Solicitors and other professionals obviously owe their clients a duty to use all reasonable care and skill in advising them – but what happens if they make a mistake that causes economic loss to an opposing third party who is not their client? The Supreme Court tackled that issue in a decision that will be required reading for all professionals.

The case concerned a solicitor whose corporate client owned a business park that had been used as security for substantial loans. The lender also held a floating charge in respect of all the client's assets. When one of the park's units was sold, it was envisaged that the lender's floating charge and security in respect of two other units would be maintained.

However, the solicitor sent the lender an email that mistakenly stated that the client's whole indebtedness was to be paid off and the entire security discharged. The lender did not query that statement or make any attempt to check its accuracy before discharging the entire security, including the floating charge. The mistake went unnoticed until the client went into liquidation and the lender suffered substantial loss.

The solicitor could not explain how she had come to make the error and the lender launched proceedings against her and her firm, alleging professional negligence. The claim, which was decided in Scotland, was dismissed by a Lord Ordinary. However, that decision was subsequently reversed by the Inner House and the lender was awarded £369,811 in damages.

In upholding the solicitor's and the firm's appeal against the latter ruling, the Court noted that it was presumed to be inappropriate for a solicitor to assume a duty towards a third party who is in opposition to his or her client. Such a duty could only be imposed if the solicitor concerned could reasonably be expected to foresee that his or her statements would be relied upon by the opponent.

Any prudent lender, taking basic precautions, would have checked the accuracy of the solicitor's statement. In implementing a transaction with critical implications for its security, the lender had not acted reasonably in proceeding upon no more than a description of the agreement's terms put forward by the borrower's legal representative.

Contact Sundeep Bilkhu, Associate Solicitor, Sydney Mitchell LLP - 0121 698 2200 s.bilkhu@sydneymitchell.co.uk

The rules governing the taxation of termination payments are being tightened from 6 April 2018 by means of legislation to amend Chapter 3, Part 6 of the Income Tax (Earnings and Pensions) Act 2003.

Hitherto, where the employee's contract of employment contained an express payment in lieu of notice (PILON) clause, such payments were taxed at the appropriate rate. Where a PILON was not contractual, or the business making it did not routinely make such payments to departing staff, it could be regarded as compensation for breach of contract and paid free of tax up to a threshold of £30,000.

In order to ensure that the £30,000 exemption cannot be abused, the distinction between contractual and non-contractual PILONs has now been removed. The change applies to payments or benefits received on or after 6 April 2018, whether contractual or non-contractual, in circumstances where the employment also ended on or after 6 April 2018.

Employers are now required to calculate the amount of basic pay excluding bonuses, referred to as post-employment notice pay (PENP), the employee would have received had they worked their full notice period. This amount is taxable as earnings and subject to Class 1 National Insurance Contributions (NICs).

The first £30,000 of a termination payment that is not PENP remains exempt from Income Tax, and any payment made to any employee that relates solely to the termination of their employment will continue to have an unlimited employee NICs exemption. The proposal to subject all termination payments above the £30,000 threshold to employer NICs, which was originally due to take effect at the same time, has been delayed until April 2019.  

The legislation ensures that PENP calculations are not to be applied to statutory redundancy payments. These are always taxable as specific employment income and subject to the £30,000 exemption where appropriate.

Initial guidance on the new rules can be found in HM Revenue and Customs Employer Bulletin 70 at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/684355/EmployerBulletin.pdf. More detailed guidance will be published in the Employment Income Manual in due course.

A further change is that Foreign Service Relief in respect of termination payments is to be removed. This will not apply to seafarers, however.

In addition, the legislation clarifies that the exemption from tax for payments for injury and disability is not intended to apply to payments for injury to feelings, except where the injury amounts to a psychiatric injury or other recognised medical condition. 

Employers are advised to include a PENP clause in employees' contracts of employment as the tax advantage of excluding such a clause no longer exists. If you would like assistance in reviewing your contracts of employment to ensure they are fully compliant with current legislation, please contact Samantha Glynn (s.glynn@sydneymitchell.co.uk) on 0121 698 2200.

When a tenant of industrial land failed to adhere to a notice to quit the premises, the landlord brought a legal action under the law of trespass for its lost rental income – £12,000 per annum.

The tenant did nothing and the landlord then instructed experts whose report indicated that a claim of £78,000 per annum was appropriate, based on the current rental value of the property.

The tenant raised points on the expert's report and indicated that he would commission his own report from another expert. In the event, he failed to do so. However, the landlord also failed to amend its own particulars of claim. It was therefore somewhat surprising that when the matter reached court the judge accepted the expert report as it stood and awarded the landlord damages based on the £78,000 it indicated.

The tenant appealed to the Court of Appeal, arguing that the claim should be limited to the £12,000 contained in the landlord's particulars of claim.

The Court of Appeal dismissed the tenant's challenge. He was aware of the content of the expert's report. The increased rental figures could be claimed without the requirement to amend the particulars of claim.

Says Sundeep Bilkhu

Whilst the decision comes as something of a surprise, it does make the point that in any legal dispute where a claim is backed up by an expert report, at the very least consideration should be given to the appointment of a second independent expert to review the evidence and provide a second opinion on what is reasonable in the circumstances.

For help or advice on this or a legal dispute matter, please contact Sundeep Bilkhu on 0121 698 2200 or email s.bilkhu@sydneymitchell.co.uk

Those who do not make use of their land take a risk that title to it will be acquired by others in the exercise of so called squatters’ rights. Exactly that happened in one case in which property owners objected in vain to their neighbour incorporating a slice of what they claimed was their land into his garden.

The case concerned a banana-shaped strip of land, measuring two metres at its widest, between the car park of the owners’ animal feed store and their neighbour’s property. Due to a missing conveyance, the exact boundary line between the two properties could not be determined, but it was apparent that at least part of the strip fell within the owners’ registered title. A dispute arose after the neighbour redesigned his garden so as to include the disputed strip.

After the neighbour applied to be registered as the strip’s rightful owner, the matter was referred to the First-tier Tribunal (FTT) for resolution. In ruling in the neighbour’s favour, it found that he had enjoyed exclusive possession and control of the strip for more than 10 years in the reasonable belief that it belonged to him. By operation of the Land Registration Act 2002, he was thus entitled to be recognised as its owner.

The FTT noted that, before the owners had acquired their property, the neighbour had put in place a chain link fence to prevent his dogs from straying. That had later been replaced by another fence and both structures had the effect of excluding the owners and their predecessors from gaining access to the strip. He had been in adverse possession of the strip since the first fence was erected in 2001.

For help on this or other related property dispute or litigation matter, please speak to Sundeep Bilkhu on 0121 698 2200.

Employers are reminded that the minimum required contribution levels to auto-enrolment pension schemes or qualifying workplace pension schemes (based on a worker's 'qualifying earnings') increase from 6 April 2018.

From that date, the employer minimum contribution rate will be 2 per cent and the staff minimum contribution rate will be 3 per cent.

There will be a further increase from 6 April 2019, when the employer minimum contribution rate will rise to 3 per cent and the staff minimum contribution rate will rise to 5 per cent.

Failure to comply will mean that the pension scheme will no longer be a qualifying scheme for existing members and cannot be used for automatic enrolment.

Further information and detailed guidance for employers can be found on the website of the Pensions Regulator.

For help or guidance on this or other related employment matter, please contact Samantha Glyn s.glynn@sydneymitchell.co.uk 0121 746 3300

References to 'seniority' or 'length of service' can all too easily be read as impermissible references to an employee's age, a point which was made by one case in which a sporting body narrowly defeated its former group marketing director's claim that his dismissal was infected by ageism (Kelly v PGA European Tour).

Mr Kelly commenced employment with PGA European Tour, the organisation which operates the three leading men's professional golf tours in Europe, in 1989 and was 60 years old at the time of his dismissal. This occurred following the body's appointment of a new chief executive officer (CEO) who had been critical of his performance. The CEO had, without success, urged retirement upon him as a dignified means of managing his departure and had eschewed putting him through a formal disciplinary process because of his senior position and his many years of service to the organisation.

Advertisements placed in search of a successor to Mr Kelly had stated that PGA European Tour was looking for 'energised' and 'vibrant' candidates and, in a presentation, the CEO had said that the body's aim was to establish 'a diverse group of millennials and established experienced employees'. In those circumstances, after Mr Kelly launched proceedings, an Employment Tribunal (ET) found that he had established an arguable case of age discrimination and the burden of proving otherwise was shifted onto his former employer.

In ultimately rejecting Mr Kelly's claim, however, the ET accepted that the CEO had wished to handle his departure respectfully and that the CEO's comments did not reveal a preoccupation with age. The real reason for his dismissal was the CEO's view that he had not bought into his ideas on the way forward for the organisation and was unable to embrace the changes he wished to introduce.

In rejecting Mr Kelly's challenge to that ruling, the Employment Appeal Tribunal found that the ET had not erred in law in concluding that the reason for his dismissal was not age and had given adequate reasons for its decision.

Says Samantha Glynn, Employment Lawyer at Sydney Mitchell,

We can advise you on any aspect of discrimination legislation, how it affects your business and how to ensure that your employment practices, policies and procedures are fully compliant.

For help or advice on this or other employment law matter, please contact Samantha Glynn on s.glynn@sydneymitchell.co.uk

When assigning a commercial lease or exercising a break clause, sensible tenants know that taking legal advice is mandatory. In one case that underlined the point, a series of errors resulted in a company being burdened by a costly and lengthy lease that it did not want.

The case concerned a lease of office premises at an annual rent of almost £220,000 which was due to continue until 2023. The original tenant had, with the landlord’s permission, taken steps to assign the lease to another company. There was, however, a delay in registering the assignment and that was not done by the time the second company served a notice on the landlord purporting to exercise a break clause in the lease.

The landlord refused to treat the lease as having been brought to an end on the basis that the first company, not the second, was the tenant on the date that notice was given. The landlord applied to the High Court for summary judgment in the form of a declaration that the lease had not been validly terminated.

In ruling on the matter, the Court acknowledged that the second company was the beneficial owner of the lease prior to its registration and on the date when notice was given. However, in granting the landlord’s application, the Court noted that the lease remained vested in the first company on the relevant date. On a true interpretation of the lease, it was the first company that should have issued the notice.

The Court rejected arguments that a reasonable recipient of the notice would have realised that a mistake had been made and that the notice had been served on behalf of the first company. The decision meant that the second company would continue to be bound by the terms of the lease until its expiry.

For help and advice on lease matters contact Shilpa Unarkat s.unarkat@sydneymitchell.co.uk on 0121 746 3300 or complete on our online enquiry form.

The Employment Rights (Increase of Limits) Order 2018, which details the annual inflation-linked changes in limits on the compensation amounts which can be awarded by an Employment Tribunal (ET), has been laid before Parliament. The new rates will apply where the appropriate date falls on or after 6 April 2018.

The main changes are:

• The maximum amount of a week's pay for the purpose of calculating a redundancy payment, or for various awards including the basic or additional award of compensation for unfair dismissal, increases from £489 to £508. The maximum award of an employee's statutory redundancy pay therefore increases from £14,670 to £15,240;
• The minimum amount of compensation where an individual is found to have been unlawfully excluded or expelled from a trade union increases from £9,118 to £9,474; and
• The statutory maximum compensatory award for unfair dismissal increases from £80,541 to £83,682.

There is no statutory cap on the amount an ET can award in discrimination cases.

See http://www.legislation.gov.uk/uksi/2018/194/pdfs/uksi_20180194_en.pdf for full details of the changes.

For Legal help and advice on employment matters, please contact Samantha Glynn s.glynn@sydneymitchell.co.uk

No matter what stage in its lifecycle a business has reached, there is always something that the owners can learn to help them achieve their ambitions. This is the view of Solihull Professionals, a group of like-minded businesspeople who have joined forces to support organisations of all shapes and sizes located across the Solihull Borough.

To signpost the experience, advice and knowledge that business owners and managers can access to help them take their companies to the next stage in their development, the group is organising a special event at Solihull’s Hogarth’s Hotel on 28 March 2018.

The Business Life Cycle Event will encourage delegates to take a step back and look at business from a different perspective.  In a series of interactive sessions, which are expected to be enlightening and thought-provoking, a panel of entrepreneurs and business leaders, including Ruth Chipperfield (Ruth Mary Jewellery), Robert Elliot (Hogarths), Paul Black (i-sales), Jane Weaver (JWL),  Kam Majevadia (Sydney Mitchell) and Kevin Johns (Prime Accountants) are panellists who will address some of the major issues surrounding the three main stages of the business lifecycle.

Kam Majevadia and Kevin Johns, facilitators at the business lifecycle event and members of ProSolihull Group, commented:

Businesses succeed through sheer determination and effort; at every step of development, help and advice at the right time can help a business fly and soar to the next level.

Our panellists at this Business Life Cycle Event, may just give you that snippet of information that will unlock or explain a stumbling block that you have been facing.

Solihull Professionals member Bob Mountford, says:

All businesses have a natural lifecycle and this event will appeal to people thinking about giving up their jobs and putting their ideas into practice and SMEs seeking growth opportunities while also being equally relevant to companies contemplating diversification and business owners who are preparing their exit strategy.

It’s a unique opportunity to learn valuable lessons from people who have lived and breathed their businesses and are passionate about sharing their experiences and resolutions, including common pitfalls and how to avoid them.

Solihull Professionals says

businesspeople will come away from the meeting with fresh ideas, new solutions and valuable contacts who can support them as they plan for the next stage in their company’s lifecycle.

The Business Lifecycle Event starts with registration at 8.30am and concludes at 1.30pm.
Tickets can be booked at https://how-far-can-your-business-fly-solihullpros.eventbrite.co.uk and cost £15.00 plus VAT and Eventbrite fees (£19.79) including a light lunch.

ProSolihull Members are:

Solihull Chamber, Sydney Mitchell Solicitors, Prime Chartered Accountants, Lloyds Bank, Solihull College, Solihull Council, Plum Personnel, i-Secured, Ruxton, GBS LEP and JM Bailey

PROSOLIHULL GROUP

Solihull a vibrant place to do business – the Solihull Professionals group was developed to bring together professionals in the area to get our voice heard further afield showing the opportunities in the region for companies to start-up, grow and develop and we have all in the region to help them no matter what stage of business life a person or company is at.

Contact:  Linda Heyworth, Senior Marketing Manager Sydney Mitchell - Event organiser and ProSolihull Member,  07772795041