business law ( PDFDrive )

Part 3 Business transactions

2 The Business Advertisements (Disclosure) Order include promoting competition and protecting the con-
1977. This order requires business sellers of goods to sumer in relation to pricing and terms of supply.
make it clear in their advertisements directed at con-
sumers that they are traders. The fact can be made In 1991 the government launched its Citizens’ Charter
apparent by the content of the advertisement, its format initiative for public services. The aim of the initiative
or size. is to raise standards in public services such as health,
education and the courts, by producing charters which
Consumer Focus (formerly the National set out what kind of services consumers are entitled to
Consumer Council) expect and how they can complain if things go wrong.

The National Consumer Council was set up in 1975 to Voluntary organisations
represent consumer interests in dealings with the govern-
ment, local authorities, the Office of Fair Trading and Consumers’ Association
trade bodies. It also advised on consumer-protection
policy through the publication of reports and making The Consumers’ Association was established in 1957.
representations to relevant bodies. Following the Con- The inspiration for its creation came from the USA. It
sumers, Estate Agents and Redress Act 2007, the Welsh, has five main aims:
Scottish and National Consumer Councils merged with
Postwatch and Energywatch to create Consumer Focus. 1 to encourage people to spend their money wisely;
Consumer Focus was established on 1 October 2008. It 2 to reduce the inequality between the shopper and the
is sponsored by the government.
manufacturer or supplier;
Public services and privatised 3 to improve the quality of British goods, creating more
industries
discriminating purchasers;
Newly privatised, large-scale suppliers of goods and ser- 4 to tackle the growing complaints about unsatisfactory
vices, such as British Gas, BT, the water and electricity
supply companies, have found themselves in a position goods;
of having a monopoly or near-monopoly of supply. It 5 to combat the power of advertising by providing
has, therefore, been thought necessary to regulate their
operations by appointing statutory ‘regulators’, and, in information so the consumer can choose goods on
some cases, formalising consumer representation in the more rational grounds.
industry (see Fig 14.1). The duties of the regulators may
The main aim of the Consumers’ Association is to
provide information to the consumer about products
and services by testing them thoroughly and giving the
subscriber an independent appraisal through the medium
of its magazine Which? In addition, the Consumers’

Industry Regulator Office Consumer representation

Communications Office of Communications OFCOM Ofcom Consumer Panel

Gas and electricity Chairman of Gas and Electricity OFGEM Gas and Electricity Consumer Council
Markets Authority (Energywatch)

Water Director General of Water OFWAT Consumer Council for Water and local
Services customer service committees

Rail transport Rail Regulator ORR Rail Passengers Council and rail
passengers committees

Air traffic Civil Aviation Authority CAA –

Figure 14.1 Regulators
406

Chapter 14 Consumer protection

Association seeks to influence consumer protection of Advertising Practice (CAP). The code applies to all
policy by lobbying Parliament or by representation on advertisements in newspapers, magazines, posters, bro-
other bodies in the UK and Europe. chures and leaflets for the public, cinema, commercial
and viewdata services. The ASA and CAP also adminis-
Citizens’ Advice Bureaux (CABx) ter the British Code of Sales Promotion Practice. Separate
systems operate in relation to broadcasting and cable
These were first established in 1939 by the National operations.
Council of Social Service. They deal with a wide range
of problems: employment rights, social security, land- Professional bodies
lord and tenant disputes, etc. Approximately 20 per cent
of the enquiries they deal with are consumer prob- The Law Society, for example, operates a compensation
lems. They are funded by central government and local fund for the victims of dishonest or insolvent solicitors
authorities. and requires compulsory insurance against negligence.

National Consumer Federation (NCF) Ombudsmen
The financial sector has appointed a number of
The NCF was established in 2001 following the amal- ‘ombudsmen’ to deal with complaints, e.g. insurance,
gamation of the Consumer Congress and the National building societies, pensions, banking. The powers of
Federation of Consumer Groups. It encourages and these ombudsmen vary from scheme to scheme, but,
co-ordinates the activities of the local consumer groups. as a minimum, they provide a channel for complaints
and, at best, they can require an organisation to pay
British Standards Institute (BSI) compensation.

The BSI was established in 1929. It sets standards, Different approaches to consumer
dimensions and specifications for manufactured goods. protection
A ‘British Standard’ is a document which stipulates the
specifications, requirements for testing or measurements The law on consumer protection has been developed on
with which a product must comply in order to be suited a piecemeal basis over many years and has a variety of
for its intended purpose and work efficiently. Com- sources: EU regulations and directives, statutes, minis-
pliance with such a standard is a matter of choice on the terial regulations and case law. Over the years differ-
part of the producer. However, in some cases compliance ent approaches have been taken, causing problems of
is compulsory, e.g. crash helmets. A producer may apply overlap and complexity. The four main approaches are:
to the BSI for certification of his products, in which case providing civil remedies, imposing criminal liability,
he may display a BSI kitemark on the product. administrative controls, and business self-regulation.

Other organisations Providing civil remedies

Trade associations An individual consumer may be able to bring a civil
action against a trader for a breach of contract or for liab-
An important aspect of consumer protection is the ility in tort, e.g. negligence. The liability of a supplier of
extent to which laws are supplemented by codes of prac- goods and services for breach of contract was examined
tice drawn up by trade associations in consultation with in Chapter 10 , and his liability in tort was considered
the Office of Fair Trading (discussed in more detail later in Chapter 11 .
in this chapter).
Imposing criminal liability
Advertising Standards Authority (ASA)
Certain types of trading activities are deemed to be so
The ASA was established in 1962 to provide independ- harmful that the law imposes criminal sanctions on the
ent supervision of the advertising industry’s system of
self-regulation through a monitoring programme and
investigation of complaints. The main instrument of
control is the British Code of Advertising Practice
(BCAP) which was published in 1961. It is kept under
continuous review and amendment by the Committee

407

Part 3 Business transactions

offending trader. Some of the more important criminal respond to a super-complaint. The response must state
offences in relation to traders were explored in Chap- whether action is to be taken and, if so, what is pro-
ter 12 . posed. Any of the powers of the OFT or regulators may
be used. In the case of the OFT, actions could include:

Administrative controls ■ bringing enforcement action under either competition
or consumer regulation powers;
An alternative to using the civil or criminal law as a
means of consumer protection is to place responsibility ■ launching a market study;
for the regulation of traders in the hands of an adminis- ■ making a market investigation reference to the Com-
trative body which is given powers to deal with unfair
trade practices. The advantages of administrative con- petition Commission (CC) for further investigation;
trols compared to legal controls are as follows: ■ making recommendations for changes in legislation.

1 Individual consumers are often ignorant of their Super-complaints can be made to the OFT and the
rights or reluctant to enforce them in the courts. The following regulators: Civil Aviation Authority (CAA),
creation of administrative controls allows action to be Office of Gas and Energy Markets (OFGEM), Office
taken on behalf of all consumers. of Communications (OFCOM), Northern Ireland Auth-
ority for Energy Regulation (OFREG-NI), Office of the
2 Depending on the powers vested in the administrat- Rail Regulator (ORR) and the Office of Water Services
ive agency, it may be able to act more quickly than (OFWAT). The following have been granted designated
Parliament to deal with new forms of unfair trading. consumer body status: The Consumers’ Association;
National Consumer Council (now known as Consumer
3 The administrative agency may be able to achieve the Focus); Citizens’ Advice; Consumer Council for Water
desired effect by persuasion rather than using the (formerly known as Watervoice); CAMRA and General
threat of legal action, and it may be able to use its Consumer Council of Northern Ireland. The OFT has
influence to raise standards above the minimum received super-complaints in relation to private den-
acceptable by encouraging self-regulation. tistry, door-step selling, mail consolidation, care homes,
home collected credit, Northern Ireland banking, credit
4 Dishonest traders may not be deterred by the threat card interest calculation methods, payment protection
of legal action. Some forms of control, such as licens- insurance and the Scottish legal profession.
ing, may stop undesirable traders from operating in
the market.

The main forms of administrative control are to be 2 Enforcement orders (Part 8 of EA 2002). Part 8 of
found in the Enterprise Act 2002. the EA 2002 introduces a new procedure for the enforce-
ment of specified consumer legislation by means of court
Administrative controls under the orders, known as enforcement orders, taken against
Enterprise Act 2002 (EA 2002) businesses in breach of the legislation which harms the
collective interests of consumers. This new procedure
1 Super-complaints. The EA 2002 introduces a new replaces Part III of the Fair Trading Act 1973 and the
procedure to allow certain designated consumer bodies Stop Now Orders (EC Directive) Regulations 2001,
to make super-complaints to the OFT and other which had been implemented by the 1998 EC Directive
specified regulators where ‘any feature or combination on injunctions for the protection of consumers’ interests
of features of a market in the UK for goods or services (the ‘Injunctions Directive’).
is or appears to be significantly harming the interests
of consumers’. Features of a market which could give Enforcement orders can be obtained for two types of
rise to a complaint are the structure of the market, the infringement:
conduct of those supplying or acquiring goods and ser-
vices in the market and the conduct of any customers. ■ Community infringements – these are breaches of UK
The market can be regional, national or international laws which give effect to specific EC Directives, e.g.
although the OFT and regulators can only act in the UK. Package Travel, Package Holidays and Package Tours
The OFT and other regulators have up to 90 days to Regulations 1992 and Unfair Terms in Consumer Con-
tracts Regulations 1999.

408

Chapter 14 Consumer protection

■ Domestic infringements – these are breaches of spe- Licensing of traders under the
cified UK law, listed in delegated legislation, which Consumer Credit Act 1974
are committed in the course of a business and which
harm the collective interests of consumers, e.g. Con- The OFT is responsible for administering the system of
sumer Credit Act 1974 and Sale of Goods Act 1979. licensing for consumer credit and hire businesses (see
Chapter 13 ). Undesirable traders may be refused a
The EA 2002 identifies three kinds of enforcers: licence or have their licences withdrawn.

■ general enforcers, e.g. the OFT, Trading Standards Business self-regulation
Service and the Department of Enterprise, Trade and
Investment in Northern Ireland; The OFT is under a statutory duty to encourage relevant
trade associations to prepare and disseminate to their
■ enforcers designated by the Secretary of State, e.g. members codes of practice for guidance in safeguarding
regulators, such the CAA, ORR, FSA; the Information and promoting the interests of consumers in the UK.
Commissioner, Consumers’ Association; The aim of such codes is to enable a particular industry
to try to regulate the practices of its members. The
■ Community enforcers, which are limited to enforcers advantages of voluntary codes of practice are as follows:
from other EEA states.
■ codes can deal with matters which it would be difficult
The OFT has responsibility for leading enforcement to deal with by means of legislation, e.g. availability of
activity and co-ordinating action by enforcers, to ensure spare parts;
that only the most appropriate body takes action.
■ codes may be able to go further than the existing law or
Before seeking an enforcement order, the enforcer improve upon legal remedies, e.g. the Code of Practice
must first consult the OFT (if it is not the enforcer) and for the Motor Industry provides that copies of informa-
the trader against whom the order may be made with a tion provided by previous owners of a car concerning
view to giving the trader an opportunity to stop the its history should be passed on to the new owner;
infringement and avoid the need for court action. At
this stage the enforcer may accept an undertaking from ■ any change in trading practices can be dealt with
the trader about his future conduct. After 14 days the quickly by the association, whereas changing the law
enforcer may apply to the High Court or county court to deal with an undesirable trade practice may take a
for an enforcement order. (This period is reduced to long time;
seven days for an interim order where urgent action is
required.) Where proceedings are brought against a ■ codes encourage an industry to put its own house in
trader the court may: order; complaints may be dealt with within the spirit
of the code rather than according to the letter of the
■ Accept an undertaking from a trader about his con- law; and the code may even explain legal require-
duct instead of making an enforcement order. ments to its members;

■ Make an enforcement order, requiring the trader to ■ codes are developed for a particular trade or industry
stop and not continue the infringing conduct. The order and can, therefore, deal with the problems which are
also stops the trader from pursuing similar infringing specific to the industry;
conduct through other businesses with which he or
she might have a connection, e.g. as a director. ■ disputes can be dealt with in a less formal way, e.g. by
conciliation;
If a trader breaches an enforcement order or an
undertaking given to the court (but not to an enforcer), ■ most codes provide for arbitration in the event of a
the trader will be in contempt of court and can be fined dispute; arbitration may be preferable to bringing a
or imprisoned for a maximum of two years. case through the courts.

The OFT and other general and designated enforcers Although codes of practice have a number of advant-
which are public bodies with statutory powers have the ages, there are some significant drawbacks to self-
right to require information, including documents, regulation. They are:
from traders by issuing a written notice. If a trader fails
to comply with a notice, an enforcer can seek a court ■ not all traders are members of the trade associations
order requiring the trader to produce the information. and subject to their rules and codes of practice;

409

Part 3 Business transactions

■ members of the public are often not aware of the exist- 2 The holiday is often arranged by one individual on
ence of codes of practice and their rights under them; behalf of himself and his family or a group of friends.
The rights of holidaymakers who did not personally
■ the sanctions which a trade association can impose make a booking may not be clear.
against a member for failing to comply with the code
are often very weak; 3 Holiday selections are made on the basis of advertis-
ing, descriptions in a brochure and advice by travel
■ codes are drawn up by a trade or industry and may agents. Customers need adequate and accurate infor-
not adequately address the interests of consumers. mation to make an appropriate choice, but brochures
are usually prepared a long time in advance of the
The EA 2002 requires the OFT to establish criteria for holidays to which they relate.
approving codes and to allow a symbol to be used to
show which codes have been approved by the OFT. 4 The holiday may be disrupted by events beyond the
control of the tour operator: flights may be delayed by
A summary of the different approaches to consumer bad weather or industrial action by airport staff, or
protection is set out in Fig 14.2. independent hoteliers may have overbooked their
hotels. To what extent should the operator be held
In the next part of this chapter we will examine how responsible for the holidaymakers’ loss of enjoyment
the law is applied to protect consumers by considering a when such things happen?
consumer transaction which gives rise to a large number
of complaints: the package holiday. 5 Competitive pricing policies have led to low profit
margins and the need to reduce financial risk to a
Consumer protection case study minimum by restricting consumers’ rights through
– package holidays the use of standard terms and conditions.

Over the past 30 years there has been an enormous growth Legal controls over package holidays
in the package holiday market. As the volume of trade has
increased, the real cost of taking a package holiday has Before 1993 there were few legal rules designed specific-
fallen. A package holiday to popular European destinations ally to control the package holiday industry. By and large,
such as Spain, Greece and Turkey is now well within the general consumer protection measures were used.
financial resources of most people. Intense price com-
petition between the main tour operators has led to UK 1 Civil law remedies. Individual holidaymakers could
holidaymakers enjoying the lowest prices in Europe, but bring actions in contract or tort against the tour oper-
at the expense of standards. There is a high level of dis- ator if the holiday failed to live up to expectations (see,
satisfaction with package holidays. In 2006/7 the Associ- e.g. Jarvis v Swans Tours (1973)). Although the travel
ation of British Travel Agents (ABTA) received 18,151 agent acts on behalf of the tour operator, the agent may
complaints about holidays and in 2007 Consumer Direct incur liability to the consumer in tort if, for example, he
received 14,391 complaints about holidays. or she makes untrue statements about a holiday. Con-
sumers’ civil remedies were enhanced by general con-
sumer protection legislation, such as:

The problems with package holidays ■ the Misrepresentation Act 1967, which provided a
remedy for a negligent misrepresentation;
1 A package holiday involves a complex set of legal rela-
tionships between the travel agent, tour operator, ■ the Consumer Credit Act 1974, which by s 75 imposed
hotelier, carrier and local suppliers of services. In most equal liability on credit card companies;
cases, the tour operator does not own the airlines or
hotels but contracts with independent suppliers to ■ the Unfair Contract Terms Act 1977, which controlled
make up the package. Although the contract is usually the use of unfair exemption clauses;
made in this country, most of the components of the
package are delivered abroad. The consumer may be ■ the Supply of Goods and Services Act 1982, which
unsure who, exactly, is responsible if something goes provided that the supplier of services should exercise
wrong and which country’s law applies. reasonable care and skill.

2 Criminal penalties. Travel agents and tour oper-
ators are vulnerable to prosecution under the Consumer

410

Civil law Criminal law Administrative controls Business self-regulation
To encourage traders to observe high
Aims To protect all consumers by punishing To ban dishonest traders standards
To remedy a wrong suffered by an traders who fail to meet minimum To tailor standards to particular
individual consumer standards To persuade traders to improve upon industries
minimum legal standards To allow traders to police themselves
To protect honest traders from unfair The British Code of Advertising
competition by unscrupulous traders To promote competition between traders Practice requires advertisements to
by regulation of anti-competitive practices be legal, decent, honest and truthful.
Breaches of the code are publicised
False/misleading statements Various offences under the Consumer Office of Fair Trading may apply for and offenders warned. OFCOM has
Advertisements Protection from Unfair Trading Regulations an injunction to stop publication of powers to deal with misleading TV
No civil liability for inaccurate ‘trader’s 2008 in respect of unfair trading practices misleading advertisements (Control of advertising
puff’ unless specific promise made as Misleading Advertisements Regulations Trade association codes of practice
in Carlill’s case Offence to fail to disclose specified 1988)
information to package holiday customers Trade association codes of practice
Directors/experts are liable for false/ (Package Travel etc. Regulations 1992) Enforcement orders to stop breaches of
misleading descriptions in company consumer legislation under the EA 2002 Trade association codes of practice
prospectuses (Financial Services and Offence for estate agents to give
Markets Act 2000) false/misleading statements about property Super-complaints under the EA 2002 Trade association codes of practice
(Property Misdescriptions Act 1991)
Package holiday providers are liable
for misleading descriptions of package
holidays (Package Travel etc.
Regulations 1992)

Representations Offences under the Consumer Protection Enforcement orders to stop breaches of
Civil liability for misrepresentation from Unfair Trading Regulations 2008, consumer legislation under the EA 2002
Rescission of the contract and/or Property Misdescriptions Act 1991 (see
damages above) Super-complaints under the EA 2002
(i) at common law (tort of deceit or tort
Deception offences under the Fraud Act
of negligence) 2006
(ii) under the Misrepresentation Act 1967
Offence to apply false descriptions to food
(Food Safety Act 1990)

Terms Offences under the Consumer Protection Enforcement orders to stop breaches of
Damages for breach of express or from Unfair Trading Regulations 2008 consumer legislation under the EA 2002
implied terms of contract and repudiation (see above)
of the contract for breach of condition or Super-complaints under the EA 2002
serious breach of innominate term
Chapter 14 Consumer protection
411
Unsolicited goods/services Offence to demand payment for or Enforcement orders to stop breaches of
No contractual obligation to pay for threaten proceedings in respect of consumer legislation under the EA 2002
unsolicited goods. They are treated as unsolicited goods and services (Unsolicited
unconditional gift (Consumer Protection Goods and Services Act 1971 and Super-complaints under the EA 2002
(Distance Selling) Regulations 2000) Consumer Protection (Distance Selling)
Regulations 2000)

Figure 14.2 Consumer protection – a summary

Civil law Criminal law Administrative controls Business self-regulation
Part 3 Business transactions
412
Cancellation rights Enforcement orders to stop breaches of Trade association codes of practice
Credit agreements signed away from consumer legislation under the EA 2002
business premises are cancellable
(Consumer Credit Act 1974) Super-complaints under the EA 2002

Non-credit agreements involving Licence required to carry on consumer
payments over £35 signed away from credit business (Consumer Credit Act
business premises are cancellable 1974)
(Cancellation of Contracts made in a
Consumer’s Home or Place of Work etc. Offence not to inform timeshare customer Timeshare Council Code of Practice
Regulations 2008) of cancellation rights (Timeshare Act 1992)

Timeshare agreements made in the UK
are cancellable (Timeshare Act 1992)

Distance contracts are cancellable
(Consumer Protection (Distance Selling)
Regulations 2000)

Defective goods Offence to supply unsafe consumer goods Secretary of State can issue prohibition Trade association codes of practice
Strict liability for breach of implied (General Product Safety Regulations 2005) notices and notices to warn; trading
contractual terms as to quality and standards officers can issue suspension
suitability (Trading Stamps Act 1964, Various offences related to the sale of food notices and apply for forfeiture orders in
Supply of Goods (Implied Terms) (Food Safety Act 1990) respect of unsafe goods (Part II,
Act 1973, Sale of Goods Act 1979, Consumer Protection Act 1987)
Supply of Goods and Services Act 1982, Offences under the Consumer Protection
Sale and Supply of Goods to Consumers from Unfair Trading Regulations 2008 Food authorities can apply for e.g.
Regulations 2002) improvement notices, prohibition orders or
emergency orders to deal with unsafe
Fault-based liability in the tort of negligence food. Food premises must be registered
(Food Safety Act 1990)
Strict liability for breach of statutory duty
under Part II, Consumer Protection Act 1987 Enforcement orders to stop breaches of
consumer legislation under the EA 2002
Strict liability under Part I, Consumer
Protection Act 1987 Super-complaints under the EA 2002

Defective services Offences under the Consumer Protection Enforcement orders to stop breaches of Trade association codes of practice
Liability for breach of implied contractual from Unfair Trading Regulations 2008, consumer legislation under the EA 2002 Professional bodies’ codes of
terms as to use of reasonable care and skill, Package Travel etc. Regulations 1992 practice
time of performance and consideration (see above) Super-complaints under the EA 2002
(Supply of Goods and Services Act 1982) Citizens’ Charter standards for public
Licence required to carry on consumer services
Fault-based liability in the tort of negligence credit business (Consumer Credit Act 1974)

Liability for breach of implied contractual Bonding requirement for package travel
terms in package holidays (Package organisers and retailers (Package Travel
Travel etc. Regulations 1992) etc. Regulations 1992)

Exclusion of liability Offence to display ‘no refunds’ notices Enforcement orders to stop breaches of Trade association codes of practice
Exclusion clauses may be ineffective under (Consumer Transactions (Restriction on consumer legislation under the EA 2002
the common law or rendered void by Statements) Order 1976)
statute (Unfair Contract Terms Act 1977, Super-complaints under the EA 2002
Unfair Terms in Consumer Contracts
Regulations 1999) Office of Fair Trading and other qualifying
bodies can challenge unfair contract terms
(Unfair Terms in Consumer Contracts
Regulations 1999)

Figure 14.2 (continued)

Chapter 14 Consumer protection

Protection from Unfair Trading Regulations 2008 for ■ a pre-arranged combination of at least two or more
false and misleading statements. specified components which are: (i) transport; (ii) ac-
commodation; (iii) other tourist services not ancillary
3 Administrative controls. One of the consequences of to transport or accommodation, but which account
cut-throat price competition in the travel industry has for a significant proportion of the package;
been a high rate of company failures because of insol-
vency. The problem for the consumer is that they may ■ the combination is sold or offered for sale at an inclus-
find themselves stranded abroad. Administrative con- ive price;
trols have, therefore, tended to concentrate on putting
in place arrangements to safeguard holidaymakers in the ■ the service covers a period of 24 hours or more or
event of the tour operator becoming insolvent. The Civil includes overnight accommodation.
Aviation Authority (CAA), for example, required any-
one organising inclusive holidays involving air travel to 2 The parties. The regulations use the terms ‘organiser’
obtain an Air Travel Organiser’s Licence (ATOL). Such and ‘retailer’ to describe the tour operator and travel
operators were required to satisfy financial requirements agent respectively. The ‘consumer’ is given a broad defini-
and to provide a bond to cover liabilities, which may tion so as to include not only the person who makes the
arise from insolvency. An Air Travel Reserve Fund was contract for the package but also anyone else on whose
set up as an additional precaution. behalf he has contracted, i.e. members of a family or
someone to whom the contracting person has trans-
ferred the package.

4 Business self-regulation. The Association of British 3 Misleading information. Regulation 4 provides
Travel Agents (ABTA) was set up in 1951 and, despite its that a consumer is entitled to be compensated by the
name, represents the interests of both travel agents and organiser or retailer for any loss arising from misleading
tour operators. All ABTA members are bound by the information about the package, its price or any other
codes of practice: the Tour Operator’s Code of Conduct conditions applying to the contract.
and the Travel Agent’s Code of Conduct.
Mawdsley v Cosmosair Plc (2002)
The fragmented nature of the controls over the
package holiday industry, the high level of consumer Mr and Mrs Mawdsley booked a full board package
dissatisfaction and the obvious European dimension holiday in Turkey with Cosmos for themselves and their
to the industry made this form of consumer transaction two young children, J and C, aged three-and-a-half and
a natural target for EC legislation. The EC Directive on six months respectively. The Cosmos brochure included
Package Travel, Package Holidays and Package Tours the following entry for the hotel chosen by the Mawdsleys
was adopted by the EC Council in 1990. Member states under the heading ‘Facilities’: ‘Lift (in main building)’.
were required to implement the measure by 31 Decem- There was a lift in the main building but it did not stop at
ber 1992. The directive was given effect in the UK by the the floor where the restaurant was located. Mrs Mawdsley
Package Travel, Package Holidays and Package Tours was injured while trying with her husband to carry their
Regulations 1992, which came into force on 23 Decem- daughter C in her pushchair down the stairs to the re-
ber 1992. staurant. Mrs Mawdsley lost her footing, slipped and fell.
The Court of Appeal upheld the decision of the trial judge
The Package Travel, Package that the statement ‘Lift (in main building)’ amounted to a
Holidays and Package Tours misrepresentation that all levels of the hotel were access-
Regulations 1992 ible by lift and that it was reasonable to assume that the
restaurant was in the main building and therefore also
The main provisions of the regulations (SI 1992/3288) accessible by lift. The misrepresentation constituted ‘mis-
as they affect consumers are as follows: leading information’ under reg 4 of the Package Travel
Regulations. In the absence of a novus actus interveniens,
1 Package. The regulations do not apply to travel or Cosmos was liable for Mrs Mawdsley’s injuries.
accommodation, which are separately arranged. The
regulations apply only to ‘packages’ which are sold or 4 Provision of information. The regulations set out
offered for sale in the UK. The definition of a ‘package’ what information must be given to consumers in bro-
requires the existence of the following elements: chures and before the package starts:

413

Part 3 Business transactions

(a) Brochures. Regulation 5 provides that brochures must sumer before the contract is made and that the contract
contain certain specified information, e.g. the destination, contains specified elements, e.g. travel destination(s),
the means of transport, the type of accommodation, its travel dates, accommodation, the itinerary, inclusive
location, main features and category, inclusive meals meals and excursions, the price and payment schedule
and the itinerary. It is an offence for an organiser to and time limits for complaints (reg 9).
make available a brochure which does not comply with
the requirements. It is also an offence for a retailer to 6 Transfer of bookings. If the consumer is prevented
make a brochure available to a possible consumer which from going ahead with the package, he has the right
he knows or has reasonable cause to believe does not under reg 10 to transfer the package to a third party if he
comply with the requirements. The penalties are a max- gives reasonable notice. However, a transfer may involve
imum fine of £5,000 in the magistrates’ court or an extra costs and the transferor and transferee are jointly
unlimited fine in respect of a Crown Court conviction. and severally liable for the price of the package.

Inspirations East Ltd v Dudley 7 Surcharges. Price variation clauses will be void
Metropolitan Borough Council (1997) under reg 11 unless they comply with the following
requirements:

Inspirations, an organiser of package holidays, included ■ the clauses provide for both upward and downward
a statement in its ‘Inspirations Cyprus’ brochure that revision; and
a certain hotel in Limassol was very suitable for people
who use a wheelchair. A customer booked a holiday at ■ the contract states precisely how the revised price is to
the hotel but discovered on arrival that there was no be calculated; and
access to the swimming pool for people in wheelchairs.
Inspirations’ conviction was upheld. The magistrates ■ the variation is solely due to changes in the cost of
were entitled to find that the indication that the hotel was transportation; or dues, taxes or fees for services, such
suitable for the disabled was a misdescription about a as landing taxes; or exchange rates.
main feature of the package in breach of reg 5.
A price increase cannot be made within 30 days of
Regulation 6 provides that particulars in the brochure departure or where the increase is less than 2 per cent of
have the status of implied warranties, unless the parties the price.
agree otherwise. If the brochure contains an express
statement that particulars are subject to change and any 8 Alteration of the terms. Regulation 12 incorporates
changes are clearly communicated to the consumer an implied term into every contract that the organiser
before the contract is concluded, then no liability for will inform the consumer of a significant alteration of
breach of warranty will arise. any of the essential terms of the contract, e.g. price,
so the consumer can decide whether to cancel, or accept
(b) Before the package starts. Regulation 7 requires the the alteration. If the consumer decides to cancel, he
organiser and retailer to provide the consumer with or she is entitled to a substitute package of the same or
information about matters such as passport and visa superior quality, or a lower quality package with an
requirements, health formalities and arrangements for adjustment of price, or a full refund (reg 13).
security of money paid and arrangements for repatria-
tion. Regulation 8 requires the organiser and retailer to 9 Significant proportion of services not provided.
provide the consumer in good time before the journey Regulation 14 provides that there is an implied term that
starts with information about transport arrangements where after a departure a significant proportion of the
and local representatives. Both regulations create crim- services contracted for are not provided, the organiser
inal offences with maximum penalties of £5,000 on con- must make suitable alternative arrangements for the
viction in the magistrates’ court and an unlimited fine in consumer to continue the package, at no extra cost. If
the Crown Court. there is a difference in the services supplied under the
alternative arrangements, the consumer must be com-
5 Content of the contract. It is an implied condition pensated. If it is impossible to make alternative arrange-
of the contract that the organiser or retailer supplies a ments or the consumer reasonably refuses to accept the
written copy of the terms of the contract to the con- alternative offered, the consumer must be provided with
equivalent transport back to the departure point or
another place agreed by the consumer.

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10 Liability for proper performance of the contract. continue as the EU pursues its aim of a high level of pro-
Under reg 15 the organiser and retailer are liable to the tection for consumers. However, creating more and bet-
consumer for the proper performance of the contract, ter rights will count for little if consumers do not have
irrespective of whether the obligations are to be per- a cheap and simple way of enforcing those rights. There
formed by the organiser or retailer or by other suppliers. are currently three main ways in which a consumer may
Liability will not arise where the failures in performance obtain redress: compensation orders, conciliation or
are attributable: arbitration under a code of practice, and arbitration
under the county court small claims procedure.
■ to the consumer himself; or
■ to a third party unconnected with the services con- Compensation orders

tracted for; or If a trader is convicted of a criminal offence, e.g. under
■ to unusual or unforeseeable circumstances beyond the Consumer Protection from Unfair Trading Regula-
tions 2008, the court may make a compensation order
the control of the organiser or retailer (known as force requiring the trader to pay compensation for ‘any per-
majeure). sonal injury, loss or damage’ resulting from the offence
under the Powers of Criminal Courts (Sentencing) Act
Where the second and third points occur, the 2000. Magistrates’ courts are limited to £5,000 in respect
organiser and retailer must give prompt assistance to of each offence for which the trader is convicted. There
any consumer in difficulty. The contract can include a is no limit to the amount of compensation which can be
reasonable term, which limits the amount of compensa- awarded by the Crown Court. Compensation orders are
tion payable for non-performance or improper perform- beneficial to the consumer in the following situations:
ance of the contract. However, liability for death or
personal injury cannot be excluded. If the consumer ■ where the amount of loss suffered by the consumer is
complains, the organiser or retailer or his local repres- so small that it is not worth bringing a civil action to
entative must take prompt action to find a solution. For try to recover it;
their part, consumers are under an obligation to make
their complaints known to the supplier of the service at ■ where the consumer has no remedy in civil law, e.g.
the place where the service is supplied. If, for example, there is no civil remedy for misleading advertising
the consumer is unhappy with the standard of his hotel but an offence under the Consumer Protection from
room, he must make his complaint known to the hotel Unfair Trading Regulations 2008 may have been
management. committed.

11 Protection against insolvency. The regulations Conciliation or arbitration under a
provide that the organiser and retailer must provide code of practice
evidence of security for the refund of money paid over
and for the repatriation of a consumer in the event of The trader may be a member of a trade association which
insolvency. The protection against insolvency is further operates a conciliation or arbitration scheme to deal with
strengthened by compulsory bonding arrangements. complaints against members. The aim of conciliation
is to get the parties to resolve their differences in an
12 Offences and enforcement. As we have seen already, informal way. If conciliation does not result in agree-
the regulations create a number of offences. It is a defence ment, the consumer is still free to take the matter to
for a defendant to show that he took all reasonable steps arbitration or to the courts. Arbitration consists of an
and exercised due diligence to avoid committing a crime independent person hearing both sides of the dispute
(reg 24). The regulations are enforced by local trading and then making a decision which is binding on the
standards departments. parties. Arbitration is usually very informal and is often
done in writing. It is usually inexpensive but in some
Enforcing consumer rights cases can be more expensive than going to court. One of
the problems with some arbitration schemes was that an
There has been a considerable improvement in con- agreement to refer the dispute to arbitration precluded
sumers’ rights over the past 30 years, which is set to

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Chapter 14 Consumer protection

the consumer from bringing an action in the ordinary can adopt any procedure he considers fair. The court has
courts. The Consumer Arbitration Agreements Act 1988 the power to use an external arbitrator if the parties
was designed to deal with this problem by providing that agree. The procedure for bringing a claim is relatively
a consumer was not bound by a clause in a contract straightforward so that it should not be necessary to
which said that any dispute must be referred to arbitra- have legal assistance. There are a number of leaflets avail-
tion where the amount claimed fell within the small able from the county court which provide a step-by-step
claims limit for county court arbitrations (see below). guide to making a small claim. The parties are discour-
It has now been decided that consumer arbitration aged from using lawyers by the ‘no-costs’ rule which
agreements should be dealt with as potentially unfair means that each side must pay its own legal costs what-
terms in a consumer contract and therefore subject to ever the outcome. The only exception is where one of
the protections contained in the Unfair Terms in Con- the parties has incurred unnecessary cost because of the
sumer Contracts Regulations 1999 (SI 1999/2083). The unreasonable behaviour of the other, e.g. failing to turn
Arbitration Act 1996 repealed the Consumer Arbitration up to a hearing. The procedure for bringing a small
Agreements Act 1988 and extended the application of claim in the county court is summarised in Fig 14.3.
the Unfair Terms in Consumer Contracts Regulations
to consumer arbitration agreements. A term which con- Although the small claims procedure is a more user-
stitutes an arbitration agreement is unfair if it relates to friendly method of obtaining redress for consumer
a claim for a pecuniary remedy which does not exceed problems than normal civil court procedure, it is not
an amount specified by an order made under the Act. particularly well-used by consumers. It is often used by
businesses to recover money owing by consumers! The
The small claims track reluctance to use the procedure suggests that consumers
are generally unaware of the small claims system or
Since 1973 the county court has operated a special scheme daunted by the prospect of taking DIY legal action. Even
for ‘small claims’. If a claim for £5,000 or less (or £1,000 where a consumer pursues a claim and obtains a judg-
or less in the case of a personal injury claim) is defended ment, it may be more difficult to then enforce it and get
the case will be allocated to the small claims track. Small payment. A further problem is that an appeal can be
claims cases are usually heard by a district judge but made against the judge’s decision only on very limited
complex cases can be referred to a circuit judge. The judge grounds. Moreover, if a consumer appeals and is unsuc-
cessful, he or she may have to pay costs.

Self-test questions/activities

1 How would you define a consumer for the purposes 5 How have the Package Travel etc. Regulations 1992
of framing protective legislation? improved the rights of consumers in relation to
package holidays?
2 What justification could you give for providing
special protection for consumers? 6 What matters should you consider before deciding to
sue a trader?
3 What contribution has the EC made to the law of
consumer protection? 7 What are the advantages and disadvantages of
arbitration as a mechanism for resolving consumer
4 If you had a consumer problem, where could you go complaints?
to obtain advice and assistance?

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Part 3 Business transactions

Specimen examination questions

1 Outline the powers available to protect ■ the flight to Spain was delayed by 18 hours because
consumers. of industrial action by British air traffic controllers;

2 Your friends have just returned from a holiday in ■ the hotel to which your friends were transferred
Spain complaining bitterly about a catalogue of had a lower star rating than the hotel originally
disasters which occurred, namely: booked; it was further away from the sea and
■ 24 hours before departure your friends there was no swimming pool;
received a telephone call from the tour
operator to say that the hotel was overbooked and ■ the free excursions advertised in the brochure
it would be necessary to transfer surplus were not available.
holidaymakers to another hotel in a different, less
attractive resort; One of your friends paid by credit card. The others
paid by cheque.

Advise your friends of any rights they may have
and against whom they may be able to exercise
them.

Website references

http://ec.europa.eu/dgs/health_consumer/index_en.htm http://www.consumerdirect.gov.uk/. Consumer Direct is
The website of the European Commission Directorate of a government-funded service providing information and
Health and Consumer Protection. advice to consumers.

http://www.which.co.uk/ This part of the Which? site http://www.ncf.info/ This is the website for the National
contains some useful information for consumers, including Consumer Federation which co-ordinates the work of local
some real-life ‘case studies’. consumer groups.

http://www.oft.gov.uk The OFT website provides http://www.courtservice.gov.uk/ The Court Service site
guidance on its responsibilities under the EA 2002, provides information about the small claims track.
including super-complaints and enforcement of consumer
legislation under Part 8. http://www.berr.gov.uk/whatwedo/consumers/
buying-selling/ucp/index.html This part of BERR’s
http://www.consumerfocus.org.uk/ Consumer Focus is website provides information on the implementation of
the new champion for consumer’s interests in England, Unfair Commercial Practices Directive 2005 by the
Wales and Scotland and for post in Northern Ireland. It Consumer Protection from Unfair Trading Regulations
was previously known as the National Consumer Council. 2008.

Visit www.mylawchamber.co.uk/riches
to access selected answers to self-test questions in the
book to check how much you understand in this chapter.

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Part 4 BUSINESS RESOURCES

15 Business property 421
16 Employing labour 452

Chapter 15 Business property

Learning objectives

After studying this chapter you should understand the following main points:
■ the various legal classifications of property;
■ property rights and liabilities such as easements and restrictive

covenants;
■ the legal estates in land including the commonhold;
■ the tort liability of occupiers of land;
■ intellectual property rights such as patents and copyright;
■ the legal framework governing data protection, the misuse of computers

and freedom of information.

Generally However, if it was put on the land so that the land can
be better enjoyed, then it is a fixture.

English law divides property into real property and per- Leigh v Taylor (1902)
sonal property. The assets of a business are usually made
up of both sorts of property. A person put some valuable tapestries on the wall of his
house, the house being real property. He used tacks to
The distinction between the two sorts of property is fit them on a framework of wood and canvas which he
mainly that real property cannot be moved but personal then nailed to the wall. Upon his death the court had to
property can. decide whether the tapestries were real or personal
property and it was decided that they were still personal
However, this is not the only test because some things property. They had been fixed to the wall so that they
which can be moved are regarded as real property and could be better enjoyed for themselves.
called fixtures, while other moveables are regarded as
fittings which do not become part of the real property to Comment. A contrast is provided by D’Eyncourt v
which they are attached. A diagram showing the broad Gregory (1866) where certain statues, vases and stone
classification of property in English law appears at Fig 15.1. garden furniture standing on their own weight were
decided to be real property because they formed part of
Fixtures and fittings the design of a landscaped garden. They were there for
the better enjoyment of the land.

As we have seen, fixtures become part of the land itself; The importance of the idea of fixtures and fittings is
fittings do not. If a piece of personal property is securely that if you buy land and buildings, say as a business
attached to the ground it is probably a fixture, but a sec- asset, then, in the absence of a special provision in the
ond test needs to be applied in order to finally decide. If conveyance to the contrary, the conveyance will pass the
the piece of personal property was put on the land so fixtures to the buyer and they cannot be removed by
that it could be better enjoyed for itself, it is not a fixture. the seller. They are also regarded as included in the

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■ curtains, blinds and pelmets specifically designed for
the particular windows – fixtures;

■ towel rails, soap fittings, tap fittings and shower heads
– all fixtures;

■ white goods fitted into standardsized holes and piped
or wired in and aligned with and abutted on to each
other so as to be part of the overall fitted kitchen – all
fixtures.

In practice, to avoid misunderstanding, the Law
Society’s National Protocol ‘Transaction’ for the sale of
residential property requires a seller to complete a fix-
tures form detailing those fixtures that are included in
the sale and those which are excluded. It is equally sens-
ible and usual in sales of commercial property to follow
a similar course in order to avoid disputes.

The lease

Figure 15.1 The classification of property A lease of land, e.g. office premises, is obviously an
interest in land (or realty) but for historical reasons it is
price. Fittings are not and can be removed by the seller regarded as personal property and not real property.
in the absence of an agreement to the contrary.
This distinction has lost much of its importance in law,
The distinction is also important to lenders on mort- though still today if a person, T, were to leave by his will
gages since if they take possession of a property because ‘all my personal property to P and all my real property
of the borrower’s default, the mortgage will give the lender to R’, P would get any leases which T had when he died.
a charge over fixtures but not fittings in the premises.
The matter came before the High Court in TSB Bank Pure personalty and chattels real
plc v Botham (1995) when the lending bank, which had
taken possession of the borrower’s flat, claimed that The word personalty is another name for personal prop-
certain items were fixtures and as a result were subject to erty. The word chattel is also used to describe personal
its mortgage and could be sold to the new flat buyer. property.

The judge said that whether a chattel had become a Although leaseholds are regarded as personalty, they
fixture depended first on the object and purpose for are over land and result in a person having use of land,
which it had been fixed. If the object and purpose was and so they are referred to as chattels real to distinguish
to make a permanent and substantial improvement to them from pure personalty, such as a watch or a foun-
the land or buildings, the chattel would be regarded as tain pen.
a fixture. If it was attached so that it could be better
enjoyed for itself, it would be a fitting, on the lines of the Pure personalty – choses in
tapestry in Leigh. The judges also thought that if signific- possession and choses in action
ant damage would be done to the premises on removal
the chattel would be more likely to be a fixture. He then
applied the principles to the items in dispute as follows:

■ fitted carpets – fixtures; Things such as jewellery and furniture which are tangible
■ light fittings attached to the property – fixtures; objects and have not only a money value but can also be
■ mock coal gas fire piped in – fixture;

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enjoyed by the person who owns them in a physical artificial light. The court did not say that the existence of
way through the senses are called choses (or things) in artificial light should always prevent a claim for infring-
possession. ment of a right to light but the case will no doubt be put
forward by defendants in future claims.
Things which cannot be enjoyed by the person who
owns them in a physical way, but which, nevertheless, An easement may also be a right to support from
are worth money, are called choses (or things) in action. other buildings. Where a house or business premises
Examples are patents, copyrights, trade marks, shares are attached to other property, as with a semi-detached
and cheques and the goodwill of a business. The value house, one property needs the support of the other.
lies not in the thing itself but the legal right to money
which it represents and the right to bring an action at Thus, if B decides to pull down his semi-detached
law to enforce or protect that right should this become premises which will leave A’s premises in danger of col-
necessary. lapsing, A can, once again, ask the court for an injunc-
tion to prevent B from doing this.
Thus, if you have a fire in your business premises, you
will no doubt value your fire extinguisher (a chose in The case of Batchelor v Marlow (2000) is also of inter-
possession), but you will find your insurance policy (a est in a modern context. In that case it was decided by
chose in action) to be of greater value! the High Court that the right to park cars on another’s
property could exist as an easement.
Easements and profits
However, the Court of Appeal in 2001 reversed the
We have already dealt with a property right called a lease. above decision of the High Court. The Court of Appeal
This is a right to use another person’s land for a period did concede that an easement of vehicle parking could
of time (usually) in return for the payment of rent. It is, exist at law but not on the facts of the case. The right
however, also possible to have ownership of other rights claimed was to park such a large number of vehicles
over someone else’s property. These are typically known that the owner of the land was virtually excluded from
as third party rights. his property. As the Court of Appeal said, if the adjacent
owner wanted such an extensive right, he would have to
Easements buy the land or lease it for a period of time. Only in such
circumstances could he enjoy what amounted to exclus-
A may have what is called an easement over B’s land. This ive possession.
might be a right of way so that, for example, A could get
goods and services into his business premises by bring- The High Court reached the same conclusion in Cen-
ing them across land belonging to another business. tral Midlands Estates Ltd v Leicester Dyers Ltd (2003)
where the High Court accepted that there could be an
An easement may also be a right to light which would easement of car parking. However, since the claim was
prevent the owner of a neighbouring business from build- to park an unlimited number of vehicles anywhere on
ing on his own land but so close to A’s premises that A the piece of land concerned being restricted only by
was unable to use them without constant artificial light. the space available, there could be no easement on the
A could stop such a building from being put up by asking facts because this would make the actual owner’s right
the court for an injunction to protect his right of light. illusory.

The position as stated above was thought to be the law It appears, however, that so long as the easement
on rights to light. However, in Midtown Ltd v City of claimed will not prevent its use by the owner, the ease-
London Real Property Co Ltd; Joseph v City of London ment will be allowed, even if a particular use to which
Real Property Co Ltd (2005) the High Court dealt a the owner wished to put the land is restricted. Thus, in
severe blow to those trying to protect the right of light to Mulvaney v Gough (2003) the claimant, who owned a
their property. Although the court accepted that the group of cottages, claimed an easement in regard to a
activities of a developer would have a significant effect communal garden at the back of the cottages over land
on the claimant’s right of light to his property, the court owned by the defendants. The defendants intended to
refused an injunction on the basis of the existence of gravel the surface of the garden and use it as vehicular
access to the adjoining land which they owned. They
had already started to remove a flower bed. The Court
of Appeal ruled that the right to use the land as a com-
munal garden had been established by long use and was

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a valid easement for those who lived in the cottages. This It is important to note that an easement is a private
was not to say that the defendants could not carry out right (a public right of way is a different matter with
works on the land but they would have to do so in a way which we shall not deal), enjoyed by owners or occupiers
that would substantially maintain its character as a com- of land over neighbouring land. You cannot by owning
munal garden and after prior consultation. land in Essex have an easement over land in Yorkshire.

Comment. Although the ruling does not exclude the Finally, it is not uncommon in business for a pur-
owner from the land as a matter of law, in practice, it chaser to take out indemnity insurance which will pay
does restrict his use of the land significantly. The ex- compensation if vital easements, e.g. of access, are later
tent to which the presence of an easement restricts the successfully challenged or easements are established that
owner’s use of the land will depend on the circumstances might prove a nuisance to the business.
of the case but the creation of a driveway would seem to
be impossible on the facts of Mulvaney v Gough. Profits

The entries relevant to the property in the Land Sometimes the right which exists over someone else’s
Registry of the concerned properties will usually reveal land is to take something from the land. It may, for
what easements exist between the landowners. Ease- example, be a right to fish or cut wood.
ments can be acquired by express grant/reservation,
implied grant/reservation, prescription (long use) or by These rights can be acquired over any land. Unlike
statute. If a parcel of land has already had its title regis- an easement, they are not restricted to rights over neigh-
tered (the vast majority of land in England and Wales bouring land. You can, therefore, buy fishing rights
is already subject to the registration system created by over a river in Surrey even though you live in Lancashire
the Land Registration Act 1925) any expressly created and do not own any land at all in Surrey. The Land
easement must be entered on the register for it to have Registration Act 2002 added profits to the list of inter-
binding effect under the Land Registration Act 2002. ests that are capable of being overriding interests.
Nevertheless, if the easement was acquired through pre-
scription (by open use for a period of at least 20 years) Securities
or it was implied into the conveyance that transferred
the land to the registered proprietor then this unregis- A person may raise a loan on the security of his prop-
tered interest may constitute an ‘overriding interest’ that erty, whether real (say, his house) or personal (say, his
will bind an owner despite the absence of registration. In shareholding in a company), and the lender has certain
relation to prescriptive claims, an unregistered interest rights over the property so used as a security if the loan
will be overriding when it would not have been obvious is not repaid.
on a reasonably careful inspection of the land.
The use of mortgages on their own assets, such as the
This is a major change from the position adopted by family home, by sole traders, partners and directors of
the Land Registration Act 1925 which provided, under companies together with the use of personal guarantees
s 70(1), that all legal easements were overriding interests, of business debt and fixed and floating charges over the
which therefore did not have to be registered. This change assets of a company were considered in Chapter 4 as part
was introduced to ensure that the register is a more of the topic of raising finance .
accurate mirror of the totality of rights and interests
over land in preparation for the forthcoming introduc- A licence
tion of a system of electronic conveyancing. While not
all land in England and Wales is subject to the registra- Legislation giving business tenants (but not licensees)
tion system at present, since 1990 title registration has security of occupation has encouraged property owners
been compulsory for all land in the event of the sale. to attempt to create licences rather than leases. A licence
The Land Registration Act 2002 increased the number can be ended on reasonable notice; the rights of a busi-
of situations (‘trigger events’) in which title registration ness tenant may under the Landlord and Tenant Act
is compulsory with the aim of ensuring that all land in
England and Wales is subject to the registration system
in the near future.

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1954, Part II, survive the end of the period of the lease. necessary to preserve the whole or part of his land
In particular, the tenant is able to apply to the court including buildings, and that the work cannot be done
for a new lease and the landlord can only oppose the at all, or that it would be substantially more difficult to
application on one of the grounds set out in the Act, e.g. do it, if entry to neighbouring land was not granted. The
poor state of repair of the premises owing to a breach of order will be made against the person who could other-
the tenant’s repair obligations in the lease. wise sue for trespass, and so if the neighbouring property
is let it will be made against the tenant.
If the agreement is to be a licence, the main test must
be satisfied, which is that a licence will exist if the tenant The order may restrict entry to a specified area and
does not have exclusive possession of the premises. Thus, provide for compensation to be made to the neighbour-
in Dresden Estates Ltd v Collinson (1987) the landlord’s ing owner if this is appropriate. It may also require the
right to relocate the licensee of an industrial unit to dif- person given access to make a payment to the neigh-
ferent premises deprived the licensee of exclusive pos- bouring owner, reflecting the financial benefit which the
session and confirmed the agreement as a licence and person given access has received. This does not apply
not a lease. where the property subject to the access order is resid-
ential land.
Those in business should therefore ensure, through
legal advice, that their tenancy agreement is indeed a An order will not be granted if access would cause
lease covered by the 1954 Act. interference with or disturbance to the servient land or
to anyone in occuption. Finally, all agreements, whether
Commercial uses of the licence made before or after the Act came into force, which pre-
vent a person applying for an access order or restricting
A main reason in business for the use of a licence rather rights to do so are void and of no effect.
than a tenancy is for short-term trading, for example,
during the Christmas period or during the summer holi- Countryside and Rights of Way Act 2000
day period, either for retailing or storage purposes. The
licence is also useful where a prospective tenant wants This Act also provides for access to land by non-owners.
early access to the premises before a lease is granted or The main provisions are as follows:
an existing tenant wishes to remain in occupation for
a short period of time after the end of a lease. In these ■ a right of access on foot for open air recreation to
situations the landlord will want to retain rental income mountain, moor, heath, down and registered com-
but will not want the tenant to acquire security of tenure mon land (or open country);
under the Landlord and Tenant Act 1954.
■ land over 600 metres above sea level is automatically
Access to land covered;

Access to Neighbouring Land Act 1992 ■ open land will be shown on maps that will be avail-
able to the public (there is an appeal to the Secretary
The Access to Neighbouring Land Act 1992 deals with a of State where land is included by mistake);
situation in which a person who owns a building which
is badly in need of repair cannot carry out necessary work ■ there are exceptions for land that is cultivated, land
on that building without entering on to his neighbour’s covered by buildings, parks and gardens, mineral work-
property, and he cannot do this without committing a ings, railway land and golf courses, aerodromes, race
trespass because the neighbour will not consent to access. courses and development land where planning permis-
Under the Act the owner of the building can apply to the sion has been granted, though it is unclear whether
court for what is called an ‘access order’, under which he development must have been implemented;
may enter the neighbouring property and carry out the
necessary work on his own property. The applicant for ■ landowners must not erect false or misleading signs
an access order must show that the work is reasonably likely to deter people from using their statutory right
of access, though signs indicating boundaries are accept-
able so long as they do not deter walkers by giving
them false information;

■ landowners may need to provide for new access to
open country where public rights of way do not exist
or are insufficient;

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■ open country access may be closed for up to 28 days having sold it all off for housing plots. These are com-
each year, but not over bank holidays or weekends. monly known as building schemes.

Limitation on access rights These covenants can be enforced between subsequent
owners of the houses as an exception to the rule of
Even where access rights are granted, these rights are privity of contract (see also Chapter 7 ). They are, how-
limited by Sch 2 to the 2000 Act so that, e.g. no vehicle ever, void unless registered as a land charge at the Land
can be used (including bicycles), no craft can be sailed Registry.
on waters and no organised games played – so no paint-
ball games. Camping is also prohibited. If these activities When a person buys a house a solicitor acting in the
are undertaken, the persons concerned become tres- matter will get a search of the Land Register done and
passers and can be removed by the use of reasonable will find the restrictive covenants which exist over the
force. Countryside bodies have power to further restrict property. If he does not find any, because they are not
access during a specified period in the event, e.g. of a fire registered, then they are void.
risk, and indefinitely for nature conservation, heritage
preservation and national defence. The owner of the land As far as business premises are concerned, these
is under a duty only to warn of dangers known to him or covenants can be a nuisance, in that they may restrict the
her or which are reasonably believed to exist. development of the business. A person who wishes to get
rid of a covenant is able to pursue an application to the
Restrictive covenants Lands Tribunal, which deals with certain disputes over
land, for modification or discharge.
These covenants control the way in which a person uses
his land. There is public control of the use of land However, the expense and delay which are unfor-
through Town and Country Planning Acts (see further, tunately typical of so many legal procedures apply to
Chapter 4 ) and there are also building regulations to Lands Tribunal applications so that developers of land
cover the way in which buildings are constructed. As who are faced with the possible enforcement of a covenant
well as public control, however, there is also private making development more expensive may insure against
control by means of restrictive covenants. If these are that possible loss. A Lands Tribunal application may be
put into a lease of land the landlord can enforce them considered for a major development where insurance
against the tenant because they are parties to the contract; is expensive and not an economic option. It can also be
in other words, there is a privity of estate or contract used to sound out the strength and identity of possible
between them. objectors.

However, it is often desirable that covenants (or agree- The method of enforcement is by a claim for dam-
ments) restricting the use of land should be enforceable ages or an injunction. The right to an injunction may be
between those who own freehold properties. For example, lost by delay and/or acquiescence (see further Chapter 7
when estates of private houses are built, it is desirable in on the remedy of injunction ). Thus, it was held in
order to preserve the residential nature of the estate that Gafford v Graham (1998) that a landowner enjoying the
covenants, e.g. to use the premises for residential pur- benefit of a restrictive covenant over adjoining land who,
poses only, should be complied with by the purchasers with full knowledge of his rights, failed to seek relief to
of the individual houses and also by those who buy from restrain the unlawful erection of an indoor riding school
them and so on, and that these covenants should be in breach of covenant could have damages only when
enforceable by the house owners as between themselves. he eventually brought a claim. Delay and acquiescence,
which is assumed from delay, had barred his claim to
Covenants can be created by a common seller of the injunctive relief.
property, e.g. the builder or developer (whoever owns
the land), and then they can be enforced by the pur- Legal estates in land
chasers of the houses as between themselves. The builder
or developer will not normally be able to enforce them There are three legal estates in land – the fee simple
because he will not usually own any land on the estate, absolute in possession (usually called a freehold), the
term of years absolute (usually called a leasehold) and
the commonhold.

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The word ‘estate’ is used because in theory at least the Generally
Queen owns all our land and we can only hold an estate,
as it is called, from her; in other words, part of what A commonhold is defined as a freehold with special
she owns. However, the Queen has now no right to take characteristics – mainly that it is not necessary for the
back these estates from their owners. property to have foundations in the land, which is a
requirement for the ordinary freehold. This is why it is
The freehold often referred to colloquially as a ‘flying freehold’.

If we have an estate from the Queen, we want to know The owners of commonhold units such as common-
how long it will last. The fee simple absolute in posses- hold flats will be members automatically of the com-
sion (or freehold) lasts indefinitely and the word ‘fee’ monhold association that will own the common parts
means that the land can be inherited, as where it is left such as lifts, entrance halls, stairs, refuse areas, gardens
by the owner to another person by a will. ‘Simple’ means and driveways. The association will be a company lim-
that it can be passed on to anyone. The word ‘absolute’ ited by guarantee governed by the Companies Act 1985.
means that it must not be what is called a modified fee, The use and maintenance of the units will be governed
such as a life interest, which can only be an equitable by the commonhold community statement (CCS): the
interest behind a trust (see below). CCS is the constitution of the commonhold land and
must be registered at HM Land Registry, and a com-
There must also be possession of the land, though the monhold assessment will fix the percentage payable for
freehold owner need not be living on the property; it is each unit. This in other situations, e.g. leasehold flats,
enough if he receives rent for it, as where he has let it on would be a service charge.
a lease to a tenant and is himself a landlord.
Most commonholds will be a block of flats but they
So, if freehold land is sold or left by will to X, the free- could be shop units in an arcade or units on a business
hold will belong to X and he can pass it on to another. park. Therefore, property capable of becoming a com-
monhold unit is residential or commercial property. A
If, however, land is left ‘to X for life and after his death unit-holder will have a registered freehold title to it.
to Y’, X does not take a legal estate of freehold, nor does
Y. Y’s interest is absolute but not yet in possession until The usual provisions for company winding-up will
X dies. X’s interest is in possession but is not absolute apply where a commonhold association becomes in-
because it is only for his life. solvent and it will be necessary to dissolve an associ-
ation where the unit-holders wish to sell the block for
The above interests are equitable interests and can redevelopment.
only be held on a trust. The trustees would have the free-
hold and when X died they would transfer the freehold Three major points about commonhold from a com-
to Y who would then be the absolute owner and the trust mercial aspect are:
would come to an end.
(a) Although it will be possible to convert from lease-
The leasehold hold to commonhold, it will be necessary to obtain
the consent of all the existing leaseholders, which
A term of years absolute, usually called a lease, is an indicates that the legislation is aimed mainly at new
estate which lasts for a fixed time. It is usually given by a developments.
freehold owner to a tenant. It will normally be for a fixed
period, e.g. 21 years. (b) In the case of a residential commonhold, there will
be a restriction on the commonholder letting the
A lease for a fixed term comes to an end when the premises. A maximum of only seven years will be
term finishes, though in the case of business leases there permitted. This provision will be most unattractive
may be statutory protection, in terms, e.g. of security of to the property industry because it means in effect
tenure under the Landlord and Tenant Act 1954, Part II, that investors will not want to invest in common-
which was considered earlier in this chapter. hold property. The object of the restriction is to
develop a community and not encourage the absen-
The commonhold tee landlord syndrome which has often blighted
leasehold developments. Business leases, e.g. shops
The Commonhold and Leasehold Reform Act 2002 within the development, will be subject to the terms
(CLRA 2002) sets up the commonhold. of the commonhold statement that is filed at the

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Land Registry when the commonhold arrangement the court has a power to vary these in a termination
is set up, e.g. by the developer. situation.
(c) It is anticipated that commonhold residential devel- ■ A leasehold is a wasting asset. A leasehold is a term
opments will become, in time, more desirable than of years absolute that will eventually come to an end
leasehold properties and will trade at a premium even where there is a long term, e.g. 99 years. A free-
compared with such properties. hold is a perpetual estate.
■ A lease is subject to forfeiture if there is a breach of
Commonhold should not be confused with leasehold covenant, e.g. assigning or sub-letting by the tenant.
enfranchisement under which flat owners in blocks of
flats collectively buy out the freehold owner of the prop- A main business application is, therefore, that a free-
erty and so obtain control of the freehold of the block hold title in commonhold land is a better security than a
but not their individual flats in the sense that they are lease in terms of lending and borrowing.
still tenants.
Setting up a commonhold
Comment. It is the responsibility of the association to
enforce any breaches of the CCS. In effect, this gives A commonhold may be established in two ways:
the association a role similar to that of a landlord in a
landlord and tenant relationship. In common with most ■ It can be registered at the Land Registry with unit-
leases, the CCS will restrict the granting of leases in the holders where the identity of the unit-holders is
commonhold unit. In general, a unit-holder will not be known. The freehold of the units vests in them and
able to grant a leasehold interest of the unit unless the the commonhold arrangements come into force on
commonhold association is a party to the lease or gives registration; this will occur where there is a conver-
its consent (CLRA 2002, s 20(3)). sion from a leasehold arrangement but will otherwise
be uncommon.
Advantages over leasehold
■ A person developing by building afresh or converting
The commonhold legislation is concerned to over- an empty building with the intention of selling off
come certain weaknesses in leasehold arrangements as the units will register a commonhold without unit-
follows: holders. The developer retains ownership after registra-
tion for an interim period until the first unit is sold.
■ A lease is granted for a fixed term and admittedly the The developer has complete control during the interim
term may sometimes be lengthy. However, the issue period and can, if he wishes, abandon the develop-
of renewal will arise and this may require troublesome ment and cancel the registration. Even after the initial
negotiation that can also be costly. A commonhold is sale the developer’s business is protected in the sense
a type of freehold and therefore permanent. that the CCS can give him rights to prevent early pur-
chasers from interfering with the process of market-
■ Leasehold properties have no standard management ing the units.
structure as the commonhold has and the structures
offered can vary greatly in their quality. Comment. The cost of establishing commonhold arrange-
ments will not always justify conversion of an existing
■ Mistakes may occur in the documentation so that the leasehold arrangement unless the leases are near to ter-
terms of the various leases in, say, a block do not match. mination. However, since commonhold arrangements
This can cause difficulty in enforcing conditions that will put a premium on sale of the units, this might prove
do not occur in a commonhold development where an incentive to conversion from leasehold.
one document, i.e. the CCS, sets out the obligations
and terms of ownership for all units. There is thus no The nature of the property
chance of mismatching provisions.
Agricultural land cannot be registered as commonhold
■ Premature termination of a leasehold development but an existing freehold or leasehold can be converted.
can cause problems in terms of dividing assets. How- An existing freehold can be divided into parcels or plots
ever, commonhold arrangements have documentation and held under commonhold arrangements.
laying down the terms in advance of termination but

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Termination of commonhold Holling v Yorkshire Traction Co Ltd
(1948)
A commonhold arrangement is brought to an end by
winding-up the commonhold association. Since the units Steam and smoke from the Traction Company’s factory
are not owned by the association, they are not available went across a road next to it and made it difficult to see.
to pay its debts. However, the court may make what is As a result, two vehicles collided and this caused the
called a ‘succession order’ under which a new common- death of Holling. The court said that the Traction Com-
hold association is substituted, the members being those pany was liable. It was negligent of the company not to
who have met their liabilities to the full. This has been post a man at each end of the affected area to warn of
called a ‘Phoenix association’ that takes over the man- the danger.
agement so that the unit-holders can continue to hold
and enjoy their properties. If no succession order is 2 Liability to persons on adjoining premises. An
made, the commonhold arrangement ceases to exist and occupier has a duty not to injure persons on adjoining
the properties will be dealt with in accordance with the premises by allowing a harmful situation to develop on
directions of the liquidator. the land.

Joint owners Taylor v Liverpool Corporation (1939)

A commonhold unit can be held by joint owners.

The rights and duties of an The claimant was the daughter of the tenant of some
occupier of land flats owned by the Corporation. She was injured when a
chimney stack from adjoining premises, also owned by
The main right of an occupier of land is to seek an the Corporation, fell into a yard. The Corporation had
injunction against persons who trespass on his land or, been negligent in that it had not maintained the chimney
alternatively, sue the trespasser for damages. These mat- properly. The Corporation was liable in negligence and
ters were considered in Chapter 11 . However, in the claimant won her case.
addition to the general rules which apply to trespass to
land, there are aspects specific to occupiers of land which Duties to persons on the premises
are considered below. In addition, the question of the
liability of occupiers of land and premises to persons Under the Occupiers’ Liability Act 1957 an occupier of
suffering injury arising from that occupation may be premises must take reasonable care to see that a visitor
regarded as an aspect of negligence (which has also been to his premises will be reasonably safe in using the
considered in general terms in Chapter 11 ). How- premises for the purposes for which he is invited or per-
ever, specific aspects of liability applying to occupiers mitted by the occupier to be on them.
and arising from legislation are covered in the material
which follows. The House of Lords has ruled that there is no duty to
warn people of obvious dangers or to protect them from
Duties to those who are not on their own foolish acts.
the premises
Tomlinson v Congleton BC (2003)
We must look separately at liability to persons on the
road (or highway), if any, which is next to the premises. The claimant was an 18-year-old who on a hot bank
We must also consider liability to persons on premises holiday and while in a country park owned and occupied
which are next to the property. by the defendant waded into a lake to cool off and when
only up to his knees in water executed a dive and struck
1 Liability to persons on the highway. The occupier his head on the uneven bottom of the lake. He broke his
has a duty not to injure persons on the highway by neck and became tetraplegic. He claimed damages from
allowing a harmful situation to develop on his land. the defendant council for what he alleged was a breach
of duty by it under the 1957 Act. There were warning
notices prohibiting swimming in the lake but, as the

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defendant knew, these were often ignored. The House of Glasgow Corporation v Taylor (1922)
Lords turned down the claim because, in the view of
their Lordships, the defendant council was not in breach A boy aged seven years died after he had eaten some
of its duty. The claimant must have realised the dangers poisonous berries which he picked from a tree in a park
involved in diving into shallow water. He, therefore, was owned by the Corporation.
responsible for his own actions and the defendant was
not under a duty to protect against foolishness. The result There was a notice in the park but the court decided
would appear to have been the same even if no notices that this was not adequate as a means of communicating
had been placed by the council. As Lord Hoffmann said, the danger to young children. Also, the berries were within
‘A duty to protect against obvious risks or self-inflicted easy reach and were attractive to children. The Corpora-
harm exists only in cases where there is no informed tion was liable.
choice . . . such as the inability of children to recognise
danger.’ Visitors who are experts
The 1957 Act provides that persons who enter premises
This decision was reinforced by Lewis v Six Con- as part of their job, e.g. plumbers and electricians, ought
tinents plc (2005), where the Court of Appeal dismissed to have a better appreciation of the risks which may arise
Mr Lewis’s claim for damages for personal injury caused while they are doing their work.
when he fell out of a second floor window at the de-
fendant’s hotel. He had no explanation as to how this Roles v Nathan (1963)
happened. The Court of Appeal ruled that, since Mr
Lewis did not suffer from any disability, the test was N employed two chimney sweeps to clean out the flues
whether the windows were unsafe for anyone. The win- of a heating system fuelled by coke. Although N warned
dows were quite safe for ordinary use. There was no the sweeps against it, they blocked off a ventilation hole
need, e.g. to restrict access to hotel windows. while the coke fire was still alight. They were later killed
by the escape of carbon monoxide fumes. This action,
Visitors – generally which was brought by the dependants of the sweeps,
failed. The court decided that an occupier is entitled to
The above duty is owed to all lawful visitors. These are assume that a chimney sweep will guard against such
individuals who enter the premises with the express per- dangers.
mission of the occupier, as where A (an occupier) invites
B (a plumber) to enter his home to repair a leaking pipe. Warnings
The 1957 Act states that if the occupier gives a warning
However, permission to enter premises is also implied of the danger, it will free him from liability, but only if
by the law. So, for example, persons who enter premises the warning makes the visitor safe.
to read, for example, gas and/or electricity meters are
there by the implied permission of the occupier, as would It would not be enough, for example, for a cinema to
also be a policeman with a search warrant, though in the give warning of a dangerous roof over what was the only
last case it is unlikely that the occupier would expressly approach to the ticket office. However, if customers in
invite him on to the premises! The term ‘visitor’ does a shop are told not to go to the far end of it because
not apply to trespassers. builders have opened up a dangerous hole, the shop-
keeper might well have no duty to a customer who
Children defied his instruction and fell down the hole.

The 1957 Act provides that persons who occupy pre- Exclusion of liability
mises must take into account the fact that children may The 1957 Act provides that an occupier may ‘restrict or
be less careful than adults and therefore the duty of care exclude his duty by agreement or otherwise’. However,
owed to children is higher. because of the Unfair Contract Terms Act 1977 (see
Chapter 9 ) there can be no exclusion of liability for
An example of this is that things which constitute a
trap or are especially alluring to children must be given
special attention by an occupier, because he may be
liable for any damage which such things cause, even if
the child involved is a trespasser.

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death or personal injury on business premises. In regard Furthermore, the risk must be one which in all the
to other loss, e.g. damage to the goods of a visitor, liab- circumstances of the case it is reasonable to expect the
ility can be excluded only if it is reasonable to do so. occupier to offer the non-visitor protection against. It was
held, for example, in Proffit v British Railways Board
Faulty work of outside contractors (1984) that British Rail (as it then was) had no general
duty to erect or maintain fences sufficient to keep tres-
The 1957 Act allows an occupier to escape liability if the passers out. The case applies to Network Rail, which is
damage results from the faulty work of an outside contrac- the successor to British Rail.
tor (called also an independent contractor) whose expert-
ise is necessary to get the job done, provided the occupier The duty is to take such care as is reasonable in all the
behaved reasonably in the selection of the contractor. circumstances of the case to see that the non-visitor does
not suffer injury because of the danger concerned. The
Cook v Broderip (1968) duty may be discharged by giving a warning of the dan-
ger or taking steps to discourage persons from incurring
The owner of a flat, Major Broderip, employed an appar- risk. Thus, the defence of assumption of risk is preserved.
ently competent electrical contractor to fix a new socket.
Mrs Cook, who was a cleaner, received an electric shock A case in point is Ratcliff v McConnell (1999) where
from the socket while she was working in the flat. This the claimant sued for tetraplegic injuries sustained by
was because the contractor had failed to test it properly. diving into the shallow end of a college swimming pool
The court decided that Major Broderip was not liable to when the pool was closed for the winter. He had climbed
Mrs Cook but the contractor was. over a locked gate in the early hours of the morning.
There were warning notices and notices prohibiting use.
Comment. In a more recent case the Court of Appeal The claimant, who was an adult, did not recover any
has ruled that it can be part of the occupier’s duty to damages against the college (represented by the defend-
employ a competent contractor to see that the contrac- ant who was a governor). He willingly accepted the risk,
tor has unexpired insurance so that if he or she is neglig- said the Court of Appeal.
ent and sued successfully by an injured claimant there
is the backing of insurance to pay the damages. Failure Intellectual property and its
to make such a check may result in the occupier being protection
liable for the damage on the ground that the contractor
was not competent. (See Gwilliam v West Hertfordshire Generally
Hospital NHS Trust (2003) where a fair was set up on the
defendant’s property and the claimant was injured by Intellectual property is a term used to refer to a product
the fairground equipment arising from the fair contrac- or a process which is marketable and profitable because
tor’s negligence. His insurance had expired and because it is unique.
the trust did not check this it was held liable for the
claimant’s injuries.) This uniqueness is protected by patent law, which
gives protection to technological inventions. The law
Trespassers relating to registered designs protects articles which are
mass produced but distinguished from others by a reg-
The position of trespassers is covered by the Occupiers’ istered design which appears upon them. The law of
Liability Act 1984. The Act deals with the duty of an copyright protects, e.g. rights in literary, artistic, and
occupier to persons other than his visitors and this musical works. The law of trade marks and service marks
includes trespassers and persons entering land without protects the use of a particular mark if it is used in trade.
the consent of the owner, but in the exercise of a private
right of way or public access. In these cases the occupier The law also protects those in business from com-
owes a duty, if he is aware of the danger which exists, or petitors who maliciously disparage their products or who
has reasonable grounds to believe that it exists. pass off their own products as those of another business.
There is also some protection in regard to the commercial
He must also know, or have reasonable grounds to use, e.g. by employees without permission, of confidential
believe, that the non-visitor concerned is in the vicinity information.
of the danger – whether he has lawful authority to be in
that vicinity or not.

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The current main legislation is to be found in the Registration
Patents Act 1977 (as amended by the Patents Act 2004),
the Copyright, Designs and Patents Act 1988 and the An application for a patent can be made by or on behalf
Trade Marks Act 1994. of the inventor of a new process or device, and the grant
of a patent will be made to the inventor himself or to any
Patents person who is entitled to it, as where the inventor has
sold the idea before patenting it. Application is made to
Application the Patent Office in London or in Newport, Gwent, South
Wales. The Patent Office is part of the Department for
An application for a patent can be made by or on behalf Innovation, Universities & Skills and it deals with the
of the inventor of a new process or device and the grant granting of patents, registered trade marks and regis-
of a patent will be made to the inventor himself or to any tered designs.
person who is entitled to it, as where the inventor has
sold the idea before patenting it. The Comptroller-General maintains at the Patent Office
a register of patents and the date of entry gives priority
What can be patented? over later inventions. A patent lasts for 20 years but must
in effect be renewed annually by payment of a fee to the
It should not be assumed that every bright idea can be Patent Office. These fees are payable on the anniversary
the subject of a patent. When application is made for a of the filing date and increase with the age of the patent.
patent certain essential criteria must be met. It must be A patent cannot be extended beyond 20 years.
shown that the applicant has an invention; the invention
must not be excluded (see below); it must be new and Using patents
not something that would be obvious to lots of people.
The 1977 and 1988 Acts do not define an invention, It should be noted that a patent does not necessarily
but do require that it be made or used in industry. How- give the patent holder a right to use his invention. For
ever, a product, article, material apparatus or process example, a patented drug may have to be withdrawn
will generally come within the term ‘invention’ and the from the market if it does not comply with government
method of its operation or manufacture should be regulations. The right given by a patent is the right of the
patentable. Thus, a toothbrush with an integral tooth- holder to control his invention, in the sense of having
paste tube, and the method of making a particular type a total monopoly in the market or allowing others to
of chocolate bar, should be patentable, as was the bag- market the invention subject to conditions imposed upon
less vacuum cleaner invented by Dyson. As a matter of them by the patent holder.
interest, the High Court has ruled that a bagless cleaner
subsequently made by Hoover was an infringement of Infringement
Dyson’s patent for its bagless cyclonic vacuum cleaner
(see Dyson Appliances Ltd v Hoover Ltd (2000)). A UK patent will, in general, be infringed by making,
using or selling something in the UK which is subject
Exclusions to the patent without the owner’s consent. However, a
UK patent applies only within the UK so that a German
Under the Patents Act 1977 certain items cannot be pro- competitor could legally make the invention in Germany,
tected by a patent. Among these are discoveries, so that unless of course there was also a German patent. The
if you had been the first person to discover gravity (actu- German goods could also quite legally be exported to any
ally it was Newton), you could not have patented the other country where there was no patent, though not of
principle of gravity. However, the inventor of a pendulum course to the UK.
clock which utilised gravity could seek to protect the
device. Infringement of a patent is a matter for the civil rather
than the criminal law and actions for an injunction,
Computer programs (software) are generally protected damages, or an account of profits, are brought in the
by copyright, but exceptionally, if a program was invented Patents Court which is part of the Chancery Division of
which enabled the computer to work faster, patent protec- the High Court. However, the 1988 Act sets up the
tion would be available for the programmed computer Patents County Court (see Chapter 3 ) where the cost
and the method of operating it. of actions against infringement are lower.

The Civil Procedure Rules now provide a streamlined
procedure for patent claims in English courts. The aim

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is for the case to be completed within six months of contract of service which cut down an employee’s rights
being commenced. The procedure can be used if both in inventions where these exist are unenforceable.
sides agree to it or if the court agrees with one party that
it is appropriate. Designs: the UK regime

Further improvements that will assist particularly small What is meant by a design?
businesses to enforce patent rights are contained in the
Patents Act 2004. The Act, among other things, enables A design refers only to the features of shape, pattern or
the Patent Office to provide an independent non-binding ornament applied to an article by an industrial process
opinion on patent validity or alleged infringement to which appeals to, and is judged solely by, looking at the
settle disputes over patent rights without the parties article, e.g. the shape of a Coca-Cola bottle.
having to resort to litigation in the Patents Courts. Out-
of-court settlement of disputes is encouraged and there For example, a firm making a special design of fabric
are provisions to deter patent owners from making for use in curtains or chair covers might register the design.
unreasonable allegations of infringement.
It is now possible to register the Coca-Cola bottle as a
The European Patent Convention 1973, along with trade mark under the Trade Marks Act 1994 (see further,
provisions in the Patents Act 2004, allows the issue of a later in this chapter).
Community patent protected in European states. Applica-
tion is to the European Patent Office and a centralised Registration
Community Patent Court of first instance situated in
Luxembourg has exclusive jurisdiction over invalidity Designs may be registered at the Patent Office (Designs
and infringement proceedings. Registry) under the Registered Designs Act 1949 (as
amended by the 1988 Act), and there is an appeal to the
Patents: effect of repair Registered Designs Appeal Tribunal if the Registrar
refuses to register a particular design. Registration gives
The matter of infringement of patented goods by repair the owner of the design protection for five years and this
was raised in United Wire Ltd v Screen Repair Services can be extended for four further periods of five years
(Scotland) Ltd (2000) where the Court of Appeal decided on payment of four further fees every five years, making
that, while in the normal way a repair would not amount 25 years in all. The Register of Designs can be inspected
to an infringement of the patent, much would depend on payment of a fee.
on the extent of the repair. If, for example, it amounted
to manufacture of a large part of the product, it might Infringement
do so. In this instance repairs to filtering screens used
in the oil industry were sufficiently extensive to infringe The registered or unregistered design right owner’s re-
the patent in the screens held by United Wire. medies for infringement are to sue the person respons-
ible for damages and/or an injunction, or an account of
Employees’ inventions profits made from the wrongful use of the design or an
order for the delivery up of the infringing copies.
Under the Patents Act 1977 an invention of an employee
belongs to the employer if the employee arrives at it Unregistered design right
during his normal employment or during a specific job
outside his normal duties. Other inventions, e.g. those The Copyright Act 1956 gave protection against the
made during the employee’s spare time, belong to the reproduction of articles from drawings of them. The
employee. provisions were primarily intended to give protection
against unauthorised use of drawings of cartoon charac-
Under the 1977 Act, where the invention turns out to ters, as by making dolls from them. Also, while the pro-
be of outstanding benefit to the employer the employee tection offered to an article under a registered design
may be awarded compensation by the Comptroller- was limited to 15 years (now 25 years, see above), the
General or the court so as to ensure that the employee copyright protection lasted for 50 years (now 70 years).
gets a fair share of the benefit. The court will come in
where the Comptroller-General will not deal with the The law of copyright was therefore increasingly used
matter because it is felt that the issues in a particular to protect articles in effect by copyright law, by protecting
case would be better dealt with by the court. Terms of a a drawing from which they were made. This approach
was used, in particular, by motor manufacturers to

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protect their exclusive production of spare parts for Application is made to the Office for Harmonisation
their vehicles. of the Internal Market in Alicante. After registration the
design is published in the Community Designs Bulletin.
The 1988 Act abolishes copyright protection for However, applicants can ask for publication to be de-
drawings but gives instead a new design right which is ferred for 30 months where it is felt that publication
automatically acquired and does not require registra- might otherwise adversely affect the commercial success
tion. It lasts for 10 years from the end of the year when of the article. Organisations that have applied for design
the article is first marketed or 15 years after it was first rights on a national, e.g. UK, basis have priority when
designed, whichever period is the first to expire. During they apply for a new registered Community Design Right
the last five years of its life anyone will be able to get a for the same design. It is six months’ priority from the
licence to make the article by paying a royalty to the date of first filing.
owner at a rate to be determined by the Patent Office in
the absence of agreement. United Kingdom applicants may file community
design rights applications through the UK Patent Office.
The Act excludes from the new right items which
‘must fit’ or ‘must match’, e.g. an exhaust system which 2 Unregistered Community Design Right. Regulation
‘must fit’ a particular car or a body panel which ‘must 6/2002 also brought in a new unregistered design right
match’ a particular car body. The exclusions are there- from March 2002. The UK now has two separate design
fore those features of a design which are made to ensure rights.
that it fits or matches with another part. These exclu-
sions will, in the main, deny protection to car manufac- The EU right lasts for only three years from when the
turers in regard to spare parts for their vehicles and design was first made available to the public in the EU.
prevent what many regarded as the use of intellectual This contrasts with the UK right which lasts for 10 years.
property law to sustain a restrictive practice. It protects designs that are new and of individual charac-
ter. A design is deemed new if when it becomes available
Nevertheless, other aspects of a design are covered. to the public it is not identical to an already existing design.
The right is applicable to the whole of the product and
Example includes its ornamentation. A design on a product will
not be protected unless it remains visible during the
Suppose that the open end of a replacement bag for a normal use of the product. The EU right differs from the
‘Hover’ vacuum cleaner needs to be of a particular shape UK right since the latter lasts for 10 years and does not
to fit the end of the hose of the ‘Hover’. Anyone can copy protect surface ornamentation.
this part of the ‘Hover’ bag but it would be an infringe-
ment of the ‘Hover’ bag design to copy other aspects of Copyright
its shape which were not essential to the fitting of the
‘Hover’ bag. The 1988 Act does not require the owner of a copyright
to register it or to follow any formalities in respect of
The shape of the ‘Hover’ bag should now also be reg- it. The protection is given by the Act to every original
istrable as a trade mark under the Trade Marks Act 1994. literary, dramatic, musical and artistic work which was
previously unpublished.
Infringement
Copyright does not protect ideas. Anyone is entitled
The owner’s remedies for infringement are to apply to to incorporate those ideas in a new work provided that
the court for damages, an injunction and for delivery-up substantially the same words and examples are not used.
of infringing materials.
Ownership and duration
Designs: the Community regime
The author of the work is the owner of the copyright.
1 Community Registered Designs. Regulation 6/2002 However, it may be a term of the contract between, say,
on Community Designs came into force on 6 March 2002. a newspaper company and its journalists that the entire
It provides for a registrable design right that applies across copyright in the journalist’s work is to belong to the
all EU states. It lasts for renewable periods of between newspaper company.
five and 25 years as does UK design law.
Under the Act, protection of copyright existed in a
work during the lifetime of the author of it and until the

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end of the period of 50 years from the end of the calendar photocopied an article for its internal press-cuttings service
year in which the author of the work died. The copyright (see Newspaper Licensing Agency v Marks and Spencer
then came to an end. plc (2000), particularly the Comment, below).

The relevant rules are now contained in a statutory The Newspaper Licensing Agency (NLA) is a com-
instrument, the Duration of Copyright and Rights in pany formed to protect the intellectual property rights
Performance Regulations 1995 (SI 1995/3297), passed of national and provincial newspapers relating to press-
in order to harmonise UK law with that of the EU. The cuttings. It operates a collective licensing scheme for
regulations increase the basic term of copyright in liter- making copies of press-cuttings. Marks and Spencer plc
ary, dramatic, musical and artistic works. This raises the (the defendant) needs no introduction. Its involvement
former provision of the present life of the author plus in these proceedings arose from its use of a press-cuttings
50 years after his death to life plus 70 years. Copyright agency (duly licensed by the NLA) to make copies of
in film now lasts for 70 years from the last to die of the cuttings from newspapers; the defendant copied certain
principal director, the authors of the screenplay and articles for circulation within the company.
dialogue, and the composer of any music specifically for
the film. The regulations came into force on 1 January Newspaper Licensing Agency v Marks
1996 and apply to existing works. Copyrights that were and Spencer plc (2000)
due to expire on 31 December 1995 are continued in
force and will be extended. The NLA sued the defendant for breach of copyright
and Lightman J held in the High Court that the distribu-
Infringement – generally tion of copies of such cuttings to 70 persons within the
defendant company infringed copyright. The defendant
The person infringing the copyright will usually have appealed to the Court of Appeal, wherein Peter Gibson
copied from the work and an action can be brought for LJ (with whom Mance LJ agreed, Chadwick LJ dissent-
an injunction and/or damages or for an account of profits ing) said that the first issue was to determine what was
made from the wrongful use of the copyright work. meant by the ‘typographical arrangement of published
editions’ in s 1. One possible interpretation of this phrase
It was held in Redrow Homes Ltd v Bett Brothers plc was the typographical arrangement of each article pub-
(1997) that a claimant owner who asks the court to lished in a newspaper, but he preferred the view that
order the wrongful user of a copyright to hand over the the phrase referred to the typographical arrangement
profits made from the wrongful use cannot have, in addi- of the whole newspaper. The latter view was supported
tion, an award of damages. The case involved the infringe- by an Australian decision, Nationwide New Pty Ltd v
ment of copyright in drawings containing the designs of Copyright Agency Ltd (1996).
houses. The decision will presumably have application
in other areas of intellectual property where there is an He turned next to the question of whether the defend-
alternative remedy of damages and an account of profits. ant’s copying of some articles constituted a copying of
a substantial part of the copyright work. Although the
Infringement – press-cuttings court had been shown samples of cuttings and of the
complete pages from which they had been extracted,
Many companies institute a press-cuttings service for the issue of whether substantial parts had been copied
circulation among staff to alert them and inform them could be determined by judicial knowledge of the form
as to developments in relevant areas of business. of newspapers. The compiler of the cuttings had re-
arranged the format of the original article and accord-
A property right subsists in the typographical arrange- ingly the articles appeared in a different image from that
ment of published editions (s 1 of the Copyright, Designs in which they had appeared in the newspaper. Neverthe-
and Patents Act 1988). The term ‘published edition’, less, there was a facsimile copy of each part of any
so far as a newspaper is concerned, means the whole article which was cut up and pasted. Each such part
newspaper, and questions as to the infringement of this was a separate part of the image on the page, and the
property right by copying parts of a newspaper must ‘substantiality’ of each part had to be considered.
focus on whether the infringement related to a substan-
tial part of the whole newspaper (s 16(2) and (3)(a)). However, the court had not been shown any cutting
which could properly be regarded as a ‘substantial part’
In this connection, the Court of Appeal ruled that of the published edition from which it had been taken.
Marks and Spencer plc did not infringe the copyright That was decisive in the appeal, and was supported by
in a newspaper’s typographical arrangement when it

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the Nationwide case. The court had heard argument unfairly using their intellectual property rights to abuse
whether the copying constituted fair dealing in reporting their monopoly in replacement toner supplies.
current events in accordance with s 30(2). Peter Gibson
LJ felt that, if what the defendant had done had been Moral rights
a prima facie breach of copyright, s 30(2) would have
afforded no defence, but a decision on the point was not Under the 1988 Act authors are given certain moral
necessary in view of the decision which the court had rights in their work which exist quite independently of
reached. copyright. They provide protection alongside a copy-
right and would be especially useful and necessary to an
Comment. The above case is retained as an example of author who had sold the copyright to someone else.
copying for commercial research. However, the Copyright,
Designs and Patents Act 1988 has been significantly The right of paternity
changed by the Copyright and Related Rights Regulations
2003 (SI 2003/2498), which implement the EU Copyright This is a right to be identified as the author of a literary,
Directive 2000/29/EC from October 2003. The regulations dramatic, musical or artistic work. In general terms this
abolish the fair dealing exception for commercial research right operates whenever the work is performed in pub-
and businesses wishing to conduct research through lic, or issued to the public or commercially exploited. It
press-cuttings, as in the above case, will need a licence. includes the right to be identified as the author of a work
from which any adaptation is made. The right extends
For more on the regulations, see p 437 . to copies of the piece and to signs on buildings such as
theatres, where the sign can be seen by people entering
Exceptions or approaching the building. This right of paternity
must be specifically claimed by the author.
There are no statutory defences to copyright infringe-
ment. However, there are common law defences, the The exceptions to the right of paternity are quite
principal being known as ‘non-derogation from grant’. extensive and include what are called fair dealing excep-
This defence was developed from the decision of the tions that also apply to copyright. These include the use
House of Lords in British Leyland v Armstrong Patents of extracts of works for the purpose of reporting current
Co (1986). In this case the House of Lords refused to events, incidental inclusion in a broadcast or cable tele-
allow British Leyland (as it was then) to enforce its copy- vision programme and extracts for use in examination
right in drawings relating to replacement exhaust pipes papers. If the author consents to the publication of the
so as to prevent car owners from obtaining replacement work in collective works, such as encyclopedias and/or
exhausts from independent makers. The House of Lords dictionaries, he or she forgoes the right to be credited in
said this would derogate from British Leyland’s implied the work.
grant of rights to buyers of British Leyland cars, allow-
ing them to repair their cars by the most economical The right of integrity
method during the normal working life of the vehicle.
Under this right the author may object to changes in his
However, in Canon Kabushiki v Green Cartridge Co or her work by way of additions, deletions, alterations or
(Hong Kong) Ltd (1997) the Privy Council approved a adaption which amount to a distortion or mutilation of
decision of the court of trial granting an injunction to the the work, or in some way harm the author’s honour or
claimants, thus prohibiting the defendants from infring- reputation. Film directors are included in the expression
ing copyright in the claimants’ drawings of replacement ‘authors’ for this purpose.
toner cartridges for photocopiers and laser printers.
As regards exceptions, an author may not exercise the
The Privy Council said that the cost of a replacement right of integrity in translations of the underlying liter-
exhaust was relatively small in relation to the capital and ary or dramatic work. So, authors may have to put up
running costs of a car. In contrast, the cost of replace- with poor translations of their work with no remedy.
ment cartridges for a laser printer substantially exceeded
the cost of the printer itself. There was also competition False attribution
for the claimants, as suppliers of replacement cartridges,
from those who refilled exhausted toner cartridges. It This gives the author a right against false attribution
could not, therefore, be said that the claimants were which mirrors the right of paternity referred to above.
Under the paternity right an author is entitled to be

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recognised as the creator of the work. The right of attri- Copyright and the Internet
bution gives a person such as an author the right to pre-
vent a work which he has not produced being attributed Advances in technology have resulted in the 1988 Act
to him, or a film falsely attributed to him as a director. being applied in novel fact situations. Thus, in Shetland
Times Ltd v Jonathan Wills (1997) the court decided
Private or domestic commissions that it would be appropriate to issue an injunction to
prevent the defendants placing their newspaper head-
There are special rights given to those who commission lines on the claimant’s website.
photographs or films for their own private or domestic
purposes. Where there is copyright in the resulting work, The Copyright and Related Rights
the person who commissioned it has the right not to Regulations 2003
have the work issued, exhibited or shown to the public,
or broadcast or included in a cable programme service. These regulations (SI 2003/2498) came into force on
31 October 2003. They make changes in the law by adding
Infringement new provisions to the Copyright, Designs and Patents
Act 1988. The main changes appear below.
An author whose moral rights have been infringed is
entitled to an injunction and damages. These moral rights Performers now have the right to consent or prohibit
continue for the same length of time as copyright, i.e. a recording of their performance being made available
the life of the author plus 70 years except for false attribu- to the public by electronic transmission, including the
tion which continues for only 20 years after the person’s Internet. There is a new criminal offence for those who
death. Moral rights can be left by will or separately from make infringing copies and communicate them to the
any copyright and the beneficiary would then be able to public or have reason to believe this will happen. Those
enforce them in the same way as the original author. So making illicit recordings also commit an offence. If the
a son or daughter made the beneficiary of an author/ ‘making available’ is not in the course of a business, there
parent’s moral rights could protect those rights after the will only be an offence if the infringement is to such an
death of the parent, even though the parent had sold the extent as to be prejudicial to the holder of the right.
copyright during his lifetime.
These new rights are designed to assist the music and
The Copyright etc. and Trade Marks (Offences and film industries, in particular, in the fight against wide-
Enforcement) Act 2002 should also be noted. It will spread and unauthorised downloading of their works
help enforcement against those who infringe copyright on the Internet.
and trade mark rights. The Act gives the police power
to obtain warrants to search and seize property from any Other areas of change that have impact on business
business that they believe is using unlicensed software. generally are set out below.
Under previous law only traders and importers could be
prosecuted. 1 Copying for commercial research. The most import-
ant change that the regulations make to the 1988 Act
Semiconductor product topographies and the one that will have the most immediate effect on
business is the abolition of the fair dealing exception
This is a new form of intellectual property protection for commercial research. Under previous law those in
introduced into the UK by statutory instrument under business could lawfully take copies of copyright works
an EC Directive. It protects integrated circuit layout as a basis for commercial research so long as the copy-
designs found in computers, and in home equipment ing was fair. There was no definition of what could be
such as hi-fi, compact disc players and food processors, regarded as fair but the general understanding was copy-
in a similar way to literary copyright. ing that was not prejudicial to the rights of the holder
of the copyright. In consequence, much of the copying
Computer software by those in business arguably fell within the fair dealing
exception. Under the regulations businesses including
The 1988 Act continues the previous position under accounting and law firms will have to review their pro-
which computer software is protected in the same way as cedures to see whether a licence may be required.
that of literary copyright.
2 Criticism, review and news reporting. The provi-
sions of the 1988 Act have been amended but continue

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to allow fair dealing with acknowledgement provided or the shape of goods or their packaging. It is also ex-
that the work has been made available to the public. Mak- pected to include sounds, smells and colours. The first
ing available to the public includes Internet publication. application for registration of a smell was the scent of
roses impregnated into Sumitomo tyres.
3 Library copying. Copying works in libraries will be
permitted only if required for non-commercial purposes However, the registration of smells may now have
or private study. Any other copying will require a licence, become harder since the German Patent and Trade Mark
and some libraries are considering the taking up of licences. Office (supported by the European Court of Justice)
turned down a trade mark application for the smell of a
Other matters of general interest are that it becomes scent described as ‘balsamically fruity with a slight hint
an offence to supply a person with the means to get of cinnamon’. It appears that non-visual trade marks
round anti-copying protection on CDs: and injunctions can be registered if they are capable of being represented
can be obtained against an Internet service provider if he graphically. Thus, in Shield Mark BV v Kist (2004) the
or she has actual knowledge that another person is using European Court ruled that a mark consisting of the first
the service to infringe copyright. five notes of Beethoven’s composition ‘Für Elise’ could
be the subject of a trade mark. The claimant used the
Trade marks sound in advertising its wares on radio commercials that
commenced with the notes and on stands at bookshops
Types of trade marks and newspaper kiosks where removal of its news sheets
from the stand caused the tune to play. It is, of course,
There are two types of trade marks: possible to represent the notes graphically on a musical
stave. The sound of a cockcrow was turned down in the
■ common law or unregistered trade marks; and same case.
■ registered trade marks.
Although personal names are allowed, they must
A common law trade mark is any mark which has comply with s 3 which allows the refusal of registration
been so widely used on or in connection with a certain where the so-called mark is not distinctive. Thus, if Mr
class of goods that it can be shown that the public recog- Brown trades in a business name of Brown & Co, this
nised goods with such a mark as coming from the owner cannot be registered as a mark since it is not distinctive.
of the mark. The remedy to restrict improper use is a In this connection it is of interest to note that the Court
passing-off action. In this category would come ‘Persil’ of Appeal held in Elvis Presley Enterprises Inc v Sid Shaw
and ‘Polaroid’, which are household names in regard to Elvisly Yours (1999) that the name Elvis Presley was too
the products concerned. well known to have the inherent distinctiveness which is
required for a registered trade mark for goods such as
Registered trade marks perfumes, soaps and other toiletries. The Trade Mark
Registrar had therefore been in error when he registered
The law of registered trade marks in the UK was the name in favour of Elvis Presley Enterprises Inc. The
reformed by the Trade Marks Act 1994 which came into court decided in favour of a London businessman, Sid
force on 31 October 1994. The impetus for the Act was Shaw, who had been trading in Elvis products since 1979
the implementation of the EC Trade Marks Directive and could continue to do so.
(89/104) which harmonised the law of trade marks
throughout the EC. The distinction between trade marks Mr Shaw also complained that the Elvis Presley
on goods and on services, e.g. the black horse of Lloyds Enterprises registration was an infringement of his own
Bank, has gone. These are now under the same law. Also registration of the expression ‘Elvisly Yours’ as a trade
abolished was the system of registration as a Part A mark mark, which is, of course, registrable since it is not merely
or a Part B mark. The main provisions which affect UK a name. The court quoted from the judgment in Du
law appear below. Boulay v Du Boulay (1896) where it was said:

Definition ‘. . . in this country we do not recognise the absolute right
Section 1 of the Act states that a trade mark is any of a person to a particular name to the extent of entitling
sign capable of being represented graphically which is him to prevent the assumption of that name by a stranger
capable of distinguishing goods or services of one . . . [this] is a grievance for which our law affords no
undertaking from those of others. It can include words redress.’
(including personal names), designs, letters, numerals

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It would therefore be impossible, in the UK at least, because the shortened phrase was not distinctive. It was
to copyright as a trade mark the name ‘Diana’, though a slogan used in a number of contexts.
‘Diana Queen of Hearts’ should be acceptable as should
‘Diana Princess of Wales’. Comment. Mars’ objection can be appreciated. Many
companies might wish to tell us to take a break with their
However, if, say, a geographical location is added products and to give one company exclusive trade mark
then it may be that a business name can be registered rights would be an unwarranted protection. In a separate
as a trade mark, e.g. Mr Ahmed trading as ‘Ahmed’s case Beckham v Peterborough United Football Club
Barbican Tandoori’. This is an important change and (2003) Victoria Beckham failed to get an injunction to
since such geographical marks are registrable under restrain the football club from using the word ‘Posh’, a
the 1994 Act registration, where possible, should give term the club had been using for some 50 years, even
better protection to a business name than the tort of though Ms Beckham had registered ‘Posh’ as a trade
passing-off (see later in this chapter). All that needs to be mark. The case points up the fact that having a trade mark
established once the mark has been registered is whether will not necessarily allow the owner totally to exclude
the marks are confusingly similar and they are in respect its use in the absence of some evidence of public con-
of goods or services covered by the registration. The fusion. ‘Posh’ would not seem to have the distinctive-
case for infringement is then established. Passing-off is ness required for registration but it had been accepted,
a much more difficult matter to prove. Deception is though there were no objections, when Ms Beckham
the essence of an action for passing-off. In the absence of registered it during her time with the Spice Girls band.
any patent or trade mark infringement it is only unlaw-
ful for a trader to copy and market a rival’s product Procedure for registration
if the rival can show that purchasers are being or will Any person who claims to be the proprietor of a regis-
be deceived into buying the copy instead of the real trable trade mark and who wishes to register it must
thing (Hodgkinson & Corby v Wards Mobility Services apply to the Registrar of Trade Marks giving a statement
(1994)). of the goods or services and a representation of the
mark. The Registrar may accept the mark absolutely or
Since the shape of goods is now covered, the decision approve registration subject to conditions or refuse to
of the House of Lords in Coca-Cola Trade Marks (1986) register the mark. The applicant is entitled to be heard
in which their Lordships held that the shape of a Coca- before refusal. Where registration is acceptable, the
Cola bottle could not be registered as a trade mark Registrar must advertise the application in the Trade
under previous legislation, is now reversed. The change Marks Journal. Persons aggrieved by the application may
has produced a major revival of interest in trade marks then object to the Registrar giving grounds for their
as a cheap and effective way of protecting brands. In objection. The period for objection is three months from
fact, Coca-Cola became the first company to register a the advertisement with no provision for extension. If
three-dimensional shape as a trade mark in 1995. no application is made within that period or is made
but fails, the mark will be registered and will be valid
In this regard, the Trade Marks Registry has granted for 10 years from the date of application renewable
trade mark status to Heinz for the shade of turquoise every 10 years. Even after registration, application can
used on its tins of baked beans. be made to the Registrar or the court to rectify any error
or omission in the Register, but not in respect of matters
Registration: the mark must be distinctive affecting the validity of the registration.
A mark that is not distinctive can be excluded from reg-
istration under the Trade Marks Act 1994 as the follow- Collective and certification marks
ing case shows. The Act allows the registration of collective marks, e.g.
the Wool Mark on clothing, and certification marks
Société des Produits Nestlé v Mars such as the mark of the British Standards Institute (the
UK Ltd (2003) Kitemark).

Nestlé attempted to register part of a familiar catch- Enforcement
phrase ‘Have a Break’ in regard to its chocolate, choco- The effect of a registered trade mark is to give rights
late products, confectionery, candy and biscuits. Its rival of exclusive use to the owner. The general remedy is an
company, Mars, objected. The High Court ruled that reg-
istration for the first three words would not be granted

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injunction to prevent wrongful use. In this connection, control of counterfeit goods. This produces the rather
use of a mark in a different business is no defence. Thus, bizarre result of prosecutions being brought by trading
in Discovery Communications Inc v Discovery FM Ltd standards to protect the consumer, but incidentally to
(2000) the court granted an injunction to prevent the protect the interests of enormously wealthy organisations,
use of the claimants’ registered mark ‘Discovery Channel’ e.g. Microsoft, at the UK taxpayers’ expense. The cost of
by the defendants who were trading under ‘Discovery these prosecutions awarded out of public funds may in
102’. The fact that the claimants were engaged in cable some cases exceed £100,000!
and satellite television, whereas the defendants were in
radio, was no defence. The Community Trade Mark

A more recent and high-profile case of infringement The Community Trade Mark (CTM) is a single trade mark
of a trade mark appears below. right which extends throughout the EU. The system is
available to any country which is a member of the EU or
Arsenal Football Club plc v Reed (2003) person who is domiciled in a country in the EU or has a
commercial establishment in the EU.
The case arose because Arsenal had registered the words
‘Arsenal’ and ‘Arsenal Gunners’ as trade marks along with A CTM may consist of any distinctive sign capable of
its cannon and shield emblems. The marks were used on being represented graphically.
a wide variety of goods. Registration took place in 1989.
Mr Reed had since 1970 sold unofficial Arsenal souvenirs Applications are filed at any National Trade Marks
outside the club’s ground Highbury. The club contended Registry such as the UK Registry in London or directly
that this was an infringement of their trade mark. at the CTM office in Alicante, Spain. The CTM office is
known as the Office for Harmonisation in the Internal
The High Court ruled against the club because it was Market.
known that the goods sold by Mr Reed were not official
club merchandise. Mr Reed had a notice of disclaimer Enforcement
by his stall indicating that his products were not official A CTM is enforced by what is called ‘an infringement
club merchandise. However, the High Court asked the action’ in a national court. It is possible to ask for a pan-
European Court to consider the application of the law. European injunction covering the whole community and
Under Article 226 of the Treaty of Rome the ECJ can damages.
only pass judgment on the law and not on the facts of
the case. The ECJ ruled that the function of a trade mark Advantages and disadvantages of the
is to avoid confusion as to the origin of goods but went CTM system
on to rule on the facts that Mr Reed had infringed the A main advantage is that a single application allows
Arsenal trade mark. a trade mark to be registered throughout the EU at less
cost and administrative effort than individual applica-
The case came back to the High Court where the tions to each country, making enforcement easier.
judge refused to apply the ECJ ruling because it was of
mixed law and fact. The matter then went to the Court of However, since CTM gives rights to so many coun-
Appeal. The High Court felt that the fact of the disclaimer tries it is likely that large numbers of conflicts will arise
avoided confusion. The ECJ did not think the disclaimer so that it will be difficult to select a CTM which will not
necessarily removed all confusion – a different view of be opposed at registration stage. The registry is required
the facts. The Court of Appeal accepted the ECJ’s view to publish applications and oppositions must be lodged
of the facts and ruled that Mr Reed was infringing the with the Registrar within three months.
Arsenal trade mark in spite of his disclaimer.
Trade marks and comparative advertising
Comment. The case provides a singular illustration of a
UK judge refusing to apply an ECJ ruling. The law on comparative advertising (which is advertis-
ing by reference to a competitor’s name or product) has
Section 92 of the Trade Marks Act 1994 contains been relaxed by the provisions of the Trade Marks Act
the criminal offence of unauthorised use of trade mark 1994. It appears from the following case that the court
materials and goods. The maximum penalty is an un- felt that in considering the new provisions for the first
limited fine and/or imprisonment for up to 10 years. time the main object of those provisions was to allow
The section is used by trading standards in regard to the comparative advertising and that they should not be
read in such a way as to effectively prohibit it.

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Barclays Bank plc v RBS Advanta (1996) cause and does cause damage to the business of the other
person.
RBS wished to promote its new credit card. It published
a leaflet listing 15 ways in which its card was superior to Injurious falsehood is an aspect of defamation and
others and in a brochure it included a comparative table where the false statement is made about another’s goods
listing six other credit cards including Barclaycard and it is sometimes called ‘slander of goods’.
Standard Visa, setting out their annual fees, annualised
rates of interest on purchases and on cash advances, De Beers Abrasive Products Ltd v
and their monthly interest rates. Barclays Bank, the owner International General Electric Company
of Barclaycard, claimed that in setting down details RBS of New York Ltd (1975)
had not been comparing like with like and had implied
that its own card was superior on all 15 points. The bank De Beers made a diamond abrasive known as and mar-
asked for an injunction to prevent RBS from referring to keted under the trade mark ‘Debdust’. It was used for
its mark (Barclaycard) in literature promoting the RBS card. cutting concrete. International made and marketed a
competing product under the trade name ‘MBS-70’.
Section 10(6) of the 1994 Act was at the root of the
case. It provides as follows: ‘Nothing in the preceding International stated in a trade pamphlet that laborat-
provisions of this section shall be construed as prevent- ory experiments had shown that MBS-70 was superior
ing the use of a registered trade mark by any person for to Debdust. De Beers alleged that the contents of the
the purpose of identifying goods or services as those of pamphlet were false and misleading. The court said that
the proprietor or a licensee. But any such use otherwise the pamphlet would amount to an actionable slander of
than in accordance with honest practices in industrial goods if De Beers could prove the allegations and show
or commercial matters shall be treated as infringing the malice on the part of International.
registered trade mark if the use without due cause takes
unfair advantage of, or is detrimental to, the distinctive Passing-off
nature or repute of the trade mark.’ The court decided
that the literature conveyed the honest belief of RBS that Any person, company or other organisation which car-
its card, taken as a whole, offered customers a better deal, ries on or proposes to carry on business under a name
and refused the application by Barclays for an injunction. calculated to deceive the public by confusion with the
name of an existing concern, commits the civil wrong
Internet domain names of passing-off and will be restrained by injunction from
doing so. Other examples more important in our con-
The Trade Mark Registry has issued guidelines on the text of passing-off are the use of similar wrappings, iden-
treatment of Internet domain names. Signs including tification marks, and descriptions. Thus, in Bollinger v
http://, www., .co, .gov, .org do not have any distinctive Costa Brava Wine Co Ltd (1959) the champagne pro-
character as trade marks for goods and services sold via ducers of France objected to the use of the name ‘Spanish
the Internet. Instead, trade mark examiners and hearing Champagne’ to describe a sparkling wine which was
officers will look at the rest of the domain name. If it made in Spain and they were granted an injunction to
has a distinctive element, it will be considered for accept- prevent the use of that term. The remedies other than an
ance as a trade mark in the electronic information injunction are an action for damages or for an account
services class or in the software class. of profits made from wrongful use of the wrapping,
mark or description.
Domain names containing the words ‘web’ and ‘net’
tacked on to descriptive or non-distinctive words will The use of the passing-off rules in the context of
probably not be registrable as they are considered generic branded products is illustrated by the following case.
terms for discussing the Internet.
United Biscuits (UK) Ltd v Asda Stores
Injurious falsehood Ltd (1997)

In our present context a person is liable for injurious (or This case concerned two chocolate sandwich biscuits:
malicious) falsehood if he makes a statement about the Penguin, which is the brand leader owned by United
goods of another which is malicious and is intended to Biscuits, and Puffin, a biscuit manufactured by Asda and
retailed at a price 25 per cent lower than Penguin. The

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High Court ruled that Puffin’s packaging and get-up was be restrained from using them to his employer’s disad-
in a material sense deceptively similar to that of Penguin, vantage without any contract in restraint of trade.
so that Asda was guilty of passing-off its own cheaper
brand as though it was connected with the Penguin brand. An employer who copies names and addresses of his
The court drew attention, in particular, to the names of employer’s customers for use after leaving his employ-
the two products and to the seabird pictured on them ment can be restrained from using the lists without any
both. The court granted United Biscuits an injunction express restrictions in his contract.
preventing further sales of Puffin, but suspended the
operation of the injunction for 35 days to allow Asda, Robb v Green (1895)
among other things, to dispose of five weeks’ stock
of biscuits by selling them. However, the case failed on The claimant was a dealer in live game and eggs. The
the use of the word ‘Penguin’. Evidence showed that, major part of his business consisted of procuring the
as regards the two names, ‘Penguin’ and ‘Puffin’ taken eggs and the hatching, rearing and sale of gamebirds.
alone did not cause significant confusion to consumers. His customers were numerous and for the most part
Asda could therefore continue to use the ‘Puffin’ brand were country gentlemen and their gamekeepers. The
name. claimant kept a list of these customers in his order book.
The defendant, who was for three years the claimant’s
The advantage of registration as a trade mark where manager, copied these names and addresses, and after
possible has already been considered, as has the protec- leaving the claimant’s employment set up in a similar
tion of Internet domain names (see Pitman Training business on his own and sent circulars, both to the
Ltd v Nominet UK (1997)). claimant’s customers and to their gamekeepers, inviting
them to do business with him. The claimant asked for
The High Court has also ruled that the fact that a damages and an injunction and the Court of Appeal
company may find it harder to achieve brand recog- decided that, although there was no express term in the
nition when another company is actively promoting a defendant’s contract to restrain him from such activities,
similar brand is not enough in itself to allow the it was an implied term of the contract of service that
aggrieved company to claim an injunction, particularly the defendant would observe good faith towards his
if there is no serious confusion. Thus, in HFC Bank plc employer during the existence of the confidential rela-
v Midland Bank plc (2000) Midland Bank rebranded its tionship between them. The defendant’s conduct was a
business and associated businesses as HSBC. HFC Bank breach of that duty of good faith in respect of which his
tried for an injunction to restrain the use of the HSBC employer was entitled to damages and an injunction.
brand name and failed. The High Court judge did not
feel there was a serious likelihood of confusion and felt Comment. In connection with the duty of fidelity, it
that the matter could in any case be solved by proper should be noted that it does not matter who initiates
marketing. Interestingly, therefore, the judge was putting the infidelity; although in most cases the employee
forward a commercial rather than a legal solution. approaches the customer, the rule still applies even where
the customers approach the employee.
However, the High Court held in Pfizer Ltd v
Eurofood Link (UK) Ltd (1999) that giving the name Although cases such as Robb can still be relied upon
‘Viagrene’ to a beverage that was to be marketed as an on their own facts, where the employer relies on the
aphrodisiac was a passing-off of the name ‘Viagra’, the implied term of good faith to protect trade secrets or
anti-impotence drug, as well as an infringement of UK business connections that have simply been learned as
and Community trade marks. part of doing the job, the implied-term theory is much
less secure, and today a commercial lawyer would recom-
Confidentiality: employment mend an express contractual term setting out clearly
what it is intended to protect. The complexity of some
Certain activities by employees are regarded by the law modern products is such that the court needs guidelines
as breaches of the duty of faithful service which an through the contractual term as to what is to be pro-
employee owes to his employer. Breaches of this duty of tected. Thus, in Pocton Industries Ltd v Michael Ikem
fidelity will sometimes be prevented by the court, so that Horton (2000) the Court of Appeal ruled that, although
a person who retains secret processes in his memory can an electro-plating apparatus was a trade secret, it was

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not protectable under an implied duty of good faith The Court of Appeal decided that the unauthorised
and non-disclosure. There was no contractual provision photographs of the wedding reception plainly portrayed
regarding which part of the employee’s knowledge was aspects of private life and fell within the protection of
to be regarded as confidential and the plating process the law of confidentiality as extended to cover private or
was only part of a number of pieces of information that personal information. Thus, individuals have an enforce-
the employee could not help but acquire from his duties. able right to privacy (in this case in the photographs)
The implied term was too vague: more specific guidance which was redressable in damages. See Douglas v Hello!
was needed. Ltd (2005).

Confidentiality: other business Data protection
applications

The defendant’s breach of the law of confidentiality is an One of the most important resources a business makes
accepted head of liability in the common law for which use of is information. Increasingly, the information
there is a remedy of damages. Such a breach was the collected is stored on computer and processed automat-
basis of the following high-profile case. ically. Some organisations, however, still keep a substan-
tial amount of information in the form of paper records
Douglas v Hello! Ltd (2003) which are processed manually. The collection and pro-
cessing of all forms of information about people is now
The first two claimants are well-known film stars. They subject to the provisions of the Data Protection Act 1998
married in November 2000. Before the ceremony they (DPA 1998). The DPA 1998 replaces the Data Protection
made a contract with the third claimant OK! magazine Act 1984, which was limited in its scope to data processed
under which that magazine acquired exclusive photo- automatically, i.e. by computer.
graphic rights to the event. Unauthorised photographs
were taken at the event and sold to OK!’s rival magazine We will examine the main provisions of the DPA
Hello!, which published them on the same day as OK! 1998 and consider its implications for business. But first,
magazine. The claimants asked for damages for breach why has it been necessary to legislate on data protection?
of confidence and the film stars additionally claimed
damages for breach of the law of privacy. Background to the 1984 Act

The High Court ruled that there was no existing tort of There are two main reasons why the government decided
privacy and refused to extend the common law into this in 1984 to take action to regulate the use of computers
area. Furthermore, there was no need to introduce Art 8 to process personal information: first, concern had been
of the Convention on Human Rights (respect for private growing since the 1960s that the widespread use of in-
and family life) because English law was not inadequate creasingly sophisticated computers posed a considerable
in this case which could be dealt with as a branch of threat to the right to privacy. Computers not only had
commercial confidence, i.e. a recognised head of law. the ability to process large quantities of information at
The judge also awarded the Douglases compensation high speed, but could also transfer data quickly from
for damage and distress under the Data Protection Act one system to another, and combine information from
1998. The unauthorised pictures were to be regarded as different systems in ways which had not been possible
personal data and the Hello! magazine was a data con- before. Existing laws were inadequate to deal with this
troller. Thus, publication of the pictures in England was new threat to our civil liberties.
processing by Hello!, which was bound by the require-
ments of the Act. The second and main reason why the government
introduced legislation was to avoid commercial isola-
Comment. The High Court took the view that if a gen- tion. In 1981 the UK had become a signatory to the Council
eral law of invasion of privacy was to be created it should of Europe Convention on Data Protection. The Conven-
be done by legislation through Parliament and not by tion permits ratifying countries to prohibit the transfer of
the judiciary since the latter did not have adequate personal data to countries without comparable data pro-
consultation powers with those interests that might be tection legislation. Failure to introduce such legislation
affected.

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in this country would have led some British businesses ■ information which can be processed automatically,
with international interests to face a boycott. i.e. by computer; or

The government’s response to these developments was ■ information which is recorded as part of a ‘relevant
the enactment of the Data Protection Act 1984, which filing system’, that is a set of information in which
became fully operational from 11 November 1987. the records are structured either by reference to indi-
viduals or by criteria relating to individuals; or
The background to the 1998 Act
■ information which does not fall within the two points
We have noted how the 1984 Act was enacted to imple- above but which forms part of an ‘accessible record’,
ment the Council of Europe Convention ‘for the protec- e.g. school pupil, housing, social services and health
tion of individuals with regard to automatic processing records.
of personal data’. Both the Convention and the 1984
Act were limited in scope to data which are processed The definition of data in the 1998 Act broadens the
automatically, i.e. by computer. In October 1995, the scope of regulation and protection to include not only
EC adopted a Data Protection Directive, which had to information held on computers but also some manual
be implemented by member states by October 1998. information, i.e. paper records. It is important to note
Although the 1984 Act met many of the requirements of that not all manual information is covered by the DPA
the directive, there were some important differences 1998; only manual information which falls within the
which necessitated changes in the UK legislation. The definition of ‘data’ set out above is subject to regulation.
DPA 1998, which came into force on 1 March 2000, It should also be noted that transitional arrangements
introduces a new framework for the protection of data. exempt manual information kept in a relevant filing sys-
tem before 24 October 1998 from full compliance with
The 1998 Act itself the DPA 1998 until 2007. However, individuals have the
right to gain access to information held in paper records
The DPA 1998 establishes a legal framework to regulate from 24 October 2001 irrespective of the date from
the storage and processing of personal information. which the information was held.
Most persons who process, or have processed for them,
personal information are affected by the legislation. At Personal data. These are items of information about a
the centre of the scheme of regulation is the Information living individual who can be identified. ‘Personal data’
Commissioner (previously known as the Data Protec- include factual information about the person, expressions
tion Registrar). The Commissioner is responsible for of opinion about him and any indications of the inten-
maintaining a public register of those involved in pro- tions of the data controller in respect of that individual.
cessing personal information, promoting good practice
by data controllers and observance of the requirements Data controller. This is a person who (either alone or
of the DPA 1998, and disseminating information about jointly or in common with other persons) determines
the DPA 1998. the purposes for which and the manner in which any
personal data are, or are to be, processed.
The DPA 1998 gives rights to individuals, including
the right to obtain details of information held about Data processor. This refers to a person (other than an
them and a right to obtain compensation for damage employee of the data controller) who processes personal
suffered as the result of any contravention of the re- data on behalf of the data controller.
quirements of the DPA 1998 by a data controller. The
DPA 1998 does not establish blanket regulation of all Data subject. A data subject is an individual who is the
personal data: there are exemptions from some or all of subject of personal data. Information about corporate
its provisions. bodies is not covered.

Terminology Processing. In relation to information or data, this means
obtaining, recording or holding the information or data
The terms used in the DPA 1998 are described below. or carrying out any operation on the data including:
Data. This term refers to:
■ organisation, adaptation or alteration of the data;
■ retrieval, consultation or use of the data;
■ disclosure of the data;

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■ alignment, combination, blocking, erasure or destruc- ■ the processing is necessary to protect the vital inter-
tion of the data. ests of the data subject or another person and the data
subject cannot give consent or the data controller
The data protection principles cannot reasonably be expected to gain consent, or the
data subject has unreasonably withheld consent and
As under the 1984 Act, the DPA 1998 sets out eight data the processing is necessary to protect the vital inter-
protection principles, which must be complied with by ests of another person;
data controllers, subject to any exemption. The principles
are as follows: ■ the processing is carried out by not-for-profit organ-
isations which exist for political, philosophical, reli-
1 Personal data shall be processed fairly and lawfully, gious and trade union purposes, subject to certain
and, in particular, shall not be processed unless – requirements;

(a) at least one of the conditions in Sch 2 is met, and ■ the personal data have been deliberately made public
by the data subject;
(b) in the case of sensitive personal data, at least one of
the conditions in Sch 3 is also met. ■ the processing is necessary in connection with legal
proceedings, obtaining legal advice, or establishing,
At least one of the following Sch 2 conditions for exercising or defending legal rights;
processing must be met:
■ the processing is necessary for medical purposes;
■ the data subject has given his consent to processing; ■ the processing relates to racial or ethnic origins and
■ the processing is necessary in relation to a contract to
the processing is necessary for equal opportunities
which the data subject is party; monitoring.
■ the processing is necessary to comply with a legal
As well as fulfilling one of the conditions for process-
obligation to which the data controller is subject; ing personal data, data controllers must also ensure that
■ the processing is necessary to protect the vital inter- the processing is carried out fairly in accordance with
the fair processing code. The code requires that data is
ests of the data subject (i.e. matters of life or death); obtained fairly (i.e. the provider of data must not be
■ the processing is necessary for the administration of misled or deceived) and that certain information is pro-
vided to the data subject.
justice, for the exercise of any statutory functions, or
any functions of the Crown, ministers or government 2 Personal data shall be obtained only for one or
departments or other public functions carried out in more specified and lawful purposes, and shall not be
the public interest; further processed in any manner incompatible with
■ the processing is necessary for the legitimate interests that purpose or those purposes. There are two methods
of the data controller, except where the processing is by which a data controller can specify the purposes for
unwarranted because of the prejudice to the rights, which the data is obtained. First, by giving notice to the
freedoms and legitimate interests of the data subject. data subject in accordance with the fair processing code,
and, secondly, by notifying the Information Commis-
The DPA 1998 introduces special rules prohibiting sioner under the notification procedures.
the processing of sensitive personal data revealing, for
example, racial or ethnic origin, political opinions, reli- 3 Personal data shall be adequate, relevant and not
gious or philosophical beliefs, trade union membership, excessive in relation to the purpose or purposes for
criminal proceedings or convictions and data concern- which they are processed. Data users must be selective
ing health or sexual life. about the data held; it must relate directly to the pur-
poses for which it is obtained.
At least one of the Sch 3 conditions relating to pro-
cessing sensitive data must be satisfied, in addition to 4 Personal data shall be accurate and, where necessary,
one of the conditions applying to all personal data. The kept up to date. Data controllers should take steps to
conditions include: check the accuracy of information. Data subjects have
the right to compensation for damage caused by inaccur-
■ the data subject has given his explicit consent; ate data. Files should be reviewed from time to time to
■ the processing is necessary for the purposes of fulfil- update the information.

ling legal obligations in relation to employment;

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5 Personal data processed for any purpose or pur- ■ a general description of security measures to protect
poses shall not be kept for longer than is necessary for the data (this information will not appear on the
that purpose or purposes. Once the specific purpose for register).
which the data was collected has been achieved, the data
should be destroyed. The notification requirements do not apply to man-
ual data contained within a relevant filing system or data
6 Personal data shall be processed in accordance with within non-automated accessible records.
the rights of data subjects under this Act. A data con-
troller will contravene this principle if he or she fails to The period of notification lasts for one year and the
supply information following a subject access request or fee (in 2008) is £35.
fails to comply with certain other notices under the DPA
1998. It is an offence to process personal data without noti-
fication, unless it can be shown that a person exercised
7 Appropriate technical and organisational measures all due diligence to comply with the requirements. Offences
shall be taken against unauthorised or unlawful pro- are triable either by magistrates or in the Crown Court.
cessing of personal data and against accidental loss or If convicted, the offender is liable to a fine of £5,000 in
destruction of, or damage to, personal data. Data con- the magistrates’ court or an unlimited fine in the Crown
trollers and data processors must take steps to secure the Court.
personal data they hold. The level of security will depend
on the nature of the personal data and the damage likely Business organisations should decide who will take
to be caused by a breach of the principle and the meas- responsibility for ensuring that the organisation complies
ures necessary to ensure security. with the requirements of the DPA 1998. The duties of
such a data protection officer must be defined and lines
8 Personal data shall not be transferred to a country of responsibility established. The data protection officer
or territory outside the European Economic Area, should ensure that the notification requirements are com-
unless that country or territory ensures an adequate plied with and the entry in the register kept up to date.
level of protection for the rights and freedoms of data This includes devising a system to monitor any changes
subjects in relation to the processing of personal data. taking place so that they can be recorded on the register.
This principle will not apply in certain circumstances, for
example where the data subject consents to the transfer Information Commissioner
or the transfer is necessary for reasons of public interest
or in connection with legal proceedings. In addition to maintaining the Register, the Commis-
sioner is charged with promoting good practice by data
Notification controllers and in particular promoting observance of
the data protection principles. The Commissioner is under
The 1984 Act established a Data Protection Register, which a duty to make an assessment of whether processing of
was open to public inspection. The DPA 1998 introduces personal data is being carried out in compliance with the
a new simpler notification system. A data controller will DPA 1998, if so requested.
be required to provide the following information:
The Commissioner has the power to issue the follow-
■ the data controller’s name and address; ing notices:
■ the name and address of any representative;
■ a description of the personal data being processed 1 An enforcement notice requires a data controller to
observe the data protection principles.
and the category of data subject to which they relate;
■ a description of the purpose(s) for which the data are 2 An information notice requires a data controller to
provide information relating to a request for assessment
being processed; or to compliance with the data protection principles
■ a description of any recipients of the data; within a specified time.
■ a name or description of countries outside the European
3 A special information notice may be served to ascer-
Economic Area to which the data may be transferred; tain whether personal data are being processed only for
■ a statement that the personal data are exempt and special purposes or with a view to the publication of any
journalistic, literary or artistic material not previously
notification does not extend to that data; published by the data controller.

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There is a right of appeal against the issue of any of a relevant filing system. The Court of Appeal upheld
notice to the Information Tribunal. the trial judge’s refusal to order the FSA to make further
disclosure. The mere mention of the data subject in a
The Commissioner can apply to a circuit judge for a document did not necessarily amount to ‘personal data’
warrant to enter and search premises if there are reason- under the DPA 1998. Whether it did so in any particular
able grounds for suspecting that an offence has been case depended on where it falls in a ‘continuum of
committed or that the data protection principles are being relevance or proximity to the data subject as distinct,
contravened. say, from transaction or matters in which he may have
been involved to a greater or lesser degree’. Two factors
Rights of data subjects may assist in judging relevance or proximity: whether
the information was significantly biographical, and
The DPA 1998 gives a number of rights to data subjects whether the data subject was the focus of the information.
in respect of the personal data held about them. The Moreover, the information must affect a person’s privacy
corresponding duties of data controllers may give rise to whether in his personal or family life, or his business or
claims for compensation. Business organisations should professional capacity. On the question of the meaning of
consider the possibility of obtaining insurance cover a ‘relevant filing system’, the court concluded that the
against such risks. The rights are as follows: DPA 1998, and the EC Directive on which it was based,
supported a restrictive interpretation. The protection is
1 Access to personal data. A data subject is entitled to provided for personal data not documents. A relevant fil-
be informed of whether a data controller holds any data ing system is a system ‘in which the files forming part of
about him or her and to be supplied with a copy of such it are structured or referenced in such a way as to clearly
data in an intelligible form. The data controller may indicate at the outset of the search whether specific
insist on receiving a written request, checking the data information capable of amounting to personal data of
subject’s identity and the payment of a fee (subject to a an individual requesting it . . . is held within the system
maximum fee of £10 in 2008). The information must be and, if so, in which file or files it is held; and which has
available within 40 days. Obviously, business organisa- as part of its own structure or referencing mechanism, a
tions must establish a clear procedure for dealing with sufficiently sophisticated and detailed means of readily
requests for access to data. indicating whether or where an individual file or files and
specific criteria or information about the applicant can
The Court of Appeal has provided useful guidance on be readily located.’
the scope of the right to obtain access to personal data in
the following case. Comment. The Information Commissioner’s view is that,
following the Durant judgment, ‘very few manual files will
Durant v Financial Services Authority be covered by the provisions of the DPA’.
(2003)
2 Right to prevent processing likely to cause damage
Durant had been involved in unsuccessful litigation or distress. A data subject can ask a data controller to
against his bank. Subsequently, he sought disclosure of stop, or not to begin, processing personal data relating
documents which he believed might help him to re-open to him where it is causing or is likely to cause substantial
the dispute. He had asked the Financial Services Author- unwarranted damage or substantial distress to him or to
ity (FSA) to help him to obtain disclosure and he also another person. There are situations where this right is
wanted to know what information the FSA had obtained not available (e.g. where the data subject has previously
from the bank in its supervisory capacity. The FSA com- consented) and data controllers do not always have to
pleted its investigations but, for reasons of confidentiality, comply with the request.
did not inform Durant of the outcome. Durant complained
to the FSA Complaints Commissioner but the complaints 3 The right to prevent processing for direct market-
were dismissed. Durant then made two subject access ing. A data subject can ask a data controller to stop,
requests under the DPA 1998, covering both electronic or not to begin, processing data relating to him for the
and manual information. The FSA provided documents purposes of direct marketing. If the data controller does
about Durant held in computerised form but refused not comply with such notice, the data subject can apply
access to manual files on the grounds that the informa- for a court order to that effect.
tion was not personal and, if it was, it did not form part

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4 Rights in relation to automatic decision-taking. An The ‘miscellaneous’ exemptions include:
individual can ask a data controller to ensure that no
decision which significantly affects him is based solely on ■ confidential references given in connection with, for
the processing of his personal data by automatic means. example, employment;
Examples of the purposes for which automatic decision-
taking might be used include establishing creditworthiness ■ information which would prejudice the combat effect-
or reliability. There are some exemptions to these rights. iveness of the armed forces;

5 Right to compensation. The data subject can claim ■ processing personal data in connection with judicial
compensation from a data controller for damage or dam- appointments and honours;
age and distress caused by a breach of the DPA 1998,
where the data controller is unable to show that he or ■ processing personal data in connection with assess-
she has taken such care as is reasonable to ensure com- ing suitability for Crown employment and Crown or
pliance. Damages for distress alone can be claimed only ministerial appointments;
where the breach of the DPA 1998 relates to processing
personal data for special purposes. ■ personal data used by businesses in connection with
management forecasting and planning;
6 The right of rectification, blocking, erasure and
destruction. Individuals can apply to the court for an ■ personal data consisting of the intentions of the data
order requiring a data controller to rectify, block, erase controller in relation to any negotiations with the
or destroy personal data which are inaccurate or contain data subject;
expressions of opinion based on inaccurate data.
■ personal data processed in connection with a corpor-
7 The right to request an assessment. Any individual ate finance service, where there may be concerns in
may ask the Commissioner to assess whether the pro- relation to price sensitivity;
cessing of personal data is being carried out in com-
pliance with the DPA 1998. Depending on the outcome ■ personal data recorded by candidates in examinations;
of the Commissioner’s assessment, this may lead to ■ in the case of examination marks, a candidate’s right
enforcement action.
of access can be delayed for up to five months or 40 days
Exemptions from the announcement of the results;
■ personal data subject to professional legal privilege;
The nature and extent of each exemption is a complex ■ self-incrimination by complying with a subject access
matter and the guidance produced by the Information request.
Commissioner should be consulted.
Offences under the DPA 1998
Exemptions are referred to as either ‘primary’ exemp-
tions, meaning that they are more likely to be claimed or The DPA 1998 creates a number of criminal offences.
more wide ranging in scope, or ‘miscellaneous’ exemptions. These include processing personal data without com-
‘Primary’ exemptions include personal data related to: plying with the notification requirements, unlawfully
obtaining or disclosing personal data without the consent
■ safeguarding national security; of the data controller and unlawfully selling personal data.
■ prevention and detection of crime; The Criminal Justice and Immigration Act 2008 makes
■ assessment and collection of taxation; two changes to the DPA to strengthen enforcement:
■ health, education and social work;
■ regulatory activity of certain bodies; 1 The Secretary of State acquires the power to increase
■ special purposes covering journalism, artistic and lit- the maximum penalty for an offence under s 55 (knowingly
or recklessly, without the consent of the data controller,
erary purposes; obtaining or disclosing personal data or procuring the
■ historical or statistical research; disclosure of personal data to another person). The
■ information made available to the public by statute; penalties may be increased to six months’ imprison-
■ disclosures required by law or in connection with any ment on summary conviction (increasing to 12 months
when the sentencing powers of the magistrates’ court are
legal proceedings; increased) or two years’ imprisonment if convicted on
■ domestic purposes, i.e. household matters. indictment in the Crown Court. A new defence against
the s 55 offence is provided where a person acts for
journalistic, literary or artistic purposes with a view to
the publication of any journalistic, literary or artistic

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material and in the reasonable belief that their actions the deletion or alteration of material or the introduction
were justified as being in the public interest. of computer viruses. The offence is triable either by
2 The Information Commissioner acquires new powers magistrates or in the Crown Court where the maximum
to impose monetary penalties on data controllers who penalty is five years’ imprisonment or an unlimited fine.
deliberately or recklessly breach the data protection prin-
ciples and the contravention is of a kind likely to cause The Act also takes into account the international
substantial damage or distress. dimension of computer crime by giving UK courts wide
jurisdiction to hear cases, provided that there is some
Computer misuse connection between the offender’s activities and the
UK, and by making provision for extradition for these
offences.

The Computer Misuse Act 1990, which came into force Freedom of information
on 29 August 1990, creates three criminal offences to
deal with the misuse of computers. The offences are as The Freedom of Information Act 2000 requires every
follows: public authority to put in place a publication scheme to
be approved by the Information Commissioner which
1 Unauthorised access to computer material. It is an identifies the information available from the authority
offence knowingly to cause a computer to perform any and how it can be obtained. From 1 January 2005 indi-
function with intent to secure unauthorised access to viduals have had the right to make a request for in-
programs or data held in a computer. This basic offence formation held by a public authority, subject to certain
is designed to criminalise the activities of both outside exemptions, e.g. information relating to national secur-
‘hackers’ who obtain access to computers using the pub- ity or information given in confidence. Authorities must
lic telecommunications system and insiders who know- supply the requested information within 20 days, unless
ingly exceed the limits of their authority. The offence is the information is exempt. The authority may make a
triable summarily and is punishable by a maximum of charge for providing the information, subject to a max-
six months’ imprisonment or a fine of £5,000. imum fee which is set by regulation. If an individual
does not pay the fee within three months, the request for
2 Unauthorised access with intent to commit or facil- information lapses. Public authorities include central
itate commission of further offences. It is an offence and local government, police and prosecution services,
triable either by magistrates or in the Crown Court to the health service and education organisations, e.g. col-
commit the basic unauthorised access offence with in- leges and universities. The Information Commissioner
tent to commit or facilitate the commission of any may issue the following notices:
serious offence for which the sentence is fixed by law or
where the maximum sentence could be five years or more. 1 A decision notice: a person who has made a request
These serious crimes would include theft and blackmail. for information may apply for a decision as to whether
This offence would cover a ‘hacker’ who obtains unau- his request has been dealt with by the public authority in
thorised access to a computer in order to hijack funds accordance with Part I of the Act.
in the course of an electronic funds transfer. The max-
imum penalty for this offence if convicted on indictment 2 An information notice: requires a public authority to
is five years’ imprisonment or an unlimited fine. provide specified information.

3 Unauthorised modification of computer material. 3 An enforcement notice: requires a public authority
It is an offence intentionally to cause the unauthorised to comply with the requirement to provide information.
modification of the contents of any computer with intent
to impair a computer’s operation, or to prevent or hin- Complainants and public authorities can appeal to
der access to any program or data held in any computer, the Information Tribunal against a decision notice and a
or impair the operation of any such program or the reli- public authority can appeal to the Information Tribunal
ability of any such data. This offence is designed to cover against an enforcement notice.
interference with computer programs and data such as

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Self-test questions/activities

1 Explain the difference between real property and was hiding behind a rubber plant in the hope
personal property. What kinds of personal property of getting some exclusive pictures of the new
are there? restaurant.

2 John wants to buy a house. He tells you that he has Advise Mr and Mrs Snooks and Archie.
seen some advertised as ‘freehold’ and some as
‘leasehold’. 5 If you had registered a patent and a design, for
Write a note explaining these terms stating how he how long would registration protect you, and what
would be affected as a buyer in each case. remedies would you have if someone infringed
your rights?

3 Explain what is meant by an easement. How does an 6 Jane’s father has died. He left her by his will the
easement differ from a profit? Give two examples of copyright in a very successful novel which he wrote
each. five years before his death.
For how long will the publishers pay royalties to
4 Anton is the owner of the Napoli restaurant. He Jane?
engaged Edgar, a builder who was made redundant
by Bodge Builders Ltd but has recently started up 7 Distinguish a trade mark from a service mark. How
his own business, to renovate the restaurant. are trade and service marks protected?
On Monday, the day before Anton re-opened the
restaurant to the public, he invited the mayor and his 8 Bob and Jane run a newsagents’ shop. They have
wife, Mr and Mrs Snooks, to take a meal at the just acquired a computer to help them run the
restaurant. business more efficiently. They anticipate that they
During the meal a large piece of plaster fell from will use the computer for the following purposes:
the false ceiling which Edgar had installed. It fell stock control, calculating the wages of their
on the mayor’s table, injuring both him and Mrs paper-boys and girls and customer records.
Snooks. Will Bob and Jane need to register under the
Several pieces of plaster hit and injured a local DPA 1998?
press photographer, Archie, who had got into the If they are required to register, what will their
restaurant uninvited through a side door. Archie obligations be under the DPA 1998?

Specimen examination questions

1 Wharf Ltd occupies office premises in the High premises and discover that there is no specific
Street. Next to the office premises is a parking space mention of the car parking right on Canary’s land.
for ten cars. The parking space is on land owned by
Canary Ltd, which has office premises adjacent to it. Advise the board of Wharf Ltd as to the
For some 30 years the managing director and company’s position in law and, in particular, whether
finance director of Wharf Ltd and their predecessors it is likely to be able to retain this right to park for the
have used two parking spaces reserved for them. future.
Now Canary Ltd, whose staff have used the other
eight spaces, has increased its staff and proposes to 2 Last week James, aged 21, was walking home from
take over the two spaces used by Wharf staff. a party. It would be fair to describe his condition as
As company secretary to Wharf Ltd you have drunk. When James was passing by the local park
looked at the documents of title Wharf has to its he vaguely remembered that the Barchester Council
which owned the park ran an open-air swimming

450

pool and, although it was mid-December and Chapter 15 Business property
freezing cold, James decided that he would like a
swim to clear his head. The park was closed and the her time at the High School Jane has been mistaken
gates locked but James climbed over them and went for another pupil, Jayne Smith. Jayne Smith is a
to the pool. It too was locked and there were notices troublesome pupil who has been suspended on a
saying it was closed for the winter season. James number of occasions for poor behaviour. Jane
ignored these notices and climbed over the gates to Smith is a ‘model’ student and is predicted to
the pool and dived in. The pool had been drained for achieve good grades in her GCSEs. Jane applies
the winter and James was severely injured. Two to her local FE college to study A-levels and is
nights after this incident Jane, a six-year-old child, interviewed for a place. She is very disappointed
climbed the gates of the park in the early evening when she receives a letter to say she has been
after the park was closed and was injured when she rejected. She believes that the head teacher of
fell off a swing. the High School may have provided a reference
for Jayne Smith rather than for herself and this
James and Jane are bringing claims against has adversely affected her chances of obtaining
Barchester Council for their injuries as occupiers a place. Jane would like to obtain the following
of the park and its facilities. information:
(a) a copy of her personal reference provided by
Advise the council as to its potential liability to
James and Jane. the head teacher of the High School;
(b) the reasons for the Sixth Form College’s
3 Jane Smith is in her final year at Southtown High
School where she is studying for eight GCSEs. During rejection of her application;
(c) the Sixth Form College’s admissions policy.

Advise Jane.

Website references

http://www.dca.gov.uk The Department for Constitutional http://www.ipo.gov.uk The Patent Office website provides
Affairs is responsible for changes in property law. It is one information about intellectual property rights and current
of the best websites for a great many types of interest: developments in this area.
consultation papers, White Papers, Green Papers, etc.,
in connection with reforms such as commonhold and http://oami.eu.int This is the website for the EU’s Office
leasehold reform. for Harmonisation in the Internal Market in respect of
Trade Marks and Designs.
http://www.lawcom.gov.uk The Law Commission is also
a useful site in regard to its proposals for property law http://www.ico.gov.uk The Information Commissioner’s
reform. website provides information about the Data Protection
Act 1998 and the Freedom of Information Act 2000.

Visit www.mylawchamber.co.uk/riches CASE
to access selected answers to self-test questions in the
book to check how much you understand in this chapter. POWERED BY

Use Case Navigator to read in full some of the key cases
referenced in this chapter:
Tomlinson v Congleton Borough Council and another [2003]
3 All ER 1122

451

Chapter 16 Employing labour

Learning objectives

After studying this chapter you should understand the following main points:

■ the legal rules by which the relationship of employer and employee is
established, and the concept of self-employment, together with the
purpose of the distinction in terms of vicarious liability and statutory
employment rights;

■ the special nature of the contract of employment, in particular, the
legislative interference with free negotiation to protect worker rights;

■ health and safety at work requirements, and the criminal sanctions and
civil remedies that may arise when the relevant legislative provisions are
infringed;

■ discrimination protection in terms of sex, race, disability, religion and
belief, sexual orientation and in regard to transsexuals;

■ the termination of the contract of employment and, in particular,
legislative protection in terms of unfair dismissal and in regard to
redundancy.

In this chapter we are concerned with employment law. or salary. Of course, A may still be an employee though
This is based upon and deals with the relationship of working part time.
employer and employee. Employment law is made up of
common law and, more and more these days, of statute Also, if A is an employee, B will deduct income tax
law passed by Parliament. from A’s pay (if it exceeds A’s allowances) under PAYE
(pay as you earn) arrangements. B will also make social
Employer and employee security contributions for A and will often provide a
pension scheme which A can join. In addition, although
Generally a contract of employment (or service) need not be in
writing, if A is an employee, then B must, under the
It is important to know how this relationship comes Employment Rights Act 1996, give A within two months
into being and to distinguish it from the relationship after the beginning of the employment written particu-
between a person who buys the services of someone who lars of the major terms of the contract.
is self-employed (often called an independent contractor).
The control test
Usually it is not difficult to decide whether A is em-
ployed by B so that the relationship of employee and In earlier times the above tests would not all have been
employer exists between them. If A is an employee, he or available, particularly the deduction of income tax
she will have been selected by B; A will usually work which, after some earlier experiments beginning in
full-time for B under a degree of supervision for a wage 1799, was finally brought in for good in 1842. Social
security legislation and the modern deductions from
pay, together with contributions from the employer,

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Chapter 16 Employing labour

have only come in on the present scale since the Second their control. Therefore, his true employer, the Board,
World War. was vicariously liable for Mr Newell’s negligence.

In times past, therefore, a person, whether employed Comment. It is presumed in these cases that the gen-
or self-employed, would simply receive money from the eral employer continues to be liable and it is up to him to
employer and it was less easy to distinguish one from the satisfy the court that control has passed to a temporary
other. employer. This is a very difficult thing to do and the tem-
porary employer will not be liable very often, though it is
There was, even so, a need to do so, because an a possibility.
employer was liable to pay damages to those injured by
his employee if those injuries took place during the Joint vicarious liability
course of the employee’s work. This is called an em-
ployer’s vicarious liability and it is dealt with in greater In situations such as Mersey Docks, the possibility of
detail later in this chapter. joint liability between employing parties had never been
considered.
A person was not vicariously liable for injury caused
to others by a self-employed (or independent) contrac- The Court of Appeal did so in the following case
tor who was doing work for him. Obviously, then it was and any principled objection to joint liability has been
necessary to find a test to decide whether A was, or was removed.
not, an employee of B.
Viasystems Ltd v Thermal Transfer
The earliest test was called ‘the control test’. Since it is (Northern) Ltd (2005)
not normally necessary to use this test today in order to
decide whether A is the employee of B because we have The claimant was having air conditioning installed in
much more evidence of the relationship now, why should a factory. The main contractor, Thermal, subcontracted
we bother with it? the ducting work to company A which used company B
to supply a fitter and his mate. While working under the
The answer is that it is sometimes necessary to decide fitter and a supervisor from company A, the fitter’s mate,
whether B, who is truly employed by A, has been tem- C, by what the Court of Appeal described as foolish
porarily transferred to another person, C, so that C (the negligence, managed to flood the claimant’s factory.
temporary employer) and not A (the general employer)
is liable vicariously for the injuries caused to a person or In a claim against Thermal and A and B, the High
persons by B. Court found that B was liable. In this appeal company B
contended that company A was liable because they had
Mersey Docks and Harbour Board v control of C who was working within the environment of
Coggins & Griffiths (Liverpool) Ltd (1946) company A.

The Board owned and hired out mobile cranes driven The Court of Appeal decided it was time to re-assess
by skilled operators who were employees of the Board. existing law and ruled that company A and company B
Coggins & Griffiths, who were stevedores, hired one of were liable for the negligence of C, each bearing 50 per
the Board’s cranes and an operator, Mr Newell, to unload cent of the damage, thus introducing joint vicarious liab-
a ship. ility, a concept hitherto unknown in this country.

In the course of unloading the ship, a person was Shareholders and directors
injured because of Mr Newell’s negligence and the court
had to decide whether the Board or Coggins & Griffiths In spite of the fact that a majority shareholder and/or a
were vicariously liable along with Mr Newell for the lat- director of a company are not, strictly speaking, under
ter’s negligence. The matter was one of control because the control of the company which, of course, they in large
the Board was quite clearly the general employer. Actu- measure control, it seems from the decision of the Court
ally, the answers given by Mr Newell to questions put of Appeal in Secretary of State for Trade and Industry v
to him by counsel in court were highly important. At Bottrill (1999) and of the Employment Appeal Tribunal
one point he said: ‘I take no orders from anybody.’ Since in Connolly v Sellers Arenascene Ltd (2000) that majority
he was not truly employed by Coggins & Griffiths and shareholders and directors will be regarded as employ-
since he did not, so he said, take orders from them, there ees of the company where there is a written contract of
was no way in which he could be regarded as under

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Part 4 Business resources

employment and all the usual hallmarks of employment Particular cases examined
are present. Certainly, the almost blanket ban introduced
by earlier cases such as Buchan v Secretary of State for In the majority of cases there is no difficulty in deciding
Employment (1997) has been considerably eroded. The whether a person is employed or self-employed. For ex-
cases have generally arisen where the company has gone ample, factory employees, office clerical staff and agricul-
into an insolvency procedure and cannot pay wages and tural workers are clearly employees. Garage proprietors,
salaries. In such an event employees may make a claim house-builders and dry cleaners are contractors inde-
for outstanding remuneration on the state through what pendent of the members of the public who use them.
was the Department of Trade and Industry (DTI). How-
ever, the DTI was replaced by a new organisation: the As we have seen, a particularly compelling example
Department for Business, Enterprise & Regulatory Reform comes from a comparison between a chauffeur and a
(BERR) in June 2007. person who owns and drives his own taxi. The chauffeur
is an employee; the taxi-driver is an independent con-
Recent case law gives employed controlling share- tractor. Suppose, then, that Fred is employed as my
holders and directors a better chance of doing that. Fee- chauffeur: I would have enough control over him to ask
paid directors could not claim. In any case, controlling him to drive more slowly in a built-up area. In the case
shareholders and directors would seem to satisfy the of the taxi-driver, I would not have (or even feel I had)
organisation test set out below and come in as employ- the necessary control to insist on a change of speed.
ees under that.
Contract of service or for services –
The organisation test why distinguish?

Later on a test called the ‘organisation or integration’ First of all, because of the existence of vicarious liability,
test was brought in because the control test was not an employer is liable, for example, for damage caused
really suitable for employees who were highly skilled. to another by his employee’s negligent acts while that
employee is acting in the course of his employment, that
There was a possibility that, even though there was a is, doing his job, but not otherwise.
lot of general evidence of employment, such as PAYE
deductions from pay, an employer would not be vicari- Second, the rights and remedies provided by employ-
ously liable for the acts of a highly skilled employee, such ment legislation, such as the Employment Rights Act
as a doctor, or, really, anyone qualified and experienced 1996, are available to an employee, but not all of them
and acting in a professional field, if that employer could are available (but see below) to the self-employed. We
convince the court in his defence that he did not have shall be looking at these rights and remedies more
the necessary control of the skilled person. closely later in this chapter.

This has not been possible because of the organisation Rights of non-employees
test put forward by Lord Denning in Stevenson, Jordan
& Harrison Ltd v Macdonald & Evans Ltd (1952). He Certain statutory rights are given to persons who are not
decided in that case, in effect, that an employee is a employees in any sense of the word. Rights in respect of
person who is integrated with others in the workplace racial and sex discrimination are enjoyed by job applic-
or business, even though the employer does not have a ants, contract workers and partners. Job applicants also
detailed control of what he does. have the right not to be refused a job on the grounds of
trade union membership or because they do not belong
Independent contractors – to a union.
self-employment
An employer may also be liable for sex discrimination
The main feature here is the absence of control or mean- after employment has ceased. The Employment Appeal
ingful supervision which can be exercised by those who Tribunal (EAT) has ruled that the Sex Discrimination
buy the services of an independent contractor by means Act 1975 covers acts of discrimination, e.g. by failure to
of what is called a contract for services. give a reference, even though the relevant acts took place
after the claimant ceased to be employed (see Coote v
Granada Hospitality Ltd (1999)).

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Chapter 16 Employing labour

Failure to give a post-employment reference ranks other than the genuinely self-employed and so ensure
also as a detriment under s 47B of the Employment that none are excluded merely because of technicalities
Rights Act 1996 where it is in regard to a person who has relating to their working arrangements, which are often
blown the whistle about some aspects of the employer’s designed by less scrupulous employers to produce a virtu-
organisation, in what is called a public interest disclos- ally rightless and bogus self-employment.
ure (Woodward v Abbey National plc (2006)).
The contract of employment
In addition, a series of regulations passed in 2003 pro-
vide post-employment protection from discrimination. Generally
These will be referred to as the chapter progresses but
for now we can use a short form, i.e. the Sex Discrimina- The ordinary principles of the law of contract apply. So,
tion Regulations 2003, the Race Regulations 2003, the in a contract of employment there must be an offer and
Sexual Orientation Regulations 2003 and the Religion an acceptance, which is in effect the agreement. There
or Belief Regulations 2003. There are similar provisions must also be an intention to create legal relations, con-
in the Age Regulations 2006 which also provide post- sideration, and capacity, together with proper consent
termination discrimination protection. by the parties, that is, no mistake, misrepresentation,
duress or undue influence. In addition, the contract must
A contract worker is one who is employed by a third not be illegal.
party, such as an agency, and whose services are supplied
under a contract with that third party. A claim against However, since we have already looked at these gen-
an employer could be made, for example, by a tempor- eral principles of the law of contract, it is only necessary
ary secretary who is turned away or treated in a hostile to highlight certain matters which are of importance in
manner on grounds of colour or disability or who is the context of employment law.
subjected to sexual harassment.
Fraud and illegality
The same would be true of a salesman without a con-
tract of service who was paid by commission only, who The general rule is that the courts and employment
was not given work because of his race (see Hill Samuel tribunals will not do anything to enforce either party’s
Services Group Ltd v Nwauzu (1994)). rights under a contract which is illegal. The general rule
does not apply, however, if the party seeking to enforce
As regards disability discrimination, the right not to the contract was not aware of the illegality or, possibly,
be discriminated against covers employees and applicants if his or her involvement is minimal compared to that of
for employment including contract workers, appren- the other party.
tices and self-employed people who contract personally
to do any work (Disability Discrimination Act 1995, If any employer and employee agree that the latter be
s 68(1)). However, while the Act covers partnerships treated as non-existent for tax and national insurance
in their capacity as employers, it did not prohibit, for purposes, with all payments being unrecorded cash
reasons of disability, discrimination against the partners payments, neither party will be able to enforce the con-
or prospective partners themselves. This contrasted with tract. The employee would have rights, however, if the
sex and race discrimination which covers discrimination employer deducted tax and national insurance contri-
against partners or prospective partners, albeit only for butions (NICs) and, without the employee’s knowledge,
firms consisting of six or more partners in the case of failed to account for the payments or submit any
discrimination on racial grounds. records.

The position now is that the Race Regulations 2003 Legitimate tax avoidance schemes do not render a
remove the size restriction that once applied to partner- contract of employment illegal. Thus, in Lightfoot v D &
ships. The Disability Regulations 2003 protect partners J Sporting Ltd (1996), L was employed as a head game-
in all partnerships against disability discrimination as do keeper and was assisted by his wife who initially received
the Sexual Orientation Regulations and the Religion or no remuneration from his employer. Later the em-
Belief Regulations all of 2003 in their respective fields of ployer entered into an agreement to pay one-third of L’s
operation and the Age Regulations of 2006. income to his wife to save some liability on L’s tax and

In this connection, it is worth noting s 23 of the Employ-
ment Relations Act 1999, which gives the government
power to extend employee status and rights to all workers

455