NEWSLETTERS

Firm Newsletter October 2011 no.23

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First in Ireland

O’Rourke Reid Law Firm are the first law firm in Ireland and only the fourth in the world to achieve the Lexcel International Practice Management Accreditation (version 4.1) which was introduced in September 2010 and is administered by the Law Society of England and Wales. Lexcel accreditation is independently assessed and only awarded to firms who provide their clients with the highest management and customer care standards.

Each firm is required to meet a standard of excellence in areas including client care, case management and risk management prior to achieving accreditation. Part of our objective in seeking Lexcel accreditation was to ensure a flexible, supportive management framework and to achieve a quality standard that was recognised in both jurisdictions. In this way, O’Rourke Reid have demonstrated a transparent management process to support its continuing efforts to provide an excellent service to our clients.

In January 2011, O’Rourke Reid commenced work towards Lexcel accreditation. A small in-house working group was formed to benchmark all the existing office and departmental systems and procedures against the Lexcel standard. As O’Rourke Reid is a full service firm, it became clear that standards for each department were differentiated according to the area of law practiced.

A framework was put in place where each department structured their procedures to take account of new guidelines in accordance with the Lexcel standard for their area of law. A set methodology for each department made the task of an overall Case and Risk Management areas more focused and easier to achieve.

Roles on the working group were allocated to people who specialised in each area, e.g. reviewing and updating IT policy was undertaken by the IT Manager. Each person assigned a role reported back to the working group with a proposal outlining work that needed to be done. These updates were then adapted to include each department’s separate requirements.

The working group was chaired by Partner, Killian O’Reilly who reported on progress to the other Partners. The co-ordinator of the Firm’s working group, Noelle McDonald, Quality Assurance Manager also spoke to a number of firms who had gained the accreditation in the UK and to Lexcel to tease out how O’Rourke Reid’s procedures should be modified to become more client friendly.

Prior to the assessments taking place, a series of in-house seminars were held where each sub-group leader gave a presentation outlining the main policies and procedures and any changes required in daily work. Attendances at these seminars was compulsory and a Q&A took place at the end of each seminar. The seminar notes and revised policies in the new Office Manual were then distributed to all staff. To encourage and promote awareness of the policies, staff completed a series of ‘pop quizzes’ in which they had to answer a multi-choice questions in an ‘open book’ exam format.

Noelle found that the feedback from both the working group, together with the seminars and pop quizzes "gave a sense of ownership to all staff and increased awareness each department’s role in the Firm. The Partners also encouraged new ideas and suggestions from employees and some of these initiatives were taken on board and used in the revised policies."

In achieving the Lexcel accreditation, employees are now more aware of the implementation of case and risk management procedures required to help resolve clients’ problems. The existing case and risk management structure has been re-inforced by establishing the role each member of staff plays in maintaining the quality of work expected by our clients. John Reid, Managing Partner believes that this "will enable O’Rourke Reid to improve our relationship with our clients and to demonstrate our commitment to the best standards which in turn, we believe, will reduce risk and costs through effective risk management processes."

UK Government to ban referral fees - Philip Adams

Following an announcement on 9th September, Justice Minister Jonathan Djanogly has confirmed that the UK Government will ban the payment of referral fees in personal injury cases. The ban follows continued pressure from the Association of British Insurers (ABI), who attribute the payment of these fees to increased legal costs.

Prior to 2004, Claimant (Plaintiff) solicitors were banned from paying referral fees for the introduction of personal injury claims. In 2004, the Solicitors Regulation Authority relaxed the ban on referral fees and it became commonplace for Claimant lawyers to purchase referrals for claims from third party companies who sought potential Claimants by way of TV, radio and internet advertising. These ‘claims management’ companies would then sell the details of the potential Claimant to solicitors who could then pursue the claim in the standard fashion.

The insurance industry has welcomed the decision but warned the Government that further challenges may arise. Otto Thoresen, Director General of the ABI said that it is important that ‘the ban must be watertight and apply across the board.’

The ban on referral fees is the latest in a series of Government steps to reform civil litigation costs following last year’s review by Lord Justice Jackson. The Motor Insurance Regulation Bill will be introduced on the 20th January 2012.

Conservation or Conservatory? – Simon Rea

It is predicted that home ownership will fall in England from 72‰ to just over 64‰ over the next decade. At the same time, the average house price is predicted to rise from £214,647 this year to £260,304 by 2016.

But despite the obvious need for housing, confusion is rife. In March, the Government was condemned by a Parliamentary Select Committee for leaving "a vacuum at the heart of the English Planning System" through its abolition of regional special strategies. This removed the housing target that Local Authoritys had to meet. The Coalition Government also came under criticism from the Opposition for their Localism Bill which is accused of being "a nimby’s charter". The Localism Bill would effectively give power to local communities to dictate developments within their community. Concerns were also raised that the ‘new homes bonus’, which would give cash awards to communities that accept developments, may not be a sufficient incentive to encourage housing growth where it is most needed.

The Planning Minister, Mr Greg Clarke MP has made it clear that the Government is in favour of sustainable development through the draft National Planning Policy framework. The framework has created uproar in the UK and a backlash against the Policy framework has resulted in high profile media coverage against the Government’s plans.

Mr Grant Shapps MP, the Housing Minister, has gone on record to state that not enough homes have been built, but has also stated on the Government’s behalf that this could be offset by changes to the planning laws in the framework and the release of Government owned land for building purposes. Mr Shapps said that this was the only "long term solution” to the housing crisis and that the Government were releasing enough "land to build Leicester twice over across the Country". He went on to say that the Government "are reforming the planning system which is massively complex and very, very slow." The Government hopes to meet people’s dreams to own their own home and the Minister believes that it is “the Government’s responsibility to try and help people meet their aspirations".

But whose aspirations will be catered for?

It would appear that the Government are ‘damned if they do and damned if they don’t’. So, how can the Government get this balancing act right, national need versus popular opinion? Is there any way of keeping all parties happy?

One way forward is through Government engagement with the respective parties and management of expectations. A recent YouGov poll showed that the public recognised the tensions caused by planned developments but broadly approved of the Government’s strategy and recognised the need for new homes to be built. The Government needs to engage with communities to seek trade offs between protection of the environment and the need for development. Few would disagree that using previously developed land should be the first port of call in development but redeveloping brown field sites will only provide some of the necessary land.

The Government are left with a series of compromises. They will need to come down either on the side of greenfield land or suburban development; there does not seem to be a middle ground. Society can not have it all three ways; a rising population, sustained quality housing; and total conservation of all green spaces no matter how aesthetic or otherwise. One of these will have to give.

The rock and a hard place between which the Government is stuck is subject to on-going discussion.

What next for JLCs? – Claire Benson

The High Court decision of 7th July 2011 upholding a challenge by fast-food operators to an order setting minimum pay and conditions for catering workers outside of Dublin has serious implications for employers, employees and those in the Industrial Relations arena.

Mr Justice Kevin Feeney declared that laws which set minimum pay and conditions under Employment Regulation Orders (EROs) are unconstitutional. Pay and conditions for certain sectors would be proposed by joint labour committees (JLCs) for approval by the Labour Court. Once approved, these pay and conditions would become EROs.

Mr Justice Feeney declared that the relevant provisions of the 1946 and 1990 Industrial Relations Acts (‘the Acts’) were unconstitutional after finding that they delegate “excessive” law-making powers concerning pay and conditions to JLCs and the Labour Court without stating any policies or principles to guide those powers.

This delegation amounted to an unconstitutional transfer of power as the Acts allowed the Labour Court to be “at large” in making laws which could be enforced by criminal sanction.

An employer who failed to comply with an order was guilty of a criminal offence under Section 45 of the Acts and was liable to pay fines and be ordered to pay compensation to affected workers.

Resulting from this judgment, any pending prosecutions brought by the National Employment Rights Authority (NERA) against employers for alleged breaches of pay rates set under the JLCs will now fall.

The impact of this decision affects all employers and employees who work in these sectors. About 190,000 workers are employed in the 13 sectors covered by EROs drawn up under the JLC system.

The decision also raises questions as to the legality of the system of Registered Employment Agreements (REAs), a separate system whereby the pay and conditions for more than 60 companies and industries are set by the Labour Court.

Since the decision, the Government has indicated that new laws will be drawn up to reform the area. However as of yet there has been little information on how the system will be reformed.

Outline plans have been discussed and a bill to reform the area is mooted for this Dáil term. The Minister for Jobs, Enterprise and Innovation, Mr. Richard Bruton, has indicated that the proposals include reducing the number of JLCs from 13 to 6. JLCs will have power to set only a basic adult rate and two higher increments to reflect longer periods of service. Sunday premiums and other conditions of employment will no longer be set by JLCs. There are also indications that companies will be able to opt out of JLC agreements, i.e. EROs, in cases of financial difficulty.

However until reform legislation is published, all parties can only speculate as to how any new system might operate.

At present, the Government’s position is that affected workers are protected under their own contracts of employment. Under contract law, both parties must agree to any change to the terms of that contract. Payment of wages legislation also does not allow employers to deduct monies from employees, including pay, without their consent.

The current position in respect of new recruits is unclear. Many employers have indicated that new recruits would be paid in line with the national minimum wage and organisation of working time legislation. For example, this could mean that rather than having specific legally binding rates for Sunday working, employers could offer alternative arrangements such as time off in lieu.

As expected, there has been a mixed reaction to the ruling. Employers have welcomed the ruling and have indicated that it could lead the way for increased employment. Workers and Unions have responded to the ruling by saying that it removes the only protection that low paid workers had on their pay and conditions and could have potentially devastating effects for them.

It remains to be seen how the Government will reform the system. Undoubtedly the decision has provided employers operating in affected low paid sectors with more flexibility in setting pay and conditions for new recruits and in agreeing rates and conditions with current employees.

The Companies’ Bill is Published – Helen H. Whelan

In the first major reform of company legislation in Ireland since the Companies Act 1963, the Minister for Jobs, Enterprise and Innovation, Richard Bruton T.D. published Parts 1 – 15 of the Companies Bill earlier this year. The Bill is based on the general scheme published by the Company Law Reform Group (CLRG) in 2007.

The ‘think small first’ approach adopted by the CLRG means that the new bill reverses the focus of company legislation away from the large company and onto the private company limited by shares. It is this type of company which forms the backbone of Irish enterprise. The private company limited by shares or CLS becomes the model company under the proposals with all of the provisions concerned with it contained in Parts 1 - 15. The remainder of the Bill is not due to be published until 2012. It is expected to apply, disapply or vary the provisions of concerning the CLS for the other company types identified in the proposals.

Key Features of the CLS

The key features of the ‘new’ private CLS are:-

  • it is to be limited by shares and have a share capital;
  • it is to have the same contractual capacity as a natural person;
  • it is to have a single document modernised constitution;
  • it will have a limit of 99 members;
  • it requires just one director and a company secretary;
  • it can have just one member; and
  • the member(s) can waive the requirement to hold an AGM.

So what are the differences between the present situation and this ‘new’ type of private company? One of the main differences is that the CLS will have the same contractual capacity as a natural person: this abolishes the doctrine of ultra vires. The CLS private companies will not be required to set out any objects or powers such as those now contained in the Memorandum of Association. This means that it will have unlimited capacity to carry on any business or activity with the exception that it must always act within the law.

A second difference will be that the private company may have only one director who must be over the age of 18 years. Where there is only one director, that director may not also act as company secretary. Thus a single director company will be required to have a separate company secretary.

It is proposed that existing private companies limited by shares may elect to convert to the new model CLS private company. However, a default conversion procedure will apply to convert existing companies to the new model, unless the company passes a resolution making it into one of the other types of generic company. Details of this will be contained in the remainder of the Bill.

Directors Duties

Until now, the sources of directors’ duties have been diverse. One of the most significant changes proposed by the Bill is the codification of directors’ fiduciary duties. These duties are owed to and are enforceable by the company. The fiduciary duties are stated in general rather than specific terms and they are derived from principles previously established by the Courts.

The main duties are to act in good faith in what the director considers to be in the best interests of the company and to act honestly and responsibly in the conduct of the affairs of the company. However, it is anticipated that interested parties will still have to look at case law to interpret what these duties entail.

Registration of charges over the assets of a Company

At present not all charges are subject to the requirement to register particulars with the Companies Registration Office. Charges include mortgages over land, stock and machinery as well as what are known as ‘floating charges’, that is charges which are not attached to any specific asset of the company. It is proposed to change the rules for registration of charges so that all charges will have to be registered.

It is also proposed to change the system whereby charges acquire their priority. Currently priority arises by the date of their creation rather than the date of their registration. In future, the creditor who files first in time will gain priority.

Single Director Companies

As noted earlier, companies will be permitted to operate with just a single director. In circumstances where single member companies already exist, this will facilitate the operation of many small businesses.

It will also be possible for the CLS to dispense with the requirement for an Annual General Meeting. Currently, this option is only available to single member companies.

Other Corporate Governance Reforms

One reform which has been welcomed is the proposal to permit majority written resolutions of shareholders, dispensing with the requirement to have unanimous written resolutions.

There are changes to the provisions which determine where a directors’ meeting is deemed to be held, where some or all of the directors participate by telephone. This may have implications in determining where the ‘management and control’ of the company is located.

Trends in Occupier’s Liability – Martin Hogg

Over the past year, there has been a hardening of attitude from the Courts in relation to the liability of occupiers for injuries sustained on their premises. These cases involve nightclubs, public houses, swimming pools and even National Trust parkland. The circumstances of many of the cases are tragic as the victims have suffered catastrophic injury or death but all of these actions have failed. This has been seen in some quarters as indicative of a move away from the widely-held idea of a ‘compensation culture’. However, all of the cases were decided on established law. As always in cases of this nature, the facts of each case are important.

In Everett v Comojo, a guest at an exclusive London nightclub was stabbed by a fellow guest. A claim was brought against the nightclub management alleging that they had breached their duty of care to him as a customer. Although the Court found that a duty was owed, they decided that the standard of the duty must be "fair, just and reasonable". In this case, the management were not in a position to prevent the incident and were not liable. However, the position may have been different if they ran an establishment where violence was commonplace. The practical effect for the occupiers is that they should carefully risk assess their businesses as there remains potential for negligence claims following a non-accidental injury.

Alcohol has played a part in some cases such as those of Geary v J D Wetherspoon and Grimes v Hawkins.

Ms Geary had gone to a pub in Newcastle-upon-Tyne for a drink with colleagues after work. The pub she visited was an historic listed building containing a large ornamental staircase. Having been inspired by the film ‘Mary Poppins’, Ms Geary decided to slide down the banisters whereupon she fell and broke her neck. The Judge expressed sympathy for Ms Geary but was unable to find in her favour. It was unreasonable to blame the pub when the victim had voluntarily assumed the risk she was taking. Interestingly there were no warning signs on the staircase as it was thought that this would encourage similar behaviour.

Similar principles applied in the case of Kylie Grimes who was seriously injured in the Defendant’s private pool during a teenage house party. The Claimant was an experienced swimmer and it was found that she was aware of the risk of diving into the shallow part of the pool. The Claimant was catastrophically injured and the Judge scrupulously reviewed the law and evidence with great care and compassion. Notwithstanding this, the claim failed.

From the above we can see that the Court will adopt a robust approach when an adult is injured as a consequence of a reckless action where there is an obvious hazard but nonetheless voluntarily proceeds with this action. The position appears to be different if the Claimant is a child.

There have been two further cases this year involving liability of occupiers for the safety of trees on their land; Bowen v National Trust and Micklewright v Surrey County Council. Both cases involved fatalities following falling tree branches in parkland.

The case of Bowen turned on the competence of the tree inspectors employed by the National Trust. The question for the Court was, ‘would a reasonably competent tree inspector have spotted the diseased branch and thus removed the hazard?’ The Judge accepted that the tree inspectors had acted appropriately: he adopted a test commonly used in professional negligence cases and found the inspectors had acted in a manner to be expected of a reasonably competent person doing the same job. Even though the inspectors’ judgment was wrong, it would be incorrect to require the Defendant to do more than was reasonable.

Micklewright’s case is more contentious in that the Defendant had not assessed the trees and had no system of inspection in place. However, the defect in the tree would not have been apparent even if an inspection had been carried out and the Court found for the Defendant. This was reluctantly upheld on appeal although the decision was based on a technicality rather than further consideration of the evidence.

An end to Landlord and Tenant disputes? – Charlotte Kay

Landlords are still not doing enough to prepare themselves for legal battles when disputes arise with tenants according to the Association of Independent Inventory Clerks (AIIC).

Statistics from The Deposit Protection Service’s independent Alternative Dispute Resolution (ADR) process show that, of 880 decisions completed so far, 18‰ of deposits went entirely back to the landlord, 43‰ entirely to the tenant, and 39‰ of deposits were split between the two. This means that the landlords involved won some or all of the deposit back in just 57‰ of cases.

Pat Barber, Chair of the AIIC, said that landlords have a "poor record in winning tenant dispute cases". Barber advised "you must provide evidence to support your claim."

For many years the general principle was that an accurate inventory was not needed. This was because a landlord was both ‘judge and jury’ and could decide on what part of the deposit was withheld to cover the costs of repair and cleaning. This was not to say that tenants had no recourse if they felt aggrieved with the landlord’s decision. To challenge a landlord, a tenant would encounter significant inconvenience in pursuing this action so most tenants did not take matters further, especially where small sums were involved.

The Tenancy Deposit Scheme changed this and inventories became important in several important ways:

  • The landlord no longer has the benefit of controlling the monies from the outset;
  • The inventory has become far more important for many landlords as it is the key document in proving the condition of the property before the tenant moved in;
  • The way of assessing disputes has now changed. Rather than matters being resolved through the Courts,most matters are now resolved by independent Arbitrators. Arbitration is generally seen as less adversarial and fixed legal procedure; and
  • This gives tenants more confidence to take on landlords if they think they have a chance of winning.

The AIIC works to ensure that all landlords, tenants and letting agents understand the importance and benefit of professionally completed property inventories.

Therefore the AIIC have put together some advice on what landlords need to do it they are faced with a tenant dispute:

  • The Tenancy Agreement: First and foremost, you must submit the Assured Shorthold Tenancy (AST) agreement to help establish the obligations between you and the tenant.
  • The Inventory: Ensure that you have a comprehensive inventory that is signed by the tenant when they move in. Make sure any photos or videos are dated, and clearly point out any damage if you decide to rely on photos as evidence in a dispute.
  • Check-in and check-out: Attend the property when the tenant is moving in and moving out and inspect it together. This way, you can usually come to an agreement over the deposit return at final inspection.
  • Relevant Evidence: Only submit evidence relevant to the claim. For example, if claiming for property damage, do not submit an unpaid utility bill.
  • Invoices, receipts or rental account statements: Submit invoices or receipts for any repair work that you are claiming for. If the claim involves rent arrears, provide detailed accounts showing unpaid rent.
  • Fair Wear and Tear: Do not make deductions for minor damage that should be expected in any normal use of the property.

Time and time again, landlords are losing disputes because they are not providing the right evidence to show that a tenant has damaged the property. It is important for landlords to get their paperwork right at the start and at the end of any tenancy agreement.

Watch this Space - Emma Farrell

Two potentially significant changes to the current legal landscape appear to be gaining momentum.

The first is the notable increase in the number of defamation cases brought by businesses, following in the wake of the widely reported claim brought by Tesco against The Guardian in 2008. Research has shown that there has been in excess of a three fold increase in the number of such cases brought in the year ending May 31, increasing from 5 to 16 in the 2010/2011 period, compared with the same period in 2009/2010.

Conversely, cases brought by celebrities to ‘defend’ their name fell from 22 in 2009/2010 to 9 in 2010/2011. This downturn can largely be attributed to the increase in so-called ‘super injunctions’ obtained. Also notable is the number of cases originating from comments made on social media, such as Facebook and Twitter.

The second change that may be introduced is by the Dangerous and Reckless Cycling (Offences) Bill, which is due for its second reading before the House of Commons on 4 November 2011. If passed, this will create new offences of causing death or serious injury through dangerous or reckless cycling and will make provision regarding minimum sentencing and fines for those convicted of such offences.

There has been some criticism of the proposals on the basis that they are unnecessary as incidents between cyclists and pedestrians are relatively rare, and that it diverts attention away from the more prevalent problem of cyclists being injured or killed by motorists. However, the Bill appears to have the backing of the Coalition Government and as such, may make it to the Statute books.

Breaking News...

As we go to press, O'Rourke Reid Law Firm is pleased to announce that we have been included in the Legal 500 listing as a leading firm for Defendant personal injury for Yorkshire and the Humber region.

You can visit the Legal 500 site and read our citation at:
http://www.legal500.com/firms/3828/offices/5338

Alternative Business Structure:- What will happen? – Noelle McDonald

On 6th October 2011 for the first time ever, lawyers and non-lawyers in England and Wales will be able to go into business together to provide legal services. The provisions of the Legal Services Act 2007 created the new Alternative Business Structure (ABS).

What triggered the radical shift away from the traditional business model?

In 2004 the Government commissioned Sir David Clementi to furnish a report on the regulation of legal services. He was asked to include recommendations on how to improve competition, innovation and consumer protection and to suggest a new regulatory framework to achieve the proposed reforms. In the review, Clementi concluded that the legal services market was outdated, inflexible, over-complex, insufficiently accountable and lacked transparency. These findings later formed the basis of the Legal Services Act, 2007 (LSA).

The LSA is the first attempt by the Government to bring the entire legal services market under one regulatory framework. A similar framework exists in Australia and has proven successful.

The Legal Services Board (LSB)

The LSB is the overarching regulator under the new framework. There are seven other approved regulators (ARs) including the Law Society, the Bar Council (Bar Standards Board) and Institute of Legal Executive (ILEX Professional Standards Boards). The Law Society, with the approval of the LSB, delegated all its regulatory functions to the Solicitors Regulation Authority (SRA).

What the LSA has meant for the SRA?

The SRA conducted a fundamental review of regulation to meet the objectives of the LSB. The new regulatory regime is known as Outcomes Focused Regulation (OFR). It launched a new Handbook covering every aspect of the regulation from individual firms authorised and licensed by the SRA to ABS’s. It contains 20 sets of requirements governing all aspects of practice. The old prescriptive rules have been removed and are replaced by the OFR.

The SRA has new enforcement powers and can impose conditions on the authorisation of any firm they consider to represent a risk to the public. In identifying high risk firms, the SRA requires annual information reports on the financial stability, regulatory compliance and service standards of firms.

What OFR has meant to existing Law Firms?

It is expected that most large and medium sized firms will easily adjust to the new regulatory regime as many already have sophisticated risk and compliance procedures to deal with money laundering, conflicts of interest and confidentiality. Many also have designated Compliance Officers and Financial Controllers monitoring risk procedures. In O’Rourke Reid, we have adopted the Lexcel standard and have both a designated Compliance Officer and Financial Controller.

Alternative Business Structures (ABS’s)

There are at least three ABS’s envisaged.

Banks and Insurers

It is expected that service providers within the banking and insurance industries will want to enter the market by operating a multi-disciplinary business offering a ‘one stop shop’ legal and financial service. Such organisations will be very keen to promote legal products that complement their own services or which facilitate opportunities to cross sell. Law firms who choose to integrate will benefit from the compliance and governance structures already embedded within such large organisations.

Multiples

Multiples such as Tesco and The Co-Op are also expected to enter the market. Many believe that a new entrant like Tesco will affect the viability of the smaller conventional firms who will find it hard to compete with big brands as they will be able to offer accessible online and affordable legal products and to leverage off their existing client base using loyal discounts.

SME’s

Many mid-tier law firms who specialise in niche areas of law will look to grow by integrating their businesses and operating under a single brand. For example, firms that specialise in personal injury work may seek mergers with loss adjusters or firms that specialise in conveyancing may enter into joint ventures with estate agents. Other smaller firms will be able to grow their business by seeking private investors who can offer both external funding and business guidance.

It is unclear how the SRA will approach the ABS, but it is anticipated that the process will be robust. The SRA have already stated that ABS applicants also have to provide projected balance sheets, monthly cash flow and profit and loss for the first year of trading after authorisation.

Will the Irish market react?

It is difficult to compare Ireland with England and Wales. Certainly there are many advantages to the ABS model that would appeal to large accountancy firms and law firms, especially those who provide services to mutual clients. The Minister for Justice, Alan Shatter T.D., has published the Legal Services Regulation Bill as we go to print and we will return to this issue in a future newsletter. The Minister also recently endorsed a Blueprint Report produced by Anne Neary, Legal Risk Consultant in June 2011. He said it was an important contribution "to the future of the legal profession and law firms of the future and how they should operate".

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