| September 2010 Description Employment Law - "Without Prejudice" Rule Trumps Public Disclosure The Employment Appeal Tribunal (EAT) has upheld the principle that ‘without prejudice’ communications are not permitted as evidence in court except in very clearly defined circumstances. Without prejudice communications are those which take place between the opposing sides in a legal dispute that are entered into with a view to reaching a settlement. Making such disclosures ‘without prejudice’ means that the negotiations can be undertaken without the fear that disclosures made for the purpose of settling the dispute will be produced in evidence later. In principle, the court will only allow the use of without prejudice material as evidence either when a failure to do so would act as a ‘cloak for perjury’ or to prevent a clear impropriety on the part of one or both parties. In a recent case, a woman who was claiming sex discrimination and victimisation against her ex-employer sought to produce in evidence communications made to her on a without prejudice basis during negotiations prior to settlement of an earlier claim. It was her contention that evidence regarding a refusal on the part of her employer to give her a reference showed that it had ‘reprisal in mind’ from that time onwards and had subsequently discriminated against her either by refusing to provide a reference or by giving her a poor reference when approached. Her ex-employer wished to prevent the evidence from being used. The Employment Tribunal and (on appeal) the EAT both declined to allow the material to be used as evidence despite the fact that it had already been made public as a result of ‘whistleblowing’ by the woman. We can assist in facilitating all negotiations and ensure your interests are protected where necessary. Contact Scott McDermott in our Edinburgh office orAlistair Cockburn in our Glasgow Office
Tax - HMRC Set Listed Building VAT Trap A recent case involving the VAT treatment of listed buildings illustrates a potential trap for those who convert such buildings. A listed building which has been ‘substantially reconstructed’ is a zero-rated supply, which means that the VAT incurred on the ‘approved alterations’ is recoverable. However, for this treatment to apply, it is also necessary that at least 60 per cent of the work carried out is ‘approved alterations’. Accordingly, a building which has been gutted and rebuilt will qualify. Herein, however, lies the problem: substantial reconstruction implies that the building has been reinstated to its former appearance and this is, in effect, a form of repair. This argues against the possibility of 60 per cent of the work involving ‘alterations’. HMRC’s argument is that work cannot be both reconstruction and alteration. The case in point only considered whether the property had been substantially reconstructed, but the indications are that HMRC wish to pursue their argument at a later date, so watch this space. Says Harry Smith, our Glasgow based Head of Housebuilders Unit, “This legislation has been around for a long time and this is the first case to pick up on the looseness of the wording of the sections relating to the VAT treatment of listed buildings. If HMRC are successful in their argument, it could have severe implications for developers of such properties.”
Company Law - Appeal Court Upholds Eight-Year Ban on Director A case concerning a company director who was disqualified from acting as a director serves as a reminder of the circumstances in which the court will reverse such a decision. It involved a director whose conduct was judged to have fallen below the standards of probity and competence appropriate for a person acting as a director of a company, after taking into account all the extenuating circumstances. The director involved had an IT company which became insolvent, owing £1.7 million. He allowed the company to continue to trade when insolvent, drawing more than £160,000 in remuneration in its final months. He had authorised expenditure when there was little realistic chance it could be met and so on. The company had also failed to meet its legal administrative requirements. The director was disqualified for eight years. He appealed against the decision to ban him. In considering whether leave to appeal should be granted, the judge was not allowed to alter the original decision unless there was an error of law, such as failing to take into account a relevant matter, failing to exclude an irrelevant matter or reaching a conclusion that was so extreme given the facts that it must embody an error of legal reasoning. On the basis that material facts had not been incorrectly dealt with by the lower court, no appeal could be allowed. Contact Ross Hood in our Edinburgh Office for advice on any company law matter.
Intellectual property - When Design Rights End, Economic Rights May Persist A design right lasts for only 25 years after the application to register the design has been made. Once the right to the design has ceased, other organisations can, in principle, make use of the design for their own purposes. Does this then mean that the design is entirely ‘up for grabs’? The answer to this question appears to rest to a large extent on the distinctiveness of the product and the effect the distinctive design characteristics have in influencing consumers to buy it. In a recent case, the makers of the well-known ‘Henry’ vacuum cleaners went to court to prevent another firm from using their designs. They sought an injunction to prevent the other firm from manufacturing and selling vacuum cleaners that had the same appearance as the Henry. The design right in the distinctive Henry design had lapsed. However, the manufacturers made their claim on the basis that a prospective buyer of the rival product would believe it to be a Henry and this would affect their buying decision. The other company would therefore profit because consumers would buy its products believing them to be Henrys. This is called ‘passing off’ in legal terminology. The High Court agreed that the Henry design was sufficiently distinctive to lead people seeing it to believe that the product on sale had been made by the manufacturers of the Henry, even if it carried a different brand name. The brand name of the copycat manufacturer was not a well-known brand. Says Raymond Mclennan “This case was exceptional because of the very distinctive characteristics of the Henry design and the ruling is not likely to apply to a wide range of circumstances. However, it does illustrate the wisdom of building a distinctive design and making it well-known in the market if there is a desire to retain the economic benefits of it when the formal design right expires.” We can advise you on any intellectual property matter. Please contact Raymond McLennan in our Edinburgh Office or Paul McNairney in our Glasgow Office | 
