Companies who load the dice against the consumer stand to lose their shirt

So easy, a child could do it.... That was a nasty truth for one punter when he found himself £50,000 in the red after a five year old got into his online spread betting account.
But as well as striking fear into the hearts of parents everywhere, the resulting court case has delivered a wake-up call for companies who rely on contract terms that are buried in the small print. Now experts are warning all businesses, especially online traders, that the terms of consumer contracts must be fair and clearly presented.
The case focussed on punter Colin Cochrane who set up an account with Spreadex, an online spread betting bookmaker, which allows the public to bet on rises and falls in the price of stocks and shares. Soon after setting up his account, Mr Cochrane showed his girlfriend’s young son how it worked.
But the demonstration was something he lived to regret, as having left his computer switched on, he returned from a trip to find his account was £50,000 in the red. It turned out that his girlfriend’s son had racked up the losses by trading in gold, oil and silver whilst he was away.

Although Mr Cochrane immediately rang Spreadex and explained what had happened, Spreadex were unsympathetic and issued proceedings to recover the £50,000. They argued that Mr Cochrane had no case to answer, because clause 10.3 of their consumer contract said ‘you will be deemed to have authorised all trading under your account.’

But the judge in Spreadex Ltd v Cochrane ruled that the consumer contract was unfair and unenforceable under the Unfair Terms in Consumer Contracts Regulations 1999, saying that the 49 pages of T&Cs was an “unfair contract”.
First, there was an imbalance between the parties’ rights and obligations, as Spreadex did not assume any obligations, but the consumer assumed considerable risks without gaining any rights. The judge accepted that Spreadex was entitled to protection against unauthorised use of the account but said that the clause 10.3 was too broad.
Second, the judge held that the way in which the clause was presented was unfair. A customer signing up to the site was invited to click to view the consumer contract and three other documents. The judge said that most customers would proceed without viewing the document and, even if they did look at the documents, they would be faced with lengthy and complex clauses. It would be a miracle, said the judge, if Mr Cochrane had read clause 10.3 let alone understood its implications.
Said commercial law expert Brendan O’Brien of Breeze & Wyles Solicitors LLP : “Where consumer contracts are presented on a take it or leave it basis, as happens with online trading, there may be a temptation to load the dice against the consumer and think that covers it.
“But that’s not the way to do it. All the terms must be fair and reasonable and must make allowances. And the terms must be clear – it’s particularly important for consumer contracts - and the harsher the provisions, the clearer they must be if companies want a chance of getting the courts on their side.”


Spreadex Ltd v Cochrane [2012] EWHC 1290 (Comm)

Web site content note:
This is not legal advice; it is intended to provide information of general interest about current legal issues.

IP Seminar: Have you left the door open for thieves?

“Whether a start up or a multi million pound business, your Intellectual Property is your most valuable asset.” – Brendan O’Brien, Director, Breeze & Wyles Solicitors LLP

Intellectual property, sometimes abbreviated IP, is a legal definition of ideas, inventions, artistic works and other commercially viable products created from one's own mental processes and essential to the operation of your business. Millions of pounds are lost annually across all industries through IP theft, proving that protection is a necessity not a luxury.

What's in it for me? Creating value from Intellectual Property

In conjunction with Red Sky Partnership Ltd

Date: Thursday, 5 July 2012Time: 9.30am - 11.00am

Venue: Breeze & Wyles Solicitors LLP, 2nd Floor Stag House, Old London Road, Hertford SG13 7LA

This free seminar will ensure that you’re fully informed on all aspects relating to intellectual property, so that you can safeguard and make the most of what is rightfully yours. It is therefore essential for all business owners.

Using a series of case studies, Sarah Staines of Breeze & Wyles Solicitors LLP will demonstrate the very real value of intellectual property in the operation of any business and give an insight into what can go wrong if protection is not sought.

Attendees will also learn how to reduce tax with Research and Development tax credits, and how this can benefit your business. This is a government incentive for companies developing new technology, and an incentive that government know works, so it keeps getting better with each year. Make sure you are not missing out.Following the talks by Breeze & Wyles and Matrix, there will be opportunity to network with other attendees.Spaces are limited to 25 attendees, therefore please respond by Thursday, 28 June 2012 to secure your place. To register, please email Rachel Harper at or El Edmunds at Alternatively, please call 01992 558411.

How do I maximise my business value for sale?

A sale without planning is unlikely to provide you with the right cash value for your business.

Value cannot be built overnight. A business being operated for long term income reward does not always give the same value as one that has been subject to planned preparation for sale. The expectation to obtain sale value immediately has to be reconsidered if the best price is to be achieved. Most exit coaches, people contracted to assist in getting the business ready for sale, will tell you that to achieve an appropriate sale price you must commit significant amounts of time in addition to the ‘day job’ and have an expectation that this will take about three years.

Why does it take so long and why should I be committed to the process?
Due Diligence. The process of due diligence requires that the buyer produce significant amounts of information to the buyer. This usually happens at the outset of the sale transaction and most often defines whether the original price offered is an accurate reflection of the value of the company or business. However, a serious buyer will use that information to check that the right operational processes exist and that those processes are able to withstand close scrutiny. Among the tests that the Buyer will attempt is to see what would happen if the Seller was taken out of the business. The only way to ensure that the business is sustainable in this event is to ensure that there is a strong tier two management team capable of stepping up to deal with the parts of the business that are normally the Sellers responsibility.

Why should that matter? If the business is incapable of operating without the Seller this means that when the Seller leaves so will significant amounts of business knowledge and value. So the only people who might be willing to buy the business are those in the same market. Applying the rules of supply and demand this means that with a smaller number of buyers the price will necessarily be less than expectation.

Financial Modelling. The Buyer will expect to model the financial performance of the business going forward to include any fluctuations in sale volumes going forward.

Any serious seller will have a fully flexible financial model to allow the Buyer the ability to flex them. This will enable the Buyer to avoid the cost of modelling themselves and work through the business projections put forward in any business plan. To produce a document of this type requires a verbal demonstration of the channels to market, opportunities for extension of core business, delivery and production, people and their integrations and finally the finance in place or that might be required to maintain sufficient working capital.

Most SME business owners work at the coal face and cannot therefore see the business holistically. The planning process will require the business owner to create a tier two management platform to enable them to start the sale planning process including financial modelling, business planning and marketing strategies all of which must be resilient under the scrutiny of a professional Buyer or the Buyer’s professional advisers.

The changes produced by this process are used to create a road map for growth, with specific key performance indicators and time lines, with the exit or capital event set as the final goal.

This is my guest post from SME Ambassador

New rulings help employers weigh up when TUPE applies

The TUPE regulations are under the spotlight with three recent cases clarifying when the regulations will apply in a service provision change.

Cases heard by the Employment Tribunal and on appeal are helping to clarify the circumstances when a service provision change will create the conditions for TUPE to apply, and the advice to employers is to ensure that teams are clearly distinguished and named if they are to be dedicated to a single contract and customer, with employment contracts clearly setting out the relationship.

By Brendan O’Brien Corporate Restructuring with Breeze & Wyles Solicitors LLP:

A string of cases over the last twelve months should help employers trying to interpret TUPE regulations, which dictate the circumstances where a company must take over the employment obligations of another employer.

TUPE stands for the Transfer of Undertakings Protection of Employment Regulations and their purpose is to protect employee jobs when a business is transferred. If a business is sold, then the new owner of the business has to honour the employment contracts of the seller’s employees – the buyer steps into the shoes of the seller, so far as the employees are concerned.

The rules may also apply when there is a ‘service provision change’. This arises when a company cancels or does not renew a long term contract for the supply of services and either takes the services in-house or awards the contract to another service-provider. When this happens, TUPE may mean that the employees of the original service-provider become employees of the new service-provider, or if the contract is going in-house, then they may become employees of the company to which the services were provided.

It is this aspect of TUPE regulations which still come as a shock to some employers, particularly smaller ones, who discover the strange outcomes that can arise when it is applied to service provision changes. A major customer decides it is not getting a good service from Company A and so it awards the contract to Company B. It must come as a shock for Company B to discover they might have to take on the very employees who provided such a poor service when they were working for Company A.

But it isn’t cut and dried as to exactly when TUPE will apply following a service provision change. Now, a number of cases have clarified the conditions that must be satisfied for TUPE to apply when a service provision change has taken place.

In Seawell v Ceva Freight (UK) Ltd, Ceva provided freight forwarding services to Seawell. One of Ceva’s employees worked solely on the Seawell contract and when the contract was cancelled with Seawell taking the service back in-house, Ceva claimed that TUPE applied and that Seawell were liable for unfairly dismissing Mr Moffat, the employee concerned. At the first hearing, the Employment Tribunal agreed and ordered Seawell to pay Mr Moffat £25,000. But on appeal, the Employment Appeal Tribunal found that this was wrong, saying that for TUPE to apply in a service provision change scenario, there must be a clear and formal grouping of employees brought together for the purpose of the client’s contract. An employee who happens to spend all his time working on a single client’s contract is insufficient grounds for TUPE to apply.

Similarly in Eddie Stobart Ltd v Moreman and others, Eddie Stobart provided storage and transport services to ASDA, among other supermarkets. Staff were organised into shifts, one of which, because of the timing of orders from ASDA, worked principally on the ASDA contract. When ASDA awarded the contract to another company, Eddie Stobart dismissed the workers on the ASDA shift in the belief that the new company was now responsible for the employees under TUPE. However both the Employment Tribunal and the Employment Appeal Tribunal held that TUPE did not apply: because that shift did in fact deal with other clients as well as ASDA, those employees could not be regarded as a recognised team working for a particular client.

The other aspect that must be satisfied for TUPE to apply on a service provision change is that the service activity taken in-house or contracted to another supplier must remain the same. In Johnson Controls Ltd v Campbell, taxi administrator Johnson Controls lost their contract with UKAEA, as the company decided that its own staff would place bookings direct with taxi companies. One of the employees was made redundant by Johnson Controls, as he was not taken on by UKAEA. He subsequently sued both Johnson and UKAEA, but the tribunal found that under the new regime, the taxi booking services had been significantly remodelled and that therefore TUPE did not apply.

Employers who think they are running teams who may be affected by TUPE if contracts were terminated need to respond to the decisions of these cases by reviewing their current employee contracts.

Fulfilling an important contract that requires taking on employees, who will service that contract exclusively, requires major investment. It is equally important to both employer and employees to make sure that they have the protections they are entitled to. If a team is taken on to service “Client X”, their contracts of employment should say so, and they should be formally labelled and recognised as the “Client X” team.

That way there is a good chance that if the employer subsequently loses the contract, the team will be in a more secure position and the company will not be hit by a double whammy of losing the income from the contract, as well as being liable to make redundancy payments to the team who serviced the contract.


Seawell v Ceva Freight (UK) Ltd (UKEATS/0034/11BI)
Eddie Stobart Ltd v Moreman and others (UKEAT/0223/11/ZT)
Johnson Controls Ltd v Campbell (UKEAT/0041/12)

Web site content note:

This is not legal advice; it is intended to provide information of general interest about current legal issues.

Brendan OBrien guest blog on SME Ambassador

Brendan O'Brien Director and Head of Business Services is pleased to have been invited to provide a guest article for SMEAmbassador blog wbsite.

You can find the blog here and the article here

Employment Newsletter June 2012

Dear Employer

You may have been excited to hear in the news of the proposal that there be “no fault dismissal” on the basis that the Employer pay specified compensation. However, that is unlikely to happen any time soon; probably best to content yourself for the time being with the fact that since April this year the qualifying period for being able to claim unfair dismissal (which includes constructive unfair dismissal) has increased to 2 years. But, before you get too carried away, remember that a discrimination claim does not require any minimum qualifying period, so be sure before you dismiss that you are unlikely to face that sort of claim. As always, if in doubt, shout.

If you have any particular employment issues, please do not hesitate to contact us: details are at the end of this letter. If you have any comments or suggestions on this newsletter, please email

Kind regards

The Employment Law Team

Some Recent Cases in Employment Law

Reasonable Investigation and Suspension

Employers should beware of suspending as a knee-jerk reaction. A recent case involved the employer investigating misconduct and suspending employees. The case concerned care workers who had used a form of restraint on a difficult mental patient. The NHS Trust regarded this as misconduct and immediately suspended them. This was despite the fact that, though such conduct was unauthorised under the Trust’s internal rules, it was no more extreme than other authorised procedures. On the basis that it “must be an assault”, the Trust also involved the police. The Trust dismissed the workers, who brought claims for unfair dismissal.

The judgment that was given in favour of the employees suggested that some employers may be too ready to resort to such measures, especially when confronted with a “protection” issue. The result can be an imbalance between that factor and good employment practice. Apart from the judge being astonished that the Trust had seen fit to involve the police, he said that even where there is evidence supporting an investigation, it does not mean that suspension is automatically justified. He also said, “It should not be a knee-jerk reaction, and it will be a breach of the duty of trust and confidence towards the employee if it is.” In short, it can lead to a constructive dismissal claim. Employers should heed those words when they are considering suspension. (Crawford and Anor v. Suffolk Mental Health Partnership NHS Trust)

Employees Abroad

Increasingly, British businesses have employees who work abroad for periods of time. The question can arise as to whether they are entitled to bring an employment claim under British law. The recent Supreme Court judgment in the case of Ravat v Halliburton Manufacturing & Services Ltd has clarified the position. A previous case established that there are three broad categories of employees:

· the standard employee working in Britain
· the peripatetic employee (e.g. who lives here and commutes abroad to one or more countries or lives abroad but commutes here)
· the ex-patriot employee (e.g. employees “posted” abroad by a British employer for the purposes of a British business)
It had been the case that British employee protection would clearly apply to the standard employee; however, it would only apply to the peripatetic employee if the base was Britain and to the ex-patriot employee if there were otherwise equally strong connections to Britain.

In the current case of Ravat, he worked as a “rotator” with 28 days working in Libya alternating with 28 days rest at home in Preston. He was made redundant by his British employer and tried to make an unfair dismissal claim in Britain.

The factors in Mr Ravat’s case included the fact that his employment contract was said to be subject to the law of England & Wales. He was described in his contract as a “UK commuter”, and when not working on rotation in Libya, he lived at home in England. He was paid in sterling with deductions for UK tax and National Insurance contributions. He participated in the UK employees’ benefit package. His employer was a group company, although Mr Ravat performed no work at all in the UK, performing his duties for a German group company. His Operations Manager was in Libya and his Line Manager in Cairo. HR support was provided from Scotland.

The Supreme Court held that he was entitled to claim unfair dismissal. It clarified the test of whether an employee is eligible to claim British employment protection by formulating the new test which is “whether the connection with GB is sufficiently strong to enable it to be said that Parliament would have regarded as appropriate for the Tribunal to deal with the claim”.

Of course, this means that every case will (as usual) depend entirely on the individual facts. However, the key issue is to consider when considering whether employees might have the right to protection under GB law include (but are not limited to):

· Where the employee was hired
· Who line manages the employee and where they are located
· The currency in which the employee is paid
· Any assurances or other indications given by the employer as to which employment protections are relevant
· Where the employee lives etc

What’s in the pipeline

Protected Conversations

Sometimes the employer and employee reach an agreement to part company, with the employee leaving with a settlement or some other benefit. A compromise agreement requires them to give up all their claims in return for accepting the money/benefit. Remember, however, that in a situation where there is no formal dispute between you and the employee, and you try to talk to the employee on a without prejudice basis, this could be taken to be a repudiatory breach of contract on your part and become the subject of a constructive unfair dismissal claim. Consultation is under way within the Government to introduce “protected conversations” to enable parties to raise an employment issue at any time (i.e. without the existence of a formal dispute) as a way of resolving the matter without fear.

The Employer Traps and Other Tips

Unlawful Provisions in Contracts of Employment

Ensure that your contracts do not have any clauses that are unlawful and/or otherwise unenforceable. Examples include not allowing someone to have accrued holiday pay when they leave if they have been dismissed; putting in a retirement clause that says they must retire at 65 (if it is already there from previously, just remember not to enforce it); providing for insufficient notice to be given to the employee of the termination of their employment; and benefits that are age-related that cannot be justified and therefore may lead to allegations of discrimination.

Selection Process

Remember that there are limits on what you can ask about an applicant’s health at interview stage; this situation changes once an offer of employment has been made to the applicant.

Changes in Contracts

It is a legal requirement that any changes in an employee’s contract should be given to them in writing within one month of the change.

SME CORNER: Cost saving - debt recovery v redundancy

In these uncertain times, how do businesses with a profitable core operation ensure that they are able to grow when new opportunities arise? Decision makers in business should focus on maintaining a strong cash-flow position .

In a recession cost cutting exercises are the norm with the choices of redundancy and a tighter debt control system. However, redundancy is often primary when analysing how to improve cashflow. This is particularly true where a business’ goal is survival. Whilst redundancies will help reduce staff costs long term, in the short term it may not materially improve cashflow because redundancy payments and notice periods have to be funded. Entering the redundancy process will often result in key staff being taken “out of the business” while they manage the redundancy process and this limits the time the business is able to dedicate to customer acquisition and service. This will inevitably have an effect on turnover.

Any business will focus on customer and contract acquisition and then delivery to those customers. Whilst banks were lending in support of growth, book debt recovery was down the list of priorities as it supported the borrowing. However, as lending has been severely curtailed, focusing on recovering aged debts is imperative to position for growth. Without this focus, cashflow will not be as strong as possible and “scaling up” may not be a real economic option. The process of making redundancies for the purpose of improving cashflow, will restrict the opportunity for growth because there are fewer people in the business to act and build on opportunities.

Cost effective debt recovery may offer a real opportunity to improve cashflow in the short term, without incurring the costs associated with the redundancy process and the detrimental effect that redundancies have on growth potential. A review of your aged debtor list will show a considerable amount of ‘survival’ or ‘growth’ money tied up in debt much of which is long-term. The contradiction between aggressive debt recovery and customer retention is accepted but an analysis of the debtor book will ensure that staff are not deployed on work for which payment will never be received. Credit check monitoring is an essential part of the customer acquisition and retention process. Do not be a Bank for your clients with cheap funding because no interest will be paid and the risk of damage to your business increases with the debt.

We have noticed an increase in the age of debt upon which we are asked to advise notwithstanding the fact that banks are placing greater emphasis on a businesses ability to review and analyse the profile of its debtor book. We offer a low cost fixed fee debt recovery service for those businesses who wish to apply pressure to debtors releasing some of the considerable sums that are often tied up.

The cost of a letter before Court action is £2.00 plus VAT. If you have an aged debtor list of 200 debts, the cost of sending an initial letter to each of these debtors will be £400 plus VAT. This cost should be compared to the cost of time / redundancy pay and lost opportunity that will be involved in staff redundancies.

We also add to the debt amount compensation and interest to which you are entitled in order to maximise your claim. Often a Solicitors letter adds the necessary pressure to encourage payment by your debtor. Many of the debts will be paid following the initial letters thereby providing immediate cashflow.

Where payment does not follow the letter before action, a business must decide whether to pursue the unpaid debts through the Courts. This assessment will take in to consideration whether a business can identify if a debtor is a “won’t pay” or a “can’t pay” debtor and we investigate whether the debtor has sufficient assets to make court action cost effective. Clients of our debt recovery service benefit from lower Court fees and fixed cost legal fees when issuing proceedings against those “won’t pay” debtors.

Our debt recovery service ensures that aged debtors can be pursued quickly and cost effectively. This service offers to client’s an alternative solution for improving cashflow so that they can strategically place themselves to achieve the businesses goal. Whilst the business may need to still undertake other cost cutting exercises, depending on the level of aged debt, redundancies may not need to be at the top of the list..

For more information regarding our debt recovery service, please contact Maria Koureas-Jones;