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Welcometo the Summer edition of Retail LineThe news that the Government will be consulting on proposals to extend the Sunday Trading hours in England and Wales is already dividing opinion, both within the sector and outside of it. In the 20 years since the legislation was introduced, retailers have faced unparalleled changes. The challenge of economic recession, the migration of shopping habits from high streets to hyper shopping centres and seaside tourist towns and the spectacular escalation of online shopping could never have been predicted in 1994, so the consultation is, at the very least, an opportunity to examine whether Sunday trading meets current requirements and to discuss how the sector should respond to emerging issues. Clarke Willmott will be following the consultation and reporting in later editions of Retail Line.
In this edition we look at new consumer protection legislation, provide an update on the ECJ’s decision in the Woolworths and Ethel Austin cases, and report on the suspension of websites selling fake luxury goods. Also, our property experts offer advice to tenants about the new Minimum Energy Efficient Standard.
Peter Swinburn Partner 0845 209 1539* / 0117 305 6539 peter.swinburn@
clarkewillmott.com
William Juckes Partner 0845 209 1340* / 0117 305 6340 william.juckes@
clarkewillmott.com
Retail Line
Retail & Leisure Briefing Summer 2015
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Is your business ready for a radical reform of consumer rights? The Consumer Rights Act 2015 is expected to come into force on 1 October 2015 and sets out new consumer protection legislation relating to the sale of goods, services and digital content to consumers. Some of the provisions have already been brought into force and retail businesses need to have a clear understanding of the new relevant standards.
In respect of goods, the new Act echoes the existing law with regard to implied contract terms for satisfactory quality, description, fitness for purpose and other standards, but it also adds several new standards. For example, certain information which is provided pre-contract will now become a contractual term.
The right to reject goods which do not conform to statutory standards will change significantly. The Act provides a timetable regarding the consumer’s right to reject goods. There is a short-term right to reject and a final right to reject. The short-term right to reject gives the consumer a clear right to reject if the defect is discovered within 30 days. After that period the consumer has the right to request that the goods which do not conform to the contract are repaired or replaced. If the first repair or replacement is unsuccessful the consumer then has the right to reject the goods or to a reduction in the price.
Businesses supplying services to consumers are also affected by the new Act. New provisions include strengthening the implied term that the trader must perform the service with reasonable care and skill and a new term that information said or written to the consumer about the service or the trader which is relied upon, is binding. This new term is significant as it means that claims against a trader for false statements will become easier. If the trader fails to provide a service with reasonable skill and care, or if the service does not conform to pre-contract
statements, the consumer can require the trader to repeat the service. Consumers may also claim a price reduction, up to the full amount of the price, depending on how serious the breach is.
Importantly, the new Act introduces specific rights and remedies relating to digital content. Digital content is defined as data produced and supplied in digital form. It includes software, music, computer games, films, e-books and apps. The Act provides standards for digital content which are similar to those relating to goods. Where the digital content is not tangible there is no automatic right of rejection. However, the consumer has the right to a refund if the repair or replacement is not possible or if it would take an unreasonable amount of time or significantly inconvenience the customer. In certain circumstances the consumer is given the right to claim compensation in the event that the digital content supplied caused damage to their device or other digital content.
The new Act also deals with unfair contract terms and enforcement.
Businesses should review their existing policies, in-store notices and terms and conditions to ensure they comply with the new Act.
For further information about commercial contracts, please contact: Chidem AlissSenior Associate 0845 209 1562* / 0117 305 [email protected]
For further information about commercial disputes, please contact: Owen WilliamsPartner0845 209 1381* / 0117 305 6381 owen.williams@ clarkewillmott.com
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Vacantly occupied – half-empty or half-full?
A lot can hang on this in two particular leasehold situations:
i. When ‘vacant possession’ needs to be returned to the landlord on lease termination
ii. Where vacant possession is a condition for the successful operation of a break option
In situation (i) the tenant’s failure to properly empty the premises can expose it to a claim for damages for trespass after lease expiry, including any consequential losses suffered by the landlord, which could be considerable in some situations. If the landlord is aware of this, it can also result in the tenant being required to pay double the rent/rental value of the unit until full vacant possession has been delivered, as a result of some 18th Century legislation that, surprisingly, remains in force today (Landlord and Tenant Act 1730 and Distress for Rent Act 1737).
In situation (ii) the tenant could be in an even worse situation. It might have served a break notice and found new premises. Perhaps there have been delays because the notice was in fact served with a view to renegotiating the rent but the landlord has decided to relet to someone else. There might have been problems with the removal of tenant’s ‘chattels’, particularly bulky or heavy items or those requiring specialist dismantling and transport: kitchen equipment, high-volume racking, production lines or IT equipment, to give just a few examples., These sometimes need to be taken out through tight common areas, including lifts, in multi-occupied buildings, which can cause a problem or delay in itself if this needs to be done within business hours, something that is potentially injunctable by the landlord or another tenant whose business is being disrupted.
There can be considerable pressure on the tenant to be fully out of the property within a compressed timescale, something on which a hard-nosed
landlord can capitalise by disingenuous negotiations which come to nothing and then leave the tenant in an irretrievable situation, particularly if there are problems on the relocation or fit-out of the new premises. The worst case scenario is where a lease has been signed on the new premises but the break notice is rendered invalid on the old because of the failure to fully vacate in time; the result being two lots of rental and other liabilities, including service charges, insurance and business rates, and having to negotiate an expensive surrender with the old landlord or assign or sublet that unit.
This is however avoidable by conservatively-early planning and a thorough ‘legal audit’. Having a ‘Plan B’ is also useful for resilience if there are unanticipated problems.
Although volumes have been written, and many high-value cases decided, on what ‘vacant possession’ means legally, the situations involved have often flowed from a lack of proper planning and preparation by the tenant or its advisers. One needs to be meticulous in this area, particularly if a ‘one-bite’ time-critical conditional break option is involved, where to all intents and purposes ‘vacant possession’ means ‘completely empty’, unless one has an unhealthy appetite for the risks and expense of avoidable litigation.
And as well as the unit being properly empty, remember to give the keys back on time, leave interior secure areas unlocked if possible, take some photos or video evidence … and give the landlord all the alarm codes!
For further information, please contact: Neil HamPartner0845 209 1386* / 0117 305 6386 [email protected]
Show a randomly-selected group of people a vacated unit with some odds and ends left behind by the departing occupier, and it would be surprising if all agreed whether it was, for practical purposes, ‘empty’. This is the sort of situation that vacating tenants need to avoid, since where there is dispute, the law is decided by a person, a judge, whose conclusion is necessarily to an extent subjective and always fact-sensitive.
03 Retail & Leisure Briefing Summer 2015
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In the Spring edition of Retail Line we reported on the Opinion of the Advocate General in the UK cases involving employees of Woolworths and Ethel Austin.
Following the Advocate General’s Opinion, the European Court of Justice (“ECJ”) has confirmed that an ‘establishment’ refers to an individual workplace, not to the employment organisation as a whole.
The ECJ Ruling
The ECJ decided that the number of proposed redundancies should be measured at the site (“the establishment”) to which the workers are assigned to carry out their duties, rather than across the whole organisation. Importantly the UK law (TULCRA 1992) is compatible with European law. Although the judgment means that during a redundancy consultation process employers will now have certainty about which establishments require consultation, in this case the decision means that around 4,000 former workers are likely to be deprived of a protective award.
Implications for businesses
The decision is good news for retail businesses, particularly large employers operating across multiple sites. The earlier EAT decision would have forced employers to closely monitor multiple site redundancies due to the risk of triggering collective consultation obligations and the threat of protective awards.
The ECJ decision marks a return to the old law and reintroduces the ‘establishment’ test. Businesses should now be able to engage in more efficient periods of redundancy consultation. Companies will only have to collectively consult where 20 or more staff at one establishment are to be made redundant within a period of 90 days. Failure to do so will still result in hefty Employment Tribunal protective awards. In the Woolworths case the total amount awarded in respect of the failure to consult was £70 million and the ECJ decision has only saved another £5 million being added to the bill.
For further information, please contact: Emma HamnettPartner0845 209 1878* / 0117 305 6878 [email protected]
Bex SinclairHead of the HR Consultancy Unit 0845 209 1831* / 0117 305 6831 [email protected]
The end of the line for Woolworths
Since the start of 2015 the UK’s Police Intellectual Property Crime Unit (PIPCU) has suspended more than 2,000 websites selling fake luxury goods.Sites suspended as part of ‘Operation Ashiko’ sold counterfeit versions of high-end goods including Burberry, Longchamp, Abercrombie, Oakley, Tiffany & Co and Thomas Sabo.
PIPCU is warning consumers to be aware of the risks of buying fake goods online. Counterfeits are often bad quality and can be potentially dangerous. The websites themselves can also be unsafe; they more often than not contain harmful viruses and malware and personal information is also at risk of being compromised. The suspended websites were selling items including jewellery, electronics, footwear and clothing. PIPCU warned that while prices are low, so is quality and the likelihood of delivery.
PIPCU head, Detective Chief Inspector Danny Medleycott, said consumers needed to be “extremely vigilant” online, so that they are not misled into buying fakes. “Many sites claim to be selling genuine items, but in fact they are just cheap imitations,” he warned. “The general rule is if it looks too good to be true then it probably is; heavily discounted products are often a tell tale sign that something isn’t right”.
He added, “The criminals behind these websites will often take advantage of your personal details, such as financial information and so people may find their card has been compromised and used for other fraudulent scams. The sites themselves can also be harmful, as they contain malware and viruses that can infect your computer.”
Operation Ashiko, which is an initiative between the police, brands, brand protection organisations and internet registries, has disrupted nearly 5,500 websites selling illicit products since it commenced in October 2013.
Roy Crozier, brand protection expert and Head of our Anti-Counterfeiting team comments, “The efforts of PIPCU are welcomed by the brand protection community but as one site is taken down another quickly springs up. Website suspensions are an important part of any anti-counterfeiting strategy but need to be employed in conjunction with other measures such as civil actions and criminal prosecutions and a robust policy for intercepting counterfeit goods at the border.”
For further information, please contact: Roy Crozier Partner0845 209 1900* / 0117 305 6900 [email protected]
Purge of illegal sites offering counterfeit products
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There is an ever growing raft of environmental legislation designed to encourage property owners and occupiers to improve the energy efficiency of their properties. It brings the potential for significant compliance costs and the likelihood that landlords will want tighter control of premises during the lifetime of leases.Regulations coming into force in April 2016 prohibit private sector landlords from granting new leases of sub-standard commercial property as of 1 April 2018 and from continuing to let such property as of 1 April 2023. In this context, “sub-standard” means a property with an EPC rating of “F” or “G”. Below are some key points for tenants considering whether to rent property affected by the regulations or by other environmental schemes such as CRC or ESOS.
• Is the property sub-standard? From 2023, landlords will not be allowed to continue to let sub-standard property and risk a significant fine if they do. Possibly of more immediate concern to the tenant, from April 2018, the tenant will also risk such a fine if it sub-lets the property, regardless of what the lease says, unless either it carries out prescribed energy efficiency works or it documents and reports any exemptions it intends to rely on. Exemptions are time limited and will probably cost time and money to establish. Tenants not wishing to risk a fine should ensure they have an exit route in place before April 2023.
• Compliance costs. These, many of which are recurrent, could include the costs of energy audits, complying with reporting duties, energy scheme registration, carrying out energy efficiency improvement works and administering the apportionment of such costs between tenants. The landlord may seek to pass on such costs through service charge or otherwise.
• Tenant’s alterations. Energy efficiency improvement regimes are driving tighter restrictions on alterations, making it even more important for tenants to assess what their alterations requirements are before taking the lease. An absolute prohibition on works that may impair the property’s EPC rating is common. We are also seeing more proposed restrictions on a tenant’s ability to alter building systems such as air conditioning or utility conduits generally.
• Rights of entry and landlord’s alterations. Landlords often want rights of entry to gather environmental information and carry out such works (e.g. meter installation) as may be required to do so. Landlords may also seek rights of entry to carry out energy efficiency improvement works. Tenants should enquire about what such rights are likely to mean in practice, including whether the landlord has any works programme planned.
• Rent review. Tenants should watch for any attempt by the landlord to assume that the premises have a better EPC rating than they actually do. At the outset, both parties should consider what rent review, if any, is acceptable on a sub-standard property.
• End of lease obligations. Tenants should avoid accepting any obligation to reinstate the property to a particular EPC standard.
For further information, please contact: William JuckesPartner0845 209 1340* / 0117 305 6340 [email protected]
The minimum energy efficiency standard, what does it mean for tenants?
05 Retail & Leisure Briefing Summer 2015
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This follows a rigorous examination procedure and recognises our significant experience working for both franchisees and franchisors. The British Franchise Association (bfa) is the only voluntary self-regulatory body for the UK franchise industry and has a standards based approach to membership. Its aim is to promote ethical franchising practice in the UK and help the industry develop credibility, influence and favourable circumstances for growth.
The bfa’s endorsement is seen as the ‘gold standard’ in the industry and as fewer than 50 legal practices are members of the bfa, membership is a quality benchmark for our clients confirming that our services have been closely scrutinised by the industry body.
Simon Bartholomew, bfa chair said: “Affiliate members of the bfa have demonstrated considerable expertise and experience within their profession and the proven, successful application of these skills to the franchising industry. Accredited on this basis, Clarke Willmott have committed to providing advice to clients consistent with the European Code of Ethics on franchising, on which the bfa’s own guidelines on best practice are modelled.”
The Clarke Willmott franchise team includes experts in IP and IT, corporate and commercial issues, property, employment and regulatory law.
Commercial Property
Contacts:
Peter Swinburn - [email protected]
William Juckes - [email protected]
Notable transactions on which the team has acted include:
• Acting for a large restaurant chain on the multi-million pound sale of franchised businesses to the franchisees, involving two large property portfolios of more than 25 properties located in Scotland and the north. We advised on the sale and purchase agreement, the franchise subleases and negotiated and completed licences to underlet with a large number of landlords.
• Acting for a service station group on the acquisition and construction of a new motorway service station in Cobham, together with associated infrastructure agreements, such as highways agreements and included dealing with the easements granted to the statutory service providers. The team negotiated and exchanged pre-lets and (following practical completion) completed leases with WH Smith and substantial franchise operations, McDonalds, KFC and Welcome Break. The completed development has an investment value in excess of £75m
Intellectual Property
Contacts:
Paul Cox - [email protected]
Roy Crozier - [email protected]
We have one of the largest specialist Intellectual Property law practices outside of London, which has this year assisted clients with regard to matters on every continent.
Unusually, the team also includes a fully qualified Trade Mark and Design Attorney.
We have a full service IP practice undertaking enforcement work, trade mark and design prosecution work, and drafting of commercial/intellectual property agreements such as licences, assignments and franchise agreements.
In particular:
• We manage several large trade mark portfolios and instruct agents around the world to file and oppose trade marks.
• We deal with various IP disputes in the UK and around the world
• We undertake work for a large shoe retailer, which has a very large franchise system around the world, including reviewing their franchise agreements, advising on competition law and how it impacts on the franchise network, and enforcing the terms of franchise agreements.
• We assist franchisors in the UK to set up their franchise system and draft appropriate franchise documentation.
• We advise on selective distribution networks and issues relating to competition law.
Corporate and Commercial
Contact:
Kelvin Balmont - [email protected]
Our work includes, acting for:
• A Motor Service Group in relation to the purchase of a chain of motorway services areas. The total consideration was in excess of £200 million and the transaction was particularly complex in structure involving a share acquisition, a debt purchase (which itself involved elements of conditional and deferred consideration), a complex equity funding structure involving offshore limited partnerships, and two bank facilities.
• A large property investment and management group and one of the UK’s largest commercial landlords in respect of a large facilities management and outsourcing transaction involving the procurement of services in relation to certain strategic assets and resources of our client.
• A franchisor in acquiring franchisee outlets and drafting and negotiating IT contracts.
Employment
Contact:
Marc Long - [email protected]
We specialise in representing employer organisations and offer a genuine “cradle to grave” support service suitable for all sizes of business. We pride ourselves on being able to meet the legal needs of small owner-operated concerns right through to large national and international businesses. The combination of employment lawyers working with our HR consultants means we are always able to provide an appropriate and cost effective solution to any issue or project that you might need to tackle.
Litigation
Contact:
Alex Jakubowski - [email protected]
Disputes are an inevitable part of business life and stopping them getting out of hand is crucial to keeping your business focussed on what it does best. We never believe that litigation is the inevitable end game and always look for ways to manage the dispute to mitigate its impact and resolve it at least cost and damage to your business.
We have particular expertise in the world of franchising having acted on numerous disputes involving one of the two largest global burger chains and have a real understanding of the unique challenges that franchisors and franchisees can face in business.
For further information about our franchising expertise, please click here to download our franchising brochure or contact a member of our franchising group.
Focus on: FranchisingClarke Willmott’s franchising group has been admitted as an affiliate member of the British Franchise Association.
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Clarke Willmott LLP is a limited liability partnership registered in England and Wales with registration number OC344818. It is authorised and regulated by the Solicitors Regulation Authority (SRA number 510689), whose rules can be found at http://www.sra.org.uk/handbook/. It is also authorised and regulated by the Financial Conduct Authority for certain consumer credit activities only (see http://www.clarkewillmott.com/terms). Its registered office and principal place of business is 138 Edmund Street, Birmingham, West Midlands, B3 2ES. Any reference to a ‘partner’ is to a member of Clarke Willmott LLP or an employee or consultant who is a lawyer with equivalent standing and qualifications and is not a reference to a partner in a partnership. The articles in this briefing are not intended to be definitive statements of the law but instead provide general guidance. *Calls cost 2p per minute plus your phone company’s access charge. We receive no monies from your call and an alternative geographic number is provided.
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We are pleased to announce that Jane Dunlop, head of Clarke Willmott’s debt recovery department, has been awarded the title Credit Manager of the year at the Credit Today awards 2015. As reported in the Spring edition of Retail Line, this is a UK wide award and Jane was shortlisted alongside credit managers from MVF, OVO Energy, MBNA and AXA.
The award recognises Jane’s development of a highly efficient team, as well as her knowledge and technical expertise in the fields of debt recovery, insolvency and litigation.
The Debt Recovery team was also nominated for Commercial Credit Team of the Year and Litigation Team of the Year.
If you would like further information about our debt recovery services, please contact: Jane DunlopPartner0845 209 1689* / 0117 305 6689 [email protected]
Credit Today Awards 2015 – Congratulations to Jane Dunlop
OfficesBirmingham Office 138 Edmund Street, Birmingham B3 2ES T: 0845 209 1000* / 0117 305 6000
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Manchester Office 19 Spring Gardens, Manchester M2 1FB T: 0845 209 1000* / 0117 305 6000
Southampton Office Burlington House, Botleigh Grange Business Park, Hedge End, Southampton SO30 2AF T: 0845 209 1000* / 0117 305 6000
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