Pinewood Technologies Asia Pacific Ltd v Pinewood Technologies PLC

A recent judgment by the High Court considered the construction of exclusion of liability clauses. The court held that a claim for breach of various contractual obligations was excluded under the ‘loss of profit’ clause. The claimant unsuccessfully argued:

1. That under section 3(1) of the Unfair Contract Terms Act (UCTA) 1977 the agreement constituted its standard terms of business and the exclusion clause didn’t meet the requirement of ‘reasonableness’. The argument was dismissed on the basis it was clear that the agreement had been negotiated.

2. Exclusion clauses cannot apply to the non-performance of contractual obligations or to repudiatory breaches of contract. Rather the judge ruled it is a question of construction in each case as to whether the breach/loss in question is covered by the exclusion.

How could it impact your business?

The case reiterates the benefit of including well drafted exclusion clauses in commercial contracts. Care should be taken when drafting or reviewing an exclusion of liability clause to ensure it includes the appropriate heads of loss and the language is clear and unambiguous.

What steps should you take?

We always recommend that clients periodically review and update key provisions around limitation of liability and exclusions and/or liability caps thereunder. Given the increasing importance of data, this too should be considered in detail and risks allocated accordingly.

Companies should also be fully cognizant of any key indemnities contained within their day-to-day contracts. Are these appropriate given the circumstances? Likewise what should we expect our suppliers to be giving us and/or taking responsibility for if contract terms are breached?

The Building etc (Amendment) (England) Regulations 2023

From 1 October 2023, for all new developments (with certain exceptions for developments already at certain stages) businesses will have to appoint a Principal Designer (“BR PD”) and a Principal Contractor (“BR PC”) for the purposes of the Regulations. While these new roles have the same names as existing positions under the CDM Regulations, they are separate appointments with slightly different duties and so businesses must ensure the BR PD and BR PC are properly appointed.

How could it impact your business?

Appointments of the BR PD and BR PC must be made for a project where:

1. Higher Risk Building (“HRB”) work requires building control approval to be submitted to a regulator, before the application is submitted; and

2. in relation to any other project, before construction phase begins.

If these appointments are not made, the company must take on these roles.

The BR PD role involves ensuring designs are compliant with Building Regulations and so for large developments, the BR PD role will likely be undertaken by the lead design consultant. For smaller developments, the BR PD role will likely be undertaken by the Contractor, if they have a design responsibility (and if no design responsibility, the consultant with the most design responsibility will take on the role of BR PD).

The BR PC role will always sit with the main contractor.

Requirements are more stringent and costly for HRBs, which apply to buildings in England which:

• are at least 18 metres or 7 storeys high; and

• contain 2 or more residential units.

What steps should you take?

Businesses needs to put in place BR PD and BR PC appointments as appropriate.

The role of the BR PD and BR PC are competency based and the business needs to “take all reasonable steps” to ensure that the consultant/contractor taking on these roles has the required competency to carry them out. The consultant/contractor cannot accept the role if they do not meet competency requirements and it is a criminal offence if they do so.

Should the role of the BR PD or BR PC change hands during a build, the business must inform the relevant local authority and the Building Safety Regulator.

For non HRBs, if plans have been submitted to the local authority prior to 1 October 2023, and meaningful progress in the construction has begun by April 2024 (for instance, laying the concrete for the foundations) then the new regime does not apply.

UK critical national infrastructure (CNI) inquiry

In September, the UK Government launched an industry consultation aimed at tightening the UK’s resilience to cyber-attacks. The inquiry is widely pitched and will focus upon the UK's critical national infrastructure, encompassing the financial sector, Governmental departments, energy, and transport.

Whilst only at its opening stages, the inquiry proposes to identify what additional support is needed to achieve the Cyber Resilience Targets announced by the UK Government in April 2023, as well as amending standards and regulations to increase the UK's preparedness for cyber-attacks in the public and private sectors.

How could it impact your business?

With the project in its infancy, there is currently no certainty as to the depth of any proposed reform. However, in order to meet the Cyber Resilience Targets, proposed changes are likely to be in force by 2025.

In practice, this means that within the next two years, affected businesses could be required to update internal processes and invest in new computer hardware, to comply with new requirements.

What steps should you take?

The deadline for responses falls on 10 November 2023 and businesses will need to keep a keen eye on any ripples coming out of the project to ensure they remain prepared to make any required changes under the amended regulations.

Implementation of the UK-US ‘data bridge’

From 12 October 2023, UK businesses can begin to transfer personal data to the US in reliance upon a new ‘data bridge’. The data bridge signifies the UK Government’s approval of the Data Privacy Framework recently implemented between the EU and US (DPF) and extends its application to the UK (the ‘UK Extension’ to the DPF). It allows for the safe and free flow of personal data from the UK to certain organisations within the US, without the need for additional safeguards.

For US companies to benefit from the data bridge, they must be an active participant in the DPF (eligibility criteria apply) and have signed up to the UK Extension. They must also be certified to receive particular types of UK data.

How could it impact your business?

The data bridge offers new possibilities to those previously deterred from engaging US providers because of the invalidated EU-US Privacy Shield and associated burden of risk-assessing and contractually-safeguarding transfers, as well as those wishing to simplify their transfer mechanisms. These compliance protocols are effectively removed where a UK business establishes that it can rely on the data bridge to effect a transfer to the US.

What steps should you take?

UK organisations wishing to rely on the data bridge must establish that:

1. the US recipient is an active DPF participant;

2. the US recipient has signed up to the UK Extension; and

3. the types of data to be transferred are covered by the US recipient’s commitments.*

*Note that special rules apply to personal data collected in the context of an employment relationship (so-called ‘HR data’) and other types of sensitive data.

Further guidance is available on the UK Government’s website.

UK organisations establishing they can rely on the data bridge, whether for existing or new transfers, must update their organisational policies and procedures to reflect the new transfer mechanism. This will include privacy notices and contracts with US-based recipients.

Organisations establishing that they cannot rely on the data bridge will need to revert to using a pre-existing safeguard under Article 46 UK GDPR (the IDTA or Addendum to the EU SCCs) or one of the derogations under Article 49. The transfer will also need to be risk assessed (TRA).

Obtaining judgements in foreign currencies

In the recent case of Shabeiry v Patel, the High Court has ruled on two key points. Firstly, a party cannot request default Judgment using a different exchange rate to the original rate included in the claim form or particulars of claim.

Secondly, the High Court has confirmed there are two circumstances in which a Judge may enter Judgment in a different currency.

1. The first is where the claim form or particulars of claim, claim a debt in one currency (in this case United Arab Emirates Dirham) and in the alternative, claim an equivalent sum for the debt in a different currency (British Pound Sterling). In this scenario, a Defendant would be on notice of the intended claim and if no defence is filed, a Defendant may be taken as accepting that a Judgment would be entered in either of the currencies claimed.

2. The second situation is where the currency in which Judgment is sought best reflects the loss a claimant has suffered through non-payment.

How could it impact your business?

The point of whether a Judge can award a Judgment in a different currency has not previously been considered by the Courts. This decision will therefore provide clarity to businesses dealing with debt claims in international currencies.

Key points arising from this recent decision include:

• If a business wishes to reserve a right to enter Judgment in an alternative currency, they should ensure that this is included in the claim form and particulars of claim.

• A party wishing to request Judgment in an alternative currency, will need to make an application to Court. This is because a request to enter default Judgment (using a form N225 application in the High Court) is an entirely administrative process that is dealt with by court staff and the request for Judgment to be entered in an alternative currency would need to be considered by a Judge.

What steps should you take?

Businesses should consider two points when preparing a claim to seek payment of a debt:

1. What currency best reflects the loss they have suffered by the non-payment of the debt. For example, in a situation where a business has loaned funds under a loan agreement in AED, AED may be held by the courts to best reflect the loss suffered.

2. Businesses should consider if it would be advantageous to include a claim for payment of the debt in an alternative currency. Companies who do not regularly use, for example AED, may prefer to recover payment of the debt in Sterling.

PRA and FCA Consultation – Proposals to Improve Diversity and Inclusion In Regulated Firms

The Regulators (PRA/FCA) have jointly issued consultation papers on a new regulatory framework for Diversity and Inclusion (D&I). The proposals build on a previous well-received BOE/PRA/FCA discussion paper, and a 2021 survey of dual-regulated firms.

The consultations run until mid-December.

The Regulators’ stated motivations include better outcomes for consumers, avoiding “groupthink”, supporting healthy work-cultures and unlocking diverse talent. They cite research that effective D&I can improve outcomes for consumers and markets.

If taken forward, responsibility for implementing effective D&I strategies will be given to Senior Managers.

How could it impact your business?

Over time, a tailored diversity and inclusion strategy is likely to be a standard feature of business regulation, with senior managers inevitably going to have to take a greater share of responsibility for implementing meaningful D&I initiatives which yield tangible results.

Many businesses are already acting to get ahead of the curve and adopt best practice in this area, reviewing policies and devising meaningful initiatives, anticipating the need for:

• Clear diversity targets;

• Board governance requirements;

• Individual accountability under the SM & CR regime; and

• Monitoring, regulatory reporting and disclosure.

What steps should you take?

Whilst there are no immediate changes required, it is sensible for organisations to consider their Diversity and Inclusion initiatives. Points of consider include:

• How is D&I measured in the business?

• Is the business able to report on the composition and makeup of its workforce, on metrics such as:

  • age;

  • sexual orientation;

  • sex or gender;

  • long term health conditions (including disability, neurodiversity and mental health);

  • ethnicity;

  • religion.

• How will future progress be measured? and who, principally, will be accountable for it?

• How can job profiles and searches be adapted to speak to a wider range of candidates?

• What initiatives can be implemented to promote meaningful change? Who will take ownership of these?

Greening the Economy - Net Gains from Biodiversity

On 27 September 2023, the Government announced that the Biodiversity Net Gain (“BNG”) regulations would be delayed and not come into effect until January 2024. Once implemented, though, land developers must deliver a minimum biodiversity gain of 10% as part of the planning process.

BNG aims to ensure that developers leave the natural environment in a better state than it was in before they developed the land. This will include things such as creating green spaces and new habitats.

The BNG concept was first introduced as part of the Environment Act 2021. Further guidance including details on the statutory biodiversity metric and a template biodiversity gain plan is due to be provided by the Government in November 2023 (a specific date is yet to be confirmed).

How could it impact your business?

During the planning application process, developers must produce and submit a ‘biodiversity net gain plan’. This will detail the steps the developer ought to take to ensure the delivery of a minimum biodiversity net gain of 10%.

A hierarchy of action has been published which states that developers should seek to:

1. Avoid;

2. Minimise;

3. Mitigate; and (as a final option)

4. Offset

their impact on biodiversity. If this cannot be achieved on-site, compensation for the impacts to biodiversity can take place off-site.

Once the regulations have been implemented, development may not begin unless a biodiversity net gain plan has been submitted to the planning authority and the planning authority has approved the same.

As such, it is likely that developers will experience further difficulties in obtaining planning approval. In addition, due to the additional administrative burden this will place on local authorities, it is likely that further delays could be experienced.

Developers will also experience an additional administrative and financial burden through the development and implementation of their ‘biodiversity gain plan’.

What steps should you take?

Some local authority planning authorities have started to request biodiversity net gain plans on a voluntary basis in anticipation of the (now delayed) November implementation date. But the Government has confirmed that the mandatory BNG provisions will only apply to new applications for planning permission for major development after January 2024 and that it will not be applied retrospectively.

In addition, there seems to be an emerging trend from the Government in relation to environmental policies in that certain deadlines and target dates are being pushed down the line, the BNG implementation being one. Therefore, there is a real possibility that the proposed date of January 2024 could well be pushed further.

There has also recently been speculation around the date of the next general election and should the BNG requirement not be implemented before this date they may be revised even further. The King’s Speech 2023 is scheduled to take place on 7 November 2023 and it has already indicated this Government’s desire to scrap nutrient neutrality – could BNG end up going the same way?

In the meantime, as some local authorities already request details from developers about their proposed biodiversity plans developers should make sure that they are complying with local authorities in order to ensure timely processing of planning applications.

Corporate Governance and reporting

In the realm of corporate governance and reporting, the landscape is rapidly evolving, driven by a growing emphasis on Environmental, Social, and Governance (ESG) factors. Several key developments are shaping this transformation.

Regulatory Framework

Regulatory bodies worldwide are imposing stricter reporting requirements aimed at driving greater transparency of ESG factors. Notably, the EU Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation are setting comprehensive guidelines for ESG reporting. Parts of the Taxonomy Regulation have applied since January 2022 and created criteria for determining whether an economic activity is environmentally sustainable (or "green").

In response to the White Paper on Restoring Trust in Audit and Corporate Governance in 2021, the Government invited the FRC to further strengthen the UK Corporate Governance Code in certain specific areas, with specific mention of ESG objectives and reporting. The 4 month consultation closed last month on 13 September 2023 and the revised Code is expected to be in place for financial years beginning 1 January 2025.

The Code applies to all companies with a premium listing on the London Stock Exchange. However, many companies that are not required to follow the UK Corporate Code still choose to do so, looking to the Code as a benchmark for good corporate governance. So, we expect to see a trickle down of ESG objectives into the governance of most UK companies.

The UK’s largest private companies that have more than 2,000 employees, or have a turnover of more than £200 million and a balance sheet of more than £2 billion, are already required to report on their corporate governance arrangements on their websites. The statement should cover purpose and leadership, board composition, director responsibilities and remuneration. This guidance comes from the Wates Principles and although not mandatory, many large private companies choose to adopt them.

The FCA together with TCFD (Task Force on Climate-related Financial Disclosures) have begun phasing in changes to climate change-related financial disclosures (non-financial and sustainability information statements are now required from the largest private UK companies for financial years beginning April 2022).

Also, in July 2023, the Government published draft secondary legislation, the Companies (Strategic Report and Directors’ Report) (Amendment) Regulations (SRDRR 2023), which proposed to amend the Companies Act 2006 to introduce new mandatory reporting requirements for companies with over 750 employees or turnover of £750m, including new narrative reporting on resilience, distribution policy, audit and assurance and material fraud. However, this month the Government has withdrawn the draft Regulations amid concerns raised by companies about the burden of additional reporting requirements.

In September 2023, new guidance was published to create UK Sustainability Disclosure Standards which is set to become the definitive UK sustainability reporting standard. This is based on the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board and is created with the intention of providing a framework for future legislation and harmonising UK reporting standards with global reporting standards.

The UK Sustainability Disclosures Standards will apply to listed companies, large private companies and large partnerships. The Secretary of State for Business and Trade will consider the endorsement of the IFRS standards in order to create the UK Sustainability Disclosure Standards by July 2024.

Investor & Stakeholder Focus on ESG

With increased disclosure and reporting comes higher levels of activism and reputational risk, as it becomes easier to scrutinise corporate behaviours and performance against ESG measures.

Investors, customers, and employees increasingly demand transparency and ethical behaviour from corporations. They expect companies to address ESG issues, such as climate change, diversity, and data privacy. The International Auditing and Assurance Standards Board (IAASB) have recently proposed their International Standard on Sustainability Assurance Engagements which looks to address this demand for transparency with stakeholders.

The Investment Association has published guidance on executive remuneration. This recommends that companies should use ESG metrics, and if this has not been done, the company’s executive remuneration policy should explain to shareholders what their intentions are.

Integration of ESG into Corporate Strategy

The integration of ESG principles into business strategies is becoming key. Companies are expected to align their operations with sustainability goals and demonstrate commitment to responsible business practices.

Technology and Data Analytics

The use of advanced technology, including artificial intelligence, is enhancing ESG reporting capabilities. These technologies enable better data collection, analysis, and reporting, making it easier to track ESG performance.

How Will It Impact Your Business?

These changes to corporate governance could affect your business’ reputation if it does not meet ESG standards. Given the integration of ESG factors into investment decisions, corporate governance may also impact your relationship with your key stakeholders and even access to capital.

In terms of immediate risk, non-compliance with evolving ESG regulations and reporting requirements may lead to legal and regulatory risks, including fines and legal action.

Moving forward, by incorporating ESG objectives into your business, they may drive operational efficiencies and enhance long-term sustainability.

What Steps Should You Take?

To navigate these changes effectively, companies should consider the following steps:

1. Assess current ESG policies & practices - Conduct a comprehensive review of your current ESG policies, practices and reporting. Identify gaps and areas for improvement.

2. Embrace ESG integration - Integrate ESG principles into your corporate strategy, including setting clear ESG goals and KPIs, and ensure they are aligned with industry standards and regulatory requirements.

3. Enhance data collection and reporting - Invest in data collection and reporting systems that facilitate accurate and transparent ESG reporting. Leverage technology for better data analysis.

4. Engage stakeholders - Communicate your ESG efforts to stakeholders, including investors, customers, employees, and regulatory bodies. Transparency and engagement are key to building trust.

5. Board accountability - Align your corporate governance with ESG principles, including the Wates principles, ensuring board accountability for ESG matters.

In conclusion, the changes in corporate governance and reporting and ESG regulation present both challenges and opportunities. Companies that embrace and align their strategies with ESG principles are likely to benefit whilst also contributing to a more sustainable and responsible global economy. The ESG agenda is evolving at speed and continued horizon scanning of the developing legal obligations that underpin it will be crucial.

Trade mark classifications for NFTs

In April, the IPO released guidance on trade mark classifications of non-fungible tokens (NFTs), the full details of which can be read here. The guidance, which came into immediate effect, was released following a steep increase in trade mark applications relating to NFTs and virtual goods and services.

How could it impact your business?

The guidance highlights the opportunities available to trade mark new forms of goods and services in a quickly developing area. However, for those looking to file an application, it is important to note that the term NFTs will not be accepted as a standalone classification due to its indistinct nature. Instead, an indication of the asset the NFT relates to must be included in the trade mark application.

The guidance also notes that despite NFTs relating primarily to digital assets, they can be used to authenticate physical goods.

The existing response period to any objections made by an examiner during the review of an application has not been changed under the guidance. Under rule 8(2)(b) of the Trade Mark Rules 2008, if a statement of objection as part of the examination report is made, the applicant will have two months in which to respond to provide clarity.

What steps should you take?

The key message is that trade mark examiners will raise objections to any ambiguity around trademark classification. So, should there be any interest in filing a trade mark application concerning NFTs or digital goods, it is important to review the guidance to ensure the appropriate classes are included.

For those not looking to file a new application, the introduction of the guidance still provides a useful reminder to consider whether your wider protection around digital activity is robust and up to date. 

Landlord and Tenant Act 1954

The Law Commission announced on 28 March 2023 that it would review how the right to renew business tenancies, as set out in Part 2 of the Landlord and Tenant Act 1954, is working. The consultation paper is expected to be published in December 2023.

Part 2 of the Landlord and Tenant Act 1954 is a key piece of legislation in commercial lettings that governs the statutory rights for tenants to renew their leases at the end of the term (also known as ‘security of tenure’) and a landlord’s right to procure possession of the premises.

The current regime is seen by some as inflexible, burdensome and out of date, with many landlords opting to contract outside of this, causing uncertainty for tenants and their businesses.

How could it impact your business?

The intention of the Law Commission is to conduct a review of the legislation and look to modernise commercial leasehold legislation and create a legal framework that is adopted by both landlords and tenants, is easy to use and helps foster a productive and beneficial commercial relationship between the parties.

Depending on the recommendations proposed and legislation introduced, the implications for both landlords and leasehold property occupiers could be significant. However, if the aspirations of the Law Commission are achieved then it should enable commercial lettings to be completed more quickly and efficiently, by removing some of the statutory processes that can delay this at renewal.

What steps should you take?

To await publication of the Consultation Paper and consider the potential reforms and how these may impact on your business in the future.