In this issue

Editorial
Directors and fiduciary duties
Upper qualifying age for unfair dismissal may be illegal
Holiday entitlement
Land Registration Act 2002
Rebalancing the scales?
Penalising late payers
Tree Root Invasion
Meade King news

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Editorial

Welcome to the autumn edition of the Orchard which I hope finds you rested after well-deserved summer breaks.

The period since our last newsletter has seen further expansion for the firm and we have been very pleased to welcome two new senior recruits (see back page).

Inside this edition you will find a mini brochure from our private client team which continues to grow and expand its sphere of business. The team is recognised nationally by the Legal 500 and Chambers and provides an excellent service to its clients.

Please feel free to contact either of my partners Richard Boulding or Jackie Martin if there are any private client issues where we may be able to help - or simply for a review of your present arrangements.

I hope you enjoy this edition of The Orchard and wish you all well in the busy run-up to Christmas.

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Directors and fiduciary duties

Directors are trustees. Although they do not own company assets, they control those assets and exercise powers for the company's benefit and not their own. As such, they owe fiduciary duties to the company.

Flowing naturally from the director's position as trustee is the governing principle that he must act in good faith in his dealings with the company and must not make a personal profit from his position beyond what he receives in the form of authorised remuneration.

It follows that, in the normal course of events, an individual should not be involved in a business, (whether a company a partnership or as sole trader), which is in competition with a company of which he is a director. The sanction, if he does, will be to account to the company for all profits which he (either directly or indirectly through the second business) makes from the second business.

But this is not a completely rigid rule. In Plus Group Limited v Pyke [CA 21.03.02], it was held by the Court of Appeal that a director of a company was not in breach of his fiduciary duties by carrying on a competing business in circumstances where he had been excluded from the management of the company.

The case is extreme in that Mr Pyke was refused access to even the most basic of information as to the company's financial circumstances and was refused explanations in relation to entirely reasonable enquiries.

The outcome, as must be right, is that a company's remaining board cannot take the moral high ground and argue breach of duty in circumstances where they have placed a director in the impossible position of having no work unless it is with a competitor.

If you require any further information please contact Clare Harris ch@meadeking.co.uk

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Upper qualifying age for unfair dismissal may be illegal

An Employment Tribunal in the cases of Rutherford v TownCircle (trading as Harvest) and Bentley v DTI, has concluded that the 65 year age limit which is set on claims for unfair dismissal had a disproportionate impact on women in the workplace and was not justified by the Government on social policy grounds.

After a thorough review of the statistics the tribunal concluded that the qualifying upper age limits should not apply and these two cases were allowed to proceed. Interestingly, the cases also involved redundancy payments which are also normally subject to the upper age qualification.

Subject to any appeal, it would appear that upper age limits are unlawful and that people over 65 will be entitled to claim unfair dismissal and redundancy payments.

For further information, please contact Richard Holmes rwfh@meadeking.co.uk

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Holiday entitlement

On 23 August 2002 the TUC published a report arguing that over 850,000 employees are 'losing out' on holidays, and another 400,000 are being denied their entitlement to holidays as a result of employers breaking the law on paid holiday.

The main objection of the TUC is that employers can count public and bank holidays toward the 20 days holiday employees are entitled to under the Working Time Regulations.

The TUC is calling for the government to do something about this and asking them to provide full time employees with 31 days holiday a year (being made up of four weeks paid annual leave and 11 paid bank holidays).

For further information, please contact Richard Holmes rwfh@meadeking.co.uk

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Land Registration Act 2002

The Land Registration Act 2002 is expected to come into force late this or early next year. The Act provides for the development of an all-electronic system of land transfer which the Government believes will provide buyers with better information about the rights and responsibilities involved in land ownership.

As well as changing the conveyancing process - something which will be introduced over a period of time and which will see electronic and paper systems initially working side by side - there will be other changes which will have a more immediate impact. These include:

• Adverse Possession. A new system will protect the interests of registered owners against the acquisition of rights by people in adverse possession (ie squatters)
• First Registration. Currently only leases of more than 21 years have to be registered at the Land Registry. This will be reduced to 7 years
• Overriding Interests. These are interests which a third party has over someone else's land (eg. a right of way) which may or may not be registered. The Act reduces some rights and abolishes or phases out others
• Other Third Party Rights. Currently some third party rights are registrable either as a caution or an inhibition at the Land Registry eg a trustee in bankruptcy's beneficial interest in property.

These will be abolished and any such rights will only be registrable as a notice or restriction.

These changes are intended to ensure that as much information as possible about a property is obtainable at a glance from the papers which the Land Registry hold. We will in future editions of The Orchard examine the changes in more detail and in particular look at their likely practical impact for both commercial and residential property owners and tenants.

For more information, please contact Catherine Ainley caa@meadeking.co.uk

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Rebalancing the scales?

In July 2002 the Government published the White Paper "Justice For All". This sets out the strategy for overhauling the Criminal Justice System based on the recommendations contained in Lord Justice Auld's "Review of the Criminal Courts" report which was published in October 2001. Although the proposals are still subject to a consultation process, the Government has made it clear that it intends broadly to introduce them, subject in some areas of major reform to Parliamentary scrutiny.

There are many proposals which will affect the conduct of cases listed before the Magistrates or Crown Courts:

• at present, previous convictions can usually be disclosed only after conviction. Under the proposed new regime, magistrates and juries will be given details of previous convictions and, significantly, "relevant" previous misconduct. This is likely to impact on "due diligence" style defences, where prosecuting authorities are likely to argue that previous behaviour is relevant to any decision on diligence. Companies which have previously been investigated by, for example HSE or Local Authorities, may have the details of those matters produced against them in evidence even where there has been no previous conviction
• where a case is stopped from proceeding on a technical point, the prosecution will have a right of appeal. At present, there is no right of appeal for the prosecution
• certain types of hearsay will become admissible at trial. This will allow in evidence statements by witnesses of what they have been told happened rather than what they saw happen. The risk is obviously that through word of mouth reports can become distorted, and there will be no opportunity to test by cross-examination the veracity of the original witness
• defendants will be required to make fuller disclosure of witness and documentary evidence to the prosecution in the course of preparation for trial
• serious and complex fraud cases are to be tried by a Judge sitting alone, thereby removing the defendant's right to trial by jury. It is also proposed that defendants should have the right to ask for trial by Judge alone in the Crown Court if they prefer. The grant of such an application will be at the discretion of the Judge.

The guiding principle is stated to be the need to balance opponents rights in the quest for the truth. The Paper suggests that the system at present is heavily weighted in favour of the guilty being able to manipulate the system in order to hide the truth. The proposals now put forward will certainly adjust the balance to favour the prosecutor. Time will tell whether the balance has been tilted too far.

It will be some time before the proposals begin to take effect, as the necessary legislation needs to be implemented. Many of the new rules are likely to increase the procedural objections and technical arguments open to both parties and there is certainly no reason to suppose that the reforms will achieve the original reform objective, which was to speed up and simplify the delivery of criminal justice.

If you have any queries on the Auld Report or the White Paper please contact Darren Burleigh on telephone number 0117 9264121 or by e-mail on djb@meadeking.co.uk.

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Penalising late payers

New Legislation has come into force enabling suppliers to charge interest and compensation on unpaid debts. The new law was to have been implemented in November but following an EC Directive was brought forward to August 2002.

The right to claim interest and compensation has been extended to all businesses regardless of size. The appropriate rate of interest has been set at 8% over the Bank of England Dealing Rate. Compensation is tiered to the sum claimed namely:

Any contract for goods and services entered into after the 7th August 2002 will be subject to the new regime although certain contracts eg employment and consumer credit contracts are exempt.

It is important for both supplier and customer to be clearly aware of when payment of invoices become due. There will obviously be circumstances where suppliers will be reluctant to pursue important customers for interest and compensation or to challenge clauses excluding their right to statutory interest. We will have to wait and see whether or not the new law on late payment of commercial debts has the desired effect.

Suppliers do not need to refer to the legislation or reserve any right to claim statutory interest in their contractual terms. However, if contrary terms are expressly agreed then these may in certain circum-stances prevail. It is therefore an appropriate time to review standard terms and conditions to ensure that these new rights are not effectively excluded - you may decide not to enforce them but you should at least give yourself that option.

If you require any further information or wish to revise your Terms and Conditions please contact Val Chapman by e-mail on vc@meadeking.co.uk.

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Tree Root Invasion

Damage caused to properties by tree root invasion ("TRI"), principally subsidence, is a frequent cause of litigation.

The mechanism of root subsidence damage is the movement of soil by a tree hungry for water during the summer. The roots abstract moisture out of clay soils when the tree is at the peak of the growing season. When a wet season arrives, water returns to the soil when the tree requires much less feeding. The soil subsides in summer and returns to its original position in winter.

Four elements must be present to found a claim:

1. the claimant must usually be the freeholder or long leaseholder of the land where the damage occurs
2. the defendant must be responsible for the offending tree. Usually, he will be occupying the land on which the tree is situated so that he knows of the problem and can take steps to do something about it
3. the damage complained of must have been caused by the tree - there is often an issue whether damage to a property was caused by tree roots or some other factor eg building works or even simply the age and character of the building. With TRI, cracking tends to be apparent in the summer but not in the winter. However cracks may occur on the initial settlement of a house, or following the expansion and contraction of bricks and other materials. Interior alterations (such as the addition of an extension) may also be to blame
   
   Claimants are inclined to think that an indication of root damage is the presence of roots in broken drains. In fact, the roots have probably sought out drains which have already fractured through some other cause. Tree roots cannot penetrate drains which have not already broken and when replaced by flexible PVC hoses the problem will be cured
   
   Expert evidence is therefore needed to determine the cause of the subsidence. His instruction at an early stage can avoid much wasted effort and cost
4. the damage must have been reasonably foreseeable. An individual is under a duty of care to his neighbours to take steps to prevent damage from occurring once he knows of its existence.

Two recent cases have extended the law in this area. Firstly, in Delaware Mansions Limited v Westminster City Council [2001] the House of Lords held that a Defendant was entitled to notice of the damage and then a reasonable opportunity of abatement before liability for remedial expenditure can arise.

Then, in L E Jones (Insurance Brokers) Limited v Portsmouth City Council [March 2002], the defendant denied liability on the ground that it was not given a proper opportunity to abate the nuisance. It was argued that when the defendant was first notified of the damage, the claimant had already made an irrevocable decision to underpin the property. The Judge found against the defendant on the basis that the defendant had not asked for an opportunity to abate the nuisance.

In light of these cases defendants would be well advised to take a more pro-active stance when informed of potential damage by tree roots and to actively seek an opportunity to abate any nuisance and to take steps to abate it. That may ultimately prove less costly.

For further information, please contact Mark Chawner mac@meadeking.co.uk

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Meade King news

In the summer edition of the Orchard, we promised news of new expansion and recruitment. We are delighted now to be able to confirm the addition of associates Julie Scott to the commercial property team and Jon Law to the insolvency team.

Julie is a senior property lawyer of some 7 years experience specialising in retail, development and secured lending work. She can be contacted on 0117 926 4121 or by e-mail jhs@meadeking.co.uk

Jon joins us from Reading firm Clarks where he built up a substantial insolvency practice specialising in transactional and other non-contentious insolvency work. He therefore adds great strength and diversity to our highly regarded and successful insolvency team.

Jon can be contacted on 0117 926 4121 or by e-mail jl@meadeking.co.uk

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.

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