news...corporate news autumn 2014 3 edwincoe.com the offer was expressed to be a “firm offer”...

INSIDE THIS ISSUE:

Beware Email Exchanges!

EMPLOYMENT LAW Changing Times for Collective Redundancy Consultation

INTELLECTUAL PROPERTY LAW CJEU Rules on Specsavers v Asda: A Win for Brand Owners?

CORPORATE & COMMERCIAL LAW

Prest v Petrodel ResourcesRelaxation of the Share Buyback Regime

Autumn 2014

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CorporateNews

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A recent High Court case, Proton Energy Group SA v Orlen Lietuva [2013] EWHC 2872 (Comm), serves as a useful reminder that contracts can be formed by an exchange of emails.

Beware Email Exchanges!

It appears that, even if not all the terms have been finalised, a court will apply an objective test to determine if, in the circumstances, the parties intended to be bound.

The Facts

�� P was a company trading in gas and petroleum.

�� O was a petroleum refining company.

�� P sent O an email to O with a “firm offer” to sell a consignment of oil blend. O responded by email suggesting some changes to the transaction to which P Agreed.

�� P responded on one outstanding issue by email stating, “Contractual price is fixed as per confirmed offer. All other contractual terms not indicated in the offer shall be discussed and mutually agreed between the parties on contract negotiations.” O replied with an email stating, “Confirmed.”

�� A few days later, O sent P a written contract. P made various amendments to the written terms and there were some further email exchanges. O did not open a letter of credit as required by the contract and a few days later O terminated negotiations.

�� P alleged that O’s failure to open a letter of credit or to take delivery of the oil was a repudiatory breach. P sued O for damages for breach of contract.

P’s ArgumentP’s argument included the following:

Editor’s Note

Welcome to the Autumn 2014 edition of our newsletter for legal personnel.

This issue covers a variety of useful articles and of particular interest to M&A lawyers, operating on both sides of the Atlantic.

Please keep an eye out for details of our future seminar programme scheduled to take place in 2015.

If you have any queries, please email or call me, or your regular contact.

Contents: Page

Corporate & Commercial Law Beware Email Exchanges! 2-3

Editor’s Note 2

Corporate & Commercial Law Prest v Petrodel Resources Limited and Others 4

Employment Law Changing Times for Collective Redundancy Consultation 5

Intellectual Property Law CJEU Rules on Specsavers v Asda: A Win for Brand Owners? 6-7

Corporate & Commercial Law Relaxation of the Share Buyback Regime 8

Charities & Non-profitConstruction

Corporate & CommercialEmployment

Financial Services & RegulatoryHotel & Hospitality

ImmigrationInsolvency & Restructuring

Insurance LitigationIntellectual Property

IT & MediaLitigation & Dispute Resolution

Private ClientProperty

Tax Services

Myri Papantoniou, Senior Associate

�� an objective appraisal of its words and conduct demonstrated that the parties intended to be bound immediately after “confirmed” was inserted into the email exchange


Russel Shear Head of Corporate & Commercial

t: 020 7691 4082e: [email protected]

Corporate NewsAutumn 2014

3

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�� the offer was expressed to be a “firm offer” which was language requesting a definite acceptance or rejection in response

�� there was a same day time limit which required an immediate binding commitment

�� this was spot business which required an urgent commitment from O and this was evident by the fact that there was little time until performance of the deal

�� the offer expressly provided for the negotiation of further, more detailed terms and the parties agreed to be bound despite these outstanding terms, and

�� the subsequent conduct was indicative of the existence of a contract, such as P contracting to purchase the oil.

O’s ArgumentO argued that the terms were to be agreed later and no contract had been concluded.

Consideration of the Requirements for a Binding ContractIn its judgment, the court reiterated the legal principles applicable to the question of whether a legally binding contract has been concluded, as set out in RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co [2010] 1 WLR 753.

In summary, the judge stated that whether or not there is a binding contract between the parties and, if there is, upon what terms, depends upon what they have agreed. In order to identify what

has been agreed the court must look at what was communicated between them by words or conduct and consider whether objectively they intended to create legal relations and agreed upon all the terms which they regarded, or the law requires, as essential for the formation of legally binding relations.

It further iterated that the fact that some terms may not have been finalised does not mean that a legally binding agreement cannot be formed.

The Decision

The court held that the parties had entered into a binding contract and that there were “powerful objectively ascertainable indications” present in this case that a legally binding contract had been concluded. For example, use of the words “firm offer.”

The court further held that the market practice for this type of sale meant that, for reasons of speed, parties would normally agree the main terms and leave the details to be discussed and agreed later. It, therefore, agreed with P’s analysis that it was a classic spot deal.

On these facts, following the initial email exchange, O had entered into a binding contract with P. O’s subsequent withdrawal from the contract was a repudiatory breach (which P accepted) and, as a result, P was entitled to damages.

For further information with regard to this article, contact:

Myri Papantoniou Senior Associate

t: +44 (0)20 7691 4064 e: [email protected]

For individual profiles please visit our website:

www.edwincoe.com

The court held that the parties had entered

into a binding contract and that there were

“powerful objectively ascertainable

indications”

If there is any risk at all that a contract may be unintentionally entered into, the words “subject to contract” or similar must be used in all correspondence.

PRACTICAL TIPS

If a party wishes it and its counterparty to be bound, language such as “firm and binding offer” and a clear follow-up message “confirming the deal” should be used so that there can be no doubt of the parties’ intentions to bind and be bound.

If a party does not intend to be bound by any terms received from the other party during any stage of negotiations, it should raise an immediate objection and avoid using, throughout correspondence, any language that could be construed as being indicative of commitment.

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Prest v Petrodel Resources Limited and Others [2013] UKSC 34

Whilst corporate personality has been fundamental to English law for over a century, the application and extent of piercing the corporate veil has long been the subject of debate.

The Supreme Court sought to clarify this ambiguity in the recent landmark case, Prest. In the leading judgment, Lord Sumption revealed that the corporate veil had historically only been pierced in a small number of cases, which involved principles he labelled as “concealment” and “evasion”. The concealment principle merely looks behind the corporate facade to discover the facts concealed by the corporate structure. The evasion principle enables the court to disregard the corporate veil if there is a legal right against the person in control of it which exists independently of the company’s

Salomon v A Salomon and Co Ltd [1897] AC 22 established the principle of corporate personality: a company is a legal entity, distinct and separate from its shareholders and directors. To this principle arose the exception, “piercing the corporate veil”: disregarding the company’s separate legal entity.

involvement, and a company is interposed so that the separate legal personality of the company will defeat the right or frustrate its enforcement.

Prest was a divorce case for ancillary relief. Central to proceedings were a number of properties allegedly owned by companies controlled by the husband. Whilst the Supreme Court held that the corporate veil was not to be pierced, as only the concealment principle applied, the properties in question were ordered to be transferred to the wife on the grounds that the husband was the beneficial owner. It remains to be seen whether Prest has satisfactorily clarified the circumstances in which the corporate veil will be pierced. The case has however achieved certainty as to the existence of the exception to corporate personality established by Salomon.


Sophia Mew, Associate


Sophia Mew Associate t: +44 (0)20 7691 4184e: [email protected]

For individual profiles please visit our website: www.edwincoe.com

‘Whilst corporate personality has been fundamental to English law for over a century, the application and extent of piercing the corporate veil has long been the subject of debate.‘

Edwin Coe Blogs

For more information on our blogs, or if you would like to join our mailing list, please contact our Marketing team at [email protected]

��Corporate & Commercial

��Charities & Non-Profit

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��Insolvency & Restructuring

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��Tax & Private ClientCor

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So goes the adage “justice has to be seen to be done and seen to be believed”. A recent case concerning employees of Woolworths is one where the decision is so surprising that it has to be seen in black and white.

Changing Times for Collective Redundancy Consultation

Woolworths, a once popular high street store, went into administration in 2008. All its stores were closed shortly afterwards resulting in large scale redundancies. The USDAW Trade Union brought a claim that there had been a failure to inform and consult over collective redundancies.

The law on collective redundancies provides that there is a duty to collective consult with employee representatives where an employer proposes to dismiss as redundant 20 or more employees at the one establishment within a period of 90 days or less. In the Woolworths case the words “at one establishment” came under the scrutiny of the Tribunal. Woolworth’s Administrators took the view that the individual stores were separate establishments and they therefore only collectively consulted with those stores which had 20 or more employees affected by the closures. This meant that over 1,200 employees missed out on the collective consultation process. The USDAW, as the employee representative, brought a claim for those 1,200 employees for the failure to inform and consult. This failed at the hearing in the Employment Tribunal as the Tribunal followed the established case law finding that the stores were separate “establishments”.

So far, so good, however, the Employment Appeal Tribunal took a very different view. The finding was in effect that the words “at one establishment” should be disregarded as they were incompatible with the EU Collective Redundancies Directive. This

led to a finding that there had indeed been a failure to inform and consult with those 1,200 employees. The decision is being appealed and there is a reference for the European Court of Justice in a Northern Irish Case (Lyttle and others v Bluebird UK Bidco 2 NIIT/00555/12) for clarification on the meaning of the term “establishment” and whether the duty to collectively consult is triggered when 20 or more employees are dismissed effectively at one site or when the dismissals take place anywhere across the employer’s business.

Pending an appeal in the Woolworths’ case where does this leave employers now? The short answer is in the soup. Compensation for failure to collectively consult can be up to 90 days’ gross pay for every affected employee, and so a failure to comply with the requirements can be a very costly exercise. In practice this means that many employers may have to opt for collective consultation in circumstances where they would not have previously done so. This means more expense as the employer is then tied into a 30 day minimum consultation period (or 45 days if there are more than 100 affected employees). A word of warning; employers who artificially separate redundancies into two or more batches to avoid having to consult with the second batch, will still face claims for failure to inform and consult.

For those seeking to follow the Woolworths case this is under the lead case of USDAW v Ether Austin Limited (in administration) UKEAT/0547/12.

Edwin Coe Employment team

EMPLOYMENT LAW

‘Compensation for failure to collectively consult can be up to

90 days’ gross pay for every affected

employee, and so a failure to comply with

the requirements can be a very costly

exercise.‘


Alexandra Carn Partner

t: +44 (0)20 7691 4165e: [email protected]


www.edwincoe.com

6

�� two shaded logo marks containing the word “Specsavers” as follows:

�� an unshaded logo containing the word “Specsavers” as follows:

�� a wordless logo mark as follows:

CJEU Rules on Specsavers v Asda: A Win for Brand Owners?

Can a superimposed word mark over a wordless logo mark constitute use of the latter mark? Is the use of a colour relevant to the global assessment of the likelihood of confusion and unfair advantage? Well the Court of Justice of the European Union (CJEU) recently provided guidance in relation to just that in Specsavers International Healthcare Ltd and others v Asda Stores Ltd.

BackgroundIn 2009 the supermarket retailer, Asda, launched an advertising campaign for optical products using the slogans “Be a real spec saver at Asda” and “Spec savings at Asda” as well as the following logo:

Karen Lee & Nick Phillips

INTELLECTUAL PROPERTY LAW

‘For a trade mark to possess distinctive character, it must allow consumers to identify the goods and services offered under that mark as originating from a particular undertaking so as to distinguish it from other undertakings.‘

In response, Specsavers, the largest chain of opticians in the UK and Asda’s main competitor, brought an action before the High Court of Justice (England & Wales) against Asda on the grounds of Community Trade Mark (CTM) infringement. Specsavers relied on the following CTMs in its action:

�� two word marks for “SPECSAVERS”


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Whilst Specsavers’ logos are registered in black and white, in practice Specsavers uses them in a particular shade of green.

In October 2010, the High Court dismissed Specsavers’ infringement claims and moreover, revoked the wordless logo mark for non-use. On appeal, the UK Court of Appeal held in 2012 that Specsavers’ CTMs could prevent Asda from using the slogans and logo in its advertising campaign. However, in order to make a ruling on the dispute concerning the wordless logo mark, the Court of Appeal referred a number of questions to the CJEU and stayed the proceedings. Those questions are essentially as follows:

�� Can there be genuine use of a logo mark where it has been used with a word mark superimposed over it? Does it make a difference if the combination of the two marks is itself a registered CTM?

�� In assessing likelihood of confusion and unfair advantage, does it matter if the proprietor has used the mark extensively in a particular colour such that it has become associated with it, even if the mark was registered in black and white?

�� In assessing likelihood of confusion and unfair advantage, is it of relevance if the alleged infringer is also associated with that particular colour?

CJEU Decision

Genuine use For a trade mark to possess distinctive character, it must allow consumers to identify the goods and services offered under that mark as originating from a particular undertaking so as to distinguish it from other undertakings. The CJEU explained that such distinctive character may result from use of the mark as a component of a registered trade mark, or in conjunction with another registered trade mark. In both cases, it is sufficient that, in consequence of such use, the relevant public perceives the goods or services as originating from a particular undertaking.

The CJEU therefore viewed that the condition of “genuine use” may be fulfilled where a word mark is superimposed over a figurative mark,

and the combination of those two marks is itself a registered CTM, provided that the differences between the form in which the trade mark is used and that in which it is registered do not change the distinctive character of that trade mark as registered.

Relevance of colourIn response to the next question, the CJEU reiterated that according to settled case law, the existence of a likelihood of confusion and unfair advantage must be assessed globally, taking into account all relevant factors to the circumstances of the case.

It therefore follows that the use of the mark in colour should be taken into consideration as part of the ‘global appreciation’ assessment of analysis.

Association of third party with a particular colourIn this instance, the CJEU found that the fact that a third party making use of a sign which allegedly infringes the registered trade mark is itself associated, in the mind of a significant portion of public, with the colour or particular combination of colours which it uses for the representation of that sign is relevant to the global assessment of the likelihood of confusion and unfair advantage.

Accordingly the fact that Asda is itself associated with the colour green which it uses for the signs alleged to infringe Specsavers’ trade marks, could result in a reduction of the likelihood of confusion or association between those signs and Specsavers’ trade marks.

CommentsWhilst it is now for the Court of Appeal to decide on the case in light of the CJEU’s guidance, the CJEU guidance should be seen as welcome news to brand owners. The decision highlights the value of logo marks which can be enforced against third parties even where they are not used on their own, provided that the distinctive character of the logo mark is unaltered.

The decision also reinforces the benefits of registering a mark in black and white which provides broader protection in that it can be used in all colours with the additional benefit of enhanced distinctiveness of a particular colour through use without the need to register the mark in that particular colour.

Karen Lee & Nick Phillips


Karen Lee Associate



www.edwincoe.com

‘The decision highlights the value of logo marks which can

be enforced against third parties even

where they are not used on their own,

provided that the distinctive character

of the logo mark is unaltered. ‘


8

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Relaxation of the Share Buyback Regime

The law relating to share buy backs by private limited companies has been amended with the introduction of the Companies Act 2006 (Amendment of Part 18) Regulations 2013 (the “Regulations”).

The key changes introduced by the Regulations for all private limited companies generally are:

�� The Regulations have introduced a new method of funding a share buy back.

Private limited companies may now, if expressly authorised to do so by their articles, buy back their own shares with cash up to an amount in a financial year not exceeding the lower of £15,000 or the value of 5% of its share capital.

In making a purchase out of cash, a company does not need to concern itself as to whether the purchase is out of distributable profits or not. Therefore, provided the amount falls within the threshold figures, companies may purchase their own shares out of capital without following the usual protracted procedure.

In its “Simple guide to the Companies Act 2006 (Amendment of Part 18) Regulations 2013” published on 18 November 2013, the Department for Business, Innovation and Skills advises that a company may use this new de minimus exemption in tandem with a purchase from capital. They have also

advised that shares bought back under the de minimus exemption must be purchased at their normal value, as the regulations do not provide for the treatment of shares bought back at a premium or discount.

�� The requirement for approval of an off-market share buy back contract has been reduced from a special resolution to an ordinary resolution.

�� Private and unlisted public companies may hold treasury shares, meaning they do not need to cancel any shares they have bought back from shareholders. They can hold the shares in treasury and may then re-sell the shares at a later date if required.

The Regulations have further relaxed the buy back regime where the buy back is for the purpose of an employees’ share scheme. The ompany may be generally authorised by its shareholders to make multiple off-market purchases for a five year period and payments for shares may also be made in instalments. The requirements for a buy back out of capital have been reduced and the process is now by way of a special shareholder resolution supported by a solvency statement.

Eoin Broderick, Associate

Edwin Coe LLP 2 Stone Buildings

Lincoln’s Inn London WC2A 3TH



Eoin Broderick Associate



www.edwincoe.com

‘The Company may be generally authorised

by its shareholders to make multiple off-market purchases for a five year period and

payments for shares may also be made in

instalments.‘


Edwin Coe LLP is a Limited Liability Partnership, registered in England & Wales (No.OC326366). The Firm is authorised and regulated by the Solicitors Regulation Authority. A list of members of the LLP is available for inspection at our registered office address: 2 Stone Buildings, Lincoln’s Inn, London, WC2A 3TH. “Partner” denotes a member of the LLP or an employee or consultant with the equivalent standing. This newsletter concerns the law in England and Wales and is intended for general guidance purposes only. It is essential to take specific legal advice before taking any action.

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news...corporate news autumn 2014 3 edwincoe.com the offer was expressed to be a “firm offer”...

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