
[2] R (Timmins and another) v Gelding Borough Council [2015] EWCA Civ 10
[3] Secretary of State for Communities and Local Government and others v Redhill Aerodrome Ltd [2014] EWCA Civ 1386.

Pre-incorporation contracts and the personal liability of the signatory

Section 51 of the Companies Act 2006 regulates contracts entered into by or on behalf […]

Section 51 of the Companies Act 2006 regulates contracts entered into by or on behalf of a company before the company has been formed. It provides that, subject to agreement to the contrary, the person purporting to act as the company’s agent will be liable on the contract.

This section replaced a similar provision in section 36(C)(1) of the Companies Act 1985.

In Royal Mail Estates Ltd v Maple Teesdale Borzou Chaharsough Shirazi, [1] the court considered what was meant by “agreement to the contrary”.

In the case, the company (the Company) had purportedly entered into an agreement with a third party to purchase a property. The contract contained various restrictions on assignment, including a provision that stated “the benefit of this Contract is personal to the Buyer”.

The contract was signed on behalf of the Company by a firm of solicitors. At the date of this contract the Company had not yet been incorporated. When the third party sought to enforce the contract against the solicitors in reliance on section 36(C)(1), the solicitors argued that the above clause constituted an “agreement to the contrary” for the purpose of section 36(C)(1).

The court rejected this submission. It ruled that there could only be a contrary agreement within the meaning of the section if, upon a construction of the relevant wording, objectively the parties had intended that the contract would not take effect as one made with the agents – in other words, did the parties intend to exclude section 36(C)(1)?

The wording in question fell short of that threshold. The fact that the solicitors and the third-party seller did not even know that the Company was not yet incorporated meant they could not have agreed that section 36(C)(1) would not apply. The actual intention of the wording in question was more likely to prevent or restrict a third party from becoming a third-party purchaser by way of assignment or sub-sale in circumstances where the original contracting party was the Company.

This decision sets a very high hurdle for anyone wanting to rely on the “agreement to the contrary” wording in section 51 of the 2006 Act (section 36(C)(1) of the 1985 Act). Indeed, it seems a prerequisite that the parties knew the company was not formed. The result is that anyone signing on behalf of a company needs to ensure he or she makes appropriate checks that the company has been duly formed and is continuing its corporate existence.

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[1] [2015] EWHC 1890

Property enquiries: what do you need to disclose?

The recent case of Thorp and another v Abbotts and another [1] has provided useful […]

The recent case of Thorp and another v Abbotts and another [1] has provided useful guidance on the construction of certain key phrases in standard form enquires before contract. In this case, the High Court dismissed a claim for damages for misrepresentation as a result of alleged fraudulent responses to standard form property enquiries before contract. In order to reach its decision the court was required to consider a number of terms, including what comprises a notice, discussion and neighbour for the purpose of the standard form enquiries. It held that the terms should not be construed too widely as to do so would oblige sellers to disclose speculative information. Furthermore, the court held that a possible effect on value alone was not sufficient to require disclosure as the words “affecting the property” required the possible future event to have an effect on the property, or its use and enjoyment.

Background

It is standard practice for a buyer to raise enquiries of the seller when purchasing a property. The enquiries are in a standard form; in the case of residential property enquiries are raised using the Seller’s Property Information Form (SPIF) and when dealing with commercial property enquires are raised using one, or more, of a number of sets of standard enquiries called the Commercial Property Standard Enquires (CPSE). It should be noted however that, under common law, a seller is under no obligation to respond to enquiries raised. If responses are given by a seller, care should be taken to ensure that they are accurate as inaccurate responses to enquiries raised before exchange of contracts (be they formal pre-contract enquiries or not) may give raise to a claim for misrepresentation or negligent misstatement.

Thorp and another v Abbotts and another – the facts

In 2006, three local authorities in South Worcestershire commenced a planning and consultation process known as the South Worcestershire Joint Core Strategy (JCS). The process continued for a number of years and eventually became known as the South Worcestershire Development Plan (SWDP). Landowners and developers could put forward proposals for development and the JCS considered what land might be designated in planning terms as suitable for development. A reference in the JCS documents or on its website did not mean however that there was any view from the relevant bodies as to whether in planning terms a site was approved for housing.

The JCS indentified three sites in the vicinity of a residential property known as Oakwood Lodge that could potentially be developed for large-scale housing projects. Two of these sites featured in a ‘preferred options’ document which was the subject of a consultation in 2008 but it remained clear that no decision had been reached on the sites.

Between August 2008 and September 2009 the sellers of Oakwood Lodge (S) became involved in the JCS planning and consultation process and at one point submitted an online response to the consultation in addition to attending public meetings and signing a petition. S’s involvement ceased in 2009 because in their view there were no specific proposals being considered that affected Oakwood Lodge.

In October 2010 S sold Oakwood Lodge to the buyer (B). S had provided B with replies to a SPIF which contained the following two questions:

“3. Notices

3.1 Has the seller either sent or received any communications or notices which in any way affect the property (for example from or to neighbours, the council or a government department)? If yes, please supply a copy.

3.2 Has the seller had any negotiations or discussions with any neighbour or any local or other authority affecting the property in any way? If yes, please give details.”

S answered ‘no’ to both questions.

In May 2011, a planning application was submitted for 800 houses, a care home and other development in the vicinity of Oakwood Lodge. The application was initially refused but subsequently granted on appeal.

B commenced proceedings against S for damages for fraudulent misrepresentation on the basis of their assertion that if S had answered the SPIF honestly, the replies would have revealed the proposals for development in the vicinity of Oakwood Lodge and they would, as a result, have withdrawn from the purchase. B argued that the response to questions 3.1 and 3.2 were false because S should have disclosed the following:

as ‘communications of notices affecting the property of the neighbouring property:’

– public consultation documents inviting S to the meetings arranged by the JCS authorities;

– other unspecified documents that the court was requested to infer were received; and

– a flyer delivered by a local campaign group that opposed development.

as ‘negotiations or discussing with [a] neighbour or [a] local or other authority affecting the property:

– a discussion with a resident of a nearby housing estate who was a leading member of the local campaign group; and

– other unspecified discussions that the court was invited to infer that S would have had with neighbours of the local authority.

Decision

The court held that S’s responses to the SPIF were not misrepresentations and B’s claim failed. To constitute a fraudulent misrepresentation the person providing the response must either know that a representation is false or suspect it to be false but fail to make enquiries to check the response. There is no requirement for a dishonest motive in giving the false reply.

In the court’s opinion:

enquiry 3 should have a narrow interpretation. The SPIF was designed to be interpreted by lay people and therefore should be interpreted in a manner consistent with that. The questions should not be interpreted in such a way that expert advice would be needed to understand the scope of response required
enquiry 3 should not be interpreted so that it became a matter of subjective assessment as to whether information was pertinent. The enquiries were to be considered objectively, so that the decision to be made was whether a reasonable person with the seller’s knowledge of the facts would consider the property was affected
enquiry 3 was aimed at future events which would affect the property. A balance had to be struck between opinions or conjecture and matters which actually had approval and could be implemented
enquiry 3.1 sought to identify the point at which future possibilities should be disclosed as that at which ‘a communication or notice’ has been given ‘which affects the property’. The terms’ notice and communication suggested a degree of certainty of intention was required sufficient that a formal notification must be given. ‘Communication’ could potentially also cover less formal notifications but these would still be notifications where there was a reasonably definite intention to take some steps that would affect the property. In other cases a notice may be required by law to be given, or may be voluntarily given to persons who are entitled to object or be consulted
furthermore enquiry 3.1 only applies to notices or communications coming from someone proposing to take some action or some regulatory body responsible for authorising or permitting the action. It does not apply to communications from other people, e.g. someone who has heard rumours of a development that they wish to oppose but who is, themselves, not responsible for the development.
enquiry 3.2 referred to negotiations or discussions with a neighbour or authority affecting the property. This was aimed at circumstances where there was a proposal or intention to do something which would affect the property and negotiations or discussions occurred with the person whose proposal or intention it was, or an authority in a position to authorise or permit it. A discussion with a person who was not in a position to either carry out, or authorise, the proposal would not affect the property because the outcome of the discussion would not affect whether the proposal went ahead
the phrase ‘affecting the property’ required that the possible future event, if it happened, would have some effect on the property itself or its use and enjoyment. The test was objective, in that the question to be asked is whether a reasonable person with the seller’s knowledge of the facts would consider that the property was, indeed, affected. A possible effect on the value of the property would not be sufficient on its own.
Applying these conclusions the court confirmed that letters received from the JCS authorities was a communication and S’s attendance at meetings were discussions capable of being disclosed in questions 3.1 and 3.2. However, at the date of exchange of contracts they did not affect the property because a reasonable person would have concluded thus. Flyers put out by a campaign group were not communications affecting the property and discussions with the local resident were not discussions with a neighbour (as the resident’s house was too far away) and further, the resident was not putting forward any development proposal that would affect Oakwood Lodge and was not acting in an official capacity where they could approve or reject a proposal.

WM Comment

The court’s comments on what constitutes a notice, communication, discussion and neighbour are interesting. The court confirmed that these terms should be construed in a relatively narrow way in order that there is no obligation on sellers to disclose mere speculation. A degree of certainty that the event would happen, and affect the property would be needed before a requirement for disclosure arises. The current version of the SPIF frames questions more broadly in order that disclosure of proposals for development of land nearby is also required. The comments of the court however still remain useful although it should be noted that an application for permission to appeal the decision of the High Court has been made, to be heard in November 2015. The application is however on a discrete point (the definition of ‘neighbour’ for the purpose of the SPIF).

In terms of CPSE affecting commercial transactions, enquiry 19 deals with notices affecting the property and neighbouring property and the court’s comments would provide useful guidance to sellers responding to these enquiries. Enquiry 20, which relates to disputes, uses similar language. Whilst the CPSE relate to commercial properties and it could therefore be argued that, unlike the SPIF, they may not be designed to be used by lay people, often the people providing responses to CPSE are not property professionals and as such an increased level of understanding cannot be imputed. The likelihood is though that such people will have engaged solicitors to represent them and should therefore consult with those solicitors as to whether information is pertinent and ought to be disclosed. As such, whilst this case does provide an interesting discussion as to interpretation of these terms, and some helpful guidance, a degree of caution should be exercised in applying it to a commercial transaction.

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[1] 2015 EWHC 2142 (Ch)

Renewable energy update

Introduction Financial support for renewable technologies primarily comes in the form of subsidies which are […]

Introduction

Financial support for renewable technologies primarily comes in the form of subsidies which are ultimately paid for via consumer energy bills. The total amount of subsidies available is capped via the Levy Control Framework (LCF). The Department of Energy and Climate Change (DECC) has announced various consultations and policy changes in recent weeks with the purpose of managing the predicted overspend within the LCF.

The first consultation deals with the removal of pre-accreditation under the feed-in tariff (FIT). The second consultation relates to controlling subsidies under the Renewables Obligation (RO) for solar PV of 5 MW and below. DECC also announced its response to the consultation on changes to the grandfathering policy in respect of future biomass co-firing and conversion projects in the RO. In addition, the immediate withdrawal of the climate change levy (CCL) exemption was declared in July’s budget. Even investors hoping to cash in on the only real remaining scheme, Contracts for Difference (CfD), are left with delays and uncertainties.

The Feed-in Tariff

Under FIT, businesses and consumers generating their own electricity through renewable methods receive a subsidy. When pre-accredited projects progress to full accreditation, they are funded through the LCF at a cost that is passed onto consumers. This is the rationale that DECC has provided to justify the need for a consultation. The Energy and Climate Change Secretary Amber Rudd stated:

“My priorities are clear. We need to keep bills as low as possible for hardworking families and businesses while reducing our emissions in the most cost-effective way”.

The removal of pre-accreditation creates uncertainty in the sector, as the level of FIT support will be unknown until a developer has applied to Ofgem for final accreditation. Consequently, this means that developers will potentially take higher commercial risk on projects, resulting in financing becoming increasingly more expensive. However, the government maintains that the uncertainty is within the bounds of “acceptable commercial risk”.

The consultation for the removal of FITs pre-accreditation was launched on 22 July 2015. The consultation period ran for four weeks and closed on 19 August 2015; we currently await the results of the consultation.

The Renewables Obligation

On 22 July 2015, the government also launched a consultation on proposals to change the RO. Under the scheme, operators of accredited generating stations producing renewable electricity receive Renewables Obligation Certificates (ROCs); funds from the scheme are then distributed in proportion to the number of ROCs the operator has obtained in relation to their obligation. DECC proposals include the early closure of the RO to new solar PV projects of 5 MW and below from 1 April 2016 (the RO was originally due to remain open to new applicants for renewable energy support until March 2017). The proposed change follows the closure, on 1 April 2015, of RO support for large-scale solar projects.

Grace periods will allow new solar PV projects of 5 MW and below to continue to be eligible to enter the RO after 31 March 2016 (until the full closure in 2017) if certain criteria are satisfied. The criteria include providing evidence of a grid connection offer and acceptance, confirmation that a planning application has been submitted, or evidence that there is a delay in grid connection that is outside of the developer’s control.

DECC is also proposing to exclude new solar PV projects of 5 MW and below, and additional capacity, from its grandfathering policy. Under the grandfathering policy, a fixed level of support for the lifetime of a generating station’s eligibility under the RO can be put in place, protecting investment decisions.

The precise meanings of the proposals are in debate. One interpretation is that the proposals would mean that DECC can intervene at any point during the lifetime of a project and change the level of support a project receives. An alternative interpretation is that once a project is commissioned the rate is fixed, but the problem is that it will not be certain what rate the projects will receive until they are commissioned. We await the results of the consultation.

Grandfathering – Biomass

On 22 July 2015, the government’s response to the December 2014 consultation on grandfathering biomass co-firing and conversion projects in the RO was published. DECC confirmed that the grandfathering policy would no longer apply to:

new biomass conversion and co-firing stations and combustion units; and
existing generating stations or combustion units that are already receiving support under the RO and move for the first time into the mid-range co-firing, high-range co-firing or biomass conversion bands.
The changes will apply with retrospective effect from 12 December 2014, a move which is intended to reduce the LCF spend by up to £500 million a year.

These changes are likely to affect investor confidence in the sector and could result in reduced returns for biomass projects.

Climate Change Levy Exemption

DECC announced the immediate withdrawal of the CCL exemption in July, with levy exemption certificates (LECs) no longer being issued from 1 August 2015. The CCL is a UK tax on energy use by businesses (not domestic users). Exemption was previously granted for the generation of electricity from qualifying renewable sources. Generators would be issued with LECs for each MWh of electricity generated; they would then sell the LECs to suppliers under power purchase agreements to obtain a commercial deal.

The removal of the CCL exemption is predicted to reduce LCF spend by £900m by 2020, but has come at the disappointment of renewable energy companies as it potentially represents a significant reduction in their revenues.

Contracts for Difference

The CfD scheme, which remains in place, enables low carbon generators to be paid the difference between a pre-agreed price for electricity which reflects the cost of investing in low carbon technology (the “strike-price”) and the actual market price of such electricity by entering into a contract with the government owned Low Carbon Controls Company. The aim is to provide greater certainty for generators given the volatility of wholesale prices.

Competitive auctions are used to implement the scheme and, although the first round auction proved successful, the second round auction has been postponed, with no indication from DECC as to when it will take place.

Conclusion

The changes have been driven by the expected overspend of the LCF and the government’s desire to keep household energy bills to a minimum. Although the policy to keep bills to a minimum is welcomed, it appears to have displaced decarbonisation as the priority on DECC’s agenda.