Confidentiality Duties Affecting Directors and Shareholders in Business Sales

Investors and directors may have to manage potentially competing obligations when they are involved in negotiations to sell shares in a private business.

In Richmond Pharmacology Ltd v Chester Overseas Ltd and others [2014], the court explored whether an investor, the defendant, had breached the confidentiality clause in a shareholders’ agreement by making disclosures to prospective purchasers relating to its share holdings in the claimant company.

Breaches of statutory duties under Companies Act 2006 were also considered in relation to disclosures made by the defendants’ representatives as directors on the board of the claimant.

Protecting Confidential Business Information

Protecting confidential information is becoming an increasingly important concern for businesses worldwide.

The proliferation of digital mediums, the internet and smart phones means that records of sensitive data are easy to copy. Combined with the speed in which information can spread through channels such as social media, this greatly increases the potential damage which a confidentiality breach may cause.

The problem of employees distributing confidential information is easier to regulate when they are still working in the business as all employees are subject to a duty of good faith and fidelity to their employers.

However, once an employee ceases to work in a company a serious problem can potentially arise. Apart from highly secretive trade secrets, the duty of good faith does not cover confidential information once an employee leaves his job.

Therefore, in the absence of any agreement to the contrary, ex-employees are free to use the contacts and information they have learned in their next form of employment to their advantage.

Trademark Survival: Bear Grylls v Bear Knifes

A dispute over naming rights recently arose between a company representing the popular TV adventurer Bear Grylls and Bear Blades, a small knife manufacturer in Devon.

It appears that lawyers for Bear Grylls Ventures were concerned about the potential for Bear Blades to piggy-back off the goodwill currently generated by Mr Grylls in the adventure goods market.

In particular, the firm was worried about the application to register the logo, ‘Bear. Blades.Steel.Strength.Utility’.

Lawyers for Bear Grylls Ventures sought to have the newly formed company’s website changed so as to avoid customer confusion.

Employers Must Exercise Caution in Dismissal Procedures

An employment tribunal found that former BBC technology chief, John Linwood was unfairly dismissed by the corporation.

This was despite the fact that his own conduct over the management of the scrapped Digital Media Initiative, a project to move content previously stored on tape online, contributed to the dismissal.

The main concern for the Tribunal was the BBC’s failure to follow correct procedure during the investigation and the way in which it carried out the dismissal.

Other employers should take note.

Monkey Selfie Copyright Row Remains Unresolved

British photographer David Slater has faced repeated refusals from Wikimedia, the US organisation responsible for running Wikipedia, the online encyclopaedia, to take down photographs taken from his camera.

Although it was not Mr Slater’s hands that took the pictures but those of a black macaque monkey, the photographer is asserting that he owns the copyright to the pictures.

The pictures have since been deemed as the ‘monkey selfies’.

A Case of Suspicious Copyright Licence Fees for the Conan Doyle Estate

A US federal court recently ordered the Arthur Conan Doyle estate to pay legal costs ($30,679.93) to a claimant who mounted a successful copyright challenge against the estate.

Leslie S. Klinger, a co-editor of a forthcoming anthology of new stories about Sherlock Holmes and Dr Watson, brought the action after being informed by the estate that his publisher would have to pay a licence fee in order to publish the new stories.

Professional Negligence Over Yacht Advice Results in Only Nominal Damages

Solicitors that gave professionally negligent advice on the purchase of a luxury yacht managed to escape lightly after a court awarded only nominal damages to the claimant.

The recent High Court case revolved around the sale of a 200 foot yacht by luxury property developer, Christian Candy, to US telecoms magnate, Michael Hurtenstein, which suffered major engine failure within an hour of the purchase.

Michael Hirtenstein had bought the £3.6m yacht under the impression, supported by his solicitors’ advice, that its seller had personally guaranteed the condition of the yacht through a warranty in the contract.

After the Yacht suffered the engine failure, and when no such guarantee was found to exist, Hirtenstein commenced a claim for professional negligence against his solicitors.

Interpreting Restrictive Covenants in Employment Contracts

Employers and employees should ensure that the restrictive covenants included in employment contracts are appropriate and carefully drafted. Employers must ensure that they are adequately protected while employees should aim to avoid being unduly restricted if they move to a new job.

It should be noted that the courts are willing to enable employers to protect themselves proportionately but clauses that are drafted to widely are likely to be unenforceable. At the same time the recent case Prophet PLC v Huggett [2014] makes it clear that employers should make sure that the specific restrictions will actually be effective in offering them protection.

What Can be Done to Combat the Streisand Effect for Individuals and Businesses?

The Streisand effect refers to the adverse reaction generated from trying to conceal data from publicity whereby more attention is drawn to the information rather than repressing it.

It was coined by Mike Masnick following the suit filed by Barbara Streisand to have photographs of her house removed from the internet. Prior to the suit, the photographs had only been downloaded six times but once the suit was filed, visits to the site increased to 420,000.

Businesses Battling Dissatisfied Bloggers

Internet phenomena such as social media and review sites have given ordinary individuals extraordinary power by providing them with platforms to make their voice heard by the world at large. This is a great thing in many ways as people on the ground can pick up important news in a few seconds and mistreated customers can call out abusive businesses in real time.

However, that power comes with a degree of responsibility as a heat of the moment post on a website can have lasting effects.

The possibility of lone bloggers disrupting sales, or even bringing down a business, should by now be recognised by all businesses. With customers increasingly using online reviews to assure themselves of the reputation of a given business, the presence of a scathing review or blog post about the business can easily translate into lost sales.

Are the Current Laws Adequate for Social Media?

Since the explosion of social media services such as Twitter and Facebook there has been a gradual proliferation of headline-grabbing legal slip-ups by users and also deliberate criminality.

The House of Lords Select Committee on Communications has released a report dealing with criminal offences committed through the use of social media.

Although the impetus behind the report was the widely held belief that the current law on permitted behaviour in social media was inadequate in the 21^st century, the Committee (tentatively) concluded that the current law is “generally appropriate”.

This comes at a time when 34m people in the UK use Facebook and 15m use Twitter.

Is Your Business Ready for Tougher EU Data Protection Laws?

The EU Commission has recently overhauled data protection legislation which means significant changes will be implemented over the next 12 to 24 months.

Individuals have a right to protection of their personal data, and the new legislation standardises data protection across the EU. It offers a high level of protection for personal data to individuals who will be permitted to make claims against companies that mishandle personal data.

Fines for noncompliance are steep and can run up to the larger of €100 million or 5% of annual income. Businesses and marketing firms which collect personal data will need to change their practices in a relatively short period of time to comply. All terms and conditions, and opt-in procedures are likely to need reviewing and updating.

The Effect of Jurisdiction on Expert Evidence and Damages in Insurance Claims

Insurers should take note of the rules relating to expert evidence and damages where an accident happens abroad.

Private international law deals with a number of important considerations in international civil cases, ranging from the determination of the applicable law to the selection of the jurisdiction where the case should be heard.

The recent case of Wall v Mutuelle Insurance de Poitiers Assurances [2014] has helped to clarify some of the issues arising out of the Rome II directive and establish a number of important principles in relation to insurance claims which have a cross border element.

In particular, the Court laid down specific guidelines on evidentiary rules and the assessment of damages.

Heroism Bill Incites Strong Reaction from Politicians and Lawyers

The Social Action, Responsibility and Heroism Bill, is a government bill focused on protecting employers acting responsibly and emergency response services from litigation.

The ‘Heroism Bill’ as it has been dubbed has been met with strong reactions from the legislative and legal community.

The Dramatic Effects of ‘Fundamental Dishonesty’ on Personal Injury Claims

Insurers are likely to have a stronger means to tackle dishonest personal injury claims in future.

The Criminal Justice and Courts Bill includes Clause 45, which addresses personal injury claims where the court has found fraudulent or inflated claims for compensation.

If the claims are based on ‘fundamental dishonesty’, Clause 45 allows the court to dismiss the case entirely, including any genuine underlying claims. An exception may be made for the genuine claims if the claimant would suffer ‘substantial injustice’ in the face of a complete dismissal.

Furthermore, in the event of a finding of fundamental dishonesty, a court may order the defendant’s costs to be paid by the claimant. As well as aiding insurers in the fight against dishonest claims, this should also go some way towards disincentivising the claimants that make them.

Abdul Hakim Belhaj Rendition Damages Case Heard in Court of Appeal

In 2012, Abdul Hakim Belhaj and his wife brought an action against the British government and its intelligence agencies, alleging that ministers had participated in Belhaj’s unlawful abduction and rendition.

In 2004, Belhaj was kidnapped in China and transported to Libya where he was subsequently tortured – with his wife forced to watch – further to his status as a leader in the uprisings against the Gaddafi-regime during 1994-1998.

Following a preliminary hearing in 2013, the High Court last December ruled that, although Belhaj had a good claim, pursuing it in English courts would jeopardise national security. It held that because the claims were necessarily related to the actions of US, Chinese, Malaysian, Thai and Libyan officials, the allegations were non-justiciable in the UK.

Belhaj has appealed that decision.

Leading Mortgage Company publishes latest monthly update

John Charcol, the leading independent mortgage experts, have published their regular monthly newsletter industry update, “Much Ado About Mortgages”, offering a roundup of the latest mortgage related news and topical stories from their experts. The key stories include:

All change on rate rises
by Simon Collins, Technical Mortgage Expert, who gives his monthly update on the state of the mortgage market, and the about turn on the expected rate rises.

Could an Interest Only Mortgage be right for you?
by Alistair Hargreaves, who says that contrary to popular belief, interest only mortgages are still available – for very specific circumstances. Could interest only be right for you?

Perplexing Polls miss the point
Ray Boulger’s latest blog says we should take polls in press releases with a pinch of salt

Getting your house in order – why credit report is important
Elena Todorova explains why your credit score is important and how to make sure it’s correct

Equity Release – your path to a comfortable retirement
Towergate Financial ask could equity release mean you’re sitting on a comfortable retirement?

For more information, visit http://www.charcol.co.uk/

Copyright Issues with a Foul-Mouthed Teddy Bear

The proliferation of YouTube stars and home movie producers has created some interesting issues for intellectual property lawyers.

According to a lawsuit filed in the US District Court in Los Angeles, Seth MacFarlane, Universal Pictures and Media Rights Capital are being sued for alleged copyright infringement in relation to their hit comedy ‘Ted’ which starred a vulgar, talking teddy bear. The movie successfully grossed $550m worldwide.

The plaintiff, Bengal Mangle Productions, created a screenplay and a corresponding web series featuring a vulgar teddy bear named Charlie. ‘Acting School Academy’, as a web series, received over 1.2m views between July 2009 and June 2012.

Charlie the Abusive Teddy Bear, as the spin-off to the original web series, Acting School Academy, was exhibited on Youtube, IMDB, and Blip.tv, and continues to be exhibited online.

Property Buyers May Benefit from Land Registry Taking Control of Local Land Charges Register

Management of the local land charges register is set to be transferred from local authority to central control as the Land Registry becomes the sole registering authority for Local Land Charges (LLC). This is despite 95% of the 620 respondents to an earlier public consultation disapproving of the proposal.

Instead of the maintenance and delivery of separate land charges lists, maintained by 348 separate local authorities, a ‘one-stop shop’ digital search service will be implemented.

The rationale behind the reform involves making registration a much easier process as well as ending the ‘post-code lottery’. Fees for local authority searches currently range from between £3 and £96 while search completion can take between 1 and 42 days.

Refusal of Gay Cake Order May Lead to Sticky Legal Problems

Businesses must be aware of their responsibilities to avoid discrimination in all its forms whether they are dealing with employees, customers, suppliers or other stakeholders.

A cake manufacturing business in Northern Ireland is the latest business to end up attracting both legal threats and news headlines for allegedly discriminatory practices towards customers.

Update on the FCA Review into Payday Lender Debt Collection Practices

The Financial Conduct Authority’s regulation of consumer credit, beginning on 1 April 2014, included subjecting payday lenders to an in-depth thematic review into their arrears management practices.

The review was one of the first actions the FCA took in order to bolster the statutory objective behind its creation - the protection of consumers.

The FCA made clear that this area of finance is a priority for the newly created regulator, citing how six out of ten complaints to the OFT are about how debts are collected.

Furthermore, the FCA stressed the fact that over a third of all payday loans are repaid late or go unpaid.

How Can the ECJ’s ‘Right to be Forgotten’ Rule be Fairly Implemented?

Google has attracted plenty of criticism in its application of the new ‘right to be forgotten’ rules following the recent European Court of Justice (ECJ) ruling.

The rules make clear that EU citizens who are not ‘in the public life’ have the right to request that internet links, resulting from name-based searches which are ‘inadequate or irrelevant’, or no longer relevant, be removed from search results.

This does not change the status of the webpage itself, which remains online, but merely blocks access from European search engines such as google.co.uk.

Google deals with 90% of Europe’s online searches and the company now receives 1,000 requests to take down search links per day. But what makes a particular takedown decision by Google fair or unfair?

Widow of Chain Smoker Awarded $23.6bn: Is There an Equivalent British Case?

Cynthia Robinson, the widow of a chain smoker, has been awarded $23.6bn (£14bn) in punitive damages following judgment in Florida.

RJ Reynolds Tobacco, the company which manufactured the cigarettes her husband had smoked, has been ordered to pay the sum as compensation following Cynthia Robinson’s filing of a lawsuit against the company in 2008 alleging wrongful-death.

Supreme Court Eases Pain of Holiday Injuries for UK Insurers

As the summer of 2014 draws to a close there are those who will be suffering from more than just feeling seasonally SAD. In addition to the direct pain injuries sustained on holiday can bring, there are also a number of legal complexities that can follow.

The conflict of laws governing torts including personal injuries occurring whilst on holiday was in question in the case of Katerina Cox v Ergo Versicherung AG [2014] at the beginning of the year.

The question as to which law is applicable, that of the state hosting the accident or that of the state to which the claimant is resident remains an important one. It is generally accepted that English law provides for more generous payouts of damages than, for example, French law.

Will a New Parliamentary Bill Bring the Abolition of Chancel Repair Liability?

Chancel repair liability is a long standing legal provision which makes homeowners liable for the repair of churches where a parish has registered an overriding interest in their land. The potential costs attached to repairing churches can give homeowners unholy nightmares but unfortunately the title deeds of a house do not necessarily show that liability for chancel repairs exists.

Parochial Church Councils had until October 2013 to register chancel repair liability with the Land Registry. Properties sold after this date where no interest has been registered cannot be held liable but properties where an interest has been registered or which have not been sold since October 2013 may continue to be held liable.

The National Secular Society has alleged that 12,000 properties have already had a registration notice served on them, and many more may yet receive one. As a result, public interest and awareness in the issue has increased.

The only way to remove the liability is to convince the parish to do so, or to prove the liability was enforced incorrectly. Abolition of chancel repair liability would therefore be a great relief to owners of encumbered properties given the vast expense often associate with it.

Certain Litigation Time Extensions Are Now Available Without an Application to Court

The Civil Procedure Rules (CPR) have been subjected to a variety of changes recently in order to foster a more co-operative approach to resolving disagreements between litigating parties.

CPR 3.8 has been amended effective from 5 June 2014 such that parties are able to agree extensions of a deadline of up to 28 days without application to court, provided such an agreement does not affect hearing dates.

The rule change is the latest example of the court system being tweaked to encourage co-operation between parties so as to facilitate more proportionate costs.

Refusing to Mediate May Bring Cost Penalties

Disputing parties should seriously consider mediation and other forms or dispute resolution where it is proposed as an alternative to court proceedings. Failure to do so may bring cost penalties.

Despite the fact that it appears to undermine the adversarial approach traditionally favoured in common law countries, mediation has become an increasingly popular mechanism of Alternative Dispute Resolution (ADR) in England and Wales.

It offers a less confrontational alternative to a court action and has proven to be very successful. It is estimated that 70% of cases taken before a mediator settle at the mediation stage or soon after.