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  • 20/02/2017 Insolvency: The Insolvency Rules 2016: Some of the key changes

    The Insolvency Rules 2016 have now been published by the Government and are due to come into force on 6 April 2017. Sundip Mapara considers some of the key changes to be aware of in April this year. 

     

    Background

    The Insolvency Rules 2016 have now been published by the Government and are due to come into force on 6 April 2017. The new Insolvency Rules intend to consolidate the law, modernise its language, and reduce administrative bureaucracy in insolvency. The question is: what are the key changes and what will they mean for insolvency practitioners? 

    Analysis

    Physical creditors’ meetings to be restricted
    The requirement to hold a physical meeting to agree creditors’ resolutions in insolvency proceedings is being removed. 

    Under the new regime, as opposed to being standard practice, officeholders will now require the express permission of creditors to call a physical creditors’ meeting. Permission must be granted by at least 10 individual creditors or by creditors with at least 10% of the total value of creditors’ claims. The power for officeholders to call creditors’ meetings has therefore been significantly curtailed. 

    Decision making process reformed
    Officeholders will now be able to use a new process of ‘deemed consent’. A proposal by an officeholder will be deemed approved if, after writing to creditors to communicate the proposal, objections are received by creditors with 10% or less of the total value of claims. 

    Creditors with less than 10% in value will therefore lose the right to singularly prevent decisions being made. However they will still have the right to raise concerns with the officeholder who will then have a duty to consider whether deemed consent is the appropriate decision-making mechanism. 

    In the event that objections are received from creditors with a value of more than 10%, an alternative decision making procedure must be used. 

    Which actions cannot be made by deemed consent?
    Some processes are considered too important to creditors to be made via the deemed consent process. Those are:

    approval of an individual or company voluntary arrangement;
    removal of an officeholder; and
    approval of an officeholder’s remuneration. 

    Rather, these processes will need to be dealt with by an alternative creditors’ decision making procedure.

    What are the alternative creditors’ decision making procedures? 
    The alternative creditors’ decision making procedure consists of any decision making procedure which enables all creditors who are entitled to participate in the making of the decision to participate equally.

    The following methods of communication will be considered as valid alternative decision making:
    correspondence;
    electronic voting;
    virtual meetings; and
    physical meetings.

    Abolition of final meetings
    Final meetings are to be scrapped in liquidation and bankruptcy proceedings. Instead, liquidators or trustees will now be required to submit a final report. There is a supplementary provision stipulating what information should be included in the report, how creditors go about requesting further information, and the procedure for challenging the remuneration claimed. Also included is the provision for creditors to object to the release of the liquidator or trustee within a defined period; the later of:

    8 weeks from delivery of the prescribed notice; or
    determination of an application for the request for further information or challenge to the remuneration.

    Creditors whose claims are worth less than £1,000
    Officeholders will now be entitled to rely on information contained in the company’s or bankrupt’s statement of affairs or accounting records to treat debts recorded for amounts below £1,000 as proved without any need for further investigation. In such cases the officeholder will however need to let the creditor know that their claim will be treated as proved and that the officeholder must be notified if the debt is inaccurate or no debt is owed. 

    Opting-out of correspondence
    Creditors will be able to opt-out of receiving further correspondence in relation to insolvency proceedings by submitting a notification to the officeholder. Upon receipt of that notification the officeholder will then be under an obligation not to send that creditor any further correspondence. Some documents must however be delivered to creditors even if they have opted out, these include changes of officeholder contact details and notices of distributions. 

    Electronic correspondence 
    Officeholders will no longer be required to obtain the written consent of creditors to continue corresponding with them via email after insolvency. Going forwards, where e-communications have been customarily used between the creditor and the debtor before the insolvency, this method of communication can continue post-insolvency as the creditor is deemed to have consented.  

    Use of websites to deliver information to creditors
    Currently a court order needs to be obtained to place information relevant to insolvency on an insolvency practitioner’s website. Under the new Insolvency Rules, creditors will simply need to be notified that all future correspondence will be placed on a website. 

    Exceptions will however apply and some documents will still require personal service, such as a notice of declaration of a dividend, or a letter that is only intended for one individual creditor. 

    Comment

    The revision of the Insolvency Rules 1986 is likely to meet a mixed reception by insolvency professionals. The aim of the new Insolvency Rules is to reduce red-tape, consolidate the legislation, and modernise the language used. Some of the measures will certainly help to reduce the administrative burden on insolvency practitioners, such as the encouragement to use electronic communication, introduction of deemed consent, and ability to treat debts under £1,000 as proved. On the other hand, the changes will, by virtue of their introduction, initially invoke an increased administrative burden on insolvency practitioners as they will be required to verse themselves in the new Insolvency Rules. In addition some of the measures that reduce inconvenience for creditors, such as the ability to ‘opt-out’ of correspondence, will introduce a corresponding burden on insolvency practitioners, who will be now be required to maintain a list of all creditors who have opted-out of receiving further communications in relation to the insolvency.

    The above is only a summary of the some of the key changes taking effect in April this year. Our specialist insolvency team will be keeping abreast of all developments so that we are well-positioned to advise on all aspects of the Insolvency Rules 2016 when they come into force. Should you have any questions in respect of the new rules, please contact Sundip Mapara at sundipmapara@howespercival.com or by telephone on 0116 2473587.

    Further sources
    Government’s explanatory note
    Full text of the Insolvency Rules 2016

    © Howes Percival LLP

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    Know the Rules!
  • 20/02/2017 Insolvency: The Third Parties (Rights against Insurers) Act 2010 is good news for creditors.

    The long awaited Third Parties (Rights against Insurers) Act 2010 came into force on 1 August 2016 and should make life easier for creditors and third parties looking to bring claims direct against insurers where the insured debtor is insolvent.  Commercial Litigation solicitor Gordon Simpson comments on the key changes.

     

    Background

    The Third Parties (Rights against Insurers) Act 2010 (“the 2010 Act”) has been brought into force on 1 August 2016 by way of provisions in the Insurance Act 2015.  The 2010 Act replaces and deals with some of the shortcomings within the Third Parties (Rights against Insurers) Act 1930 (“the 1930 Act”).  The legislation deals with rights of recovery of insured liabilities against insurance companies, where the individuals or corporate bodies who are liable are in an insolvent situation.

    Analysis

    Relevant persons under the legislation

    Sections 4 to 7 of the 2010 Act set out the relevant persons covered by the changes which include individuals and corporate bodies. Section 4 includes individuals who have in force within England and Wales, any of the following:

    a. an administration order;
    b. an enforcement restriction order;
    c. a debt relief order;
    d. a voluntary arrangement; or
    e. a bankruptcy order.

    The legislation also includes at Section 5 individuals who die insolvent.

    Corporate bodies are covered by Section 6 of the 2010 Act in the following circumstances:

    a. there is a compromise or arrangement in force between the body and its creditors (or a class of them) which is sanctioned in accordance with Section 899 of the Companies Act 2006; or 

    b. the body has been dissolved under Section 1000, 1001, or 1003 of the Companies Act 2006 and the body has not been:
         i. restored to the register; or
         ii. ordered to be restored to the register;

    c. an approved voluntary arrangement is in force;

    d. an administration order is in force;

    e. a receiver of the corporate body’s property has been appointed;

    f. the body is being wound up voluntarily;

    g. a provisional liquidator has been appointed; or 

    h. the body is, or is being, wound up by the Court following the making of a winding up order.

    Key Changes 

    There are three key changes between the 2010 Act and the 1930 Act, which are focussed on in this article:

    1 third parties can now proceed against the insurer without the need to also add the insured to the proceedings;
    2 certain defences available to the insurers under the 1930 Act have been removed; and
    3 there are provisions to improve access to information about the defendant’s insurance arrangements.

    Provision to allow the third party to proceed against the insurer direct

    Section 1 of the 2010 Act provides that:

    1(2) The rights of the relevant person under the contract against the insurer in respect of the liability are transferred to and vest in the person to whom the liability is or was incurred (the “third party”).  

    1(3) The third party may bring proceedings to enforce the rights against the insurer without having established the relevant person’s liability; but the third party may not enforce those rights without having established that liability.

    This is a significant change from the 1930 Act that the creditor or third party does not need to bring the action against the relevant person and can claim direct against the debtor’s insurance company.  This has practical significance if, for example, the relevant person was a company which had been removed from the Register of Companies at Companies House, as there would no longer be a need to restore the company to the register.

    The third party can bring the proceedings to enforce the rights against the insurer prior to actually establishing the relevant person’s liability. The rights can only be enforced however after establishing that liability.  Liability can be established by way of a declaration from the Court, a judgment, an award in arbitration proceedings, or by way of an enforceable agreement. The proceedings to seek the declaration or obtain the judgment can now be brought against the insurer.

    Defences available to the insurers

    Under the 1930 Act insurers had wider defences than are available under the 2010 Act.  

    In the past, the insurer could seek to avoid liability by relying on failure by the insured to fulfil conditions of the policy, such as providing notification, information or assistance to the insurer.  The 2010 Act provides that the rights transferred under the insurance policy are not subject to some of the policy conditions.  Therefore if it is not possible for an insured to provide information to the insurer, for example if the insured is an individual who has died or is a dissolved corporate body, that will not provide the insurer with a defence to the claim.

    Improved rights to information

    Section 11 of the 2010 Act and Schedule 1 deals with requests for information and disclosure. In practice this will be extremely beneficial to third parties or creditors. Where the third party has a reasonable belief that: a debtor owes a liability; the debtor is a relevant person under the 2010 Act; and the debtor is insured, the third party can give notice in writing requesting the information from the debtor. If the third party has a reasonable belief that another person is able to provide the information, such as an insurer or insurance broker, the third party can give notice in writing requesting the information from that other person. The information that can be obtained is set out in Schedule 1 paragraph 1(3) as follows:

    a. whether there is a contract of insurance that covers the supposed liability or might reasonably be regarded as covering it;
    b. if there is such a contract then -
    i. who the insurer is;
    ii. what the terms of the contract are;
    iii. whether the insured has been informed that the insurer has claimed not to be liable under the contract in respect of the supposed liability;
    iv. whether there are or have been any proceedings between the insurer and the insured in respect of the supposed liability and, if so, relevant details of those proceedings;
    v. in a case where the contract sets a limit on the fund available to meet claims in respect of the supposed liability and other liabilities, how much of it (if any) has been paid out in respect of other liabilities; 
    vi. whether there is a fixed charge to which any sums paid out under the contract in respect of the supposed liability would be subject.”

    The recipient of the notice has 28 days to provide the information that they are able to provide. If the recipient is unable to provide some of the information requested, a response must be given within 28 days stating reasons why the information cannot be provided. In the absence of a response within 28 days, the third party can make an application for an order from the Court for provision of the information.

    Comment

    The introduction of the 2010 Act is good news for third parties bringing claims against insolvent individuals or corporate bodies who are insured against the liability. The changes in relation to access to information mean that requests for information must be dealt with promptly and will help creditors to identify quickly whether insurance cover is in place to cover the liability of the relevant person. The ability to go against the insurer direct will also speed up the process, although the option to include the relevant person is still there if that is needed. It will be more difficult for insurers to avoid liability. The legislation should make recovery for creditors, where insurance is in place to cover liabilities, more efficient and lead to better prospects of a successful recovery. 

    Please contact gordon.simpson@howespercival.com for more information on this subject, or to ask a question.

    © Howes Percival LLP

     

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  • 20/02/2017 Insolvency: High Court Chancellor looks at the future for London business litigation and insolvency

    Clare Leverton reviews a recent speech by Sir Geoffrey Vos, the Chancellor of the High Court, to the Insolvency Lawyers Association in which he considered the future for business litigation and insolvency in post-Brexit London, and the recent procedural developments that keep London competitive in the international market.  

    Background
    On the international stage, London is a popular forum for the resolution of commercial disputes, and indeed a number of emerging legal markets have based their procedure on that of the English courts.  However, with the Brexit vote casting uncertainty over various aspects of international jurisdiction, applicable law and recognition of England’s insolvency procedures, will London still be a hub of both national and international importance in the resolution of commercial disputes? 
    Sir Geoffrey Vos certainly thinks so.  In his speech to the Insolvency Lawyers Association, published to the judiciary’s website late last year, he discussed recent and impending developments to the Rolls Buildings courts which will help London to retain its competitive edge as a world leader in commercial dispute resolution.  

    Analysis

    The Financial List

    Introduced on 1 October 2015, Sir Geoffrey Vos considers the Financial List to have been a “huge success”.  The Financial List enables parties to obtain quick and efficient outcomes in cases which require expertise in financial markets.  A test-case procedure has also been adopted where resolution of a particular issue would benefit the financial markets as a whole. 

    Insolvency Express Trials

    Insolvency Express Trials, involving straight-forward insolvency cases which can be resolved using a two day trial and at a cost of less than £75,000 per party, have also proved successful since their introduction in April 2016.  They have enabled parties to speed up the litigation process and obtain expedited trial dates without the additional burden, in some cases, of costs budgeting.  Sir Geoffrey Vos reports that the uptake of Insolvency Express Trials is rapidly increasing, and its success is also reflected in the similar Shorter Trials Scheme rolled out across the Chancery Division, Technology and Construction Court and Commercial Court.  

    New Insolvency Rules

    The new Insolvency Rules are due to come into force in April 2017, having been delayed from their original planned commencement date of October 2016.  Sir Geoffrey Vos confirmed that the changes are aimed at restructuring and consolidating the previous version of the Insolvency Rules, and removing unnecessary regulatory burdens and costs.

    Enforcement of Judgments/Applicable Laws

    Referring to a consequence of Brexit that may not have crossed the minds of many non-lawyer voters, Sir Geoffrey Vos mentioned the need to ensure that English judgments are enforceable in the EU once we are no longer a member state, and not bound by the relevant EU legislation.  Brexit also gives us an opportunity to consider the application of other legislation concerning the choice of law in commercial disputes.  As with many other aspects of post-Brexit Britain, how this will work is not clear at present but listeners may have been reassured by Sir Geoffrey Vos’ statement that the judiciary and the government are looking for “simple and practical solutions”.  

    Comment

    For Sir Geoffrey Vos, legal London’s post-Brexit vote future is looking bright.  He notes that the UK has always been a world leader in arbitration, and that the quality and certainty of English law is something that will continue to attract business people choosing a law by which to resolve their disputes.  He warns, however, against complacency and encourages development and modernisation to retain competitiveness, currently characterised by the measures outlined in his speech. 

    If you want to find out more about how to resolve a dispute through the London courts, please contact Clare Leverton on 0116 247 3546 / clare.leverton@howespercival.com.

    © Howes Percival LLP

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  • 10/02/2017 Another one bites the dust: The significant legal bill of Brian May

    In April 2013,  a new test of proportionality was introduced to assess the amount of costs to be awarded in cases brought before the court. This article considers a recent decision taken by the Senior Courts Costs Office and the implications this will have on claimants in the future.

    In April 2013,  a new test of proportionality was introduced to assess the amount of costs to be awarded in cases brought before the court. This article considers a recent decision taken by the Senior Courts Costs Office and the implications this will have on claimants in the future.

    Once a litigated dispute has been resolved, the court has complete discretion to decide whether costs are payable by one party to another, the amount of those costs and when they should be paid. The general rule is that unsuccessful parties to litigation are often ordered by the court to pay the costs of the successful parties. This case reviews the cost assessment process taken by the court in deciding these matters.

    Cost assessments: the two-stage test

     When assessing the amount of costs to be awarded, the court will first consider whether those costs have been reasonably and necessarily incurred. Having established this, the court will go on to consider whether those costs reasonably incurred are also proportionate. 

    Proportionality means five factors will be considered: 

    • the amount in issue in the proceedings;
    • the value of any non-monetary relief in issue;
    • the complexity of the case; 
    • any additional work generated as a result of the paying party’s conduct; and 
    • any wider factors, such as reputational harm or public importance.

     

    May v Wavell Group Plc (2016)

    Brian May brought an action in private nuisance when construction work, which involved the development of  a basement of a neighbouring property, interfered with the normal noise levels in his own property. The claim settled when May accepted an offer of £25,000 from the neighbour. However, the court was required to assess the level of costs sought when Brian May claimed costs from that neighbour amounting to just over £208,000. 

    The facts were simple. There was an initial possibility of an injunction being sought, but the offer was accepted before a defence was filed; Mr May had made no attempt to negotiate a higher offer before accepting the £25,000. Unusually, Mr May instructed a QC directly to conduct the litigation, rather than instructing a firm of solicitors. As a result of this method of representation, his costs were higher.   

    The court’s discretion: Application of the two-stage test

    The costs judge reduced Mr May’s costs in two stages. In the first stage, on the basis of reasonableness alone, the judge reduced the bill from £208,236 to £99,655. He noted that Mr May’s unusual means of representation was not a factor to be considered when assessing the reasonableness of recoverable costs.

    When applying the second stage of the test, proportionality, the judge considered the five factors affecting proportionality  outlined above. As a result, the reasonable figure of £99,655 was further reduced to a proportionate sum of £35,000.

    The judge explained that, even where the costs incurred were reasonable,  some of those costs were disproportionate for the following reasons:

    1. The sums in issue in the proceedings were £25,000. Mr May had accepted the first offer given to him, and the amount accepted was an accurate reflection of the sums in issue. The level of costs was therefore not in line with the value of the claim.
    2. The value of any non-monetary relief (i.e. the fact that the claim included a request for an injunction) must be weighed in the balance of factors to be considered. The judge considered that the evidence obtained with regards to the noise levels served both the claim for damages and any claim for injunctive relief, therefore no extra cost would have been incurred in considering an injunction. The judge did, however, take into account the extra time spent contemplating injunctive relief and the value of this was considered when assessing proportionality.
    3. The claim was neither legally nor factually complicated and as such the high level of costs was disproportionate to the issue.
    4. The defendant’s conduct did not cause additional work to be generated. In fact, the costs judge noted the defendant’s pre-action correspondence and their willingness to consider alternative forms of dispute resolution. The level of costs was therefore disproportionate in this respect.
    5. Whilst the claimant was a public figure, there were no wider facts such as reputation or public importance to be taken into account when considering the propoportionate level of costs.

    What this decision means for future

    The court’s two-stage approach to the assessment of costs may mean successful parties to litigation could see a significant reduction in the level of costs they can recover from unsuccessful parties.

    Successful parties who incur costs that are disproportionate to the amount of sums in issue are unlikely to recover the full amount of those costs, even where such costs are reasonably and necessarily incurred. In particular, the importance of the amount of damages claimed is notable in cases where the level of costs far exceeds the value of the claim itself.

    The amount that can be recovered in costs is not measured by the minimum sum necessary for the claimant to successfully bring the claim or the defendant to successfully defend it, but rather it is only a contribution to that sum. In order to avoid a situation like that in May v Wavell Group Plc, more thought ought to be given to costs management at every stage of proceedings. The approach taken by the court in this case may encourage parties in the future to consider more seriously the alternative forms of dispute resolution available to them.

    Louisa McMurdo and Jane Bloomer

    For further information please contact Jane Bloomer, Director of Property Litigation, on 01604 258079 or by email to jane.bloomer@howespercival.com. 

     

    © Howes Percival LLP

     

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  • 31/01/2017 Employment status - what does the future hold for the gig economy?

    Graham Irons from Howes Percival, explores the recent Uber and Citysprint cases, which determined that “self employed” contractors were actually workers and the impact that this could have on the growing gig economy in the UK.

    Employment status has become a hot topic in recent months, with a number of high profile cases grabbing the headlines. Graham Irons from Howes Percival, explores the recent Uber and Citysprint cases, which determined that “self employed” contractors were actually workers and the impact that this could have on the growing gig economy in the UK.

    Why does employment status matter?

    An individuals’ employment status is key, as it determines what employment rights they are entitled to at work.

    Employees are afforded a wide range of rights, including the right to claim unfair dismissal and family related rights. In contrast, the only rights that a self employed individual has are those contained within the contract between the individual and the company and they have no protection under employment legislation.

    Workers are effectively individuals whose status is in-between that of an employee and someone who is genuinely self employed.  Workers do not have as extensive rights as employees, but they are still entitled to certain statutory rights such as the right to paid annual leave, statutory sick pay and the right not to be unlawfully discriminated against.  

    Unfortunately, there is no clear set of defined criteria against which an individual’s status can be determined and no one factor is conclusive.  As a result, it can be difficult to determine employment status, which often leads to confusion for employers and individuals.  It also means that there has been an increasing amount of legal cases challenging employment status, particularly in light of the introduction of a variety of modern working practices over recent years.

    Rise of the Gig Economy

    There has been a rise in recent years of companies who operate a business model of engaging “self employed” contractors to complete short term or temporary tasks, often using technology platforms.  This has become known as the gig economy. 

    However, recently the so called “gig economy” has been placed under scrutiny.  Concerns have been raised that it is being used as a way of preventing individuals from having access to employment protections. 

    The first two high profile cases challenging the employment status of the gig economy model were Aslam and others v Uber, in October 2016 and more recently, Dewhurst v CitySprint UK Ltd, which we explore further below. 

    Uber decision

    Two Uber drivers brought a test case in the employment tribunal, arguing that they were workers rather than self employed contractors.

    For the individuals to establish worker status, a contract is needed, under which they undertake to do work personally for an employer who must not be a customer of any business operated by the individual. The tribunal found that the drivers had established these elements and were entitled to worker rights. 

    Uber denied that its drivers were workers.  It claimed that it was not a taxi company and did not employ any drivers. Rather, Uber was merely an app which connected drivers with customers; they did not work for Uber but for themselves in a self-employed capacity. This idea of independent self-employed drivers was rejected. The Tribunal used the following factors, among others, in forming its decision:

    • Uber interviews and recruits drivers and subjects them to an induction process;
    • Uber asserts the power to accept or decline bookings;
    • Uber sets a route for each trip and the driver may face fare deductions if they depart from it;
    • Uber fixes the fare and the driver cannot agree a higher sum with the passenger;
    • Uber has a rating system for its drivers, which is effectively a performance management/disciplinary procedure; 
    • Uber handles refunds for passengers, sometimes without involving the driver; 
    • Uber accepts the risk of loss e.g. where a passenger soils a vehicle or for fraud. If the drivers were genuinely self-employed, they would deal with such costs; 
    • Uber handles passenger complaints; and 
    • Uber reserves the right unilaterally to amend drivers’ terms.

    Uber also had very complex contractual documentation that supposedly set out the relationship between the Company, the drivers and the passengers. The Tribunal found that the language in the documents contained “fictions” and “twisted language” and did not correspond to the reality of the relationship between Uber and the drivers. As a result they disregarded it. 

    CitySprint decision

    The Tribunal held that a cycle courier for CitySprint was a worker, rather than being self employed. 

    Ms Dewhurst, who brought the claim, works as a bike courier and normally works four days a week between 9:30 am and 6:30 pm. A typical day involves completing several deliveries with gaps between them. At the start of the day, she notifies a controller and logs into CitySprint’s tracking system. Ms Dewhurst’s whereabouts are tracked until she finishes work. This helps controllers assign jobs to couriers. Controllers and couriers contact each other via radio and mobile phones throughout the day. 

    Couriers who pass a two day recruitment process sign a contract titled ‘Confirmation of Tender to Supply Courier Services’, which states that they are self employed contractors. Ms Dewhurst signed this contract and was required to acknowledge its key terms by ticking a list on a computer. 

    The Tribunal examined the ‘Confirmation of Tender’ document and held that it did not reflect the true relationship between the parties. The judge described the contract as "contorted", "indecipherable" and "window-dressing". Crucially, the substitution clause was so narrow that in practice Ms Dewhurst could only use a colleague at CitySprint to replace her. The Tribunal states that the title of the contract aroused suspicion that “an army of lawyers” had been used to draft it. The Tribunal also held that the electronic list of key terms, which a courier must complete to begin work, exacerbated that suspicion and indicated an unequal bargaining position. The tribunal therefore departed from the wording of Ms Dewhurst’s contract and instead inspected the whole of the employment relationship in order to consider whether the contract represented the true agreement between the parties. The Tribunal held that:

    • Ms Dewhurst was required to log in to the Company’s tracking system when she was on circuit and to log out at the end of the day;
    • Ms Dewhurst was expected to work at certain times and remained under close instruction throughout the day (including being told to smile as part of providing a professional service!);
    • Ms Dewhurst was required to wear a uniform; and
    • Citysprint calculated Ms Dewhurst’s pay and decided when she would be paid.

    Overall, the Tribunal held that in light of the above factors and the degree of control enjoyed by CitySprint during the time Ms Dewhurst was logged into the tracking system she was not working for herself, but on behalf of CitySprint and had been integrated into their business. As such, the tribunal held that Ms Dewhurst was a ‘worker’.

    What does this mean for the gig economy?

    It is important to remember that both the Uber and Citysprint decisions are first instance employment tribunal decisions, so they are not binding on future decisions. In addition the cases are fact sensitive. Indeed, the Tribunal noted in the Uber case that the Company could have formulated a different business model that did not involve the individuals being workers (though they gave no clues about how this model would look!) however, their current model did result in the individuals being classed as workers.

    It is also likely that both Uber and Citysprint will appeal against the decisions, particularly given that Uber has approximately 40,000 drivers registered in the UK, who could all be affected by this decision.

    However, the decisions do show that the Tribunal will closely scrutinise the relationship between the company, the individual and the customer when determining employment status and they are clearly willing to disregard a company’s business model and contractual framework if it does not reflect the reality of the working arrangements.

    The publicity of the cases also certainly increases the chances of companies with similar business models facing claims for workers rights. In fact, it is reported that there are already at least three other employment status claims being pursued in the London Central Employment Tribunal against courier companies. 

    In addition, the Government have launched a review into modern employment practices including the “gig economy”.  It is not yet known whether this review will lead to any changes in the law.

    Given that further litigation on this matter is likely, organisations that use self employed contractors should keep their business models under review in order to work out whether individuals may have acquired additional employment rights as “workers”.

    Please contact Graham Irons at graham.irons@howespercival.com if you would like to discuss further.

     

    © Howes Percival LLP

     

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  • 25/01/2017 Update: Legal challenge to the ministerial statement on housing land supply.

    In December we published an article relating to the ministerial statement on housing land supply where a recently adopted Neighbourhood Plan allocates sites for housing.  This article is by way of update.

     

    Background

    On 12 December 2016 Gavin Barwell, the Minister of State for Housing,  Planning and Minister for London, made a written ministerial statement (“WMS”) clearly designed to change how the presumption of sustainable development is applied for those areas which have an up to date adopted Neighbourhood Plan.

     In brief, Barwell has set out that relevant policies for the supply of housing in an adopted  Neighbourhood Plan should not be deemed to be out of date under paragraph 49 of the NPPF where the following circumstances are in force at the time the decision is made:

    • the decision is made before 12 December 2018 or the Neighbourhood Plan has been part of the development plan for 2 years or less;
    • the Neighbourhood Plan allocates sites for housing; and
    • the LPA can demonstrate a 3 year supply of deliverable housing sites.

    Barwell’s reasoning for this WMS was to ensure that up to date Neighbourhood Plans produced by local communities are not deemed out of date under paragraph 49 as a result of the LPA’s failings in providing a 5 year housing land supply.

    To support this approach Barwell stated that recent analysis suggested Neighbourhood Plans which plan for housing have on average planned for approximately 10% more homes than the number for that area set out by the LPA. Barwell did not provide any evidence that the sites already allocated by Neighbourhood Plans which are the basis of this figure are deliverable in reality or have actually delivered new homes.

    Practical consequences

    This WMS is now to be taken into account as a material consideration in the determination of planning applications and appeals. It is clear that subject to the qualifications identified above, if a 3 year housing land supply could be demonstrated, all relevant policies for the supply of housing in a Neighbourhood Plan would be up to date and full weight attached to them in the planning balance.  The presumption in favour of sustainable development in the second limb of paragraph 14 of the NPPF would not apply. 

    At that time there was uncertainty as to how the 3 year housing land supply should be calculated. There continues to be fears about the use of Neighbourhood Plans to control housing development where there are housing land supply issues.

    Legal Challenge

    Earlier this year we secured a copy of a pre-action protocol letter to the Secretary of State for Communities and Local Government.  18 claimants including Richborough Estates, Redrow Homes Limited and Linden Homes Limited are seeking to challenge the WMS.  A copy of the letter can be seen from the following link:

    http://offlinehbpl.hbpl.co.uk/NewsAttachments/RLP/NP_WMS_legal_challenge.pdf

    The WMS has been attacked on a number of grounds relating to: legitimate expectation that consultation would be undertaken prior to adoption of the WMS; the policy being illogical, irrational or Wednesbury unreasonable compared to the stated intention of the policy; the policy being predicated in part on evidence which is mistaken as to facts, irrational and Wednesbury unreasonable; the policy being irrational, perverse and Wednesbury unreasonable when set against Government policy (in the NPPF) to significantly boost the supply of housing; and the adoption being a breach of the Public Sector Equality Duty.

    Some who have followed the WMS anticipated that the Secretary of State may immediately withdraw it but nothing could be further from the truth.  We understand that the Secretary of State will vigorously defend any challenge and in their response to the pre-action protocol letter has rejected all five grounds of challenge:

    • the objectives of boosting housing supply and supporting localism “are not seen to be in conflict with each other”;
    • the WMS “is a policy statement to highlight the importance of supporting local communities with a qualifying plan in place, whilst continue to support the delivery of housing”;
    • there is no legitimate expectation of consultation, adding that there is “no statutory duty to consult” and that other ministerial statements have been issued without prior consultation;
    • that a three-year housing land supply means three-year supply as against a five-year requirement”.  This is important.  If for example a local planning authority has an annual requirement of 2,000 houses and can show a 5 year supply of 6,000 dwellings, they will have a three-year land supply.  In addition, if 5,000 houses are delivered in years 4 and 5 and only 1,000 in years 1 to 3 they will still have a 3 year supply.

     It remains to be seen if the claimants decide to pursue the challenge and we will keep you informed of all developments. However, for the time being where an up to date Neighbourhood Plan exists and allocates land for housing, the onus on the local planning authority will be significantly reduced where there are housing land supply issues.  This will inevitably have an impact on the prospects of securing planning permission on sites in some instances and we are already seeing local planning authority decisions where permission which may well have been granted prior to the WMS are now being refused.

    Please contact Paul Wootton at paul.wootton@howespercival.com if you would like to discuss further.

     

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