Legal Update - March 2009
Is your business money safe if it is lodged with the bank? Likewise, what about any client account monies held by you? With new stories of bank instability featuring regularly in the newspapers, the Government’s decision to raise the amount of deposit that it will guarantee in the event of bank failure to £50,000 was welcomed by all. However, it had not been made clear if the guarantee under the Financial Services Compensation Scheme (FSCS) applies only to individuals or whether it includes company deposits as well. Recent guidance has sought to clarify the issue though arguably it could be clearer still.
Care has to be taken re debt collection in these trying times as this British Gas case shows. Getting it wrong could result in a harassment claim. The case highlights how complaints departments in large companies need to work closely with credit controllers to avoid causing harassment by making unwarranted demands. The court was unimpressed by the plc’s argument that some demands were not serious as these were “computer generated” noting that “..real people are responsible for programming and entering material into the computer...”. It also demonstrates that outsourcing to an external agency such work needs careful consideration and control lest this result in customer complaints and claims being made against you. Therefore by all means support your FD/credit controller in their drive for cash control but do this properly by having a system for dealing with complaints which must include proper identification of matter issues and adequate communication between departments/functions. Blaming the computer is no excuse or defence.
Have you heard of “pre-packs”? This is another new entrant into the OED along with “credit crunch”. A proposed set of rules for ‘pre-pack’ administrations (where a company goes into administration with the prospective purchaser already in place and the sale of the business is pre-arranged) has been given the thumbs-up by insolvency practitioners. For more about “pre-packs” please see here.
The main advantage of a pre-pack is that the company in difficulty can continue to trade without interruption. It is argued that this allows the best price to be realised for the company. It is also argued that it allows the administrator to avoid many expenses that would normally be incurred during the period in which a buyer is sought, thereby reducing the risk to other creditors of receiving a smaller dividend. In addition, pre-packs are claimed to reduce the likelihood that the business will be put into liquidation. However there are risks to suppliers of “pre-packs” who may be left out in the cold. For more on these please get in touch.
Businesses that have websites may need to think again about the website contact information they provide for users, following a surprise ruling of the European Court of Justice (ECJ). The reason? The desire of the ECJ to protect the interests of all consumers. In the course of a case brought by a German consumer group against a German insurance company, which failed to give one of its customers an effective way to communicate with it, the ECJ has issued a ruling that appears to increase the minimum amount of contact information that must be displayed on all business websites. The Court ordered the insurer to make sure its telephone number appeared on its website and that an online contact form was responded to within 60 minutes. Arguably this can mean many businesses will need to change their website information and how they respond to clients/customers going forward.
The Health and Safety (Offences) Act 2008, which alters the penalty framework set out in Section 33 of the Health and Safety at Work etc. Act 1974, has received Royal Assent. The Act introduces harsher penalties for businesses that commit certain health and safety offences. The Act increases the maximum penalty that can be imposed in the lower courts for breaching health and safety regulations from £5,000 to £20,000 and the range of offences for which an individual can be imprisoned has also been broadened.
Tougher rules also come into force with respect to environmental law. Based on the ‘polluter pays’ principle, new regulations set out action to be taken where there is an imminent risk of environmental damage or environmental damage has occurred. In the former case, action must be taken to prevent damage and in the latter case, remedial action can be required by the enforcing authority.
As for litigation generally there are risks to businesses that want to DIY. The basic idea of ADR (non litigation Alternative Dispute Resolution) today is that the court will look at the entirety of the behaviour of any litigant, in particular regarding failures to make an offer to settle or a refusal to negotiate with the other side. In such cases, a cost ‘penalty’ may well result, especially if the costs are allowed to become large when compared with the value of the claim so this requires litigants to be “reasonable” in their conduct of any dispute no matter how emotional or principled they feel. Discussing the offer to settle with your solicitor and barrister is always advisable to avoid such costly mistakes as such dispassionate and objective advice can help to cut through “blinkered” and wishful thinking that could result in cost penalties being suffered.
Trust the above helps you avoid costly mistakes other businesses have made and wishing you continued success in your own business plans going forward.
