Artificial Intelligence (AI) tools can provide an efficient and low-cost solution to overcoming many of the obstacles faced by early-stage businesses with limited resources. For example, OpenAI’s ChatGPT can help with troubleshooting, processing large data sets and drafting terms and conditions, whilst Microsoft’s Clipchamp can edit and produce slick marketing videos.

However, it is important to understand the limitations of this technology in order to protect your business from being exposed to risks. We explore some of the limitations of these popular AI tools below.

1. Unreliable and unbalanced output

• AI tools such as ChatGPT are prone to “hallucinations“, meaning the generation of false information. In fact, the OpenAI Terms of Use specifically say that “Given the probabilistic nature of machine learning, use of our Services may in some situations result in Output that does not accurately reflect real people, places, or facts.” This could lead to liability and reputational issues where a business uses such output in a professional context, such as in the case of lawyers who were fined for citing fake case law generated by ChatGPT in their court filings.
• The tools also have the potential for bias that reflects biases within a society, due to using imbalanced or discriminatory datasets. This can be particularly problematic when the tools are used as part of making business decisions, for example during the recruitment process, where AI is used to review resumes and identify candidate compatibility.
• To mitigate these risks, output generated by AI tools should never be taken at face value and should instead be independently verified before being used. Further, if such output is going to be incorporated into goods or services provided to customers, then the customer terms and conditions should make clear that an AI tool has been used in the process.

2. Intellectual Property infringement and ownership issues

• AI models are trained using content produced by third parties, and there is a risk of infringing intellectual property rights in doing so. As we reported last year, there is a conflict between the UK Government’s push for rapid AI development and a lack of guidance for tech firms regarding their responsibility to obtain consent from rightsholders. Without adequate guidelines in place, there will be increased litigation in this area. A recent landmark decision in the case of Kneschke v LAION at the District Court of Hamburg addressed the intersection of copyright and AI training when a photographer brought a claim against an AI research organisation for using his photographs in its training datasets without his consent. The court dismissed the claim.
• Users of Microsoft’s Clipchamp, which uses stock media such as audio, video and graphics in order to create user videos, have faced copyright infringement claims. Whilst Clipchamp provides guidance for customers regarding how to respond to such claims and assures customers that they have the right to freely share the videos, there is a grey area in relation to stock media that Clipchamp has not licensed from its third party media partner. In addition, the Microsoft terms and conditions do not provide customers with recourse against Microsoft in the event of a copyright infringement claim and say that customers are “solely responsible for responding to any third-party claims regarding your use of the AI services in compliance with applicable laws (including, but not limited to, copyright infringement or other claims relating to content output during your use of the AI services).”
• A business uploading data into an AI tool may also breach the licence terms pursuant to which that data was obtained, resulting in a damages claim or an injunction to stop using such content.
• By using AI to develop a product, a business may also lose the ability to later protect their work. This was demonstrated in a recent case, where technologist Dr Stephen Thaler sought to have his AI, called Dabus, recognised as the inventor of a food container and a flashing light beacon. The UK Supreme Court held that a human inventor is required and that a person who is the owner of the AI machine that invented something, but not the actual inventor, is not entitled to a patent. An AI system cannot be an inventor under the Patents Act 1977.

3. Breaches of Data Protection legislation

• AI tools process personal data as a result of scraping data such as names and images from websites. In doing so, the operator of the AI system must demonstrate compliance with the requirements of data protection legislation, such as having a lawful basis for carrying out such processing. In 2023, the Italian Data Protection Authority issued an interim emergency decision ordering OpenAI to immediately stop the use of ChatGPT for processing the personal data of Italian data subjects, on the basis that it violated several GDPR obligations.
• Similarly, businesses deciding to process personal data using AI systems as part of their operations will need to ensure compliance with their own data protection obligations.

4. Breaches of Confidentiality

• AI tools use content provided by users to train their models, meaning information that is input can later be included in output for another user. The Open AI Terms of Use specify that a user’s content will be used to develop and improve the product, unless users specifically opt out, and say that they do not want their content to be used to train the model.
• This raises particular concerns if confidential information is input, as this could result in commercially sensitive information being unintentionally shared. For example, Samsung decided to ban employees from using ChatGPT after an employee leaked sensitive internal source code by inputting this into the system.

5. Punitive contractual terms

• The terms and conditions offered by the providers of AI tools often significantly limit their own liability and place the onus and risk on users of the platform. For example, the OpenAI Terms of Use limit their liability to the greater of the amount paid for the service or $100, and require the customer to indemnify Open AI for losses arising from third party infringement claims relating to the use of content generated using ChatGPT.
• Where such terms are offered by a large enterprise such as OpenAI or Microsoft, they are likely to be non-negotiable, and so a business seeking to use such services will need to take a risk-based decision as to whether or not to accept this.

Businesses using AI technology should do so with caution. Having a corporate policy in place setting out rules and procedures for the safe use of AI can help to ensure that employees are informed and do not expose the business to the risks that we have outlined above.

If you would like further insight into this topic or advice on AI agreements, licensing arrangements or claims relating to intellectual property rights, our Technology & Innovation and Intellectual Property teams are well-placed to advise you.

Data protection laws apply to all types of businesses regardless of size, and early-stage businesses are not exempt. If you process the personal data of UK citizens, even if you are a non-UK business, you are likely to be subject to UK data protection laws. You may also have obligations under contracts with your customers or other companies to comply with these laws.

Setting up and scaling a business takes an enormous amount of effort. It is easy to be distracted by other priorities, but the risks relating to non-compliance are high, including substantial fines and risks of claims, potential criminal liability of directors and senior managers, damage to your reputation with customers, vendors, and potential investors and business continuity issues. Adopting the correct measures and establishing a framework for compliance is much easier to do in the early days when you are building your business processes and designing your products and services. It will help you to reduce these risks and to build trust and a positive reputation with your customers, vendors and potential investors.

In this article, we have summarised some of the key considerations under UK and EU data protection law.

1. What are the applicable data protection laws?

The Data Protection Act 2018 transposed the EU General Data Protection Regulation (EU GDPR) to become UK GDPR. Further codes and regulations apply, for example in relation to processing of children’s personal data, processing of biometric personal data, and use of AI. Regulations also apply to use of cookies and direct marketing.

Whilst in this article we will focus primarily on UK GDPR, we will come back to the other topics in further articles.

2. What is personal data?

Personal data is defined broadly and comprises data relating to any living individual who can be identified from that data either directly or indirectly.

It includes information such as: names, addresses, social security or other national identification numbers, telephone numbers, health information (of, for example, customers and employees), location data and online identifiers.

3. Who needs to comply?

All organisations which process personal data in the UK must comply with UK GDPR. UK GDPR also applies to organisations based outside of the UK which offer goods or services to individuals in the UK.

There are two types of organisations:

• controllers: who decide what information should be collected and the purpose or outcome of processing that information; and
• processors: who follow the instructions of somebody else in relation to data processing.

UK GDPR applies to both controllers and processors, but different requirements apply to each, with controllers having the highest level of responsibility. In practice most businesses will be controllers in relation to some of their data processing activities and processors in relation to other activities.

4. Check if you need to register the business with the ICO

Most small businesses must register as controllers with the Information Commissioner’s Office (the ICO) and pay a data protection fee (which for most small businesses is £40 a year). There is no minimum financial threshold or minimum number of employees which determines this.

Failure to comply can incur a fine of £4,000. The ICO undertakes routine checks against Companies House records to identify whether there are any companies which may need to register but have not yet done so. Non-registration can also lead to the ICO deciding to undertake a wider investigation or audit of the data processing practices.

To determine if your business needs to register and to register your business, you can use the ICO’s data protection fee self-assessment tool here.

5. Comply with the six key data protection principles

UK GDPR requires that you abide by six key principles. These principles require that personal data is:

• processed lawfully, fairly and in a transparent manner;
• collected for specified, explicit and legitimate purposes and not further processed in a manner that is incompatible with those purposes;
• adequate, relevant and limited to what is necessary in relation to the purpose(s) for which it is processed;
• accurate and up to date;
• not kept in an identifiable form for longer than is necessary for the purpose(s) for which it is processed; and
• kept secure using appropriate technical and organisational measures.

You need to keep these principles in mind in respect of all of your data processing activities.

In addition, personal data must be processed in line with individuals’ rights and not transferred to countries outside the UK without adequate protection. This will include using a data hosting facility located outside of the UK. At the current time the UK and EU have arrangements in place to recognise each other, which allows for data to be transferred freely between the UK and EU. There is also currently an arrangement between the UK and US, please see our article here.

6. Establish who will be responsible for data protection compliance within your business

As you grow your team, you will need to consider how data protection responsibilities will be managed within your business and by whom. For example, who will keep customer and staff records up-to-date and respond to data subject access requests (which we explore further in Data Protection by design and default – establish compliant business processes below)? Smaller businesses are likely to require external guidance from advisors with expertise in this area, such as to help with preparing key data protection documentation (see Prepare key documentation below).

Certain organisations are required to designate a data protection officer (DPO). A small organisation is unlikely to need a DPO, however you should identify who within the business will take responsibility for ensuring compliance and responding to any subject access requests and dealing with data breaches. As your business grows you should keep up to date with the ICO’s guidance regarding DPOs to determine if this requirement later applies to you.

You should also consider who will be responsible for information security within your business, to ensure that you have processes and infrastructure in place to protect personal data (such as by using encryption and training employees to avoid fraudulent emails).

We recommend researching the UK Government Cyber Essentials scheme and engaging with a cybersecurity expert to keep your business, your staff and your customer data safe from cyber attacks.

7. Identify the personal data that you will be collecting, and why you need this

The scope of data protection obligations that apply to your business will depend upon the categories of personal data that you collect and process. It is therefore important to identify all such categories. As mentioned above, personal data is very broadly defined pursuant to UK data protection law, and includes categories such as names, addresses, emails, telephone numbers, and bank or credit card details. It can also include more sensitive information, such as criminal records.

Once you have identified the categories of personal data that you are processing, you will need to be able to explain why you are processing it, and the lawful basis that you have for processing it. The ICO’s lawful basis interactive toolkit can be used to help determine the lawful basis.

8. Prepare key documentation

UK data protection law requires businesses to have certain key documentation in place, such as:

• Data Processing Agreements: Whenever an organisation provides personal data to a third party (for example, as part of outsourcing your operations or services), there must be a data processing agreement in place that documents certain key terms. You can ensure that a compliant version of this agreement is used and avoid negotiations down the line by having a template form of this ready to be shared with third parties that you work with. You should carefully consider which third parties personal data is shared with, and regularly audit this.
• Website Privacy Policy: This is displayed on your website, to provide users with key information regarding how you will collect, use and store their personal data when they interact with your website. The ICO’s website contains a privacy notice generator that can be used as a starting point. If you use cookies, you will also need a Cookie Policy to provide users with information and choice regarding your use of cookies.
• Data Protection Policy: This is an internal document which sets out the principles and legal conditions under UK data protection law that your business will need to satisfy when handling personal data.
• Employee Privacy Notice: This is an internal document that provides your employees with information regarding their rights in relation to personal data that your organisation processes and stores.

This documentation will need to be reviewed on an ongoing basis to ensure that it captures changes in data protection law and remains compliant.

9. Data Protection by design and default – establish compliant business processes

UK GDPR requires “data protection by design”, which means that you have a general obligation to implement appropriate technical and organisational measures to show that you have considered and integrated the principles of data protection into your processing activities and that individuals’ rights are safeguarded. The ICO explains that in essence, you have to integrate or ‘bake in’ data protection into your processing activities and business practices, from the design stage right through the lifecycle. It is about considering data protection and privacy issues upfront in everything you do. It can help you ensure that you comply with the UK GDPR’s fundamental principles and requirements, and forms part of the focus on accountability.

Certain business processes will need to be designed to ensure data protection compliance. For example, consider the following:

• If a customer contacts an employee asking a query related to data protection (such as requesting that their data is erased), how will this be escalated to the appropriate person to respond? If your business receives a subject access request (which is where an individual can ask you for a copy of any information that you have about them) (a SAR), you will be obliged to respond in a certain way and within certain timelines. Please see the ICO step-by-step guide on SAR’s for further information.
• Before a customer interacts with your website, have you drawn your use of any cookies to their attention and provided the customer with the option to select the cookies that will apply to them?
• Before you send marketing emails to a customer, have you obtained their consent for you to do so? The ICO website contains a direct marketing advice generator which provides guidance on using marketing in a compliant way.

10. Be prepared to respond to data breaches

If the personal data that your business holds is lost, disclosed, destroyed or altered without proper permission, this could amount to a personal data breach that may need to be reported to the ICO within 72 hours.

In addition, where a breach is likely to result in a high risk to the affected individuals, you must also inform those individuals without undue delay.

It is therefore important to have a procedure in place, that employees are aware about and that will be followed should a data breach occur. This includes maintaining an internal record of all personal data breaches or suspected personal data breaches.

At Michelmores, we frequently advise early-stage businesses on data protection compliance matters through MiVentures, an award-winning programme which is dedicated to giving extra support to innovative and scalable businesses.

For advice on the particular issues relating to compliance with data protection covered in this article, please contact Anne Todd, Moya Smith or other members of our Data Protection & Privacy team. Anne and Moya have both worked as in-house lawyers at large enterprise customers as well as on behalf of scale-up and SME suppliers. We have an experienced team of experts who can advise you on data breaches, subject access requests and claims brought in respect of data breaches.

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.

• Your beginner’s guide to data protection | ICO
• Getting started with data protection | ICO

Background

Since being published in October 2024, the Employment Rights Bill (the Bill) has been subject to continuous debate as it makes its way through Parliament.

On 4 March 2025, the Government published its responses to consultations (which commenced at the end of 2024) with business groups and unions on key aspects of the Bill, before publishing an Amendment Paper on 5 March 2025 outlining the proposed amendments to the Bill.

Included in the amendments to the Bill were various changes relating to collective redundancy as follows:

One establishment

The original Bill proposed removing the wording ‘at one establishment’ from collective consultation obligations. If passed, this would have meant that any proposed redundancy of 20 employees or more, regardless of whether these 20 are at the same establishment or different establishments, would have triggered the requirement for a collective consultation process. This would have been particularly onerous for multi-site employers.

Following the consultation, the Government explained it will no longer remove the wording; therefore collective consultation will only be required if 20 or more redundancies are proposed at one establishment.

However, the Government does intend to introduce an additional business-wide threshold to cover redundancies across multiple establishments, but it has not yet disclosed the full details of this. There is a suggestion the threshold would be based on either a percentage of the workforce or a set number of redundancies (over 20). The Government intends to set out the full details of the collective consultation process for multiple establishment redundancies in future regulations.

In response to concerns raised around delays and complexities should employers be required to consult with employee representatives across different establishments, the Bill now includes a provision that states that, in carrying out collective consultation, the employer does not need to consult all employee representatives together or try to reach the same agreement with all of the representatives. This is particularly relevant for employers considering future redundancies across multiple sites.

Protective awards

To encourage employer compliance, the Government also confirmed an amendment to increase the cap on protective awards in collective redundancy situations, where the award for failure to collectively consult will increase from 90 days to 180 days’ pay.

This increase in the protective award, combined with the existing Tribunal power to award (up to) a 25% uplift to a protective award, could have a significant impact on employers facing claims related to alleged failures to follow the Code of Practice on Dismissal and Re-engagement in a collective redundancy situation. This could be incredibly costly for employers, and compliance in collective redundancy situations will be all the more important if the changes come into force.

The Government also consulted on introducing interim relief for employees claiming collective consultation breaches in redundancy or ‘fire and rehire’ situations. This would have meant that where a Tribunal considered a claimant was likely to succeed in their claim, it would have the power to award the claimant immediate financial remedy (usually in the form of full salary pay until the case’s conclusion). Ultimately, the Government decided against incorporating interim relief into the Bill, due to the practical complexities of implementing it, and the likely effect of putting increased pressure on an already stretched Tribunal system.

Finally, the Government has confirmed that further guidance on consultation processes for collective redundancies will be produced in due course to assist employers.

To discuss how your organisation may be impacted by the proposals, or to discuss any of the other aspects of the Employment Rights Bill, please contact Robert Forsyth.

At Michelmores, our Technology & Innovation team is dedicated to supporting the growth of cutting-edge businesses and the development of transformative technologies. Through our expertise in legal support, we assist startups and established companies alike in navigating the complex challenges of the digital age. Below, we highlight some of the exciting and impactful work we’ve done with pioneering firms at the forefront of innovation.

Oriole Networks: Revolutionising AI with Photonics

Oriole Networks is a London-based tech firm on a mission to accelerate AI and machine learning in a sustainable, low-carbon world. Founded by University College London (UCL) scientists and entrepreneurs, Oriole’s groundbreaking technology leverages the power of light to connect thousands of AI GPUs directly, dramatically improving performance. This innovation can train large language models up to 100 times faster, using a fraction of the energy of traditional methods.

We were thrilled to advise Oriole Networks on its £10m seed round and £17.5m Series A funding round in 2024. This funding will help the company scale its energy-efficient AI solutions, addressing critical issues such as unsustainable power consumption in data centres. Oriole’s technology is set to revolutionise time-sensitive tasks like algorithmic trading, offering a transformative edge for industries worldwide.

Wilder Sensing: AI for Biodiversity Monitoring

Wilder Sensing, founded in 2021, is bringing AI into the field of conservation. The company developed a unique software solution that monitors biodiversity through audio analysis, helping to track and preserve ecosystems. In December 2024, we advised Wilder Sensing on securing a £300,000 equity investment from the South West Investment Fund. This investment will enhance the company’s platform, allowing it to expand its reach and improve biodiversity monitoring worldwide.

Wilder Sensing’s customers, including Somerset Wildlife Trust and ecological consultancies, are already using the platform to support biodiversity efforts. The company’s innovative technology is critical in combating the biodiversity crisis, and we are proud to be supporting their mission to create a more sustainable planet.

Sealeo: Revolutionising Vaccine Delivery

Sealeo, winners of the 2024 Imperial Enterprise Labs WE Innovate final, is tackling one of the global healthcare industry’s most significant challenges—vaccine wastage. Co-founded by Diana Epel and Emanuele Griccioli, Sealeo has developed a biodegradable material that maintains the safe temperature of medicines for 2.6 times longer than existing solutions. This breakthrough technology aims to drastically reduce vaccine wastage, particularly in last-mile deliveries, where 50% of vaccines are typically lost.

We provided legal advice on intellectual property protection as part of Sealeo’s participation in Michelmores’ MiVentures programme. Their environmentally friendly, cost-effective solutions promise to revolutionise the pharmaceutical supply chain while also reducing CO2 emissions associated with current packaging materials.

LIFELENZ: Transforming Workforce Management

LIFELENZ, an AI-enabled workforce management platform, is changing how businesses manage employee shifts and compliance. The Australian-founded company, trusted by leading global brands, provides businesses with tools to meet evolving market demands. We played a key role in supporting LIFELENZ’s entry into the UK market, in its negotiations with leading Quick Service Restaurant brands and providing strategic advice on data protection, employment law, and company secretarial matters.

LIFELENZ is now poised to expand its innovative platform further into the UK and beyond, and we are proud to have contributed to its successful UK launch and ongoing growth.

South West Grid for Learning

We have supported South West Grid for Learning (SWGfL) in its efforts to enhance online safety, particularly in tackling the growing issue of non-consensual intimate image (NCII) abuse. The Firm advised SWGfL on its industry partnerships with major social media platforms such as TikTok and Bumble, which enable SWGfL to share image hashes with industry partners. This sharing increases the effectiveness of SWGfL’s reporting tool and, crucially, improves the support provided to victims of NCII abuse. SWGfL is dedicated to creating a safer online environment for everyone. They provide essential resources and education around digital safety, empowering schools, parents, and the wider community to better navigate the challenges posed by online harm.

As the proliferation of NCII has become an increasingly topical issue, the work done by SWGfL is more relevant than ever. This issue has gained heightened attention due to Meta and X (formerly Twitter) removing content moderators from their platforms, which has left users increasingly exposed to harmful content online. The legal expertise provided by Michelmores has helped guide SWGfL to better collaborate with tech companies, aligning both the legal and ethical considerations necessary to safeguard vulnerable users from the detrimental effects of online harm.

By providing this support, Michelmores has played an important role in the ongoing fight against online harm, particularly when it comes to the proliferation of NCII.

Conclusion

At Michelmores, our Technology & Innovation team is proud to be part of the journey of these trailblazing companies, providing the legal support that empowers them to scale and innovate. Whether through cutting-edge AI solutions, environmental sustainability, or digital safety, we are dedicated to helping our clients navigate the ever-evolving tech landscape while driving positive change across industries.

For more information or to get in touch, please visit our website.

As Biodiversity Net Gain (BNG) became mandatory in England in February 2024, landowners are increasingly recognising the opportunity to diversify by creating habitat banks, providing BNG units to meet the growing demand from developers. Habitat banks are areas of land where biodiversity is created, enhanced and legally secured for a minimum of 30 years, generating biodiversity units that developers can purchase from the landowner to offset the environmental impact of their development project and meet the 10% minimum mandatory BNG requirement (if this cannot be achieved onsite).

Legal mechanisms for securing habitat banks

There are two primary legal mechanisms under the Environment Act 2021 to secure habitat banks for the long-term: Section 106 agreements and conservation covenants.

Section 106 agreements

Section 106 agreements are planning obligations that bind the land with positive environmental commitments which run for at least 30 years from completion of the habitat enhancements. Section 106 agreements are familiar to local planning authorities (LPAs) and developers. Our experience is that increasingly, more LPAs are becoming willing to engage and enter into Section 106 agreements in relation to habitat banks. Key aspects include:

• The main obligation is for the landowner to perform actions for habitat creation, management, and enhancement.
• LPAs can monitor progress through regular reports on achieving the Habitat Management and Monitoring Plan (HMMP) objectives.

Conservation covenants

Conservation covenants are an alternative to Section 106 agreements, involving a legal agreement with a responsible body registered with DEFRA. At the time of writing, there are currently 24 registered responsible bodies and these are listed on the GOV.UK website. The obligations in a conservation covenant are similar to those in a Section 106 Agreement and a landowner may find:

• A responsible body might be willing to be more flexible on the terms or take a view on a higher risk or complex project when an LPA will not.
• A direct agreement with an environmental organisation could offer more support in terms of delivery and ongoing compliance.
• A conservation covenant could be used when Section 106 agreements are not feasible or when LPAs lack resources to process them quickly.

Choosing between Section 106 and conservation covenants

The choice between these mechanisms often depends on several factors:

• Capacity: If LPAs are awaiting additional resourcing or guidance, conservation covenants may be a faster alternative, if a responsible body can be found that is willing to enter into a conservation covenant.
• Cost: Whether the habitat bank is secured by conservation covenant or a Section 106 agreement, there will be a fee payable to the LPA or responsible body for monitoring the HMMP. As more LPAs are entering into Section 106 agreements and more responsible bodies are being registered with DEFRA, the market is becoming increasingly competitive. The financial implications of the ongoing monitoring costs and the timing of payment of those costs will play a crucial role in determining the most suitable mechanism for a landowner and should be explored at the outset, where possible.
• Flexibility: Conservation covenants may provide greater flexibility in some cases, especially for larger or more complex habitat banks.
• Timing: Some LPAs are introducing a “call for BNG sites” process and applications will only be considered through this mechanism, early communication with the LPA is key.

Conclusion

Both Section 106 agreements and conservation covenants play vital roles in securing habitat banks for BNG. As the BNG market continues to evolve, it is likely that both mechanisms will coexist and the choice between these mechanisms should be based on specific project needs, commerciality, and the timing of securing biodiversity units.

If you are considering entering into a Section 106 agreement to set up a Habitat Bank and would like advice, please contact Harriet Grimes, Helen Hutton or Fergus Charlton.

Michelmores has advised the shareholders of Synertec, a document management and communications business, on its sale to Restore plc, the UK’s leading provider of secure and sustainable business services for data, information, communications and assets. The Synertec management team were majority shareholders prior to the acquisition and will remain with the business.

Synertec was founded in 1999 and is a UK market leader in document solutions and processes, sending communications both electronically and physically on behalf of major public sector and commercial organisations, including around 75% of NHS Trusts. In the last year, it processed c76m physical communications (print/mail) and c52m electronic communications for its customers.

Synertec’s proprietary software platform captures data, transforms it into the required format, and delivers it to the end recipient either electronically or through the more traditional medium of print and mail. The company operates from sites in Bristol, Taunton, Milton Keynes and Warrington.

The Michelmores team advising on the deal was led by Partner Harry Trick, alongside Senior Associate Chris Cook and Solicitor Harry Jones, all from the Firm’s Corporate team. Transactional support was also provided by Cathy Bryant (Corporate Tax), Jonny Lane (Real Estate) and Tom Torkar (Technology).

Tom Baldock, Synertec Managing Director, commented:

“I am proud of what our teams have achieved over the last 25 years. We have a strong platform for growth and an exciting new phase in the company’s development to look forward to. Finding the right fit was an important consideration for us and Restore’s common values will benefit both our staff and customers”.  

Craig Richmond, Synertec Finance Director, commented:

“We are really grateful for the expert guidance and support we received from the whole team at Michelmores. They provided responsive and commercial advice right from the outset, which helped ensure that the transaction ran as smoothly as possible. We look forward to working with them as we continue to grow the business and wouldn’t hesitate to recommend them to others”

Charles Skinner, CEO of Restore plc, commented:

“Synertec is a highly complementary addition to Restore and will broaden our service offering to existing customers and provide an attractive opportunity to accelerate growth, both for Synertec and the Group. We look forward to bringing the businesses together and creating value for all our stakeholders.”

Other advisors on the transaction were Isca Ventures (corporate finance advisors to the shareholders), Fieldfisher LLP (legal advisors to Restore plc) and Shoosmiths (Natwest).

On the 5 March 2025, the Home Office continued with its phased roll out of Electronic Travel Authorisation (ETAs) to all eligible European visitors. This means that from 2 April 2025, all eligible European visitors who wish to travel or transit through the UK will require an ETA.

For a full list of nationalities who can apply for an ETA, see here.

As set out in our previous article, here, an ETA is only required by non-visa national visitors. It is still the case that Visa-national individuals should continue to apply for UK visas and should not obtain an ETA. This also means that anyone that currently holds a valid UK visa, does not need to apply for an ETA.

The most cost effective and efficient way to obtain an ETA is via the UK ETA app. There are other websites where you can purchase a valid ETA, however, many of these websites often charge more. It is not currently possible for the decision making of an ETA application to be expediated, despite any advertisement to the contrary, and it is therefore advisable for applications to be made directly via the UK ETA app. Currently, applications cost £10. However, in the Home Office’s most recent update, here, they have announced that it is their intention to increase the cost to £16 in the near future.

The Home Office are continuing with their efforts to complete the roll out by April 2025. Which means that from April 2025, it is expected that all visitors to the UK (except British and Irish citizens) will require permission to travel in advance either through an ETA or an eVisa.

Should you wish to discuss any of the issues raised in this article, please contact Lynsey Blyth

Have the recent planning reforms been radical enough and will the next round of changes proposed make a real difference?

Join us for the next Michelmores’ Planning Primer seminar on 6 November in association with the LPDF (Land, Planning and Development Federation) with keynote speakers:

• Steve Quartermain CBE, former Chief Planner at the Ministry of Housing, Communities & Local Government. Steve led the last set of major changes to the English planning system and is well placed to comment on the recent changes and the current proposals. Steve is a well known expert in the development world and acts as a strategic advisor to a number of organisations including the LPDF.
• Claire Pearce BSc MSc MRTPI MIED DipPA. Claire has over thirty years’ experience working across the public and private sectors, notably as Chief Planning Officer in Sedgemoor District Council, leading the public sector planning and implementation strategy of Hinkley Point C and then shifting to the private sector to lead the Gravity enterprise zone LDO transformation. She is now at the helm of Real Growth Ltd, kickstarting a new era of transition and growth for Dorset, and is Chair of South West Business Council.
• Helen Hutton, Partner in Planning and Environmental Law, Michelmores. Helen is an experienced planning and environmental solicitor, who, alongside her work in strategic land development, energy schemes and planning, is heavily involved in Natural Capital planning matters.
• Harriet Grimes, Senior Associate, Planning and Environmental Law at Michelmores. Harriet has a broad spectrum of planning and environmental experience, acting for a range of different clients and commercial organisations

The event will be chaired by Steve Quartermain, who, as well as being a keynote speaker, will also introduce the LPDF.

Our leading Planning and Environmental speakers will cover the following topics:

• The Government is rolling out a wide range of planning reforms. Have the recent reforms been radical enough and are the proposed amendments, within the next round of changes, really going to make a difference? Our panel of experts will consider what the Government has altered already in the NPPF (and PPG) and discuss their effect in practice. The speakers will then look at the changes proposed under the Planning and Infrastructure Bill and the BNG reforms and predict how likely they are to improve the system;
• The Government’s Plan for Change and its Industrial Strategy, ‘SW annex’, Dorset projects and the impact of other consenting/licencing regimes;
• The need for place leadership, advocacy and planning, development leadership and decision making. Simplified and efficient processes are needed for a country struggling to stimulate economic growth and transition; and
• Recent withdrawal of L7 funding for apprenticeships.

Both of our external speakers have much invaluable experience at senior level within local and/or national Government. They are both advising industry players on strategic and infrastructure development now. They are exceptionally well placed to analyse the effects of changes already seen in different types of development and to predict if the next raft of reforms proposed will speed up the pace of change. They will also comment on the issues which are still holding back the development of housing and commercial sites, despite the proposed reforms.

The seminar will end with a panel discussion between our three keynote speakers where there will be a chance for delegates to raise questions for the panel members’ response.

Networking:

As well as the chance to network before the seminar starts, attendees are invited to stay on afterwards for drinks and canapés, to discuss the issues covered with the Michelmores’ lawyers, our keynote speakers and fellow delegates.

Who should attend:

This event will be of interest to planners, developers, housebuilders, local councils, land agents, property consultants, and other industry professionals.

Please contact us at events@michelmores.com with any questions about this event.

Timings:

15.30   Arrival for refreshments and networking

16:00   Seminar starts

18:00   Networking with drinks and canapés

19:00   Event close

Michelmores has supported the oversubscribed equity fundraising by AIM quoted Panthera Resources plc. Michelmores acted for the joint bookrunners Allenby Capital, VSA Capital and Novum Securities who conducted the institutional placing element of the fundraising, structured as an accelerated bookbuild.

Panthera Resources is an AIM-quoted gold exploration and development company, with a portfolio of high-potential gold assets in West Africa and India. The Michelmores team was led by Ian Binnie and Senior Associate Victoria Miller.

Ian Binnie, Partner in Michelmores’ London Corporate team, commented:

“The need to scale back orders under the bookbuild reflects the confidence investors have in AIM companies with growth potential and demonstrates that AIM remains an important market to raise capital.”

Michelmores’ capital markets team is a highly regarded group of legal professionals with deep expertise in advising businesses across a broad range of sectors. With a reputation for delivering practical, commercially focused legal advice, the team assists clients with mergers and acquisitions, capital markets transactions, private equity, joint ventures, and general corporate governance matters. The team has recently been strengthened by the addition of Corporate Partner, Dearbhla Quigley, whose extensive experience and strong profile in UK equity capital markets as well as international M&A complements the Michelmores offering.

Read more on our website.

Darcliffe Homes Ltd v Glanville Consultants [2024] EWHC 3184

Introduction

Property developers regularly engage professional consultants whose reports guide them in assessing site viability, potential risks and overall project feasibility. However, what happens when a consultant’s advice is found to be negligent? What does the developer need to show in order to successfully claim for damages?

The recent case of Darcliffe Homes Ltd v Glanville Consultants provides an interesting example of a negligence claim in the construction industry where, even though the consultant was found to have acted negligently, the claim was dismissed on the grounds that the negligence had not caused the developer’s losses.

This article sets out the legal context surrounding reliance on consultants’ reports, reviews the case and highlights lessons developers and construction professionals can learn from the judgment.

Reliance on expert reports

Developers in the construction industry routinely rely on the reports and advice provided by consultants to guide key decisions. In Smith v. Eric S. Bush [1990] 1 AC 831, the House of Lords held that a consultant owed a duty to a purchaser to exercise reasonable skill and care and that a claimant could rely on such advice.

Darcliffe v Glanville – Background

The case was heard before Adrian Williamson KC sitting as a Deputy Judge in the Technology and Construction Court (“TCC”) with the judgment being published in December 2024.

Darcliffe Homes Ltd (“Darcliffe”), a property developer, engaged Glanville Consultants (“Glanville”), to perform a desktop analysis of ground conditions of a site near Reading that they were proposing to purchase to use for a residential development. Glanville provided its report in 2014 (updated in 2016) which gave a clean bill of health for the site. Planning permission was granted in December 2016 for the construction of 66 dwellings. Intrusive site investigations were subsequently carried out by Ground and Water Ltd (“GWL”) (also instructed by Darcliffe), who submitted both a formal report and report by letter in 2017-2018. Darcliffe subsequently purchased the site in November 2019 for approximately £5 million. Darcliffe later discovered that the site suffered from ground dissolution due to underlying chalk, which greatly increased the cost of the build. Consequently, Darcliffe claimed approximately £7.5 million in damages for negligence and breach of contract against Glanville and GWL. Damages claimed were for recovery of the substantial remediation costs; in the alternative, for the diminution in value between what Darcliffe had paid for the site and what they would have paid had the site investigation reports been accurate. All claims against GWL were settled before trial.

TCC judgment – Negligence

The judge found that Glanville was negligent in its reports. Glanville had produced a desktop summary of the ground conditions at the site but had performed no analysis. Glanville’s report stated “It is indicated that the site’s geology is at a low from ground dissolution”, this sentence was incomplete, did not identify the source of the information or issue any sort of warning. The report concluded: “the conceptual model has demonstrated that there should be no significant geo-environmental issues that would prevent the site from being redeveloped for its intended use”. The report was produced by a practitioner who was not qualified in geo-technical engineering. Experts from both sides agreed that Glanville’s advice was inadequate.

TCC judgment – Causation

Despite the above breach, the claim failed on causation. In coming to that conclusion, Williamson DJ noted that causation was a question of fact and presented the issues as three discrete questions:

“(a)  If Glanville were in breach of duty, what was the minimum further and/or different that they were obliged to do in order not to be held negligent?

(b)  In the light of the answer to (a), how would Darcliffe’s corporate mind have been affected if Glanville had given non-negligent advice as thus defined?

(c)  Would Darcliffe have done differently than they in fact did, the corporate mind having been affected as mentioned above in answer to (b)?”

Addressing each of these points in turn:

Requirements for non-negligent advice

This was held to be a very minimum requirement, as much as a line or two of warning would have been sufficient for the consultant to discharge its duty of reasonable skill and care.

The corporate mind

The judge was complimentary about the way Darcliffe functioned as a company. He called it “a well and prudently run business”. He described the directors, Mr Denton and Mr Smith, as “honest and careful witnesses”. When speaking of the corporate mind he noted that, in reality, the “mind” was specifically that of the Messrs Denton and Smith. This was to have severe consequences when it came to a review of witness evidence. In his testimony, Mr Denton admitted that, whilst he had “read the conclusion that said “low risk”, yes”, he had not read the whole of Glanville’s report:

“I’m not going to claim that I read the rest of the report. I may have skim read it.”

Consequently, the judge held that even if non-negligent advice been given and even if an extra sentence of warning been added to the report, this would have made no difference. Given such a cursory reading, the corporate mind would not have been much affected, if at all.

What would Darcliffe have done differently

As to the third question posed, the judge held that Darcliffe would not have done anything differently. Had Darcliffe been given non-negligent advice by Glanville, and had they been made aware of the issue of potential ground dissolution, they would have engaged GWL for further investigations. This is in fact what happened.

Obiter remarks on measure of loss

As a separate point, the judge made obiter remarks on the measure of loss in such situations.  Following Perry v Sidney Phillips & Son [1982] 1 W.L.R. 1297, the correct measure of loss was diminution of value between the sum actually paid for the purchase of the site and the sum which should have been paid had the report not been negligent.

Implications – Developers take heed

Following this judgment, developers would be wise to demonstrate both engagement and reliance regarding specialist advice. In particular:

• Developers should thoroughly review all consultant reports. The court put a low bar on what would have been deemed non-negligent; a single sentence setting out a warning was held to be sufficient. In this context, it is incumbent upon developers to “read the small print”, take heed of all warnings and seek clarification on any ambiguities or potential risks identified. It is salutary that the directors of Darcliffe were not seen as reckless. The judge assessed them to be careful men – and yet their actions were held to be insufficiently diligent;
• A claimant must be able to demonstrate that the corporate mind has been affected by a report on which it relies. Where the testimony and practice of an individual or a few individuals are concerned, their behaviour will be analysed. The question remains as to how this will be interpreted where a large board is involved;
• The injured party must show that, but for the negligent advice, it would have acted differently. What else would it have done? If it would have taken the same course of action anyway, that would be fatal to the claim; and
• As always in disputes, record-keeping is crucial. If developers can produce contemporaneous evidence that they reviewed reports and made decisions based on that advice, they stand a much higher chance of convincing a tribunal that they relied on that advice.

Whilst this case concerned geo-engineering reports on site conditions, the lessons are likely to be applicable to advice from consultants in a wide range of disciplines, from ecology to structural engineering to fire safety.

Should you wish to discuss any of the issues raised in this article, please contact Anna Wood or Andrew Pratten.