News Updates January 2012
Employees will have to pay to bring tribunal claims
Employees wanting to bring tribunal claims will have to pay fees ranging from £150 to £1,750 under new proposals announced by the Government.
Ministers say the move will relieve pressure on businesses and reduce the £84m annual cost to the taxpayer.
The Ministry of Justice has now begun a public consultation on the proposals, which are designed to ensure that those who use the system make a contribution towards the costs.
The consultation offers two options for consideration:
- Option 1: an initial fee of between £150-£250 for a claimant to begin a claim, with an additional fee of between £250-£1250 if the claim goes to a hearing, with no limit to the maximum award; or
- Option 2: a single fee of between £200-£600 – but this would limit the maximum award to £30,000 – with the option of an additional fee of £1,750 for those who seek awards above this amount.
Both options would allow the tribunal to order the unsuccessful party to reimburse the other side’s fees.
It’s hoped that the proposals will discourage unmerited claims and encourage early settlement.
Many employers believe that the current system puts them at a disadvantage even if they are blameless because complainants have nothing to lose by going to a tribunal and have few incentives to choose conciliation or mediation.
The Government fears that excessive claims may be a barrier to employment with firms reluctant to recruit because they fear they could be “taken to a tribunal on a whim” if something goes wrong.
Justice Minister Jonathan Djanogly said: “We believe that people should pay a fair amount towards the cost of their case. Fee waivers will be available for people on low incomes to protect access to justice.
“Our proposed fees will encourage businesses and workers to settle problems earlier, through non-tribunal routes like conciliation or mediation and we want to give businesses – particularly small businesses - the confidence to create new jobs without fear of being dragged into unnecessary actions.”
There were 218,100 claims to Employment Tribunals in 2010-11, a 44% increase on 2008-09. The introduction of fees will bring employment tribunals in line with civil courts where claimants already have to pay to bring a case.
The consultation closes in March, but the fees are unlikely to be introduced before 2013-14.
We shall keep clients informed of developments.
Please contact us if you would like more information about tribunal claims or any aspect of employment law.
Local authorities lose appeal over planning permission for HMOs
Three councils have lost their appeal for a judicial review of the Coalition Government’s decision to scrap the need for planning permission when converting single dwellings into houses in multiple occupation (HMOs).
The need for planning permission was introduced in April 2010 by the last Labour Government after it had conducted a consultation with interested parties the previous year.
However, the new Coalition Government decided that imposing a blanket need for planning permission in such cases could not be justified. It feared it would deter landlords from providing much needed low cost accommodation.
It carried out an informal consultation with key stakeholders and then abolished the planning permission requirement in October 2010 – only six months after it had been introduced.
This led to a call for a judicial review of the decision by three local authorities – Milton Keynes, Oxford and Newcastle. They argued that Eric Pickles, the Secretary of State for Communities and Local Government, had failed to consult councils sufficiently before proceeding.
In giving the court’s decision, Lord Justice Pill said the issue of whether or not planning permission should apply was a macro-political decision. “The Secretary of State was minded to make the orders challenged notwithstanding the strong, articulated objections to them by local planning authorities, of which he was aware.
“The decision to make them was a political decision which the Secretary of State was entitled to make.”
Please contact us if you would like more information about the issues raised in this article or any aspect of commercial property law.
Developers must pay extra after selling land cheap
A development firm must pay more than it bargained for to a local authority after selling on land at below market price to a group company.
The developers bought the land from the authority with a view to creating a business park. The authority retained a share in the open market value of the land, which meant an uplift was payable if the developers disposed of the land by sale or lease, or if they wanted to buy out the authority’s share.
The developers then sold the land to a group company for a notional sum, triggering the uplift clause.
This led to a dispute as to whether the uplift should be calculated on the basis of the actual market value or on the basis of the notional sum paid by the group company.
Surprisingly, perhaps, the contract did not make this clear and so the court had to decide what both sides had intended at the time they made their agreement.
The court held that although the contract was not explicit, the context showed that the intention of both parties was that the base figure for the calculation of the uplift was to be the open market value of the land rather than the actual sale price.
It could be assumed that that was what the parties would have said had they been asked about it at the time.
Please contact us if you would like more information about contract law.
Don’t overlook new tax relief for property investors
Investors buying properties consisting of two or more flats could be spending far more than necessary if they don’t take advantage of a Stamp Duty Land Tax (SDLT) relief introduced in the Finance Act 2011.
The change rectified the situation whereby if an investor bought a property containing several flats from the same seller, the rate of SDLT would be determined by the total amount payable. For example, if there were five flats at £250,000 each then the total purchase cost would be £1.25m.
SDLT would then be charged at 5%, because the total price exceeded £1m. The buyer would therefore be paying £12,500 tax on each flat.
The new system is far more generous. It allows the rate of SDLT to be determined by the average cost of each unit.
In the example given above, the average cost of each flat is £250,000, which falls within the 1% band. The tax on each one is therefore reduced to only £2,500 – five times less than under the old system.
There are conditions, of course. The relief only applies to properties that consist of two or more dwellings, or land on which a property consisting of two or more dwellings is being constructed or adapted.
It may not apply to bedsits because HM Revenue & Customs considers that for a unit to be classed as a single dwelling, it must be self-contained. That view could be open to challenge, however, and there is case law to suggest that the courts may be prepared to consider a unit as a separate dwelling even if it is not self-contained.
There are some other important provisos. The rate cannot fall below 1%, even if the average price of the each dwelling is less than the £125,000 threshold, and the relief doesn’t apply to properties that are subject to a lease or sublease granted for an initial term of more than 21 years.
The relief may also be clawed back if certain changes are made to a property within three years of purchase. For example, if the relief is granted on a property consisting of several flats, it may be taken back if the flats are later converted into a single unit.
The relief may not apply in all cases but where it does, it could provide substantial savings in SDLT.
Please contact us if you would like more information about the issues raised in this article.
When a letter can amount to a written contract
A firm of architects has won a dispute over fees after the High Court ruled that a letter it had sent to its client did amount to a written contract.
The case arose after the architects agreed to carry out consultancy services for a local authority under a framework agreement. The work was to be carried out in two stages.
The first stage was completed without incident but there was a disagreement about fees for the second stage.
The architects claimed they were entitled to charge commission at 5.5% as set out in a letter they had sent to the authority. They argued that the authority had effectively accepted those terms by its conduct in allowing the work to go ahead.
The authority maintained that the overall framework agreement required that commissions had to be renegotiated for the second phase. Those negotiations had not taken place and there was no written contract in relation to paying commission of 5.5%.
The court ruled in favour of the architects. It held that the terms were set out in the letter. The authority had effectively accepted those terms by allowing the work to go ahead. The architects were therefore entitled to their fees.
Please contact us if you would like more information about the issues raised in this article or any aspect of contract law.
OFT updates its guidance on debt collection
The Office of Fair Trading (OFT) has updated its Debt Collection Guidance, which sets out the standards required of any business involved in recovering consumer credit debts.
The revised guidance highlights specific practices that the OFT considers to be unfair, such as using Facebook, Twitter and other social networking sites to contact debtors.
It says that it is not acceptable to contact debtors at unreasonable times or inappropriate places, such as when they are a patient in hospital.
The guidance also warns against the misuse of continuous payment authority to recover debts, such as making recurring attempts to recover a single repayment.
It highlights the responsibilities of all parties involved in the debt recovery process, including creditors, for the quality and level of information they maintain and exchange with others, in order to avoid the wrong person being pursued for a debt.
It also provides greater clarity on the OFT's position on issues such as reasonably queried and disputed debt, and statute barred debt.
The OFT stresses that debt recovery businesses should adopt appropriate practices and procedures for dealing with particularly vulnerable debtors.
David Fisher, the OFT's Director of Consumer Credit, said: “In the present economic climate, with many people, including those who may be particularly vulnerable, in financial difficulties, it is crucial they are treated fairly by companies recovering their debts.
“This updated guidance makes clear the standards the OFT expects of all businesses involved in debt recovery, including debt collectors, banks and law firms.”
Please contact us if you would like more information about the issues raised in this article or any aspect of credit control and debt collection.
Regulators to treat businesses as ‘customers’ not culprits
The Government wants businesses to be treated as customers rather than culprits when it comes to the enforcement of regulations.
It has put forward a number of proposals in response to its recent Transforming Regulatory Enforcement consultation, which set out how the Government wanted a more mature and open relationship with businesses in relation to regulations.
There will be a full scale review of UK regulatory bodies and one of the key moves could be to cut the number of inspections for compliant firms.
A Government statement says its proposals include:
- a review of all regulators, not just to examine the case for continued existence, but to make sure each one is making the fullest possible use of alternatives to conventional enforcement methods, working with business and others and reducing state activity wherever possible.
- making greater use of ‘earned recognition’, so that compliant businesses are subject to fewer inspections and unnecessary regulatory action.
- doing away with the assumption that compliance is something for the State to enforce alone, moving to a presumption that regulators should work with business through ‘co-regulation’ wherever possible.
- working with businesses, through local enterprise partnerships and local authorities, to promote better local regulation.
- a presumption that regulators should help businesses comply with the law.
- establishing the principle that no business should face a sanction for simply having asked a regulatory authority for advice.
Business Secretary Vince Cable said: “Business has said clearly that regulatory enforcement is too often heavy-handed, inefficient and risk-averse – all of which drains productive businesses of time and resources. That’s why we’re introducing a review of all regulators.
“We will also move to a transparent and light-touch system based on real risks, including extending the successful Primary Authority scheme and bringing the Local Better Regulation Office (LBRO) into Government as a new Better Regulation Delivery Office.
“We will end the tick-box approach to inspection, including establishing sunset review clauses on most new statutory regulators created in the future.”
The Government now plans to gather more evidence before outlining more detailed proposals in the spring. It says that businesses “will see a real difference, becoming more like customers rather than simply on the receiving end, of the regulatory enforcement system”.
We shall keep clients informed of developments.
Government plans to modernise UK copyright laws
The Government has outlined plans to modernise UK copyright laws to encourage business growth and development.
It has now begun a public consultation on its proposed measures which are based on recommendations in the Hargreaves Review of Intellectual Property and Growth.
The proposals include:
- Creating an exception to allow limited acts of private copying - for example making it legal to copy a CD to an MP3 player. This move will bring copyright law into line with modern technology and the reasonable expectations of consumers.
- Widening the exception for non-commercial research to allow data mining, enabling researchers to achieve new medical and scientific advances from existing research. Currently researchers cannot use some new computer techniques to read data from journal articles which they have already paid to access without specific permission from the copyright owners of each article.
- Introducing an exception for parody and pastiche, to give comedians and other people the creative freedom to parody someone else’s work without seeking permission from the copyright holder.
- Establishing licensing and clearance procedures for ‘orphan works’ (material with unknown copyright owners). This would open up a range of works that are currently locked away in libraries and museums and unavailable for consumer or research purposes.
- Introducing provision for voluntary extended collective licensing schemes, which would make it simpler to get permission to use copyrighted works and help ensure rights owners are paid. These schemes would allow authorised collecting societies to license on behalf of all rights holders in a sector (except for those who choose to opt out).
- Modernising other exceptions to copyright including those for education, quotation, and people with disabilities.
The Minister for Intellectual Property, Baroness Wilcox, said: “The Government is focused on boosting growth and some freeing up of existing copyright legislation can deliver real value to the UK economy without risking our excellent creative industries. We are encouraging businesses to come forward with thoughts and evidence on our proposals to help us achieve this.”
The consultation runs until 21st March.
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