Insights

LEMON & DUKE VS FBD

G J Moloney issued High Court proceedings on behalf of the Lemon & Duke pub in Dublin following FBD’s refusal to cover the pub under its business interruption policy. The policy concerned states that cover will be provided in the event of a forced closure where there is an outbreak of contagious or infectious disease on the premises or within 25 miles.

There are in the region of a thousand other publicans in Ireland who have similar cover in place for their businesses and who have also been refused cover by their insurers. It is an extremely distressing time for publicans, who are faced with ongoing overheads such as rents and rates and have no cash flow coming in. in addition to this, publicans do not know when they will be allowed to re-open and what restrictions will be imposed upon them when they do. There will necessarily be considerable expenditure in fitting out the pubs to meet Government and HSE requirements and also in training staff in this regard.

The proceedings were issued following FBD’s confirmation that it would not be indemnifying the Lemon & Duke bar for business interruption insurance, despite the fact that the policy was specifically taken out to cover this very circumstance. A number of other publicans subsequently issued proceedings and on Monday 25 May 2020, Mr Justice Barniville accepted the proceedings into the Commercial List of the High Court on the basis that they concerned very significant commercial issues.

The proceedings, along with three other sets of proceedings, will act as ‘pathfinder’ cases in that the Court will determine the correct interpretation of FBD’s policy and FBD will be bound by this interpretation with regard to all of its customers who have the same policy. The proceedings are listed for hearing in the Commercial Court for 14 days in October.

If you have a similar type issue, please contact G J Moloney in Cork or Dublin.

https://www.irishtimes.com/business/retail-and-services/lemon-duke-and-insurer-fbd-fail-to-resolve-covid-closure-row-1.4273652

BUSINESS INTERRUPTION INSURANCE & COVID-19

BUSINESS INTERRUPTION INSURANCE & COVID-19

What is Business Interruption Insurance?

Business Interruption Insurance is direct physical loss, damage or destruction to property which is caused by an ‘insured peril’ (e.g. fire/escape of water) which in turn leads to business closure. 

In terms of events, there are ‘damage’ and ‘non-damage’ events. For the purposes of this article, we will be focusing on non-damage events.

Examples of non-damage events:-

    • Loss arising from an outbreak of a “notifiable” infectious disease on the property; and 
    • Loss arising from denial of access where the property is restricted from trading by a public authority or personnel are restricted from entering premises. 

Business Interruption Insurance and COVID-19

Since the 28th of February 2020, COVID-19 qualifies as a “notifiable” infectious disease. However, some insurers are still refusing indemnity cover citing the following reasons:

    • COVID-19 is not present on the particular premises; or
    • Covered notifiable diseases are limited to those specifically listed in the policy only; or
    • There is a carve-out/exclusion for “virus” (more common in the aftermath of previous epidemics and pandemics such as SARS, Swine Flu and Ebola virus); or
    • Many businesses were requested (not directed) by the Government to close; or
    • Where COVID-19 was not anticipated as a triggering event, business interruption simply does not apply.

In light of the above, please see below some practical tips that may be of benefit to your business during this pandemic.

Practical tips for businesses:-

  • Obtain full copies of your policies;
  • Record your costs and expenses;
  • Utilise your in-house capabilities to calculate trading losses;
  • Comply with the notification provisions in the policy;
  • Carefully consider making any customer refunds not contractually necessitated;
  • Argue your claim and expect push back;
  • Engage with your insurance broker and legal advisor;
  • Outline your circumstances to other companies and in turn be reasonable with the other parties to your affected contracts. It is important to maintain these relationships into the future.

For further information on Business Interruption Insurance and what it means for your business, please contact our Cork or Dublin offices.

Covid-19 as a Force Majeure Event in your Contract

Covid-19 as a Force Majeure Event in your Contract

Force Majeure is not a term that’s defined in legislation, it is contractual term. The Courts have considered various other events as to what amounts to a force majeure event. They arise in circumstances which are outside the control of the asserting party, abnormal, unforeseeable and unavoidable despite exercise of  due care. 

You cannot use Covid-19 to simply get out of an unfavourable contract. it needs to be the actual and genuine reason for non-performance of the contract. 

How Is A Force Majeure Event Defined Within A Contract?

The contract will generally list specific events (e.g plagues, epidemics, pandemics, plans of government etc). If you are a business in retail and you have a Force Majeure clause that references acts of government, you will be in a strong position in the current climate with COVID -19. It is vital that you establish whether the list is exhaustive or not. A question to ask oneself is whether issues can be implied into the contract? The contract may have a sweep up clasue.  Importantly the Courts will look at totality of contract. 

Types of Force Majeure Clause

  1. Prevents Performance: similar to the Doctrine of Frustration – the party trying to rely on the clause must be able to demonstrate that performance is legally or physically impossible. Just because it is less profitable/unpalatable to one party, does not mean it is sufficient to invoke Force Majeure. Equally, if more effort is required, then that is not sufficient either.
  1. Hindering Performance: an increase in cost in not sufficient. Performance must actually be hindered.  For example a genuine shortage in supply may hold up.
  1. Delayed performance: easier to invoke this than the first two as the contract may simply be performed at a later date. 

Views of the Courts

  • The drafting of the clause is crucial. The clause is to be interpreted by the words used, not the general intention of the parties.
  • The burden of proof is on the party who wishes to rely on the clause. It is up to the person moving the litigation to prove that the event is a Force Majeure.
  • Sole cause of delay: if you are going to relay on COVID-19 to invoke Force Majeure, it must be the sole case of your inability to perform. Mere inconvenience will not stand up.

Mitigation 

It is important for parties to do all they can and to mitigate the effects of COVID-19.

Some clauses may allow either or both parties to serve a Notice of Termination, where the Force Majeure event continues. 

After the expiry of a specified period of Force Majeure, the contract will often provide that if it continues for a certain amount of time, either party may serve notice to terminate. 

This clause must not operate unfairly, e.g., if one party has given a deposit – there must be restitution. 

Other Financial Remedies

If there is no Force Majeure clause in the contract, the Doctrine of  Frustration may assist here, absolving parties of their obligations due to a supervening event. There is a high threshold to meet, but this is not to say that COVID-19 will not be applicable here. Lockdowns could give you sufficient basis to maintain that the contract is frustrated. 

Other Relevant Clauses

  1. Price Adjustment Clause
  2. Limitation/Exclusion of Liability Clause
  3. MAC Clause (Material Adverse Change) If there is a gap between signing and closing, there may be a MAC clause. If circumstances have changed materially between these two dates, the buyer can get out of its obligation to buy the goods etc. 

Practical Tips

  • Review the clauses in your contract.
  • Mitigate your risks if and where possible. 
  • Engage with the other parties to the contract.
  • Consider what effect COVID-19 will have on future business arrangements with these parties – try to maintain a good relationship with your business connections.

Once the “event” (e.g Covid-19) comes to an end the contract is reactivated.

 If you have any queries relating to how Covid-19 may have affected your contract please contact G J Moloney:-  jmoloney@gjmoloney.ie

Mergers & Aquisitions

If you have questions about Merger or Aquisitions, please contact G J Moloney for information and expert advice.

“Delighted to announce our 2nd acquisition as Cuil Dídin Nursing Home in Tralee, a modern 64 bed home with an excellent reputation. We look forward to working with Caitriona and the team in Cuil Dídin in continuing to deliver excellent care to our residents. This is the second of a number of acquisitions of top quality existing homes we aim to acquire in the next 12 to 18 months. CEO Paul Kingston said: “We are interested in acquiring homes who have an excellent reputation of care and the home itself is modern and has a capacity to expand, Cuil Dídin meets all these requirements and we look forward to continuing the excellent care provided under the stewardship of Caitriona. We also look forward to continuing to serve the needs of our residents in Cuil Dídin, ably led by Director of Nursing, Caitriona O’ Connor and her team.” Special thanks to our acquisition team of led by and , , and .”

Planning Permission

 

 

Strategic Housing Developments: The failure to upload report forming part of application can lead to planning permission being set aside

 

In the recent decision of Southwood Park Residents Association v An Bord Pleanála & Others [2019] IEHC 504, the High Court held that failure to upload and make available to the public an updated bat survey/report submitted as part of a SHD planning application was not merely a de minimis breach (a breach which is trivial, technical or insubstantial) of the Planning and Development Regulations 2001 (“the Regulations”). As a result, the decision of An Bord Pleanála (“the Board”) to grant planning permission for a large-scale housing development in Blackrock, Co Dublin, was set aside.

This decision is of particular significance to developers involved in Strategic Housing Development (“SHD”) applications. It highlights the need to ensure full compliance with the relevant procedural and legal requirements.

Background

In February 2019 the Board granted planning permission for a housing development in Blackrock, County Dublin under the SHD planning regime. Pursuant to Article 301(3) of the Regulations, all documents submitted as part of a SHD planning application must be uploaded to a dedicated website by the developer from the date of application and for a period of eight weeks.

In this case, the applicant failed to upload one of the documents forming part of the application. This document was the second of two reports on bats at the site of the proposed development. The first report uploaded to the website contained a survey of bat activity at the site and recommended measures to mitigate against any environmental impact the development might have on the bats. The second report however, which was not uploaded to the website, amended the mitigation measures proposed in the first report.

Grounds of Review

Southwood Park Residents Association sought an order setting aside the decision of the Board to grant planning permission for the development. The failure to upload the second report was conceded by both the Board and developer to be a breach of the Regulations. However, the Board contended that this breach was de minimis and did not affect the validity of the decision to grant planning permission.

Decision

Justice Simons emphasised that neither the Board nor developer enjoyed any discretion as to compliance with the obligation to upload all documentation. There was no question as to whether a breach had taken place. The relevant question was whether the failure to upload the second report could be considered a de minimis breach and the judge held that it could not be regarded as such on the basis that:

  • The breach deprived the public of a right to review and make submissions on the actual application documentation; and
  • A member of the public reviewing the earlier report which was uploaded may have thought certain mitigation measures, which were more robust in the first report and subsequently amended in the second report, remained in place.

The judge referred to the differences between the mitigation measures proposed in the two reports. One of the mitigation measures proposed in the first report was the requirement to obtain a derogation licence pursuant to the Birds and Natural Habitats Regulations 2011. This was amended in the second report, resulting in a member of the public relying on the website version. The suggested effect of this is that such a person may have decided not to object to the proposed development on the basis that the mitigation measures were in place. The court therefore granted a provisional order setting aside the Board’s decision to grant planning permission.

Conclusion

This decision highlights the importance of ensuring full compliance with the procedural and legal requirements when making an application for planning permission. It also emphasises that a failure to ensure full public participation during the planning process can prove detrimental to an application.

This is particularly important for SHD applications, given that the SHD procedure does not contain any ‘request for further information’ mechanism which might allow potential issues to be resolved in advance of the application being considered. As the application is made directly to the Board, the public do not have an opportunity to make submissions or observations at both the planning authority stage and any subsequent Board appeal, as would be typical in a standard planning application.

 

Vanessa Mullally

For further information on Environmental & Planning law, please contact our Cork or Dublin offices.

TUPE REGULATIONS

The European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003

The European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (“the Regulations”) protect the rights of employees when there is a transfer of the undertaking in which they are employed. The Regulations transpose Council Directive No 77/187 of 14 February 1977 on the approximation of the laws of the Member States relating to the safe-guarding of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses (“the Directive”).This area of law is commonly referred to as “TUPE”.

An ‘undertaking’, for the purposes of the Regulations, is an economic entity. This is an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective. The entity must retain its identity in that it is actually continued or resumed.

The transferor’s rights and obligations arising from a contract of employment existing on the date of transfer shall, by reason of such transfer, be transferred to the transferee.

The date of transfer is the date on which responsibility as employer for carrying on the business of the unit transferred moves from the transferor to the transferee.

The existing terms and conditions of the employment contract and the employer’s obligations thereunder are automatically transferred to the new employer. The parties, employer and employee, remain free to agree changes in terms and conditions of employment regardless of whether or not a transfer is or has taken place under TUPE.

The rights of the transferor vis-á-vis its employees also pass to the transferee. Thus the benefit of restrictive covenants and contractual obligations must pass to the transferee.

Employee pension rights, apart from those provided for by social welfare legislation, do not transfer to the new employment. However, where there is a pension scheme in operation in the original employer’s business at the time of the transfer, the legislation provides that:

  • If the scheme is an occupational pension scheme covered by the Pension Acts, then the protections given by that legislation apply;
  • In the case of other pension schemes, the new employer must ensure that rights are protected.

The parties to a transfer have obligations to notify, inform and possibly to consult employees and their representatives before the transfer takes effect.

There are joint obligations on the transferor and transferee to inform employee representatives of the reasons for the transfer, the legal, economic and social implications of the transfer for the employees, and any of the measures envisaged in relation to the employees.

This information is to be given, where reasonably practicable, not later than 30 days before the transfer is carried out and, in any event, before the employees are directly affected by the transfer ‘as regards their conditions of work and employment’.

The Regulations generally prohibit dismissals for reasons connected with the transfer. An employee who is terminated may claim either under the Regulations, or the Unfair Dismissals Acts 1977 – 2015.

The Regulations do allow for dismissals to take place for economic, technical or organisational reasons entailing changes in the workforce (ETO). Only the transferee can make such dismissals.

Irish cases in this area have tended to equate the ETO dismissals with the concept of redundancy.

Economic, technical or organisational reasons must entail ‘changes in the workforce’. This normally requires a change in the numbers of people employed to perform particular functions, not merely a change in their terms and conditions.

European Court of Justice decisions have made it clear that the term “transfer” implies that the transferee actually carries on the activities of the transferor as part of the same business. The decisive criterion for establishing whether there is a transfer for the purposes of the Directive is whether the business in question retains its identity.

Contracts for Services

In relation to contracts for services, where the main/only asset is the workforce, which were previously carried out by one contractor but are now carried out by another contractor (also in circumstances where the contract is brought in house or outsourced), the EAT/WRC decisions have found that it is essentially up to the incoming contractor to decide whether or not to take on the outgoing contractor’s employees.

If the incoming contractor does choose to take on these employees then TUPE may apply, provided the employees can be said to be part of a stable economic entity, i.e. the job that they were doing before the transfer is essentially identical to the job they are doing after the transfer.

If the incoming contractor chooses not to take on the outgoing employees then TUPE will not apply.

The Right of an Employee to Object to a Transfer

The transfer of the employee from transferor to transferee is automatic irrespective of the wishes of either party. This is subject to the right of the employee to object to a transfer of his employment relationship.

The legal effect of the employee’s right to object is a matter for each member state to determine; consequently, differing positions regarding the effect of a refusal have emerged.

The legal effect in Ireland was considered in Symantec Ltd. v Leddy & Lyons where the employees refused to transfer when Symantec sold part of its business to another company. The EAT (Employment Appeals Tribunal) held that in refusing to transfer, the employee remained employed by the transferor. If the transferor had no alternative position to offer the employee, he would be redundant and the transferor would be liable for that redundancy.

However, the High Court overturned the EAT’s decision, holding that the refusal of an employee to transfer does not result in the employee being made redundant. Consequently the employee was not entitled to any severance payment, statutory or otherwise. The High Court appears to have aligned itself with the UK approach, where legislation provides that a refusal to transfer is deemed to be a resignation by the employee.

Please contact our offices in Cork or Dublin for further information.