It is well established that the physical surface of land dedicated as highway maintainable at the public expense vests in the Highway Authority for the area concerned (the HA). The most common provisions used to dedicate highway as being maintainable at the public expense are those set out at section 38 of the Highways Act 1980 (the Act). The length and width of the area to be dedicated will be shown on drawings approved by the HA which are then annexed to an agreement made under section 38, the depth of the area to be dedicated is traditionally thought as being “the top two spits” (spade depths) under the surface of the highway.

What is often overlooked is that in addition to the above dedicated area other infrastructure is potentially maintainable by the HA. Notably section 264 of the Act vests the drains belonging to a road in the HA. Ancillary rights to enable the HA to construct such drains as it considers necessary in land adjoining the highway together with powers to scour, cleanse and keep open such drains are set out under section 100 of the Act.

If powers are exercised under section 100 there is arguably no need for the HA to acquire an easement to drain over, onto or through adjoining land (although compensation will be payable by the HA). Despite these powers there has been a recent trend for HAs to require the grant of express rights of drainage as a condition of entering into section 38 agreements. Such agreements will typically oblige the landowner to construct the works and create a legal easement benefiting the highway over the landowner’s adjoining land.

If powers of entry are exercised under contractual provisions (rather than the statutory regime) it is essential that landowners consider a number of issues, including:-

• that appropriate covenants are offered by the HA regarding the exercise of such powers
• that they have defined remedies against the HA in the event of breach of such covenants (the statutory compensation under section 100(3) is unlikely to be payable) and
• if the land over which such easements are granted forms part of a potential development site the landowner will need to ensure that the grant and registration of a legal easement against the landowner’s title does not interfere with its future dealings of the land concerned.

We previously reported that the new Insurance Act 2015, which is due to come into force on 12 August 2016, would not include the Law Commissions’ proposed amendments to the law regarding late payment of insurance claims.

The current law prohibits policyholders from recovering losses suffered as a result of an insurer’s unreasonable delay in paying a valid insurance claim, and consequently fails to encourage insurers to deal with claims expeditiously. In our experience, this can often lead to a situation where insurers delay responding to a claim in order to put pressure on the policyholder to accept a lower settlement.

On 17 September, the Department for Business, Innovation & Skills (BIS) released a series of publications relating to the Government’s Enterprise Bill, including an announcement that the Bill would seek to tackle the problem of late payment of insurance claims. BIS said:

“Late payment is a major problem for businesses. Where a business has suffered a loss such a fire or flood, it is likely to rely heavily on insurance. Any unnecessary delay in payment can have significant impacts on a business’ ability to continue or re-start trading after an insured loss. However, insurers under contracts of indemnity insurance in England and Wales are under no legal obligation to pay valid claims within a reasonable time. Although Financial Conduct Authority (FCA) rules require claims to be handled and settled promptly, any failure to comply does not entitle a policyholder to claim damages for late payment. The Government is committed to combating unreasonably late payment of sums due to businesses in particular. The law should incentivise insurers to pay as promptly as is reasonable, and give policyholders a legal right to enforce this.”

The Bill proposes to:

• Introduce into every contract of insurance a requirement on the insurer to pay sums due within a reasonable time;
• Provide a non-exhaustive list of matters which may be taken into account when determining what is a reasonable time for payment in the particular circumstances of a case; and
• Allow for contracting out of the default rules for non-consumer contracts, provided that the insurer satisfies the transparency requirements set out in the Insurance Act 2015.

Michelmores has previously called for the law on late payment of damages to be changed to protect policyholders and bring English law in line with the position in most other major jurisdictions. Harriet Stokes presented a paper in support of reform at the June 2015 AIDA Conference in Copenhagen and her work on the subject has been published in the British Insurance Law Association Journal.

The government has now issued its response to the consultation on minimum energy efficiency standards for the commercial rented sector.

The response confirms what had been previously mooted:

1. The regulations will apply to all non-domestic property, except those which are already exempt from the requirements of the EPC regime;
2. The minimum energy efficiency rating will be ‘E’ – this mirrors the domestic property regime;
3. Landlords will not be required to make energy efficiency improvements:

– which are not cost effective (i.e. cannot be repaid within 7 years or available under the Green Deal);
– where necessary consents cannot be obtained; or
– the measures will reduce a property’s value by 5% or more.

The regulations will come into effect on the 1 April 2018 and will apply to any new lease to new or existing tenants.  From 1 April 2023, there will be a blanket application of the regulations, so the trigger will not be a new lease.

Enforcement will be by local authorities.  Although it is expected that Trading Standards will undertake this function, local authorities will be able to choose. There will be a six month window for compliance.

Penalties for non-compliance will be twofold:

• For providing false information on the register, a penalty of £5,000 is stated in the response.
• For renting out a non-compliant property, there will be a sliding scale depending on the length of breach. The fines will be linked to the rateable value of the property.  For infringements of less than 3 months, the fine will be 10% of the rateable value, but with a minimum penalty of £5,000 and a maximum of £50,000.  For infringements of more than 3 months, the fine will be 20% of the rateable value, but with a minimum penalty of £10,000, and a maximum of £150,000.

The government will be drafting and issuing guidance shortly.

Read the full government response.

If you have a building that is subject to the EU Emissions Trading System (EU ETS) because it contains standby boilers or generators, then you may now be able to drop out of the CRC Energy Efficiency Scheme − potentially saving you thousands of pounds!

On 8 October 2014 the Environment Agency published a CRC Update intended to simplify the exclusion of EU Emissions Trading System (EU ETS) from the CRC Energy Efficiency Scheme.

Following this update, when calculating qualification for CRC Phase 2, you can now exclude gas or electricity supplies to sites where there are EU ETS installations. This approach excludes energy supplies to all of the activities on the site where there is an EU ETS installation − even if some of the activities are not listed within the permit for the EU ETS installation.

Therefore, it looks like all energy supplies to buildings which are subject to the EU ETS are now excluded from CRC Phase 2.

This seems a surprising decision by the Environment Agency, given the potential effect on estates including large, high use, buildings such as office blocks and shopping centres.  At a time when Government is seeking opportunities to maximise revenue we would not be surprised if The Department of Energy and Climate Change (DECC) intervene to ‘clarify’ this recent EA Update!

Highway rights over land can present a considerable obstacle to development of land. At best the process required to remove such rights can be costly and time consuming. In the worst case development can be entirely frustrated if such rights cannot be removed and a site becomes commercially unviable as a consequence. Even where such rights are little exercised they should never be ignored as development on or over a highway may leave a developer liable to carry out expensive alterations to a completed development and may even constitute a criminal offence.

The principle methods of removing highway rights over land (known as ‘stopping up’) can be achieved by application to a magistrates court (section 116 of the Highways Act 1980) or by application to the Secretary of State (section 247 of the Town and Country Planning Act 1990). What follows is a brief overview of some of the factors to be considered by a developer when highways rights interfere with development.

Procedure

The procedures under the Highways Act and the TCPA are very similar requiring prior notice to be published in at least one local newspaper and the London Gazette, displayed on a site notice at each end of the length of highway to be stopped up,  served on every ‘statutory undertaker’ who has apparatus under the area that is to be stopped up and on every local authority in whose area any highway or any land to which the order relates is situated (the exact recipients in each case depending on the structure of local government in the area).

Prior notice of a s116 application will also need to be served on all owners or occupiers of land adjoining the highway to be stopped up (and in the case of classified roads the Secretary of State). In the case of an application under the TCPA advance notice does not have to be served on such persons.

The issues of effecting service should not be underestimated. Thorough due diligence must be undertaken to ensure that all appropriate bodies are identified otherwise the body determining the application may well refuse to grant an order on procedural grounds.

In the case of a Highways Act application the local highway authority for the area will make the application and prior consent (as distinct from notice) to the application of parish and district councils must be obtained in relation to applications concerning certain roads and paths. As a consequence various tiers of local government can effectively veto an application before it ever reaches the magistrates court. Although local authorities do not have the ability to veto an application made pursuant to the provisions of the TCPA a sustained objection will lead to the Secretary of State requiring that a public inquiry be held.

A welcome change to the law came into force when the Growth and Infrastructure Act 2013 amended section 253 of the TCPA 1990 to enable a draft stopping up or diversion order to be published alongside the planning application (i.e. before the consent is granted). Prior to this change an application could only be made following the grant of the planning permission (and then only if the development concerned had not been completed).

What has to be proved

Provided that development has not been completed, all that needs to be demonstrated for the purposes of the TCPA is that the stopping up is required to to enable development to be carried out:-

• in accordance with a valid planning permission (s247(1)(a));
• by a government department (s247(1)(b)); or
• in accordance a specified anticipated permission (s253(1)(a))

Contrast the above with the provisions of the Highways Act which require a highway authority to demonstrate to the satisfaction of the court that it is “unnecessary”. Where possible it is clearly preferable for a developer to make an application under the provisions of the TCPA rather than trust to what is regarded by both the local highway authority and magistrates court as being unnecessary.

Costs

The costs of stopping up should not be underestimated. In the case of a contested application under the TCPA the costs of a public inquiry can be extremely significant. In addition even if an order is obtained it is capable of being challenged by appeal to the crown court (in the case of an order obtained pursuant to s116) or being quashed by the High Court (in the case of an order obtained pursuant to the TCPA).

Where applications for an order are uncontested costs under the Highways Act may well be higher than under the TCPA due to the fact that the local highway authority for the area will usually seek to recover its costs from the party seeking an order. An often overlooked provision is the potentially significant costs of relocating the apparatus of statutory undertakers under part II of schedule 12 of the Highways Act 1980.

Choice of Procedure

Advice should be sought at an early stage in the project where highway rights exist over a development site to ensure the best choice of procedure and the correct timing of the application in any specific case.

Although the changes introduced by the Growth and Infrastructure Act 2013 will be welcome to developers, in certain circumstances the procedure under the Highways Act may be preferable given the potential for a potential obstacle to development to be overcome at an early stage and before many other project costs involved with a planning application are incurred. Section 116 is also useful in circumstances where the TCPA would not be appropriate (such as where development has been completed or where fixed proposals for development have not been finalised).

The law concerning stopping up is a specialist area with traps for the unwary. In addition to the above principle provisions there are other powers available to highway authorities to extinguish highway rights and additional provisions concerning roads in Greater London which should be considered where appropriate on a case by case basis and which specialist advice should be sought.

Sound familiar? Dealing with complaints, or concerns as some like to call them, are a necessary part of school life. Complaints can take a huge amount of time and staff resource away from daily school life − it is arguable if the time taken away from teaching children is proportionate to the complaint made. However they need to be taken seriously and sometimes lessons need to be learnt.

The DfE have recently released new guidance regarding Academies and Free Schools and the requirement to have a complaints policy in accordance with the Education (Independent School Standards) (England) Regulations 2014. Similar guidance exists for maintained schools.

Complaints could be anything from teacher’s attitudes, to failure to follow procedures to under supervision of Jimmy in his Forest School lesson, when he is playing with that marshmallow on a stick.

Some parents are unsure where to turn if they have a concern or are angry about something at the school therefore it is very important to make it clear within school where to find this information and to have it clearly displayed on the school’s website. Often schools have generalised leaflets regarding how to raise a concern which makes the process accessible for all and then they move onto the more formal complaints policy if needed.

Within the recently published guidance there are the obvious complaints procedures requirements such as the complaints procedures must be in writing, made available to parents and set out clear timescales. Nothing unusual here. The procedure must consist of 3 stages; informal, formal and a panel hearing. If the complaint progresses to a final panel hearing the school must allow the parent to attend (again an expected requirement) and be accompanied if they wish and the school must also ensure that at least one member of the panel is independent of the management and running of the academy, this is slightly more tricky. All governors at the school would not be independent of the management and running of the academy as that is what they are there to do…. So where does a school find a suitable independent individual who wants to take on the responsibility? Perhaps another local governing body….

Some complaints cannot be dealt with at that panel hearing so what happens when the complaints process at the school has been exhausted?

The EFA/DfE can support. However their scope is narrow as they look at delay, compliance with complaints procedures, breaches of funding agreements in the case of Academies and compliance with other legal obligations i.e. compliance with the Admissions Code. They do not overturn complaints but can request that the complaint is looked at again and instruct the school to make sure that procedures are put right.

A complaint can also be made to Ofsted if the schools complaints process has been exhausted. Ofsted don’t usually investigate individual complaints and only really focus on complaints which affect the whole school such as the management of school resources.

The recently released guidance doesn’t appear to be anything particularly new and it is likely most schools would be following similar principals anyway. The best thing to do is to make sure you have a watertight complaints policy and you follow it to the tee. If you are in the unfortunate position where a complaint is escalated through the stages you will then have the backbone and procedures in place to deal with it in the most efficient way.

The internet is full of information on training contract applications and interviews. But before you start to diligently write down your attributes and practice your interview questions in front of a mirror (trying to project an aura of yourself as serious and ambitious yet friendly and approachable) you need to make sure that your efforts are being focussed at the right firm.

So, what are your options?

The first thing to consider is what type of firm you want to join. Taking a broad brush approach, there are three main ‘types’ of law firm to consider:

1. Local high street firms

Working in a high street firm you may be likely to practise in a number of areas, across one broad specialism. For example, you may practise in both commercial and residential conveyancing, or civil litigation that spans family, employment and property litigation. This exposes you to a range of practice areas, but may inhibit you from becoming highly specialised in any one area. That said, the number of practice areas in the firm as a whole are likely to be more limited than other firms.

Your client base is likely to be individuals and smaller businesses that are based in the local area.

2. Regional firms

Working in a regional firm will give you the choice of a wide variety of practice areas and enable you to specialise in one of these. What I enjoy about working at Michelmores is that these specialisms encourage different departments to work together on projects, sharing their in-depth knowledge.

Regional firms will vary in their approach to the market. Some may focus on the regional work in their area, whilst others will focus on the London and international markets. Michelmores have taken the latter approach and this has exposed me to London quality work whilst maintaining the lifestyle benefits of working in a South West firm.

3. City firms

City firms tend to have a very glamorous image. The quality of work is likely to be very high, with both national and international clients. How much exposure a trainee will have to this work will depend upon the firm and the number of trainees that are taken on. City firms do not only do business-related work, but their focus is often on commercial law and a number of their clients will be well known businesses.

There are also a number of US and international firms based in London. If you have an interest in global business then this might be a route for you to explore. The possibilities of international placements are common in these firms and their clients will be from all over the world.

What matters to you?

Once you have an understanding of the types of firm, you need to consider what you want from your career. If I had to pick my top 3 priorities, they would be:

1. I want to have a successful career that exposes me to challenging and interesting work.

Michelmores have an impressive client base and high quality work that is often won in London. As a trainee, I was exposed to this from my first day.

Because Michelmores have a smaller trainee intake than city firms, I am given high levels of responsibility and exposure to interesting and complex work. I have been able to handle the progress of matters where appropriate, undertake interesting research tasks and I am often out of the office meeting clients.

2. I want to enjoy going to work (after all, this is where I spend a lot of my time!).

Michelmores have an active social committee, rarely a week goes by without an event happening. Last week, we had a firm sports day that was great fun, if not a little competitive! I find that this is a great way to get to know people from all over the firm even if you don’t work with them regularly.

The open-door policy and open-plan working environment facilitate team work, making it easy to approach supervising solicitors. The combination of this makes Michelmores a very productive and enjoyable learning environment.

3. I want to have a healthy work-life balance.

Being able to keep my horses and my social life as well as having a good job wasn’t something that I ever thought would be possible – however, when I found Michelmores, I realised that it was.

My working day is flexible and there is no stigma about leaving the office at 5.30pm.Of course, sometimes there will be an urgent task that needs to be completed, but if this does happen then the whole team will pull together to complete it.

Michelmores also offer good annual leave which ensures that everyone is able to take the time off that they need to get some R & R and take part in events going on away from the firm.

Naturally, other considerations are salary and location.

It is important to reflect upon and remember your priorities. If a firm isn’t in line with these then it is unlikely that you will be able to forge a successful and happy career with them.

How do you know which firm can meet your needs?

Once you have an idea of what you want from a firm you can look at your options in a productive way.

My first port of call would be the website and social media pages of the firm. This will give you an idea of their clients and type of work. It will also give you a sense of the extra-curricular activities they offer and the general ethos of the firm.

It is important to remember that this will be a firm’s ‘best side’. When I was applying for training contracts I found it helpful to look past the marketing. I spoke to current employees (from trainees to partners), asking them why they chose the firm, what they particularly enjoy about working there, and if there was anything that they didn’t like about the firm. You can do this by attending open days, law fairs, or approaching employees by email or social media – if you pitch the approaches professionally and carefully. People will remember you for this and it is the best way to get a ‘full picture’ of the firm.

I know a lot of graduates apply to as many firms as possible in the quest to secure a training contract. However, if you take the time to consider whether a firm is right for you and the reasons why, this will shine through in your application and the assessment process. It will also mean that you have a better chance of enjoying your training contract, having chosen a firm that is the right fit for your own happiness and success. Good luck!

In the February 2018 edition of Corporate Rescue and Insolvency, we discussed the recent decision in Re Agrokor DD and in the matter of the Cross-Border Insolvency Regulations 2006 [2017]. The case serves as a useful reminder of the provisions and utility of the Cross-Border Insolvency Regulations 2006. A copy of our article can be found here, and is reproduced with the publisher’s kind permission below.

Introduction

Re Agrokor DD and in the matter of the Cross-Border Insolvency Regulations 2006 [2017] EWHC 2791 (Ch) concerned an application by the ‘foreign representative’ of Agrokor DD (the ‘Company’), a Croatian company, for recognition in Great Britain under the Cross-Border Insolvency Regulations 2006 (the ‘CBIR’). The application was opposed by Sberbank (‘Sberbank’), a Russian bank and creditor. Sberbank claimed in excess of €1bn from the Company and had commenced arbitration proceedings against the Company in London in July 2017. Contested applications for recognition under the CBIR are uncommon. This case therefore serves as a useful reminder of some of the provisions of the CBIR and the issues the English court must consider in determining whether to grant recognition. The outcome of Brexit as regards Regulation (EU) 2015/848 on insolvency proceedings (recast) (the ‘Recast EIR’), Regulation (EU) 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) (the ‘Recast JR’) and other EU legislation remains uncertain. However, it is possible, particularly as new insolvency and/or restructuring procedures continue to be introduced around the globe, that practitioners in the United Kingdom (and overseas) might need to become better acquainted with the provisions of the Model Law (as defined below), and other means of coordinating cross-border insolvencies and related disputes.

Background

The Company is the holding company of a group of companies (the ‘Group’) specialising in agriculture, food production and related activities in Croatia. Its annual revenue is around £6.5bn, and it was said to account for circa 15% of Croatia’s GDP (more, if one includes supply chains). Because of its size and systemic importance to the Croatian economy (and because a desired restructuring could not be effected pursuant to the existing Croatian Bankruptcy Law 2015), it became necessary to introduce specific legislation to resolve the Company’s financial difficulties. This new law, the Law on Extraordinary Administration Proceeding in Companies of Systemic Importance to the Republic of Croatia (the ‘Extraordinary Administration Law’), was passed by the Croatian government on 6 April 2017. The Company did not delay, and on 10 April 2017 the Croatian court made an order that the Company be made subject to an extraordinary administration. The commencement of an extraordinary administration has the consequence of, among other things, prohibiting the bringing or conducting of civil or enforcement proceedings against the debtor and its controlled and affiliated companies; in effect, a moratorium on claims. Therefore, both the Company and the Group became subject to an extraordinary administration.

Extraordinary administration

The court noted that the Extraordinary Administration Law was based, at least in part, on the Italian Legge Marzano, enacted in relation to the collapse of the Parmalat group. An extraordinary administration is overseen by an extraordinary administrator. Certain decisions require the approval of the court, the creditors’ committee, the relevant government Ministry or the government of the Republic of Croatia (as applicable). The Extraordinary Administration Law empowers the extraordinary administrator, with the approval of the creditors’ committee, to propose a satisfaction of creditor claims by way of settlement agreement. By the settlement agreement it is possible to, among other things, transfer some or all of the assets of the debtor to a third party, for the debtor to continue trading, for the debtor to merge with another entity, and to reduce or postpone the debtor’s payment obligations. Creditors are categorised by class, and each class must approve the settlement agreement by a simple majority. An extraordinary administration can be converted into a bankruptcy proceeding at any point in the process.

The cross-border insolvency regulations

The Recast EIR applies to Croatia. However, the Extraordinary Administration Law is not included in Annex A of the Recast EIR and, therefore, is not a ‘main proceeding’ to which automatic recognition is given. Accordingly, it was necessary to seek recognition via the CBIR instead. The CBIR were introduced in Great Britain (that is, England, Scotland and Wales) under the Insolvency Act 2000. This enacted (with some modifications) the model law (the ‘Model Law’) drafted by the 30th session of the United Nations Commission on International Trade Law, known as UNCITRAL relating to cross border insolvency. The Model Law was devised to resolve issues arising in crossborder insolvencies. Unlike other crossborder insolvency legislation (such as the Recast EIR), the Model Law (in unmodified form) does not require reciprocity from the requesting state in order for the enacting state to be obliged to recognise foreign insolvency procedures. Some states (but not Great Britain) have chosen to enact the Model Law to include a reciprocity requirement. Croatia has not adopted the Model Law. Under Art 2(i) of Sch 1 to the CBIR:

‘“foreign proceeding” means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision of a foreign court, for the purpose of reorganisation or liquidation’

Under Art 20.1 of Sch 1 to the CBIR, upon recognition:

‘commencement or continuation of individual actions or individual proceedings concerning the debtor’s assets, rights, obligations or liabilities is stayed [and] execution against the debtor’s assets is stayed…’

Article 20.2(a) of Sch 1 to the CBIR provides that the automatic stay is the same in scope and effect as if the debtor had been made the subject of a winding-up order under the Insolvency Act 1986 (IA 1986). In Cosco Bulk Carrier Company Ltd v Armada Shipping SA [2011] EWHC 216 (Ch) Briggs J said:

‘The domestic regime for the imposition and management of a stay incorporated by paragraph 2 of article 20 is that prescribed by section 130(2) of the Insolvency Act 1986’.

Under Art 6 of Sch 1 to the CBIR:

‘Nothing in this Law prevents the court from refusing to take an action governed by this Law if the action would be manifestly contrary to the public policy of Great Britain or any part of it’

The arbitration in London was, pending the outcome of the application, stayed by consent. An automatic stay would apply under the CBIR, assuming the application was successful, thus explaining Sberbank’s objection to the application.

Opposition to the application

Sberbank, opposing the Company’s application, argued that the extraordinary administration procedure is not a ‘foreign main proceeding’ within Art 2(i) of Sch 1 to the CBIR because:

• the Extraordinary Administration Law is not a law relating to insolvency
• the Extraordinary Administration Law was not passed for the purposes of reorganisation or liquidation
• an extraordinary administration is not a collective proceeding
• an extraordinary administration is not subject to control or supervision of a foreign court
• the extraordinary administration concerns a group, and group proceedings are outside the scope of the CBIR
• even if the extraordinary administration is a foreign main proceeding, to grant recognition would be manifestly contrary to the public policy of Great Britain

The court addressed each of those arguments, with careful reference to the CBIR, the Model Law, documents of UNCITRAL and its working group relating to the preparation of the Model Law, the guide to the enactment of the Model Law (the ‘Guide’), and case-law from the United Kingdom and from other jurisdictions. The court also received expert evidence on matters of Croatian law. The court described its role as to decide whether the extraordinary administration fulfils the criteria for recognition under the CBIR, acknowledging that the characteristics of that proceeding are a matter of Croatian law. It is interesting to note that neither Serbia nor Montenegro was prepared to recognise the Company’s extraordinary administration, notwithstanding that those countries have adopted the Model Law.

Group proceedings out of scope

The Guide makes clear that what is generally being considered in the Model Law is the case of an individual debtor company that undergoes an insolvency or reorganisation process. The position of groups of companies is generally ignored. Whilst the extraordinary administration concerned the Group, recognition was sought only in respect of the Company (we assume being the only group company party to the arbitration proceedings in London). The court held that there is nothing in the CBIR to prevent a foreign proceeding being recognised, which in the foreign court involves a group of companies, but where the recognition being sought in Great Britain is only in relation to a single member of that group of companies.

Law relating to insolvency

The Guide says ‘liquidation and reorganisation might be conducted under a law that is not labelled as insolvency law (eg company law), but which nevertheless deals with or addresses insolvency or financial distress’. The law concerned does not have to be confined to the law of insolvency. The court, having analysed the Extraordinary Administration Law, observed that: ‘It is… clear that the extraordinary administration proceedings in Croatia is begun on grounds either of insolvency or impending insolvency, whether proved or deemed.’ It held that: _x0096__x0096_ the requirement that the law under which the proceeding is brought must be an insolvency law is satisfied if insolvency (presumed by operation of law or actual) is one of the grounds on which the proceeding could have been commenced, even if insolvency could not actually be demonstrated and there was another basis of commencing the proceeding; and _x0096__x0096_ it was immaterial, for the purpose of this application, that affiliate and subsidiary companies of the Company could not themselves have been made subject to an insolvency proceeding.

Subject to the control and supervision of the Court

The court was of the view that ‘supervision or control’ is not a demanding standard, and notwithstanding that the Extraordinary Administration Law confers significant powers and oversight upon the government of Croatia (among others), the test was satisfied in this case.

Control or supervision can be potential rather than actual, and indirect rather than direct.

Collective proceeding

Sberbank argued that ‘collective proceeding’ means that the insolvency proceeding must relate to the debtor and its own creditors, and not to creditors of other companies. An extraordinary administration encompasses all the assets and liabilities of the group companies subject to the proceeding, and such claims are administered on an omnibus basis. The extraordinary administrator is tasked with making a proposal between the companies subject to the proceeding and their various creditors. The court held that the proceeding was a collective proceeding, observing, rather tartly, that Sberbank’s objection seemed to be that the extraordinary administration was, if anything, too collective. A distinction was made with a proceeding that is a collection device for a particular creditor or select group of creditors (like a receivership, which is not a collective proceeding).

For the purposes of reorganisation /winding up

Sberbank argued that because a company could exit extraordinary administration without certainty that it would be made subject to a reorganisation or a winding up, such proceeding could not be recognised under the CBIR. The court agreed that as regards the possible outcomes this was right, but held that nonetheless the Extraordinary Administration Law was a law for the purposes of reorganisation and winding-up. Even though a reorganisation or winding up outcome was not certain, it was a credible possibility at the outset of such proceeding.

Manifestly contrary to public policy

The discussion revolved around whether, because an extraordinary administration might result in a distribution to creditors otherwise than in accordance with the pari-passu principle, recognition of an extraordinary administration would, therefore, be manifestly contrary to the public policy of Great Britain. Reference was made to the decisions in Re HIH Casualty and General Insurance Ltd and other companies; McMahon and others v McGrath and another [2008] UKHL 21, Re Bank of Credit and Commerce International SA (No 3) [1993] BCLC 1490 and British Eagle International Airlines Ltd v Compagnie Nationale Air France [1975] 2 All ER 390. The court rejected Sberbank’s argument, saying that the fact that the priorities of the Croatian law in reorganising or winding up are different from those which apply or would apply under English law, is simply not enough. There was no violation of public policy, let alone a manifest violation.

Next steps and comment

In our view, this is a sensible decision and one that ought to help in facilitating an orderly reorganisation of a group of companies that are of immense importance to the Croatian economy. Sberbank’s arguments felt somewhat speculative, but one now wonders whether it will take any further action. It might decide to appeal the judgment (it is interesting to note that in his conclusion Paul Mathews J confessed that ‘[cross-border insolvency] is not a field into which I regularly venture’), or request permission to modify the stay as regards the arbitration proceedings already on foot. In Ronelp Marine Ltd and other companies v STX Offshore & Shipbuilding Co Ltd [2016] All ER (D) 77 (Oct), relying on Art 20.6 of Sch 1 to the CBIR, the automatic stay was modified to permit the continuance of proceedings in the Commercial Court. Under that Article:

‘the court may… modify… such stay and suspension or any part of it, either altogether or for a limited time, on such terms and conditions as the court thinks fit…’

In Ronelp, Norris J said: In cases where the foreign main proceeding is in the nature of a restructuring rather than a liquidation it has become the practice of the English Courts as a matter of discretion to grant the whole of the relief available under paragraph 43 of Schedule B1 [to IA 1986] and to modify the automatic stay to align it with those provisions.’

As mentioned at the outset, unless some means of maintaining in force the Recast EIR, the Recast JR, and other applicable EU legislation can be achieved, or treaties having equivalent effect are put in place, restructuring and insolvency professionals may have to become more imaginative in securing cross-border recognition of insolvency proceedings (and related judgments). The Model Law may become a more popular means of them doing so, rather than having to rely on the uncertain patchwork of private international law. Readers should note however that the Model Law has thus far been adopted by only 43 states worldwide, and by only Greece, Poland, Romania, Slovenia and the United Kingdom (including Gibraltar) in the EU, meaning recognition across the EU would be asymmetrical. Also, unlike the Recast EIR, recognition under the Model Law is not automatic. The Model Law’s applicability will therefore be limited.

In the recent case of Gelber and another v Sunderland Foundation and others [2018] EWHC 2344 (Ch), [2018] All ER (D) 31 (Sep), the court was asked to consider whether the trustees of the Marlborough 1981 Settlement (Settlement) could be granted additional powers under section 57 of the Trustees Act 1925 (TA 1925) as the result would benefit both the trust and the beneficiaries. All of the parties supported the application.

Background

The Settlement was created by the 11th Duke of Marlborough and has offshore resident trustees. The income from the Settlement assets is paid to the current Duke of Marlborough. The Settlement assets included land around Woodstock in Oxfordshire which had been granted planning permission, although a condition was imposed whereby 70% of the development value had to be paid to the Blenheim Palace Heritage Foundation (BPHF), a charity whose primary objective is restoring and preserving Blenheim Palace and its park. Blenheim Palace is a World Heritage site and is also the home of the current Duke of Marlborough under the terms of a Parliamentary Settlement. There is therefore a close alignment of interests between the Settlement and the Parliamentary Settlement.

Whilst the Settlement would increase in value by developing the land, notwithstanding the substantial payment to BPHF, and in turn some of the beneficiaries of the Settlement would also benefit as BPHF maintain their home, the trustees of the Settlement did not have the power under the Settlement to make the payment.

A separate but connected issue was that the Settlement did not permit the appointment of a sole trustee, unless that was a trust corporation. In relation to the sole trustee, the definition of a trust corporation does not include an offshore (non-EU) company but it was preferable to administer the trust using the single offshore corporate vehicle.

The outcome

The court exercised its jurisdiction under section 57 TA 1925 which enables the variation of trustees’ powers in certain circumstances. The court can provide the trustees with a power, either generally or for a specific instance, in circumstances beyond those of salvage or emergency (as had not been the case prior to 1925), where the wider power or transaction would be in the best interests of the trust as a whole, rather than particular beneficiaries. The test is based on expediency.

The court held that permitting the development of the land, and in turn the payment to BPHF, would benefit the Settlement as a whole. The Settlement’s net assets would increase (the net sum the Settlement would receive would still be between 20 and 25 times the current agricultural value), the beneficiaries of the Settlement would benefit from the funds being spent by BPHF on Blenheim Palace and it would also satisfy a moral obligation as the trustees of the Settlement have an obligation to maintain and conserve Blenheim Palace. It was also held expedient to have a sole corporate trustee (a foundation) as the Settlement had always been managed outside the UK and the change would bring benefits for the Settlement and the beneficiaries.

The case demonstrates that the court will consider exercising its powers under section 57 TA 1925 where it is appropriate given the particular circumstances. It also confirms, for the first time in England, that the jurisdiction can extend to the powers to appoint or replace trustees.

At a time when building materials can be difficult to source, professional indemnity insurance is becoming harder to procure at higher levels and the risk premiums sought by design and build contractors, many developers are turning to construction management as an alternative procurement strategy for their projects.

Construction management as a procurement route which sees the developer engage various trade packages for the works directly, as well as appointing design consultants and a construction manager who uses their expertise to programme, co-ordinate and tender the contracts. The construction manager is effectively engaged as a professional consultant – they have no contractual link to the trade contracts or design team – but their skill is critical to the success of this method of procurement.

Construction management isn’t for everyone – and it is not appropriate for every project. It is most successful when implemented on large-scale project where flexibility and early start on site are key – and where up front cost certainty is not the principal driver.

The advantages are generally seen as:

• High levels of flexibility during the construction process;
• Early start on site possible and savings on construction duration due to overlapping of design and construction process;
• Cost savings by the tendering of each works package;
• Further cost savings as no overall risk premium payable to a main contractor;
• Value engineering during construction phase is easy to implement;
• Allows developer to proactively manage its own project.

However, it is not all sunshine and roses. Critics of the procurement method will warn that the disadvantages of construction management include:

• A lack of cost certainty;
• An increase in administrative and legal time/cost upfront;
• Incorrect programming may lead to trade packages delaying one another.

In terms of the contractual aspect of this procurement method, the Joint Contracts Tribunal (JCT) updated their construction management suite of contracts in 2016 and these are the most commonly used contracts. These are drafted for large construction management schemes – but developers could also use other forms of contract to work for this procurement method (suitably amended) – including or incorporating JCT Minor Works, NEC forms of contract or indeed (for projects with an engineering or plant element) iChemE or FIDIC contracts.

Whilst it is not for everyone, the increasing prevalence of construction management procurement in the market suggests that in these changing times developers are starting to look for alternatives to the traditional or design and build approach to construction. We have recently advised on a number of projects which are using construction management and once the whole construction team and the investors in the project understand the risk profile of this procurement model, the project progresses in the usual way.

Earlier this year, the government announced a plan to introduce a new Residential Property Developer Tax to raise revenue in order to address building safety defects and in particular the removal of unsafe cladding in the aftermath of Grenfell. The government also plans to introduce a levy on planning permission for high-rise buildings.

The tax is expected to be introduced in April 2022, is intended to be time-limited and will apply to the larger residential property developers. The tax rate has not yet been set but will apply to profits in excess of £25m per annum.

The consultation on what that policy might look like recently came to an end and we continue to await an announcement on the further details of how this tax will operate.

With only a number of months until the tax is implemented, it will be interesting to see if larger developers will factor the increased tax burden into the purchase price of a development site and whether it will have any impact on build-out rates. Watch this space…

This article is for general information only and does not, and is not intended to, amount to legal advice and should not be relied upon as such. If you have any questions relating to your particular circumstances, you should seek legal advice.

Annual holiday entitlement has been a much talked about topic over the past year or so (think holiday and furlough interaction, the extension of the right to carry-over, as well as the ever-changing international travel bans/quarantining etc). In addition, the pandemic has brought a sharper focus to mental health in the workplace and employee well-being.

With the above in mind, plus the general shift to more agile working arrangements, is now the time to ditch the traditional “20 days plus bank holidays” approach to holidays, and move towards a more flexible “unlimited holidays” style offering?

What is “unlimited” holiday?

Unlimited holiday has traditionally been popular in the US (where statutory holiday entitlement is much less generous than in the UK), as well as in technology/start-up companies. It’s a policy where employees are given no set number of holiday days per year, meaning employees can – at least theoretically – take as much or as little holiday as they like.

Several global companies have successfully implemented this policy for a long time. Ranked by Forbes as one of the best employers globally, Netflix was one of the first to offer unlimited holiday to its staff – the focus being on the quantity and quality of the work output, rather than the number of hours or days worked. LinkedIn and Virgin have reportedly adopted such policies, too.

Take-up of such a policy in the UK seems to be relatively low, though job site Indeed.co.uk reported that since 2017, the number of job posts on its site mentioning unlimited holiday have increased by 148%. But, despite this dramatic rise, unlimited holiday policies remain rare, with only 1% of jobs on the site offering it.

Holiday entitlement in the UK

Regulations on working time, particularly regarding holiday, are in place to safeguard employee health and safety.

Employers must meet their statutory minimum obligations with regards to holiday. Under the Working Time Regulations 1998, workers are entitled to 5.6 weeks’ holiday each year and payment in lieu of accrued but untaken holiday on termination. Employers can offer more generous holiday entitlements, and many do.

Employers also have a responsibility to try and ensure that workers take their statutory minimum entitlement. This requires businesses to show that they enable their workers, through the provision of sufficient information, to take their annual leave.

Unlimited Leave policy – Is it really “unlimited” and how does it work in practice?

It will depend on the terms of any policy and the approach adopted by each company.

Whilst the idea of truly unlimited holiday sounds great, as a concept it’s not really workable in practice, given that the business still needs to operate throughout the year, which involves sufficient numbers of people being present and working at any one time. As such, this necessitates there being some form of process/procedure to help manage the entitlement.

If you’re considering introducing unlimited holiday, getting the policy right is key.

You’ll need to make sure your policies are operationally sound. You should consider practical issues like:

• Setting out procedures for requesting leave.
• The rights of your business to reject leave requests.
• How you’ll deal with competing requests.
• Consider how you’ll deal with “carry over”.
• Setting a maximum number of days which can be taken in a block at any one time.
• Introducing minimum performance targets as a pre-requisite to being entitled to extra leave – e.g. making it a condition that an employee needs to be hitting their targets/KPIs to be eligible. It’s likely that this type of policy will be better suited to roles where output is easily measurable.
• How you’ll manage under-performance if this is linked to an employee taking too much holiday.

You’ll also need to be mindful of complying with your legal obligations. Relevant considerations will be:

• Ensuring your workers are getting to enjoy their statutory minimum holiday. As outlined above, you should be able to show that you enable your employees to take annual leave – for example, by transparently giving them the opportunity to take leave, encouraging them to take leave, and informing them in good time that, if they don’t take their leave by the end of the leave year, they will lose it. Arguably, this becomes harder when holiday is “unlimited”, as workers will be given increased flexibility to take leave as and when it suits them. In practice, not keeping track of how many days holiday a worker has taken risks falling foul of your obligations if workers then fail to take the statutory minimum. Although you might think that giving unlimited holiday would encourage staff to take more than the statutory minimum, the reality can be quite different (discussed in further detail below).
• Ensuring your contracts are compliant. You may wish to consider including a minimum amount of holiday in your employment contracts (e.g. the statutory minimum annual leave entitlement) and then add some wording to deal with any additional discretionary leave under your “unlimited holiday” policy. Simply referring to holiday entitlement as “unlimited” in your contracts risks falling foul of employment legislation.
• Ensuring that workers are paid properly for the leave they take. The rules on holiday pay calculations are complex but, essentially, workers should be paid the same during statutory holiday as they would if they were working, so as not to deter them from taking leave.
• Considering the interaction with carry-over and periods of maternity leave, sick leave etc. and how this might impact your business and staff.
• Discrimination risk – if it’s going to be up to line managers to make “judgment calls” on holiday requests, there may be a discrimination risk depending on how decisions are made. Providing training and ensuring you have a clear policy and criteria in place is likely to mitigate this risk.

In light of the above, if you are looking to introduce unlimited holiday, a sensible approach might be to agree a baseline holiday entitlement with staff, that’s in line with the WTR, and then offer discretionary unlimited holiday on top of this.

What are some of the advantages of unlimited holiday?

• Wellbeing – providing employees with the ability to take more time off could help improve work/life balance. If staff don’t have to worry about their remaining holiday entitlement when emergencies arise, or how to balance their work with other personal commitments, they may feel empowered to manage their own workload, which makes them feel trusted, valued, and respected. Some companies who have successfully implemented a policy like this have reported that staff are happier and more productive.

• Recruitment and retention – having unlimited holiday is a perk that could help attract more talent to the business. Equally, it could also help retain existing employees if they are given freedom and flexibility and trusted to manage their own workload.

• Improves productivity – Overwork can lead to stress, anxiety, illness and absence which can impact on productivity and also have tangible financial impacts on a business. Awarding staff with as much time off as they need, should help prevent this.

What are some of the disadvantages of unlimited holiday?

• The reality of fewer holidays – it has been suggested that unlimited holiday policies can actually result in fewer holidays being taken, as staff can experience anxiety around not knowing the boundaries of what is “appropriate” to take and not having a fixed number of days. Also, many employees are at the mercy of their workloads: some might feel too busy to take leave, whilst others will be deterred in the knowledge that they’ll have a mountain of work to return to. There will need to be management buy-in to ensure that employees truly feel empowered to take leave and that the overall effect is not to discourage employees from having a break from work.

• Added strain on fellow employees – If employees do make the most of the policy and book a large amount of time off, without careful scheduling, this could put an increased strain on those employees left behind who will have to take on extra work.

• Could lead to unfairness – While some employees will have no qualms about taking extra days off and making the most of the policy, others will be less inclined. This disparity between staff will leave some picking up the slack and having to work harder than others.

• Extra holiday no longer a reward – Another consequence of offering unlimited holiday is that you then can’t use extra days off as an incentive or reward. Providing an extra day’s paid leave is a common way to reward hard work, so companies will need to come up with equally as desirable methods of rewarding success.

Food for thought

It goes without saying that this type of policy won’t work for every company.

In the current market, where recruits are very much in the driving seat, offering unlimited holiday might be a great perk to entice new starters to join your company. That being said, in reality, it’s potentially quite a tricky area to manage and it doesn’t always have the positive impact on employee-wellbeing that you might hope. As such, it will be worth engaging with your staff and key stakeholders to get a better idea of the appetite for such a policy before committing to its implementation.