Flower power wins the day in Interflora trademark battle

Internet advertisers who use competitor names to draw traffic have been dealt a rap on the knuckles following a high profile battle between Marks & Spencer and Interflora.

In the fast growing world of internet advertising, new online techniques are demanding new rules and the latest ruling from the Court of Justice of the European Union (ECJ) says that a trademark owner can stop a competitor from using their trademark as a keyword in a search engine such as Google.

But the judgement stopped short of a complete ban, saying the competitor would have to be taking unfair advantage of the trademark owner’s reputation or devaluing the trademark itself.

Marks & Spencer had selected the word ‘Interflora’ as a keyword on Google’s paid referencing service, AdWords. As a result, when a member of the public searched for Interflora on Google, a Marks & Spencer advertisement appeared at the top of the screen, as a ‘sponsored link’.

Interflora objected to this and brought proceedings in the High Court on the basis that M&S was abusing its trademark. The English court referred the issue of whether a competitor could use a trademark as a keyword to the ECJ, who published their ruling last week (24th November).

The ECJ ruled that a trademark owner was entitled to prevent a competitor from using its trademark as a keyword in order to advertise identical goods or services, or where using the trademark as a keyword amounts to taking advantage of the reputation of the trademark owner or is likely to dilute or tarnish the trademark.

Explained Brendan O’Brien Head of Business Services: “Although this involved the might of Marks & Spencer versus a franchise representing small florists across the land, I suspect that usually it is a smaller company that wants to take advantage of the reputation of a large company’s trademark. Small businesses should take note of this case and be aware that nowadays trademark owners are vigilant in protecting their rights, both online and offline.”

However the ECJ did not outlaw using a trademark as a keyword completely: this would be allowed, the Court said, where the advertisement put forward alternative goods and services and did not merely offer an imitation of the trademark owner’s goods or services and provided the advertisement did not dilute or tarnish the trademark.
He added “As is so often the case, you can do it if you do it right, so before you use McDonald’s as a keyword to advertise your takeaway, get advice from an expert.”

ENDS

This information is not intended as legal advice

Interflora Inc and Another v Marks and Spencer plc Times Law Reports 24.11.2011
First Council Directive 89/104/EEC Articles 5(1) and (2)
Council Regulation (EC) no. 40/94 Article 9(1)A

Distributorship Agreement and Vertical Restraints

SUMMARY
DEFINITION OF VERTICAL RESTRAINTS

Vertical restraints are agreements or concerted practices entered into between two or more companies each of which operates, for the purposes of the agreement, at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services. These guidelines set out the principles for the assessment of vertical agreements with a view to determining whether they affect competition between Member States.

SCOPE

The guidelines describe the vertical agreements that generally do not fall within Article 81(1): agreements of minor importance, agreements between small and medium-sized firms and agency agreements

GENERAL FRAMEWORK FOR CASE-BY-CASE ANALYSIS

The guidelines on vertical restraints also describe the general framework of analysis and the policy which the Commission plans to follow in the field.

Analysis of the effects on the market of vertical restraints

The negative effects on the market that may result from vertical restraints which EC competition law aims to prevent are as follows:

•foreclosure of other suppliers or other buyers by raising barriers to entry;
•reduction of inter-brand competition between the companies operating on a market;
•reduction of inter-brand competition between distributors;
•limitations on the freedom of consumers to purchase goods or services in a Member State.
However, vertical restraints often have positive effects, in particular by promoting non-price competition and improved quality of services. Consequently, the application of certain vertical restraints may be justifiable for a limited period where:

•one distributor may "free-ride" on the promotion efforts of another distributor;
•a manufacturer wants to enter a new geographic market, for instance by exporting to another country for the first time. This may involve certain "first-time investments" by the distributor to establish the brand in the market;
•certain retailers in some sectors have a reputation for stocking only "quality" products;
•client-specific investments have to be made by either the supplier or the buyer, such as in special equipment or training;
•know-how, once provided, cannot be taken back, and the provider of the know-how may not want it to be used for or by his competitors;
•in order to exploit economies of scale and thereby see a lower retail price for his product, the manufacturer may want to concentrate the resale of his product on a limited number of distributors;
•the usual providers of capital (banks, equity markets) provide capital sub-optimally when they have imperfect information on the quality of the borrower or there is an inadequate basis to secure the loan;
•a manufacturer increases sales by imposing a certain measure of uniformity and quality standardisation on his distributors. This may enable him to create a brand image and thereby attract consumers. This can be found, for instance, in selective distribution and franchising.

Method of analysis for vertical restraints

In general, the assessment of a vertical restraint involves the following four steps:

•the companies involved need to define the relevant market in order to establish the market share of the supplier or the buyer, depending on the agreement. In order to calculate the market share, the relevant product market (which comprises any goods or services which are regarded by the buyer as interchangeable) and the relevant geographic market (which comprises the area in which the companies concerned are involved in the supply and demand of the relevant goods and services) are taken into account;

•If the relevant market share does not exceed the 30% threshold, the vertical agreement is covered by the Block Exemption Regulation, subject to the conditions set out in Regulation No 2790/1999;
•If the relevant market share is above the 30% threshold, it is necessary to assess whether the vertical agreement distorts competition. The following factors to be taken into consideration are: the market position of the supplier, competitors and the buyer, entry barriers, the nature of the product, etc;
•If the vertical agreement falls within Article 81(1), it is necessary to examine whether it fulfils the conditions for exemption. In that case, the vertical agreement must contribute to improving production or distribution or to promoting technical or economic progress and must allow consumers a fair share of those benefits. At the same time, the vertical agreement must not impose on the companies concerned restraints which are not indispensable to the attainment of those benefits or to eliminate competition.

The most common vertical restraints

The most common vertical restraints are:

•Single branding

Single branding results from an obligation or incentive which makes the buyer purchase practically all his requirements on a particular market from only one supplier. It does not mean that the buyer can only buy directly from the supplier but that he will not buy and resell or incorporate competing goods or services. The possible competition risks are foreclosure of the market to competing and potential suppliers, facilitation of collusion between suppliers in cases of cumulative use and, where the buyer is a retailer selling to final consumers, a loss of in-store inter-brand competition.

•Exclusive distribution

In an exclusive distribution agreement, the supplier agrees to sell his products only to one distributor for resale in a particular territory. At the same time, the distributor is usually limited in his active selling into other exclusively allocated territories. The possible competition risks are mainly reduced intra-brand competition and market partitioning, which may in particular facilitate price discrimination. When most or all of the suppliers apply exclusive distribution, this may facilitate collusion, both at the suppliers' and the distributors' level.

•Exclusive customer allocation

In an exclusive customer allocation agreement, the supplier agrees to sell his products only to one distributor for resale to a particular class of customer. At the same time, the distributor is usually limited in his active selling into other exclusively allocated classes of customer. The possible competition risks are mainly reduced intra-brand competition and market partitioning, which may in particular facilitate price discrimination. When most or all of the suppliers apply exclusive customer allocation, this may facilitate collusion, both at the suppliers' and the distributors' level.

•Selective distribution

Selective distribution agreements, like exclusive distribution agreements, restrict the number of authorised distributors, on the one hand, and the possibilities of resale on the other. The difference vis-à-vis exclusive distribution is that the restriction of the number of dealers does not depend on the number of territories but on selection criteria linked in the first place to the nature of the product. Another difference vis-à-vis exclusive distribution is that the restriction on resale is not a restriction on active selling to a territory but a restriction on any sales to non-authorised distributors, leaving only appointed dealers and final customers as possible buyers. Selective distribution is almost always used to distribute branded final products. The possible competition risks are a reduction in intra-brand competition and, especially in cases of cumulative effect, foreclosure of a certain type or types of distributor and facilitation of collusion between suppliers or buyers.

•Franchising

Franchise agreements contain licences of intellectual property rights relating in particular to trade marks or signs and know-how for the use and distribution of goods or services. In addition to the licence of IPRs, the franchiser usually provides the franchisee during the life of the agreement with commercial or technical assistance. The licence and the assistance are integral components of the business method being franchised. The franchiser is in general paid a franchise fee by the franchisee for the use of the particular business method. Franchising may enable the franchiser to establish, with limited investments, a uniform network for the distribution of his products. From the competition viewpoint, in addition to provision of the business method, franchise agreements usually contain a combination of different vertical restraints concerning the products being distributed, in particular selective distribution and/or non-compete and/or exclusive distribution or weaker forms thereof.

•Exclusive supply

Exclusive supply means that there is only one buyer inside the Community to which the supplier may sell a particular final product. For intermediate goods or services, exclusive supply means that there is only one buyer inside the Community or that there is only one buyer inside the Community for the purposes of a specific use. For intermediate goods or services, exclusive supply is often referred to as industrial supply. The main competition risk of exclusive supply is the foreclosure of other buyers.

•Tying

Tying exists when the supplier makes the sale of one product conditional upon the purchase of another distinct product from the supplier or someone designated by the latter. The first product is referred to as the tying product and the second is referred to as the tied product. If the tying is not objectively justified by the nature of the products or commercial usage, such practice may constitute an abuse of a dominant position. Agreements of this type, which are designed to make the sale of one product conditional upon the purchase of another distinct product, may be incompatible with the competition rules.

•Recommended and maximum resale prices

The practice consists in recommending a resale price to a reseller or requiring the reseller to respect a maximum resale price. The possible competition risk of maximum and recommended prices is that they will work as a focal point for the resellers and might be followed by most or all of them. They may then facilitate collusion between suppliers.

Employment Law Newsletter December 2011

Dear Employer

Finally, after much speculation, the Government has announced its plans for the “most radical reforms to the Employment Law system for decades”. Some of the proposals are subject to consultation, while the Government has committed to others. Meanwhile, the good old chestnuts continue to crop up and not just in the turkey stuffing: the Christmas season is nearly upon us and with it comes (for those who can still afford it) the oft-dreaded office party. If you are one of the employers who will still be contemplating putting on their Santa Claus outfit and entertaining their staff, do remember that drunken lunges, whether by the Managing Director or the Accounts Clerk, are generally to be discouraged in order to avoid a claim.

We take this opportunity to thank you for your loyalty in the past year and let us look ahead to a brighter New Year.

In the meantime, remember prevention is generally better and cheaper than cure. If you have any problems, take advice before they fester. If in doubt, shout.

If you have any particular employment issues, please do not hesitate to contact us: details are at the end of this letter. If you have any comments or suggestions on this newsletter, please email newsletter@breezeandwyles.co.uk

Kind regards

The Employment Law Team

Some Recent Changes and Cases in Employment Law

Facebook and Unfair Dismissal

Posting derogatory statements on Facebook and other social network sites about an employer/clients can constitute a disciplinary offence. However, in a recent case involving an employee who made minor derogatory remarks on Facebook and was dismissed, the dismissal was held to be unfair. She had an excellent disciplinary record and had apologised for the comment, which did not refer to any clients by name, neither was there any evidence of any actual or likely harm to the company’s relationship with its clients. This is in contrast with an earlier case in which an employee was fairly dismissed for making derogatory comments about the customers in the pub where she worked.

It is worth noting however, that in this case the employee’s compensatory award was reduced by 20% for contributory fault (Whitham v Club 24 Limited (trading as Ventura)) (the earlier case was Preece v J D Wetherspoons Plc)

Employee on Sick Leave

The Employment Appeal Tribunal (EAT) has held that an employee on long-term sick leave must request annual leave in accordance with the Working Time Regulation in order to be entitled to payment for it. In this case a nurse injured her knee in an accident at work in November 2005. She was on long-term sick leave then returned to work, but she was eventually dismissed in March 2008. The employer paid her in lieu of untaken leave accrued in the annual leave year, which began April 2008, but nothing in respect of the two previous leave years, during substantial parts of which she had been receiving no pay at all. She brought a Tribunal claim seeking payment of four weeks leave for each of those two years.

There was no dispute that she had accrued leave in those years but the Tribunal found that she had to trigger her entitlement to be paid for it, by giving notice of the employer of her wish to take holiday, which she had not done. (Fraser v South West London St George’s Mental Health Trust)

What’s in the pipeline

“Radical Reform”

The changes to the Employment Law system which have been proposed include the following:
• Reform of the Tribunal system

• The introduction of Tribunal fees. Currently, two options are proposed, an initial fee to lodge a claim and then a second fee to proceed to a hearing. The second option would require those seeking an award above £30,000 to pay more to bring a claim.

• “No Fault” dismissal for firms with fewer than 10 employees.

• Reduction of consultation period for collective redundancies.

As advised in a previous Ezine, the Government has already committed to increasing the qualifying period for unfair dismissal to 2 years (currently 1) from April 2012 (NB – this may be indirectly discriminatory to women, as fewer women acquire 2 years continuous service: employers should therefore not get too excited yet and watch this space). It has also committed to:

• Requiring all employment disputes to be offered ACAS pre-claim conciliation before going to a Tribunal.

• Consulting in 2012 on “Protected Conversations” to allow Employers to have discussions with staff about retirement or poor performance which could not be relied on in a Tribunal claim.

• Consulting on simplifying Compromise Agreements (renamed “Settlement Agreements”)

• Considering how, and whether, to develop a “rapid resolution scheme” to offer a quicker and cheaper alternative to Employment Tribunals.


Long Term Sickness Absence Review

The Government has published the results of an independent review of the sickness absence system which recommends the creation of an independent assessment service (IAS) to provide an in-depth assessment of individuals’ physical and/or mental function when they have been signed off work for four weeks. The IAS would provide advice on how an individual on sickness absence could be supported to return to work. The review also analyses the current sickness absence system and makes a number of other suggestions to help combat the 140 million days lost to sickness absence annually. The review says that the current sickness absence system is failing e.g. because it pushes people away from the labour market towards inactivity. To address the failings, the review also suggests that (for example):

• There should be employer expenditure to keep sick employees in work or speed their return, e.g. medical treatments or vocational rehabilitation, which should attract tax relief;

• SSP record keeping obligations should be abolished, reducing administrative burdens on employers and saving them £44 million a year.

Watch this space!


The Employer Traps and Other Tips


References

Remember, there is no general obligation in law to provide a reference. However, if you do provide one, it must be true, accurate and fair.

Old Staff, New Methods

It may be helpful to remember that there is an implied duty on the part of the employee to accept reasonable adaptations to change e.g. to keep up with new technology. However, be aware that the implied term applies to the methods of performance of existing contractual duties and is not to be used to force through changes to those contractual duties themselves.

Interest on Commercial Debt - DONT FORGET!!

Asking for interest on unpaid invoices will sometimes be enough to prompt payment and avoid having to issue proceedings in the County Court.

It is always a tough decision to take the step of instructing solicitors to collect an unpaid invoice and taking legal action should always be a last resort. But in these tough economic times, businesses cannot afford to allow invoices to remain unpaid for too long.

When we send a letter before action we always include interest from the date the invoice was due and this will often have the desired affect of prompting a debtor to make an immediate payment to avoid the debt for continuing to grow.

You have the right to ask for interest on unpaid invoices in 3 circumstances.

1. Your terms and conditions may have a clause that claims interest for late payment of invoices. It is surprising how often Companies don’t know that they have this clause in their terms and conditions and this interest will take precedence over other forms of interest. It should be noted that it should be enough to deter late payment and should be a fair alternative to statutory interest. Quite often terms and conditions were drafted when the Company first started trading and have never been changed.

Check your terms and conditions and if you think these need updating or you would like us to simply look them over please contact Brendan O’Brien for further information.

2. Under the Late Payment of Commercial Debts (Interest) Act 1998 you are entitled to claim interest at the rate of 8% above Bank of England base rate on all invoices from the date the invoice was due. You are also entitled to compensation on each invoice under the Act. This can substantially increase the amount owed. For letters before action we will calculate the interest and compensation for you and add this to the amount owed. We have found that this is often enough to prompt payment. This does, however only apply to business to business debts but from 7 August 2002 all businesses can now claim interest under the act from the public sector.

3. Finally, you are entitled to interest under s69 of the County Court Act 1969 at the rate of 8% from the day you issue proceedings to the date you are paid or Judgment. For Judgment debts over £5,000 you can continue to claim the interest until the debt is paid. You can therefore claim the Late Payment interest or if you are not entitled, (for example your contract is with a “consumer” rather than a business), you can claim interest under the County Courts Act.

Remember you can only claim type of interest at a time.

It is, I think you would agree, worth trying our Low Cost Fixed Fee Debt Recovery Service where we will send calculate the interest, add the compensation if you are claiming under the Late Payments Act, and send a letter all for £2 plus VAT.

If you would like to know more about our Debt Recovery Service please contact me at Rita.Wright@breezeandwyles.co.uk or telephone 01992 558411 to speak to me personally.
Rita Wright

Head of Undefended Debt Recovery Team

Hertford Contact Centre - Coffee Morning 3 December 2011

As some of you will know, Olive McCarthy, Director and Head of Family Law at Breeze & Wyles Solicitors LLP set up the Hertford Contact centre in 2009 with Nicola Cable to enable absent/estranged parents to have quality time with their children in an environment acceptable to the other parent with care. It is run on donations, funding and volunteers to keep it going. It has helped 26 families to date and is a valuable service offered to the public for the benefit of children without charge.

The centre will be holding a fund raising coffee morning on Saturday 3 December 2011 between 10am and 12noon at the Oasis Coffee Bar at the front of Hertford Methodist Church, Ware Road, Hertford.

Please do come along and join us to help raise funds. We will be selling cakes and a small selection of homemade crafts as well as holding a raffle.

We look forward to seeing you there!

Continuity planning – planning for the unexpected

Planning for every eventuality is costly and time consuming but some things are worth the time and expense. Continuity planning is a normal consideration for most businesses...but what if those making the decisions can no longer do so? Dementia, although far more common in the elderly, can occur before the age of 65 ("early onset dementia"), how would your business cope if a key person suffered from sudden onset dementia? If not dementia then consider what would happen to your business if a director/partner were involved in an accident and suffered serious injuries, perhaps leaving them in a coma.

It is very common for elderly parents to consider appointing their children as Attorneys, to deal with financial matters when they can no longer do so for themselves. However, Lasting Powers of Attorney (LPAs) should be used to safeguard not only your family but also your business and business finances in times of emergency.

Would your creditors be willing to wait whilst the director recovers? Would staff wait to be paid? Numerous problems could arise if a key person in your business is unable to fulfil their role. It is important to have steps in place to ensure that your business can carry on trading properly in the absence of key personnel.
If one of your key personnel loses mental capacity without having documentation in place (whether company documentation or an LPA) to deal with your business, only the Office of the Public Guardian (OPG) (also known as the Court of Protection) has power to appoint someone to manage their finances (Court cannot make healthcare/welfare decisions). This person is known as a Deputy. Obtaining a Deputy can be a long and costly procedure, time you do not have if you wish your business to run smoothly. Further, obtaining an LPA is far cheaper than obtaining a Deputy Order.

Obtaining an LPA should be viewed as an “insurance policy” – you may not need to use it but if you do you will certainly be glad it was there!

Rather than leave the decision to the OPG as to who deals with your business finances if you are not mentally capable of doing so, why not make the decision for yourself? An LPA is a document which allows you to appoint someone to act on your behalf, as if they were you, but their action must be in your best interests. Prior to use the LPA must be registered with the OPG.

The important difference between LPAs and ordinary powers of attorney is that they remain valid after the individual who has granted the power becomes mentally incapable.

There are several decisions to make when drawing up an LPA, these include:

• Who will be your Attorney(s)? You can appoint more than one person to be an Attorney.

• Replacement Attorney(s)? If for some reason your chosen Attorney cannot or will not act (there is no obligation on them to do so) do you wish to name a replacement?

• How should your Attorneys Act? If you appoint more than one Attorney should they act jointly or jointly and severally or even a mixture of both?

• Restrictions and/or guidance: You can place restrictions on your LPA, such as the fact that it will only become effective IF/WHEN you lose mental capacity. You may wish to advise on the type of investments your attorney can make or which banking/investment institutions you would like them to use.

• Notification – would you like a business partner, accountant, family member or friend to be notified that you have entered in to the LPA?
All LPAs must be signed by a “certificate provider” this can be a solicitor, doctor or other professional or someone that has known you for two years or more. If you choose not to notify anyone of your decision to enter into an LPA then two certificate providers will be required. Before you can use the LPA it must be registered with the OPG, registration can take some sixteen weeks, depending on the workload of the OPG.

As you can see dealing with an LPA whilst you do have mental capacity may be a lengthy process but hopefully you have the time to wait!! It is possible to leave it too late, at which time the OPG will need to step in, meaning that you do not get to choose your own Attorney, place any restrictions or conditions on the use of the LPA and whilst all of this is being decided, what is happening to your business?.
Take action before it is too late!!!

For further information please contact Hardeep Nijher, based at Breeze and Wyles’ Cheshunt office either by telephone 01992 642333 or email: hardeep.nijher@breezeandwyles.co.uk

Where there is a WILL there is a way!

There are many reasons to make a Will including providing for your family and ensuring your assets are distributed in the way you want, rather than in accordance with the laws of intestacy. However, as a business owner have you considered: WHAT WILL HAPPEN TO YOUR BUSINESS IF YOU DIE WITHOUT MAKING A WILL?

Failure to make a Will can leave family and business partners in chaos. As a business owner, you should consider the following and make sure that the way in which your business is dealt reflects your wishes:

Do you want your business to continue trading after your death?

Yes: Then you need to clarify who should inherit your business interests

No: How will the interests and assets be dealt with? Should they be sold and monies distributed to your beneficiaries or do you wish to make specific gifts of your assets, such as your tools or premises?

When deciding upon the above, consideration should always be given to any Partnership Agreements, Shareholder Agreements and/or any other company documentation which may dictate the way in which your business is to be distributed upon your death. This is particularly important as company documentation can take precedence over a Will. If there is a conflict between your Will and the company documents, then the company documentation may be followed – even if this is not what you had intended!

Ensuring that your Will is properly drafted can help prevent costly disputes after your death. Even the most complex of Wills is, by far, more cost effective than protracted litigation. The last thing your family or business partners need after your death is lengthy litigation relating to the ownership/running of the business: a business that you have spent time and money building!

Tax relief – a range of potential tax savings can be utilised when making a Will, to include Inheritance Tax and Business Property Relief. Failing to make the most of available tax reliefs for your business could be very costly to your business and family........but extremely profitable to the tax man!

Is there adequate succession planning for directors? If, not then this should rectified in your company documentation.

Finally......once you have a Will ensure that it is regularly updated to take account of changes in your personal, tax and business circumstances.
MAKE A WILL you cannot take away the stress caused to your family or business partners after your death but you do not need to add to it!!!

For further information in relation to making a Will please contact Mr Hardeep Nijher, who is based at our Cheshunt office, either by telephone on 01992 642333 or email hardeep.nijher@breezeandwyles.co.uk and he will be happy to assist.

Improve your internal debt recovery rate

DELIVERY OF AN INVOICE;

 Ensure that an invoice is delivered promptly and accurately and that the invoice states the customer’s full name. Make sure that you are able to clearly and correctly identify your client’s name and status – is your client a Limited Company? Partnership or Sole Trader? Include your customers full and correct name. Correct identification of your customer is imperative if you are to successfully decrease your average debtor days.

 Include on the invoice your customer’s reference number so that your customer is able to easily identify the invoice.

 Ensure that the invoice states clearly the payment terms and the date by which payment is to be made.

 Ensure that a copy of the invoice is retained.

 Ensure that the invoice goes directly to the person in the organisation who will be responsible for paying the bill. It is sensible to call and obtain this information from your customer, before sending the bill. This limits the risk of your invoice sitting on anothers desk for a few days or weeks, before finally making its way to the correct person.

 Ensure that your invoice clearly shows the manner in which payment can be made. Ensure that you offer the opportunity to pay by credit card / debit card or BACs and identify how these methods can be utilised by your payee. Payment by these methods is often the quickest and easiest method for your payee – the easier it is for your payee to pay your invoice, the quicker you will get paid.


CREDIT CONTROL

 Ensure that you have a proactive and efficient process for chasing unpaid debts, as soon as the payment term expires. The key here is to ensure that you receive reminders, through either your accounting package or outlook, as soon as an invoice becomes overdue. You can not chase your debts proactively if you do not know when an invoice has become overdue.

 Where the chasing of invoices is being done internally, automation is ideal because it will limit internal resources whilst ensuring that debts are still being chased. Use standard precedent letters and diarise weekly chasers to be made both by letter and telephone.

 Telephone calls are time consuming but often offer a higher rate of return. Make sure you stick to the timescales (If you tell a customer you want payment in 7 days and they don’t pay, chase again by letter or phone promptly on day 8).

 Decide how many letters and telephone calls you will undertake during your internal credit control process and what the course of action will be should payment not be made. We would suggest that instruction to us to send a letter before action to your debtor, at a cost of £2.00 plus VAT, should be the automatic next step following exhaustion of your internal credit control function. Our instruction is quick and easy and instructing us promptly will ensure that ongoing pressure is applied to your debtor. This will increase the likelihood of recovery.

 Make sure that staff with the appropriate skill set and personality are responsible for your credit control. There is little point having someone who is overtly shy and embarrassed, in charge of asking a customer for a commitment to pay by a certain date.

 Make sure that your credit controller is efficient and proactive and keeps records of each call made. When a debtor says that they will make payment, make sure that your credit controller asks them to commit to a date by which payment will be made. If your customer defaults, ensure that the customer is called again and ask for a revised payment date. If the customer defaults again, it is highly likely that further action is going to be required. Continued failure to meet agreed payment proposals may be a sign that your debtor is experiencing financial difficulty.

 To illustrate the importance of making a record of a telephone call with a debtor, you can take the example where in a telephone call a debtor admits liability, or tries to agree a payment plan. A telephone note recording admission may well help to question the credibility of a debtor who subsequently tries to deny liability for the debt.

 If you do agree an installment plan with a debtor, it is worth confirming the agreement in writing and making sure that when negotiating the agreement with the debtor, you reserve the right to claim the entirety of the invoice should the debtor default on the installment plan.

 Act quickly and don’t delay. Delay will breed further delay by your debtor. If you threaten Court action or referral to a Solicitor, follow through with the threat. Otherwise, the debtor may not take you seriously and prioritise paying other creditors that are pushing for payment.

 Categorise your debtors in to those who “Won’t pay” and those who “Can’t pay”. Where resources are limited, focus your internal resources on chasing those who “won’t pay”.

Recession: Cash Flow is paramount

Most small business owners have had a difficult few years, the lack of available cash and new customers has made some small businesses think hard about what they are doing; whilst some still seem to be content to sit and try to weather the storm, waiting for the economic recovery! Now, more than ever, small business owners need to realise cash generated from customers - the effective collection of such cash has become priority.

Markets are smaller and customers can afford to be choosy about when, where and how they spend their money. Many small businesses have no idea how to attract new clients as until recently the customers have come to them. Even now, when attending networking events, there can be many businesses of a similar nature and with no demarcation in promises or offers. It’s no longer enough for a business owner to say that their unique selling point is “great service” and/or “personal service” because all businesses claim to offer these!

There needs to be a clear difference between you and your competitors: tangible benefits to meet with the customer needs. Business owners must ensure that they have systems in place to help deliver a better and more consistent service, services which are more cost effective and efficient than those used in recent times. Keeping your customers happy and keeping them coming back for more is now, more than ever, vital to making a success of your business. Excellent service, professionalism and value for money are all fundamental to attracting new customers. The complacency gained during a business boom needs to be replaced with diffidence; there is longer a queue of potential customers waiting at the door.
When business is plentiful pricing is not an issue as there was enough business to be had to make up for loss leaders and margin shortfall, although pricing and margins are now critical to business success.......remember, there is always somebody who can do it cheaper than you!

Lack of cash is the number one killer of small businesses and the old business adage “turnover is vanity, profit is sanity, but cash is reality,” has never been more true. Your suppliers will want you to pay quickly however, your customers will take their time in settling your invoices. In brighter times (remember the days before the recession?) it was easier to be relaxed with finances, a 90 day debt was nothing to worry about......anyway the banks would assist with loans and overdrafts! However, now businesses are finding more and more that they need to live on immediate cash flow generated and effective credit control is therefore paramount.

Most businesses sell their products and services on credit, Late Payment Legislation has been in place since November 1998, this gives businesses the right, in certain circumstances, to charge statutory interest and compensation on late payments from customers.

Breeze and Wyles offer a low cost, innovative debt recovery scheme with LBAs costing just £2.00 plus vat, making it cost effective to chase even lower value debts. For further information please contact Rita Wright: rita.wright@breezeandwyles.co.uk or Rachel Harper: rachel.harper@breezenadwyles.co.uk or telephone: 01992 558411.

Relationship Insurance: Kernott -v- Jones

We insure our cars against accidents that we hope will never happen, we insure our houses against fires that we hope will never happen, we insure our holidays against mishaps that we hope will never happen, so why don’t we insure our relationships against breakdowns that we hope will never happen?

The idea of setting out in writing what should happen on the breakdown of a relationship may not be a romantic one but, like all insurances, is becoming increasingly necessary.

Following a landmark decision of the Supreme Court on 9th November 2011 ‘relationship insurance’ seems to be all the more important.

In the case of Jones v Kernott, the Supreme Court this week gave their judgment. The case involved an ordinary couple, Patricia Jones and Leonard Kernott, who bought a house together. They went on to have two children but sadly the relationship broke down. The couple separated and then tried to sell the property but it failed to sell. They cashed in a life insurance policy to enable Mr Kernott to move out and buy another property. 14 years later Mr Kernott asked for his 50% interest in the house back but Ms Jones claimed that as she had been maintaining the property and all outgoings since their separation, she should be entitled to a much greater share of the property which had substantially increased in value since the date when they had originally attempted to sell.

The Supreme Court held that it was only fair that Mr Kernott should not receive 50% of the increase in value since the date of the original attempt at sale as Ms Jones had maintained the property, including the mortgage, since this date and Mr Kernott had benefited from the increase in his own property.

Whilst this might sound straightforward, the couple’s claim was originally started in 2007, some 4 years ago. The reason for the complexity is that the law relating to unmarried cohabitating couples has been, and still continues to be, as clear as mud! The Supreme Court was left with the job of inferring what they believed was likely to have been the couple’s intention as to ownership as their actual intentions were unwritten.

The law relating to ownership of property continues to be complex and unclear for unmarried couples. The Courts continue to look at, among other factors, the written intentions of the parties and if they didn’t write these intentions down, they can also find themselves going through years of litigation.

If you want advice as to how to best protect your interest in property or other assets, speak to one of our family solicitors.

Terms of Business: Retention of title

A retention of title clause is a provision in a contract for the sale of goods that the ownership of the goods remains with the seller until payment of the purchase price is made by the buyer to the seller.

The reason for a retention of title clause in a contract is to ensure that when a seller extends credit for the provision of goods, if the buyer subsequently becomes insolvent without making payment for those goods then the seller can recover those goods instead.

The protection afforded generally only relates to the goods themselves so that when they are incorporated into other goods, the best example of which is raw materials converted into other products the created product cannot be protected and then recovered.

The nature of this type of clause is relatively simple but also looks very much like a form of security. So when this clause is drafted quite widely, for instance to cover products created from those goods, security is deemed to be given by the company and as a result it should be registered in accordance with the Companies Act. Failure to register will mean that the clause is no longer valid. Accordingly the wider the clause is drafted the more likely that the a court will set the clause aside for want of registration.

Retention of title is a valuable tool for the seller who sells with extended terms of credit, i.e. not payment on delivery. However, the clause can be rendered meaningless if the drafting is wrong.

Does TCF have benefits for the non-regulated sector?

Does TCF have benefits for the non-regulated sector?



For eight of the last ten years Debt Collection has seen very little investment. This is not the case now. The existing profit centres are generating less income than and have been downsized. Now credit recovery is seen by many as such a key component of the business process that recovery teams are receiving unprecedented levels of investment. The availability of external debt recovery products is much larger than it was. At the same time, businesses in the regulated sector are facing compliance issues from the FSA. What can we learn from their changes in culture.

Those businesses with lending as their core activities already need to know and comply with the principles of ‘Treating Customers Fairly’ (‘TCF’). They will know that an automated debt recovery system is unlikely to fit all customers. Where processes are compliant, where a customer is identified to be in financial difficulty, appropriate communication is made with them to discuss the solutions available. The reasons for non-payment can be many and varied as are the solutions.

Is TCF a burden or a tool?

In an upturn in the economic cycle TCF can be seen by many to be a burden as rates of recovery are higher using the traditional tools available. Credit Control and Debt Recovery systems will generally ensure a good return on the lower levels of debt with minimal wastage. In a downturn debtors are more likely to be in a distressed financial situation. TCF requires the lender to indentify the debtor’s financial situation and to consider the options available to the customer even if those options do not form part of the lender’s product range. The credit professionals dealing with customer relationships must exhibit similar skills and attitudes to those of the frontline sales team, ensuring that both parties reach a satisfactory solution.

Upper management should be using this information to inform their business and recovery strategies to ensure that the efforts are not wasted. The availability of this information is critical to the management of the debtor profile while also giving the business the opportunity to retain hard-won customers.

It is no surprise that large numbers of businesses do not know their debtors or debtor profile and any credit control action taken is tends to be counterproductive. Quite often a debtor is a slow payer rather than obstructive. While the first impression after initial contact may be that the debtor is obstructive in fact significant numbers of debtors really do not know enough about their financial position to be immediately or assistance. Should you move to debt recovery as the first option the uninformed debtor will balance the pressure that the recovery process places on them against the stigma attached to formal insolvency procedures. In the majority of cases the pressure will be too great and insolvency will be guaranteed. As a result they will miss out on the options available to them and by proceeding to an insolvency event reduce the level of returns available to all of their creditors. While insolvency may be unavoidable where it can be avoided it should. Creditors should not create this situation by their actions.

TCF requires and enables you to obtain information about your customer. It is only by understanding your customer that you can balance your subsequent decisions and actions between being effective, timely and fair. Moreover implementing compliant procedures ensures that customers consider all of their options before having to take the drastic action of entering formal insolvency procedures.

TCF for all?

It is deliberate that the above paragraphs have not been restricted to FSA regulated organisations. TCF must be seen as a tool for all credit professionals whether internal, external or in the legal professions. Knowing your debtor is key to both retaining a long–term relationship and a greater recovery rate. Whether you are operating in or outside the regulated sector, creating a recovery process that follows the principles of TCF is essential to the continued existence of your business. Rather than a ‘necessary evil’ TCF is a business imperative.

Brief Guide to Enforcement of Foreign Judgments and Orders

1.Enforcement of United Kingdom Judgments in England & Wales

1.This section relates to enforcement of judgments and orders from other parts of the United Kingdom, i.e. Scotland and Northern Ireland, in England and Wales.

2.Usually the judgments in question are for money especially as it is desired to enforce by execution, but similar provisions can apply to a non-money judgment.

3.The normal procedure is for the Court in Scotland or Northern Ireland to issue a certificate under Section 18 of, and Schedule 6 to, the Civil Jurisdiction and Judgments Act 1982.

4.For Scottish cases this is normally known as a Form 1 (which is a different Form 1 from their form of summons to start proceedings which appears also to be called Form 1).

5.This certificate certifies the date of judgment and the amount due under the judgment and whether interest runs and if so the amount and the date from which it runs. In Scottish cases this is commonly different from the date of judgment, sometimes earlier, and sometimes there are different dates and rates of interest applicable to different sums due under the judgment, for example if interest is due at a higher rate on some of the money under the Late Payment of Commercial Debts legislation.

6.The certificate (Form 1) has to be registered in the Central Office of Queens Bench Division of the High Court in London before a writ of execution can be issued. Sometimes this is done by the Claimant’s solicitors and sometimes by Breeze & Wyles Solicitors LLP as part of the process for issue of the writ of execution. There is no fee for registration of the Scottish or Northern Ireland Judgment in the Queen’s Bench Division of the High Court of Justice in London but the Court allows £39.00 additional costs for the registration process.

7.It is important to note that the Certificate of the Court in Scotland or Northern Ireland must be registered in the Queen’s Bench Division within six months of the date of its issue otherwise an updated Certificate will be required.

8.Once the foreign judgment has been registered in the High Court in London either by the Claimant’s solicitors or Breeze & Wyles Solicitors LLP a writ of execution can be issued and delivered to Marston Group Limited for the normal Court fee of (presently) £50.00 with the writ attracting the normal costs of execution of £101.75 recoverable against the Defendant (inclusive of the £50.00 Court fee).

9.This process is dealt with by Breeze & Wyles Solicitors LLP at the same charge as a normal transfer up of £27.50 plus VAT whether the Claimant’s solicitors register the judgment or Breeze & Wyles Solicitors LLP undertake this. Assuming no complications the process is generally completed within 7-14 days of receipt of papers.

10.In relation to Scottish matters, some liabilities which are not at first sight matters relating to judgments or Court orders can be enforced under the above procedure if they are registered in the Books of Council and Session in Edinburgh. Examples might be liabilities under deeds of separation or bonds relating to loans for crofters.

2. Enforcement in England & Wales of European Community Judgments (including Republic of Ireland)

1.The procedure depends upon whether there is in force a European Enforcement Order (see section 3 below) or not.

2.In the absence of a European Enforcement Order enforcement is dealt with under what is known as “the Judgments Regulation” which is the European Council Regulation (EC) number 44/2001 of 22nd December 2000.

3.Application has to be made to the Central Office of the Queen’s Bench Division of the High Court in London for registration of the EEC judgment. This application is made without notice to the Defendant and attracts a fee of (presently) £40.00.

4.The application has to be supported by a witness statement exhibiting:

1.The foreign EEC judgment or order for enforcement, or an authenticated copy.
2.Where the judgment is not written in English a translation into English certified by a notary public or other qualified person and accompanied by written evidence confirming that the translation is accurate is also required.

5.The application (usually in the witness statement) where it relates to enforcement of a money judgment must state:

1.the name of the Judgment Creditor and his address for service within England & Wales (usually the address will be that of Breeze & Wyles Solicitors LLP).
2.the name of the Judgment Debtor and his address or place of business if known.
3.the amount in respect of which the judgment is unsatisfied.
4.that the European Court has not suspended enforcement of the judgment.
6.The witness statement is normally drafted by Breeze & Wyles Solicitors LLP on the basis of information received from or obtained from the Claimants lawyer.
7.The application will be considered by a Master at the Central Office of the High Court and assuming permission is granted to register the judgment the Registration Order, which must be in a special form, must be served on every person against whom the jdgment was given. This is normally done by a process server whose fee is likely to be about £70.00 plus VAT in a straightforward.
8.The Registration Order must state the right of the Judgment Debtor to apply within 28 days from service of the Order for the variation or cancellation of the Registration Order.
9.No steps may be taken to enforce the judgment before the end of the 28 day period or, where an application is made, until it has been determined.
10.The costs of Breeze & Wyles Solicitors LLP for this service are approximately £350.00 plus VAT (if applicable) plus the Court fee of presently £40.00. Normally the Court will add these costs to the indebtedness so they are recoverable from the Debtor in the event of a successful recovery. In the absence of complications a Registration Order would normally be received within about 21 to 28 days of receipt of papers.
11.After the time of 28 days from service required under the Registration Order has expired a writ of execution can be issued in the normal way paying the Court fee of £50.00.

3. European Enforcement Orders

1.Commonly a Creditor’s lawyers will obtain a European Enforcement Order which is an Order under European Council Regulation (EC) 805/2004 creating a European Enforcement Order for uncontested claims. This is often referred to as an EEO.

2.The foreign lawyers have to obtain the European Enforcement Order Certificate and supply it to Breeze & Wyles Solicitors LLP.

3.The requirements from the foreign lawyers are:

1.An authenticated copy of the judgment of the foreign Court.
2.If the judgment of the foreign Court is not in English an authenticated translation.
3.An original copy of the European Enforcement Certificate.
4.If the European Enforcement Order Certificate is not in English and authenticated translation thereof.
5.A cheque for the Court fee of £50.00 in favour of HMCS.
6.The procedure, provided the documentation is in order, is somewhat simpler than the method of enforcing a European Judgment under the 1982 Act but more complex than a transfer up.
7.Breeze & Wyles Solicitors LLP would normally propose to charge approximately £150.00 plus VAT (if applicable) plus the Court fee payable of (presently) £50.00 for this service.

The authentification of documents generally relates to them being issued or certified by the Court or other suitably empowered authority for that purpose in the country from which the document emanates.

1.The process would normally take about 14-21 days from receipt of papers in a straightforward case

4. European Enforcement Orders in respect of Judgments of Courts of England & Wales for enforcement in other jurisdictions

This is not generally within the realm of the service provided by Breeze & Wyles Solicitors LLP for Marston Group Limited as the enforcement by definition takes place outside of England & Wales and therefore Marston Group Limited have no jurisdiction. In such circumstances generally the Creditor is advised to contact the Court in question with a view to obtaining a certificate from the English or Welsh Court for registration in another part of the United Kingdom using a form number 111. The application normally has to be supported by a witness statement giving certain prescribed details.

5.Enforcement of Judgments from Jurisdictions outside the European Community

At present enquiries in regard to this are rare and each case would have to be dealt with on its individual circumstances including consideration of what treaties or other arrangements for reciprocal enforcement are in place between England and Wales and the jurisdiction in question. Such arrangements are not necessarily in place, e.g., some judgments of the lower Courts in the Channel Islands can not be enforced in an easy manner in the UK without taking completely new proceedings.

The costs of dealing with these enquiries would be dealt with on a time charge basis to be arranged with the lawyers concerned.

If you have any specific problems on which you require advice, please do not hesitate to contact us.

Brendan O’Brien

Breeze and Wyles Solicitors LLP exhibits at the Innovative Property Show 2011

Breeze & Wyles Solicitors LLP has the pleasure to announce that it exhibited at the Innovative Property Show held at Wembley Stadium yesterday. The exhibition showcased the talent existing in the Property Industry and it was good to see so many people in this depressed market promoting innovation in the way that they conduct their business.

Adrian Toulson Director of Breeze & Wyles Solicitors LLP (second from left) is shown here having presented the award for Woman Surveyor of the Year at the Innovative Property Show 2011.

Review your processes: Commercial Debt Recovery Considerations in 2012

Chasing Debt in the downturn

With the economy in the doldrums (and potentially a further recession only just around the corner) everyone seeking to recover debts must urgently review their procedures and indeed their priorities.

Cash is most definitely king in this climate.

You should look at trying to recover monies rightfully owed to you swiftly and cheaply. You can achieve this by constantly reviewing the same in conjunction with continually inventing different ways in which to encourage debtors to pay. In effect this means that you must look outside the traditional debt recovery methods for the solutions.

Recovering Debts at court should be regarded as a last resort once all other avenues have been explored.

The implications of not getting the debt recovery solution right are grave. [See my previous blog on pass the parcel]

Size of Indebtedness

No amount of money is too small to chase, however District Judges nationally do not like to see Claim Forms chasing anything less than £25.00.

You should not write off money owed to you. You are able to chase an outstanding invoice up to six years before the expiry of the Limitation Period, at which time you will not be able to bring an action.

The Costs of Recovery

There is a premise that the cost of recovery may outweigh the amount owed. This is true and there is a point when you need to address the issue, but in my view it is better to issues proceedings and move to judgment to protect your position. If you have judgment then you stand a better chance of getting your money back then if you had not issued proceedings.

Considerations

Intelligence and speed are vital

• 
  
  
  has contact with the debtor been made?



• 
  
  
  have you opened up meaningful dialogue with the debtor?



• 
  
  
  does the debtor have a justifiable dispute?



• 
  
  
  has the dispute been resolved. If not why not?



• 
  
  
  how old is the information that you have on the debtor?



• 
  
  
  when was the last time that someone visited the debtor at their premises?



• 
  
  
  do you have any personal guarantees on the file?



• 
  
  
  were trade references taken up when the sales team opened the original account?



• 
  
  
  who have you contracted with: an individual, partnership or limited company? the trading vehicle is vital.



• 
  
  
  is the debtor solvent?



• 
  
  
  customer profiles? do you track your customers trading history with you?



• 
  
  
  payment history? Can you track the history of the customer payments to you?



• 
  
  
  debtors location. Do you know the location of the debtor?



• 
  
  
  How often are your terms and conditions reviewed? if irregularly then check now and see if it reflects you current trading methods and is it fit for purpose



• 
  
  
  Are you able to take payment by credit or debit card?



• 
  
  
  if a debtor fails to make payment are you freezing their account immediately. Sales will sell whatever the problems in the background thereby increasing the debtor risk



• 
  
  
  has the debtor bounced a cheque. This is easier to sue on



• 
  
  
  Always follow through on a threat to issue proceedings. If you don’t this will be seen as a sign of weakness and be used against you in the future. It may also get out into the market meaning that when you threaten your threats become de-prioritised by the debtor against equal standing creditors.

Common sense comes out on top in contract dispute

Overview:
Contracts under dispute are not easily interpreted and the latest Supreme Court judgement has gone for the application of business common sense. Business needs to ensure that commercial contracts are well drafted.

Victory for common-sense as judgment is given in long running battle over bank payout.

Courts should apply business common sense when interpreting commercial contracts according to a judgment delivered this week (2nd November).

The Supreme Court has ruled in the case of Rainy Sky SA and Others v Kookmin Bank, that when the wording of a contract could be read in either of two ways, the court should opt for the interpretation that makes business common sense and reject the other.

The case involved a number of ship-owning companies which had placed orders for new ships to be built by Jinse Shipbuilders, a Korean company. Each contract provided that the buyer should pay a deposit on placing the order and for repayment of the deposit in certain circumstances including rejection of the ship on delivery, destruction of the ship before delivery, and the insolvency of Jinse. The contract also required the shipbuilder to provide a bank guarantee or bond for the repayment of the deposit, and these bonds were provided by Kookmin Bank.

In the event, Jinse Shipbuilding became insolvent and the buyers all called on Kookmin Bank to refund their deposit. Kookmin Bank refused, arguing that they did not need to pay out as the bond did not specifically list insolvency of the builder as being covered.

The Supreme Court has now said that if the bank’s interpretation were accepted, it would lead to the “surprising and uncommercial result” that the buyer could not call in the bond upon the insolvency of the builder, which was the very event most likely to require security.

Lord Clarke of the Supreme Court went on to say that, where there are two possible interpretations of a contract, the interpretation that is to be preferred is the one that is consistent with the commercial purpose of the contract.

There are two important principles that the courts apply when interpreting contracts and other legal documents. One is that the court should interpret the document in such a way as to give effect to the intention of the parties; the other is that the courts must give effect to the ordinary meaning of the words.

Explained commercial law expert Brendan O’Brien of Breeze & Wyles Solicitors LLP: “The two principles are often at odds with each other and both have their limitations. The previous Court of Appeal judgement in this case went on a ‘literal’ approach which found in the favour of the Bank. Now the Supreme Court has gone for an ‘intentional’ interpretation.

“The problem with the intentional approach is that the intention of the parties is often the thing that is in dispute and the only evidence of their intention is the words they have used.

“The problem with the literal approach is that often the wording of a document is like an optical illusion or double picture that can be seen in different ways. One minute you see a mermaid at the bottom of the ocean, the next a man with a moustache. You can see both images but not at the same time; they are irreconcilable and neither is the ‘correct’ image.

“So, when interpreting legal documents, you need some external factor to help decide what’s right. That is what Lord Clarke was saying in his judgment, namely that business common sense needs to be applied.

“The lesson is that a badly-drafted document can be a hostage to fortune and business needs to get commercial contracts well drafted by a specialist.”

ENDS
This information is not intended as legal advice


Rainy Sky SA and others v Kookmin Bank [2011] UKSC 50