HomeInsightsNeed to Know 2015.11.02

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This is our summary of some of the key legal developments across a range of sectors covering the period 23 to 29 October 2015.

It is intended for reference purposes only and does not constitute definitive advice. Links to the original source materials are included where there are no restrictions in terms of access. References may also be made to sources that require separate registration or subscription. A link to a source does not necessarily imply endorsement of the source or the material provided through the link. For further information on any of the matters discussed in this summary please contact Alexander Ross. If you have any comments, queries or suggestions please contact us at comments. All suggestions and comments are most welcome.

General

Government publishes consultation on “Late Payment: challenging ‘grossly unfair’ terms and practices”.

Government consults on new transitional arrangements for repeal of s 52 of Copyright, Designs and Patents Act 1988.

Technology

Unified Patent Court publishes Rules of Procedure.

Court of Justice of European Union rules on meaning of “independent material” within the definition of “database” in the Database Directive (96/9/EC).

European Parliament votes for complete ban on roaming charges for using mobile phones abroad in the EU.

Ofcom confirms plans for public sector spectrum release.

Data Protection

European Parliament urges European Commission to ensure all data transfers to USA are subject to an “effective level of protection”.

Information Commissioner’s office signs agreement to be part of a new technical solution for international agencies involved in privacy enforcement.

Information Commissioner’s Office issues fine of £200,000 for sending thousands of unsolicited marketing text messages.

Information Commissioner’s Office says, “don’t panic” about recent European decision over invalidity of “safe harbour” scheme for transfer of personal data.

European Data Protection Supervisor publishes Opinion on proposed new data protection Directive relating to police and justice sectors.

Litigation

Government publishes consultation on Law Commission’s recently published Report and Bill on unjustified threats.

High Court finds purchaser of business entitled to indemnity for loss incurred in trying to avoid a higher, contingent liability.

Publishing

Court of Protection finds naming the parties and publishing the judgment regarding the care of an elderly lady was in the public interest.

General

Government publishes consultation on “Late Payment: challenging ‘grossly unfair’ terms and practices”.

The Government says that late payment remains a serious issue for businesses, especially small businesses.  Evidence shows that small and medium businesses are owed a total of £26.8 billion, and small businesses are waiting for an average of £31,901 in overdue payments.  This has a damaging knock-on effect on small businesses’ ability to manage their finances and plan for growth, while also pushing late payment further down the supply chain, affecting many more businesses.

The proposal set out in the consultation paper is part of a broad range of action the Government is taking to tackle late payment and unfair payment terms and practices: statutory measures on public procurement and to establish a Small Business Commissioner; action to increase transparency on payment practices; and promoting wider culture change with a strengthened Prompt Payment Code.

Small businesses are more vulnerable than larger businesses to unfavourable or unfair practices and often do not have the time or resource to challenge them.  Through the Enterprise Bill the Government will create a Small Business Commissioner to help small businesses avoid having to go to court to resolve payment disputes with their larger commercial customers.  However, in circumstances where small businesses do decide to litigate, the Government believes it is important that they have the range of options available to them to take action against “grossly unfair” terms and practices.

The document sets out how the Government proposes to change the UK’s statutory framework to provide business representative bodies with additional powers to challenge “grossly unfair” payment contractual terms and practices as set out in the 2011 EU Late Payment Directive.  The Department is seeking views on how these changes could be best implemented.  This follows on from the discussion paper published by the Department in February 2015.  The consultation closes on 27 November 2015.  To access the consultation documentation, click here.

Government consults on new transitional arrangements for repeal of s 52 of Copyright, Designs and Patents Act 1988.

Section 52 of the CDPA limits copyright protection for certain artistic works that are industrially manufactured.  When more than 50 copies of such works are made then the current period of protection is limited to 25 years (from the end of the calendar year in which the work was first marketed).

Section 74 of the Enterprise and Regulatory Reform Act 2013, which came into force on 25 April 2013, repealed s 52 of the CDPA on a date to be specified by a commencement order.  When the repeal is put into effect, the exception in s 52 will cease to exist and any artistic work, whether 2D or 3D, which qualifies for copyright protection, will enjoy the full term of copyright protection (author’s life plus 70 years).

In March 2015, the Government implemented a Commencement Order under the Enterprise and Regulatory Reform Act 2013 (Commencement No. 8 and Saving Provisions) Order 2015, which would implement the repeal of s 52 of the CDPA on 6 April 2020.  Following the introduction of this Order, however, the Government received a claim for judicial review challenging the Order’s compatibility with EU law.

The Government therefore decided to reconsider the issues raised and revoked the Commencement Order in July 2015.  This consultation invites comments on the proposals for the new transitional provisions, covering the time period until repeal, the status of existing stock, the status of copyright works made before 1 June 1957 and the repeal of compulsory licensing provisions.

This consultation is aimed at all interested parties, including: creators of works of artistic craftsmanship such as designers; rights holders in those works such as licensees; manufacturers, importers and retailers of two-dimensional or three-dimensional copies of those works; and publishers, museums and educational establishments.  The consultation closes on 9 December 2015.  To access the consultation documentation, click here.

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Technology

Unified Patent Court publishes Rules of Procedure.

The UPC Preparatory Committee has adopted the Rules of Procedure of the Unified Patent Court, subject to some further adaptations once the Committee has decided on the court fees.

The agreed text is draft number 18 and will underpin the court’s framework and functioning.  The UPC says that the work “benefitted strongly” from comments from stakeholders submitted during the written consultation and the oral hearing.  To access the Rules, click here.

Court of Justice of European Union rules on meaning of “independent material” within the definition of “database” in the Database Directive (96/9/EC).

The Land of Bavaria published topographical maps covering the entire Federal state of Bavaria on a scale of 1:50000 through the Regional Office for Surveying and Geographic Information.  Verlag Esterbauer was an Austrian publisher that published, amongst other things, atlases, tour books and maps for cyclists, mountain bikers and skaters.

The Land of Bavaria issued proceedings in the Munich court against Verlag Esterbauer contending that it had made unlawful use of its maps and had appropriated the underlying data in order to produce its own maps.  The court found in favour of the Land of Bavaria and ordered Verlag Esterbauer to cease such practices and to pay damages.

The order was set aside on appeal and the matter eventually ended up at the German Federal Court of Justice in respect of the Land of Bavaria’s claim in relation to the protection of databases.

The Federal Court of Justice asked the CJEU whether the topographical maps produced by the Land of Bavaria came within the definition of “database” within the meaning of Article 1(2) of the Directive.  More specifically, the German court asked whether data identifying a certain point on the earth’s surface constituted “independent material” pursuant to Article 1(2).

Essentially, the CJEU said, the German court had asked whether Article 1(2) meant that geographical data extracted from a topographical map (so that a third party could produce and market its own map) retained, after extraction, sufficient informative value to constitute “independent material” from a “database” pursuant to that Article.

The CJEU noted that the term “database” had to be interpreted widely, unencumbered by considerations of a formal, technical or material nature.  Further, Article 1(1) states that the Directive concerns the legal protection of databases “in any form”.

In addition, Recital 17 states that the concept of “database” applies to “literary, artistic, musical or other collections of works or collections of other material such as texts, sound, images, numbers, facts, and data”, and Recital 14 makes it clear that protection applies to both electronic and non-electronic databases.

The CJEU said that the analogue nature of topographical maps, which requires them to be scanned using a scanner so that they can be utilised individually using a graphics computer programme, does not preclude them from being recognised as a “database”.

Further, classification as a “database” is dependent on the existence of a collection of “independent materials”, i.e. materials that are separable from one another without their informative, literary, artistic, musical or other value being affected.

In this case, the “separable” material concerned was made up of two pieces of information corresponding to: (i) the geographical coordinates relating to a certain point on the two-dimensional grid network; and (ii) the “signature”, i.e. the numbered code used by the map producer to designate a unique feature, such as a church.  Verlag Esterbauer and the Commission argued that the informative value of that information was reduced to almost zero once it had been extracted from the topographical map since, in the example given, the signature “church”, as indicated by a certain geographical coordinates point, in the absence of additional information about the location of the church, did not show whether the church was situated in a certain town or village.

The CJEU said that, in that case, topographical maps serve as “basic products” that are used to make sub-products through the selective extraction of material from those maps.  In this case, Verlag Esterbauer had used scanning techniques to extract geographical information on tracks appropriate for cyclists, mountain bikers and skaters from the Land of Bavaria’s topographical maps.

The CJEU noted that not only an individual piece of information, but also a combination of pieces of information, can constitute “independent material” within the meaning of Article 1(2).  Article 1(2) did not, therefore, preclude the two pieces of information making up a topographical map, or indeed a combination of more pieces of information (such as the geographical information on tracks appropriate for cyclists, mountain bikers and skaters), from being held to be “independent material”, provided however that the extraction of that information from the topographical map did not affect the value of its informative content.

In addition, the CJEU said, the informative value of material contained within a collection of information is not affected if, after extraction, it still has autonomous informative value.  Whilst the value of such material is increased by its systematic arrangement in a database and the extraction of that material tends to result in a decline in value, its classification as an “independent material” under Article 1(2) is not affected if it retains autonomous informative value.

Such autonomous informative value must, the CJEU said, be assessed in the light of the value of the information, not to a typical user of the collection concerned, but to every third party with an interest in the extracted materialIn Case C-444/02 Fixtures Marketing Ltd v Organismos Prognostikon Agonon Podosfairou (EU:C:2004:694) the CJEU held that information relating to fixtures of football matches, which had been extracted by a betting company, had an independent value as it provided interested third parties, i.e. the betting company’s customers, with relevant information.

Therefore, the CJEU said, information taken for financial gain and in an autonomous manner, such as the information extracted by Verlag Esterbauer from the Land of Bavaria’s maps, did indeed constitute “independent material” extracted from a “database” within the meaning of Article 1(2) since, once extracted, that information provided the customers of Verlag Esterbauer with relevant information.

The answer to the German court’s question was, therefore, that Article 1(2) had to be interpreted as meaning that geographical information extracted from a topographic map by a third party so that that information could be used to produce and market another map, did indeed retain, following its extraction, sufficient informative value to be classified as “independent material” from a “database”.  (Case C-490/14 Freistaat Bayern v Verlag Esterbauer GmbH, 29 October 2015 (unreported) — to access the judgment in full, go to the curia search form, type in the case number and follow the link).

European Parliament votes for complete ban on roaming charges for using mobile phones abroad in the EU.

The ban on roaming charges will take effect on 15 June 2017 and clear rules on the right to internet access will become law, following Parliament’s final approval of the new telecoms package.

From 30 April 2016 roaming surcharges (added to the price paid at home) must not exceed:

  • €0.05 per minute for outgoing voice calls;
  • €0.02 for text messages (SMS); or
  • €0.05 per megabyte of mobile internet use.

The cap on charges for incoming voice calls will be determined later this year and is expected to be considerably lower than for outgoing calls.

If operators can prove that they cannot recover their costs and that this affects domestic prices, national regulatory authorities may authorise them to impose minimal surcharges in exceptional circumstances to recover those costs.  National regulatory authorities will also have the means to amend or reject the surcharges.

To protect the industry against abuses such as “permanent roaming”, operators will be allowed, in certain circumstances, to charge a small fee, lower than current caps, according to a “fair use” policy.  The exact details of this will be defined by the Commission and telecoms regulators.

As for net neutrality, the new law will oblige internet access providers to treat all traffic equally, i.e. not to block or slow delivery of content, applications or services from selected senders or to selected receivers, unless it is necessary to obey court orders, comply with laws, prevent network congestion or combat cyber-attacks.  If such traffic management measures are needed, they will have to be “transparent, non-discriminatory and proportionate” and may not last for longer than necessary.

An operator will nonetheless be able to offer specialised services (such as improved internet quality needed for certain services), but only on condition that it does not have an impact on general internet quality.

Internet providers will also have to give users who are about to sign fixed or mobile internet contracts a clear explanation of what download and upload speeds (compared to the advertised speed) they can usually expect.  Any significant discrepancy that is continuous or occurs regularly will trigger a right to remedies such as terminating the contract or getting compensation.  National regulatory authorities will be responsible for verifying whether the difference is a breach of contract or not.  To access the new legislation, click here.

Ofcom confirms plans for public sector spectrum release.

Ofcom has confirmed its plans for releasing valuable new airwaves that could be used to meet the growing demand for mobile broadband services.

An auction is planned to take place in early 2016 for the spectrum, which has been made available by the Ministry of Defence as part of a wider Government initiative to free up public sector spectrum for civil uses.

A total of 190 MHz of high-capacity spectrum is being made available in two bands, 2.3 GHz and 3.4 GHz, which are particularly suited for high-speed mobile broadband services.  This is equivalent to around three-quarters of the spectrum released by Ofcom through the 4G auction in 2013.

Ofcom has also published details of the auction process and is setting reserve prices totalling £70 million for the spectrum.

There will not be a cap on the amounts bidders can buy.  Ofcom believes that any cap could prevent a bidder from buying large blocks of adjacent spectrum and large blocks have the potential to support very fast download speeds, meaning even faster mobile broadband for consumers, which helps pave the way for 5G.

Ofcom says that the auction is “designed to be fair and transparent”, enabling the spectrum to be awarded to those who can put it to the most efficient use in the best interests of consumers.  Ofcom proposes to auction the spectrum in lots of 10 MHz for the 2.3 GHz band and 5 MHz for the 3.4 GHz band.  For further information, click here.

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Data Protection

European Parliament urges European Commission to ensure all data transfers to USA are subject to an “effective level of protection”.

In a non-legislative Resolution, approved by 342 votes to 274, with 29 abstentions, MEPs said that too little has been done to safeguard citizens’ fundamental rights following revelations of electronic mass surveillance.  The Resolution urges the Commission to ensure that all data transfers to the US are subject to an “effective level of protection” and ask EU Member States to grant protection to Edward Snowden, as a “human rights defender”.  MEPs also raised concerns about surveillance laws in several EU countries.

The Resolution notes the (lack of) action taken by the Commission, the other EU institutions and Member States on the recommendations set out by MEPs in their Resolution of 12 March 2014 on the electronic mass surveillance of EU citizens, drawn up in the wake of Edward Snowden’s revelations.

The Resolution calls on EU Member States to “drop any criminal charges against Edward Snowden, grant him protection and consequently prevent extradition or rendition by third parties, in recognition of his status as whistle-blower and international human rights defender”.

MEPs welcomed the Court of Justice of the European Union’s ruling in Case C-362/14 Schrems v Data Protection Commissioner, which invalidated the Commission’s decision on the Safe Harbour scheme for data transfers to the US.  “This ruling has confirmed the long-standing position of Parliament regarding the lack of an adequate level of protection under this instrument”, the Resolution says.

Parliament calls on the Commission to “immediately take the necessary measures to ensure that all personal data transferred to the US are subject to an effective level of protection that is essentially equivalent to that guaranteed in the EU”.  It invites the Commission to reflect immediately on alternatives to Safe Harbour and on the “impact of the judgment on any other instruments for the transfer of personal data to the US, and to report on the matter by the end of 2015”.  The Resolution also reiterates a call to suspend the Terrorist Finance Tracking Programme (TFTP) agreement with the US.

In general, MEPs consider the Commission’s response so far to Parliament’s 2014 Resolution “highly inadequate”, given the extent of the revelations of mass surveillance.  “EU citizens’ fundamental rights remain in danger” and “too little has been done to ensure their full protection”, they say.

Parliament is also concerned about “recent laws in some Member States that extend surveillance capabilities of intelligence bodies”, including in France, the UK and the Netherlands.  It is also worried by revelations of mass surveillance of telecommunications and internet traffic inside the EU by the German foreign intelligence agency BND in cooperation with the US National Security Agency (NSA).

The resolution also calls for a EU strategy for greater IT independence and online privacy, stresses the need to ensure meaningful democratic oversight of intelligence activities and to rebuild trust with the US.  To access the Resolution, click here.

Information Commissioner’s office signs agreement to be part of a new technical solution for international agencies involved in privacy enforcement.

The agreement, or “GPEN Alert” is intended to be a secure and confidential information-sharing tool for Global Privacy Enforcement Network (GPEN) members.

The ICO says that enforcement cooperation between the ICO and others can take a variety of forms.  However, until now it has proven challenging because it has been almost impossible to share information between authorities.  Authorities need to ensure that any transfer is legally made, applying appropriate safeguards to protect the information being transferred.  This means, in particular, that the information must be sent in a confidential and secure manner.

The Alert allows participating authorities to find out what other GPEN members are investigating or taking enforcement action against the same company, person or practices.

In addition, participating privacy enforcement authorities may use the GPEN Alert to notify other member authorities of their privacy investigations and enforcement actions, specifically those that have cross-border aspects, for the purposes of potential coordination or cooperation.

Information in the Alert system may be contributed and accessed only by GPEN member authorities that have signed a memorandum of understanding and whose relevant staff has the appropriate security credentials.  It does not currently allow sharing of detailed confidential, non-public enforcement matters, nor does it allow the sharing of consumer complaints relating to privacy.

The Alert uses the existing Consumer Sentinel Network (CSN) platform operated by the US Federal Trade Commission (FTC).  The GPEN Alert is separate from the rest of the CSN platform.  To read the ICO press release in full, click here.

Information Commissioner’s Office issues fine of £200,000 for sending thousands of unsolicited marketing text messages.

Help Direct UK Ltd, a Swansea-based lead generation company has been fined £200,000 by the ICO for sending out thousands of unsolicited marketing text messages.

A marketing campaign run by the company in April 2015 prompted 6,758 complaints in just one month.  People complained about a variety of messages offering services including the reclaim of PPI payments, bank refunds and loans.  A typical text read: “Its been signed off, we have 3886.41 in your name for the accident you had, for us to put in your bank Now just fill out www.accidentinjuryclaim.so

One complainant to the ICO explained they had never had an accident and was worried someone may be fraudulently using their identity.  Another was concerned they may have unknowingly caused an accident.

An ICO investigation discovered that Help Direct UK was using unregistered SIM cards to send the messages, a common practice by companies looking to avoid the mobile networks’ spam detectors.

The ICO issued an enforcement notice in March ordering Help Direct to stop sending marketing texts after a previous investigation showed it had sent 187,960 messages in 2014, mainly offering pension reviews.  Mobile phones and devices used by the company in the past were linked to the current investigation.  Breaching an enforcement notice is a criminal offence and the ICO is now considering further action.

It is now easier for the ICO to issue fines to companies that break the law.  Previously, the ICO had to prove that a company had caused “substantial damage or substantial distress” to individuals by making nuisance calls or sending spam text messages.  From April 2015, however, the ICO just has to prove that: (i) the company was committing a serious breach of the Privacy and Electronic Communication (EC Directive) Regulations 2003; (ii) either the breach was deliberate or the company knew or ought to have known that there was a risk that the contravention would occur; and (iii) the company failed to take reasonable steps to prevent it.  This is the first fine under these new rules.  To read the ICO press release in full, click here.

Information Commissioner’s Office says, “don’t panic” about recent European decision over invalidity of “safe harbour” scheme for transfer of personal data.

Following the Court of Justice of the European Union’s decision in Case C-362/14 Schrems v Data Protection Commissioner, the “safe harbour” scheme for the transfer of personal data between the EU and the US has been removed.

Writing on the ICO’s blog, David Smith, Deputy Commissioner and Director of Data Protection, said, “It’s a complicated area”.  The judgment did not strike down Safe Harbour itself, he said, but focused on the Commission Decision that had given assurance to businesses.  It means that there is still a measure of protection for personal data transferred under the scheme.  For example, the privacy principles that members sign up to are still positive.

Mr Smith explains that the existing Commission Decisions on the adequacy of particular countries and on standard contractual clauses do still stand, and can be relied on by businesses, certainly for the time being.  However, he says, “the terms of the judgment inevitably cast some doubt on the future of these other mechanisms, given that data transferred under them is also liable to be accessed by intelligence services whether in the US or elsewhere”.  The impact on these other mechanisms and on transfers to destinations other than the US will be analysed, over the coming months by the Article 29 Data Protection Working Party, amongst others.

Mr Smith says that political, legal and technical solutions are required.  This relies on Member States (including the UK), and the EU institutions opening discussions with the US authorities.

As for the ICO’s advice, Mr Smith says that its initial message is still valid: don’t panic and don’t rush to other transfer mechanisms that may turn out to be less than ideal.

The impact of the judgment on standard contractual clauses and binding corporate rules is still being analysed.  Of course, transfers can always be made on the basis of an individual’s consent, Mr Smith says, but this does not necessarily protect personal data any more effectively than the Safe Harbour, which is, after all, what the CJEU case was all about.  Indeed, individuals may be easily induced to give their consent to the transfer of their data to destinations where there is little or no protection when the Safe Harbour does at least provide them with some genuine protection even if such protection is imperfect, Mr Smith writes.

The next thing businesses should do after not panicking, Mr Smith says, is to take stock.  Businesses should ask themselves what personal data is being transferred outside the EU, where it is going to, and what arrangements are in place to ensure that it is adequately protected.  Then, businesses should look at whether these arrangements are the most appropriate ones taking into account the ICO’s guidance on international transfers.  If they include the Safe Harbour, businesses should consider what alternative mechanisms could be used if there is no progress on a new Safe Harbour.  However, Mr Smith warns, “don’t rush to change, especially with the possibility that a new, improved and perhaps rebranded Safe Harbor will emerge”.

It is also worth bearing in mind, Mr Smith writes, that businesses in the UK do not have to rely on Commission decisions on adequacy.  UK law allows businesses to rely on their own adequacy assessment and the ICO guidance assists in how to do this.  Much depends on the nature of the data being transferred and to whom it is being transferred, he writes.

Mr Smith also says that the ICO is “not rushing to use our enforcement powers”.  The ICO will be sticking to its published enforcement criteria and “not taking hurried action whilst there’s so much uncertainty around and solutions are still possible”.  In addition, the ICO will continue to work with its European counterparts in an effort to ensure that, as far as possible, “we’re all delivering a single and sensible message”.

In time, Mr Smith writes, the ICO will update its guidance on international transfers, but “for the most part it’s still valid”.  The ICO will also be publishing some practical advice for businesses, including SMEs.

The next few months will be critical”, Mr Smith concludes.  “We very much hope that what many are calling Safe Harbor 2.0 will emerge and provide a strong and effective framework for protecting individuals when their personal data are transferred from the EU to the US”.  To read the blog in full, click here.

European Data Protection Supervisor publishes Opinion on proposed new data protection Directive relating to police and justice sectors.

Reform of EU data protection rules is “more urgent than ever”, said the European Data Protection Supervisor, following publication of his Opinion on the proposed Directive for data protection in the police and justice sectors.

The EDPS said that data protection in the police and justice sectors should be “fully consistent with the general rules contained in the General Data Protection Regulation” and should “only contain specifications and adjustments where necessary in view of the specific nature of these sectors”.  The scope of the Directive should be limited to the areas where specific rules are “really necessary”, he said, namely the activities of criminal law enforcement by police and judicial authorities, as stated in the original proposal of the European Commission.  Further, the performance of law enforcement tasks by non-public entities and organisations should be subject to the Regulation.

The EDPS called on legislators to ensure that none of the provisions of the Directive decrease the level of protection that is currently offered by EU law and by the instruments of the Council of Europe.  The essential components of data protection, laid down in Article 8 of the Charter of the Fundamental Rights of the Union, “must be respected”, he said, and exceptions must remain limited and fulfil the strict test of proportionality.  Particularly important, he said, are: (i) the principle of purpose limitation; (ii) the right to access of individuals to their personal data; and (iii) control by independent data protection authorities.

In addition, careful attention should be given to the means of the international transfer of personal data to bring it into line with the recent CJEU ruling in the Schrems case.  This ruling will, the EDPS stressed, have an impact on any new legal instruments and agreements to be concluded by the EU with non-EU countries in the field of law enforcement (including, for instance, the EU-US Umbrella Agreement) so that they pass the strict test established by the CJEU.  Where necessary, existing agreements concluded by the EU and/or Member States involving the transfer of personal data should be amended within a fixed time limit, to bring them into line with the new Directive.  To access the EDPS Opinion, click here.

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Litigation

Government publishes consultation on Law Commission’s recently published Report and Bill on unjustified threats.

The threats provisions, which provide a statutory right of redress against unjustified (or groundless) threats to sue for infringement of a patent, trade mark or design right, have been criticised over the years for not working as well as they should.  They are thought to be unclear and have been accused of failing to achieve the necessary balance, which is to allow rights holders to protect highly valuable assets, but not to misuse threats of infringement to distort competition.

Accordingly, in 2012, the Government asked the Law Commission to review the relevant law.  Following a consultation in 2013 and a response report in 2014, earlier this month the Law Commission published a final Report and a Draft Bill.

The Government is currently considering the Law Commission’s Report and the draft Bill that accompanied it.  As part of this process, the Government is also seeking the views of interested parties.  The consultation closes on 13 November 2015.  To access the consultation documentation, click here.

High Court finds purchaser of business entitled to indemnity for loss incurred in trying to avoid a higher, contingent liability.

The High Court has found that, under a Share and Business Sale Agreement, the claimant buyer, T&L Sugars Ltd, was entitled to an indemnity from the defendant seller, Tate & Lyle Industries Ltd, against a €25 million loss that T&L Sugars had incurred in trying to avoid an even higher liability of around €54 million relating to import duty payable on sugar that had been imported by Tate & Lyle pre-completion.

The agreement required the seller to indemnify the buyer against losses incurred as a result of taking reasonable action to avoid liability to pay, amongst other things, import duties.

The key issue was whether it was reasonable for the seller not to continue to roll the liability forward, as the seller had done in the years prior to the sale, in anticipation that a change in market conditions would eventually reduce it.

Finding that the buyer could not be expected to roll over the liability indefinitely, and that it was not for the seller to tell the buyer how to run the business once it had been sold in any event, Mr Justice Simon concluded that allowing recovery under the indemnity provisions of the agreement made the most business common sense.

Simon J rejected the seller’s construction of the indemnity provisions in the agreement, finding that such construction had the anomalous commercial consequence that, if the buyer had taken no action (reasonable or otherwise) to prevent a contingent excluded liability from becoming an actual and payable liability, it would have been able to be indemnified in full by the seller, whereas if it took reasonable steps to avoid such liability arising, and incurred losses in mitigating that liability, it would not be entitled to recover the costs of doing so, even where such costs were reasonable and reduced the overall liability to pay duty.  In Simon J’s view, “the parties [were] unlikely to have intended that result”.

Accordingly, following the Supreme Court decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, the leading authority on construction of a contract where the terms are ambiguous, Simon J gave the indemnity provisions the construction that made the most business common sense. (T&L Sugars Ltd v Tate & Lyle Industries Ltd [2015] EWHC 2696 (Comm) (29 September 2015) – to read the judgment in full, click here).

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Publishing

Court of Protection finds naming the parties and publishing the judgment regarding the care of an elderly lady was in the public interest.

The proceedings were the latest setting for what Mr Justice Peter Jackson called “the poisonous feud” between the children of Mrs Grace Aidiniantz.  On this occasion, they were disputing where their mother should live, who should care for her, who should see her, and whether her finances should be investigated.

A preliminary point arose about the extent to which the proceedings could be reported.  They were heard in private at a hearing at which members of the press were in attendance.  Two questions arose: should the press be allowed to report the hearing, and should there be a public judgment naming the parties?

Peter Jackson J found that there was good reason for the court to publish its judgment in this case in a form that named the individuals involved.  In Peter Jackson J’s view, it was in the public interest for the public, if it was interested, to see the consequences of a family descending to the “level of mutual acrimony that exists in this family”.  Further, he said, it was in the public interest to know how the court process operates in a recognisable case and to know what it all costs: in the past year the family had spent £270,000 on this branch of its litigation alone.  In addition, it was not in the public interest to suppress all that information: “on the contrary, knowledge of how one family has behaved may deter another family from behaving likewise”, Peter Jackson J said.

Further, Peter Jackson J found, publication of an anonymised judgment would be futile.  So much information was already in the public domain that any anonymised judgment would inevitably be linked to the family.  The press would be placed in an impossible situation in knowing what it could and could not report.

In addition, it was undesirable that there should be any greater difference of approach than is necessary between two courts dealing with different but related aspects of the same dispute.  On 4 June 2015, an extensive public judgment in relation to financial issues was given in the Chancery Division.

This was not just “a private family dispute.  The parties had repeatedly chosen to air their differences in the courts.  There was little likelihood of reconciliation.  A public judgment would not make matters any worse for Mrs Aidiniantz than they already were.  In fact, Peter Jackson J said, “The parties might even reflect on their future conduct if they know that it may come to public attention”.

Finally, Mrs Aidiniantz’s right to privacy and dignity was “undoubtedly an important consideration”.  Even though she herself would not be aware of publicity, her reputation would be affected by it being known that she was at the heart of the family discord.  However, in the overall circumstances, Peter Jackson J did not consider that publication of the judgment amounted to a significant further intrusion into her privacy.  It contained little personal information and made no criticism of Mrs Aidiniantz: “on the contrary, any fair-minded reader would be bound to feel sympathy for an elderly parent in her situation”, Peter Jackson J said.

The contents of the judgment could therefore be published, but there could be no other reporting of the hearing.  (John Neville Aidiniantz v Grace Aidiniantz [2015] EWCOP 65 (13 October 2015) – to read the judgment in full, click here).

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