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We bring you updates across Brexit, Corporate & Commercial, Data Security, Advertising & Marketing, Employment, Consumer law - in association with Iain Larkins from .

We focus on the commercial aspects and look at the practical steps for you to consider.

This month we cover parent company liability over polluted waterways, relational contracts, Third-party rights, Â£400k data breech fine for parenting club, BMW trade mark ruling, Agency worker rights, Restricting cross-boarder sales in the EEA and much more. Watch below or read, with link to further guidance on each story.

Corporate and Commercial

Parent company liability

The Supreme Court¹ has reiterated that where a parent company exercises (or purports to exercise) some control over the operations of a subsidiary it may be liable for that subsidiary.  This case concerns Vedanta Resources PLC, the UK parent of a Zambian mining subsidiary that has been accused of polluting the local waterways. 

For further guidance see:

Liquidated damages

Often when a contractor is late delivering goods or services, the customer will terminate that contractor and seek a replacement contractor to ‘finish the job’. To protect the customer, contracts sometimes include obligations for the contractor to pay a certain sum for the delay (often calculated on a daily basis) and referred to as liquidated damages. It has generally been considered that liquidated damages are only effective until the termination of the contract, but a recent Court of Appeal² decision has blurred this general rule and suggested it will turn on what’s stated in the contract. 

For further guidance see: 

Good Faith

With very limited exceptions, the English Courts have been reluctant to imply a duty of good faith into contracts but following a recent High Court decision³ it seems likely that good faith will be implied into ‘relational contracts’.

The judge in this case set out 9 non-exhaustive characteristics to help determine whether something is a relational contract or not. The intention of this list seems to be to capture agreements that necessitate the parties to have an on-going and long-term collaboration – such as joint venture or franchise agreements, but they could be interpreted to catch almost all contracts.

In this case the Court said that Good Faith is an obligation to ‘refrain from conduct which in the relevant context, would be regarded as commercially unacceptable by reasonable and honest people’ .

For further guidance see: 

Third party rights

The Contracts (Rights of Third Parties) Act 1999 created a right for a person, who is not party to a contract, to enforce a term if it confers a benefit on that person.

The law has had little impact as most commercial contracts simply exclude the right. A recent case⁴ has highlighted the perils of not excluding it.

Yorkshire Bank agreed terms with a property developer whereby money from investors would be paid into an account and only released subject to certain conditions. The investors’ money was fraudulently withdrawn and sometime later the investors learned about the terms that had been agreed between the property developer and the bank.

The investors successfully enforced their rights under this law against the bank.  The bank’s arguments that the references to ‘client’ in ‘Client Account’ was insufficient to amount to identification of a ‘class’ required for the purposes of the law failed.

For further guidance see:  

Carbon Emissions – new regime

The new Streamlined Energy and Carbon Reporting (SECR) regime will apply to financial years starting on or after 1 April 2019 and run alongside the existing CRC Energy Efficiency Scheme (CRC) during a transition period.  SECR regime apply to these organisations:

• UK incorporated quoted companies;
• UK incorporated "large" private companies;
• UK incorporated "large" LLPs; and
• Certain UK unregistered companies

A "large" company or LLP is one which meets two or more of the following criteria within a financial year:

• Annual turnover exceeding £36 million; and/or
• Annual balance total exceeding £18 million; and/or
• More than 250 employees.

Where a company or LLP moves across these thresholds in a financial year, smoothing provisions will apply.

The  available on the Government’s website sets out the detail of the reporting requirements. Failure to disclose the necessary SECR report will constitute a criminal offence punishable by a fine.

For further guidance see: 

Data Security

£400,000 data breach fine against UK pregnancy and parenting club.

The Information Commissioner’s Office (ICO) has fined , the pregnancy and parenting support club, £400,000 for data protection breaches. The ICO stated that Bounty’s privacy policy was insufficient and did not provide enough information to allow people to make an informed choice on whether to provide their data or consent to marketing – in particular it did not specifically identify third parties or the types of third parties that personal data would be shared with. 

Data Controllers and Data Processors – how to spot the differences.

Data Protection law refers to Data Controllers, Joint Data Controllers and Data Processors and imposes different obligations each.  Data Controllers, as the name suggests, control what happens to personal data and will be responsible for their Data Processors – who process personal data for Data Controllers. Determining which label applies to your business is important but can be tricky.  New guidance is now available on the ICO .  

For further guidance see: 

Advertising and Marketing

BMW wins trade mark & passing off action

BMW has successfully⁵ used the precedent set in the 1999 British Telecommunications Plc v One in a Million (OIM) case. In that case the Court ruled that OIM’s action was an ‘instrument of fraud’ when it registered domain names of famous brands that it had no connection with.  In the recent BMW case, Mr Whitehouse had registered companies that included the word BMW. Despite Mr Whitehouse’s claim that he would only use the companies for his telecoms business and that the letters BMW were his initials, the Court sided with BMW. It was analogous to the One in a Million case and was therefore both trade mark infringement and passing off. 

For further guidance see: 

Employment

Agency worker rights

Agency Worker Regulations 2010 state that after 12 continuous weeks in the same role, an agency worker is entitled to the same basic conditions as equivalent directly hired workers. London Underground (LU) hired agency workers through an agency, Trainpeople.co.uk Limited (TPL) who wrongly advised TPL that an exception to equal pay requirements applied. When LU became aware of the incorrect information it paid the additional sum to cover the underpayment, but TPL did not pass this onto the workers and subsequently became insolvent.  The matter worked its way through to the Court of Appeal⁶ â€“ which held that although LU had tried to do the right thing by paying the funds to TPL, it must now be directly responsible to the employees.

For further guidance see: 

Payment to employees for doing a bit extra

Mr Fitz was a supervisor of a retail store and was expected to provide cover when the store manager was absent but was not paid for this additional time which fell outside of his contractual hours. His contract did not refer to this work. A dispute and a tribunal claim⁷ followed where Mr Fitz claimed he had suffered unlawful deductions from his wages because he had not been paid for the additional hours. The tribunal agreed making it clear that if staff are expected to do extra, this should be stated and whether the additional time will be paid. It’s especially important for lower paid workers as pay rates must exceed national minimum wage or the fines can be £20,000 per worker.

For further guidance see: 

Reasonable and proper cause for suspensions

The Court of Appeal has ruled⁸ that an employer must not suspend an employee without first satisfying itself that it has a 'reasonable and proper cause'.  Whether there is reasonable and proper cause will, of course, be specific and factors such as the seriousness of allegations and whether the individual is working with vulnerable individuals will be relevant. 

For further guidance see: 

Competition

Restricting cross border sales in the EEA

Nike has been fined €12.5 million for restricting cross-border sales in the EEA.  Nike admitted it had implemented unlawful practices restricting its licensees from making out-of-territory sales. Its ultimate fine was reduced by 40% because of its co-operation in the investigation. 

This decision arrives as another similar investigation has started in the video games sector.

These actions show the Commission will not tolerate agreements which jeopardise the rights of consumers to purchase anywhere in the Single Market. 

For further guidance see: 

When is a free hand-out, not a free hand-out?

On advice from the Estonian Government Enterprise Agency, an Estonian Bakery applied for and was awarded public funding of €526,300 to help fund new production facilities.  It was later found that the funding breached state aid rules.  The Government Agency asked for the money to be returned and, unsurprisingly, the bakery refused. The European Court⁹ determined that the responsibility of ensuring the aid was being granted lawfully, and the risk of it being subsequently recovered, lay with the bakery as the beneficiary.

For further guidance see: 

CMA Orders parties to unwind integration.

For the first time, the UK Competition and Markets Authority (CMA) has flexed its regulatory muscles by ordering the unwinding of a completed acquisition.  The acquisition by Tobii AB of a competitor in a niche technology market for speech assistance was relatively small at just £11m, but the CMA was concerned that the acquisition would be detrimental to competition. 

For further guidance see:  and 

^{Cases, laws, decisions referred to in this update}