Even a cursory look at the statistics published by the Insolvency Service shows that the construction industry is still a sector which suffers from one of the highest number of insolvencies. The latest statistics reveal that, on average, 2,600 companies go insolvent every quarter. These are both small companies and, as recent events have shown with Carillion, large national companies. When this happens, the disruption to the projects and services the insolvent contractor has been providing can be very significant. If you are an employer of an insolvent company, it is important to put together a plan to minimise and manage this disruption. The plan will develop as further information becomes available but there are a number of key points which need to be considered straight away.

From a legal perspective, these include:

• considering whether this insolvency has given rise to a health and safety issue
• establishing the type of insolvency process and keep constant dialogue with the appointed insolvency practitioner
• reviewing the terms of the contracts and service agreements in respect of the insolvency and termination arrangements
• considering the payment position and the likely cost to complete the project
• considering  if any notices should be given in respect of any security documentation such as bonds and guarantees (parent company guarantees are unlikely to be of assistance)
• reviewing any offers from the alternative contractors or service providers who are in dialogue with the appointed insolvency practitioner
• checking the termination provisions of any JV agreements, contract or subcontracts you are a party to, to see whether the provision calls for automatic termination of the relevant agreement.

It is important to quickly establish the current situation on site or the services which the insolvent company was in the process of carrying-out – in particular, whether there are any urgent works or services which need to be carried out for health and safety reasons. If there is anything under this category, then these works and services should be carried out and a record of why they needed to be done and what has been done should be produced. Also, with health and safety in mind, the site or other facilities should be made secure so you have control of the site and facilities. Once the site and facilities are stable from a health and safety perspective then other aspects can be looked at.

During the first few days of a company becoming insolvent, it is sometimes difficult to find out the facts. Often, comments made in the press and media tend not to be technical in nature and as such, can be unreliable. Therefore, it is important to establish the type of insolvency process the company has entered into through the official channels, like the London Gazette, as the process will determine your relationship with the authorised insolvency practitioner. Also, it is likely to dictate what you are entitled to do under the particular contract.

It is also important to review the current payment arrangements in light of the insolvency, and consider whether monies which were going to be paid should be stopped and issue ‘payless’ notices accordingly. It is relatively common for contracts to state that no further payments are due and payable upon insolvency but the terms of the actual contract must be reviewed. This is also the time to look at the terms of any bonds which are in place and the mechanisms needed to commence calling on the bonds.

As the commissioner of the works or services, it is very likely that you will be contacted directly by the insolvent contractor’s supply chain. This can be particularly tricky as the supply chain will be looking to you to pay unpaid monies directly to them. Of course, both you and the supply chain are both creditors under this insolvency. As such, proper advice should be taken on whether a direct payment should or could be made.

Of course, the fundamental questions arising from a contractor’s insolvency are:

• who is going to continue with the works or services?
• how should a new contractor or service provider be found?

If you decide that you need to re-procure the works or services and are classified as a ‘contracting authority’ then the ‘EU Regulations’ need to be considered. It is relatively common for the authorised insolvency practitioner to receive offers from other contractors who wish to take-over all or some of the projects or services. If the authorised insolvency practitioner is willing to look at this option then it is likely that the proposed new contractor will approach you confirming they are in discussions with the insolvency practitioner in respect of the particular project or services. It is then a question of whether the offer from the replacement contractor or services provider is attractive enough for you to agree to the transfer of the contract to the new contractor or service provider. In respect of providing alternative services, it is worth considering whether this is an opportunity for all or part of the services to be carried out in a different way, for instance by directly employed employees. This approach was taken by a number of organisations when several services providers became insolvent a few years ago. Those organisations set-up subsidiary companies and are no longer exposed to situations like this.

This issue can also be urgent where you are in a direct contractual relationship with a consortium where one of the shareholders is the insolvent party or one of its subcontractors is the insolvent party. Some Joint Venture agreements and subcontracting agreements would provide for termination in the event of insolvency of one of the parties and the main trigger for this would be most likely to be liquidation (whether voluntary or compulsory, as is the case with Carillion). However the insolvency of a shareholder may not give you an automatic right of termination. In these circumstances it is important to understand what impact that insolvency may have on the consortium – are funders entitled to enforce security due to the insolvency and how will this impact on the consortium’s ability to continue to deliver under your contract. Similarly where a major subcontractor is the insolvent party what are the consortium doing to ensure the continued delivery of service. As with all situations involving insolvency, it is important to check what security you have. For example, by way of collateral warranties.

Clearly, there is lots to consider when a contractor becomes insolvent and a plan will develop as more information is known. In respect of Carillion, we understand that it is applying for, or has applied to the Court for, a compulsory liquidation. As such, the liquidator’s function will be to collect and realise the company’s assets. As a creditor you will be asked to provide a ‘proof of debt’ which will subject to the liquidator’s assessment and payment (if any) will be made to the creditors from the income and assets. Having said this, the Court could be asked by the liquidator to make an administration order. If so, then the administrator’s function will be to seek to rescue the company as a going concern or, seek a better result for the company’s creditors as compared to a winding-up.

Either way, a proper plan needs to be put in place to deal with both the legal and practical aspects so that the extent of the delay and disruption is minimised as much as possible.

The winners of the 15^th annual Michelmores Property Awards have been revealed, celebrating outstanding property and construction projects in Devon, Somerset, Bristol, Dorset and Cornwall, across ten categories.

Congratulations to Ralph Collison, Alder King – winner of The John Laurence Special Contribution Award, sponsored by Interserve

Ralph, a Consultant at Alder King, has become a well-established figure in Devon’s business community over the past 29 years. He has been involved in many high-profile developments which have been fundamental in changing the landscape of the South West, including advising Land Securities on the development of Princesshay in Exeter City Centre and buying the Science Park site in Exeter for Eagle One.

The winners were announced at an Awards Dinner on Thursday 15 June at the University of Exeter, hosted by comedian and actor Marcus Brigstocke.

View the full list of winning projects

Many UK cities have been through transformative growth in the last ten years and show no signs of slowing down. Our population is flocking, on an unprecedented scale, to sprawling urban areas which account for the vast majority of natural resource consumption and greenhouse gas emissions. Security of energy supply is an essential prerequisite to future economic success and meeting the growing demands of modern cities. However, long term solutions are required that factor in the impact on the environment, housing, services, infrastructure and quality of life.

A report by City Science has been commissioned by Exeter City Futures to present a road map for achieving an ambitious goal – an energy independent and congestion free city region by 2025. The report pulls together a detailed assessment of Exeter’s current and future energy needs and resources, its transport system and the economic impact of a strategic plan for the greater Exeter area. The vision pioneers a model that enshrines sustainability and quality of life at the heart of the city’s next phase of growth.

It is a must read for Exeter’s citizens and stakeholders, and of interest to anyone who wants to live in a thriving urban centre.

Read City Science’s Report

Two new Associates, Sarah Phillips and Matt Verrell, have joined Michelmores’ Bristol office.

Sarah joins the Firm’s Planning team from an in-house role at Urbis Living, having previously worked at CMS Cameron McKenna and Clarke Willmott. She advises on a range of planning and environmental matters, including initial strategic advice, co-ordinating applications, judicial review, negotiating and drafting planning and highway agreements, and carrying out due diligence on sites.

Meanwhile, Matt joins the Firm’s Banking, Restructuring & Insolvency team from Fladgate in London, having previously trained and qualified at Allen & Overy. Matt will work alongside Banking, Restructuring & Insolvency team on a wide variety of finance matters.

Malcolm Dickinson, Michelmores’ Managing Partner commented:

“We are very pleased to welcome Sarah and Matt to the Bristol office, strengthening both our Planning and our Banking, Restructuring & Insolvency teams. The Bristol office has continued to attract the very best legal talent and has seen steady growth since opening in 2012.”

The Firm hosted an event on 25 January in partnership with ‘Row for the Ocean’ – raising awareness of their voyage across the Atlantic Ocean to campaign for a plastic free Exeter.

The Exeter-based rowers, Ros, Kirsty and Kate (collectively Row for the Ocean), will row unaided for over 3,000 miles across the unforgiving Atlantic Ocean in December 2018, in order to raise awareness of the growing ocean plastics crisis. The Firm is proud to be an Affiliate Partner of the team.

Michelmores helped the crew to row a distance equivalent to the first 1% (30miles) of their voyage, inviting staff, clients and contacts to compete in a team-relay indoor rowing challenge at the Firm’s Exeter office.

Kirsty Barker, member of Row for the Ocean said:

“It was great to see everyone getting so stuck in, and we were super impressed by everyone’s performance. We definitely saw that the rumours were true – Michelmores are a sporty lot! As such a prominent local company, we’re proud to carry the Michelmores logo across the Atlantic.”

For more information or to sponsor the team, visit their website at www.rowfortheocean.co.uk

Mediation has become a very significant feature of the dispute resolution landscape.

Read our FAQ to provide a simple explanation of all you might want to know about it.

Download Mediation FAQ

The Court of Justice’s (the CJEU) recent ruling in GS Media BV v. Sanoma Media a.o. case (C-160-15) clarifies that posting a hyperlink to copyrighted material which is freely available on another website is an infringement of copyright.

This decision departs from the opinion of the Advocate General (AG) in June 2016. This case relates to a Dutch news website, GeenStijl, operated by GS Media (GS Media), which posted links to Playboy photographs of a Dutch TV presenter.

The photographs were hosted on various websites without the consent of the copyright holder. GS Media had ignored requests to take down links to the copyrighted material. The Appeal Court in the Netherlands sought a preliminary ruling from the CJEU on posting hyperlinks to copyright work.

The AG’s opinion recommended that links to copyrighted material should not be considered a breach. The AG did not consider that hyperlinks to protected content, which could be accessed without restriction on a third party website, fulfilled the criteria of being a ‘communication to the public’ within the meaning of Article 3(1) of the Copyright Directive (Directive 2001/29EC). The hyperlink simply made access easier.

In considering the AG’s recommendations, the CJEU decided that although linking when unaware of copyright infringement and in a not-for-profit context was acceptable, there should be a set of exceptions where a hyperlink could be considered a copyright breach in itself.

Firstly, if persons undertaking the hyperlinking knew, or should have known, that the copyright-protected work on the original website was published without consent of the copyright holder, the hyperlink itself also constituted copyright infringement.

In addition, the Court established that where persons posted hyperlinks for financial gain, they are presumed to be aware of the illegal nature of the publication on the original website and therefore are infringing copyright by hyperlinking to it. In the present case, the Court found that as it was undisputed that the copyright holder had not authorised the publication of the photographs on the internet, and that GS Media was aware of this fact. It could not rebut the presumption that the posting of the links was made in full knowledge of the illegal nature of that publication. In those circumstances, GS Media effected a ‘communication to the public’ within the Meaning of Article 3(1) of the Copyright Directive.

While the CJEU ruling recognised the importance of a free flow of information online for fundamental rights such as freedom of speech and expression, it also emphasised the need to maintain what it described as a ‘fair balance‘ between the interests of copyright holders and the fundamental rights of users of protected objects. It is that balance that the ruling sought to achieve by creating a distinction between knowingly posting a link to copyrighted material and doing so unaware and with no intention of seeking financial gain.

The implications of the ruling are wide ranging and whilst will be welcomed by copyright owners seeking to protect their material, the ruling could have significant consequences for businesses, in particular search engines, who frequently post hyperlinks to content hosted by third parties.

For more information please contact a member of our Intellectual Property team.

As I am undertaking the final seat of my Training Contract in London, I have now experienced a seat in each of Michelmores’ three main offices (London, Bristol and Exeter). Each office is slightly different – be it due to its décor, the focus of the work undertaken or the atmosphere, and so it has been a fantastic opportunity to be able to experience all three! It has enabled me to build relationships with colleagues across the Firm and to experience a wide variety of work.

Being the only trainee in London (and in Bristol at the time) means that I get the chance to work with lots of different teams across the whole office, assisting with a range of matters. For example, I attend the Royal Courts of Justice and have to dodge the paparazzi that regularly wait outside! I have attended Companies House, the Supreme Court and the Ministry of Justice. I have also been sent to a client’s office to work alongside them for a week in order to assist them on a matter. Being a trainee at the Firm’s London office offers you the chance to be involved in numerous matters, whilst exploring London during the working day.

I previously lived in London for four years whilst I was studying and I had initially vowed never to come back – I started to feel that London was always so busy and I didn’t like being pushed and shoved whenever I got on a tube! However, when the opportunity to experience London arose again I realised that it was too good to miss. The work and matters I am involved in and the buzz of being a trainee solicitor in the city makes it all worthwhile!

Not to mention being able to walk out of the office door and take ten steps to the local bar with my colleagues to while away the evening, being able to choose from a huge variety of places to eat, drink and explore, spending rainy days in the numerous museums and spending the rare sunny days on Clapham Common with friends.

Michelmores’ trainees are also fortunate enough to be able to stay in the Firm flat, which is based in Clapham Common. For those of you who haven’t visited this area, I cannot recommend it enough. There are plenty of bars, pubs and restaurants to choose from. The Common is huge and always full of people training for football or rugby, feeding the ducks on the pond or sunbathing. The local people are really friendly and there is a local artisan market on a weekend.

As a London trainee, you are exposed to fantastic clients, you experience the adrenaline of having big deals to complete and you are able to get involved with other teams. I would highly recommend that everyone take up the opportunity to undertake a seat in the Big Smoke!

The wide use of social media has inevitably led to an increase in cyberbullying. A Government report suggested that 21% of teachers have been victims of online bullying, with perpetrators being both pupils and parents.

How can the school prevent incidents?

It is really important to ensure that appropriate training and policies are in place. Policies could be for parents, students and staff. The staff policy may include procedures for reporting incidents, as well as naming a designated member of staff who is trained to deal with cases of cyberbullying.

The policy should make it absolutely clear that cyberbullying will lead to punishment. For students, this would follow the relevant disciplinary policy. For parents, the formal options are limited. Hopefully informal options should work but in extreme cases it may be necessary to consider banning a parent from the school site or (if violence is threatened) reporting the matter to the police.

In extreme cases, the school may wish to apply for an injunction or consider defamation proceedings.

How should the school respond to incidents?

Each case must be looked at on its own merits but we suggest the following:

• Encourage teachers to report incidents to the relevant member of staff at the school as soon as possible.
• Follow the steps set out in the school’s social media policy. Ensure that the report is dealt with quickly and objectively. Keep records of what steps were taken and why, including any communication with the perpetrator.
• Keep any offensive texts, emails, messages and screen shots, including the date and time. This evidence will form the basis of any disciplinary action or police referral.
• Ensure that the teacher does not respond to the messages and take appropriate steps to ensure that the teacher feels supported.

For more information please contact a member of our Education team.

What are the key elements of your role?

I am an Associate in the South West Transactional Real Estate team and work with both local and national house builders on a range of commercial property, land and development matters – from land acquisition for residential development through to site assembly for plot sale and affordable housing disposal.

What drew you to Michelmores initially?

Location! I completed my training in Bath, and then joined Michelmores, keen to return to Devon.

What is your favourite way to spend a day in the South West?

A coastal dog walk, a spot of fishing, and a beach BBQ.

What has been the best deal that you’ve worked on?

There have been many! One which springs to mind – the sale of 30 affordable housing units at a site in Plymouth. The title was deduced, enquires replied to, contract and transfer drafted, negotiated and settled in a matter of weeks, and the deal exchanged only two days after the site had been acquired by the Seller. The client was ecstatic!

What’s one thing on your bucket list?

To see the northern lights.

What are you most excited about this year at Michelmores?

Being part of a winning quiz team at the Michelmores Annual Quiz later this week…?!

Meet the Real Estate team

In the summer before my training contract started, I was offered the chance to work in our Bristol office for my first seat, I gladly said yes! Having worked in the Exeter office as a paralegal prior to doing my GDL and LPC, I felt very fortunate to have the opportunity to go and learn in a new office and new environment.

Michelmores’ Exeter office is its head office, and every new trainee spends time there on induction training. Because it’s set slightly out of town and has its own café, it feels rather self-sufficient, it takes a little while to know which teams are on which floors and you always see someone new at lunch or on the stairs.  There’s always something going on, either at lunch or an after-work event and so there are lots of opportunities to get involved and meet people from across the firm. Equally, if you want to clear your head there’s a country park behind the office.

By contrast, the Bristol office is smaller and the layout of the office is a sort of loop and means you can walk a circuit from one end to the other and pass everyone on your way. This did mean that I spent part of my first week walking in circles! From a new trainee’s perspective though, it means that you can learn people’s names quickly, as well as working out where each team sits.

It’s fantastically central, and I’ve loved going out at lunchtimes or straight from work – it’s a very sociable office so it’s easy to suggest getting something to eat or going for a drink. As a trainee in a smaller office I’ve really enjoyed how close-knit the whole place feels.

I relocated to Bristol the week my training contract started, and though work certainly kept me busy I’ve found that living and working centrally means I don’t lose out even in the busiest weeks.

My first seat has involved mainly Agricultural Litigation, with part of the week spent with Specialist Real Estate assisting with Planning. The Specialist Real Estate/Real Estate team is small and growing, and having previously been part of the much larger Real Estate department in Exeter, it has been exciting to get a different perspective.

The central location means there have also been several trips to and from the Court, which is 10-15 minutes’ walk from the office. Sometimes you are there to support supervisors and Counsel at a hearing, or sometimes trainees need to go over to the public desks to file papers or ask the Court to issue a claim form.

These have been some of the most exciting parts of the job so far, though everyone assures you that the Agriculture seat will get you out in the fresh air too, and they were right: no matter how urban it feels popping over the road to a café, or running bundles to the Court, nothing beats a site visit I went on to a riverbank in deepest Devon where all parties (with wellies on) boldly waded into midstream to better make their arguments about causation!

Being in the Bristol office for my first seat has been a great experience. I feel fortunate to get to know people across two offices and to learn as much as I can in the new setting. Hopefully I’ll come away wiser about both the work at the Bristol office and the finest coffee and cake spots in the city centre!

On 5 December 2018 the Supreme Court handed down its opinion in S Franses Ltd v Cavendish Hotel (London) Ltd Supreme Court [2018] UKSC 62, a case on the recovery of vacant possession (or, more accurately, opposing the grant of a new tenancy) under the Landlord and Tenant Act 1954 (the ’54 Act). But does this impact upon the problems encountered by many rural practitioners in dealing with the recovery of development land under the Agricultural Holdings Act 1986 (AHA ’86), including the old chestnut of establishing that the land is required under a bona-fide intention to implement the change of use?

The Legislation

The ’54 Act at section 30(1)(f) provides that a landlord may oppose the grant of a new tenancy to an incumbent tenant, whose original term has expired, where:

“…on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding.” 

The wording of the relevant part of Schedule 3, Case B of the AHA ’86 is:

“The notice to quit is given on the ground that the land is required for a use, other than for agriculture for which permission has been granted [etc.]”.

Where the AHA ’86 is concerned we can be reasonably certain from cases such as Paddock Investments Ltd v Lory [1975] 236 EG 803 that ‘is required’ means that where planning permission is necessary, it must have already been obtained; and that the landlord needs to establish a bona fide intention to develop the land with a reasonable prospect of doing so.

It is still just about open for a landlord to argue that ‘is required’ does not mean that planning permission has to have been obtained at the date of the notice to quit, but this is something of a minority view, yet to find a courageous enough landlord to pursue it!

In Scammell, Densham and Williams Law of Agricultural Holdings (10th edn inc. 1st supplement) at 39.35 the Editor makes it clear that the ’54 Act cases are not directly applicable because under the ’54 Act the landlord is stating an intention for the future which is established at the date of the hearing, whereas:

“It is submitted that the proper approach to this issue under Case B is a two-stage process. First, the landlord must have a settled intention at the date that the notice to quit is given requiring the land which is the subject of the notice to quit (and, in most cases, subject to the planning permission obtained) for the stated purpose. The second stage is that the landlord must establish that such requirement is to be implemented at the date that the notice to quit expires or a reasonable period thereafter.”

The Cavendish Hotel case

Cavendish Hotel does not change the position under either statute as to the time at which the intent to develop is assessed.

Cavendish Hotel establishes the need for a landlord to have a firm and settled intention to carry out the relevant works (as at the date of the hearing) and that the landlord’s purpose or motive for carrying out the works were irrelevant.

The facts of Cavendish Hotel were that the landlord opposed the tenant’s request for a new lease; on the grounds that it intended to reconstruct the premises, and it could not reasonably do so without obtaining possession.

It is fair to say that the landlord had some difficulty in putting forward a development scheme for the site which fulfilled the requirements of section 30(1)(f), whilst also complying with planning legislation and policy.

The first scheme put forward did not receive planning permission, and the landlord’s solicitors were of the view that it was, in any event, not substantial enough to amount to demolition, or reconstruction (etc.), of the premises.

The second scheme put forward by the landlord, and relied upon at the trial of the issue, involved (apparently) contrived internal works, such as lowering the basement floor, moving smoke vents, and substantial internal modifications.

The Judge at first instance found that the works were:

“…designed with the material intention of undertaking works that would lead to the eviction of the tenant regardless of the works’ commercial or practical utility and irrespective of the expense”.

The landlord was not shy of setting out its intentions. Essentially, if pointless works were required in order to get rid of the tenant, then they would be completed. However, rather fatally, as it turns out, the landlord admitted that it would not go ahead with the reconstruction works if the tenant left voluntarily.

Supreme Court judgement

The Supreme Court’s response to this was clear:

“Just as the landlord’s motive or purpose, although irrelevant in themselves, may be investigated at trial as evidence for the genuineness of its professed intention to carry out the works, so also they may be relevant as evidence of the conditional character of that intention. In both cases, the landlord’s motive and purpose are being examined only because inferences may be drawn from them about its real intentions. Likewise, although the statutory test does not depend on the objective utility of the works, a lack of utility may be evidence from which the conditional character of the landlord’s intention may be inferred.”

Effectively, a concession that the landlord would not bother with the works if the tenant left voluntarily, combined with the obviously contrived works, indicated that the landlord had no firm and settled intention to carry out the relevant works.

Further, ground (f) assumes that the landlord’s intention is being obstructed by the tenant’s occupation, and as such, if that intention is only conditional on there being an order (but not if the tenant gives up possession voluntarily), there is not a firm and settled intention.

Impact on Case B

So, does this add to the picture on the “bona fide intention” postulated by Lord Justice Goff in Paddock Investments?

Perhaps it does. We have not, until now, had an authority which covers a situation which is so obviously engineered to achieve vacant possession. The Supreme Court has clearly set out that whilst motive or purpose are not directly relevant to intention to carry out the works, the ‘acid test’ is whether or not the landlord would develop the premises if the tenant vacated voluntarily, that principle must surely be applicable to Case B. However, the extent to which that is ever at issue in a disputed Case B is perhaps less of an issue where landlords almost invariably want to achieve development for obvious commercial gains.

Perhaps an alternative view is that the acid test suggested by Lord Sumption in Cavendish Hotel is THE test for intention to develop, and as such supports the minority argument no planning permission is actually required.