As 2021 draws to a close, we reflect on some of the key legal cases and developments which have impacted upon retailers over the past 12 months with input from specialist litigation, property, commercial, insolvency and employment lawyers.
How close is too close ?
2021 saw the courts determining time and time again ‘how close is too close’ in terms of product and garment designs.
The fashion retailer House of CB succeeded in establishing that 7 out of 20 fashion garments which were the subject of its UK and EU registered design right claims were infringed by competing business Oh Polly. It did not, however, manage to succeed in its passing off claims that Oh Polly had copied its wider brand choices relating to the alleged similarities in look and aesthetic; distinctive photoshoot choices; packaging look and feel; website get-up and other social media imagery.
Colin and Cuthbert of caterpillar cake fame hit the spotlight when M&S sued Aldi for trade mark infringement and passing off. There may not yet be any legal judgment on the case, but the public certainly had their own views, with Aldi’s press team (and the memes which immediately went viral on social media) perhaps coming out on top as the real winners.
David beat Goliath when Glebe Farms successfully defended the name and branding of its PureOaty milk against Oatly’s claims of trade mark infringement and passing off. After reviewing all the evidence concerning the parties’ choices of language, typeface, colours, and imagery, the court held that there was no likelihood of confusion between the PUREOATY name, and any of the Oatly trade marks or the look and feel of the respective milk cartons. Again, the case was played out in a very public manner and the role of PR in a case has become an important factor for parties to take into consideration when determining the strategy for their dispute.
This year, two cases considered whether it would be appropriate to include a pandemic suspension clause in a lease on renewal. In Poundland Ltd V Toplain Limited the Court refused to incorporate the proposed clause whereas in WH Smith Retail Holdings Ltd v Commerz Real Investmentgesellschaft mbh, the Court was willing to incorporate a rent suspension clause.
The crucial difference was the approach of the parties. In Poundland the parties were not in agreement on the inclusion of the clause. The proposed change would therefore not respect the risks that were negotiated and agreed between the parties. However, in WHSmith the parties agreed that a suspension clause should be incorporated. The decisions reflect the court’s reluctance to re-write commercial bargains and respecting that the parties themselves know best.
Guilt-free rental fashion
This year has seen a huge increase in rental fashion. Sustainable, affordable, and giving access to high-end, luxury brands – the rental model seems to tick all the boxes. Different models include peer-to-peer services allowing users to lend to other users, a subscription service whereby renters can select several items for a monthly fee, or the rental of a single item. And it’s not just clothes – John Lewis has this year launched a furniture rental service.
Amid growing consumer awareness about the environmental impact of fast fashion and sustainability, the rental market is expected to continue to grow. The model raises new issues for the retailer to consider from a legal perspective, including how to deal with an item which is damaged, lost or stolen; for more minor damage and spillages; in what circumstances additional costs might be passed on to the renter; the cleaning of the garment, and what happens if a renter wishes to return an unwanted item, for example, if it does not fit. All the above issues will need to be expressly and clearly covered in the company’s terms and conditions with their users to avoid the scope for dispute and customer dissatisfaction.
The return of the winder
On 29 September 2021, the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) Regulations 2021 came into force. The Regulations relax the previous restrictions which had applied to the issue of winding up petitions during the pandemic.
From 1 October 2021, creditors can once again issue winding up petitions against debtors provided that (a) the debt concerned is £10,000 or more and (b) the creditor has given the debtor company 21 days’ notice of its intention to present a petition. It is important to note, however, that these new provisions do not apply to landlords seeking payment of rent arrears under a commercial lease.
Although the Coronavirus Act significantly limited a landlord’s ability to recover rent arrears and sought to protect tenants during periods of reduced trading and mandatory closure, landlords’ options were not completely fettered and the ability to recover rent arrears through debt proceedings remained squarely on the table.
The Courts have rejected various arguments raised by tenants including that the Code of Conduct for commercial property relationships during COVID had not been complied with and proceedings were issued prematurely; rent suspension clauses applied when the premises were closed due to legal requirement; the landlord was obliged to insure against loss of rent; a term should be implied into the lease suspending payment of rent when use of the property was illegal; and there was a partial failure in consideration in the case of a cinema as it could not be used in accordance with the user clause and therefore no payment was due.
That said, the Commercial Rent (Coronavirus) Bill was introduced on 9 November 2021 and is currently working its way through parliament, together with a new code of practice for commercial property relationships post-pandemic. The Bill introduces a mandatory arbitration process for landlords and tenants where there is no agreement as to rent arrears which have accrued due to the coronavirus pandemic. Claims brought from 10 November 2021 in relation to such arrears will be stayed on application to enable the matter to be resolved by statutory arbitration or otherwise.
Although the Bill is intended to come into effect in March 2022, parties are encouraged more than ever to engage to explore if a resolution is achievable, before considering if the arbitration process is necessary step.
New approach to TUPE – split transfers
TUPE is always relevant to the retail sector because it applies when a business changes its service providers such as logistics providers or security or cleaning services.
In March of this year, two combined cases heard in the Employment Appeal Tribunal (McTear Contracts Ltd v Bennett and others and Mitie Property Services UK Ltd v Bennett and others) confirmed that the novel approach adopted by the European Court of Justice in an earlier case should be followed under UK law. It has now been decided that in a TUPE transfer scenario employees can transfer to two or more different employers and be employed on a split basis by each of them.
The previous ‘all or nothing’ approach where an employee who did not spend the majority of their time providing services to a particular business would be unlikely to be caught by any transfer is no longer good law.
For retailers, this may mean a different approach is required. It is not uncommon for service providers to provide similar services to a number of business, with the employees of that service provider splitting their working time assisting a number of different businesses. For instance, a cleaning company may provide cleaning services to a number of businesses, with employees splitting their time cleaning different sites. Now where there is a change in that service provider (be it to a new provider or because the employees are taken in-house), businesses must be aware that they may inherit employees under the TUPE legislation even though employees may have split their time assisting several different businesses.
Retailers may now be left dealing with a situation where employees are inherited on a part-time basis, something which can cause significant operational and administrative challenges.
2022 looks set to present further challenge and opportunities for retailers. Innovation is likely to be key for retailers competing with an ever-expanding metaverse and continually evolving definition of “digital”. boohooMan has just announced the exciting launch of its debut collection of non-fungible tokens and Nike was recently reported as having registered several of its trade marks for use on various virtual goods/services. Retailers in 2022 may need to assess whether consumers are going to want or expect engagement not only to happen through physical stores, websites and social media channels but also in the virtual world.
If you would like to read more legal insight from Pannone on Modern Retail, click on the articles below.