26 Sep 2019

Commercial and tech update - September 2019


Welcome back to Stephenson Harwood’s commercial and tech update. We hope you have had a great summer and feel suitably rested for the months ahead.

This edition includes a helpful update on e-signatures and a challenge to advertisers on gender stereotyping.


Hiding in plain sight

Recent concerns over the use of facial recognition technology in London’s Kings Cross has intensified demands to introduce new laws to monitor the use of high-tech surveillance in public areas. This affair transpires less than 3 months after controversy was sparked in May by South Wales police using facial recognition technology, which prompted an office worker to claim that being surveyed when he had done nothing wrong was a violation of his civil rights. For more information on this case, read our previous article (link here).

It has recently been revealed that property development company Argent, has been implementing facial recognition surveillance techniques in their 67-acre plot located in the King’s Cross area in London. Although the location is privately owned, it is busy with members of the public commuting in and out of Kings Cross and St Pancras Stations, as well as having a large number of bars, restaurants and office buildings. The use of a number of Avigilon H4 cameras, with immense AI capacities to recognise and identify faces and vehicles, remained unnoticed for a long period of time, until watchdog company Big Brother Watch raised concerns over the use of such technology in an area widely used by the public.

The concern surrounding the use of facial recognition cameras in the Kings Cross area is the uncertainty of the purpose for which they are installed. Facial scanning technology requires a database from which to compare and identify matches and it is uncertain from which source Argent is drawing its information from. Argent has insisted that the use of facial scanning was only implemented in this busy area in the interests of ‘public safety’, however the public demand for more justification has been supported by the Mayor of London, Sadiq Khan, who wrote a letter to the company, amid concerns that it is unacceptable to survey individuals when they have not done anything wrong.

The Information Commissioner’s Office (ICO), under whose remit personal data falls, has expressed the need for a ‘legal basis’ for using facial scanning technology, especially in areas largely frequented by the public. In light of the recent protests to the use of modern surveillance techniques seen both in the South Wales Police case and in Kings Cross, it is clear that there is increasing support for change in regulation in order to gain public support for such surveillance techniques.

Rectifying mistakes

Earlier this summer, the Court of Appeal’s judgment in the case of FSHC Group Holdings Ltd v Glas Trust Corporation Limited clarified their approach in respect of rectifying a written agreement due to the common mistake of both parties.

Historically, the equitable remedy of rectification has required the courts to look at the subjective, actual intentions of the parties in entering into the contract. More recent obiter statements have suggested that, if rectification of a written contract is sought, the court should use an objective test to determine what the reasonable observer with knowledge of the facts and communications between the parties would have considered the parties’ intentions to be at the time of contracting.

In this case, the Court held that a contract could either be rectified:

(i) on an objective determination where rectification is based on a prior concluded contract – namely, where parties enter into a binding contract to execute an agreed document, but the document they execute contains different terms; or

(ii) on a subjective determination where rectification is based on a common continuing intention – namely that, when the written contract was executed, the parties had a shared intention which, mistakenly, was not recorded in the written contract.

In this case, the parties had entered into two deeds in 2016, the purpose of which were to provide security which FSHC (as claimant) had previously agreed to provide to the security agent for various lenders (the defendant) in connection with a corporate acquisition that took place several years earlier, in 2012. The missing security – an assignment of the benefit of a shareholder loan – should have been provided at the time of the initial transaction, but had been overlooked at the time. The parties had failed to properly review the documents that they were acceding to prior to signing the deeds in 2016. In fact, the deeds included an undertaking (which was not discussed in 2016 and did not form part of the deal negotiated in 2012) by FSHC to various additional and onerous obligations. Communications between the parties evidenced that the parties shared a common understanding that entry into the deeds was only to fill the gap in the missing security. There was no evidence that either party intended FSHC to accede to additional obligations.

The court held that the contract should be rectified. This set of facts could be considered through the lens of an objective determination, taking into account three key points. Firstly, the contractual background to the deeds formed part of a complex contractual structure entered into four years previously, of which this security was one small part, and the communications between lawyers and clients preceding the execution of the deeds made reference only to the missing security, and not to any additional obligations. Secondly, the “commercial absurdity” of FSHC agreeing “in the absence of any pre-existing obligation to do so or anything of any commercial value being given in return” to agree to additional onerous contractual obligations which did not form part of the bargain agreed in 2012. Finally, the absence of any discussion relating to a fundamental change to the structure of the transaction agreed in 2012.

This judgment helps to clarify some uncertainty around the tests applied by the courts to rectification. It is clear that the courts maintain that orders for rectification should still be made sparingly, and the starting position is that the written terms of the contract reflect the parties’ intention. Convincing proof will be required to “displace the natural presumption that the written contract is an accurate record of what the parties agreed”.

E-signatures: Law Commission report clarifies the legal position

As technology becomes more and more integrated in our society, electronic execution of documents is becoming more popular. However, some companies have been reluctant to use electronic signatures in the past because of uncertainty about their legal validity. This month the Law Commission, a body which advises on law reform, has issued a report confirming the validity of the use of e-signatures for executing documents. The report sets out a statement of the law in this area and makes a number of recommendations to the UK government for future work, in particular the need for updated legislation to provide clarity on the law relating to e-signatures.

According to the Law Commission, e-signatures will be valid provided that the person executing the document intends to authenticate the document and any formalities relating to the signing of the document are complied with. For example, one of the formalities for executing a deed is that it must be witnessed. The report finds that deeds can be executed electronically, but in order for them to be validly witnessed, the witness must be physically present and that current law probably does not allow for “remote” witnessing (such as via video). Off the back of this finding the report recommends that the government should consider potential solutions to the obstacles to video witnessing and update legislation to provide for this. Additionally, the Law Commission has recommended a future review of the law of deeds more generally to consider the issues around efficacy and whether the concept remains fit for purpose.

The Commission also stated that it is likely that a court would recognise electronic equivalents of well-established forms of non-electric signature as valid. For example, it is well-established that a party can validly enter into an agreement by signing with an ‘X’, signing with initials only, or even signing just with a mark. The courts have held that a name typed at the bottom of an email or clicking “I accept” on a website tick-box both amount to valid signatures.

While this report has clarified a few issues on electronic execution, it also highlights that e-signatures are not always appropriate. For example, wet-ink signatures will still be needed for documents with cross-border elements, where the document may need to be enforced or registered in a jurisdiction that does not recognise electronic originals, or documents for certain registries or authorities such as the Land Registry or HMRC.

For more detail see here for a summary of the report and here for the full report.

Gender stereotyping in adverts

The Advertising Standards Authority (ASA) has exercised its first ban under new gender stereotyping regulations introduced in June. Mondelez (Philadelphia Cream Cheese owners) and Volkswagen have been criticised for promoting harmful gender prejudices in their most recent television adverts.

Mondelez’ Philadelphia promotion focused on two men being placed in charge of their toddler-aged children for the day. When presented with a buffet lunch moving round on a conveyor belt, the men appear to become so distracted by the appeal of the Philadelphia coated snacks, they forget to care for their children who are sitting on the moving conveyor belt. The ad finished with both men retrieving their children and exclaiming ‘Let’s not tell mum!’. The company received 128 complaints on the basis that the advert assumes that men are not as reliable or trustworthy in caring for their children than mothers are. The ASA acknowledged that the sentiment of individuals getting distracted by the desire for Philadelphia was humorous, however it should not have played on gender stereotypes to do with childcare to express this sentiment.

Volkswagen’s advert focused on the notion that ‘when we learn to adapt we can achieve anything’. The promotion featured a male and female climber sleeping in a tent, two male astronauts completing mundane tasks in space, a Paralympic athlete jumping and a women sitting on a park bench with a pram, not noticing as the new Volkswagen ‘EGolf’ drove past. The advert received 3 complaints on the basis that all the adventurous activities were seen to be completed by male figures, with the woman climber hardly being noticeable in the opening scene. The final scene of stereotyping a woman to be the caregiver for children also caused outrage as it portrayed the idea that only men can be adventurous while women care for the children. The ASA decided the ad was likely to cause harm and offence to women and men based on gender stereotypes.

Both these adverts were ordered to be removed from viewing platforms and both companies were advised to seriously consider their use of gender in future advertisements. The introduction of the strict gender specific regulations by the ASA marks a significant step towards stopping the media and advertisements from ‘limiting people’s potential’ and enhancing the progressive stance of society in allowing individuals to pursue the careers and lives they want.