F1 - Legal Framework August 07

LEGAL FRAMEWORK

FORMATION 1 EXAMINATION - AUGUST 2007 NOTES

Number of Questions to be answered: FIVE (Only the first five questions answered will be marked). All question carry equal marks.

TIME ALLOWED:

3 hours, plus 10 minutes to read the paper.

INSTRUCTIONS:

During the reading time you may write notes on the examination paper but you may not commence writing in your answer book. Marks for each question are shown. The pass mark required is 50% in total over the whole paper. Start your answer to each question on a new page. You are reminded that candidates are expected to pay particular attention to their communication skills and care must be taken regarding the format and literacy of the solutions. The marking system will take into account the content of the candidates' answers and the extent to which answers are supported with relevant legislation, case law or examples where appropriate. List on the cover of each answer booklet, in the space provided, the number of each question(s) attempted.

The Institute of Certified Public Accountants in Ireland, 9 Ely Place, Dublin 2.

LEGAL FRAMEWORK

THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND FORMATION I EXAMINATION – AUGUST 2007

Time Allowed: 3 hours, plus 10 minutes to read the paper. Number of Questions to be answered: FIVE (Only the first five questions answered will be marked). All questions carry equal marks.

(Note: Case Law and Statute, should, where appropriate, be mentioned)

1. 2. 3. 4.

5.

6.

7.

Discuss the structure and operation of the civil courts in the Irish legal system.

[Total: 20 marks]

A mortgage is defined as a form of security in which a legal or equitable estate in property is transferred to the lender. Discuss the differences between legal and equitable mortgages. [Total: 20 marks] Discuss and analyse, with reference to the relevant case law, the duty of care in Irish tort law.

[Total: 20 marks]

Quick Jet plc. is an airline that operates an air miles scheme which promises a reward of €1,000 to any passenger who accumulates 10,000 air miles over a 4 week period. John accumulates the required air miles in accordance with the conditions of the scheme but Quick Jet refuse to make the €1,000 payment. Advise John. [Total: 20 marks] Protection is afforded to some but not all employees under the Unfair Dismissals Act, 1977, as amended. Outline and discuss the main provisions of this act, also indicating who are excluded from itʼs provisions. [Total: 20 marks]

Harry bought a second hand DVD player for Christmas from Megabargains Ltd. When he visited the shop he was told that the DVD players were in excellent condition. He was shown what appeared to be a 2005 model and was told that it was only two years old and in excellent working order. He bought the DVD player. The DVD player malfunctioned after three weeks and Harry discovered that it had been repaired on several occasions prior to his purchasing it and that it was in fact a 2002 model. Harry now wishes to return the DVD player and recover the money that he paid for it. Advise Harry of his rights under the Sales of Goods legislation. [Total: 20 marks] “Article 82 of the E.C. Treaty applies when an undertaking has a dominant position”. Discuss article 82 clearly indicating your understanding of: i) ii) iii)

an undertaking the definition of a relevant market, and the main indications of dominance.

[Total: 20 marks]

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SUGGESTED SOLUTIONS

LEGAL FRAMEWORK

SOLUTION 1

FORMATION I EXAMINATION – AUGUST 2007

This question examines the studentʼs knowledge of the structure of the court system in this jurisdiction. Students should discuss the set out the constitutional provisions relating to the courts and should refer to the distinction between the superior courts and courts of local and limited jurisdiction. Articles 34 to 38 of Bunreacht na hÉireann1937 deal with court structure and system.

Solution 1 (20 marks)

These provisions required the establishment of a new court system, which formally came about with the Courts (Establishment and Constitution) Act 1961.

Bunreacht na hÉireann provides for courts of first instance and a court of final appeal in Article 34.2. Article 34.3.1 further states:

The Courts of First Instance shall include a High Court invested with full original jurisdiction in and power to determine all matters and questions whether of law or fact, civil or criminal.

Article 34.3.4 provides:

The Courts of First Instance shall also include Courts of local and limited jurisdiction with a right of appeal as determined by law.

The Courts of local and limited jurisdiction are the Circuit Court and the District Court. The term ʻlocalʼ refers to geographical limits. There are eight circuits and twenty-four districts. Circuit and District Court judges may only exercise jurisdiction in the circuit or district to which he or she is assigned. The term ʻlimitedʼ refers to jurisdictional limits. The courts may only hear those cases that are specifically legislated for. Each court has a different jurisdiction.

The Supreme Court The Supreme Court is provided for in Article 34.4 of the Constitution and is made up of the Chief Justice and seven ordinary members of the Supreme Court. The President of High Court is an ex officio member of the Court. In the event of illness of a Supreme Court Judge, members of the High Court may sit on the Supreme Court. In terms of its jurisdiction, the Supreme Court has original civil jurisdiction in relation to the capacity of the President and the constitutionality of legislation and it has full appellate jurisdiction to hear appeals on a point of law from the High Court and appeals on liability and quantum from the High Court. The Supreme Court is a collegiate court when dealing with the issue of the validity of a law, meaning that the court will hand down only one judgment.

The High Court The High Court is made up of the president of the High Court and a number of ordinary High Court Judges. The Chief Justice and the President of the Circuit Court are ex officio members of the High Court. In the event of illness of a High Court Judge, where there is a necessity for more judges, the President may request a Supreme Court judge to sit as an additional judge. The High Court may sit as judge, judge and jury or three-judge court (divisional High Court). The High Court goes on circuit in Cork and Galway. It has full original civil jurisdiction and in practice will hear cases in the first instance where the damages involved are greater than the euro equivalent of €30,000. It can also deal with constitutional cases, judicial review, wardships, company wind-ups and personal insolvency.

The High Court also has appellate jurisdiction which it exercises by hearing cases de novo on appeal from the Circuit Court and by wa of case stated from, inter alia, the District Court.

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In addition the High Court has supervisory jurisdiction. This jurisdiction arises in judicial review proceedings where the Court may grant relief in respect of the decision of, inter alia, an inferior court or tribunal. Amongst the reliefs that may be granted are certiorari, mandamus or prohibition.

The Circuit Court The Circuit Court is composed of the President of the Circuit Court and a number of ordinary Circuit Court judges. The President of the District Court is an ex officio member of the Circuit Court. In the event of an absence of a judge, a ʻtemporaryʼ Circuit Court Judge may be appointed. Judges generally sit alone, but there may be jury trial in criminal actions. The Circuit Court has original civil jurisdiction to hear cases where the damages claimed do not exceed the euro equivalent of €30,000. It can also deal with cases regarding new intoxicating liquor licences, commercial and consumer protection within its financial limit, environmental matters within the limit, landlord and tenant actions, judicial separations and nullity, and gender equality cases under Employment Equality Act, where it has an unlimited financial jurisdiction. Appeals from the Circuit Court in all civil matters go to the High Court and appeals on a point of law by case stated go to the Supreme Court.

The District Court The District Court is composed of the President of the District Court and a number of ordinary judges of the District Court. The absence of a judge from the courts may lead to the appointment of ʻtemporaryʼ District Court judges. The District Court judge always sits alone and operates only within his or her own district. The District Court has original civil jurisdiction to hear cases where the damages claimed do not exceed the euro equivalent of €5,000. It can also deal with intoxicating liquor licence renewals, maintenance for spouses and children, commercial and consumer protection under the Hotel Proprietors Act 1963 and the Consumer Credit Act, 1995. Full de novo appeal lies to the Circuit Court for all civil cases, with very limited exceptions. An appeal on a point of law by case stated lies to the High Court in civil matters and where the High Court gives leave the point of law may go to the Supreme Court.

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SOLUTION 2

A knowledge of the different types of mortgage that may arise under Irish law forms a basis for understanding, inter alia, the different of types of security that may be granted by a company. Students, in answering this question, should demonstrate an understanding of the importance of the equity of redemption. Solution 2 (20 marks)

Given the high number of property purchases in Ireland as of late, the issue of mortgages is a highly important issue in Irish society. Mortgages generate the means needed to purchase property by allowing people to borrow money at a reasonable rate of interest over a substantial period of time with the property being used as security. Mortgages can also be used against a property already owned to renovate or improve a house, to develop a property for business purposes, to buy farm machinery, to start a business or indeed to buy something unconnected to the property, with the property being used as collateral.

A mortgage is defined as a form of security in which a legal or equitable estate in the property is conveyed to the lender, subject to the property being conveyed back the borrower once repayment on the loan is complete. Mortgages existed in common law but their terms could be harsh on the borrower. Usually, the borrower, who had freehold estate, conveyed the fee simple to the lender with a reconveyance proviso. The date by which repayment had to be made was usually not far off and if the loan and the interest were not repaid, common law took a strict view. As a result, the borrower lost all rights to his land to the lender, while still having to repay his debt to the lender. Overtime, equity intervened and the view prevailed that the essence of the mortgage was that it was security for the loan rather than a conveyance to the lender. This meant that although the date for repayment may have passed, equity kicked in and the borrower did not lose his property. This development is crucial to how mortgages work today.

There are various forms that mortgages and charges can take. Mortgages can be either legal or equitable and this depends on whether the lender takes a legal or equitable interest in the property.

A legal mortgage occurs where the borrower has a legal estate in the property which he conveys to the lender. If the proper procedures for the creation of a legal mortgage are not followed, the borrower will only be entitled to an equitable interest. If the borrower only has an equitable interest in the property, then only an equitable mortgage can be created.

A legal mortgage in unregistered land can be created in two ways. First, the borrower can convey or assign the whole legal estate or interest in the property to the lender. This is subject to a proviso for redemption, which means that the legal title to the land is conveyed to the lender and has to be reconveyed to the borrower upon repayment of the loan. Second, the borrower can grant some type of lesser estate or interest in the property to the lender, such as a lease, subject to a proviso for cesser on redemption, which means that the lease for example will automatically come to an end when the mortgage is redeemed. This is what happens in the case of freehold.

Where the borrower has a leasehold interest only, he can make arrangements similar to those pertaining to freehold. He cannot however convey the fee simple estate as he does not hold that estate. He can nonetheless assign his lesseeʼs interest to the lender, with a provision for a lease or, more usually he can make a sub-demise or sub-lease to the lender with a provision for redemption. This means that the borrower remains the lessee and the lender as sub-lessee is under no obligations under the original lease.

An equitable mortgage in unregistered land may be created in three ways. First, where the borrower only has an equitable interest to convey; second where he holds the property as a beneficiary under trust, or third where he had already created a legal mortgage on the property, thereby already conveying the legal interest in the property to another lender. The borrower can assign this equitable interest subject to a proviso for redemption. The equitable right of redemption is the right to redeem the mortgage, in other words once the sum of money is repaid, the borrower has the right to get the property back. The Statute of Frauds of 1695 provides that an equitable conveyance must be made in writing and signed by the assessor or made by will.

The second instance where an equitable mortgage will be created is where there is an agreement or contract in existence for the creation of a legal mortgage. In this case, the equitable maxim ʻequity treats as done that which ought to be doneʼ applies. The contract will therefore be treated as an effective grant of an equitable mortgage. So until the legal mortgage is formally created, equity will hold the intended legal mortgagee as holding an equitable mortgage on the property.

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The final way to create an equitable mortgage is by deposit of title deeds – this applies to registered land and is recognised by the Registration of Title Act, 1964. The deposit of title deeds will be recognised as prima facie evidence of an equitable mortgage, unless the deposit is for another purpose, such as safekeeping. There is no requirement for written documentation to accompany the title deeds but such documentation may be useful in the event of a dispute.

The most predominant way of creating a legal mortgage on registered land is to place a charge on the register. The register is supposed to be conclusive evidence of title. When a person is registered as owner for the first time, he is issued with a document called the Land Certificate, which must be produced to the Land Registry before any subsequent dealing with the land is registered. Evidence of title is contained in this single document. But its deposit with the lender of money creates an equitable mortgage similar in its effects to the equitable mortgage created by the deposit of deeds in the case registered land.

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SOLUTION 3

Students in discussing the concept of duty of care should make it clear that it is only one component in making a successful claim under the tort of negligence. Students should discuss the on-going jurisprudence of the courts establishing the ambit of the duty of care and the importance of the neighbour principle given the absence of a concept of privity as found in the law of contract. Solution 3 (20 marks) Introduction The duty of care is only one of the elements required to prove negligence. In addition, there must be a breach of the duty of care, resulting in loss or damage and there must be a causal link between the breach of the duty of care and the loss or damage suffered.

The Duty of Care The rule is that you should not harm those people to whom you owe a duty of care by your acts or omissions. In Ireland, a duty is generally owed to any person who can be classed as your neighbour, as established in Donoghue v Stevenson. A woman suffered shock and gastroenteritis after she consumed a bottle of ginger ale, which contained a decomposed snail. She took an action against the manufacturer of the ginger ale. The court found in her favour, finding that a duty of care was owed to your ʻneighbourʼ, who was defined as “persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.”

This decision was later endorsed and developed in Anns v Merton Urban District Council (1978), in which a two stage test was set out. Firstly, a duty of care must be established and secondly it must be established if there are any factors which negate, reduce or limit that duty of care in any way. This ruling was later rejected in the UK, but accepted until recently in Ireland.

For example, in Ward v McMaster, Louth County Council and Nicholas Hardy & Co. Ltd. (1985), the Irish court held that the duty of care arose from the proximity of the parties and the foreseeability of the damage, balanced against the “absence of any compelling exemption based upon public policy.” Ward purchased a house with the aid of a local authority housing grant. He later learned that the house was severely substandard and structurally unsound. He was advised by an engineer to leave the house. He brought an action against the builder, the local authority, and the valuer of the local authority. The local authority was required by law to value the house before issuing the housing grant. It did so and its valuer found no defects. However, as the valuer did not have any construction knowledge, he was not found liable. The local authority however, was found to be negligent as it had failed to engage a competent person to carry out the valuation. The Supreme Court found that there was proximity between the parties and that it was foreseeable that the plaintiff would rely on the local authorityʼs valuation. The builder was also found to be liable on the basis of Donoghue v Stevenson. The Supreme Court ruled that the duty owed would be to avoid foreseeable harm and also to avoid any financial harm that might arise from having to repair defects in the house.

In Purtill v Athlone UDC (1968), at issue was the injury of a young boy resulting from activity at the premises of an abattoir. Young boys used to go to the abattoir to observe the slaughtering of animals by pistol-like instruments and detonators. The doors and gates of the abattoir were always open during slaughtering. The young boy stole detonators from the abattoir on several occasions, exploding them in his back garden or in the garden shed. A detonator hit him in the right eye causing the loss of that eye. He sued the abattoir for negligence. The Supreme Court focused on whether a duty of care existed. It examined the issues of proximity and foreseeability and held that the relationship was proximate, given the frequency with which young boys visited the abattoir. They were owed a duty by employees of the abattoir. The Court did accept however, that the plaintiff had contributed to his own injuries and a 15% liability was apportioned to him.

In McNamara v ESB (1975), a young boy was injured when he broke into an ESB substation which was surrounded by a wire mesh fence, which was being replaced by a wall at the time. The accident occurred where there was wire meshing topped with barbed wire. There were easily reachable uninsulated conductors at the ESB substation. The ESB knew at the time that children were entering the substation. The Supreme Court found the ESB liable on the basis of proximity and foreseeability.

However, the recent Supreme Court decision of Glencar Exploration plc and Andaman Resources plc v Mayo County Council (2002) suggests a move away from this approach. In Glencar, the plaintiffs were granted ten licences by the Minister for Energy to explore for gold in the Westport area and had invested heavily in this activity for 24 years. In 1991, they set up a joint venture with an Australian company, Newcrest Mining Ltd. This collapsed when a mining ban was introduced by Mayo County Council pursuant to its 1992 draft county plan. The plaintiffs successfully challenged the mining ban in a judicial review proceeding in the High Court. They Page 8

subsequently sought to recover damages from Mayo County Council for breach of duty but the High Court dismissed the claim because although Mayo County Council had been negligent in adopting the ban, this did not give rise to any right to damages as there was a lack of proximity between the parties. The Supreme Court dismissed the action on appeal, stating that the two step approach of the Anns case was no longer appropriate to follow.

The case of Fletcher v Commissioners of Public Works in Ireland [2003] IESC 8 also heralds a more restrictive approach to the duty of care. The plaintiff had developed a reactive anxiety neurosis as a result of exposure asbestos during the time he was employed as a general operative in Leinster House between 1985 and 1991. His duties involved assisting plumbers, electricians, and fitters in the maintenance of what was described in the High Court as an enormous and labyrinthine central heating system. The piping in the system was covered with a lagging containing asbestos of various types and much of it was in an extremely poor condition as it was friable, dusty and falling off in many places. The plaintiff was regularly obliged to hack off the lagging in order to enable tradesmen to get access to the pipe work. The work had to be done in difficult conditions in very confined areas. In 1984, a report by a factory inspector from the Department of Labour recommended that the lagging had deteriorated to such an extent that it be removed under appropriate conditions in accordance with the Factories (Asbestos Processes) Regulations 1975, even though this would not have actually applied to Leinster House, as it is not a factory. It would appear, however, that no action was taken on this report for many years.

The defendants in Fletcher did not appeal the finding of 'gross negligence', but they contested liability in negligence as the plaintiff had not suffered any physical illness arising from his lengthy exposure to asbestos. Nonetheless, he developed a 'reactive anxiety neurosis' and continued to worry about his future health. In the High Court, O 'Neill J had decided that his employer, the Office of Public Works, was liable for the anxiety neurosis which the plaintiff had developed and awarded him €48,760 compensation. On appeal, the Supreme Court reversed this finding, holding that an employer does not owe a duty of care to an employee for injuries that arise from an irrational fear of disease. Also at issue was whether the courts could extend liability to cover mental injury of the type demonstrated and according to Keane CJ, this would require that the courts give due weight to ʻpolicy considerations.ʼ The following policy considerations were used to justify not extending liability in such circumstances: 1.

2.

the undesirability of awarding damages to plaintiffs who have suffered no physical injury and whose psychiatric condition is solely due to an unfounded fear of contracting a particular disease the implications for the health care field of a more relaxed rule as to recovery for psychiatric illness. The Chief Justice questioned whether the ʻegg-shell-skullʼ principle was one that could appropriately be applied to psychiatric injury cases.

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SOLUTION 4

This question requires students to identify the principles appropriate to the discussion and resolution of this question. In this instance the student is required to discuss whether the company has made an offer that has been accepted by the putative plaintiff. Students should also discuss whether a defence of lack of intention to create legal relations is likely to succeed in the circumstances. Solution (20 marks)

The main issue in this scenario is whether a unilateral offer can constitute an offer and students are expected to further addresses the difference between a genuine offer and an invitation to treat.

The airlineʼs promotion could be regarded as an offer capable of leading to a contract. In some situations however, it has been held that newspaper adverts will only amount to an invitation to treat. In Partridge v. Crittenden (1968), an advert offering for sale wild birds was deemed to be an invitation to treat as the seller did not have an unlimited supply of birds and could not possibly enter into a binding contract with everyone who replied. In Carlill v. Carbolic Smoke Ball Co (1893), the court accepted that an advertisement offering €100 to anyone who caught influenza after using the advertiserʼs smoke ball was in fact an offer. The difference between the two cases is that in the first case, the contract was a bilateral one whereas in the second, it was a unilateral one.

The defendants in Carlill v. Carbolic Smoke Ball Co (1893) argued that it was not possible to make an offer to the world at large, as then the whole world could accept the offer, which would go beyond the realms of commercial reality. However, the court held that it was not a contract with the whole world. It was considered by the court to be an offer made to the entire world which was to ripen into a contract with anybody who came forward to perform the condition. As a result, Joe cannot argue that such a unilateral offer is not an offer. The supermarketʼs catalogue advertisement falls within the realm of the Carlill v. Carbolic Smoke Ball Co (1893) category as few people are likely to find themselves in the same position as Mrs. Smyth and therefore few people will be entitled to the gift.

As to whether the catalogue advertisement is a genuine offer or an invitation to treat, the court in Carlill v. Carbolic Smoke Ball Co (1893) held that the offer must be clear, definite and explicit. In this case, the announcement that the company had deposited €1,000 with a bank to show their sincerity persuaded the court that the advertisement was meant to be perceived as an offer. In addition, the court stated that “if a person chooses to make extravagant promises … he probably does so because it pays him to make them and … the extravagance of the promises is no reason in law why he should not be bound by them.” Presumably therefore, it could be argued that the supermarket chose to use the paradise island campaign to attract customers to the supermarket to purchase their groceries there. This point was dealt with in Leonard v Pepsi Co, where the facts were very similar to the problem at hand. The court in the Leonard v Pepsi Co case adopted an objective reasonable person standard. In other words, in the problem at hand would an objective person reasonably have concluded that the catalogue advertisement actually offered consumers a holiday to Paradise Island? If this is so, then the supermarketʼs catalogue advertisement amounts to an offer. That being the case, the issue of whether John accepted the offer arises. As he has accumulated the required air miles, it appears that he has.

Can the airline claim that the offer was withdrawn before John accepted it. In a unilateral contract like this one, the offeror is usually entitled to withdraw is at any time before performance is complete. However, the courts in general do not allow the withdrawal of an offer after performance. In addition to this, it would appear that at no time did the airline indicate that it was withdrawing the offer. It is too late for to do so when John turns up with his air miles. To conclude, Johnʼs case is likely to go to court in the absence of a substantial settlement offer.

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SOLUTION 5

This question is designed to test studentsʼ familiarity with and understanding of the Unfair Dismissals Act 1977 as amended. Students should, inter alia, set out to whom the Act applies, exclusions under the Act, types of dismissal and the redress available under the legislation. Solution (20 marks)

To Whom does the Act Apply The Unfair Dismissals Act applies to those ʻemployees, working for an employer, under a contract of employment who have been dismissedʼ. The term ʻemployeeʼ includes all employees, including agency employees, for a least a yearʼs continuous service. Prior to the Protection of Employees (Part Time Workers) Act 2001, employees would have to have worked a minimum of 8 hours a week (part time employees) to be covered by the Act. This is no longer the case. The Unfair Dismissals Act does not apply to employees working outside the State unless the employee is ʻordinarily residentʼ in the State or domiciled in the State and whose employer is ordinarily resident in the State or has principal place of residence in the State.

Exclusions There are a number of exceptions under the Act. It specifically excludes civil servants employed under statute, fulltime officers of health boards, officers of VECs, independent contractors, close relatives of the employer where working in the family home or the family farm, members of the Defence Forces and the Garda Síochana. Likewise, persons employed under ʻstatutoryʼ apprenticeship contracts (for 6 months after commencement of apprenticeship or within a month of completing apprenticeship) are excluded. There is a further exception for in the case of fixed term or fixed purpose contracts where the dismissal takes place when the contract ends and where the contract specifically states that the Act will not apply, is in writing and has been signed by both parties. The Act will not apply where a second contract is signed within 26 weeks of the first contract expiring where the Rights Commissioner believes it to done to avoid the scope of the Act. The one yearʼs continuous service will not apply where an action is taken for unfair dismissal arising out of the employeeʼs trade union activities, or for a breach of the Maternity, Adoptive, or Parental Leave Acts, or for matters relating to the Carerʼs Leave Act 2001 or National Minimum Wage Act 2000. Those employees under 16 years of age or over 66, or those that have reached the normal retirement age for that profession (if under 66) are not covered by the Act. Also excluded from the scope of the Acts are employers who are subject to diplomatic immunity. In terms of the types of contract of employment covered, the contract can be written or oral.

Types of Dismissal The Act applies in the case of an unfair dismissal. Dismissal can take the form of actual dismissal (by the employer with notice); summary dismissal (by the employer without notice); constructive dismissal, (must be shown by the employee to be dismissal) or by non-renewal of fixed term or specified purpose of the contract or by dismissal by reason of a lockout or strike.

ʻ

Constructive dismissal is defined in the Acts as:

termination by the employee … where because of the actions of the employer, the employee was entitled to terminate the contract of employment or where it would be reasonable for the employee to terminate without giving prior noticeʼ.

The onus is on employee to prove dismissal and then on employer to prove fairness.

Constructive dismissal can occur where the employer is guilty of conduct which is a serious breach going to the root of the contract, the conduct of the employer shows that the employer no longer intends to be bound by the terms of the contract, or the employer has acted unreasonably.

Under section 6 of the Act, a dismissal will be deemed to be unfair unless having regard to all the circumstances there were substantial ground justifying the dismissal. The Act provides situations where a dismissal cannot be justified and also provides the ʻsubstantial groundsʼ that will justify a dismissal.

Unfair grounds of dismissal include trade union membership or activities, religious or political views, civil or criminal proceedings, race, colour, sexual orientation, age, membership of the travelling community, pregnancy, maternity, adoption, parental leave, or force majeure leave. Other unfair grounds include unfair procedures. In bringing an action of dismissal against an employee and employer must make use of fair procedures.

In Mooney v An Post [1998] ELR 238, certain guidelines were laid down for employers. An employer must at the very least inform the employee of the charges against him, and give the employee an opportunity to answer them and to make submissions. In the case of incompetence or incapability, the employee must be given an Page 11

opportunity to remedy the situation.

A Code of Practice on Disciplinary Procedures also exists as a guide where no other procedures may apply. Again, the employee has the right to details of the allegations, the right to an opportunity to respond to the allegations, to avail of representation, and the right to a fair and impartial determination of the issues.

Fair Grounds Fair grounds of dismissal include incapability, qualifications, incompetence, conduct, and redundancy (if fairly selected). Incapability refers to the physical or mental ability to carry out a job. It was defined in Reardon v St. Vincentʼs Hospital (UD 74/1979) as “Incapability which may be generally defined as long term illness.” It arises in cases of prolonged absence, regular or recurrent absence, or total disability. The case of Bolger v Showerings (Ireland) Ltd. 1990 ELR 184 set out the key requirements needed in a case of dismissal on the ground of incapability: ill health must be the reason for the dismissal; this must be a substantial reason; the employee must have received notice that the question of dismissal for reason of incapacity was being considered; the employee must be given the opportunity of being heard.

In relation to competence, a warning must be issued to the employee under Patrick OʼDonoghue v Emerson Electric Ireland Ltd UD 177/1986 and a reasonable improvement time must be granted to the employee in line with Richardson v H. Williams & Co. Ltd (UD 17/1979). The means that following a warning, an employee must be given a reasonable time to carry out improvements in his performance and a reasonable work situation to do so.

Employees can be dismissed for their conduct, including violence, alcohol abuse in the workplace, insubordination, clocking offences (where there is clear misconduct and a breach of trust), theft, acting in deliberate conflict to the interests of the employer (there is a duty not to compete with the employer and not to divulge confidential information or trade secrets) and abuse of sick pay schemes, e.g. working for someone else when on sick leave.

In Derek Dunne v Moyra Harrington UD 166/1979, it was stated that in such circumstances, the standards placed on the employer and the employee should not be unfair. Also, if a matter requires investigation, the employer should do so, personally, in a fair and reasonable manner, and give the employee a right to defend himself, to be present at all meetings, and to produce counter evidence. An employer should not act solely on the evidence of a third party. An employer should reach his conclusion in a fair, reasonable and prudent manner and any disciplinary measures should comply with the offence.

As for dismissal for conduct outside the workplace, a ratio must be established between the seriousness of the offence and the status of the employee and the trust that the employee holds. Regard must be had to the nature of the offence, its frequency and how it will affect the employeeʼs position within the workplace.

Redress The redress available for unfair dismissal includes reinstatement, reengagement, and compensation. Reinstatement is awarded in cases of ʻgrossʼ unfair dismissal. It means that the employee is given the same job as previously held with the same or more favourable terms of employment, with full arrears of salary backdated from the time of the dismissal. It is important for employers to use fair procedures when dismissing an employee or they may be required to reinstate them. Reengagement will result in the employee being given the exact same job or a similar ʻreasonably suitableʼ job subject to terms and conditions that are reasonable in the circumstances. Compensation can also be awarded and the amount of compensation given depends on the loss incurred. If no financial loss has been incurred, the employee may still be entitled to up to 4 weeks pay. Pay means gross pay and includes any bonuses or benefits in kind. Financial loss, when it exists, will be held to include actual loss of pay (from date of dismissal to the date of the hearing) plus potential loss (an estimate which is based on the employees employment prospects), plus loss of rights, to a maximum of 104 weeks pay. It is rare to be awarded the maximum but it does occur in some cases.

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SOLUTION 6

This question requires a knowledge of the rights that a consumer may invoke under the Sale of Goods Acts 1893 to 1980. Students should be aware that the Acts imply a number of terms into contracts coming within the ambit of the legislation, that these terms are subdivided into conditions and warranties and that there are significant restrictions on the use of exclusion or exemption clauses to avoid the terms implied by the legislation. Students may initially find it difficult to come to terms with the structure of the legislation given the way in which the 1893 Act was amended by the 1980 Act. In this regard the Attorney Generalʼs Office has produced a very helpful nonstatutory consolidation of the two Acts. Solution (20 marks)

This question involves an examination of the implied terms in the Sale of Goods Acts 1893-1980. Under the Acts, there are a number of conditions implied into contracts for the sale of goods. Harry will be entitled to a remedy is there has been a breach of the terms implied under the Act. These terms cover the description, quality and fitness for purpose and are dealt with in sections 13 and 14 of the Acts.

Section 13 Section 13 of the Sale of Goods Act 1893 to 1980 provides that in every sale of goods by description, there is an implied condition that the goods will correspond to that description. A sale by description is where the purchaser is buying on the sole basis of the description having never seen the product. However, this does not preclude a sale by description where the product is seen or examined by the purchaser.

In the case of Beale v. Taylor (1967), a car was advertised as a 1961 Triumph Herald 1200. The buyer came to see the car and noted the metal disc on the rear of the car showing ʻ1200ʼ. It transpired after he bought the car that only the rear of the car met with the description. Two separate and different models of Herald car had been welded together. The seller tried to rely on the buyerʼs inspection of the car, arguing that it was not in fact a sale by description. However, it was held that the advertisement and the metal disc indicated that the car was a 1200. It was a sale of description in spite of the buyerʼs inspection of the car. The buyer had relied to some extent on the description contained in the advertisement. He was entitled to damages for breach of section 13.

In contrast, if the purchaser does not rely on the description offered by the vendor, then there will be no remedy for a breach of section 13. In Harlingdon and Leinster Enterprises Ltd. v. Christopher Hull Fine Art Ltd. (1990), it was held that the purchaser must show that the description influenced their decision to buy the product.

If Harry is to establish a remedy under Section 13, he must show that the description of the DVD player was intended to be a term of the contract which was assigned to the identity of the good rather than just to its attributes. On the authority of Beale v. Taylor, there may be a breach of the implied term as to description. The description stated that the DVD player was a 2002 model and in excellent working condition. If Harry can prove that he relied on this description which attached to the DVD player and the words of the sales assistant, then he should be able to obtain a remedy for breach of section 13.

Section 14 He may also have a remedy under section 14(2) of the Acts. This section provides that when a seller sells goods in the course of business, there is an implied condition that the goods supplied under the contract are of merchantable quality. This condition only applies to goods sold “in the course of business”. The vendor must be carrying on a business or profession and make the sale in connection with that activity. This implied condition will not apply where the buyerʼs attention is drawn to defects before the contract is made of where the buyer examines the goods before the contract is made and that examination ought to reveal the defects.

The DVD player in this scenario is clearly being sold in the course of a business. The sales assistant has not pointed out any defects in the DVD player to Harry. We are told the sales assistant showed Harry a 2002 model but there is no evidence that Harry actually examined the DVD player himself. So it would appear that neither of the exclusions would apply to Harry.

Harry must establish that the goods were not of merchantable quality. This is defined in section 14(3). Goods are defined as being of merchantable quality if they are fit for the purpose for which the goods of that description are commonly bought and as durable as is reasonable to expect having regard to any description applied to them, the price if relevant and all other relevant circumstances.

The fact that the DVD player was second hand and its price are therefore relevant to the question of merchantable quality. The courts have held that if a person buys a second-hand good or a very cheap good, that person cannot reasonably expect the highest standards of quality. Page 13

In Bartlett v. Sidney Marcus Ltd. (1965), Bartlett bought a second hand car from the defendants who were car dealers. He was warned that the clutch was defective but he agreed to a reduction in the price of the car on account of this defect. However, the defect turned out to be more serious than he thought and was more expensive to repair. He claimed that the car dealers were in breach of the implied term of merchantable quality. The Court of Appeal held that in these circumstances, the car was of merchantable quality. Denning MR pointed out that “A buyer should realise that when he buys a second-hand car, defects may appear sooner or later”.

However, in Harryʼs favour is the fact that the description applied to the goods is also of importance in determining whether the goods were of merchantable quality. In our scenario, the DVD player is described as being in excellent working condition and only two yearʼs old. In reality, the DVD player has had a number of repairs and was considerably older. Therefore, it was not of merchantable quality. The fact that the DVD player broke down in a relatively short period of time is also significant as goods must remain of merchantable quality for a reasonable time. In this situation, it is likely that the court would imply a condition of merchantability into the contract and find that the DVD player did not comply with this implied term.

Harry should also consider section 14(4) of the Acts and argue that Megabargains is in breach of an implied condition because the DVD player is not fit for its purpose. Section 14(4) provides that where the purchaser expressly or by implication makes it known to the vendor any particular purpose for the which goods are bought, it is an implied condition that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is the common purpose of such goods, unless the circumstances show that the purchaser does not rely or it is unreasonable for him to rely on the skill or judgement of the vendor. There is no need for the purchaser to specify the particular purpose for which the goods are required when they have an ordinarily only one purpose.

For Harry to be able to rely on this section, he does not have to show that he made known the purpose for which the DVD player was to be used as there is one obvious intended use for a DVD player. It appears that Harry did rely on the skill and judgement of the sales assistant. It is clear that the DVD player was not fit for its purpose. If Megabargains wishes to escape liability under this section, they would have to show that Harry did not rely on the sales assistantʼs judgement or that it would have been unreasonable for him to have done so. This would only apply if Harry had expert knowledge of DVD players himself.

Conclusion If Harry is successful in his claim that Megabargains is in breach of implied terms contained in sections 13 and 14 of the Sale of Goods Acts 1893-1980, his remedy will be to terminate the contract and recover the purchase price, together with any foreseeable consequential losses, as long as he has not accepted the goods. If he has accepted the goods, he will be limited to a remedy in damages. There is no fixed period over which the right to reject is lost. Lapse of reasonable time is a question of fact and for the courts to decide in each case.

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SOLUTION 7

Article 82 form an important part of the Competition Law of the Community and is concerned with abuse of a dominant position. It is important for students to remember that Article 82 of the EC Treaty does not prohibit a dominant position, only abuse of that position. Students should discuss what constitutes an undertaking, how the relevant market is defined, with reference to the concepts of temporal, geographical and product market and the main indicators of dominance. Solution 7 (20 marks)

Article 82 EC Treaty deals with the rules that apply to undertakings that are in a dominant position. It provides that any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States. Under Article 82 EC Treaty, the activities of one undertaking can infringe its provisions.

An undertaking, under the case law of the European Courts, is an entity engaged in economic activity regardless of its legal status and the way in which it is financed.

Article 82 EC Treaty applies only when an undertaking has a dominant position. Whether an undertaking will be dominant or not depends on the conditions of the relevant market on which it operates. Therefore, it is imperative to identify the relevant market. The market is defined from three different perspectives: 1.

The relevant product market.

3.

The relevant temporal market.

2.

The relevant geographical market.

When deciding upon a product market, the test one of interchangeability or substitutability. This means that the Commission and the courts will examine whether the product in question has special characteristics, which distinguish it from other similar products so that it is only interchangeable to a limited extent.

An example of a case dealing with interchangeability is Case C-27/76 United Brands [1978] ECR 207. Here, the ECJ had to determine if United Brands was breaching Article 82 (then 86) EC Treaty. The issue was whether the market for bananas constituted an integral part of the general fresh fruit market. The ECJ found that the banana market was in fact a distinct market on the grounds that the banana has special qualities that mean that a consumer will not readily accept other fruits as a substitute.

In deciding whether an undertaking is in a position of dominance, it is also necessary to consider the geographic market on which it is operating. The geographic market is the area where the conditions of competition are the same for all traders.

In relation to the temporal market, competitive conditions in some markets may change from season to season –reasons for this include weather conditions and consumer habits. The issue arose in once again in United Brands, where there was evidence that the demand for bananas fluctuated from season to season. During the summer, when there were more fresh fruits available, the demand for bananas dropped. It was suggested therefore that the banana market could be divided into two temporal or seasonal markets and that United Brands were not in a dominant position during the summer. However, the Commission issued its decision on the basis of just one temporal market and the ECJ accepted this.

Once the relevant product, geographical and temporal markets have been identified, it is necessary to examine what constitutes dominance in that market. The main indicator of dominance is the market share and market power held by the undertaking. Although the existence of a large market share is not conclusive evidence of dominance, the higher the market share, the more likely the Commission and ECJ are to find a dominant position.

Other indicators of dominance include superior technology, access to capital, vertical integration, fragmented competitors, the ability to preserve market share despite strong competition, ownership of intellectual property rights or of an essential facility.

Article 82 contains a non-exhaustive list of abusive exploitation. Abusive conduct is essentially behaviour by a dominant undertaking that is not normal market behaviour and is detrimental to consumers and competitors. Examples of abuse include abusive pricing or price discrimination, and predatory pricing. END OF PAPER Page 15

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