Construction Matters

Walking a fine line: Copyright Infringement
24 March, 2017

A recent case, Signature Realty Ltd v Fortis Developments Ltd and another [2016] EWHC 3583 (Ch), 17 February 2017 reminds us that planning permission drawings, published on the local authority’s website are still the property of the architect in terms of copyright.  We should not confuse the council’s stipulation that a building must be developed as per the drawings submitted as an implied permission for anyone to utilise the drawings freely. A copyright licence must still be obtained from the copyright owner.

 

 

The facts

Signature noticed an opportunity to develop a building into student accommodation for foreign investors to develop and sell on. The foreign investors formed a company (Wordsworth Realty Limited) and whilst in the process of obtaining planning permission exchanged contracts with Branchester, the original owner.  The planning permission was granted on the condition that the development was carried out in accordance with the drawings of Signature’s architect C&W.  The drawings were published together with details of the planning permission on Sheffield Council’s Planning Portal.

Wordsworth failed to complete on two occasions and the property was consequently sold to another developer Fortis Developments Ltd.

Fortis subsequently began to download the architectural drawings available on the Sheffield Planning Portal for estimation and marketing purposes. Signature had the copyright ownership assigned to it by C&W so that it could bring a claim for damages. Signature argued that the copyright infringement occurred at the point of use for marketing and estimation purposes and continued by use of the drawings for development and construction of the site.

The judgment

The decision of the judge was an unsurprising one; the use of the drawings was deemed a copyright infringement.

However, it is interesting to note that, in other situations an architect may fail to claim copyright infringement if they complete the drawings in accordance with their client’s instructions and are then paid their professional fee in full. If the client then goes on to gain successful planning permission and subsequently sells the site the implied licence between an architect and their client can be transferred to an incoming purchaser of the site (Blair v Osborne & Tomkins [1971] 2 QB 78).

In any event, no assumptions can be made. The case in question highlights that there is a fine line between utilising the planning permission attached to the land for the benefit of constructing a future development and copyright infringement through use of the plans on which that planning permission was granted. Therefore, any developer acquiring a site must ensure they obtain a collateral warranty which includes a copyright licence or that they appoint the architect (if they are still the copyright owner) to complete the design of its development.

 


The big question……employee, worker or self-employed?
2 March, 2017

It is common place in the construction industry for a company to engage an individual to provide services on its behalf to an end client, and to want that individual to appear to the client to be part of the company. However, at the same time the relationship between the individual and the company is often said to be a business one, with the company arguing the individuals are self-employed contractors rather than employees or workers of the company.

The recent Court of Appeal (CoA) decision of Pimlico Plumbers Ltd and another v Smith [2017] EWCA Civ 51, following on from the high-profile cases of Uber and Citysprint, considered the important question of whether individuals are classed as employees, workers or self-employed. By doing so, the CoA highlighted the difficulties facing the above popular business model.

Why does it matter?

An individual’s status determines their rights and obligations.

Some core legal protections only apply to employees, such as the right not to be unfairly dismissed and the right to receive statutory redundancy payments; while workers are not entitled to these rights, they are entitled to minimum wage, holiday and sick pay; and, a self-employed/independent contractor’s rights are very limited since they are viewed to be operating as a business in their own right.

It could be that classifying an individual as self-employed is not an issue whilst both parties are happy with the relationship (unless, HMRC were to look into it!), but if a disgruntled individual challenges their status and is found to be a worker or employee, the company is in a difficult position.

The Pimlico Plumber

Mr Smith was registered as a self-employed plumber (and benefitted from the associated tax breaks) and worked exclusively for Pimlico Plumbers from 2005 until 2011, when after a period of illness his contract was terminated. He brought a number of claims including unfair dismissal, wrongful dismissal, holiday pay and discrimination claims.

This was an interesting case with elements supporting employment or worker status, whilst others indicated that Mr Smith was self-employed.

Factors supporting employment/worker status

The relationship was subject to the terms of a written agreement along with the company’s contractual manual. The manual provided for a minimum of 40 hours per week over 5 days and included stipulations about wearing company uniform and using a company van with Pimlico Plumbers’ logo.

The drafting of the agreement also suggested Mr Smith was to provide ‘personal service’ and it contained onerous restrictive covenants. All such provisions would suggest employment or worker status.

Factors supporting self-employed status

In addition to the agreement stating Mr Smith was self-employed, that he was registered accordingly and invoicing Pimlico Plumbers, under the agreement the company was not obliged to provide Mr Smith work and he was not required to accept it; Mr Smith could arrange for an external plumber to perform the work in his place (subject to the prior approval of Pimlico Plumbers); and there was an informal practice of effectively swapping jobs/shifts with other Pimlico Plumbers.

The Decision

In the first instance, considering the written agreement between the parties and the reality of the working relationship, the Employment Tribunal found that Mr Smith was a worker of Pimlico Plumbers – rather than an employee, meaning a number of his claims were dismissed.

Pimlico Plumbers appealed to the Employment Appeal Tribunal and then to the CoA on the grounds Mr Smith was not a worker. In coming to its decision that it agreed with the Employment Tribunal, the CoA considered two main issues: (i) was there a requirement to perform work personally?; and (ii) was Pimlico Plumbers a client of Mr Smith?

The CoA concluded that the drafting of the contract and the fact that there was not a truly ‘unfettered right of substitution’, meant that Mr Smith had been required to perform the work personally.

If Pimlico Plumbers was in fact a client of Mr Smith it would support the argument that he was acting as a business in his own right, rather than as an employee or worker of Pimlico Plumbers. The CoA deemed that in light of all the facts (including the contractual requirement of a minimum number of hours, irrespective that Mr Smith had frequently worked fewer hours) Pimlico Plumbers was not a client of Mr Smith. Rather, Mr Smith was subordinate to, and an integral part of, Pimlico Plumbers.

Advice

Although fact specific, this case highlights that irrespective of what you label the relationship, the courts will look behind this and examine the reality of the situation.

In short, businesses need to think carefully about how they engage people if they want to avoid creating an employer/ employee or employer/worker relationship – particularly if the individuals are providing services to a company’s client.

For more information on similar employment topics please visit our employment blog  or for advice on this topic please contact Erica Dennett or Chris Hovenden


Brexit – Shaping Britain’s future
28 February, 2017
by: Cripps

Please take our two-minute Brexit survey to let us know how you think Brexit might impact your business.

To what extent do you believe you will be better or worse off once the UK has left the EU? What do you think the Government’s key priorities should be when negotiating new deals?

Now that the Prime Minister Theresa May has outlined Britain’s broad objectives for the forthcoming negotiations with the European Union and announced that Article 50 will be triggered before the end of March, we are keen to understand the current business sentiment and potential future plans, following these recent developments.

We would be grateful if you could take a few minutes to complete this survey, which we are conducting in association with Insider Media. The closing date is 24 March 2017.


Late payment of liquidated damages, a qualified debt?
17 February, 2017

In Mailbox (Birmingham) Limited v Galliford Try Construction Limited [2017] EWHC 67 (TCC), Galliford challenged the validity of the adjudicator’s decision to determine Mailbox was entitled to the enhanced interest on the liquidated damages awarded pursuant to the Late of Commercial Debts (Interest) Act 1998 (Late Payment Act).

The background

GTC agreed to carry out refurbishment works of a mixed use office and retail space in Birmingham under a JCT Design and Build Contract (2011 edition) as further amended by the parties. Mailbox then purported to determine GTC’s employment and a dispute arose between the parties as to responsibility for the delay, liability of liquidated damages, the proper valuation of the final account and lawfulness of the termination by Mailbox.

It was determined by the adjudicator that Mailbox was entitled to liquidated damages, interest on the sums awarded in adjudication pursuant to the Late Payment Act and an order for Mailbox to pay 25% of the adjudicators fees and expenses with GTC to foot 75% of the bill.

Decision

The main challenge was actually whether the adjudicator’s decision that an initial assignment and subsequent re-assignment of the contract between Mailbox and the Security Trustee were valid – they were as the assignment was an equitable assignment pursuant to Section 136(1) of the Law of Property Act 1925 and the re-assignment was also valid and took place on or before the date of the commencement of the adjudication proceedings.  Therefore the adjudicator did have jurisdiction to determine the dispute and this decision was valid.

However, an interesting point to note here is how the court determined the interest for the late payment of liquidated damages. The Court considered Section 1(1) of the Late Payment Act and more particularly Section 3(1) which provided that a qualifying debt is, ‘a debt created by virtue of an obligation under a contract to which this act applies.. .’

Jervis v Harris [1995] EWCA Civ 9, shed light on the difference between a debt and damages for breach of contract. In that case a debt was defined by a two limb test (i) the sum payable must be fixed and (ii) the trigger must be a primary duty under contract (i.e. a duty to perform the promises in the contract) and not secondary (a party failing to perform their duties under the contract). This two limb test read in conjunction with the Late Payment Act makes it clear that as liquidated damages are generally for a party failing to perform their duties under contract, they will rarely be considered a debt.  

The parties agreed that liquidated damages did not amount in this case to a qualifying debt but Mailbox submitted that GTC should still have to pay at the increased rate under the act and interest could not be claimed under the act for failing to pay the liquidated damages assessed in the adjudication.  The Court decided that is was not unreasonable for GTC to dispute jurisdiction and so it should not be punished by having to pay an enhanced rate of interest.


Construction Notices: Substance over form
2 February, 2017

As we all know the process of contractors being able to serve interim payment notices and employers being required to serve pay less notices is a creature of statute, derived from the mandatory requirements of the Housing Grants, Construction and Regeneration Act 1996.  Both provide assistance to contractors in getting paid for work during the currency of a contract and an element of certainty over any potential challenge to a contractor’s entitlement to be paid.

What Constitutes an Interim Payment Notice

In Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) Limited the court had to consider whether an excel workbook called “ESH724-Logan Interim Payment Notice – Valuation No.24 – 20092016.xlsx” containing a worksheet called “Interim Payment Notice” could constitute an interim payment notice in circumstances where it was sent by email in the context of final account discussions and was not referred to by the contractor as constituting an interim payment notice under the contract until the last date for the employer to serve a pay less notice in respect of it (if it was a valid interim payment notice) had passed.  Notwithstanding the fact that the contractor did not make clear at the time its intention that the document was served as an interim payment notice the court found for the contractor.  Viewed objectively the document was sufficiently clear and free from ambiguity to stand as an interim payment notice.  The fact it was produced in the context of a final account discussion did not affect that assessment.

What Constitutes a Pay Less Notice

This being the case the court had to consider whether a document which on its face had the appearance of a final certificate could stand as a pay less notice in response to the interim payment notice.  If it could,  it was common ground that it would be sufficient to prevent the sums set out in the interim payment notice from becoming due.  While the document did not on its face indicate that it was a pay less notice (which was understandable given the employer did not view the spreadsheet as requiring a pay less notice to be served) the court determined that the final certificate satisfied all the requirements of a pay less notice.  It made clear how much the employer thought was due and why.  That being the case the question the court had to consider was whether if the sender of the document did not intend it to stand as a pay less notice, could it be treated as such.  The Court determined the reasonable recipient would have understood it to be a direct response to the documents provided within the excel spreadsheet.  It being determined that the excel spreadsheet stood as an interim payment notice, the response could be treated as a pay less notice in response to it.

What this means

The overriding theme of the decision is that the parties should be prepared to look at the substance of documents against the contractual framework in order to interpret their potential effect.  That a document is not overtly described as a pay less notice or indeed an interim payment notice does not mean it cannot stand as such, if all of the legal formalities are otherwise satisfied and it is sufficiently clear (to a reasonable recipient) what purpose the document is intended to serve


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