Case Study

Annie, Blake and Charles have, for ten years, run a small but successful partnership repairing and restoring old furniture and decorative items in a barn (known as the repair shed) in the village of Smethwick. The business has grown in success as more people are inspired by the TV show, The Repair Shop, and are enquiring about having items restored to their former glory.

The partners decide to incorporate the business in January 2019 and a new company (ABC Furniture Restoration Ltd) is created with the existing business being transferred to the new company. Annie, Blake and Charles become directors, and each take 300 shares in the company. A further 200 shares are issued and allotted to Daisy, a local businesswoman. The Articles of ABC Furniture Restoration Ltd provide that

(i)no director can be removed without his or her prior consent;

(ii)each director is to receive a salary of 175,000 per year; and

(iii)any shareholder who wishes to sell his shares must first offer them to the directors.

After incorporation of ABC Ltd they were very successful, but no dividends were paid as all the profits were ploughed back into the company, the directors drawing only their salaries of 175,000 each year.

In the repair shed, some of the processes involve the use of surface-grinding machines, which use high-speed abrasive wheels to provide a smooth finish. ABC Furniture Restoration Ltd engaged Harry on 1 February 2019, an experienced and well-qualified Works Manager, as an employee tasked to oversee all health and safety aspects of the restoration processes, including the repair and maintenance of machinery.

In April 2019, Ezra was browsing in Annie's part of the Repair shed, when he noticed a marble statue of the Greek goddess Hestia. The statue, dating from the eighteenth century, had a price tag reading '35.00'. When Ezra took the statue to the till, Annie told him that the tag was written incorrectly, and that the true price was 3,500. Ezra angrily refused to pay this price and left the repair shed. Ezra has sent a number of letters to Annie, demanding that she sell him the statue for 35.

In May 2019, a serious accident involving Jake, an experienced furniture restorer employed by ABC Furniture Restoration Ltd, occurred. One of the wheels on the surface-grinding machine flew off whilst operating at high speed, striking Jake and causing him to suffer a broken jaw, deep lacerations to his face and the loss of his left eye. Jake was rushed to Smethwick's nearest Hospital's Accident and Emergency Department. During his treatment, Karen, a junior doctor, administered a full- dose anti-tetanus injection without first testing Jake with a small amount of the vaccine to check for adverse reactions (the standard procedure). A week later, Jake experienced a seizure and suffered permanent brain damage. An investigation subsequently revealed that Jake's further injuries were probably caused by a rare reaction to the anti-tetanus injection.

In July 2019, Annie decided to promote the sale of a large floor-standing vase, as she was struggling for space in the shop and no one had expressed an interest in buying the vase. On Friday 16th July 2019, Annie placed a large poster in the window, stating: 'Time for a great bargain! 19th-century vase, excellent

condition. 99 cash first come first served'.

While the shop was closed over the weekend, Annie researched the vase on the internet and found out that it was worth more than 3,000. On Monday 19th July, Fatima, a regular customer at the repair shed, arrived at 9.05 am. She produced 100 in cash and told Annie that she wished to buy the vase. Annie refused to sell the vase, and when Fatima left, she took down the poster from the window. Fatima has made it clear that she still wishes to purchase the vase.

In relation to the workplace accident, a subsequent investigation and report by the Health and Safety Executive revealed a number of issues. It found that the abrasive wheel that hit Jake in the accident had probably been damaged prior to fitting, due to mishandling and incorrect storage at the repair shed. A relatively new and also lacking in experience fellow employee had been asked to fit the abrasive wheel to the machine. This procedure had been performed incorrectly, resulting in the wheel vibrating excessively. In addition, the machine had not been fitted with an adequate safety guard, nor had Jake been issued with any face protection or safety goggles, in breach of standard safety regulations.

Ten months ago, Charles had an argument with Blake and Annie over matters of business policy. After this argument, Blake and Annie made all the business

decisions in advance and outvoted Charles at all the directors' meetings. Charles initially complained but has now lost interest and ceased attending meetings.

On 2nd August 2020, Gus, a trader in guitars, contacted Annie via email, to ask about purchasing an antique guitar he had seen in the repair shed a few days earlier. In the small print at the end of the email were Gus' standard terms and conditions which included that all purchases were made on the basis that the seller presented a freshly strung guitar. On 3rd August, Annie replied, telling Gus that 'you can have the guitar for 3,500'. On 5th August Gus emailed back, confirming that the price included restringing the instrument. On 7th August,

Annie, who had not read the lengthy statement at the end of Gus' original email, replied to say that it did not. On 8th August, Gus emailed Annie, stating, 'as long as you will restring the instrument, I agree I will buy it for 3,500'. The email included a delivery address.

On 12th August 2020, Annie drove to Gus's delivery address with the guitar.

When Annie arrived, she handed Gus a 'delivery invoice', which Gus signed. On the back of the invoice were Annie's standard terms of business, which included a clause stating: 'all stringed instruments are sold as seen and price does not

include additional restoration, restringing, etc'. Once Gus had signed the invoice, Annie took the guitar from her vehicle and gave it to Gus.

In September 2020 there was a visit to ABC's Furniture Restoration's repair shed by Louis, the trade union representative for ABC's employees, who confronted Harry with the Health and Safety Executive report. An argument developed.

Harry, who strongly disagreed and felt falsely accused of the failures, punched Louis in the face, breaking his nose. When the directors hear about Harry's action, they dismiss him with immediate effect.

A month ago, Blake and Annie voted to remove Charles as a director at a

general meeting and to distribute the profits by increasing the directors' salaries to 350,000 per annum.

Questions:

1. Ezra and Fatima have approached you for advice as to the likelihood of success if they attempt to enforce what they believe is a contract between themselves and ABC Ltd. In addition, Gus has indicated to Annie (Director of ABC Ltd) that he intends to pursue a claim for breach of contract. Advise Annie how the courts are likely to interpret which of the standard form contracts is enforceable.

• (a) Jake continues to experience significant negative effects following the accident at work and is seeking your opinion as to any possible claims he may have in civil law.
• (b) Louis (Trade Union Representative) has recently become aware of the Judgment of the Supreme Court in WM Morrison Supermarkets plc v Various Claimants (2020). Advise Louis as to the significance that this case, and associated case law, may have for a claim in Torts law.