The UAE commercial agency regime has been a central pillar of commerce since the issuance of UAE Federal Law 18 of 1981 (the 1981 Law). While piecemeal amendments to the 1981 Law have been introduced from time to time, the UAE government has now issued UAE Federal Law 3 of 2022 concerning commercial agencies (the New Agencies Law) which repeals and replaces the 1981 Law in entirety.
The New Agencies Law represents a substantial modernisation of the 1981 Law and will no doubt contribute further to the development and expansion of the UAE economy and its integration into global commerce. This inBrief considers some of the salient issues concerning registration and termination of commercial agencies under the New Agencies Law.
Requirement for registration as a commercial agent:
The New Agencies Law provides that the following shall be permitted to act as “commercial agents”:
– natural persons who are UAE nationals; or
– a body corporate that is wholly owned by:
(a) one or more natural persons who are UAE nationals; or
(b) a public company (subject to what is stated below).
A separate regime is contemplated for UAE incorporated public joint stock companies that are (or propose to be) registered as commercial agents under the New Agencies Law. Such companies may be registered as commercial agents notwithstanding that they do not have 100 per cent UAE national participation (but provided that UAE national participation is not less than 51 per cent) however, additional specific implementing regulations are contemplated.
In addition, the New Agencies Law provides that the UAE Federal Cabinet may, upon the recommendation of the Minister of Economy, permit an “international” business not owned by UAE nationals to promote and sell its own products in the UAE (and presumably to be registered as its own “commercial agent” in accordance with the New Agencies Law) provided that:
– there is no commercial agent registered for the relevant product(s) in the UAE; and
– there has not previously been a commercial agent registered for the relevant product(s) in the UAE.
The scope of this carveout for a foreign principal is anticipated to be supplemented by a decision of the UAE Federal Cabinet and we look forward to further clarity on what is no doubt going to be an issue of interest.
As with the 1981 Law, a written contract is required to be entered into and default jurisdiction for commercial agency disputes is reserved for the commercial agencies committee within the Ministry of Economy and subsequently the onshore courts of the UAE. However, the New Agencies Law allows for the parties to a commercial agency contract to provide for the resolution of disputes by arbitration. This is an important change to the 1981 Law which did not provide for such an alternative.
Expiry or termination of a registered commercial agencies
It is common knowledge that the 1981 Law provided substantial safeguards against termination to a registered commercial agent. The New Agencies Law provides that a commercial agency shall “expire” upon the expiry of the contractual term stated in the contract of commercial agency. The New Agencies Law also provides that a commercial agency contract may be terminated unilaterally by either principal or agent in accordance with the provisions of the commercial agency contract. Both of the foregoing concepts concerning expiry and termination are new and fundamentally change the previous position with respect to termination, as stated in the 1981 Law.
In addition, the New Agencies Law provides that a party wishing to terminate a commercial agency contract at the end of its term (i.e., a “non-renewal”) shall serve notice on the other party not less than either:
(a) one year prior to the expiry of the term of the underlying commercial agency contract; or
(b) prior to the lapse of half of the stated contractual term,
whichever of (a) and (b) is shorter.
Application of the New Agencies Law to existing commercial agencies
The New Agencies Law is stated to come into effect six months after the date of its publication in the Official Gazette. The New Agencies Law was published in the Official Gazette on 15 December 2022 and accordingly will come into effect in June 2023.
Notably however, the New Agencies Law provides that the stipulation concerning the expiry of a commercial agency (as summarised above in this inBrief) shall not immediately apply to commercial agency contracts in force at the time of the issuance of the New Agencies Law and shall only apply to such contracts after the lapse of two years of the date of application of the New Agencies Law (i.e., two years from June 2023). Equally importantly (and by way of exception to the two-year period above), where a commercial agency has been registered for a period of ten years or a commercial agent’s investment into the development of the relevant agency exceeds AED 100 million, the provisions of the New Agencies Law concerning expiry of a registered commercial agency shall only apply after the lapse of ten years from date of its application (i.e., ten years from June 2023) in relation to such agencies. Further implementing regulations concerning this carveout are contemplated in the New Agencies Law.
As noted, the New Agencies Law represents a substantial modernisation of the 1981 Law. New provisions concerning the expiry and termination of registered commercial agency contracts have been introduced and will be very important in any negotiations concerning commercial agency contracts proposed to be entered into. A number of key provisions remain subject to further supplementary rules and legislation. As with all legislative updates, the application and enforcement of the New Agencies Law will determine the further development of the UAE commercial agencies regime.
Jan 25 (Reuters) – Elevance Health Inc (ELV.N) said on Wednesday that the growth in the insurer’s commercial business is expected to keep concerns over attrition in Medicaid membership at bay, even as it forecast a weak 2023 adjusted profit.
Shares of the company rose nearly 5% as investors bet on improving margins and revenues at the commercial segment, through which it sells private insurance plans to employer groups and individuals.
The segment, which reported a profit of $260 million in the quarter, is expected to bounce back this year after its profit halved due to a hit from the pandemic.
Along with an “attractive” membership increase for its commercial plans, Stephens analyst Scott Fidel said margin improvement will also aid the insurer’s earnings in 2023.
This will likely help Elevance counter a hit to its Medicaid membership enrollments from the expected removal of pandemic-related relief measures later this year.
Several members who signed up under the COVID-19 relief measures to the government-aided insurance Medicaid plans will be deemed ineligible, beginning April 1, and will move to private or employer-backed plans.
Elevance, which was previously known as Anthem, expects total medical membership at 2023 end to range from 47.4 million to 48.5 million. Of these, total commercial memberships are expected to be between 32 million and 32.5 million.
“We anticipate growth in individual and group risk-based commercial membership… to be concentrated in the second half as consumers transition from Medicaid to commercial coverage,” Elevance’s finance chief John Gallina said on a conference call.
For the full year, Elevance expects to post more than $32.60 in adjusted profit per share, below estimates of $32.67 per share.
Elevance reported a higher-than-expected profit of $5.23 per share for the fourth quarter.
Reporting by Khushi Mandowara and Bhanvi Satija in Bengaluru; Editing by Shailesh Kuber
Our Standards: The Thomson Reuters Trust Principles.
As we look ahead to 2023 with COVID-19 hopefully in the rearview mirror for the most part, we are seeing a number of predictions as to what is in store for 2023 and beyond. Rising interest rates, changing tenant demands and a cooling of the industrial market are just some of the factors that will play into how 2023 shakes out for commercial real estate. In short, while there are considerable pressures impacting the commercial real estate market as this article is written, the outlook for 2023 by most experts is generally positive with expected lessening of pressures into mid-to-late 2023.
Rising interest rates and high inflation
There has been some trepidation in the market in recent months in terms of the increases to interest rates in quick succession in the latter half of 2022. Underwriting criteria have become more strict, and lenders and investors alike have become more cautious. It is unclear how long the rise in interest rates will impact the market, which has led to increased caution among all real estate players and some owners pulling their deals from the market and some purchasers pulling out of deals and not being willing to take the risk on moving forward.
Related to the increasing hybrid nature of the office workforce, digital economies and virtual connectivity are top of mind for all players in the commercial real estate industry.
A slowdown is expected for at least the first half of 2023 in light of the uncertainty in the market. It is unclear whether rates will stabilize, increase or decrease and economists and the Bank of Canada potentially have different viewpoints as to how that looks. Investors and owners are cautious in terms of how high inflation will have an impact on their bottom line, with many companies expecting cuts to expenses and decreased revenues due to slowing consumer demand and workforce management pressures. That said, experts generally predict that the current unpredictability in the commercial real estate should stabilize in the middle of 2023. There remains a great deal of dry powder looking to be placed which bodes well for increased activity in mid to late-2023.
Changing tenant demands
One of the longer-term impacts of the COVID-19 pandemic has been a push by tenants for more flexible office space, including communal areas, ability to “hotel” employees, and robust and versatile electronic and virtual connectivity. The increasing acceptance of (and demand from workers for) a “hybrid” arrangement presents unique challenges for landlords, owners and retailers alike. How buildings and office space are used is undergoing a major shift. Tenants and landlords, especially public company tenants and landlords, are increasingly also focused on ESG considerations and related reporting to their shareholders.
These environmental and social governance matters are top of mind for landlords/investors and tenants/occupiers alike (and increasingly lenders). Many landlords are requiring tenants to adhere to increasing and more onerous sustainability requirements and associated reporting obligations. Industry players are focused not only on sustainability and governance matters, but also climate-related regulatory actions, especially foreign investors who are interested in investing in new jurisdictions. While the majority of offices in major urban centres have sat largely empty for the last two+ years, we are starting to see a return of the workforce to the office, at least on a part-time basis, with increased presence at associated retailers when those workers are returning to the office.
Given increased interest rates and more stringent underwriting by lenders, it is not surprising that there has been a slowdown in activity in the commercial real estate market in the latter half of 2023. The difficult underwriting criteria have made it more difficult for purchasers to qualify for financing which is greatly hampering deal volume. This has led to reduced competition for properties and as noted above, some owners pulling their properties off of the market until conditions are more favourable. Notwithstanding a more difficult financing environment, certain asset classes within the industry continue to remain sought after. For example, while the industrial market has seen some cooling in recent months, it still remains a very viable and stable asset class, as are data centres, storage, warehousing and fulfillment centres, multi-family residential, as well as life sciences buildings or development opportunities.
Virtual connectivity, cybersecurity and PropTech
Related to the increasing hybrid nature of the office workforce, digital economies and virtual connectivity are top of mind for all players in the commercial real estate industry. There is great demand for cloud computing and storage, which has increased interest and demand in data centres and related infrastructure. This also presents important considerations relating to the protection and confidentiality of data and cyber security.“PropTech” (aka “property technology”) remains a key focus within the industry in terms of how to best leverage new and improved technology with the “bricks and mortar” of commercial real estate. It is expected that interest in proptech will continue to be a strong trend into 2023.
- Pandemic’s long shadow in agreements. In real estate contracts, we expect to continue to see carve-outs from force majeure for COVID-19 given that it is now a known event, but with the expectation and focus on the fact that future pandemics or epidemics and associated government-ordered lockdowns will constitute force majeure events (but will not abate the obligation on a tenant to still pay rent, for example). Expect the language of force majeure clauses and associated carveouts to be of particular focus.
- Increasing scrutiny in securing financing. Lenders will be rigorous in their underwriting of deals as well as associated legal documentation given the tighter lending market.
- Budgetary priorities mount in development and construction. Inflationary pressures will result in developers and owners alike being focused on cost (and cost-cutting measures) to a greater degree of detail and specificity in development and construction contracts.
- Lease negotiations may continue to be protracted. Tenants and landlords will likely continue to dig in on issues of particular importance to them as highlighted in this article, with tenants likely demanding much greater flexibility in terms of flexible office space, accommodating floor plates and shorter lease terms.
- ESG focus continues. Expect to see more and more detailed and onerous “ESG” and reporting types of clauses in contracts, particularly from public-market players.
- Changing rules for foreign buyers. A legislative change that takes effect January 1, 2023 may also have the effect of cooling certain parts of the commercial real-estate market, such as multi-family residential, which act and associated regulations were passed on December 2, 2022 relating to the Prohibition on the Purchase of Residential Property by Non-Canadians Act. Certain exemptions under the Act are available and the impact of this new legislation remains to be seen, but is an important legal consideration in advising foreign buyers who are interested in purchasing a residential interest in Canadian real estate.
2023 is set to be an interesting and dynamic one in the real estate industry. The fast pace of change in this market demands keen attunement to many important and sometimes subtle legal considerations. Particularly amid the current broad economic volatility, knowledgeable and experienced legal counsel and other advisors who have a pulse on ever-changing market dynamics that affords the ability to negotiate “market” terms will be more important than ever.
In Fall 2022, the Office of the Privacy Commissioner of Canada (OPC) published a study it had funded on the privacy implications of direct-to-patient commercial virtual care platforms (VCPs) in Canada, technologies that allow healthcare practitioners to provide healthcare services to patients remotely.
While the study does not constitute binding law or guidance, it is nonetheless noteworthy for operators of VCPs because (1) it identifies practices by commercial operators that the study describes as problematic and (2) makes recommendations for amending Canada’s core privacy law statutes to address these issues.
(1) Practices by Commercial Operators Described as Problematic in the Study
(a) not treating personal information collected during registration as personal health information
The study found that commercial operators of VCPs collect a large amount of personal information when patients register for use of the VCP, including their name, email address, IP address, telephone number, and other contact information. However, even where such information is collected from a patient or in a healthcare setting, some operators do not treat this information as personal health information, which may call for a higher degree of care under provincial health privacy laws than private sector privacy laws.
(b) privacy policies are too vague or confusing for patients and practitioners to understand
While the study found operators of VCPs have privacy policies in place, it took issue with the fact that privacy policies tend to be vague in their descriptions of how personal information and personal health information will be used, transferred, disclosed or otherwise processed, and the fact that privacy policies tend to be too confusing or complicated for patients or practitioners to make informed decisions.
(c) VCPs use personal information to sell or promote a business partner’s products or services
The study found that some VCPs use a patient’s personal information to promote products or services of a business partner (e.g. medications or vaccinations from a pharmaceutical company if the personal information shows that the patient may not be vaccinated or is not taking a certain medicine). The study takes issue with using personal health information in this manner, especially if the use is not disclosed.
(d) where a VCP only provides one type of health service, any personal information connecting a patient to the VCP could reveal the patient’s health condition or request for services
The study found that some VCPs are only used to provide one type of health service (e.g. psychiatric services or HIV prevention services). Under those circumstances, any personal information that can connect an individual to the use of the VCP, such as their name or basic contact information, could, when combined with the fact that the VCP is only used for one type of health service, reveal a person’s health condition or their request for services relating to a particular medical issue, such as psychiatric health.
(e) requiring patients to use VCPs to access health services
The study found that some VCPs require patients to agree to commercial uses of their personal information prior to accessing health services. The study found that this practice raises jurisdictional issues around patients’ right to access medical services and flagged this practice as ethically questionable.
(2) Study’s Recommendations for Amending Canada’s Core Privacy Statutes
(a) handling of de-identified personal information should be regulated
The study found that VCPs may de-identify personal information; however, they proceed to share, analyze, publish and otherwise process the de-identified personal information. The study pointed to gaps under Canadian privacy laws, including under the Personal Information Protection and Electronic Documents Act (PIPEDA), with respect to the use and processing of de-identified personal information.
(b) personal information collected by commercial VCPs should be personal health information
The study recommends that provincial health privacy laws expressly recognize that all personal information collected by VCPs, including basic contact information, be considered personal health information and, as a consequence, be subject to health privacy law regimes under those statutes.
(c) VCPs should be prohibited from using their platforms to promote pharmaceutical products
The study argues that the collection of personal health information via VCPs and, in turn, using that personal health information to sell or promote pharmaceutical products and services, is ethically questionable and is calling for regulation to prohibit these kinds of uses of personal health information.
(d) Encouraging privacy regulators to regularly audit VCPs
Given the privacy-related risks the study identified for patients and practitioners, the study is calling for increased audits of VCPs by privacy regulators to ensure compliance with health privacy laws.
(e) Requiring VCPs to share de-identified health data with public entities
The study found that VCPs handle large amounts of de-identified health data, but that such data is only being used to serve the commercial purposes of the VCP operator. The study calls for regulations that would require VCPs to share their de-identified health data with public entities for research purposes.
Key Take-Aways and Recommendations
- Canadian privacy regulators are studying privacy-related risks from commercial operators’ use of VCPs, and have flagged a number of risks and concerns that could underscore future guidance.
- In particular, one study found that uses and disclosures of personal health information, collected using VCPs, are not clear to data subjects or practitioners, privacy policies are too vague and are confusing for individuals without legal training, and should be redrafted in plain language and in a manner that conveys the granular uses and disclosures of personal health information.
- Supplements to privacy policies may be helpful for patients and healthcare practitioners, such as descriptions of how the VCP technology works, who are the main parties involved, and how personal information will be collected, used and disclosed to help users make informed decisions.
- Audits of VCPs by privacy regulators may be on the rise; thus, commercial operators of VCPs should have policies and record retention schedules in place in the event of any future audits.
Content is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee similar outcomes. For more information, please visit: www.bakermckenzie.com/en/client-resource-disclaimer.
In a commercial real estate transaction, it’s common for the original buyer to assign the purchase agreement prior to closing or for a different party to otherwise take title to the relevant property. If you’re the party receiving the assignment or otherwise taking title, should this impact your environmental due diligence? According to a recent decision of the British Columbia Court of Appeal, it should.
In 0694841 BC Ltd. v. Alara Environmental Health and Safety Limited, the court ruled that a company who was assigned a purchase agreement could not rely on an environmental assessment prepared for a related entity when purchasing commercial real estate. As such, when the property was later discovered to be contaminated, the owner could not sue the environmental consultant for missing the contamination.
In this case, 0694841 BC Ltd. (069), a holding company used to make offers to purchase real estate, obtained an environmental site assessment from an environmental consultant, Alara Environmental Health and Safety Limited (Alara), as part of its due diligence in purchasing a commercial property. Alara conducted Phase I and Phase II environmental assessments on the property and did not find contamination. Alara’s report contained a disclaimer that only the “client” — in this case, 069 — could rely on the report. 069 then assigned its rights under the purchase agreement to International Trade Centre Properties Ltd. (ITC). 069 and ITC were related companies with a shared director and acting mind.
Six years after purchasing the property, ITC found contamination and sued Alara for negligent misrepresentation. The British Columbia Court of Appeal held that ITC could not rely on an environmental assessment prepared for 069, even though the companies were related, and ITC had, in fact, paid the Alara invoices. This was because Alara had disclaimed any liability to third parties. Buyers and assignees should be aware of the risks inherent in trying to rely on an environmental report with a disclaimer, particularly when it’s prepared for a third party, whether the entities are related or not.
It’s important to ensure that all related entities and potential assignees are entitled to rely on the environmental site assessment. This can include obtaining a reliance letter from the consultant for all related entities or incorporating a term into the contract whereby reliance is extended not just to the entity that hired the consultant but also any related entities or affiliates. If assigning the purchase agreement to a related entity is a possibility, the abovementioned rights should be included in the contract with the consultant at the outset of the engagement. If these rights are negotiated down the road, they may be more challenging to negotiate, come with an additional fee or be forgotten.
In addition, an environmental consultant’s general service terms and conditions should be reviewed before it is hired/engaged, as their initial position is often to limit their liability to the fees paid by the client on the mandate. This limit on a buyer’s potential recovery of damages may be as little as a few thousand dollars in the case of a Phase I environmental site assessment, a far cry from the clean-up costs for even the most modest environmental problem.
Blakes periodically provides materials on our services and developments in the law to interested persons.This article is for informational purposes only and does not constitute legal advice or an opinion on any issue. Blakes would be pleased to provide additional details or advice about specific situations if desired. For permission to reprint articles, please contact the Blakes Marketing Department at 416-863-4345 and [email protected] © 2019 Blake, Cassels & Graydon LLP.
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US – Customer experience (CX) management company Sprinklr has become an official software partner for Samsung for commercial display advertising.
The agreement will allow Sprinklr’s platform to be available as an integrated app for Samsung Smart Signage and Hospitality Displays.
Samsung will be able to use Sprinklr deliver content and data from more than 30 social and digital channels to commercial display products.
Users will be able to update information in real time and manage displays through Samsung’s services.
Doug Balut, senior vice-president of global alliances at Sprinklr, said: “Delivering real-time, customisable data and content from digital channels to consumers will help retailers revolutionise the shopping experience.
“By pairing Sprinklr’s Unified-CXM platform with the industry-leading digital signage and displays from Samsung, companies can enhance the seamless experience of customers, differentiate their stores and brand, and drive business results.”
Parrish Chapman, director, enterprise retail sales key accounts at Samsung Electronics America, said: “Shoppers expect to receive a positive first impression when interacting with a brand.
“Our partnership with Sprinklr helps our retail customers meet this mission by consolidating social media content, promotions and reviews that are updated in real-time while consumers are shopping.”
NEW DELHI: In a bid to make their cases legally strong, the Delhi Police have given extension to 72 legal consultants which were appointed by IPS Bhisham Singh last year.
All these 72 legal consultants are basically advocates who are working with the legal cell of the Delhi Police.
They have been given extension till December 31, 2023.
Last year IPS Bhisham Singh along with a forensic team took their interviews apart.
Now they are working under the guidance of DCP Legal Cell, Hareesh HP.
DCP Legal Cell, Hareesh confirmed to IANS that extension was given to all 72 legal consultants.
A source said that these legal consultants have proved a milestone in making their cases legally strong. Initially they were appointed for testing but when results came the entire police department was surprised as they played a crucial role to remove the legal errors from the police’s file.
“We give them Rs 2, 000 for formal legal opinion. In case of charge sheet they are paid Rs 10, 000 for their legal opinion, ” the source told IANS.
The recent sensational case of Kanjhawala where a 20-year-old woman died a painful death, will also be checked by them for legal advice apart from other experts.
They make the Delhi Police cases watertight and hence in coming days police can increase their numbers.
Construction contracts often contain detailed procedures for the various aspects of the working arrangement between the parties. These may include the agreed mechanisms for making payment claims or for variation and rectification works, as well as details such as notification periods or approval processes. Such arrangements allow for the parties to allocate their respective risks and to set out the applicable procedures with certainty.
However, where parties do not comply with the agreed mechanisms, what is the effect upon the relevant contractual claims? When does it bar the claim entirely, and when will the claim be allowed to proceed? The Appellate Division of the Singapore High Court (“Court“) had the opportunity to consider this question in Vim Engineering Pte Ltd v Deluge Fire Protection (S.E.A) Pte Ltd  SGHC(A) 2.
The Appellant sub-subcontractor in a construction project had brought claims against the Respondent subcontractor for, among others, variation works. The Respondent counterclaimed for the costs of rectifying defects and for back-charges.
The Court allowed the Appellant’s claim for variation works, overturning the decision of the High Court Judge. This was despite the non-compliance with the contractual requirement to obtain written instructions from the Respondent for variation works to be carried out, as the Respondent was found to have waived the requirement. Conversely, while the Respondent was allowed to continue with its claim for rectification and back-charges despite allegedly failing to comply with the contractual requirement to provide due notice, the Respondent’s entitlement to the claimed sum was substantially reduced as it had not provided sufficient evidence to prove its claims.
The decision is a reminder to the construction industry to be aware of the mechanisms for claims and works in their contracts, the procedural and substantive requirements therein, and whether non-compliance with such requirements will bar subsequent claims.
The Appellant, previously represented by another firm, had engaged Rajah & Tann Singapore LLP for the appeal, and were successfully represented by Avinash Pradhan, Jasmine Thng and Nikolas Tong.
The Respondent had been engaged by the main contractor on a project as a subcontractor. By way of a Subcontract, the Respondent had engaged the Appellant to carry out certain plumbing and sanitary works. The relevant provisions in the Subcontract were as follows:
- Clause 16 – Any variation works… shall be carried out only with written instruction[s] from [the Respondent’s] Project Manager.
- Clause 19 – If, under the provisions of this Subcontract, [the Appellant] is notified by [the Respondent] to correct defective or non-conforming Subcontract works, and [the Appellant] states or, by its actions, indicates that it is unable or unwilling to proceed with the Subcontract works or corrective action…, [the Respondent] may, upon written notice, perform or procure the performance of the redesign, repair, rework or replacement of nonconforming or non-performed Subcontract works by any reasonable means available at [the Appellant’s] cost.
Due to disagreements between the parties, the Appellant eventually left the project site before works were completed. The Appellant subsequently brought a suit against the Respondent for the balance amount payable for the main works under the Subcontract and for variation works it had performed. The Respondent counterclaimed for the costs of rectification works to complete the main works and rectify defects, and for back-charges.
The High Court Judge allowed the Appellant’s claim for the balance amount payable for the main works, but rejected the Appellant’s variation claims on the basis that, among other things, the Subcontract provided that variation works could only be carried out with written instructions from the Respondent’s project manager, and that such instructions had not been obtained by the Appellant. The Judge allowed the Respondent’s counterclaims.
The Appellant appealed against the Judge’s decision to dismiss its claim for variation works and to allow the Respondent’s claim for rectification works and back-charges.
Holding of the Appellate Division of the High Court
The Court found in favour of the Appellant, allowing most of its appeal.
Despite the Appellant’s non-compliance with Clause 16 of the Subcontract, which required written instructions from the Respondent’s project manager in order for variation works to be carried out, the Court allowed the Appellant’s claim for variation works.
In reaching its decision, the Court set out the following principles in determining whether to allow a claim for variation works:
- Whether the works are a variation – To claim for work as a variation under a contract, a claimant needs to establish that:
- the work is an “extra”;
- there is an express or implied promise to pay for the work;
- the work was instructed by a person with authority to vary the contract; and
- any condition precedent to payment has been fulfilled.
- Compliance with contractual mechanisms – Contracts must be construed on their particular terms, and unless the provisions require strict compliance failing which a variation claim will fail, failure to comply may not amount to an absolute bar against a right to claim for payment of the variation. Such provisions may be overcome if the claimant can prove estoppel or waiver of the relevant requirement.
In its construction of Clause 16, the Court found that the provision was not drafted in a stringent manner such that the Appellant would forfeit payment for variation works in the absence of written instructions from the Respondent’s project manager. The Appellant’s claim for variation works was thus not barred by non-compliance with Clause 16.
The Court further found that the Respondent had waived compliance with the requirement to obtain written instruction. This was inferred from the fact that the Respondent’s representatives had signed on the majority of the variation work claims by the Appellant, and had included comments on the forms that the claims would be subject to the main contractor’s approval, instead of disallowing or rejecting the claims for lack of compliance.
Finally, the Court found that the Appellant’s variation claims had been adequately substantiated with photographs, acknowledgements, and rates that the Respondent did not object to. Further, the variation works were found to fall outside the scope of the main works under the Subcontract and were accordingly variations.
Therefore, the Court allowed the appeal against the Judge’s decision to reject the Appellant’s variation claims.
Rectification and back-charges
The Court found that the Respondent’s non-compliance with Clause 19 (in that proper notice was not given of certain defects) did not bar its claim for rectification works and back-charges. However, the Court substantially reduced the sum awarded to the Respondent under this claim due to insufficient proof.
The Court set out some guiding principles regarding defects clauses and the notice requirement.
- Purpose of notice – The notice requirement gives the contractor an opportunity to cure or remedy the defect, as the contractor is usually in the best position to carry out remedial work at a lower cost.
- Failure to give proper notice – Failure to comply with a notice requirement in a defects clause may preclude an employer from relying on the defects clause against the contractor. However, the employer’s right to damages in respect of the cost of repairs is not extinguished.
- Scope of damages – Where the employer does not provide the contractor with a contractual opportunity to rectify defects, the employer can still recover the cost of repairing the defects. However, the sum recoverable may be limited to how much it would have cost the contractor to rectify the defects.
While the Court found that the Respondent’s failure to comply with Clause 19 did not materially affect its claims, it held that the Respondent had not provided sufficient evidence to establish its claim. The Court highlighted that the burden of proof in this regard was firmly on the Respondent.
- Rectification – Regarding the claim for rectification, the Court found that the Respondent’s evidence was a bare allegation without any of the necessary particulars like what part of the Appellant’s work was defective, why or how was it defective, how it was rectified or repaired, or by whom it was rectified. The award for this claim was thus set aside.
- Back-charges – Regarding the claim for back-charges, they consisted of general allegations without the requisite particulars. The Respondent was only able to show that a limited number of the back-charges were attributable to the Appellant. The Respondent’s entitlement under this claim was thus substantially reduced from S$858,604.36 to S$41,788.80.
The Court highlighted that the proper approach for determining a contractor’s liability for defects and rectification work is not the “global” approach adopted by the Judge in the High Court, which did not distinguish between delays caused by the Appellant and delays caused by Respondent or others. In determining the Appellant’s liability for the back-charges claimed, the Court applied the following four-step framework to determine each of the individual back-charges claimed by the Respondent:
- The Respondent has to first be able to provide sufficient evidence to show that back-charges were an expense that had actually been incurred by it. In the present case, such evidence would be either the relevant site memoranda or other documentary evidence.
- If the relevant back-charge was indeed incurred by the Respondent, the Court should then consider if the scope of the back-charge fell within the terms of the Subcontract.
- Should the Respondent be able to cross both the threshold requirements above, the Court should then consider if the evidence was also sufficient to show that the claimed loss had been caused solely by the Appellant.
- The burden would then shift to the Appellant to provide evidence to persuade the Court why the respective back-charge should not be imposed on it.
The decision highlights the importance of risk allocation at the contract drafting stage. Parties should ensure that the requirements for claims and works are clearly set out in the contractual provisions, and if such requirements are intended to act as a condition precedent and bar non-compliant claims, to specifically set out the intended consequences.
The judgment also demonstrates that claims in construction disputes must be adequately supported by sufficient evidence. Bare allegations will not suffice to discharge a claimant’s burden of proof.
For further queries, please feel free to contact our team below.
On January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) came into force along with regulations, Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (the “Regulations”). Much of the press regarding this new federal statute has concerned its impact on residential transactions and the housing market in Canada, however, because of certain provisions included in the regulations, which were only released on December 21, 2022, there are potentially significant consequences on commercial transactions.
The stated intention of the Act is to make residential homes more affordable for Canadians. To that end, Section 4 of the Act provides that “it is prohibited for a Non-Canadian to purchase, directly, or indirectly, any residential property.”
The Act defines Non-Canadian as:
- an individual who is neither a Canadian citizen nor a person registered as an Indian under the Indian Act nor a permanent resident;
- a corporation that is incorporated otherwise than under the laws of Canada or a province;
- a corporation incorporated under the laws of Canada or a province whose shares are not listed on a stock exchange in Canada and that is controlled by a person referred to in paragraph (1) or (2); and
- a prescribed person or entity,
The Act defines “residential property” as:
- a detached house or similar building, containing not more than three dwelling units;
- a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises;
- prescribed real property or immovable,
Section 6 of the Act makes it an offence for a Non-Canadian to purchase residential property covered by the Act. It also creates an offence for every individual that counsels, induces, aids or abets a non-Canadian to purchase any residential property covered by the Act knowing that the non-Canadian is prohibited. All such persons are liable on summary conviction to a fine of not more that $10,000.
The Regulations and Scope of Potential Application in Commercial Transactions
The Regulations were released on December 21, 2022, 10 days before the Act and Regulations came into force. Three parts of the Regulations significant expand the potential application of the Act in commercial transactions.
First, the Regulations defined “control” to include “direct or indirect ownership of shares or ownership interests of the corporation or entity representing 3% or more of the value of the equity in it, or carrying 3% or more of its voting rights.” It is unclear whether this means that an individual foreign owner must control more than 3% of the equity, or whether total foreign ownership of 3% is sufficient to make the entity “controlled” by a Non-Canadian. In either case, many entities in the commercial real estate industry would likely meet this test, which may not intuitively be considered to be “Non-Canadian”.
Second, the Regulations provide that a “purchase” includes “the acquisition, with or without conditions, of a legal or equitable interest or a real right in a residential property”. This broad definition applies to almost any direct or indirect acquisition, including the acquisition of shares, limited partnership interests, or other interests in an entity which owns “residential property”. Certain exemptions are provided, but they are unlikely to apply in most commercial contexts.
Third, the Regulations provide that residential property includes all land “that does not contain any habitable dwelling, that is zoned for residential use or mixed use, and that is located within a census agglomeration or a census metropolitan area.” This means that any vacant land that is zoned for mixed use in any major population centre in Canada is residential property and cannot be “purchased” by a “Non-Canadian”, directly or indirectly. In addition, the requirement that the lands not contain any habitable dwelling, as opposed to a requirement that the lands be vacant, may result in many commercial properties (e.g. retail plazas) which are zoned for mixed use being considered “residential property” which cannot be “purchased” by a “Non-Canadian”. While “habitable dwelling” is not defined in the Act or the Regulations, “dwelling unit” is defined to mean a residential unit that contains private kitchen facilities, a private bath, and a private living area. The vast majority of commercial properties will not contain any “dwelling unit” and so would appear to be captured in the definition of “residential property” as a result.
This definition of “residential property” will also have significant impact on parties intending to complete land assemblies in anticipation of a development and may make certain land assemblies impossible to complete.
This definition does not capture lands located outside of a census agglomeration or census metropolitan area, meaning that certain recreational property and land zoned for residential or mixed use, which is outside of these areas, will not be considered “residential property” and therefore not subject to the prohibitions set out in the Act.
The Regulations significantly expand the scope of the Act and appear to prohibit many transactions that would have little to do with the buying and selling of residential homes in Canada. Although there is an exception for publically traded corporations, it would not apply to private corporations, public or private mutual fund trusts or limited partnerships, joint ventures, and other entities that may have minority foreign equity ownership.
The broad expansion of “purchase” and the inclusion of lands with mixed zoning in the definition of residential property, significantly expand the prohibition in the Act. For example, it would be prohibited for a “Non-Canadian” to acquire any corporation that owns a vacant development property in any major population centre in Canada. This appears to be intentional as the federal government’s Regulatory Impact Analysis Statement comments that “[s]ome stakeholders raised questions or made proposals related to… the application of the prohibition to vacant land.” However, the Regulatory Impact Analysis Statement subsequently concluded that “[a] proposed exception for vacant land purchased for development purposes was considered but assessed as being too administratively complex.” It is unclear whether the broad scope of the words “which does not contain any habitable dwelling”, which could apply to commercial properties zoned for mixed use, was considered.
The legislation does not contain an exemption for investors from the United States, the European Union, the United Kingdom or any other of Canada’s major trade and investment partners thus raising the possibility of retaliation against Canadians considering residential property investments in other countries.
Notably, Canada’s most significant trade and investment agreements, including the Canada-United States-Mexico Agreement (CUSMA), the Canada-EU Comprehensive Economic and Trade Agreement (CETA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the Canada-United Kingdom Trade Continuity Agreement, as well as many of Canada’s bilateral investment treaties, contain broad investment protection obligations. These include national treatment which generally prohibits discriminating against investors on the basis of their nationality, i.e., Canada must provide to investors of its treaty partners treatment no less favourable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion and sale of investments, including those relating to real property. In addition to government-to-government dispute mechanisms, many of these treaties also contain investor-state dispute mechanisms that allow foreign investors to sue the Canadian government for damages arising out of the government’s breach of its investment obligations. The legislation may raise questions about Canada’s compliance with these international trade and investment agreements.
Given the significant uncertainty about the application of the Act and Regulations, it is strongly recommended that anyone who is potentially impacted seek legal advice immediately. The McCarthy Tétrault real property, and trade groups are available to assist parties across Canada and can be reached at the contacts below.
The Green Premium
The green premium is described as the higher price that sustainability-focused companies pay when renting or buying buildings with certified sustainability credentials that align with their values.There are market research and academic studies that show the presence of the green premium in various real estate markets around the world. A snapshot of some of green premium reported are:
- Knight Frank has found that in prime central London, offices with a BREEAM Excellent rating and BREEAM Very Good rating enjoy 10.5% and 10.1% sales premium respectively compared to equivalent unrated buildings;
- JLL has reported rental premiums for green certified Grade A offices across 11 cities in Asia.By way of example, in Hong Kong, lease premium ranges from 7% to 28% (the bottom of the range being the base level certification and the top of the range being the highest level certification);
- in London, in respect of development schemes completed between 2013 and 2017, those that have a BREEAM Outstanding/Excellent rating tended to show a higher pace of leasing and have lower vacancy rates (of 7% compared to 20% for those rated very good ) 24 months after completion;
- a higher level of certification generates a higher premium (but the relation is not linear); and
- a study reviewing empirical research carried out between 2013 and 2018 shows that buildings with green certification benefit from rental premium (up to 23%), increased occupancy (up to 17%) and sale price (up to 43%).
What makes up the premium?
Statistical analysis showing the evidence of the green premium does not identify the source of the premium or to what extent energy efficiency is important relative to other factors contributing to the premium. The studies compare the price of assets with certification standards rather than purely measuring the carbon dioxide emissions and what makes up the premium is complex and is likely to involve:
- energy cost savings (there is evidence that a 10% decrease in energy consumption leads to an increase in value of about 1% over and above the rent and value premium of a building); 
- building quality (buildings with higher standards are generally more modern/better equipped and attract a premium beyond the strict environmental impact);
- the owner/tenant taking into account occupation of a building with better environmental performance; and
- carbon price/offset impact (offset costs whether actual expenses or used in internal decision making by the investors).
Better understanding of what makes up the green premium in the future would also allow investors to cater to their approach and strategies.
As ESG measures become standard practice for the best assets, investors are becoming more inclined to consider the “brown discount” non-ESG compliant assets suffer, rather than the ‘green premium’ for better assets.
Buying green or turning green
With apparent financial rewards presented by the green premium in addition to pursuing their own environmental and sustainability goals and net zero targets, investors will focus on acquiring assets/buildings that already have some form of high sustainability rating and improving the sustainability performance of buildings already owned. RICS sustainability report 2022 states that the demand for green buildings is rising globally and demand in Europe is outpacing the other regions.The demand is likely to be greater than the pace of supply and therefore there will be competition for sustainable assets/buildings.
Over the next decade, it will be harder for the developers to justify demolition and new construction both in terms of ESG commitments and through new planning policy in the near future.The debates on and public enquiry into Marks & Spencer’s proposal to overhaul its flagship store in Marble Arch, London is a recent example illustrating the tensions between rebuilding and refurbishing. Creating more sustainable real estate through refurbishment and development will continue to be the higher risk and higher return area of the property market.
Examples of steps that can be taken to increase the energy efficiency of a building and improve its green credentials are use of renewable energy, metering, installing LED lighting, optimisation of building management systems (BMS), insulation to improve building thermodynamics, upgrades to heating and ventilation systems, window glazing and shading and reflective surfacing and measuring output in close collaboration between tenant, property manager, owner and investor.
Beyond such premiums and discounts, stricter regulation will adversely affect the older less energy efficient buildings. In the United Kingdom, by April 2023, every commercial property that is leased is required to have an EPC certificate of E or above and there are plans to increase such minimum requirement to C by 2027 and B by 2030. Buildings that do not meet such minimum requirements will not be lettable.
Sourcing energy from renewable sources works in tandem with minimising demand and increasing energy efficiency in a building, to reduce the carbon dioxide emissions of the building.In terms of renewable energy sources, on-site generation is considered as the greenest of the available options and on-site solar energy production is the most commonly reported on-site energy production for commercial real estate.
Three common models of on-site solar generation and their characteristics and benefits are set out in the table below:
Engie and Logos have established a Regional Renewable Energy Platform to provide solar generation and renewable energy options for LOGOS’ Asia Pacific portfolio. The first project under the partnership has been agreed with the global logistics leader, DHL, who has committed to a circa 5MW solar installation at its Singapore facility at LOGOS estate in Singapore; andDirect ownership model requires upfront capital and we will further discuss the financing options in the financing part of this series. Solar leasing and rooftop leasing often involves collaborations between property owners and energy providers. In addition to collaboration on a site-by-site basis, there have also been recent strategic partnerships. For example:
- SP Group is partnering AIMS APAC REIT (AA REIT) to install rooftop solar PV system across six of AA REIT’s industrial, logistics and warehouse properties in Singapore by December 2023.
Traditional real estate companies may also establish or purchase energy companies to provide their own solutions for onsite solar.Even if solar panels are not being installed for immediate use, newer developments are being built solar-ready.
We have set out below further insight into opportunities presented by the green premium and efforts to meet carbon targets in commercial real estate.
Less saturated markets
In comparison to the established markets, green certificates led to higher rental premium in emerging markets.Data by JLL also shows that the green premium is inversely correlated to the supply of green certified buildings. In Singapore, which has 90% of Grade A office stock green certified, provides a rental premium opportunity of 4% to 9%, whereas Seoul, which has 37% of stock is green certified, the rental premium is between 7% and 22%.Therefore opportunities to benefit from the green premium is greater in markets that have fewer certified buildings overall.
There is an early mover advantage as evidence shows that those buildings who adopt the green standards later do not enjoy the same rental and price premium as early movers (evidence shows that when the number of certificated buildings increases, the effect of certification to non-green buildings in the same neighbourhood decreases).
The green premium also exists at the portfolio level, which means overall greenness of a portfolio has added benefits. Based on studies conducted on US REITs in 2012, for an increase of 1% of the share of green properties within the portfolio of a REIT, the return on equity increases 7.39% to 7.92% for LEED-certified properties and by 0.66% for Energy Star-certified properties.
Environmental and sustainability regulations are expected to tighten and what is considered as an advantage today may be the norm a few years down the line. Furthermore, the certifications themselves are also evolving.Accordingly, investors may look to futureproof their asset and portfolios and acquire buildings/portfolios with the highest possible certification.
The studies cited above focus on the building and energy efficiency certification, however additional certifications may also be become important for the green premium in the future.
Following the Covid-19 pandemic, occupiers may focus on and demand health related attributes (including good air quality and ventilation, touch-free access, health amenities such as gyms and open spaces) and end-of-commute facilities such as bicycle parking and showers and there are additional certifications which buildings may opt for beyond energy and sustainability (e.g. certification by the International WELL Building Institute which certifies spaces that advance health and WiredScore which assesses digital connectivity).
For property companies that acquire older stock and carry out asset enhancement initiatives, improving sustainability of the buildings will be one of the key focus areas. The brown discount will provide such companies with acquisition opportunities.
M&A in energy efficiency services
Energy services and property management companies are carrying out bolt-on acquisitions to increase their offering in energy efficiency services. eEnergy plc, a net zero energy services provider, listed on AIM of the London Stock Exchange in January 2020 and has acquired Beond Group Limited, a renewable energy consulting and procurement business in December 2020 and UK energy consultancy Utility Team Trading in October 2021. Johnson Controls has also carried out an array of acquisitions to enhance its net zero service offering.
Consolidation of companies reporting ESG data
Companies today publish reports under multiple reporting frameworks.Due to a lack of standardisation of ESG reporting in the US, the ESG data reporting by companies tend to be inconsistent and thus ESG data and rating providers have played an important role as standard-bearers.Financial rating companies have looked to increase their ESG data capabilities by M&A in recent years.Moody acquired Vigeo Eiris, Four Twenty Seven Inc. and a minority stake in SynTao Green Finance (all in 2019). In 2020, Morningstar acquired Sustainalytics, which itself has acquired two targets in 2015.Further consolidation and acquisition of companies that undertake ESG reporting is expected.
This article has looked at the green premium and provided a snapshot of some of the transactional opportunities and activities relating to sustainability in the commercial real estate sector. The underlying factors that have fuelled such activities will continue to exist and increase. This would therefore provide a host of M&A opportunities for actors across the real estate industry in the near future and beyond.