Protected by a Collateral Warranty?

The outcomes in the cases of Scottish Widows Services v Harmon/CRM Facades and Scottish Widows Services v Kershaw Mechanical Services are a wake up call that liability can be incurred in providing collateral warranties.

Scottish Widows Services were assigned the lease to Port of Hamilton, as well as the collateral warranties provided to the original Tenant by the contractor and architect for the development. The roof of the building was leaking so Scottish Widows Services sought damages from the contractor and architect, for issues/defects in a development they had leased.

Scottish Widows Services knew of the defects before they acquired its interest and as such were in a position where they didn’t have any obligation under the lease to repair these defects. They did however chose to carry out the repairs of the own volition. They then sought to recover, but where they entitled to?

The contractor and architect argued that the losses where self-inflicted as Scottish Widows Services knew the position when they were entering into the lease. Scottish Widows Services then accepted the premises in the condition it was in at the start of the lease (including the defects). It was also argued that the repairs were done for Scottish Widows Services’ convenience and not as a legal obligation. These arguments did not carry any weight with the court as the breach of collateral warranty remained the dominant cause of loss.

Scottish Widows Services only had to prove that they incurred reasonable costs in fixing the defects, which were a result of the breach of the collateral warranty. A beneficiary of a collateral warranty is not normally party to the terms of the original contract or appointment, they are unlikely to have an existing or future relationship with the granters of the warranty, so they are likely to pursue any legal remedy robustly.

Kyle Moir
Solicitor

Blues Sky thinking

Well there may be good news for publicans who are struggling to make Sky and ESPN contracts work financially.  Many of you have just found it too expensive to subscribe and in reality when you work out the cost of the service against the increase in profits the answer is often just not worth it – BUT of course people like to come to a pub where sport is shown and if you don’t have it at all will you get anyone in at all?

Many of you will have been tempted to subscribe to cheaper European alternatives and some of you may have been sued for so doing.  We at Blackadders have certainly been called upon to assist clients in fending off legal action from the English Premier League with regard to the possession of decoder cards which enable customers to view overseas broadcasts of football matches.

The English Premier League owns the copyright in Premier league match footage and exclusively licenses its rights to broadcasters in different territories (in the UK, the live rights are currently licensed to Sky and ESPN).  Under the terms of their licences, foreign broadcasters are prohibited from supplying “non-UK” satellite decoder cards – which facilitate the transmission of match footage – for use in the UK.

Well one landlady Mrs Murphy has taken the matter to the European Court of Justice arguing that the laws governing the European Union single market should permit her to use alternative and cheaper European sports TV providers.

The European judges are due to come to a decision this Autumn.  In the meantime their legal advisor, the Advocate General Juliane Kokott, has stated that in her opinion Mrs Murphy’s case has merit and that the Premier League’s marketing of broadcasting rights on a territorially exclusive basis amounts to profiting from the elimination of the internal market.  The court does not have to agree with Ms Kokott’s opinion.  However, it would be very unusual for them to take a decision which goes against it.

What does this mean for you?  At present, nothing.  The law in the UK remains the same.  You are not currently permitted to use any provider other than Sky or ESPN who have successfully bid for the right to show Premier League football in the UK.  They have poured millions of pounds into the Premier League enabling clubs to grow, develop their offering and the Premier League will fight all the way to the end to preserve its position.  It is likely the Premier League will have the support of Sky for its interest.  That said, many believe that it will take a comeback in the mould of the recent Newcastle v Arsenal match in order for the Premier League to turn this around.

So watch this space.  We will keep you informed as to the outcome of the case and advise you of your options.

Good trading!

Janet Hood
Consultant
Accredited Liquor Licensing Specialist

Kirk Dailly
Senior Solicitor
Business – Corporate & Commercial

Equality Considerations in Public Procurement

The Equality Act 2010 (EA) brings together various public sector equality duties under a new single equality duty.  This requires public bodies to consider various factors such as race, gender, age, disability, sexual orientation, and religion or belief when making decisions about the exercise of their functions.  The aim is to “promote the development of more personalised public services… and place the achievement of equality outcomes at the heart of our public services”.  The new general duty is underpinned by the specific duties which applied under previous legislation.

On 18 January 2011, sections 151 to 155, section 157 and Schedule 19 of the EA all came into force.  These provisions relate to the application of the EA to certain public bodies.  Essentially, they allow Ministers to add to the list of public bodies who are currently subjected to the equality duty.  The current list includes the Police and the NHS.  The specific duties which are to underpin the new single duty are not detailed in the EA.   However, the EA grants Ministers power to impose these specific duties by way of secondary legislation.

Specific duties may be imposed on a public authority, for example, in connection with its public procurement functions.  The public sector spends approximately £175 million each year on goods and services.  Some public authorities already use equality duties when putting work out for tender, for example, by asking contractors for a breakdown of their workforce by ethnicity or gender.  The aim of these provisions is to enable Ministers to set out how public bodies can go about using procurement more consistently to help achieve equality objectives.

Jack Boyle
Trainee Solicitor

Planning for new property solutions?

I read a very interesting report about research by the Royal Institution of Chartered Surveyors (RICS) which has suggested one solution to easing the current housing crisis could lie in low-cost housing solutions.

In the New Law Journal, potential solutions include modular homes – self-contained houses with a bathroom and kitchen, constructed off-site and then transported to a given location. Such homes can be priced from around £20,000. In addition, RICS suggests that homes made from recycled plastic are also available. This accommodation is made from “thermo poly rock” which uses 18 tonnes of recycled plastic and minerals which would otherwise be consigned to landfill sites. the report author Dr Chris Goodier from Loughborough University, said “UK house-building has long been associated with expensive, time-consuming methods and can mean that environmental standards are difficult to maintain. [These] designs are not only cost-effective but can be constructed in a very short period of time. Furthermore, many major mortgage providers are already willing to lend against these structures, which has been a problem in the past, meaning that first-time buyers could find them a way of getting onto the property ladder.”

For the Tayside and Scottish market, it will be very interesting to see just what the reaction of planning officials will be to a planning application for these properties, what developers will make of them, if lenders are prepared to finance them, and what local surveyors will make of them in valuation reports!

Shaun Mackintosh
Associate

Tenants’ Break Options

In the present economic climate it is not uncommon to find that tenants enter into lease transactions in circumstances where they are given the right to terminate the lease before the end of its contracted duration or indeed to extend the duration of the lease beyond the period of occupation originally contemplated in the lease. Normally the lease will provide that options such as these are to be exercised by the tenant serving notice upon the landlord of the tenant’s intention to exercise such option.

In situations such as this it is essential that care is taken when serving such a notice to ensure that the notice is fully compliant with the terms of the lease. Quite frequently a lease will specify a strict time limit for service of the option notice which must be met if the option is to be successfully exercised. The tenant would be well advised to diarise in advance the date upon which service of the notice is to be made to ensure that it is not overlooked.

When serving the notice the tenant needs to consider carefully the terms of the lease before issuing the notice. The lease should specify the period of notice required,  the address to which the notice is to be served and the method by which the notice is to be served. In particular it is essential that the party serving the notice ensures that service is effected upon the correct recipient and this is frequently an issue where the landlord has disposed of the leased property to a third party since granting the lease.

The consequences of failing to validly serve a notice exercising a break option can be catastrophic to a tenant and may well result in the tenant losing the right to exercise the option and being contractually committed to continuing to occupy the leased property and meet the costs of the rent and other outgoings until the expiry date of the lease. It is therefore in the tenant’s best interest to ensure that they are correctly advised on the matter and that the notice is served appropriately.

If you require any further information in connection with the above, please contact Ken Scott whose e mail address is ken.scott@blackadders.co.uk

Delay to Bribery Act Implementation

Those with a compliance brief will be interested to hear that the Ministry of Justice has confirmed a delay in implementation of the Bribery Act.  The Act – which was one of those labeled “anti-growth” by outgoing CBI director general Sir Richard Lambert last week – was due to come into effect in April.  However, the Ministry of Justice has not yet issued the guidance for businesses that was slated for January, and the Act will not now come into force until 3 months after this has been issued.

As yet, there is no date fixed for the issue of guidance.  A draft of the guidance was issued for consultation in September last year, and my own feeling was that while it was a start, it was very general, and the examples it gave only related to overseas business.  If the result of the delay is to provide more focused guidance that is targeted at all types of organisation – large and small, regional, national and international, the delay will have been a good thing.  It will also give those organisations who have not given serious consideration to corruption issues more time to get their house in order.

The Bribery Act extends the scope of current anti-corruption laws, and will expose all organizations to the risk of prosecution if they do not have appropriate anti-corruption procedures in place.  We ran a seminar on this topic in October last year and will continue to keep clients and contacts up to date with progress.

Please contact me for further information or for help in assessing your organisation’s risk profile and formulating appropriate procedures.

Campbell Clark
Head of Corporate & Commercial