Issues for consideration on a joint venture

When considering a joint venture there are various issues that the parties should iron out at the outset to avoid running into difficulties. We have listed a few of the points that we would expect parties to discuss before entering into a joint venture.

Preliminary points

The parties should consider whether there are any applicable competition rules, regulatory matters, licences and consents that they would need for the proposed transaction.

It follows that the parties should consider whether their objectives are consistent or complementary.

Identifying the structure

The structure of the joint venture should be considered. For example, is the joint venture to be carried out through a separate ‘organisation’ (eg joint venture company) or will it merely be a contractual arrangement between the parties (eg some form of collaboration, joint research and development (‘R&D’), supply, distribution agreement)?

In addition, the parties may wish to consider the form of the venture, such as a company limited by shares, a partnership, a limited liability partnership, to name just a few.

Financing of the joint venture

At the earliest opportunity, parties should consider the proportions and how, if at all, the parties will provide initial finance to the joint venture. How much will be provided from third party sources should also be considered.

We wold expect the parties to have further discussions about financing such as whether they will be requires to provide further finance later. If so, who will decide when and how it is to be put in. The parties should also discuss whether decisions on this can be blocked in the future by any party unwilling to finance its share as well as what will happen if one of the parties defaults.

Tax considerations

The structure and form of the joint venture is likely to affect how the joint venture will be taxed. Some of the points that the parties may wish to consider include:

(1) How the contributions to the joint venture from the parties will be taxed and whether any reliefs are available.

(2) Whether there are restrictions on the capital structure of the structure of the joint venture (eg thin capitalisation rules restricting the amount of debt finance)?

(3) How will payments from the joint venture to the parties be taxed? Can a structure e used to enable profits to be distributed more efficiently? are there withholding taxes etc?

(4) Whether there will be any ongoing supplies between the parties and the joint venture, such that VAT issues may arise. Is it possible or desirable to VAT group the joint venture with one of the other parties?

(5) What will be the tax impact if the joint venture succeeds? Will the parties be able to structure an exit which will avoid or reduce any capital gains tax charge?

(6) What is the tax impact if the joint venture fails? Will the parties obtain a tax deduction or loss if their investment diminishes in value in whole or in part?

Decision making and control

The control structure will impact on the status of the joint venture under a number of merger control regimes, including EU and UK merger controls.

Parties should consider how ownership interests in the joint venture will be held. Precisely what rights (and obligations) do such interest confer?

Contributions by the parties to the joint venture

Parties should consider whether any party will contribute any specific tangible or intangible property to the joint venture.

If there are contributions to the joint venture then how will contributed assets be valued. How will adjustments be made for any shortfall or excess in relation to any contributor’s proportionate funding obligations?

Consideration should be given to whether assets need to be valued under local law (eg if shares are issued in a joint venture company in consideration for the transfer of assets).

Parties should ask whether it is possible for all contributions of assets to be made contemporaneously if regulatory approvals or consents from third parties (including lessors, licensors and lenders) are required for any transfer. If not, should the availability of all or any particular assets be a condition to the establishment of the joint venture?

The parties should consider the effect to the assets or other rights leased by the joint venture if one party subsequently leaves the joint venture.

Intellectual property

The parties should consider who will own any new intellectual property rights developed by the joint venture and to what extent will the parties have access to, or rights over, confidential information, know-how and other intellectual property rights concerning or accruing or belonging to the joint venture itself.

Employment matters

We would expect the parties to consider whether there will be a TUPE transfer either at the outset or on the termination of the joint venture. If so, the employees who work in the undertaking that is the subject of the transfer may have additional legal rights (eg they will have rights in respect of consultation and to have access to certain information). A dismissal for a reason connected to the transfer may lead to an automatic liability for unfair dismissal.

Termination

Consideration should be given as to the duration of the joint venture. Is the joint venture for a fixed term or complete of a specific project, or is it indefinite in duration?

The parties could also agree that the joint venture will automatically terminate in certain circumstances. For example, the loss of any regulatory approval; the loss of destruction of a particular asset; the insolvency of any party or the transfer of any party’s interest.

The information above should not be taken as legal or professional advice. Please contact a member of our team for advice that is tailored to your circumstances.

Small businesses to receive £2.2bn in funding amid coronavirus.

The government has announced that small businesses across England will receive £2.2bn funding  to see them through national restrictions imposed by the lockdown due to the coronavirus pandemic. 

The funding will be made  through two grant schemes, one for businesses that have had to close, and another scheme for further business support as a result of the coronavirus pandemic.

Courts to operate during lockdown

The Lord Chief Justice and the Senior President of Tribunals  have confirmed that the work of the courts and tribunals will be exempt from the latest restrictions in England announced on 31 October 2020. The exemption was confirmed in a message published on 1 November 2020.

In their message they urged judges and magistrates to make full use of the measures put in place to reduce footfall in courts so cases can be dealt with as efficiently as possible. They stated that ‘It is vital for the well-being of the country that the administration of justice continues to operate’.

Coronavirus (COVID-19)—BPF publishes licence to occupy

The British Property Federation (BPF) has published aLicence to Occupy to assist the NHS and associated organisations as they deal with pressures on their facilities and infrastructure  brought about by the spread of COVID-19. The Licence to Occupy is aimed at helping the NHS occupy new commercial properties on a temporary basis in the fight to combat the spread of COVID-19. 

A template of the Licence to Occupy which can be obtained from the BPF’s website seeks to make it easier for the NHS to find additional space, set up new facilities and work with multiple property owners at the same time.

The BPF has taken into consideration the speed at which healthcare providers may wish to secure commercial properties without undue delay during these unprecedented times. The template produced by BPF aims to expedite the process, having regard to the interests of both the licensee and licensor. 

Parties should seek specialist advice before adopting the terms of the template, especially as certain provisions within the template may not be suitable for certain transactions. 

Coronavirus (COVID-19) — support for businesses

In light of the uncertainty now caused by coronavirus (COVID-19) our lawyers are available to assist and provide the necessary support that your business needs in areas such as: 

Managing the relationship with your employees

Advice for businesses with cash flow problem

Redundancies and recruitment

Tax liability 

Business rate

Statutory sick pay 

New Engineering Contract (NEC) Platform Announced

The New Engineering Contract (NEC) announced that it will launch a new online platform to enable users edit New Engineering Contract (NEC) contracts. Users will be able to access, compile and edit its standard form construction contracts on the online platform. 

The new platform will be called ‘Contract Horizon’, and will be launched on 31 March 2020.

Contract Horizon will offer a similar service to the existing JCT Contracts Digital Service that deals with JCT standard form construction contracts. 

Civil claim for harassment

The law on harassment is set out in the Protection from Harassment Act 1997. The law forbids any person from pursuing a course of conduct that amounts to harassment of another, which he knows or should know amounts to harassment of the other. 

Although harassment can also be prosecuted in the criminal courts, for the purpose of this article we will only consider the civil action for harassment that may be brought by a victim against the person who is pursuing the course of conduct in question.

The 1997 Act does not define harassment, but harassment has been held to require misconduct that is oppressive and unacceptable. In order to consider a course of conduct as harassment, the conduct must involve at least two occasions. The facts of each case should be considered to determine whether the unacceptable conduct has occurred on more than one occasion. 

The type of conduct that could amount to harassment include speech, computer-generated correspondence, as well as actions (among others). It is generally not sufficient to prove harassment by showing that the conduct was unpleasant and irritating, the conduct must go beyond that and become abusive and harassing. In other words, the conduct must ‘cross the line’ and cause the other person distress. 

It should be noted that a person may also be liable for harassing a group of persons. For example, a person who embarks on a course of conduct by which he intends to persuade a group of persons not to do something that they are entitled to do or to do something that they are not under any duty to do could amount to harassment.   

The remedy that can be obtained in a civil court by a victim of harassment includes injunction restraining the wrongdoer from pursuing any conduct that amounts to harassment of the person or persons mentioned in the injunction. The victim of the harassment may also be awarded monetary damages for distress and anxiety caused by the harassment, as well as damages for any financial loss resulting from the harassment. 

Where an injunction has been granted against a person causing harassment and the person does anything he is prohibited from doing by the injunction he may be held in contempt of court and can be committed to prison and/or fined.  

Contact us for advice and information on harassment.

Lasting powers of attorney

Introduction 

Lasting powers of attorney (LPA) permits the appointed attorney to deal with the donor’s affairs and make certain decisions on behalf of the donor. There are two types of LPA (1) financial and property affairs LPA, and (2) health and welfare LPA. 

Scope of LPA 

In order to grant an LPA the donor must be over the age of 18 and must have capacity at the time the LPA is executed. A donor may appoint more than one attorney under the same LPA. If more than one attorneys are appointed the attorneys may be required to act together in making certain decisions.

Under the financial and property affairs LPA the attorney can pay the donor’s bills, sell the donor’s property, and operate the donor’s bank accounts. The financial and property affairs LPA can be used even where the donor still has capacity provided the donor does not specify otherwise. 

On the other hand, the health and welfare LPA can only be used when the donor loses capacity or the appointed attorney reasonably believes that the donor has lost capacity. Under the health and welfare LPA the attorney can make decisions concerning the donor’s medical treatment, diet, and where the donor lives. The attorney cannot make decisions concerning life-sustaining treatments unless the donor permits the attorney through the LPA. 

The donor is able to limit the powers granted to the attorney and express preferences on the LPA. Preferences expressed on the LPA are not strictly binding on the attorney.

Registration of LPA

An LPA must be registered with the Office of the Public Guardian (OPG) before it can be used. An unregistered LPA does not give the attorney any legal authority to make a decision for the donor and acting without registration can expose the attorney to liability. 

An attorney will not be liable if the attorney acts within the provisions of a registered LPA that is later discovered to be invalid, unless the attorney was aware that the LPA was invalid or knew of circumstances that terminated their authority under the LPA. 

Termination of LPA

A donor is able to revoke an LPA at any time while the donor has capacity — the donor should follow the prescribed procedure and the attorney(s) should be notified of the revocation. 

A property and financial affairs LPA will automatically terminate if the donor is made bankrupt or the donor is subject to a debt relief order. The LPA will be suspended but not automatically terminated if there is an interim bankruptcy restrictions order or where the donor is subject to an interim debt relief restrictions order. The suspension of the LPA will last for as long as the order remains in place. The LPA will also terminate when the donor dies.

The appointment of an attorney will be terminated if any of the following events occurs:

  1. The attorney dies 
  2. The attorney disclaims their appointment 
  3. The attorney becomes bankrupt or subject to a debt relief order
  4. The attorney is a trust corporation that wound up or dissolved
  5. The marriage or civil partnership between the donor and the attorney is dissolved or annulled (subject to the provisions of the LPA)
  6. The attorney loses capacity to act. 

If any of the six events mentioned above occurs then the LPA may also terminate unless the attorney affected was appointed jointly rather than jointly and severally and there is no provision in the LPA for a replacement attorney.

Right to Privacy — Case Summary

Fearn & Kraftman & McFadyen & Urquhart -v- The Board of Trustees of The Tate Gallery 

 

The claimants are the owners of flats in a building adjacent to the Tate Modern museum. They brought a claim in nuisance under the Human Rights Act 1998 to protect their rights of privacy. 

The claim stems from the viewing gallery within the Tate Modern that allows visitors to experience a 360 panoramic view of London. Controversially, the panoramic view includes the block of flats occupied by the claimants. The block of flats is extensively glassed to the extent that visitors of the viewing gallery are able to see the inside of the claimants’ flats. The court heard evidence that some visitors have taken photographs and filmed the occupiers inside the flats. The court also heard evidence that some visitors used binoculars to look look inside the flats. 

The claimants sought injunctive relief, inviting the court to order the Tate Modern to prevent visitors of the gallery from “observing” the claimants’ flat from a specified area within the gallery. The court heard that 5.5m people visit the Tate each year and approximately 500,000 visit the viewing gallery annually.  

The claimants argued that their claim arises under the law of nuisance which is further protected by s.6 of the Human Rights Act 1998 and Article 8 of the European Convention on Human Rights. The claimants pursued the argument that Tate Modern is a public authority for the purpose of the Human Rights Act and therefore the Human Rights Act can be directly enforced against Tate Modern. 

The presiding Judge accepted evidence that visitors to the gallery were looking inside the flats of the claimants and “displayed an interest in the interiors of the flats which is more than a fleeting or passing interest”. The Judge held that the steps taken by Tate Modern to prevent visitors from taking photographs or filming were inadequate to address the concerns of the claimants. 

The claimants accepted that the Tate Modern cannot be considered a “core” public authority, but maintained that the Tate performs functions of a public authority pursuant to s.6(3)(b) of the Human Rights Act 1998. The Tate Modern was established by the Museums and Galleries Act 1992. Indeed, the Tate argued that is it not a “core” public authority.   

The Judge noted that there is no single test in determining if a body can be described as a “public authority”. Rather there are series of factors that should be present for a body to be considered a “public authority”. In his judgment, Mr Justice Mann held that the fact that an organisation offers services for the public benefit does not make it a public authority. It was acknowledged that the Tate provides a public service to the nation, but the Judge stressed that this is not determinative in and of itself. 

In his judgment, Mr Justice Mann stated that although the Tate was founded by an Act of Parliament in 1992, prior to the Act the functions of the Tate were being carried out by other groups and organisations. Those organisations were not considered pubic authorities. Thus, it is unlikely that the 1992 Act intended to transform Tate into a public authority. 

It was noted that the Tate is only partly funded by the public — in fact the majority of its funding does not come from the State and there is no statute requiring the State to provide funding, only that the Secretary of State “may” provide funding. Mr Justice Mann said “the more a body is publicly funded, the greater the fore which can be given to this element, and the converse is true.” The Judge noted that public authorities are required to act only in the public interest and statutory constitution. This cannot be said of the Tate Modern.

The degree of control by the State was also considered by the court — Mr Justice Mann noted that although there is a degree of State control, that control is mostly restrictive rather than a positive control. The State control is to a greater extent concerned with the public funding. The supervisory control is less significant.      

Mr Justice Mann concluded that the Tate was not exercising functions of a public nature. Thus the claim of privacy under the Human Rights Act fails. Such privacy claims under the Human Rights Act can only be brought against “public bodies”.   

The Judge noted that it is possible for a person to act in contravention of Article 8 by prying into the home of another, whether or not the prying is done by equipments of photography. However, as noted above, the prying must be done by a public authority for it to give rise to action under the Article 8.

In addition to relying on the Human Rights Act, the claimants also relied on the law as it relates to nuisance. The claimants sought to pursue a claim in nuisance by arguing that the act of looking into their homes was an actionable nuisance claim. Although a claim in nuisance is a tort claim and generally considered to be a cause of action that protects land, it is was accepted by Mr Justice Mann that a claim in nuisance could potentially be used to protect privacy as in this particular case. The Judge however acknowledged that not all overlooking or prying becomes a nuisance. Whether or not it is an actionable claim in nuisance will depend on the facts of the case, including the locality, nature of the act complained about, recurrence and whether the offending party is using his land unreasonably.

In deciding the claim in nuisance, Mr Justice Mann stated that given the urban locality of the buildings the claimants can reasonably expect less privacy. The Judge gave an example of what could be considered a nuisance in a non-industrial area — the establishment of a “noisy, smoke-emitting foundry”. Further, Mr Justice Mann held that despite the installation of a viewing gallery the Tate were not using their land unreasonably.

There were questions raised about whether the developer’s decision to build the structure with more windows and less walls in that locality created the occupiers’ own sensitivity which they will have to tolerate. The Judge noted a number of remedial steps which the owners could employ to protect their privacy, including, using curtains, blinds and privacy film. However, in conclusion, the Judge held that there is no actionable nuisance and thus the claimants’ case fails. 

Remedies for unfair dismissal

The Employment Rights Act 1996 (ERA 1996) sets out the remedies available to claimants in cases of unfair dismissal. Where a tribunal finds that an employee has been unfairly dismissed, the tribunal may apply the following remedies in favour of the employee:

Order the employer to reinstate or re-engage the claimant 

Although orders for reinstatement or re-engagement are quite rare in practice, a tribunal has the power to order an employer to reinstate or re-engage the services of the claimant. If the employer fails to comply with the tribunal’s order then the tribunal can make an additional award in favour of the claimant.

The tribunal is required to explain to the claimant the circumstances in which it may order the reinstatement or re-engagement of the claimant. The claimant will also be required to confirm if they wish such an order to be made. The tribunal can only order the reinstatement or re-engagement of a claimant if the claimant expresses a wish for such an order to be made.

Reinstatement 

Under ERA 1996 an order for reinstatement requires the employer to treat the claimant as if they had never been dismissed. This means that the claimant suffers no loss of pay, pension or other benefits. The claimant also returns to work on the same terms of employment as they had prior to the dismissal.

The tribunal must first consider whether it is appropriate to order the reinstatement of the claimant before it considers making an order for re-engagement. If the tribunal decides that it is not appropriate to make an order for reinstatement then it may consider whether it is appropriate to make an order for the re-engagement of the claimant.

Re-engagement

An order for re-engagement requires the employer, its successor or subsidiary to engage the claimant in employment that is comparable to the job they had before the dismissal or in any other suitable employment.

Note that where a tribunal orders reinstatement or re-engagement it cannot also make a basic or compensatory award.   

Basic award 

The basic award is a statutory award which can be calculated by multiplying the length of continuous service, age, and a week’s pay (as it was at the date of termination). The formula for calculation is as follows:

  • One and a half weeks’ pay for each year of employment in which the employee was aged 41 or over at the beginning of the year.
  • One week’s pay for each year of employment in which the employee was aged 22-40 at the beginning of the year.
  • Half a week’s pay for each year of employment in which the employee was under the age of 22 for any part of the year.

There is a statutory cap of a week’s pay for the purposes of calculating basic award. The calculation for employees who earn less than the statutory cap on a week’s pay will be based on their actual gross weekly pay week’s pay.

If the employee’s gross weekly pay is less than the national minimum wage in force at the time then the tribunal will apply the minimum wage in calculating the basic award.

Note that a week’s pay only includes the basic pay, but does not include bonuses and overtime.

Compensatory award 

After considering basic award, the tribunal must then consider the appropriateness of making compensatory award. Unlike basic award, there is no set formula for calculating compensatory award. 

Section 123 of the ERA 1996 states that compensatory award shall be “such amount as the Tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal insofar as that loss is attributable to action taken by the employer“. 

In determining the level of compensatory award, the tribunal will consider the loss suffered by the claimant and whether the loss is (i) a consequence of the unfair dismissal (ii) attributable to the employer (iii) just and equitable. The tribunal will look at both the past (from the date of termination to the date of the hearing) and future (from the date of the hearing to an appropriate future date) losses. 

In calculating the compensatory award, the tribunal will consider losses such as:

  • Loss of earnings
  • Loss of bonus or commission 
  • Loss of benefits 
  • Insurance cover 
  • Loss of company car
  • Loss of pension 

Additional award for non-compliance 

Pursuant to section 117(3)(b) ERA 1996, the tribunal may make an award of between 26 and 52 weeks’ pay if an employer fails to comply with an order for reinstatement or re-engagement. The additional award is not intended to serve as a compensatory award for the claimant, rather it is meant to punish the employer for failing to comply with the tribunal’s order.

However, the tribunal will not make an additional award against the employer where it was not practical for the employer to comply with the order.

 

Contact us at ask@penerley.com for further advice on employment law.

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