In a ground-breaking ruling, the Employment Appeal Tribunal (EAT) has confirmed that drivers for online cab giants Uber are ‘workers’, as defined by the Employment Rights Act 1996, and are thus entitled to a panoply of rights and benefits.

In upholding complaints by a number of Uber drivers who plied their trade in London, an Employment Tribunal (ET) had found that, whenever they had the company’s app switched on and were willing to accept assignments, they qualified as workers and were, amongst other things, entitled to the protection of the Working Time Regulations 1998 and the National Minimum Wage Act 1998.

In challenging that ruling, Uber pointed out that the drivers had no written contract with the American parent company’s London-based subsidiary. Whilst they did sign written agreements with the parent company, their terms were inconsistent with the existence of any worker relationship. It was submitted that the agreements made clear that the drivers provided transportation services to those who hailed them and that Uber provided services to the drivers as their agents. The drivers were carrying on business on their own account and were not required to work for Uber.

In dismissing the appeal, however, the EAT found that the contractual documents did not reflect the true relationship between the drivers and the London subsidiary. The reality was that the drivers formed a central part of Uber’s business in providing transportation services. The level of control to which they were required to submit pointed away from a conclusion that they worked on their own account and that their direct contractual relationship was with their passengers. It could not be said that the London subsidiary merely acted as the drivers’ agent.

The obligations imposed upon the drivers to accept trips offered by Uber, and not to cancel trips once accepted – there being potential penalties for doing so – was another powerful indicator that the relationship was not one of agency. If they had the app switched on, the drivers were required to be willing and able to accept assignments and Uber described them as being ‘on duty’. There was nothing inconsistent or perverse about the ET’s conclusions.

Uber disputed the finding and continues to insist that its drivers are self-employed and value the fact that they can choose if, when and where to drive. Whilst Uber requested that the case be ‘fast-tracked’ to the Supreme Court, that was refused and the company must pursue its appeal in the Court of Appeal.

We regularly advise clients facing Employment Tribunals. Contact us for further information

It is a popular misconception that all debtors need to do to avoid their creditors is to transfer their assets to someone else. The fallacy of that belief was shown by a High Court case involving a businessman who moved property, cars and cash to his estranged wife in a fruitless attempt to escape his liabilities.

Investors in the businessman’s failed financial scheme had obtained a judgment against him for $2.5 million and sought to enforce that debt against various assets, which had been given to his wife or placed in her name. It was submitted that the transfers were at an undervalue, within the meaning of Section 423 of the Insolvency Act 1986, and were designed to put the assets out of his creditors’ reach.

The Court upheld the investors’ arguments in respect of a number of residential properties, cars – including an Aston Martin – and various cash sums and other benefits which had been passed from husband to wife. The latter’s plea that the car was a wedding anniversary gift, and that other assets had been moved to her as part of an informal separation agreement, were rejected.

The ruling opened the way for the investors to enforce the debt against the assets which had been gifted by the businessman to his wife for no consideration. However, the Court exercised its discretion to allow the wife to retain £100,000 of the relevant sum so that she would have the opportunity to re-settle herself and to pay for the completion of her daughter’s education.

On the whole, we are not accustomed in the UK to long periods of hot weather, so when high temperatures do occur employers may not be prepared to deal with situations that arise as a result.

The Advisory, Conciliation and Arbitration Service (Acas) has guidance for employers on this topic. This includes information on employers' health and safety obligations as regards ensuring that workplace temperatures are reasonable as well as adjustments that may be necessary, such as:

 - more flexible working where public transport is affected;

- measures to accommodate Muslims fasting during the Holy Month of Ramadan;

- measures to ensure vulnerable workers are not at a disadvantage; and

- relaxing dress codes.

Where employees are accused of gross misconduct, suspending them on full pay pending a disciplinary investigation is all too often a knee-jerk reaction. However, such a step is not always justified and a firm of architects which fell into that trap found itself liable to pay a substantial compensation award.

The case concerned a senior architect who had exhausted her annual entitlement to paid leave but felt that she had to fly to Greece for two days in order to deal with an urgent family matter. Due to a misunderstanding, she believed that the additional leave had been authorised by her line manager.

After the firm refused permission on the evening before she was due to fly, she took the view that the die had by then been cast and embarked on her trip. She was immediately suspended on her return and her email account was blocked. She resigned shortly before a disciplinary hearing was due to take place and launched Employment Tribunal (ET) proceedings.

In ruling on the matter, the ET found that the decision to suspend her was not taken due to concerns about her alleged misconduct but was motivated by the firm’s nervousness that she would be upset and make a scene in the office, setting a bad example to junior colleagues. The firm’s HR advisers appeared to have taken the view that any charge of gross misconduct would generally warrant suspension.

The firm had also acted unfairly in taking into account an incident the previous year which was also said to have resulted in her exceeding her holiday allowance. That matter had been resolved at the time and should not have been brought up again. After upholding her complaints of wrongful dismissal and unfair constructive dismissal, the ET awarded her a total of £34,083 in compensation.

In ruling on the firm’s challenge to that outcome, the Employment Appeal Tribunal (EAT) found that the ET was wholly justified in concluding that there was no fair reason for the woman’s suspension, which amounted to a breach of the implied term of trust and confidence in her employment contact.

Arguments that she was partly to blame for her own dismissal and that she had failed to take adequate steps to mitigate her loss were also rejected. The EAT accepted that the reasons the ET gave for awarding her 40 weeks’ net loss of pay were inadequate. The same ET was directed to consider that issue afresh, but the firm’s appeal was in all other respects dismissed.

We have experience of acting on both sides of the fence in relation to a wide variety of employment claims in the Tribunals. Get in touch for further information.

Friendly agreements between neighbours about property rights may seem a good idea. However, as a High Court case showed, they may not be binding on future owners and that is why it always makes sense to get a lawyer to formalise such deals.

 A couple owned two adjoining terraced houses and obtained planning permission to build another to the side of one of them. Developing the new house would involve building over a right of way enjoyed by their neighbour. The right of way had been fenced off and unused for a number of years.

 The neighbour had agreed to the removal of the right of way from the registered title to his property on the basis that the couple would pay the costs of doing so. After he sold his home, however, the new owners refused to take that course. Faced with the frustration of their development plans, the couple launched proceedings, seeking a declaration that the right of way had been extinguished.

 In dismissing their claim, the Court found that the couple’s informal agreement with the neighbour was not binding on the new owners. The right of way had not been removed from the registered title before the new owners bought their property and they had no prior notice of the agreement. The couple had also not taken up formal occupation of the right of way, having not yet built across it.

The Court noted that, by waiting until after they had been granted planning consent before taking steps to remove the right of way from the registered title, the couple exposed themselves to the risk that their unprotected and unimplemented agreement with the neighbour would cease to be enforceable. The ruling means that the right of way will remain in place unless the new owners agree to its removal.

The Government is in long-running default of its obligation to meet EU air quality targets – but to what extent should that unfortunate fact be taken into account by planners? The Court of Appeal considered that issue in a guideline decision.

A developer wished to build up to 330 new homes on farmland but faced opposition from the local authority and a regional branch of the Campaign to Protect Rural England. The site lay within a designated air quality management area and, following a public inquiry, a government inspector refused to grant planning consent. He found that the proposal was likely to have at least a moderately adverse impact on local air quality. His decision was subsequently backed by a judge.

In dismissing the would-be developer’s challenge to that ruling, the Court found that the inspector was under no obligation to assume that the Government’s attempts to belatedly meet the requirements of the Air Quality Directive would be effective. He was also entitled on the evidence before him to express a lack of confidence that the developer’s mitigation measures would adequately address nitrous oxide emissions arising from residents’ use of private vehicles.

 There had been no procedural unfairness, in that the developer was aware that the air quality issue would loom large at the inquiry and had been given a fair opportunity to deal with it. The inspector’s concerns about the effectiveness of proposed air quality mitigation measures were rational, adequately explained and represented a classic exercise of planning judgment that was not susceptible to challenge. 

You may recall from our summer 2013 Debt Newsletter that a guarantee is a promise to fulfil a third party’s obligations if that third party fails to do so. It is a contractual agreement that creates a secondary obligation to support a primary obligation of one party to another, for instance a director’s promise to pay professional charges due from a company.

What may be considered as a personal guarantee on the face of it, may not be enforceable.  As the personal guarantee is contractual,a guarantor may attempt to argue that it is invalid, which will include arguments such as:

1. There was no consideration
The doctrine of consideration requires both parties to ‘benefit’ from the contractual arrangement in some way. The entity requesting the guarantee will obviously have the benefit of the guarantee; however the party giving the guarantee does not necessarily personally benefit, unless it can be shown that there is some indirect benefit. The way to avoid this argument is to create the personal guarantee by a Deed. 

2.The guarantor did not have the authority to give a personal guarantee
The personal guarantee is personal to the individual giving it rather than in connection with the entity which is requiring a service.  However, it is important that the individual providing a personal guarantee understands what it is that they are signing and it is therefore advisable that this is discussed with the guarantor and a note is made of the discussion.  It is also advisable to ask the guarantor to seek independent legal advice if there is any doubt about their understanding of the terms. 

3. The guarantee is not reasonable
The guarantee may include terms which are overly onerous on the guarantor, rendering the guarantee invalid.  Accordingly, you should consider the terms of the guarantee carefully and restrict the same to what is required from the other party under the primary obligation. 

4.The guarantor was induced to give the personal guarantee by duress, misrepresentation or undue influence
In the event that the guarantor was induced to give the personal guarantee by duress, misrepresentation or undue influence, this may render the guarantee invalid; however it will be for the guarantor to give evidence in this regard and substantiate such assertions.  In order to avoid this argument, it is again advisable to make a concise and clear note of the discussions taken place with the guarantor and suggest that the guarantor take independent legal advice.

The steps taken by you with regards to ensuring the validity of the personal guarantee may be dependent on the nature of the client, the value of the likely transactions and the risks.  However we would suggest that you carefully review any documents which you may use to avoid the risks of such a personal guarantee later being determined invalid. 

If you would like us to review any existing personal guarantees and/or prepare the same for you, please contact Matthew Miles.

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The notes are not intended as a substitute for reference books or other legal materials. Nor are they intended a primary source of information upon which to base advice or opinion in any particular case.
The reader should refrain from taking any action based solely upon the basis of these notes.
We have made every effort to ensure the accuracy of these notes. If there are mistakes, we apologise and ask you to let us know, however, we cannot accept any responsibility for the consequences of such errors.

Guides coming soon! Please check back regularly.

The notes are not intended as a substitute for reference books or other legal materials. Nor are they intended a primary source of information upon which to base advice or opinion in any particular case.
The reader should refrain from taking any action based solely upon the basis of these notes.
We have made every effort to ensure the accuracy of these notes. If there are mistakes, we apologise and ask you to let us know, however, we cannot accept any responsibility for the consequences of such errors.

Be Alert We have been defending a debt claim on behalf of a client. The supplier has been putting extreme pressure for payment of invoices, but despite numerous requests, the supplier has been unable or unwilling to provide a schedule of invoices to allow our client to reconcile its own account. The supplier’s failure to provide such information raises serious concerns as to the validity of such a claim. Despite numerous threats of a claim from the supplier, one has not yet been issued and in any event, the supplier’s failure to engage in full and frank pre-action correspondence setting out its claim is likely to be frowned upon by the Court. The lesson is therefore always to provide an accurate statement of account of any invoices which are outstanding if you wish to avoid challenges to your invoices, late payment and the risks of adverse costs orders against you.

Boundary disputes can be intractable and painful for all concerned. However, as one case concerning adjoining terraced houses showed, obtaining specialist legal advice is the best means of achieving a swift, decisive and cost-effective resolution.

The houses, one to the north and the other to the south, were mirror images of each other and had a drain-down pipe between them that became the focus of the dispute. The owner of the southerly house claimed that the boundary lay at the centre point of the pipe and that his neighbour had built a wall on his side of the line.

The owner of the northerly house argued that the true boundary lay to the south of the drain pipe, in line with a fence that had been removed some years earlier, and that the wall had therefore been constructed on her land. After the neighbours failed to reach agreement, the matter was submitted to the First-tier Tribunal (FTT) under the Land Registration Act 2002 for a determination of the precise boundary.

The FTT noted that small-scale plans attached to the title deeds of the properties were of no assistance. Physical features on the ground post-dated construction of the terrace and were equally unhelpful. It could also not be assumed that the boundary lay exactly half way between the two properties.

In the circumstances, it was necessary to consider the conduct of the owners, and former owners, of the properties in order to determine whether there had in the past been express or tacit agreement as to where the boundary lay. On that basis, it was likely that the pipe, and a hedge that had once grown between the two houses, had both been in single ownership and had not marked the boundary. The FTT preferred the boundary line contended for by the owner of the northerly house.

A housing association has written to the Housing Minister, urging him to extend the current Help to Buy scheme.

Metropolitan Thames Valley Housing claims many would-be homeowners could miss out on their chance to get onto the property ladder, due to unavoidable construction delays resulting from the Covid-19 pandemic.

In a letter to Chris Pincher, Minister for Minister Housing, Communities and Local Government, the Housing Association said: “A number of our customers are set to lose out on their dream homes solely due to unavoidable delays to construction as a direct consequence of the pandemic. And they are not alone.

“Across England, a large number of buyers are facing a similarly desperate situation whereby their dream of homeownership will be lost if the government does not extend the current Help to Buy completion deadline of 28 February 2021 for new build homes.

“The construction sector is just one of many that has felt the enormous effects of Covid-19 over the last 10 months, with completions for new homes inevitably delayed due to site closures, reduced teams on site to comply with social distancing, and issues with supplies.

“We are therefore asking the Government to show flexibility, as it has done throughout the pandemic, and provide an extension to the existing Help to Buy scheme to guarantee that transactions on new build properties that have progressed to the point of completion will go ahead as planned.

“If this technical change is not made, first-time buyers across the country may see their purchases collapse, incur additional costs or even abandon purchases, which would be bad news for them, housing providers and the wider market. There’s still time to act, so we look forward to working with the Government to resolve this issue.”

Our team of experts support social housing organisations and their residents with all aspects of the Shared Ownership and HomeBuy process.

For more information on Shared Ownership and our range of legal services for the social housing sector, please get in touch.

It is a fundamental rule of law that the courts will not assist anyone to profit from his own illegal or immoral acts. However, in a landmark decision, the Supreme Court has ruled in the context of a debt recovery claim that that maxim should not be so slavishly applied as to achieve arbitrary, unjust or disproportionate results.

Businessman A gave £620,000 to businessman B in the expectation that he would use inside information to place bets on a bank’s share price. The scheme proved abortive and businessman A launched proceedings to recover his money. On the basis that the whole arrangement had been illegal from the outset, businessman B argued that the claim should be rejected on public policy grounds.

The Court of Appeal ruled that businessman A was entitled to recover his money. In dismissing businessman B’s challenge to that decision, the Supreme Court took a flexible approach in finding that businessman A’s claim was not debarred by illegality. Businessman B would be unjustly enriched if permitted to keep the money and such an outcome would be a disproportionate response to the unlawful purpose of the arrangement. The result of the case did not conflict with the public interest or undermine the integrity of the justice system.

One of the main questions we ask our clients is what do you know about the debtor and most importantly, the debtors residential address and any assets held by the debtor. 

If you do not know the whereabouts of the debtor, social networking sites may help you locate them.  It is very unlikely that you will be able to locate an exact address, however even the name of the town or city can sometimes help us in locating them for you.  Additional information, for example a date of birth, may also help. 

However, some caution must be exercised.  There is a risk of course that the search engines bring up the details of an individual who is not the debtor.  In addition, there is a risk that you may be criticised by a Judge if it is considered that you are acting unreasonably via such sites. 

In particular, last year Facebook warned debt collectors not to use its service to track down those owing money after a woman in Florida was stalked for non-payment of a car loan. In April this year the judge told the collector to cease and desist. In addition, the Office of Fair Trading (OFT) is warning debt collectors not to pursue people who owe them money on social networking sites such as Twitter and Facebook as it is concerned that embarrassing details about their financial problems will be revealed on the internet.  The OFT received a number of complaints from debtors who were being pressurised online to pay off loans.

Therefore, whilst social networking sites can sometimes be helpful in gathering information on your debtor, caution must be exercised.  It is advisable not to chase the debt via such means.

by Dr. David Gethin, Solicitor, Housing Management Department

23 March 2016

I work with a number of social housing clients that have significant numbers of properties subject to long leases. The role of service charge officers cannot be overestimated in ensuring timely recovery of service charge arrears.

There are broadly 3 types of leaseholder who do not pay:

1. Those who genuinely are suffering financial hardship and are struggling to pay;
2. Those who dispute they should have to pay; and
3. Those who have bought property for the purposes of subletting.

Where there is genuine financial hardship, the question to consider is, ‘What is the best way to secure payment without creating more stress and difficulty for the leaseholder?’ Admission of the arrears by the leaseholder and approaching the lender, or agreement to enter into a voluntary charge, are effective options whereby court proceedings can be avoided.

Where the leaseholder disputes having to pay, it is always worth considering whether the dispute is genuine and it may well be worth instructing solicitors before running to the court (or at least the County Court Money Claims Centre in Northampton) claim in hand.

When a proposed claim is referred to me, I scrutinise it to identify any weaknesses such as a failure to properly consult on qualifying works, or a failure to demand payment within 18 months of the costs having been incurred.  If a case is flawed, a negotiated settlement will be preferable to, and less expensive than, criticism and adverse decisions in the Court or Tribunal.

Then there are the absentee leaseholders; some blissfully ignorant of the charges they should pay because they have not updated the landlord with correspondence details, others who willfully avoid paying.  It is not uncommon to find that a single individual, or several members of one family, have built up a substantial portfolio of properties sublet for significant profit.  This is where the service charge officer can do a lot to ensure that cash flow is not adversely affected.  My ‘top tips’ are:

• Link accounts together on your system, if possible, or make a clear note on each account that the leaseholder holds other properties.
  
  

• Update changes of address across the board – require notification in writing, ensure that the notification is recorded on all accounts, and inform the leaseholder in writing that this has been done.

• Carry out portfolio balance reviews before reaching an agreement with the leaseholder for deferred payment on any one account. How many properties the leaseholder owes money on, and how much is owed overall, will be relevant. So too will the leaseholder’s likely total income from subletting. Look to reach one agreement to cover the whole picture.

• Separate accounts types e.g. for insurance, ground rent, miscellaneous charges and ‘major works’, where maintained, should also be checked and taken into consideration.

• Only accept agreements which are in writing and which include a statement that the leaseholder accepts that £x amount is owed at y.

• Credit payments received against the oldest debt on the account and inform the leaseholder in writing that this is being done, unless the leaseholder has specified that the payment is to cover a specific invoice. This reduces the risk of debts becoming irrecoverable due to being more than 6 years old.

• Carry out regular reviews, at management level, to ensure that collection is kept on track.

I have recently advised a client where the family members owe an eye watering £1/4 million in unpaid service charge and major works arrears on a portfolio of 30 properties. Whilst some fairly ad hoc agreements have been reached on some accounts, other accounts have not had a payment made in nearly 4 years and, in some cases, the last correspondence chasing the arrears on the account was sent over a year ago.

It is the leaseholder’s obligation to pay the service charge but it is the landlord’s responsibility to protect the business and its cash flow by ensuing appropriate action is being taken.

Contacts

Dr. David Gethin
020 8768 7067

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If an employee goes the extra mile and works outside normal office hours, does the additional income received form part of his or her pensionable earnings? The Court of Appeal analysed that issue in boosting the redundancy compensation and pension entitlements of a civil servant who regularly toiled at weekends.

The IT specialist worked for HM Court Service (HMCS) under a contract which at first required him to work 36.25 hours a week. The contract made no provision for overtime. The pressure of work was such, however, that he agreed to work extra hours at weekends. His contract was amended to reflect that arrangement and he was paid for the additional hours worked.

After he was laid off, HMCS calculated his redundancy compensation and his future pension entitlements on the basis of the 36.25 hours originally specified in his contract. The additional pay he earned at weekends was left out of account. After lawyers launched proceedings on his behalf, however, a judge upheld their arguments that, on a true interpretation of the Principal Civil Service Pension Scheme, the pay he earned at weekends qualified as pensionable earnings.

In dismissing a challenge to that ruling brought by the Ministry of Justice and the Cabinet Office, the Court rejected arguments that only remuneration that the man received for hours precisely specified in his contract qualified as pensionable earnings. The amended contract required him to work a reasonable number of hours at weekends and imposed a reciprocal obligation on HMCS to pay him for those hours. When the man worked at weekends, he was working in accordance with his obligatory contractual working hours and was not undertaking overtime.

Not every commercial contract is as well drafted as it might be and, in interpreting such documents, judges often have to fall back on intuition and business common sense. That was certainly so in a High Court case concerning a so-called ‘land banking’ operation.

A company’s business model was to acquire greenfield sites and divide them into smaller plots before selling them on to investors. Sale contracts contained covenants that required investors to pay fixed annual sums as contributions towards the costs of cleaning, maintaining and repairing roads and other byways on land the company had retained. After numerous investors refused to make such contributions, the company launched proceedings.

The company argued that investors were under an unconditional obligation to make the contributions from the date on which the contracts were entered into, irrespective of whether any roads or byways had in fact been built or were anticipated to be built. There was a requirement to make the contributions annually in advance and it did not matter that no services of cleaning, maintenance or repair had in fact been performed. The intention was that investors would be able to spread the cost of those services over the entire life of the contracts.

However, in rejecting those arguments and dismissing the company’s claims against more than 170 investors, a judge noted that the contracts were not well drafted and that four different versions of the covenants existed. He concluded that, since no roads or byways had been constructed or even planned, and no services were able to be provided, no liability to make contributions had yet arisen.

Dismissing the company’s appeal against that outcome, the Court found that, on an ordinary reading of the language and syntax employed in the covenants, they did not impose an unconditional payment obligation. Until the company was able to say that it genuinely intended and would be able to provide the relevant services in any coming year, it was hard to regard a contribution as being made ‘in advance’ of anything.

There was little commercial common sense in investors having to pay, from day one, for services in respect of roads or byways that not only did not exist at the dates of the sales but were not even foreseeably expected to be built. It was even stranger that the company was under no contractual obligation to apply for planning permission for such roads or byways or to build them. It was odder still that, if the roads or byways were in fact built, the company would be under no duty to clean or maintain them. The company’s interpretation of the covenants would have counterintuitive results and commercial common sense told firmly in favour of the investors.

It seems only natural that, when companies get into financial difficulties, directors should seek to salvage what they can from the wreckage. However, the interests of creditors have to be taken into account when insolvency threatens and, in one case, a businessman’s failure to seek legal advice left him in very deep water.

The businessman and his wife ran a once highly successful property development company which was carefully managed before it came unstuck in the recession. It entered creditors’ voluntary liquidation in July 2008 with an estimated deficiency of about £1.1 million, most of which was owed to a bank.

The company’s liquidators launched proceedings against the couple, accusing them of misfeasance and breach of trust in seeking to remove capital and property assets from the company for their own benefit, and at the expense of creditors, in the months before it went bust.The High Court found that the businessman was aware that the company was at serious risk of insolvency when he took steps to extricate certain assets from it in order to preserve them for the benefit of his family. Those steps were taken without legal advice in respect of his duties as a director and at a time when the company was entirely dependent upon continuing support from the bank, which was by no means assured.

The majority of the liquidators’ claims in respect of property assets were rejected. However, the Court found that £875,000 which was credited to the directors’ loan account prior to the liquidation remained an asset of the company and was thus available to creditors. The couple had also retained some property interests which were beneficially owned by the company. The Court would hear further argument on the precise form of order arising from its decision.