Partner and Head of Education
T: 0870 763 1332
If this e-mail is not displayed correctly, please click here to read it online
The Education Team at Martineau run three free Breakfast Briefings every term, in Birmingham, London and Leeds. Our briefings this term include Student protest: your day from hell. Please click here for further details.
Strategy, Students and Governance
The Disability Discrimination Act and dealing with behavioural difficulties | read
This article looks at the challenges faced by university staff in dealing with students who suffer from behavioural disabilities such as Aspergers syndrome. We consider what actions might fall foul of the Disability Discrimination Act and advise on what steps universities should take.
Companies - constitutional changes | read
The final stage of implementation of the Companies Act 2006 took effect on 1 October 2009 bringing about changes to the structure of a company's constitution and share capital. We consider the implications these changes will have on universities who are involved with limited companies.
Finance, Technology and IP
"Boilerplate clauses": Force Majeure - Are you in control? | read
In this article we take a closer look at the "force majeure" clause, one of the frequently overlooked "boilerplate" contractual clauses, focussing in particular on what issues should be dealt with in the clause.
Is open source software the "free" way to cheaper, better IT? | read
As many universities are preparing themselves for significant budget cuts, one area where savings could be made is in the use of "free" open source software (FOSS). We discuss the compelling advantages of FOSS solutions as well as the perceived risks.
The Carbon Reduction Commitment: Decisions, Decisions... | read
On 7 October 2009 the government published its response to the consultation on the Carbon Reduction Commitment scheme, indicating some significant changes. This article considers the change in approach to the purchase and surrender of allowances in year 1.
Breaking free - avoiding an expensive mistake when trying to end a lease early | read
We highlight the risks for universities of not complying fully with lease terms and legislation when seeking to bring an early end to long leases.
Government to tighten up rules on employing skilled foreign workers | read
The government has accepted all 16 recommendations of the Migration Advisory Committee on Tier 2 of the new points based system. We look at the background to this and summarise the key changes relevant to universities.
Sickness during annual leave - another blow for employers | read
The European Court of Justice recently ruled that, where an employee suffers a period of illness whilst on holiday, this does not count towards the minimum period of four week's paid annual leave under the EU Working Time Directive. We look at the implications for universities.
Full article details
|• Strategy, Students and Governance
The Disability Discrimination Act and dealing with behavioural difficulties | back to top
One of the most apparent changes in the culture of HE over the last 10 years is the increase in interaction between academic staff and students. This is no doubt the result of a need to meet consumer expectations generated by a fee-paying student body.
That student body has itself become more pluralistic, including students with learning and behavioural needs to which academic staff would not have been exposed to any great extent prior to the coming into force of the Disability Discrimination Act 1995 (DDA).
Aspergers syndrome and similar conditions adversely affect a person’s ability to interact with others and to decipher social symbols, such as nuances in language, facial expression, tone of voice, physical gestures and other social conventions. They can also be accompanied by dyspraxia and attention deficit hyperactivity disorder (ADHD). Students with these conditions can therefore present significant challenges for universities in the new culture of proximity of staff and students, the prerequisite for which is professional and courteous communication.
Such conditions come well within the definition of disability and all university staff will have to discharge the duties imposed on them by the DDA in relation to students who they know have the condition in question and with whom they come into contact.
Discrimination occurs when:
- stereotypical assumptions are made about a disabled applicant or student (i.e. direct discrimination) e.g. assuming that a person with Aspergers syndrome could never qualify as a nurse, without considering the specific manifestation of the individual’s disability;
- the university treats a person less favourably for a reason relating to his/her disability without justification (i.e. disability-related discrimination) e.g. avoiding giving office space to a postgraduate student who, because of his particular form of autism, cannot maintain the usual conventions respecting personal space and cannot distinguish appropriate, from inappropriate, topics of conversation;
- the university fails to make reasonable adjustments to the arrangements for determining admissions and to the student services the university provides to prevent a disabled student from suffering substantial disadvantage when compared with students who are not disabled e.g. maximising group work in admissions assessments where working in a group is merely desirable, rather than necessary, where the particular condition of the applicant is such that he/she finds it very difficult to perform group tasks.
- harassment e.g. where a tutor makes jokes in a tutorial about ‘wierdos’, thereby creating an intimidating or hostile atmosphere for a disabled student.
Discharging DDA duties in this context can be more demanding. Unlike dealing with disabilities such as hearing impairments and dyslexia, which usually require accommodations in the form of assistive technology and additional time for examinations, adjusting for Aspergers syndrome may require more individual, personal effort on the part of staff, particularly academic staff, in their dealings with the students concerned.
Interesting lessons can be learnt from a recent high court case concerning a school which excluded a pupil who had ADHD [Governors of X Endowed Special School -v- Special Educational Needs and Disability Tribunal,  EWHC 1842 (Admin)]. The condition included mood swings and temper tantrums, and the pupil was excluded following an incident in which he assaulted a member of the learning support staff. The court concluded that the exclusion was justified on health and safety grounds and hence a claim for disability-related discrimination was unsuccessful. However, the court found that the school had failed to make reasonable adjustments because none of the learning support staff had received training prior to the incident. It was reasonable and not financially prohibitive to provide staff who came into contact with the pupil with specific and distinct disability awareness training on ADHD.
The conditions already discussed are often termed “hidden disabilities” and it is not always apparent whether a student’s conduct is deliberately inappropriate or whether he/she is manifesting the symptoms of a behavioural disability. When a student provides clear evidence of the existence of a condition, academic tutors, course leaders and those who are in relative proximity to the student should be given awareness training on strategies to ameliorate the effects of the condition. These strategies may often only require only a simple adjustment to one’s normal responses in order to accommodate those with behavioural disabilities: for example, students with Aspergers syndrome understand clear and concise sentences better than long complex ones.
There is no duty to make reasonable adjustments if the university did not know and could not reasonably have known about a disability. It is important therefore that information about students who are assessed as having these disabilities is disseminated to those members of staff who need to know, and the appropriate training provided. The student’s written consent to the disclosure will have to be obtained because it is sensitive information.
It would also be prudent to provide awareness training generally for staff to discharge the anticipatory nature of the duty to make reasonable adjustments. Consequently, if a student has not declared a disability or does not consent to the information being disclosed to academic staff, and it is apparent from the student’s conduct that he/she is likely to have a behavioural disability, staff will be able to make appropriate adjustments.
Staff cannot simply refuse to deal with such students or to subject them to grievance or disciplinary proceedings on the grounds that their conduct does not comply with the standards of propriety and decorum expected from non-disabled students. Rather, they should first deploy appropriate strategies to manage the behaviour in question and if, notwithstanding the training, the student’s behaviour continues to be unmanageable and genuinely disruptive, then it is unlikely that a university will be vulnerable to a successful claim of disability discrimination.
Senior Associate, Education Team
T: 0870 763 1455
© Martineau 2009
The final stage of implementation of the Companies Act 2006 took effect on 1 October 2009. One area in which the Act makes extensive changes is to the structure of a company’s constitution and, in the case of companies limited by shares, their share capital. These changes are relevant not only for new companies incorporated after 1 October, but also for all existing companies incorporated before that date. In addition, the 1 October saw the introduction of new ‘model’ articles of association for companies which are likely to be widely adopted in whole or in part.
In our experience, universities may be involved with limited companies in a number of ways, including:
- owning and managing subsidiaries, whether a trading subsidiary or a not-for-profit entity;
- setting up joint ventures and ‘spin outs’;
- the university itself may be a company.
We are advising our education clients that now is a good time to consider updating the constitutional arrangements of the companies with which they are involved, in order to ensure that they comply with the new Act and that they take advantage of the new (often simplified) procedures afforded by the change in legislation. There are also a number of areas in which the new legislation can create difficulties for the unwary.
Memorandum of Association
From 1 October a company’s memorandum of association will cease to be of any real significance following its incorporation. Going forward, new companies will only have a very short-form memorandum setting out the name of the company and the subscribers. For existing companies, the provisions currently contained in their long-form memoranda will be deemed to be part of their articles and in the future will be capable of being amended or deleted by special resolution.
The key consequences of this are:
- companies will no longer have any prescribed ‘objects’ unless these are specifically set out in their articles (or for existing companies, deemed to be part of their articles). Existing objects clauses may act as a limitation on a company’s activities and can be deleted, in which case the company will have unlimited objects. Companies which currently have specific limited objects (e.g. charitable companies) will need to ensure that these objects are properly documented and are not inadvertently deleted when future changes are made to their articles;
- shareholders’ and members’ liability will be limited in accordance with a provision contained in their company’s articles. This presents the risk that a company might inadvertently delete or amend such an article and thereby potentially compromise its limited liability status. This was not previously possible where the statement of limited liability was contained in a company’s memorandum. Whilst there are saving provisions in the legislation to minimise the risk of this happening, in the future all limited companies will need to take great care when amending their articles so as to avoid any assertion that the limited liability of their shareholders is negated;
- when providing copies of their articles to their shareholders or to Companies House, existing companies will now need to either provide a set of articles which include the provisions deemed to be included from the memorandum, or append those provisions to their articles.
Companies can pass resolutions to ensure that these pitfalls are avoided and we recommend that all universities which are involved with private companies consider seeking to pass such resolutions.
Articles of Association
To coincide with the final implementation of the Act, a new set of pro-forma articles of association known as the ‘Model Articles’ have been introduced. The Model Articles replace the previously prescribed set of articles known as Table A (or Table C for companies limited by guarantee).
Companies which presently use articles based on Table A or Table C are not affected by the Model Articles, unless they elect to adopt them.
The Model Articles are drafted in relatively clear language and are a product of the government’s desire to simplify the administration of private companies. Although well drafted, there are a number of changes to the Model Articles which we would recommend most companies consider making, and in any event companies should consider making changes to their articles to ensure that, amongst other things:
- they can take advantage of certain reduced notice periods, including those for general meetings at which a special resolution is proposed;
- they are not obliged to have an annual general meeting if they do not wish to;
- they can, if they wish, take advantage of other new procedures introduced by the Act such as the ability to simplify the way in which a company changes its name, or the ability for shareholders to nominate other people to exercise their rights;
- their directors are not adversely affected by the changes to the law on directors’ conflicts of interest;
- their articles do not provide for outdated terms and procedures which are no longer included in the legislation;
- that the changes to the way in which a company’s share capital is treated (considered below) are properly catered for in the company’s articles.
A number of changes have been introduced that relate to companies’ share capital. Perhaps most significantly, the concept of authorised share capital has been scrapped and companies will simply have a certain amount of share capital, all of which will be issued.
One consequence of this is that companies will be required to file ‘statements of capital’ with Companies House whenever their share capital changes and on each annual return. These statements are quite lengthy and this is likely to result in an increased administrative burden on companies.
In order to preserve the status quo, for existing companies the un-issued portion of their authorised share capital will now be treated as a limit on the amount of shares that can be issued (in much the same way as it previously operated to do so). However, that limit may be amended or revoked by ordinary resolution and related changes may be required to existing articles of association.
Another change affecting private companies is that, provided they only have one class of share, their directors will now not need shareholder authority to allot further shares unless required by their articles of association. Again, this will not apply to companies incorporated prior to 1 October unless an appropriate ordinary resolution is passed. New companies will need to ensure that their articles specifically restrict this ability if they do not want to give their directors carte blanche to issue new shares. Statutory pre-emption rights will continue to apply unless disapplied by special resolution.
Although the transitional provisions to the legislation maintain the current share capital position for existing companies, such companies will be left in a very confusing position in which it will not always be clear what restrictions exist as to the issue of further shares and what powers their directors have. We therefore recommend that all existing companies consider:
- passing an appropriate resolution to ‘negate’ the effect of their historic authorised share capital;
- passing an appropriate resolution to give their directors the powers envisaged by the new legislation;
- simultaneously amending their articles to provide for appropriate restrictions on the allotment of shares that are tailored to their particular circumstances.
The principal aim of the Companies Act 2006 and the accompanying secondary legislation was to simplify the administration of private companies. This intention has clearly found its way into much of the legislation. However, the transitional provisions for existing companies are complex and, combined with the new system of registering share capital, may actually have the effect of making matters more confusing to directors and shareholders of private companies.
We therefore recommend that all universities which deal with (or indeed are themselves) private companies:
- have their constitutions professionally reviewed to ensure compliance with the new legislation and that the new procedures are taken advantage of;
- do not adopt new articles of association without first having them professionally reviewed;
- implement new procedures for monitoring and documenting their share capital so as to reduce the administrative burden of the new legislation;
- consider passing resolutions now to simplify and rationalise control over their share capital.
Partner, Head of Corporate Group
T: 0870 763 1586
© Martineau 2009
|• Finance, Technology and IP
"Boilerplate clauses": Force Majeure - Are you in control? | back to top
Universities make numerous contracts daily sometimes as seller and sometimes as buyer. Quite rightly most attention focuses on commercial clauses such as payment, what is being delivered, when, who is liable for what and how to terminate to name just a few. The so called “Boilerplate Clauses” are usually found towards the back of the contract. They are the boring “anoraks’” clauses. You know roughly what they do. Often there is not even time to read them. The trouble is that they can make the difference between effective rights and none at all if things go wrong under a contract.
One such boilerplate clause is the “Force Majeure” provision. If you are used to contracts you will have heard that phrase before. You might assume that it does not require much attention because of the general understanding that including a Force Majeure clause in a contract will protect a party from liability if unexpected things happen. A dictionary will tell you that Force Majeure is a legal term meaning “irresistible force or compulsion, such as will excuse a party from performing his part of a contract. From the French meaning superior force”. As a generality that is broadly right. A contractual Force Majeure provision allows a party not to perform his obligations if a Force Majeure occurs, without being in breach of contract. Force Majeure is an acknowledgement by the parties that in particular situations, even if obligations cannot be performed, there should be no liability.
Defining Force Majeure
Even if the dictionary definition is broadly right it is very risky to assume that Force Majeure needs no further thought. The two magic words “Force Majeure” in your contract do not on their own give any protection. The term “Force Majeure” as such has no legal meaning and the contract must state what circumstances it covers. This must be done in the context of each contract.
Generally, Force Majeure protects a supplier more than a buyer so the supplier usually tries to extend Force Majeure to include as many situations as possible with the buyer seeking the opposite. One can define Force Majeure generally, e.g. “in all circumstances outside a party’s reasonable control” or set out specifically the situations to be covered. The optimal approach will vary according to the situation and the context in which the university is acting, whether as supplier or buyer.
Perhaps the most common debate in relation to the scope of Force Majeure relates to industrial relations. How far if at all should this be a Force Majeure event? A common solution is to provide that national and industry-wide issues are a Force Majeure event whilst those specific to the contracting party are not, because they ought to be within his control if he is managing the business properly.
Entitlements in the event of Force Majeure
Beyond saying what circumstances Force Majeure applies to, the parties should set out in the contract what they must each do in such circumstances if they are to manage their risks properly.
What is appropriate varies widely and depends largely on the situation. The impact of a Force Majeure in the context of an agreement for the sale of commoditised, easily substitutable goods will be very different to that on the outsourcing of a very specialist IT function or undertaking a specialist research project. However in most cases the issues include:
- Communication - the party first discovering the Force Majeure event must be obliged to notify the other straightaway and keep him up to date with developments. In the case of any major contract the parties should probably meet to discuss how best to handle the situation;
- Alternative action - could taking alternative action avert or mitigate the impact of the Force Majeure event? For example an exclusive goods supply or service provision agreement might permit the buyer to temporarily source goods elsewhere or appoint an alternative provider;
- Who pays for what? - although the nature of Force Majeure is that the parties agree no one is to blame so there will be no damages payable, you should agree how the costs of varying the contract to mitigate the effects of Force Majeure will be borne. Parties will often agree that neither should profit from dealing with the Force Majeure event and then split costs in some way;
- How Serious? - the extent of the impact of the Force Majeure event obviously affects what your response should be but also what rights you ought to have;
- How Long? - there comes a point where a Force Majeure event has continued so long that one or both parties must be allowed to terminate. How long that is will depend on the nature of the contract and needs of the parties. It could be as long as a year or as short as one day!
Force Majeure clauses matter. In today’s economic climate it is particularly important to manage your university’s exposure so that as a supplier you are not liable if events outside your control preclude you from performing obligations. Equally, as a buyer, you should ensure that your supplier cannot get off the hook too easily if something unusual occurs. You will want him to keep trying to fulfill his obligations unless unexpected external events really have made that impracticable. Both parties need a clear understanding of their rights and what happens if a Force Majeure event occurs.
T: 0870 763 1390
© Martineau 2009
Is open source software the "free" way to cheaper, better IT? | back to top
The financial climate for universities is likely to get more difficult. Following the freeze in student numbers, many universities are quite sensibly preparing themselves for significant budget cuts. These reductions will not be easy to achieve or manage without a reduction in service.
One area where savings could be obtained, coupled with better service provision, is in IT. “Free” open source software (FOSS) would arguably be both cheaper and more effective, but universities are seemingly reluctant to take this on other than in limited areas. As change and flexibility become ever more prevalent, FOSS will be ever more useful.
FOSS should not be confused with freeware. Although freeware is provided without charge the freeware source code (the human readable code) is not necessarily made available. FOSS is licensed differently from standard proprietary software. No fee or royalty is charged, but the source code must also be published. Significantly, the publication of the source code enables the user to amend the code themselves. This gives much more flexibility than traditional proprietary licences. Also, changes to the source code have to be licensed on the same basis. Accordingly, the changes can benefit the whole user community. In some ways this licensing model is akin to the increasingly popular Creative Commons licence for broader creative content.
Universities already use a significant amount of FOSS. For example, Moodle, the virtual learning environment, is an open source project, as is the code for many Google applications and Mozilla Firefox and Apache for servers. When it comes to more significant (and costly) software e.g. desktops and CRM or ERP software, universities are apparently more reluctant to use FOSS. However, there are some compelling advantages:
- Licensing is much more straightforward, simple and cheaper. It is also very flexible. There aren’t the concerns about numbers of users and step changes in price when more licences are needed. This can be particularly useful in the current climate.
- Upgrades to new versions are straightforward and can happen automatically without additional cost.
- FOSS uses interoperable open standards so data can be easily used by others. For example, Open Office which is an alternative to Microsoft Office uses the open document format standard.
- Reduced hardware costs. Open source materials can often work on older hardware that has otherwise been seen as obsolete. For example, Friends of the Earth in Birmingham have used recovered computers running on an open source operating system which would otherwise have been thrown away.
- Reduced energy consumption. Often, FOSS operating systems work more efficiently and require less power.
- Although a service provider is likely to be needed for the management of FOSS, the university will not be intrinsically tied to that supplier since the source code is available to all. Often universities find themselves in a situation where the proprietary vendor is not maintaining the software to the required standard, and although the university could technically terminate the contract and claim damages this is not a practical solution.
- FOSS can provide a better system in terms of reliability, security and functional flexibility. The source code being immediately available negates the need for an escrow agreement with a proprietary supplier (if they will agree to this at all), and so the software can be easily adapted and customised to the university’s needs.
- Few, if any viruses.
In addition to these innate advantages of open source software there has been governmental encouragement to use this software to save money and there are procurement law reasons why open source should be considered alongside proprietary software.
With all these advantages why is it that universities are so reluctant to take on FOSS solutions?
There are a number of perceived legal and commercial risks. There is a natural reluctance to change. There is the concern that the level of performance in operation will not meet the standard required, and the usual issues with any software such as loss of data, business continuity and compatibility with other software. The primary perceived risks are as follows:
- Potential risks surrounding IP ownership and infringement - in practice these also exist with closed source software.
- The difficulties involved with migrating from one system to another (again these will also apply to a switch from one proprietary provider to another). FOSS is often built to be interoperable so migration tends to be less problematic.
- Concerns that service support is difficult to obtain (in practice there are some well established and very substantial players in the market e.g. Red Hat, Novell, Canonical).
- Warranties are not available (in practice, these can be obtained and purchased).
Overall, the perceived risks are often not properly understood. Any software has risks. There are many problems with proprietary software and indeed our recent experience has been of a number of universities having difficulty with implementation or ongoing operation and maintenance of proprietary software. Most of the risks associated with FOSS can be managed relatively easily. There has been an argument for FOSS for some time on a purely operational level, but as financial constraints increase, the lower total cost of ownership is likely to prove to be compelling. For further reading see the JISC funded project at www.oss-watch.ac.uk
Partner, Intellectual Property & Technology Team
T: 0870 763 1107
© Martineau 2009
The Carbon Reduction Commitment: Decisions, Decisions... | back to top
In the May 2009 bulletin we reported on the forthcoming Carbon Reduction Commitment, a cap and trade scheme aimed at major energy consumers which has the aim of encouraging a reduction in carbon emissions.
The government published a consultation document on the scheme in March 2009, and on 7 October 2009 published its response.
Apart from the change to the name of the scheme - it will now be known as the CRC Energy Efficiency Scheme - there are some significant changes. This article considers only the change in approach to the purchase and surrender of allowances in year 1.
The scheme will come into effect in April 2010. Originally it was proposed that allowances would have to be purchased for the first year although they would not have to be purchased until April 2011, at which time year 2 allowances would also need to be purchased.
In response to concerns about the impact on cashflow of having to purchase 2 years’ worth of allowances at one time (and no doubt, also taking account of the current difficult economic circumstances), the government has decided that the first year of the scheme will be a monitoring period so, other than registration fees and penalties in the event of non compliance, there will be no cost for participating in the scheme for year 1.
“Phew” may be the response!
An organisation with the threshold volume of electricity consumption of 6,000 MWh in 2008 would have emissions of 3,222 tonnes of CO 2 for that electricity consumption alone. At £12 per tonne, allowances would cost £38,644. Having geared up to have to pay this for 2010/11 on the basis of the regulations as originally drafted, what should a university now do? Pocket the money or spend it on energy efficiency measures?
All monies raised by the government from the sale or auctioning of allowances will be paid back (“recycled”) to participants in the scheme. The amount of an individual participant’s recycling payment will be determined by the participant’s position in the annual league table. Position in the league table will be determined by three metrics:
- the absolute emissions reduction metric - this measures the percentage change in emissions against a five year average;
- early action metric - this metric will apply only in the first phase of the scheme (i.e. the first 3 years) and is based on the achievement of certification under the Carbon Trust Standard or an equivalent scheme and/or the voluntary introduction of automatic meter reading (“AMR”) before 1 April 2011; and
- growth metric - this takes account of organisational growth or decline.
Each of the metrics is weighted, with the early action metric counting for 100% in year 1, 40% in year 2 and 20% in year 3. However, the main emphasis going forward is on the absolute emissions reduction metric which is weighted 0% in year 1, 45% in year 2 and 60% in year 3.
Clearly it will pay, in terms of league table position, to take early action now and concentrate on absolute emissions reductions as soon as the scheme comes into effect.
Towards the end of this year the final regulations for the introduction of the scheme will be published and we will provide a further update at that point.
Partner and Head of Energy, Projects and Commerce
T: 0870 763 1528
© Martineau 2009
Breaking free - avoiding an expensive mistake when trying to end a lease early | back to top
Given the current economic climate it is not surprising that many universities, and other commercial tenants, are seeking to bring an early end to long leases before the full term has expired. This is permitted where the lease in question contains an option to allow for early termination after the service of a break notice. Although the preparation and service of these notices may at face value seem to be a simple process, they do result in frequent disputes and litigation. Given the level of commercial rents and the strict requirements with which break notices must comply, even relatively minor errors run the risk of causing very significant losses.
In light of this, extreme care is required in preparing and delivering these notices and a recent ruling from the High Court in the case of The Prudential Assurance Company Limited v Exel UK Limited [ EWHC 1350 (Ch)] serves as a timely reminder of this.
In this case the break notice served by the tenant (Exel UK Limited) was found by the court to be invalid. As a result, Exel’s lease with Prudential will continue to run until the expiry of the full term in 2012 (unless it is able to dispose of the lease in some other way in the meantime and subject to any appeal it may make). Given that the initial annual rent for the premises was nearly £1 million and Exel’s break notice was intended to take effect in 2007, this will result in a substantial additional liability for Exel.
Break clauses in leases
The circumstances in which a university (either as landlord or tenant) will be able to exercise an option to end a lease early will be set out in the lease itself. If no such provision is included, then it will not be possible to infer any such right. A break clause will usually set out the following:
WHO is able to exercise the right. This will be either the original parties to the lease and their successors; or the original parties only.
WHEN it will be possible to break. This can be at any time (known as a ‘rolling break’); after a set period of time (for example, after 5 years); or on a specified date or dates only (e.g. 5 April 2012).
HOW notice of the intention to break is to be delivered. Often the clause will set out strict requirements detailing how the notice must be served, by and to whom it must be delivered and when it will be deemed to be received. In the absence of a set formula, general statutory service provisions will apply.
CONDITIONS which must be complied with for an attempt to break to be effective. Common examples of this are that all rent be paid up to date; that the tenant has complied with all its covenants and obligations under the lease; or (if the landlord is attempting to break) that the landlord has an intention to redevelop the property.
The clause may also deal with issues such as any sub-tenants occupying the property and the preservation of the rights of either party in relation to any other breaches of covenant after the service of the break notice and the early termination of the lease (for example allowing a party to claw back balancing service charge).
In order to be absolutely certain that an attempt to break is successful care must be taken to ensure that all conditions are complied with. For example, if the lease prescribes a particular form of notice then this must be used. While there are some circumstances in which a defective notice may still be effective, these are limited and case specific.
Rescuing a defective notice
The basic rule is that any requirement for the service of notices (whether set out in the lease or governed by law) must be strictly complied with. While this provides a measure of contractual certainty, there is an undoubted potential for unfairness with such an absolute rule.
To allow for some leeway the House of Lords developed a principle under which minor defects in a notice will not be sufficient to invalidate it. This is known as the ‘Mannai Principle’, taking its name from the 1997 case in which the principle was established: Mannai Investments Co Ltd v Eagle Star Assurance Co Ltd [ 2 W.L.R.945].
The Mannai Principle establishes that minor defects in a notice will not necessarily invalidate it if the reasonable recipient (with a knowledge of the factual background and context in which the notice was served) would not be confused by the error.
The Mannai case dealt with a break clause in a lease in which the tenant in giving its notice incorrectly stated that the notice would expire and the lease would terminate on 12 instead of 13 January. All other requirements had been complied with. In deciding to uphold the validity of the notice it was decided that with the exception of the one error the notice was otherwise clear and unambiguous and could not have left the landlord in any doubt as to the tenant’s intention.
Since this decision numerous efforts have been made to extend and limit the application of this principle. The most helpful result of this subsequent litigation is the introduction of a two stage process to establish when the Mannai Principle will apply:
- A consideration of what the notice says;
- A matching up of the notice against the requirements for the notice in order to establish whether the requirements are met.
Even after employing this test the position is not entirely clear. As such, it is often still not possible to say with absolute certainty when a party will be able to rely on the Mannai Principle.
This brings us back to the recent decision in Prudential Assurance Co Ltd v Exel UK Ltd and, more particularly, why none of the exceptions applied in this case.
Prudential Assurance Co Ltd v Exel UK Ltd
In this instance a lease had been granted to two companies, both within the same group, which together made up the tenants. One of these companies was a dormant subsidiary company. A break was served stating that the solicitors were authorised to act for both tenant companies and a description was given of the original lease; however, no mention was made within the body of the notice of the dormant tenant company. This mistake was only noticed by the tenant after it was too late for the solicitors to serve an amended version of the notice in its correct form.
The tenants sought to argue that the notice was valid on the basis that the solicitors serving it were authorised to act for both companies and the description of the lease which headed the notice made reference to both companies as tenants. The landlord’s position was that it was invalid on account of the omission to name one of the tenants.
As stated above, the court ruled in favour of the landlord, the reasoning being that it was not clear that the break notice had been served on behalf of both tenants.
Key points in serving break notices
- Although serving a break notice may on first glance seem to be a simple process, careful reading of the lease and a good knowledge of relevant legislation is necessary to ensure that the notice adheres strictly to the requirements set out in the lease and required by law;
- Although the Mannai Principle allows for some degree of interpretation, its application is limited and the circumstances in which it can be relied upon are imprecise and difficult to predict;
- Given the sums of money at stake if a notice is served incorrectly, universities should consider consulting their legal advisers before preparing and serving a notice to end a lease early.
Partner, Real Estate Disputes Team
T: 0800 763 1340
© Martineau 2009
Government to tighten up rules on employing skilled foreign workers | back to top
The old work permit scheme was replaced by Tier 2 of the government’s points-based system (PBS) in November 2008. Tier 2 enables skilled migrant workers from outside the European Economic Area to take up employment in the United Kingdom provided that they have a job offer from a UK employer, the employer is a registered sponsor and they meet essential requirements in relation to qualifications, prospective earnings, competence in English language and maintenance funds.
However, in response to the worsening economic situation and the increase in unemployed British workers, the government has recently accepted all 16 recommendations put forward by the Migration Advisory Committee in relation to Tier 2.
The following key changes are of relevance to universities and are expected to be implemented in 2010:
Resident Labour Market Test (RLMT)
- In order to satisfy the RLMT, employers will need to advertise all job vacancies in a Job Centre Plus for four weeks instead of two weeks before being able to legally employ a migrant worker from outside the EEA.
Points for earnings and qualifications
- In relation to prospective UK earnings, the minimum salary that will allow a migrant to qualify as a skilled worker under Tier 2 and be eligible to work in the UK will rise from £17,000 to £20,000 per annum. A migrant will be awarded 5 points for earnings of at least £20,000 and 20 points for prospective earnings of at least £32,000 (rather than the current figure of £24,000).
- A migrant possessing a Master’s degree will be awarded 15 points instead of 10 points to reflect the higher skill level.
Whilst the recommendations should give British workers a better opportunity of filling vacancies before they are offered to migrant workers, it is evident that some of the changes will also make it harder for employers to take on skilled foreign workers under Tier 2. For example, the extended advertising period will place further cost and administrative burdens on employers, as they will need to assess job applications received over a longer period.
Universities are advised to prepare for the changes now in the ways suggested below:
- communicate the changes to anybody who is involved in the recruitment of staff as soon as possible in order that applications under Tier 2 can be submitted before the rules change in 2010; and
- review the salary packages of potential Tier 2 migrants in light of the increased minimum thresholds set out above.
Partner, Employment & Pensions Team
T: 0870 763 1662
© Martineau 2009
Sickness during annual leave - another blow for employers | back to top
Last month, the European Court of Justice (ECJ) held in the case of Pereda v Madrid Movilidad SA [C-277/08 ECJ] that a period of illness whilst on holiday does not count towards the minimum period of four weeks’ paid annual leave under the EU Working Time Directive.
Mr Pereda, a specialist driver, suffered an accident at work around 14 days before the commencement of his allocated period of four weeks annual holiday leave. The injury put him out of action for six weeks. Mr Pereda’s request for an additional period of holiday was refused. The ECJ ruled that his period of sick leave should not have counted towards his annual holiday leave and Mr Pereda should have been allowed to reschedule it, even if it meant carrying it over to the next leave year.
This case highlights the distinction between the purpose of holiday (i.e. to rest) and the purpose of sick leave (i.e. to recover). This distinction was made by the House of Lords earlier this year, in the case of HMRC v Stringer [ UKHL 31], which confirmed the ECJ’s prior decision in the same case that the right to paid statutory annual leave continues to accrue during sick leave and, on termination of the employment relationship, a worker who has been on sick leave and has been prevented from taking paid annual leave is entitled to a payment in lieu of that leave.
However, it raises the issue which the House of Lords failed to deal with in Stringer, which is that the UK Working Time Regulations only allow for eight days of the 28 days statutory holiday to be carried over, whereas under the Directive it now appears employers may be required to allow employees to carry over the remaining 20 statutory days.
Employers may be reluctant to amend policies to allow annual leave to be carried over before UK case law or legislation has addressed the inconsistency between the UK Regulations and the EU Directive. However, this does risk having to defend Tribunal claims for a breach of the Regulations and/or an unlawful deduction from wages on the basis that Tribunals may construe the Regulations “purposively” in line with the Directive as interpreted by the ECJ. This is more of a risk for universities, as public sector employers, because their employees can rely directly on the provisions of the Directive.
What is certain is that (following Stringer) universities now not only need to monitor the accumulation of annual leave entitlement for employees on long-term sick leave, but also (following Pereda) give employees who request it extra holidays in lieu when they are genuinely sick during annual leave. Universities should consider making their sickness policy more robust including ensuring the effective management of long term sickness absence and obtaining medical evidence if an employee claims to have been sick when on holiday, before reallocating the annual leave.
Partner and Head of Employment & Pensions Team
T: 0870 763 1378
Solicitor, Employment & Pensions Team
T: 0870 763 1446
© Martineau 2009
The bulletin contains a summary of
complicated issues and should not be
relied upon for specific matters. You are
advised to take legal advice on particular
problems. Please contact us and we will
be happy to assist.