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Speed Read: The High Court held that an employer was not negligent or vicariously liable for a contractor’s personal injury suffered in its workplace because of an employee’s “wholly misguided” practical joke.

Chell v Tarmac Cement and Lime Ltd [2020] EWHC 2613 (QB)

The Facts

The Claimant was employed by Roltech Engineering Limited as a site fitter. From December 2013, his services were contracted by Roltech to the Defendant. The Defendant also directly employed their own site fitters (Defendant’s Fitters), who worked alongside the Claimant at the site. The Claimant had previously raised issues with the Defendant about tensions between him and the Defendant’s Fitters, but alleged that he was advised to “stick it out for a few more weeks” by the Defendant.

In September 2014, the Claimant was working and bent down to pick up a length of cut steel. One of the Defendant’s Fitters had brought two “pellet targets” with him on to the site and he put them on a bench close to the Claimant’s right ear. He then hit them with a hammer causing a loud explosion as a “wholly misguided” practical joke. The Claimant suffered a perforated right eardrum, noise-induced hearing loss measured at 9-10 decibels and tinnitus.

The Claimant brought a claim, alleging that the Defendant had been negligent and was vicariously liable for the actions of the employee.

When will an employer be vicariously liable?

The case of Lister v Hesley Hall Ltd [2001] set out the original two stage test to consider when determining if an employer is vicariously liable for an employee’s actions:

1. Is there a relationship between the primary wrongdoer and the person alleged to be liable which is capable of giving rise to vicarious liability?
2. Is the wrongful conduct so closely connected with the acts the primary wrongdoer was authorised to do (or the role or “field of activities” entrusted to the wrongdoer) that, for the purposes of the liability of the employer, it may fairly and properly be regarded as done by the employee while acting in the ordinary course of its employment (the ‘sufficient connection’ test).

It is widely accepted that employment relationships can give rise to vicarious liability. However, the sufficient connection element of the test is usually the most contested area between the parties. It requires (i) identification of the wrongdoer’s job or field of activities, or what the employee was authorised to do; and (ii) an evaluation of whether there is a sufficient connection. The Court must rely on this to determine whether the tort is so closely connected with the employment, that is with what was authorised or expected of the employee, that it would be fair and just to hold the employer vicariously responsible.

The Supreme Court recently consider and affirmed the Lister test in Morrison Supermarkets Plc v Various Claimants [2020], whereby a disgruntled employee misused a significant amount of personal data about employees to which he had been afforded access for the purposes of supplying it to an external auditor. The wrongful conduct had to be so closely connected with acts the employee had been authorised to do that, for the purposes of the liability of the employer to third parties, it might fairly and properly be regarded as done by the employee while acting in the ordinary course of his employment. The Supreme Court emphasised that the employee was acting for personal reasons and not misguidedly seeking to pursue the employer’s interests. As a result, Morrisons was not vicariously liable.

What was held?

At the first instance in the County Court, it was held that the facts did not support a finding that the employee’s actions had been within the field of activities assigned to him by his employer. As such, his actions were not sufficiently connected to his employment.

Further, the allegation of negligence required the risk of injury to have been foreseeable. The judge found that there had been no reasonably foreseeable risk of injury from a deliberate act on the part of the employee to the Claimant, such as to give rise to the duty to take reasonable steps to avoid that risk. The situation, as presented to the Defendant by the Claimant, had not merited action or given the Defendant any reason to foresee risk of injury to the Claimant at the hands of the Defendant’s Fitters. It was noted that horseplay, ill-discipline and malice are not matters that would be expected to appear within a risk assessment. The existing site health and safety procedures, which included a section on general conduct stating ‘no-one shall intentionally or recklessly misuse any equipment’ was sufficient. Accordingly, the claim was dismissed. The Claimant appealed to the High Court.

On appeal, the High Court held that the County Court had applied the law on vicarious liability correctly. In addition, it was expecting too much of an employer to devise and implement a policy or site rules which descended to the level of horseplay or the playing of practical jokes. On the evidence, the judge had been wholly entitled to come to the conclusion that he had and the appeal was dismissed.

What can employers take from this?

The case clarifies that, where an employee causes injury to another person due to a practical joke, it is unlikely that an employer will be found vicariously liable. It is difficult to see in what circumstances this type of act would satisfy the ‘sufficient connection’ test.

It may be surprising that the employer was not found negligent despite the fact that the Claimant approached them in advance of the incident and voiced concerns. However, it is key that this approach did not give the employer any reason to foresee risk of injury. If this had been the case, the case may have been decided differently. In any event, it is always important for an employer to maintain appropriate risk assessments and adopt adequate policies and procedures that suit the nature of work being carried out. Where this is done, it will be much easier to demonstrate to a Judge that the employer has upheld its duty of care to its workers in this respect. Better still, the employer should ensure that such risk assessments and policies are brought to the attention of their employees.

Yesterday, Chancellor Rishi Sunak unveiled his “Winter Economy Plan”, within which the new Job Support Scheme was announced. The Job Support Scheme (‘JSS’) is intended partially to plug the gap left by the Coronavirus Job Retention Scheme (‘CJRS’) which comes to a close on 31 October 2020, but also to subsidise employers’ costs in a way which is more consistent with the recent message to re-open the economy. Unlike the CJRS (more commonly known as the ‘furlough scheme’), it will not provide a subsidy of wages for those for whom there is no work to carry out at present. Its central objective is to protect viable jobs within businesses which are facing lower demand over the winter months, as a result of COVID-19.

The important point to note, as ever, is that only headline particulars of the JSS have been published to date, most of which are contained in the HM Treasury’s fact sheet. The details provided raise a number of questions, which hopefully should be addressed when the further guidance promised by the Government is published.

When will the JSS be coming into force and for how long will it last?

The JSS will become live on 1 November 2020, representing a seamless transition from the CJRS when it comes to an end. It will run for a period of 6 months, until 30 April 2020.

What does the JSS entail?

The JSS is designed to subsidise employees’ wages in situations where they are required to work fewer than their normal hours as a result of the pandemic.

The hours which continue to be worked by an employee will be paid by the employer as normal. For those hours which are not worked, the Government and the employer will both contribute a third of normal wages (although the Government’s contribution will be subject to a cap). This means that those employees whose normal monthly wages do not fall above the Government cap should receive a minimum of 77% of their normal wages during the winter months.

How do I know if my business is eligible for JSS?

Which employees are eligible for the JSS?

Do employers need to agree altered working hours with employees?

In short, yes.

As with the CJRS, the basic principles of employment law remain in force. Any change to contractual terms should be expressly agreed with the employees in question, and recorded in writing. HMRC has the right to request sight of such written evidence when processing claims under the JSS.

How does the JSS work in practice?

For every hour not worked by an eligible employee, both the Government and the employer will be required to pay a third each of the “usual hourly wage” for that employee.

The Government’s contribution will be capped at £697.92 per month.

In a situation where an employee is working exactly 33% of their normal hours.

How are “usual wages” calculated?

“Usual wages” will be calculated in a similar way to the methodology used under the CJRS; however, we have been promised further guidance to clarify this in the coming weeks.

Important to note is that employees who have been previously furloughed will have their normal contractual pay used to calculate “usual wages”, not the amount which they received whilst on furlough.

Is the Government contribution paid before or after an employee’s wages are due?

Government payments under the JSS will be made in arrears, reimbursing the employer for the Government’s contribution.

Will the Government contribution include Class 1 employer NICs or pension contributions?

No. However, these will remain payable by the employer.

Do employers have the option to “top-up”, to 100% of normal salary, the two-thirds contribution for hours not worked, in a similar way to the option under the CJRS?

Whilst the HM Treasury fact sheet does not expressly prohibit this, it states that “our expectation is that employers cannot top up their employees’ wages above the two-thirds contribution to hours not worked at their own expense”. Given that the JSS is intended to help businesses which have suffered as a result of the pandemic, it appears as if the Government is not expecting those who have the funds to pay a “top-up” to access the JSS in the first place.

Will employees be required to remain on the JSS for the entire six months?

No. Employees will be able to rotate on and off the JSS, and do not have to be working the same pattern every month. However, each short-time working pattern must cover a minimum period of seven days.

How does my business claim for the JSS?

Employers will be able to make a claim online, through the gov.uk website, from December 2020. Monies will be paid out to employers on a monthly basis.

As set out above, grants under the JSS will be paid in arrears. This means that claims can only be made in respect of a given pay period where payment to an employee has already been made by the employer, and that payment has been reported to HMRC via an RTI return.

Will HMRC check the validity of a claim?

Yes, HMRC has the power to review claims as it sees fit, and payments may be withheld, or required to be reimbursed, if a claim is found to be fraudulent or based on incorrect information.

This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact James Baker or Rachael Lloyd to discuss any issues you are facing. 

Speed Read

The Employment Appeal Tribunal held that, even where an employee was in breach of a zero tolerance policy, an employer must take mitigating factors into account when considering whether to dismiss. In the absence of such consideration, the decision to dismiss may give rise to a claim of unfair dismissal and/or discrimination.

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Miss E Martin v Home Office UKEAT/0046/19/AT

The Facts

The Claimant was employed by the Home Office. Between November 2012 and January 2013, the Claimant suffered a series of significantly difficult and stressful events in her personal life. Her father had been the subject of a prolonged police investigation for historic sexual offences and she suffered anxiety through worrying about the ways in which this may impact her job with the Home Office. In addition, her relationship with her fiancé had broken down and he threatened to complain to the Home Office that she had blocked his application for indefinite leave to remain in the UK. At the same time, the Claimant underwent investigation for potential cancer, which caused further anxiety.

Given her fiancé’s allegations, the Claimant had made numerous unauthorised searches of his immigration application on the system, which were picked up by the Home Office’s security software. There was a strict zero tolerance policy in place in respect of database abuse, which stated that “inappropriately looking up information is considered gross misconduct“. However, the policy also stated that “consideration of mitigating factors is of particular importance, particularly in cases where dismissal is a potential outcome”. Examples of mitigating factors, included disability, exceptional pressure on the employee and personal trauma. The guidance section concluded with “mitigation is not simply about one of the above existing but for it to have had a material impact on behaviour”. The policy had been introduced by a message on the intranet in 2013.

The Home Office commenced a disciplinary investigation in respect of the Claimant’s actions, during which the Claimant was referred to a Consultant Occupational Physician. The report suggested that the security breach was the final straw in a number of events that had been impacting very significantly on the Claimant’s psychological health, and her condition was likely to constitute a disability. In the light of this, the investigation report recommended that compelling mitigating factors should be carefully considered.

On 5 September 2014, despite the recommendations from the Physician, the Claimant was summarily dismissed. The Home Office found that her breach constituted gross misconduct and, after consideration of the material factors to which the Claimant referred, determined that it was not established that they had been directly causative of her behaviour. The Claimant subsequently brought claims of unfair dismissal, failure to make reasonable adjustments and discrimination arising from disability.

What is unfair dismissal?

To summarise, where an employee with the requisite qualifying service is dismissed, the dismissal will be unfair unless:

1. the employer shows that the dismissal was for a potentially fair reason, such as conduct or capability; and
2. a Tribunal decides that, in the circumstances, the employer acted reasonably in treating the potentially fair reason as a sufficient reason for dismissal.

Under (ii) above, it is a long established principle that an Employment Tribunal (ET) must assess objectively whether the dismissal fell within the range of reasonable responses available to the employer. The ET is not permitted to substitute its own view as to whether or not it would have dismissed the employee if it had been in the employer’s shoes. For more information on unfair dismissal, please see our article here.

What did the ET decide?

The ET dismissed all of the claims. It found that the decision to summarily dismiss was within the range of reasonable responses. The Claimant appealed the decision to the Employment Appeal Tribunal (EAT) on numerous grounds, including that the ET (i) misinterpreted the Home Office’s policy; (ii) applied the incorrect test when considering if the Home Office had taken reasonable steps to bring the policy in question to the Claimant’s attention; and (iii) wrongly concluded that there was no medical evidence to the effect that the Claimant’s condition was not directly causative of her behaviour.

What did the EAT decide?

The EAT allowed the appeal. The ET had misinterpreted the Home Office’s zero tolerance policy as requiring any mitigating factors to be a direct cause of, rather than having a material impact on, the misconduct in question. As such, the ET wrongly required a stricter causation test of direct cause and effect between any mitigating factors and the misconduct for them to qualify as having any impact on the decision to dismiss. The EAT held that this was a potentially important distinction on the facts and considered that, had the correct test been applied, the ET’s decision on the reasonableness of the sanction of dismissal would or might have been different.

The EAT also upheld various other arguments put forward by the Claimant, including that the ET had wrongly fallen into the error of applying a perversity test when addressing whether the Home Office had taken reasonable steps to communicate the zero tolerance policy. Such a test required such a high degree of unreasonableness to be shown that nothing short of a perverse decision to dismiss could be held to be unfair. It has also made errors of fact and explanation in its consideration of medical evidence, which were relevant to the claims. The case was remitted to a fresh Tribunal.

What Does This Mean For Employers?

This judgment emphasises various important steps for employers to consider when introducing new policies, including to ensure that such new policies are adequately communicated to employees. Whilst uploading policies onto the intranet may be sufficient in some circumstances, employers may wish to consider taking additional steps to notify employees, for example, sending a company-wide email. This will be even more important where the policy includes clauses that impact the circumstances in which an employee can be summarily dismissed.

In addition, the judgment serves as a reminder to consider policy wording carefully when taking it into account, particularly when relying on such wording to take a decision to dismiss for gross misconduct. Mitigating factors should also be fairly considered in all circumstances. There is always a risk that various factors could be linked to a disability and an employer risks discriminating against an employee if it neglects to pay proper attention to these points. As demonstrated here, both of these factors could have a substantial influence as to whether an employer’s decision is seen to fall in the range of reasonable responses.

This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact Rachael Lloyd to discuss any issues you are facing.

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The Employment Tribunal (“ET”) has held that an employer who failed to place a redundant employee on a list of ad hoc workers did act reasonably in the context of an unfair dismissal claim.

In Aramark (UK) Ltd v Fernandes, the Claimant brought an unfair dismissal claim after being made redundant by the Respondent. The ET considered whether, in failing to place the Claimant, whose post had become redundant, on a list of workers whose services could be called upon if required, the Respondent had acted unreasonably.

Background

Redundancy is one of five potentially fair reasons for dismissal. A redundancy situation can arise in a number of circumstances, including where an entire business ceases to trade, or there is a closure of a particular site within an organisation. However, the most common occurrence is where an employer has a reduction in the number of employees it requires to carry out a particular type of work.

In addition to establishing redundancy as the potential fair reason for dismissal, the Tribunal must be satisfied that it was reasonable to dismiss that employee. To satisfy this test, employers will have to demonstrate that they have conducted a fair procedure, including appropriate ‘pooling’ of employees, and sufficient consultation.  They also have a responsibility to take reasonable steps to identify opportunities for any alternative employment within the organisation.

Aramark (UK) Ltd v Fernandes

Mr. Fernandes was made redundant by the Respondent and successfully claimed at the ET that the Respondent’s failure to include him on a list of supplementary workers, upon whom it called on an ‘as and when’ basis, was unreasonable.

However, the Respondent appealed the decision, and the Employment Appeal Tribunal (‘EAT’) confirmed that the relevant question was whether the Respondent had behaved reasonably in treating redundancy as a sufficient ground for dismissing Mr. Fernandes.

The relevant law states that the fairness of the dismissal depends on whether, in the circumstances (including the size and administrative resources of the employer’s undertaking), the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee.

What was held?

The EAT decision turned on the fact that, if Mr. Fernandes had been added to the list of additional resource, it would not have avoided his dismissal – although it would have opened the possibility of work, it would not have secured alternative work. Therefore, the failure to be listed was not unreasonable and the Respondent’s appeal was upheld.

What should employers take from this?

When dismissing employees by reason of redundancy, the redundancy may be unfair if the employer fails to make a reasonable search for suitable alternative employment to try to avoid the redundancy. However, as a result of this case, it is clear that this obligation will not include placing the employee in question on ‘bank staff’ style list, where there is only the possibility of work, not a tangible and meaningful alternative.

This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact Emily Edwards to discuss any issues you are facing.

There has been an on-going initiative by the UK government to develop a set of corporate governance principles for large private unlisted companies as part of the package of measures to improve the UK’s corporate governance framework. The development of the Wates Corporate Governance Principles for Large Private Companies (the Wates Principles) is part of such initiative.

What is corporate governance?

As a reminder, the original definition contained in the code produced by the Cadbury Committee in 1992 set out below remains the classic definition:

“Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate structure is in place. The responsibilities of the board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship.”

Corporate governance: who does it apply to?

Most private unlisted companies are not technically required to adopt formal corporate governance principles or report on any they may have. However, the Companies (Miscellaneous Reporting) Regulations 2018 (SI 2018/860) introduced a number of new reporting requirements for financial years beginning on or after 1 January 2019 including a requirement for all companies of a significant size to disclose their corporate governance arrangements in the annual report and on their website.

These companies are also required to state which formal governance code they follow (or provide an explanation as to why they do not follow one).

UK-incorporated companies with either:

1. more than 2,000 employees; or
2. turnover of more than £200 million and a balance sheet total of more than £2 billion

are required to disclose their corporate governance arrangements with effect from financial years beginning on or after 1 January 2019.

There are various reasons why private unlisted English companies might want to voluntarily introduce more formal corporate governance principles. These include demonstrating good corporate governance practice to stakeholders and road mapping how they intend achieve the long-term sustainable success of the company. There are a number of options on which to base such principles, including the UK Corporate Governance Code (the Code), the Corporate Governance Code for Small and Mid-Size Quoted Companies produced by the Quoted Companies Alliance, and the Institute of Directors corporate governance principles. The Wates Principles are a further option.

The Wates Principles

As a reminder, the Wates Principles are intended to be flexible and high level and are not prescriptive. This acknowledges the wide variety of ownership structures among large private companies. Each of the six principles is accompanied by guidance to help a company understand how to apply the principle in a way appropriate tor it. Rather than a “comply or explain” approach adopted in the Code under the UK Listed Rules, an “apply and explain” approach has been taken. This means that companies who adopt the Wates Principles will be expected to report on their governance processes against each principle.

The Six Wates Principles

1. Purpose and leadership. An effective board develops and promotes the purpose of a company and ensures that its values, strategy and culture align with that purpose.
2. Board composition. Effective board composition requires an effective chair and a balance of backgrounds, experience and knowledge, with individual directors having sufficient capacity to make a valuable contribution. The size of a board should be guided by the scale and complexity of the company.
3. Director responsibilities. The board and individual directors should have a clear understanding of their accountability and responsibilities. The board’s policies and procedures should support effective decision making and independent challenge.
4. Opportunity and risk. A board should promote the long-term sustainable success of the company by identifying opportunities to create and preserve value, and establishing oversight to identify and mitigate risks.
5. Remuneration. A board should promote executive remuneration structures aligned to the long-term sustainable success of a company, taking into account pay and conditions elsewhere in the company.
6. Stakeholder relationships and engagement. Directors should foster effective stakeholder relationships aligned to the company’s purpose. The board is responsible for overseeing meaningful engagement with stakeholders, including the workforce, and having regard to their views when taking decisions.

One of the key themes of the recent governance reforms is the introduction of an annual reporting requirement in relation to section 172 of the Companies Act 2006, commonly known as the s172 Director’s Duty. This is the well-known duty to “promote the success of the company for the benefit of its members as a whole”, whilst having regard to various other stakeholder interests.

The purpose of the s172 Director’s Duty is to encourage boards of companies to create a culture whereby decisions are made with greater consideration for the wider impact upon the organisation beyond  the traditional emphasis on just financial performance and strategic objectives.

The GC100 group has commented that the s172 Director’s Duty has one overarching theme: culture. With their focus on the importance of culture and broader stakeholder engagement, adherence to the Wates Principles is therefore also likely to assist those companies in meeting their section 172 reporting obligation.

Are private limited companies implementing the changes necessary to comply with the new legislation, and has anybody publically adopted the Wates Principles?

Baker McKenzie recently conducted a survey of 200 general counsels, in-house lawyers and company secretaries (the survey) and found that many companies are still struggling to implement the changes that are necessary to comply with these new corporate governance reforms.

Some of the key findings of the survey were as follows:

• 56% of companies surveyed lack a clear corporate governance framework in their organisation.
• 72% of companies surveyed say that they will have difficulty compiling and verifying the information required to comply, while 32% do not have the resources available to compile the relevant information.
• 50% of companies surveyed admit that they have limited or no budget available to address the new reporting requirements.

The overall response from the survey was that better corporate governance can help prevent the collapse of large private companies, and a large percentage says that good corporate governance is a priority for their board.

There have been a number of larger private limited companies that have already chosen to include in the Annual Report and Accounts an “apply or explain” section in relation to compliance with the Wates Principles including The Wates Group (unsurprisingly as Sir James Wates is their chairman!), and Marshall of Cambridge (Holdings) Limited.

What steps should be taken in practice by larger private listed companies who want to promote a more structured set of corporate governance principles?

• Consider your current corporate governance principles.  Are they still fit for purpose?
• Does any company within your group fall within the ambits of the new reporting requirements introduced by the Companies (Miscellaneous Reporting) Regulations 2018 (SI 2018/860) (CMR Regulations)?  If so, are its current corporate governance principles suitable to explain how the directors have had regard to the matters set out in section 172(1)(a) to (f) of the Companies Act 2006, how the directors have engaged with employees and had regard to employee interests, and how the directors have had regard to the need to foster relationships with the company’s suppliers, customers and others as required by the CMR Regulations?

If not then adopting new principles based on the Wates Principals may be beneficial as they were developed alongside the CMR Regulations to be used as a user-friendly framework and benchmark for those large privately owned companies that are required to produce a statement of their corporate governance arrangements.

• Review your current board practices on matters such as agendas, board papers, board minutes, board and committee composition and reporting lines, stakeholder interaction/sharing and policies and processes in connection with it to check they are still fit for purpose.
• Consider the group’s data protection, environmental, social and financial governance policies and procedures and update as required including in relation to areas such as modern slavery, anti-money laundering and anti-bribery provisions, compliance with the Data Protection Act 2018 (and GDPR) and reporting lines and frequency of updating the board.
• Compile and seek board approval for a plan of action (and budget) to ensure compliance, involving relevant departments in the process, and setting regular monitoring and update meetings and addressing procedures to react to shortcomings – corporate governance is an on-going and evolving process and must therefore be constantly monitored and updated.
• Consider the need for training for directors and relevant employees to facilitate a proper governance system and obtain necessary budgets and the need to allocate clear responsibility and reporting lines for implementing the plan of action to relevant board and employees across the group.
• If the group has overseas members, consider and take local legal advice on codes of governance that impact them and how they will be integrated into the wider governance policies and procedures for the group. In particular be aware of health and safety and environmental, social and financial governance policies where a parent company could potentially be vicariously liable for its subsidiary’s actions.

For more information and advice on corporate governance, please contact Caroline Lavis.

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 independent legal advice.

In this Part 4 we examine the key changes the Consumer Rights Act (“CRA“) brings in, in relation to the supply of digital content. Part 1, Part 2 and Part 3 of this series of articles can be found by clicking on Part 1 here, Part 2 here and Part 3 here.

What does the Consumer Rights Act 2015 (‘CRA’) say about supplying digital content?

The CRA brings in new statutory rights and remedies specifically aimed at suppliers of digital content.  This is helpful because traditionally, the law for technology and digital content has been uncertain and slow-moving.

What types of digital content are subject to the CRA provisions on digital content?

The CRA applies, for example, to:

1. all digital content that is paid for;
2. all digital content which comes free with any other good or service purchased and not generally available to consumers unless the consumer has paid for it or paid for other goods, services or digital content; and
3. all digital content paid for using digital currency where the digital currency was firstly paid for using money.

Most of the statutory rights and remedies do not apply to:

1. digital content supplied for free; and
2. digital content supplied in return for a consumer’s personal data instead of money.

The rights and remedies under the CRA for digital content are also not applicable if the trader provides a service and, through that service, digital content can reach a consumer.  This means that internet service providers and mobile telephone providers are not caught by such provisions simply by providing internet service or mobile telephone provider services.

Terms governing the supply of digital content to consumers

Importantly, the CRA has clarified that digital content is not a good nor a service but rather a commodity in its own right.  It adopts a definition of digital content being data produced and supplied in digital form. 

As with the supply of goods generally, digital content must be of satisfactory quality; fit for a particular purpose; and as described.  There will be now be an implied term in consumer contracts that the trader has the right ‘to supply’ digital content.

When it goes wrong…

If the trader is in breach of its right to supply digital content, a consumer has a right of refund.

For any other breach (for example, if the digital content was not of satisfactory quality), a consumer has the right to have the digital content repaired or replaced and if this has failed or if it is impossible then a consumer has the right to a reduction in the price of the digital content.

If the supply of digital content causes any damage to a consumer’s machine or to a consumer’s other digital content (even where this digital content has been provided for free) and the trader has not exercised reasonable skill and care, a consumer has the right to compensation and can request repair within a reasonable time.

There is no prescribed limit as to how many times a trader can attempt repair and replacement before the price reduction kicks in.

There is also no right to reject digital content which is probably because of the logistical issues of returning digital content.  There is also no requirement that a consumer deletes or returns the digital content.

Different remedies may be available to consumers who received the same digital content, but via alternative methods (such as an app being pre-installed on a tablet or downloaded from the app store).

What should I review?

Businesses should be reviewing all consumer facing terms and conditions. These may include:

• consumer sales contracts (for goods, services and digital content)  including website terms and conditions
• contractual clauses that limit your business’s liability
• any pre-contractual information provided to consumers including marketing material
• cancellation and returns policies.

Further guidance for businesses in relation to the CRA is available on the Business Companion’s website, accessible here.

Author: Noor Al Naeme

For further information on compliance with the CRA or any other matter, please contact Tom Torkar, Partner in the Technology & Innovation team at tom.torkar@michelmores.com.

The Academies Financial Handbook has recently been reviewed by the Government (on 23 June 2020), resulting in a number of key amendments which will take effect from 1 September 2020. Academy Trusts must take note of the latest edition of the Academies Financial Handbook 2020 which sets out the main changes regrouped into the following categories: governance, executive team, general controls and transparency, internal scrutiny and annual accounts. These key amendments are as follows:

Governance

1. The Trustees must ensure that the Academy Trust is operated as a going concern (paragraphs 1.14, 2.5 and 2.9). Although this is not a new requirement (since this has always been expected of Trustees as directors under Company Law), this requirement can be supported by the Trust’s finance committee and Trustees may wish to consider the ESFA’s practice guide on Operating an academy trust as a going concern.

2. Although Members have previously been able to be employees or occupy unpaid staff roles where permitted by the Trust’s articles of association, this possibility has now been removed. This change will be effective from 1 March 2021 (paragraph 1.4) and as such Trusts should review the roles of their Members in the near future.

3. The Members must be kept informed about Trust business (paragraph 1.8), which includes being provided with the Trust’s audited annual report and accounts. To comply with this requirement we would recommend a regular dialogue between the Trustees and the Board.

4. The Academies Financial Handbook 2020 now makes it a requirement for a clerk to be appointed to support the Trustees. Trusts must ensure that the appointed clerk is not a Trustee, principal or chief executive of the Trust. Since this requirement was previously a “should” it is likely that many Trusts already have a clerk who assists the Trustees by providing administrative and organisational support amongst other things (paragraph 1.40). However, now that this is a “must” Trusts will need to fill this position.

5. The Trust’s register of interests must be regularly updated (paragraph 5.46). We would recommend that a Trust does this more frequently than on an annual basis, for instance it may decide to do this as an item on the agenda of its meetings.

Executive Team

6. The Trust’s Accounting Officer and Chief Financial Officer (CFO) should be employees of the Trust. Nevertheless, in exceptional circumstances, such as where these roles are filled on an interim or consultancy basis, the Accounting Officer and CFO may be non-employees provided that the Trust has obtained prior ESFA approval before making the appointment (paragraphs 1.26 and 1.36).

7. The Academies Financial Handbook has raised the bar on what is expected from CFOs in large Trusts, such as those with over 3,000 pupils. Trusts are expected to ensure that their CFO and finance staff have the appropriate qualifications and / or experience (paragraph 1.37). As such, a Trust should consider whether its CFO has a business or accountancy qualification and whether they are a member of a relevant professional body such as the Institute of Chartered Accountants of England and Wales, the Association of Chartered Certified Accountants, the Chartered Institute of Management Accountants or the Chartered Institute of Public Finance and Accountancy. Nevertheless, possessing these qualifications is not enough on its own, the Trust CFO is expected to maintain their professional development and undertake ongoing training (paragraph 1.38).

General Controls and Transparency

8. Trusts must now maintain a fixed asset register (paragraph 2.7).

9. Trusts are expected to review and challenge pupil number projections on a termly basis (paragraph 2.12).

10. Trusts are encouraged to take an integrated approach to the curriculum and financial planning (paragraph 2.13). The Government has published guidance on this management process with the aim that this integrated approach will provide the Trust with confidence when planning the best curriculum for its pupils and when delivering its educational priorities using its available funding.

11. Trusts must avoid the use of overdrafts on any account to comply with its restrictions on borrowing (paragraph 2.24). It is important to note that where there are concerns about financial management the Trust may be required to report its cash position to the ESFA.

12. The Trust’s website must disclose any employee benefits (including gross pay, other taxable benefits and termination payments, but not the Trust’s own pension costs) which exceed £100,000 in £10,000 bandings as an extract from its financial statements for the proceeding accounting year (paragraph 2.32). Therefore, as of 1 September 2020 where such employee benefits existed in the Trust’s 2019 accounting period these will need to be disclosed until the Trust’s 2020 financial statements are published.

13. The Trust must also publish on its website its agreed whistleblowing procedure (paragraph 2.44).

14. The Academies Financial Handbook maintains that the Trust must not use its funds to purchase alcohol for consumption, however there is now an exception where this is for religious services (paragraph 2.35).

15. The Trustees retain overall responsibility for the Trust’s risk register and must review this at least annually (paragraph 2.38). The Trustees must also establish an audit and risk committee who should meet at least three times a year to support the Trustees. It is important to note that the committee may only support the Trustees, responsibility should not be delegated to it (paragraphs 3.6 – 3.8).

16. Trusts must complete the school resource management self-assessment tool by the specified annual deadline to ensure that they are effectively managing resources and that adjustments can be made where necessary (paragraph 6.8).

Internal Scrutiny

17. The Trust’s internal scrutiny should cover both financial and non-financial controls and risk management procedures (paragraph 3.1).

18. From 1 September 2020, a Trust’s internal audit must not be performed by an external auditor in accordance with the Financial Reporting Council’s latest Ethical Standard. As such Trusts review their internal audit arrangements, for instance by appointing an in-house internal auditor, in situations where the internal and external audits were carried out by an external auditor (paragraphs 3.17 and 3.20).

19. A Trust’s internal scrutiny should not be limited to input from persons with financial expertise, rather Trusts are encouraged to call on the non-financial knowledge of additional individuals or organisations (paragraph 3.18). There is a continued obligation for Trusts to submit an annual summary report. As such, when submitting its annual summary report on the internal scrutiny work carried out (including the areas reviewed, key findings, recommendations and conclusions), the Trust should consider the ESFA’s guidance on internal scrutiny in academy trusts. This report should be submitted by 31 December each year (paragraph 3.23).

Annual Accounts

20. The Academies Financial Handbook 2020 provides further detail on the Trust’s audit and risk committee’s role in relation to assessing the effectiveness and resources of the external auditor to provide a basis for decisions by the Members about the auditor’s reappointment, dismissal or rendering. For instance, the audit and risk committee should take into account considerations such as the auditor’s sector expertise, their understanding of the Trust and its activities and the auditor’s use of technology (paragraph 4.17). Furthermore, in June 2020 the ESFA issued the Academies Accounts Direction 2019 to 2020 which is relevant for accounting periods ending 31 August 2020. Trusts should be aware that this direction incorporates some minor updates and additional reporting requirements for large Trusts.

Conclusion

The above changes to the Academies Financial Handbook are not to be ignored by Academy Trusts. There are numerous new obligations imposed following a number of switches from “should” to “must“. As such, we would recommend that all Academy Trusts, if they have not already, should familiarise themselves with the amendments to the governance and financial management obligations and contemplate those which need to be implemented going forward.

If you would like to discuss any of the issues raised in this article, or have other concerns about the impact of Coronavirus, please contact: Hollie Suddards in Michelmores’ Education team.

CORONAVIRUS STOP PRESS – Click here to keep up-to-date with all of our latest articles.

This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact our specialist lawyers to discuss any issues you are facing.

The recent Court of Appeal decision in Walker v Co-Operative Group considered the application of the “material factor defence” in equal pay claims. The Court clarified that, where a material factor defence is applicable, an employer does not have an ongoing duty to monitor the continuity of the material factors prior to a further identifiable decision (or omission to decide) about pay. The Court also clarified that a material factor needs to explain, but not justify, the pay disparity in question.

Walker v Co-Operative Group Ltd and another [2020] EWCA Civ 1075

What is the material factor defence and when is it used?

The Equality Act 2010 (EqA 2010) requires that an employee is entitled to contractual terms, such as those related to pay, which are as favourable as those of a comparator of the opposite sex in the same employment if they are employed to do equal work. In the absence of such express terms, a “sex equality clause” is automatically implied into the contract of employment. Essentially, this clause imports into the employee’s contract the more favourable terms of their comparator.

However, an employer can rebut the inclusion of a sex equality clause where they can show that the difference in terms is because of a material factor that is not based, directly or indirectly, on sex. To achieve this, the employer must show that:

1. The reason was genuine and not a sham or pretence.
2. The less favourable treatment was due to that reason and that it was a “material reason”, i.e., a significant and relevant factor.
3. The reason was not because of sex.
4. The factor relied on is a material difference, that is, a significant and relevant difference.

However, a material factor need only be the cause of the difference, rather than providing for a good reason for the difference. Once shown, it will continue to explain a difference unless and until it is shown that (i) a new decision has been taken which is tainted by sex discrimination and has the effect of displacing the prior legitimate decision, and (ii) those factors have ceased to apply and therefore, the defence is no longer applicable.

What are the facts of Walker v Co-Operative Group?

The Claimant was promoted to the role of Group Chief HR in February 2014, during a time when the Co-Op was facing financial difficulties. Employees were placed into tiers, each of which had a salary band. The Claimant was placed into a tier with two men and one other woman, with a salary band of between £350,000 and £550,000.

The Claimant’s salary was lower than the two men in the tier, who worked different roles within the executive committee. Following a period of consolidation, the Co-Op decided that the Claimant’s role should be downsized and her salary reduced. In February 2015, following an external Job Evaluation Review (JER), involving a pay grade review to introduce consistent grades across the Co-Op group, the Claimant’s role was rated equivalent to, or higher than, the two men in her tier.

The Claimant was subsequently dismissed on notice in April 2017. She commenced proceedings against Co-Op, including a claim for equal pay. The Co-Op invoked the material factor defence, relying on the following multiple material factors to justify that the differences in pay were not because of sex:

1. Each individual in the tier had a different role. The men’s roles were vital to the immediate survival of the company, whereas the Claimant’s role was important, but not vital.
2. The men were more experienced at executive level.
3. It was crucial to maintain stability and the top team of people to support the CEO.
4. The men’s pay reflected particular market forces, which put pressure on their roles and pay.

What was held by the Employment Tribunal (ET) and the Employment Appeal Tribunal (EAT)?

The ET accepted that, in February 2014, the pay difference was genuine for the reasons put forward by the Co-Op. However, by the time of the external JER, the ET held that these material factors had ceased to apply. As such, at some point between February 2014 and February 2015, when the material factors ceased to apply, an unlawful pay disparity had arisen.

Co-Op appealed the decision to the EAT on the basis that it was not open to the ET to decide that any material factors had ceased in the intervening period, without a basis for doing so. There had been no new decision made by the employer in relation to pay and conditions prior to the JER. The EAT agreed. Until a further identifiable decision (or omission to decide) about pay, at which point the Co-Op would have been required to defend any pay differential, the material factors continued to apply. The Claimant subsequently appealed to the Court of Appeal.

What was held by the Court of Appeal?

The Court of Appeal held that, where a claimant’s job is rated as equivalent with a comparator following a job evaluation scheme, the statutory language looks to the present and the future, but not to the past. As such, the ET was not permitted to look at the period before the JER review took place, to identify when the material factors had ceased.

In addition, it was held that the JER did not mean that all of the multiple factors proposed by the Co-Op then ceased to apply. In this instance, this was not the case and there was at least one material factor which remained causative of the difference in pay.

Further, it was not for the ET to consider whether the material factors justified the difference, but merely whether they caused the difference. It is likely that a JER would focus more on justification. It was not the case that the JER could be relied upon as definitive evidence that no material factors applied.

What can employers take from this?

For a material factor to apply, an employer must ensure that the reason is genuine. However, it need only be what caused the difference in pay. As such, it is not for a Tribunal to take a view on whether a material factor is a good reason for a difference in pay.

Once established, an employer is not under a continuing duty to review the differences in pay. Material factors that applied at the time of a decision will continue to apply unless and until a new pay decision is taken (or an equivalent omission to decide). Therefore, employers should consider the position at pay review meetings in the usual way, unless reasonably requested to do so at an earlier date. However, it is important to note that, where there is only one identifiable material factor, it may well be the case that more is expected from employers when it comes to monitoring material factors between pay decisions.

This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact Rachael Lloyd to discuss any issues you are facing.

In recent years the world has witnessed exponential growth of social media use; with the likes of Instagram boasting over 800 million users and Facebook in excess of an astonishing 2 billion. It is therefore unsurprising that we are seeing a vast increase in the number of businesses using social media as a platform to increase brand awareness and customer interaction.

Naturally, therefore, use of social media for competitions and prize giveaways is becoming increasingly popular. No doubt we have all come across the words “COMPETITION TIME” or “RETWEET TO WIN” on the likes of Twitter, Instagram and Facebook. Although such competitions/prize draws are a simple and relatively informal way to interact with customers and followers, it is important to remember that they must still comply with the relevant legal rules and regulations. Unsurprisingly, the internet is awash with social media giveaways and competitions which fail to do this.

The Rules

The most relevant set of rules, when it comes to prize give-aways and competitions on social media, is the CAP Code. This is the rule book for non-broadcast advertisements and direct and promotional marketing communications. It is enforced by the UK’s independent advertising regulator, the Advertising Standards Authority (ASA). Little known to many, the CAP Code applies equally to all prize promotions; including those conducted via social media.

Please do note that there are a raft of other potential compliance requirements for businesses to observe when using social media for competitions and giveaways. For example, due regard must be given to the Gambling Act 2005, the Consumer Protection from Unfair Trading Regulations 2008 and, if personal data of entrants is being collected and/or used to target recipients, the EU General Data Protection Regulations (GDPR) and the Privacy and Electronic Communications (EC Directive) Regulations 2003 (PECR) .

In addition, social media sites (including Instagram, Facebook and Twitter) often have their own “promotion guidelines”; intended to further regulate the use of their specific platform for conducting competitions and prize draws.

The CAP Code – What should businesses be thinking about?

The rules relevant to holding competitions and prize giveaways on social media within the CAP Code are relatively comprehensive. Some of the key rules businesses are required to comply with are outlined below:

1. The initial marketing communication (be it an Instagram post or a tweet etc.) should include all significant information that the customer needs to decide whether to participate in the prize draw/competition. This will usually include, for example, how to enter the competition/prize draw; any start and/or closing date and any restrictions on entry. Exemptions may, however, apply where the initial communication is limited by time or space.
2. Businesses must also have a full set of terms and conditions for the competition/prize giveaway; addressing matters such as how and when winners will be notified of the results. Whilst these terms need not be outlined within the social media post itself, customers must be able to access them prior to entering the promotion (for example, via hyperlink within the relevant post/linked post).
3. All entrants should be included in the prize-draw. Having a reliable method of collecting data will be essential here; especially where entry into the competition/prize draw is based on common social media activities such as using hashtags and sharing, liking and retweeting posts.
4. (Although this would seem obvious) Businesses must actually award the prize!

Helpfully, the ASA has produced some guidance on conducting prize draws via social media. This can be accessed here.

Non-Compliance

Non-compliance with the CAP Code can result in enforcement action being brought against offending businesses by the ASA. Where a complaint is upheld, the consequences are often limited to a warning. In theory, however, it is possible for the “penalty” to be much more severe; including the removal of trade privileges, disqualification from industry awards and/or a referral to Trading Standards.

For an example of a complaint which was upheld by the ASA (against Hard Rock Cafe (UK) Limited) for a failure to indicate that terms and conditions would apply, or to indicate how these could be accessed, see here.

Businesses must also be conscious of the ‘downside’ of social media where sanctions have been levied – bad publicity can spread like wildfire over social media where customers feel aggrieved or unfairly treated by a brand.

Conclusion

Social media is a powerful tool, and its use by today’s businesses for holding competition and prize giveaways continues on an upwards trajectory. With the constantly changing environment, it can be difficult to keep up to speed with the myriad of legal requirements that apply; however, if you want to ensure your business is #trending for the right reasons, it is essential that compliance with the relevant rules is not overlooked.

For more information, please contact David Thompson, Partner in the Commercial team on david.thompson@michelmores.com  or 01392 687656.

The Government have been busy recently in the planning arena, with both a heavily strategic planning White Paper being published, as well as legislative changes designed to bring some relief to struggling sectors of the COVID-19 affected economy. Mark Howard, Head of Planning at Michelmores, provides a swift update on the key provisions.

Radical Change

Housing Secretary, Robert Jenrick, has announced a White Paper, Planning For The Future, which outlines details of “radical” and highly strategic changes to the planning system. These changes will see land zoned in Local Plans for renewal, growth, or protection.

• Land designated for “renewal” would require local authorities look favourably on new developments.
• Land in “growth” areas, development including new homes, hospitals and schools will be allowed automatically.
• “Protected” land will include Areas of Outstanding Natural Beauty and land in the green belt.

The White Paper proposes that “all new homes be carbon-neutral by 2050, with no new homes delivered under the new system needing to be retrofitted”.

The White Paper also includes a “first homes scheme”, to provide new homes at a 30% discount for local people, key workers and first-time buyers. There is also a proposal to effectively merge the current Section 106 Agreements with CIL, in order to create a new “Infrastructure Levy” (I think we have been here before).

The White Paper also promises meaningful local consultation to take place early in the development process.

As might be expected, the White Paper has been met with both welcome and scepticism. To identify just two concerns already raised: the pushing back of the date of 2050 for carbon neutral houses has led to despair by environmental groups; further, the prospect of Local Plans securing “protected” status for entire areas looks possible and, doubtless, will lead to cries of NIMBYism that have dogged increased local involvement previously.

The White Paper seems to be regarded as rough and poorly thought out. We will keep you updated as this policy develops.

Getting Businesses Back to Work

Meanwhile, the Business and Planning Act 2020 received Royal Assent towards the end of July and contains a range of provisions that come into effect in July and August. It covers matters that are focused at helping businesses get back to work. We have picked out the main changes for construction and for the hospitality sector.

Construction – Extending Planning Permissions

This is a very welcome provision for the construction sector, finally providing some clarity around the extension of planning permissions in England. It covers both planning permissions and listed building consents.

An extension to 1 May 2021 will automatically apply for permissions that are extant between 19 August 2020 (when this provision comes into effect) and 31 December 2020.

The same extension will apply to permissions that have lapsed since 23 March 2020. These will not be automatic, but will be subject to an additional environmental approval.

Construction – Site Hours

Again, this is a speeded-up process to get consent to vary existing conditions that limit construction site working hours. This will temporarily amend planning restrictions on construction site working hours until 1 April 2021.

Local authorities have 14 calendar days excluding public and bank holidays to consider these applications.

Hospitality – Outdoor Seating

This is intended to support pubs, cafes and restaurants by introducing an accelerated process for permission to place furniture such as stalls, tables and chairs on the pavement outside their premises. These pavement licences are to be obtained from the local authority. If the licence requires works to be done then the licence grants deemed planning permission. There are enforcement and revocation provisions that ensure the licence does not cause social problems. There should be no safety or amenity issues, and the licenced activity should not block the highway for highway users and the disabled. The application fee is capped at £100 and the consultation and determination periods are speeded-up.

We will keep you abreast of developments in this area of law. But once again, planning is set to become a topical and controversial policy arena.

With the rise in popularity of websites like “Airbnb” and “Booking.com”, home owners and occupiers have increasingly taken opportunities to let (or sub-let) out their homes on very short term lets. This has sometimes given rise to noise and anti-social behaviour problems for neighbours, as guests make the most of their stay.

The recent case of Triplerose Ltd v Beattie [2020] has provided useful guidance on the extent to which a landlord can use lease covenants to control such activity.

The case

In Triplerose the dwelling was a flat, held on a long term lease, containing a covenant not to use the flat for any purpose other than “as a private dwelling house for occupation by one family at any one time”, and not to carry on any trade or business “upon the property”. The lessees lived in the flat 2-3 days a week, but let it out for short term occupation at other times.  A separate company handled advertising, check-ins and laundry.

The First-tier Tribunal found no breach of the lease, but the landlord then appealed. The Upper Tribunal found a breach of one covenant, but not the other as follows:

Private dwelling use

The Tribunal decided the correct approach was to ask whether the occupant of the flat at any given time, was using it for any purpose other than as a private dwelling for occupation by one family at any one time. The individuals who occupied the flat after responding to internet advertisements were not fulfilling this requirement, and thus the lessees were in breach of covenant.

Trade or business prohibition

The Tribunal noted a distinction between using premises as a business resource and carrying on a business upon the premises. The covenant prohibited the lessees from conducting business “upon the property”, but the lessees were not doing that. Although they were using the flat for the business of short-term letting, the business was being carried on from elsewhere. The provision of laundry and check in services by the company did not alter this position. The flat itself was being used for short-term residential purposes (albeit as part of a business); no activity was being carried on “upon” the property, which in itself amounted to a business and thus there was no breach of this covenant.

The latest Electronic Communications Code decision from the Upper Tribunal in the case of Arqiva Services Ltd v AP Wireless II (UK) Ltd [2020] UKUT 195 (LC) has done little to clarify what is becoming an increasingly uncertain area of law. There is a strong argument that where case law cannot provide legal certainty, then the Code should be amended to deal with the various issues in play.

The Arquiva case

AP Wireless 2 UK Limited (“AP Wireless“) own a site at Queen’s Oak Farm near Towcester, over which Arqiva Services Limited (“Arqiva“) wished to acquire Code rights.

Arqiva were in occupation of the site under the auspices of Schedule 2 of the Telecommunications Act 1984 (“Old Code“) and the Upper Tribunal took, as a preliminary issue, the question of whether Arqiva now has Code rights and if not how it could acquire them.

Arqiva had a twenty year lease of the site which expired in October 2016. The lease was contracted out of the security of tenure provisions of Part 2 of the Landlord and Tenant Act 1954 (“1954 Act“). Arqiva remained in occupation of the site paying rent and various discussions took place about the terms of a new lease, with no agreement being concluded.

The Code

The Electronic Communications Code 2017 (“Code“) came into force on 28 December 2017 and Arqiva gave notice on 2 July 2019 seeking orders under paragraphs 20 and 27 of the Code. Paragraph 20 enables the Tribunal to impose an agreement on an operator and landowner, whilst paragraph 27 provides for the imposition of temporary Code rights. These temporary rights apply where an operator has electronic communications apparatus on land and the landowner has the right to require its removal. The aim, of course, being the maintenance and continuity of the network.

The Code also sets out transitional provisions which apply to operators who had rights under the Old Code, at the point when the Code came into effect. Such agreements are called subsisting agreements and the Code will apply to them with some important modifications. We set out the detail of these modifications in our recent article on the Ashloch case.

It is worth noting that the Ashloch case also confirmed that, where a subsisting lease is protected by Part 2 of the 1954 Act, the operator must seek a new tenancy under the 1954 Act procedure and cannot apply for Code rights using paragraph 20. Any new 1954 Act tenancy ordered by the court will, from that point, be deemed to be a Code agreement following the reasoning in the case of Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2019] (“Compton Beauchamp“).

Preliminary Issues in Arqiva

1. Did Arqiva occupy the site under a subsisting agreement?
2. Could the Tribunal impose an agreement under paragraph 20 of the Code?

The answer to the first preliminary issue depends upon Arqiva’s status following the termination of the original lease in 2016. Arqiva maintained that it was a tenant at will and there was no subsisting agreement in place as a result. By way of reminder, a tenancy at will is a precarious arrangement, which can be terminated by either party, at any time and which is not protected by Part 2 of the 1954 Act.

AP Wireless submitted that a tenancy at will existed during the negotiations for a new lease, but when those ended, a periodic tenancy was created. This was therefore a subsisting agreement and then subsequent correspondence created a 5-year licence, which conferred Code rights on Arqiva. As such the Tribunal did not have jurisdiction under paragraphs 20 or 27, but Part 5 of the Code would have applied.

Tenancy at will or periodic tenancy?

It is often assumed that when a fixed-term lease expires and the tenant holds over, paying the same rent, a periodic tenancy is created on the same terms as the original agreement. However, there is no such presumption and the conduct of the parties has to be considered objectively, so their intentions can be established.

The Tribunal Judge concluded that work on the travelling draft lease ceased in September 2017, because the Code was about to come into force and a new approach was required. However, the intention remained to grant a new lease of the site and so the tenancy at will continued throughout.

A subsisting agreement?

The consequence of the decision that a tenancy at will existed is that, if it had been a subsisting agreement, the Tribunal could have made an order under Part 5 of the Code. If the finding had been that a periodic tenancy existed, then it would have been protected by Part 2 of the 1954 Act and as per Ashloch, the apparatus of the 1954 Act would have applied to the lease renewal.

In order to be a subsisting agreement, the tenancy at will would have needed to be an agreement in writing, permitting the keeping of apparatus on the site. That presented a problem to AP Wireless, because the tenancy at will was oral. AP Wireless argued that the oral tenancy at will was on the same terms as the original 1997 lease and therefore the permission to keep apparatus on the site remained in force, like all the other terms. The Tribunal Judge was not persuaded and ruled that the permission was time-limited to the 20-year fixed term of the lease.

Purposive approach

A further argument was that a purposive approach should be taken to the definition of subsisting leases, which includes these sorts of situations. This argument overlaps with the issue (explained below) of whether Arqiva could have made an application under paragraph 20 when it was already in occupation of the site and did not have Code rights. This loophole (identified in the Compton Beauchamp case) could have been avoided if a purposive approach had been taken, as operators would have been able to use Part 5 of the Code to secure the necessary rights.

Again, this argument did not find favour with the Tribunal, which made the point that the Code was not intended to be retrospective in effect and even Old Code rights did not become full-blown Code rights. Therefore it cannot have been intended to bestow Code rights on operators, who did not even have Old Code rights in the first place.

As such, the finding was that the tenancy at will did not confer rights under the Old Code and was not a subsisting agreement. The same result would have arisen if the arrangement had been an oral periodic tenancy and not a tenancy at will.

Did anything else change Arqiva’s status?

Given the findings that the tenancy at will was not a subsisting agreement, Arqiva was then occupying the site without Code rights, unless something had happened to change its status.

AP Wireless maintained that correspondence between the parties created a 5-year contractual licence, which prevented the grant of temporary rights under paragraph 27 of the Code (because AP Wireless did not have the right to remove the apparatus) and also blocked the paragraph 20 application, as the licence conferred Code rights.

The Tribunal agreed with Arqiva that its status did not change as a result of the correspondence.

Could the Tribunal impose an agreement under paragraph 20?

According to the Tribunal’s findings, Arqiva was on site without Code rights. The final question was a very important one, namely, how could an operator without Code rights, obtain those rights, when occupying a site with electronic communication apparatus in situ?

Arqiva’s case was that the Tribunal had stand-alone jurisdiction under paragraph 20, or alternatively, Arquiva had made an application under paragraph 27. Lewison LJ in University of London v Cornerstone Telecommunications Infrastructure Limited [2019] EWCA Civ 20 described paragraphs 20 and 27 as “inextricably linked” and the Code confirms that a paragraph 27 application can only be made if a notice has been served under paragraph 20.

AP Wireless conceded that the Tribunal had jurisdiction under paragraph 27, but not in accordance with paragraph 20. This was because the Court of Appeal found in Compton Beauchamp that there was no jurisdiction to impose an agreement under paragraph 20 on an operator, already in occupation of the site.

A similar finding in Ashloch required the operator, in occupation of the site, to use the 1954 Act procedure to seek lease renewal, rather than paragraph 20 of the Code. In Ashloch, Part 5 of the Code was not available, because the lease was protected by Part 2 of the 1954 Act. If the Code rights were not so protected, then Part 5 of the Code would have been available.

The Tribunal decided that an occupier of a site without Code rights could not succeed in an application under paragraph 20, whether or not an application was also made under paragraph 27. This decision was reached with some reluctance as being contrary to the policy of the Code. How could it be right that an operator was prevented from obtaining Code rights for a particular site, when it was in occupation and had apparatus in situ providing a service?

Consequences of this decision

A further problem arises because if this decision is correct, an operator with a periodic tenancy, protected by the 1954 Act, can never obtain Code rights. This is because they cannot serve a section 26 notice (as that option is only available for leases granted with an initial fixed term). Therefore the 1954 Act route, with the likelihood of a better rent than the Code, is closed in terms of seeking a new lease. In addition, Parts 4 and 5 of the Code are unavailable as set out above.

Equally if Arqiva’s case was successful, an operator with a protected 1954 Act lease could simply fail to respond to a section 25 notice and allow the lease to expire. It would then have no Code rights and could apply under paragraph 20. That would render the decision in Ashloch of no effect.

One answer to this series of problems is an amendment to the transitional provisions of the Code. The Tribunal was bound by the Court of Appeal’s findings in Compton Beauchamp, but respectfully suggested that the interpretation of paragraph 20 in that case was too restrictive.

The result in Aquiva, was that both paragraph 20 and 27 applications were struck out. Leave to appeal to the Court of Appeal was granted on the second preliminary issue and the strikings out were postponed until the appeal is determined. It was noted that permission to appeal has also been granted in Ashloch and the suggestion was made that the cases might be heard together, as a number of Tribunal cases are backed up, pending the results of the Ashloch appeal. Taking into account the recent news that permission to appeal to the Supreme Court has just been granted in Compton Beauchamp, the telecommunications sector is clearly in desperate need of some judicial or legislative guidance.