Travis Perkins: Commercial Focus – Summer 2021

Cases

• The meaning of “deliberate act” in exclusion clauses
  Burnett v International Insurance Co of Hanover Ltd [2021] UKSC 12

• Post-termination restrictive covenants did not cause losses
  Dwyer (UK Franchising) Ltd v Fredbar Ltd and another [2021] EWHC 1218 (Ch)

• “Reasonable detail” in notice of claim depends on information recipient already knows
  Dodika Ltd v United Luck Group Holdings Ltd [2021] EWCA Civ 638

• Company signing a contract in its own name was a party
  Gregor Fisken Limited v Bernard Carl [2021] EWCA Civ 792

• Incorporation of standard terms, and UCTA reasonableness for exclusion clauses
  Phoenix Interior Design Ltd v Henley Homes PLC & anor [2021] EWHC 1573

Legislation

Our Coronavirus Exchange covers the significant amount of coronavirus-related legislation that has been put in place since the start of the pandemic, including the Corporate Insolvency and Governance Act 2020, the evolving position with relation to business closures, and the latest on Government support measures such as the furlough scheme. In addition, our Brexit Exchange contains a range of news and guidance in various areas affected by the UK’s exit from the European Union.

• Ecodesign regulations indicate direction of travel

News

• Lugano Convention unlikely to assist cross-border disputes
• Cyber-security requirements for smart devices
• Modern Slavery Private Members’ Bill
• International data transfers: UK adequacy decision finally approved
• ICO draft anonymisation guidance

 

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Recent Case Law

The meaning of “deliberate act” in exclusion clauses

Burnett v International Insurance Co of Hanover Ltd [2021] UKSC 12

Although this case relates specifically to the wording of an insurance policy, it presents a useful example relating to contractual interpretation. The policy in question was a public liability insurance policy for a pub, in which a pub bouncer had caused the death of a customer. The policy excluded “deliberate acts”, and the court looked at whether this excluded all acts that were done deliberately, or just those which were done with the intention of causing injury. It concluded that the exclusion of all acts done deliberately would remove many of the accidental injuries that the policy was intended to insure, and so in this context a deliberate act was one which intended to cause injury; effectively, the word “deliberate” referred to the outcome rather than the act.

Comment: From a drafting point of view, the interest in this case is less about the meaning of the word “deliberate” per se, and we would expect that particular word could have different interpretations in different contexts. The interest here is more about the fact that a word that is typically assumed to have a specific or certain meaning can in fact be interpreted in more than one way. Careful drafting requires careful consideration of where this might be the case, and the avoidance of ambiguous drafting.

For further information, please contact Rebecca Howlett.

 

Post-termination restrictive covenants did not cause losses

Dwyer (UK Franchising) Ltd v Fredbar Ltd and another [2021] EWHC 1218 (Ch)

In a recent High Court case, the court looked at the operation of post-termination covenants preventing a franchisee from competing within the franchisor in a given territory. The covenants in question were designed to protect a legitimate interest (the franchisor being able to recruit a replacement franchisee for that area). However, the wording was relatively broad, in that it sought to prevent the franchisee from engaging in any plumbing and drainage business in the territory without exception, leaving the franchisee unable to carry on business, and its owner likely unemployed. This meant that the restrictions imposed were not reasonable in relation to the interest being sought. In addition, a second provision which extended the prohibitions to a radius outside the territory was void because there was no goodwill to protect in that extended area, since the franchisee had not provided services in that area.

Comment: This is a useful illustration of the principles involved in restraint of trade cases. Any restrictive covenants should both protect a legitimate business interest, and be reasonable in the light of that interest and the surrounding circumstances. Covenants should be considered carefully in the individual circumstances, and this case illustrates that a blanket approach to use of covenants cannot be used; in many other circumstances a 12 month non-compete covenant may have been reasonable.

For further information, please contact Louise Wilson.

 

“Reasonable detail” in notice of claim depends on information recipient already knows

Dodika Ltd v United Luck Group Holdings Ltd [2021] EWCA Civ 638

In this case a claim had been made under a tax covenant in an SPA that also included a provision requiring notices to state in “reasonable detail the matter which gives rise to” the claim. When the buyer gave notice in relation to an ongoing tax investigation, the court held that the matter giving rise to the claim was in fact the underlying pre-completion facts giving rise to the tax liability in question, not just the investigation itself. However, on the facts, the relevant information was already in the possession of the sellers, and so what constituted “reasonable detail” depended on all the circumstances including that knowledge; the buyer did not have to repeat information that the sellers already had.

Comment: Compliance with the detail of notice clauses often seems to trip people up, with cases appearing with relative regularity in which a notice has failed for not meeting all the contractual requirements. It is interesting, therefore, to see a case in which the courts have landed on the side of the notice-giver.

For further information, please contact Josh Middleton.

 

Company signing a contract in its own name was a party

Gregor Fisken Limited v Bernard Carl [2021] EWCA Civ 792

The Court of Appeal recently reaffirmed the principle that a person who signs a contract in their own name will be a party to the contract, in the absence of a clear indication that they are signing as an agent for another party. The case concerned the sale of a gearbox for a Ferrari 250 GTO. When the parties fell out over shipping costs, the seller attempted to argue that the buying company was in fact an agent for an undisclosed principal, and could not therefore enforce the contract itself. However, the court found that, since the buying company had signed the contract in an unqualified manner, with nothing to indicate agency status, it was itself a party to the contract.

Comment: It should be noted that in this case the heading of the contract described Gregor Fisken Limited as “agent for an undisclosed principal”. Even with that qualifier, the fact that the signature block itself was unqualified meant that they were a party in their own right. Signature blocks are often added last-minute and it is easy not to give due attention to them, but this case illustrates that it can be key to get them right.

For further information, please contact Rebecca Howlett.

 

Incorporation of standard terms, and UCTA reasonableness for exclusion clauses

Phoenix Interior Design Ltd v Henley Homes PLC & anor [2021] EWHC 1573

In this case an initial proposal had been provided by the supplier with terms and conditions attached, but the later proposal that was actually signed did not include terms and conditions (although the proposal referred to terms and conditions being “overleaf”). The court found that the supplier’s terms and conditions applied, since it would have been clear to a reasonable person what terms applied to the later proposal, but also on the grounds that there had been no attempt on the customer’s part to counter-offer on their own terms.

In addition, an exclusion clause was considered, which stated that the supplier would not be liable under the warranties (quality etc.) if payment was not made by the due date. The court considered this to be an unusual clause, and that it had been “tucked away in the undergrowth” but yet “potentially exorbitant” as a slight delay would bar all rights of redress. The seller could not, accordingly, rely on the exclusion as it was not reasonable.

Comment: The fact that the decision on incorporation was based partly on the customer’s failure to put its own terms on the table indicates the importance of considering the “battle of the forms”. For suppliers, it is often a case of having a standard order acknowledgment process, but for customers it can require a more ad hoc approach of actively raising any issues with a supplier’s T&Cs up front. In relation to exclusion clauses, it is important to bear in mind that the reasonableness of an exclusion of liability under the Unfair Contract Terms Act 1977 includes whether the customer ought reasonably to have known of the term.

For further information, please contact Rebecca Howlett.

 

Legislation

Ecodesign regulations indicate direction of travel

The Ecodesign for Energy-Related Products and Energy Information Regulations 2021 came into full force as of 1 July, and mirror EU legislation that came into force earlier this year. Amongst provisions relating to ecodesign and energy labelling requirements, the Regulations introduce ‘right to repair’ requirements, which will require specified spare parts and maintenance information to be made available for household dishwashers, washing machines, washer dryers, fridges, freezers and electronic displays (including televisions), as well as for refrigerated vending machines, electric motors, and welding equipment. Products must be able to be repaired with commonly available tools, and spare parts must be made available for a period of 7-10 years after products are withdrawn from the market.

Comment: The intention of these requirements is to improve energy savings by making sure that products can be repaired rather than go to landfill, and hence last longer, contributing to a more sustainable economy. Given the narrow range of products covered, this is clearly just a first step, but consultations are ongoing in Europe as to extending ecodesign rules to other products such as smart phones, and we would expect future regulation to similarly broaden the scope of the UK requirements to other power-driven products.

 

News

Lugano Convention unlikely to assist cross-border disputes

The UK was previously a party to the Lugano Convention as part of its membership of the EU. The Lugano Convention provides a broadly similar regime (covering civil jurisdiction and the enforcement of judgments between EU member states and the EFTA countries – Norway, Switzerland and Iceland) to that previously applicable as between EU member states (and formerly the UK) under the Brussels (Recast) Regulation: both ensured that parties’ freedom to choose where their disputes would be heard, and that the court judgments they then obtained would be respected and upheld.

The UK had applied to rejoin Lugano in its own right post-Brexit. However, the European Commission has now formally stated that this should not happen. Although the ultimate decision rests with the European Council, hopes are fading that the UK will be given access to Lugano. In its absence, the UK is left with the Hague Convention (which provides a regime for the enforcement of exclusive jurisdiction clauses in contracts, and judgments obtained in relation to such contracts, as between the UK, EU member states, Mexico, Montenegro and Singapore). The Hague Convention is not as comprehensive as Brussels (Recast) or Lugano were and, where it does not apply (such as non-exclusive jurisdiction clauses and for contracts entered into before the Hague Convention came into force vis-à-vis the UK), parties will be left to look at the national laws of each individual country to decide which court has jurisdiction to hear a dispute, and whether a court judgment issued in another country can be enforced.

For further detail see our Brexit update: hopes that the Lugano Convention will provide a safe harbour for de-risking pan-European relationships fade, and for information on the implications of Brexit for these issues more generally, see Brexit: Jurisdiction and Cross-Border Enforcement.

Comment: This emphasises the importance of including an effective governing law and jurisdiction clause, to ensure that you are able to rely on the more limited protection provided by the Hague Convention in the event that a dispute arises. The rules on service of proceedings have also changed following the end of the transition period, which has made it more important than ever to include an appointment as an agent for service of process clause in your contracts where working with an overseas counter-party, even if they are within the EU.

For further information please contact Lindsey Clegg.

 

Cyber-security requirements for smart devices

The May 2021 Queen’s speech announced the Product Security and Telecommunications Infrastructure Bill, which, amongst other provisions, will implement the Government’s proposals to require smart devices to meet certain cyber-security requirements:

• A ban on the use of universal default passwords, such as ‘password’ or ‘admin’, that are often present in a device’s factory settings and easy to guess.
• The requirement for customers to be informed at the point of sale of the period for which the device will receive security software updates.
• The requirement for manufacturers to provide a public point of contact to make it simpler for anyone to report vulnerabilities.

Comment: The requirements are expected to apply to manufacturers, importers and distributors, so is likely to impose obligations on Travis Perkins in respect of the smart devices that it supplies such as Nest thermostats.

 

Modern Slavery Private Members’ Bill

In June 2021 a Private Members’ Bill was introduced into the House of Lords, seeking to strengthen the supply chain obligations under the Modern Slavery Act. Currently the obligation on businesses is to publish a statement setting out the steps they have taken towards elimination of slavery in their supply chains and in their own business. The Private Members’ Bill seeks to make it a criminal offence to supply false information in a modern slavery statement, as well as requiring minimum standards of disclosure and transparency, and making it an offence to continue to source from suppliers that do not meet those standards after a formal warning.

Comment: Although this is a Private Members’ Bill and it is therefore relatively unlikely that it will become law, it does indicate the general intention of Government to tighten the requirements on businesses in respect of modern slavery in the supply chain.

 

International data transfers: UK adequacy decision finally approved

Towards the end of June 2021 the EU Commission finally adopted the data transfer adequacy decision in favour of the UK. This is important news for any UK organisation that receives personal data from the EU. The EU’s decision means that personal data may continue to flow freely between the EU and the UK. It also means that UK organisations will not have to make potentially costly and time-consuming alternative arrangements to legitimise their data transfers from the EU to satisfy the requirements of EU GDPR.

Whilst this is undoubtedly good news for UK businesses, it comes with a caveat. The adequacy decision includes a “sunset clause” that allows the EU to review the adequacy decision in four years’ time. This is potentially significant because the EU has said that its decision is based on the UK’s data protection regime being the same as when it exited the EU, whilst the UK Government has referred to the UK’s “fully independent data policy” post-Brexit.

Comment: The UK has said that it will monitor the UK’s data protection standards going forward, and will intervene if those standards cease to be “adequate” to safeguard EU personal data. Such intervention could involve the EU refusing to renew the UK’s adequacy status. It also remains to be seen whether the decision will be subject to legal challenge from third parties. However, for the time being, standard contractual clauses remain unnecessary for data flows from the EU to the UK.

For further information please contact Luke Dixon.

 

ICO draft anonymisation guidance

The ICO has commenced a consultation on its new guidance on anonymisation, pseudonymisation and privacy enhancing technologies. They are currently seeking views on the first draft chapter, and will be issuing further chapters throughout summer and autumn. The guidance builds on the recently published data sharing code of practice, and the published chapter contains useful discussion around what constitutes anonymisation vs pseudonymisation, and what ‘de-identified personal data’ covers.  See the ICO consultation for further details.

Meanwhile, the European Data Protection Supervisor has published a paper setting out ten common misunderstandings related to the anonymisation of personal data. The contents of the paper will not come as a surprise to those with a familiarity with data protection matters, but is a useful checklist debunking myths such as “encryption is anonymisation”, “anonymisation is always possible” and “anonymisation reduces the probability of re-identification to zero”. For further information see the paper 10 Misunderstandings Related to Anonymisation.

For further information please contact Luke Dixon.

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If you would like to ask any questions regarding anything covered in this update, please do not hesitate to contact Rebecca Howlett 

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The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.