Autumn 2004

In this issue

Disability Discrimination - the next phase

Cold Calls : Protection for Businesses

Eggs and baskets? The global claim

Residential lettings - Landlords obligations

Stop Press - Ruling on dividends

Meade King news

When is a bankrupt's home not a bankrupt's home?

Saving tax for the next generation - Will Trusts for married couples

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Disability Discrimination - the next phase

From 1st October 2004 new duties under the Disability Discrimination Act 1995 (DDA) will affect all employers with fewer than 15 employees and anyone who provides goods or services to the public

Impact on employers

Employers will need to make sure any disabled employees or job applicants are not discriminated against because of their disability and may have to consider making "reasonable adjustments" to the workplace.

Most organisations employing 15 or more staff are already subject to these duties. Certain types of employer, previously excluded under the DDA, are now covered for the first time. These include barristers and partners in business partnerships.

No changes are needed unless there is already a disabled employee in the workplace or a disabled person who applies for a job.

Employers are not expected to do more than is reasonable nor anything which is beyond their resources. A common sense approach is advocated since different disabilities bring different needs and some employers can afford to do more than others.

So, what is a reasonable adjustment? Examples will depend on the employer's situation and the needs of the disabled person.
They might include:

• Rearranging furniture to provide better access
• Providing specialist equipment for the visually or hearing impaired
• Flexibility of hours
• Time off for treatment
• Transferring to another, more accessible, site

Reasonable adjustments on recruitment might include:

• Making application forms available in large print or Braille
• Moving the interview to a more accessible venue

Discrimination against a disabled job applicant or employee can result in an action in the employment tribunal and compensation awarded against the employer. It is important to do the right thing (and be seen to be doing so) to avoid claims and possible liability

Impact on service providers

The broad principles set out above apply equally to service providers who will have to make reasonable adjustments to any physical barriers that may prevent disabled people from using their service. Examples would include:

• Ensuring that premises are well lit with clear signage
• Providing a Loop system for those with a hearing impairment
• Installing a ramp and handrail
• Conducting meetings at a more accessible venue
• Adapting website pages or offering versions for the visually or hearing impaired

Discrimination against a potential user or customer for services can result in an investigation conducted by the Disability Rights Commission giving rise to a brokered agreement. Worse still it can give rise to a civil claim which, if proved, can result in an order for damages for any financial loss and for injury to feelings. The provider could also be made subject to an injunction to prevent any repetition of the discriminatory act in the future.

If you require any further information concerning the DDA or on other employment issues, please contact Richard Holmes on or Nicola Hughes on or ring either of them on 0117 926 4121

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Cold Calls : Protection for Businesses

Consumers have for some time been able to register with the Telephone Preference Service to avoid unsolicited calls. This service is now available to businesses as well.

It is an offence for an unsolicited call to be made to a telephone number once it has been registered with the TPS for more than twenty-eight days. All direct call operators will need to check the TPS register on an ongoing basis to ensure that they do not make calls to registered numbers.

Registration is free.

Further information can be obtained from the following sources

The Information Commissioner has guidance at
www.informationcommissioner.gov.uk/ eventual.aspx?id=786

You can register on line by going to
www.tpsonline.org.uk

Registration is free but you do need to register every telephone number - it is not the businesses name but its telephone number that is registered.

Operators who make an unsolicited marketing calls to numbers registered with the TPS, faced unlimited fines.

If you continue to receive cold calls more than a month after registration you can register a complaint with the Information Commissioner. The Commissioner would expect you to try and contact the cold call company direct first to stop them continuing to call you before formally registering a complaint.

James Hawkins

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Eggs and baskets? The global claim

Loss and expense claims in construction contracts are notoriously difficult to formulate and to prove.

Broadly to succeed the contractor has to show

• The existence of one or more event for which the employer is responsible
• Loss and expense suffered by the contractor
• A causal link between the event and events and the loss and expense

Normally a causal link must be demonstrated between each of the events for which the employer is responsible and each of the items of loss and expense. This can be difficult. Some contractors have avoided the problem by bringing a global claim on the basis that if the contractor is able to demonstrate that all of the events on which he relies are in law the responsibility of the employer it is not necessary for him to demonstrate causal links between individual events and particular heads of loss.

A common example is where a contractor says he has suffered delay and disruption from a combination of late provision of drawings and information and design changes instructed on the employers behalf. In these circumstances all the matters on which he relies are the legal responsibility of the employer.

Greater problems arise however where a significant cause of the delay and disruption has been a matter for which the employer is not responsible e.g. bad weather (neither party responsible) or inefficient working (contractor responsible). In these circumstances a global claim will necessarily fail.

Some welcome guidance in dealing with global claims is provided by a recent Court of Session decision in John Doyle Construction Limited v Laing Management (Scotland) Limited. It reinforced the concept of the global claim. Although a Scottish case it is worth taking on board since it is likely to be a useful authority in England and Wales

Global claims have traditionally been frowned upon but the case suggests that they can still have a part to play. The broad principles to bear in mind are these:

• the mechanism for calculating a global claim need not be applied to the whole of the contractors claim. The contractor can divide his loss and expense into discrete parts and use the global claim technique for only one or a limited number of those parts. In dealing with the remaining parts of his loss and expense the contractor can try and prove causation in the conventional manner. This is particularly useful in cases of delay (as opposed to disruption). Since delay is calculated in terms of time only it is relatively straight forward to separate the effects of delay caused by matters for which the employer is responsible (e.g. late instructions) and delay caused by other matters (e.g. bad weather)
• sometimes as well as a group of events for which the employer is responsible there are other events for which he is not. If there is more than one cause of the same delay try and establish which is the dominant cause for that is likely to determine whether the claim can be proved. To avoid good claims failing separate them from other claims which are more troublesome
• even if it cannot be said that events for which the employer is responsible are dominant causes of the loss it may be possible to apportion the loss between the causes for which the employer is responsible and other causes e.g. where work is held up because of late provision of information by an architect but during that period bad weather might have prevented work for part of the time. When both matters are relevant each should normally be treated as contributing to the loss with the result the employer is responsible for only part of the delay during the period in question. Normally responsibility should be divided on an equal basis at least where the current cause is not the contractor's responsibility. Where he is at fault he may not be able to recover for any period of delay during which he was to blame

The conclusion? If a contractor cannot hold the employer wholly liable for his loss he should avoid putting all his eggs in one basket but where he can show that the employer is legally responsible for all his loss the global claim is still very much an option.

Philip Burbidge

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Residential lettings - Landlords obligations

The boom in the housing market has been generated partly by the increase in buy-to-let purchases. In becoming landlords, house owners must remember that they are taking on statutory obligations in respect of the maintenance of properties and their responsibilities to their tenant, which go beyond the obligations which may be contained in the tenancy agreement.

The landlord's obligations are imposed by the Landlord and Tenant Act 1985 and Section 11 states that the landlords will normally be responsible for the following:

• Keeping the structure and exterior of the premises in repair. This imposes on the landlord an obligation to put premises in repair even if they were not in repair at the commencement of the tenancy. The landlord is not liable where the tenant breaches its duty to behave in a tenant like manner. The tenant will be liable where damage is caused by their own breach
• Keeping in repair and proper working order all installations for the supply of water, electricity, sanitation space and water heating in the premises. The landlord is not generally required to provide installations which are not in existence at the commencement of the tenancy provided that the premises have:
  • adequate provision for light, heating and ventilation
  • an adequate supply of wholesome water
  • satisfactory facilities for the preparation and cooking of food
  • a suitably located WC and facilities for washing, bathing or showering

The landlord also has the following specific obligations:

Gas

The Gas Safety (Installation and Use) Regulations 1998 require landlords to ensure that all gas supplies flues and pipe work serving such appliances are maintained in good order. Annual safety checks must be carried out by a CORGI approved contractor and a copy of the report supplied to the tenant.

Electricity

Electricity systems and any appliances supplied as part of the rent must be safe to use.

Furniture & Furnishings

All furniture and furnishings supplied by the landlord must comply with the fire resistance requirements contained in the Furniture and Furnishings (Care)(Safety) Regulations 1988.

Consequences of non-compliance

At worst, non-compliance can result in the imprisonment of the landlord. In April this year joint landlords were jailed for 5 and 3 years respectively when fumes from a faulty gas fire in the flat they rented out killed two teenagers. This is an extreme case but does illustrate the need for landlords to ensure they meet their statutory obligations. Failure to comply could also result in action being taken by the tenants.

The tenant must give the landlord notice of any disrepair and if the landlord fails to remedy the problem within a reasonable period, the tenant can claim damages - the aim being to restore the tenant to the position he or she would have been in if there had been no breach of the repairing covenant. An award may include the cost of the tenant carrying out the repairs on the landlord's behalf, compensation for inconvenience or for the cost of moving to alternative accommodation.

Although tenants sometimes withhold rent on the basis of using the rent to pay for repairs there is no legal right for them to do so. However, in certain circumstances a tenant may use the rent to pay for repairs or offset arrears where the landlord has clearly been in breach of the repairing obligation and has failed to remedy the breach on notice. The tenant must follow a clearly defined procedure including serving on the landlord notice of the intention to carry out the repairs and submitting estimates in order that the landlord is given the opportunity to carry out the works himself.

For more information on these or any other Landlord & Tenant issues, please contact Catherine Ainley on or ring her on 0117 926 4121

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Stop Press - Ruling on dividends

In the last issue of The Orchard we looked at the Inland Revenue's targeting of family businesses where both husband and wife draw dividends and reported that it was bringing a case against a married couple arguing that the dividend income the wife received should be reallocated to her husband under s.660 Income and Corporation Tax Act 1988.

Judgment has now been given by the Special Commissioners in favour of the Inland Revenue, but has been criticised as adding to uncertainty, as the two commissioners who heard the case took differing views on almost every one of the issues addressed. A decision was reached only by the senior commissioner exercising her casting vote.

The presiding commissioner appears to have reached her decision on the basis that, in this case, there was a non-commercial arrangement whereby the wife held her share of the company through her husband's 'bounty' and had no absolute right to transfer it. In addition, as the only director, he had sole right to declare dividends, making the arrangement substantially a right to income.

The Revenue has said it will issue guidance in light of the decision.

Vanessa Eyre

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Meade King news

Congratulations to Vanessa Eyre (right) who qualified in September into the private client team where she is focussing on capital tax planning and trusts. She is also joined by trainee Jessica Mead (left) who joined the firm this month

Welcome also to Assistant solicitor Nicola Hughes who has joined the commercial team dealing with employment and a wide range of trading standards and licensing issues, while Trainee Christopher Mitchell joins the insolvency team.

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When is a bankrupt's home not a bankrupt's home?

Once a bankrupt has been discharged from bankruptcy it might be presumed that this is the end of the matter. However, as any insolvency lawyer will tell you, the bankrupt's property 'vests' in his trustee-in-bankruptcy irrespective of discharge. This is the case in respect of the bankrupt's interest in his family home, or in the home of his present or former spouse.

This has often come as a surprise to discharged bankrupts who, years after their discharge, awake to find a letter on their doorstep from a trustee in bankruptcy appointed to realise the value of his/her interest in their home. Whilst the family home may not have been of sufficient value at the time of the bankruptcy to be worth selling, the effect of house price inflation is that such property is now a valuable asset. It is not unheard of for proceedings to be commenced more than ten years after the making of a bankruptcy order.

The law in this area changed as a result of the Enterprise Act 2002. Since 1 April 2004 a trustee has only three years from the bankruptcy order to realise the bankrupt's former interest in his principal residence or the residence of the spouse or former spouse (although the period is extended where the trustee does not learn of the existence of the bankrupt's interest until more than three months after the date of the making of the bankruptcy order). All bankruptcies commenced before 1 April are also caught: the three year period runs from 1 April 2004, expiring on 1 April 2007.

Since the coming into force of the new regime the trustee must:

• realise his interest; or
• apply for an order for sale; or
• apply for a charge under s.313 of Insolvency Act 1986; or
• agree a deal with the bankrupt

If the trustee fails to do one of the above within three years then the property will re-vest in the bankrupt.

For further information please contact Keith Mahoney on 0117 926 4121 or e-mail him on

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Saving tax for the next generation - Will Trusts for married couples

A common tax planning vehicle for married couples whose individual estates exceed the tax free amount that can be left on death (known as the 'nil rate band' or 'NRB') is a nil rate band discretionary Will Trust.

The purpose of such trusts is to leave assets to the value of the NRB (currently £263,000) to beneficiaries other than the spouse in order to minimise the inheritance tax (IHT) payable on the death of the survivor of the couple. Anything left to the spouse is tax free but on the death of the survivor anything over his or her NRB is taxable at 40 per cent if left to a non-exempt beneficiary such as a child.

NRB Will Trusts ensure that assets to the value of both the husband's and wife's combined NRB, that is £526,000, are passed down tax free rather than just the NRB of the surviving spouse. However, few people have sufficient assets to leave the NRB amount outright to beneficiaries other than their husband or wife, as to do so would leave the spouse short of income.

In such cases it is often necessary to use the matrimonial home to fund the trust and the trustees are given power under the trust to accept an IOU from the surviving spouse so that all the assets of the first to die, including his or her share of the matrimonial home, can be transferred to the surviving spouse. On the death of the survivor his or her estate will be reduced by the outstanding loan, thus achieving the tax saving aim.

The beneficiaries of the NRB discretionary trust are usually the surviving spouse and any children or remoter issue. The surviving spouse is usually one of the trustees who have discretion over which of the beneficiaries should benefit from the trust.

The Inland Revenue are examining cases where they perceive that the trustees have failed to act to protect the interests of the beneficiaries. If they can successfully argue that there is not a 'real' trust the debt will not be deductible from the estate of the survivor. It is important that trustees observe all the necessary formalities and meet regularly to exercise their discretion.

All decisions made by the trustees should be minuted, in particular

• the original decision to accept the IOU instead of assets
• whether or not to charge the debt and the reasons for the trustees' decision
• whether interest should be charged on the debt and if so whether it should be rolled up

The Inland Revenue has also said that in their view Stamp Duty Land Tax is payable on the value of the IOU but this may be open to challenge.

For further information on NRB discretionary trusts or other personal taxation matters please contact Richard Boulding or Vanessa Eyre on 0117 926 4121 or email them on or

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Whilst every effort has been made to ensure accuracy, information contained in the Orchard may not be comprehensive and should not be acted upon without professional advice.