News

GFSB Board member and businesswoman Michaela Rees who has had experience with a four-day working week was asked to take part in the GBC Viewpoint programme on the 6th of July alongside Wendy Cumming GGCA Union president, Damex Director of Operations Thomas Johnson and Businessman James Brenig, as well as Dr. Karl Alvarez, Occupational Health Services Medical Director.
The concept of a four-day working week globally has seen an increase in popularity with benefits such as great productivity within the workplace, increased happiness with a better work-life balance, less sickness and absenteeism, reduced stress, and a better workplace environment.
Many countries are trialling the idea in various formats and to date a staggering 92% of companies continue to offer reduced hours to staff after the initial trial period.GBC did ask the Government for its stance and a spokesperson said they would not consider the idea, nor any proposal that increases cost given the need to restore financial stability.

https://www.gbc.gi/tv/programmes/viewpoint

What are your thoughts on the four-day working week?

Restaurant chain Wahaca is suing its insurer, QIC Europe Ltd, for allegedly failing to pay out for losses incurred when it was forced to close sites during the COVID-19 pandemic. Oaxaca Ltd, which trades as Wahaca, said in a High Court claim on 24 May 2023 that QIC had refused to provide cover for the losses that came after the UK Government ordered businesses to shut in 2020.

Wahaca claims that the COVID-19 regulations – which included enforced closures and stay-at-home orders – were directly caused by government action, entitling it to cover from QIC Europe under the terms of its insurance policy. Wahaca added that the failure by QIC Europe to pay out such sums also entitles it to damages.

The 2021 FCA test-case

The claim by Wahaca follows the landmark 2021 United Kingdom Supreme Court (UKSC) decision in which the Court confirmed the correct interpretation of a variety of different standard Business Interruption (BI) insurance policy wordings in order to clarify whether they provided cover in principle for COVID-19 related losses (see Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1). In so doing, the UKSC held that insurers must pay out to hundreds of thousands of companies forced to close during the first pandemic lockdown.

In relation to ‘radius’ disease wordings, hybrid clauses and Prevention of Access wordings, the Supreme Court found that individual cases of Covid-19 within the relevant radius of the insured premises were concurrent causes of the closures and restrictions, and consequent business interruption losses, along with all other cases of Covid-19 elsewhere in the UK. However, while some insurers have accepted cover under ‘At the Premises’ (ATP) wordings, many have not. This led to the need for further litigation, which the Commercial Court recognised by listing six expedited test cases for preliminary issue trials in May 2023.

The ’At the Premises’ test cases

In a ruling handed down by Mr Justice Jacobs on 16 June, the Commercial Court found emphatically in favour of the owners of London’s ExCeL Conference Centre in their claim against insurers, including Royal & Sun Alliance, over pandemic-related losses. The test case, which also involved a similar claim brought by Pizza Express, concerned ATP clauses in various insurance policies and whether the closure of businesses was covered.

The central question for ExCeL was whether the terms of their ATP cover justified the same approach to proximate causation as the disease covers considered in the FCA test case. ExCeL argued that the UKSC’s finding on concurrent causation applied in the same way to ATP clauses as to radius clauses. It argued that there was no good basis to distinguish ATP clauses from radius clauses when determining the appropriate test of causation, and if a single occurrence of Covid-19 within one mile of the insured premises was a proximate cause of government action and therefore interruption, the same must be true for a single occurrence at the insured premises themselves.

Conversely, the Insurers argued that ATP clauses were qualitatively different from radius clauses as radius clauses provided coverage for events occurring externally to the insured premises, while ATP clauses concerned matters at (and only at) the premises themselves. It was therefore inappropriate, the insurers argued, to import the Supreme Court’s findings on radius clauses to ATP clauses.

Rejecting each of the insurers’ competing cases on causation, Mr Justice Jacobs agreed with the policyholders on the central causation issue. The Supreme Court finding on concurrent causation was indistinguishable from, and applied equally to, ATP as to radius clauses.

Meanwhile, Pizza Express had its hopes of securing a £200 million-plus pay out extinguished by the High Court earlier this month, which ruled that the restaurant chain wrongly interpreted liability limits in its policy and sided with its insurers’ interpretation of how much Pizza Express could claim under its policy wording.

Pizza Express’ principal claims were made under two BI extensions in the standard Aon Trio policy which extend cover beyond the typical type of business interruption loss arising from physical damage to a policyholder’s premises. For its part, the insurer had denied coverage under both the ‘at the premises’ disease and ‘prevention of access’ BI extensions, arguing that the cover was limited to “localised cover” and did not correspond with BI losses caused by central government action taken in response to a nationwide public health emergency.

Both BI extensions in the Pizza Express policy were subject to a sub-limit of liability of £250,000. The Insurer, Liberty, successfully argued that the sub-limit of liability was a ‘Limit of Liability’ that applied ‘per Occurrence’, meaning that Pizza Express’s losses were to be aggregated and that any indemnity due to Pizza Express would accordingly be limited to £250,000.

What do the test cases mean for future claimants?

These are the latest in a string of judgments relating to Covid-19 business interruption insurance disputes and decisions on the application of causation principles to insurance disputes more widely.

The ExCeL judgment provides some further finality and clarity  for issues left unresolved by the FCA test case and is a helpful development for the insurance market. The judgment could potentially affect hundreds of thousands of policyholders based on previous FCA estimates as to the extent to which ATP cover was purchased, and policyholders whose BI losses remain uncompensated.

Insofar as Pizza Express, the case indicates that coronavirus BI claims pursued under similarly-worded policies are likely to be subject to relatively broad aggregation by reference to one ‘source or original cause’, which will limit the amount recoverable, particularly in the case of policyholders with multiple insured premises. However, the Pizza Express ruling turned on a narrow point of construction that was entirely specific to the policy wording in question, and the judge’s decision was influenced not just by the content of the standard policy wording, but by the structure and formatting of the policy schedule, which may vary considerably between policyholders and insurers.

Policyholders whose BI losses remain uncompensated should now revisit their policy documents to consider whether they may now have a valid claim to pursue.

This month some of the GFSB Board met with Together Gibraltar to discuss the GFSB Election Wishlist.

The GFSB wants to make Gibraltar an attractive place to do business, keeping costs and bureaucracy down as much as possible.
It needs to be easy for businesses to start and flourish.
We believe the Government can really help to encourage businesses which in turn helps Gibraltar PLC.

Some of the conversation focused on tourism and the need to improve the offering and experience to encourage repeat visits.
The long-term tourism plan and heritage preservation.
The need to improve public transport.
Entry points to be enhanced and beautified with added clear signage.
Support for local businesses and new start-ups.
Reducing the costs associated with running a business.
Transparency and full disclosure within Government.
Training and education.

The GFSB believes Gibraltar can create a more vibrant business environment and the full GFSB Election Wishlist can be read here: Election Wishlist

“What about a claim against the contractor/company who due to negligence cause the power cut? There seems to be no liability on their part as it keeps reoccurring”.

1. A claim against a private contractor in these circumstances would need to be brought under the common law which, as explained in our Note, provides guidance and instruction as to the recovery of economic losses suffered by businesses in certain circumstances, including in relation to business interruption arising from power cuts.
2. Our Note addresses the prospects of a successful claim being brought against the GEA, however as a matter of law the same principles would apply to a private contractor. In particular, a claim in respect of what is defined as a ‘pure’ economic loss (i.e. the loss of a potential gain or profit, or a wasted cost) will normally fall outside the range of economic loss which a court will be prepared to allow and is unlikely to be successful (whether against the GEA or a private contractor).
3. The basic rationale for limiting the liability in such circumstances will, in our view, be fundamentally one of public policy.

The Court’s public policy considerations

1. In the law of negligence, civil liability is based on establishing three principles: duty of care, breach of the said duty, and damage rising from said breach of duty. Compensation may be paid out to a claimant, which aims to put them back into the position they were in before the damage occurred provided all three principles are satisfied.
2. In respect of duty of care, the Court will determine whether or not this is established using the three-part Caparo Test, which originated from the case of Caparo Industries PLC vs Dickman. In his judgement, Lord Bridge explained the parts to the Caparo test: (1) foreseeability of damage, (2) proximity between the defendant and the claimant; and (3) that it is fair, just and reasonable to impose a duty of care in such a situation.
3. In applying the third stage of the Caparo test, of fair, just and reasonable, the courts take certain policy factors into account. Policy factors which may influence the court include such issues as:

Loss allocation:–

Who can afford to bear the loss?

Which of the parties have insurance/ is the situation one subject to compulsory insurance?

Is the defendant a publicly funded body?

Opening the floodgates:-

Will imposing liability lead to a high volume of new claims?

What effect would this have on cost of insurance or its availability?

Will the courts be able to cope with the volume of cases?

The practical effects of imposing liability

Will the imposition of a duty of care act as a deterrent or raise standards?

Will imposing a duty have an adverse effect on decision making?

Will it affect the allocation of resources away from necessities?

1. In our view, whilst a claim against a private contractor responsible for causing a power outage might arguably satisfy the first two limbs of the Caparo test described above (i.e. foreseeability of damage and proximity between the defendant and the claimant), it may however be unlikely to succeed on the third limb (whether it is fair, just and reasonable to impose such a duty of care). Taking into account the various policy issues outlined at paragraph 6 above:

(i)             if the law allowed recovery for all economic loss, the extent of liability in many situations would be enormous. In this case, the contractor who cut the mainline electricity cable would have been liable to a range of businesses whose trade had been interrupted as a result;

(ii)           the contractor could be bankrupted by needing to compensate all business affected by the power interruption arising from this single mistake and would have been forced to carry an excessive part of the risk associated with a socially useful activity which it carried on;

(iii)          the effect of imposing such liability upon the contractor could deter the activity from being carried out at all;

(iv)          the Court’s fear behind allowing claims for “pure economic loss” is that potentially unlimited claims could flood in. The Court has continued to have regard to these public policy considerations in cases involving public utilities and has limited the right to make claims for damages due to concerns that it may open the floodgates to litigation.

World Environment Day (WED) is celebrated annually on the 5th of June and reminds us of the need to accelerate the transition towards a circular economy. It is a day identified by the
United Nations to inspire governments and businesses, and not just individuals, to take on a deeper responsibility towards the planet.

Owen Smith, Chair of the Gibraltar Federation for Small Business (GFSB) explained:
‘GFSB members are already actively engaged in sustainability matters and are already taking actions in favour of the environment. The next step is to escalate the ambition as well as connect our efforts across the Rock in ways that make sense for small businesses’ The GFSB is working closely with Prof Daniella Tilbury to offer support to members on the circular economy. The focus of this commitment is in making the changes to business thinking, operations, procurement and management in support of the planet.

Prof Tilbury added:
‘We will offer opportunities to consider the business opportunities that a circular economy can bring and consider how sustainability can add value to the business proposition itself. Small
businesses also have an important role in communication and awareness raising of choices faced by consumers. We will be considering the evidence base for what works best in
Gibraltar’s context.’ This year marks the event’s 50th anniversary of WED and captures how far we have travelled along the sustainability journey and also consider what still needs to be done. It is expected that millions of people from across the globe, will showcase what actions they are taking to protect and restore the earth’s natural ecosystems. You can learn more about World
Environment Day at https://www.worldenvironmentday.global.

Companies House has been supporting and improving services to local businesses for the past 30 years, subsidising the registration of business names, the fee for which has remained
unchanged throughout this period, and facilitating the administrative aspect of business registration. As part of our continued drive to improve our service and access to this for local
small businesses, we are pleased to announce the launch of a new addition to our online offering.

The owner of any business name registered by an individual who is the holder of a Gibraltar ID card or Civilian Registration card is being offered the option to open a business name
account with Companies House, free of charge. In the first phase of this new service, the business name owner will have access to the following:

• Free e-Monitoring of his/her own business name (including the added benefit of receiving
an automated email reminder of the next renewal);
• Free name search facility (to search for basic registration details of any Gibraltar- registered
entity);
• Free access for one year to download business name profiles for his/her own business name;
• Free access for one year to business name e-Searches for his/her own business name; and
• Free access for one year to download copies of any documents filed for his/her own business
name.

In addition, those business name owners who take advantage of this option will be able to file their next business name renewal online in a year’s time via the Companies House e-
Services Platform when this falls due, with payment of the existing fee being payable online. The new business name e-Service will also be incorporated into an iOS Companies House
Gibraltar App that is currently under development, and which will at a future date act as a gateway for users to access other online facilities.

The application form for this new service can be downloaded from our website here:
https://www.companieshouse.gi/applicationforms/form-uid-bn.pdf

Disclaimer

Please note that the contents of this article do not constitute legal advice from Signature Litigation or the GFSB and should not be relied upon or treated as a substitute for seeking separate and specific legal advice.

Introduction

 Despite hopes that the LNG power plant would assist in meeting the energy demands of a growing local economy, power cuts remain frustratingly common. Only last week, we were affected by a Gibraltar-wide blackout said on this occasion to be the result of a cable interference by a local contractor, which halted trading at a crucial time of the working day. Those not protected by backup generators or other alternative power supplies were inevitably the worst impacted.

Members are naturally keen to understand whether it is possible to bring claims seeking compensation for business interruption caused by power cuts.

Summary

1. Can I bring a claim for compensation under the Gibraltar Electricity Authority Act 2003? Whilst the Act provides for the payment of compensation by the GEA in certain circumstances, the GEA is not required to pay compensation to customers for any damage or financial loss arising from any interruption or discontinuance of the supply of electricity.
2. Alternatively, can I bring a claim for compensation under the common law? A claim in respect of what is defined as a ‘pure’ economic loss (i.e. the loss of a potential gain or profit, or a wasted cost) will normally fall outside the range of economic loss which a court will be prepared to allow and is unlikely to be successful.

The position in the United Kingdom

Claims for compensation arising from unplanned power cuts in the UK may be brought in prescribed circumstances. Consumers’ rights in the UK are protected by a robust regulatory framework serving as a watchdog for energy companies falling foul of their obligations to customers.

If a power cut is a result of poor or extreme weather conditions, consumers left without power for a period of 24 hours or more may claim compensation totalling £70 with further sums capable of being claimed for every subsequent 12-hour period of outage up to a maximum of £700.

Customers may also entitled to compensation where power outages are a consequence of some other fault or reason (for example, mechanical/infrastructural issues). The amount payable by energy

In this case, a contractor (Martin & Co) carrying out work digging up a road negligently damaged an electric cable which it knew supplied power to a factory (Spartan Steel). Spartan had to dispose of molten metal out of their furnace to prevent damage to the furnace, which meant that the metal lost value and they suffered a loss of profit it was sold. They also lost profits from further work and production could have been undertaken had the power not been cut. The English Court of Appeal held that Martin & Co:

• was liable for the loss of profit on the damaged metal of which it had needed to dispose (i.e. the consequential economic loss);
• but that it was not liable for loss of profit suffered by Spartan in relation to the work and production which it had been unable to do because of the interruption (i.e. the pure economic loss).

The basic rationale for limiting the liability of Martin & Co was stated by the English Court of Appeal to be fundamentally one of public policy. The Court reasoned that:

• if the law allowed recovery for all economic loss, the extent of liability in many situations would be enormous. In this case, the contractor who cut the mainline electricity cable would have been liable to a range of businesses whose trade had been interrupted as a result;
• the contractor would have been bankrupted by needing to compensate all business affected by the power interruption arising from this single mistake and would have been forced to carry an excessive part of the risk associated with a socially useful activity which it carried on;
• the effect of imposing such liability upon the contractor would deter the activity from being carried out at all.

The common law has therefore sought to protect defendants from being exposed to an unknowable scope of potential liability. The Court’s fear behind allowing claims for “pure economic loss” is that potentially unlimited claims could flood in. The Court has continued to have regard to these public policy considerations in cases involving public utilities and has limited the right to make claims for damages due to concerns that it may open the floodgates to litigation.

Summary

Applying the above legal principles to the current issue affecting Members, our view is that:

1. a claim against the GEA under the Act is unlikely to be successful in light of the restriction on the GEA’s liability contained in Section 7 of the Act;
2. a claim brought on the basis of a consequential economic loss may potentially be brought under common law rules but is unlikely to be successful given the restriction of liability contained in Section 7 of the Act;
3. a claim in respect of a purely economic loss (i.e. loss of a potential gain or profit or wasted cost) will normally fall outside the ambit of the economic loss which a court will be prepared to allow and is also unlikely to be successful.

companies will generally depend on the severity of the power cut and the number of homes affected. In the case of single interruptions, providers have a period of 24 hours in which to restore supplies. Domestic customers may claim a sum of £75 and non-domestic customers (i.e. businesses) £150 for every subsequent 12-hour period of outage.

Can I bring a claim against the Gibraltar Electricity Authority under the Act?

Unfortunately, energy customers in Gibraltar do not enjoy this same protection.

The duties and obligations of Gibraltar’s sole provider of electrical power, the Gibraltar Electricity Authority (the “GEA”), are reflected in the Gibraltar Electricity Authority Act 2003 (the “Act”).

Section 9 of the Act sets out the duties owed by the GEA to customers and the obligations it is required to meet in the performance of its functions. Section 9(f) in particular imposes upon the GEA a duty to:

• “minimise inconvenience and detriment” to customers as far as possible;
• suitably and reasonably compensate customers for damage sustained “by reason or in consequence of the exercise by the authority of its duties”

Section 9(f) of the Act notionally allows for a claim to be brought against the GEA for damage arising from a negligent act which results in a customer experiencing “inconvenience and detriment”.

However, this right to compensation under section 9(f) of the Act is stated to be subject Section 7 of the Act which expressly precludes a legal claim being brought against the GEA in respect of:

“….any injury, damage, or economic loss of inconvenience caused by or arising directly or indirectly from any interruption, defect, variation or discontinuance of the supply of electricity of from any break-down of or accident to the authority’s machinery or any other apparatus.”

The upshot is that a customer will not be able to pursue a successful claim for damages or compensation arising from an interruption to the electrical supply under the Act.

Can I bring a claim against the GEA under common law principles?

The English common law (which applies to Gibraltar) provides guidance and instruction as to the recovery of economic losses suffered by businesses in certain circumstances, including in relation to business interruption arising from power cuts.

Economic loss is, as a matter of law, divided into:

• consequential economic Loss :- defined as loss arising directly from some physical damage or injury; and
• pure economic loss :- defined as financial losses which do not result from any direct physical damage to a person or property. In essence, pure economic loss relates to loss of a potential financial gain or profit, or a wasted cost.

The approach of the English (and Gibraltar) courts both to “consequential” and “pure” economic losses is exemplified in the case of Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd, a 1973 English Court of Appeal case concerning the recovery of economic losses caused by negligence.

Disclaimer

Please note that the contents of this article do not constitute legal advice from Signature Litigation or the GFSB and should not be relied upon or treated as a substitute for seeking separate and specific legal advice.

However, please feel free to contact our legal team at Signature Litigation if you have any questions about the work we do or would like to enquire about our services.

Paul Grant

paul.grant@signaturelitigation.com

www.signaturelitigation.com/people/paul-grant/

Ben Pharoah

ben.pharoah@signaturelitigation.com

www.signaturelitigation.com/people/ben-pharoah/

GFSB Members have expressed their concern about the ongoing issue of regular power cuts, which are having a significant impact on their operations, costs of doing business and profitability.

Power outages have become an all-too-common occurrence, with many businesses experiencing frequent disruptions to their power supply. Power cuts such as todays can result in lost productivity, damaged equipment, and reduced customer satisfaction, all of which are impacting the bottom line of local businesses.

The situation is particularly concerning for small businesses, who do not have the resources to invest in backup power solutions or absorb the costs associated with lost revenue and equipment damage.  Power cuts have immediate and direct financial consequences for small business owners.  GFSB Members commented;

“We rely heavily on the shop having power to accommodate our upwards of 20 clients per day. With the most recent outage we had to send 4 clients away with wet hair, which also costs us around £300 in lost revenue”. 

GFSB Member: Hairdressing and Beauty Sector

“These sudden power cuts are happening too often and without warning.  This morning Main Street was full of tourists just off two cruise liners in port.  Some asked if this is a regular occurrence in Gib.  Others were hesitant to enter a dark shop.  My shop lost business to card paying customers as the broadband system was down.  I’m sure many other shops have lost business too.  I have another shop where we have 4g card machines, so at least those customers could pay by card.  I will now equip all our shops with 4g card terminals.   But this is an added unnecessary expense”

GFSB Member: Retail Industry

“On top loss of direct sales because we can’t finish, serve or sell out product, we suffer losses from having to dispose of half cooked food in our ovens.  Our equipment also regularly suffers damage from power cuts – today it was the fire alarm system that got damaged when power eventually returned. We will need to spend money to fix it.  At a time when the cost of produce and overheads are going up at a rate we simply can’t absorb or plan for, the continuing power cuts just rub salt in the wound.”

GFSB Member: Catering Industry

“As a small business owner, power outages have a significant impact on our day-to-day operations, causing a variety of problems, from lost productivity to lost revenue. Without power, my business comes to a complete standstill as we rely heavily on electronic equipment and computers. This not only causes missed deadlines, unhappy customers and lost revenue, but also damages our reputation with customers who depend on us. Even after power is restored, the disruption caused by outages can lead to a loss of productivity, low morale, and employee frustration. It is very hard to plan for and mitigate the effects of power outages, and the cost to invest in backup generators or uninterruptible power supplies (UPS) is too prohibitive for small businesses. I understand that power outages are a complex issue, but I believe that more can be done to mitigate their effects on small businesses like mine”

GFSB Member: Online Business Owner

“Without electricity, we cannot work on our systems, process orders, invoicing etc.. delays our days work and we have to retain workers where possible to work overtime at extra costs to our business, so we are able to deliver on commitments and not let our customers down.”

GFSB Member: Distribution Business

https://www.gbc.gi/news/gfsb-laments-impact-power-cuts-small-businesses

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Press release ends.