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The Abortion (Safe Access Zones) (Northern Ireland) Bill was passed by the Northern Ireland Assembly on 24 March 2022. The Bill is primarily designed to protect the right of women to access abortion and associated sexual and reproductive health services. It prohibits anti-abortion protests and other specified behaviour within “safe access zones” around abortion clinics and related premises.

This reference concerns clause 5(2)(a) of the Bill, which makes it a criminal offence “to do an act in a safe access zone with the intent of, or reckless as to whether it has the effect of… influencing a protected person, whether directly or indirectly”. The persons protected by clause 5(2)(a) include patients, persons accompanying them, and staff who work at the premises where abortion services are provided.

Under the Northern Ireland Act 1998, the power of the Assembly to make legislation (or its “legislative competence”) is limited. A provision of a Bill is outside the Assembly’s legislative competence and therefore not law if it is incompatible with any of the rights protected by the European Convention on Human Rights (“the Convention”) (sections 6(1) and 6(2)(c)).

The Attorney General for Northern Ireland is concerned that, because clause 5(2)(a) of the Bill does not provide any defence of reasonable excuse, it disproportionately interferes with anti-abortion protesters’ rights to freedom of thought, conscience and religion, freedom of expression, and freedom of assembly. These rights are protected by articles 9, 10 and 11 of the Convention. The Attorney therefore asks the Supreme Court to decide whether the penal sanction with no provision for reasonable excuse created by clause 5(2)(a) of the Bill is outside the legislative competence of the Assembly because it involves a disproportionate interference with the article 9, 10 and 11 rights of those who seek to express opposition to the provision of abortion treatment services in Northern Ireland.

 

HELD: The Supreme Court unanimously holds that clause 5(2)(a) of the Bill is compatible with the Convention rights of those who seek to express their opposition to the provision of abortion treatment services in Northern Ireland. Accordingly, clause 5(2)(a) is within the legislative competence of the Assembly.

Before considering clause 5(2)(a) of the Bill, the judgment addresses a number of preliminary issues. First, the Court confirms that a provision of devolved legislation such as clause 5(2)(a) will only be outside legislative competence because it is incompatible with Convention rights if it would give rise to an unjustified interference with those rights in all or almost all cases.

Secondly, the Court considers questions arising from the cases of Director of Public Prosecutions v Ziegler [2021] UKSC 23 and Director of Public Prosecutions v Cuciurean [2022] EWHC 736 (Admin). It holds that, during a criminal trial, it is not always necessary to assess whether a conviction for an offence would be a proportionate interference with a particular defendant’s rights under articles 9, 10 and 11 of the Convention. The ingredients of an offence can in themselves ensure that a conviction will be compatible with those Convention rights. This may be the case even if the offence does not include a defence of lawful or reasonable excuse. The assessment of whether an interference with a Convention right is proportionate is not an exercise in fact-finding, but rather involves the application of a series of legal tests in a factual context. As a result, it does not necessarily need to be conducted by the body responsible for finding the facts at any trial.

 

The Court then turns to the question referred to it by the Attorney, namely, is clause 5(2)(a) outside the legislative competence of the Assembly because it is incompatible with anti-abortion protestors’ rights under articles 9, 10 and 11 of the Convention?

The Court holds that clause 5(2)(a) is compatible with the Convention rights of anti-abortion protestors and is therefore within the legislative competence of the Assembly. It recognises that – although not all anti–abortion protest activities are protected by the Convention – clause 5(2)(a) does restrict the exercise of protesters’ Convention rights. However, this restriction can be justified.

First, the restriction of the exercise of Convention rights is prescribed by law. Secondly, clause 5(2)(a) pursues a legitimate aim. It seeks to ensure that women have access to advice and treatment relating to the lawful termination of pregnancy under conditions which respect their privacy and dignity, thereby protecting public health. It is also designed to enable staff who work at abortion clinics and related premises to attend their place of work without being intimidated, harassed or abused. These aims fall within the qualifications in articles 9(2), 10(2) and 11(2) of the Convention, which permit the restriction of rights in order to prevent disorder, protect health and protect the rights and freedoms of others. Furthermore, the right to access health care in conditions of privacy and dignity, and the right to pursue employment, are protected by article 8 of the Convention. That right entails a positive obligation which requires states to enable pregnant women to exercise their right of access to lawful abortion services effectively, without being hindered or harmed by protesters in the ways described in the evidence before the Court.

Thirdly, the restrictions imposed by clause 5(2)(a) are proportionate. The aim of the clause is sufficiently important to justify restricting anti-abortion protestors’ rights under articles 9, 10 and 11, and the restrictions the clause imposes have a rational connection to that aim. Clause 5(2)(a) is not unduly restrictive: rather, it is rational and necessary if the Bill is to achieve its intended aims. A defence of reasonable excuse would render clause 5(2)(a) less effective. The clause itself strikes a fair balance between competing rights.

 

In reaching this conclusion, the Court has regard to the following considerations. First, the context is a highly sensitive one in which the protection of the private lives and autonomy of women is of particular importance. Secondly, women who wish to access lawful abortion services have a reasonable expectation of being able to do so without being confronted by protest activity designed to challenge and diminish their autonomy and undermine their resolve. Thirdly, the Bill only prevents anti–abortion protestors from exercising their rights under articles 9, 10 and 11 of the Convention within designated safe access zones. They are free to protest anywhere else they please. Fourthly, the women and staff protected by clause 5(2)(a) are a captive audience who are compelled to witness anti–abortion activity that is unwelcome and intrusive when they visit premises where abortion services are provided. Fifthly, the Bill is intended to implement the UK’s obligations under the Convention on the Elimination of All Forms of Discrimination against Women. Sixthly, the maximum penalty for an offence under clause 5 is a fine of up to £500. Seventhly, in a sensitive context like this one, states have a wide margin of appreciation in situations where it is necessary to strike a balance between competing Convention rights.

For all of these reasons, the Court is satisfied that the restrictions imposed by clause 5(2)(a) of the Bill are justifiable. They are required to protect the rights of women seeking treatment or advice, and are also in the interests of the wider community, including other patients and staff of clinics and hospitals. A conviction under clause 5(2)(a) will not therefore interfere disproportionately with a protestor’s rights under articles 9, 10 and 11 of the Convention. Accordingly, clause 5(2)(a) is within the Assembly’s legislative competence.

 

For the judgment, please see:

Judgment (PDF)

For the Press Summary, please see:

Press summary (HTML version)

Watch hearing

19 July 2022    Morning session    Afternoon session

20 July 2022    Morning session    Afternoon session

In this post Aleksandra Gajewska, an Associate, and David McKie, a Partner at CMS, preview the decision awaited from the UK Supreme Court in the matter of Shanghai Shipyard Co. Ltd v Reignwood International Investment (Group) Company Ltd.

On 8 December 2022, the Supreme Court will hear the appeal in Shanghai Shipyard Co. Ltd v Reignwood International Investment (Group) Company Ltd. This will be a significant decision for those involved in construction projects and their financing and should clarify the legal principles applicable to the interpretation and effect of guarantees of payments or refunds due under shipbuilding, onshore and offshore construction contracts.

Factual background

Shanghai Shipyard Co. Ltd (the “Shanghai Shipyard”) is a company operating a shipyard in Shanghai, providing shipbuilding and repairing services. Reignwood International Investment (Group) Company Ltd (“Reignwood”) is an international multi-industrial company offering investment services and investing in a number of industries.

By a shipbuilding contract (the “Contract”) Shanghai Shipyard agreed to build an offshore drillship, “Tiger 1” (the “Vessel”) for Reignwood for US$200 million.

In due course, Reignwood was replaced as the buyer by a single purpose vehicle, Opus Tiger 1 Pte. Ltd (“OT1”). The price was to be paid in three instalments, with the final instalment of US$170 million due upon delivery (the “Final Instalment”). Reignwood entered into an “Irrevocable Payment Guarantee” to support OT1’s obligation to pay the Final Instalment in favour of Shanghai Shipyard (the “Guarantee”).

The key provisions of the Guarantee were as follows:

Clause 1 of the Guarantee provided that:

“In consideration of your entering into the Shipbuilding Contract…[Reignwood] hereby IRREVOCABLY, ABSOLUTELY and UNCONDITIONALLY guarantee in accordance with the terms hereof, as the primary obligor and not merely as the surety, the due and punctual payment by the OWNER of the Final Instalment of the Contract Price amounting to a total sum of United States Dollar US$170,000,000 as specified in (2) below…”. (Emphasis added.)

Clause 4 of the Guarantee provided that in the event that OT1 fails to punctually pay the Final Instalment and:

“any such default continues for a period of fifteen (15) days, then, upon receipt by us of your first written demand, we shall immediately pay to you or your assignee all unpaid Final instalment, together with the interest as specified in paragraph. (3) hereof, without requesting you to take any or further action, procedure or step against the Owner or with respect to any other security which you may hold”.

Clause 4 provided that in the event of any dispute between OT1 and Shanghai Shipyard and if such dispute is submitted to arbitration (in accordance with Clause 17 of the Contract), Reignwood:

 “shall be entitled to withhold and defer payment until the arbitration award is published”

and

“shall not be obligated to make any payment to [Shanghai Shipyard] unless the arbitration award orders [OT1] to pay the Final Instalment”.

Clause 7 further provided that:

Reignwood’s “obligations under this guarantee shall not be affected or prejudiced by: (a) any dispute between [Shanghai Shipyard and OT1] under the Contract…”.

On 12 December 2016, Shanghai Shipyard gave notice of completion of the Vessel to OT1, and on 11 January 2017, Shanghai Shipyard made a demand to OT1 for the Final Instalment and other sums allegedly due under the Contract. Given that the sums due had not been paid, on 23 May 2017 Shanghai Shipyard made a demand of Reignwood under the Guarantee for payment of the Final Instalment.

At some stage OT1 contended that the Vessel contained a number of major and critical defects and a dispute arose between Shanghai Shipyard and OT1 as to whether the Vessel was in a deliverable condition. On 10 December 2018, Reignwood commenced proceedings in the Singapore court, seeking leave to commence an arbitration against Shanghai Shipyard, in the name of OT1. The arbitration proceedings were eventually commenced on 3 June 2019.

Meanwhile, Shanghai Shipyard commenced the proceedings in the Commercial Court against Reignwood under the Guarantee.

Decision of the Commercial Court

The Commercial Court had to decide the following issues (as preliminary issues).

Firstly, was the Guarantee:

a demand guarantee, such that, subject to issue 2 below, Reignwood’s liability arose upon (and by reason of) a demand, regardless of OT1’s liability under the terms of the Contract; or

a “see to it” guarantee such that Reignwood’s liability arose only if OT1 was liable to pay the Final Instalment under the terms of the Contract?

Secondly, whether Reignwood, as a guarantor, could refuse payment under Clause 4 of the Guarantee pending the outcome of an arbitration between Shanghai Shipyard and OT1 concerning OT1’s liability to pay, and Shanghai Shipyard’s entitlement to claim, the Final Instalment under the terms of the Contract.

The Commercial Court (Knowles J) determined both issues in favour of Reignwood. It was held that: (1) the Guarantee was a “see to it” guarantee; and (2) in any event, Clause 4 was engaged by the commencement of the arbitration, notwithstanding that it had commenced after the date of demand, such that Reignwood was entitled to refuse payment pending the outcome of the arbitration.

Shanghai Shipyard appealed the Commercial Court decision.

Decision of the Court of Appeal

The Court of Appeal considered the same two issues and found for Shanghai Shipyard.

The Court of Appeal disagreed with the Commercial Court on the construction of the Guarantee and found that: (1) the Guarantee was a demand guarantee; and (2) Shanghai Shipyard was entitled to payment under the Guarantee, given that it made a demand prior to the arbitration being commenced.

With regard to the first issue, in reaching its decision, the Court of Appeal commented extensively on the differences between a demand guarantee and a “see to it” guarantee (or a surety guarantee). In particular:

The Court of Appeal restated that a “see to it” guarantee creates an independent, primary liability of the guarantor upon the obligor’s default. A demand guarantee, in turn, is contingent upon and arises by reason of the demand (without the beneficiary having to establish a liability of the obligor). In case of any dispute as to the obligee’s entitlement, a demand guarantee provides that the guarantor must “pay now and argue later”.

The Court of Appeal further emphasized that guarantees should be interpreted in accordance with normal principles of construction and no particular regard should be given to the identity of the guarantor, such that similarly worded guarantees shall be interpreted in the same manner, regardless of whether they are issued by a bank, or a parent company. The court highlighted the risk in over-reliance on preconceptions or presumptions. In particular, the court considered that “Paget’s Presumption” (derived from Paget’s Law of Banking (15th edition)), approved by the Court of Appeal in Wuhan Guoyo Logistics Group Co Ltd v. Emporiki Bank of Greece SA [2012] EWCA Civ 1629, was not of any real assistance. The authors of Paget were attempting to provide a succinct statement of guidance based on previous case law, and wrote that an instrument will almost always be construed as a demand guarantee if it: (a) relates to an underlying transaction between the parties in different jurisdictions; (b) is issued by a bank; (c) contains an undertaking to pay “on demand”; and (d) does not contain clauses excluding or limiting the defences available to a guarantor.

The court also cautioned against overreliance on previously decided cases regarding instruments that appear to be similarly worded. The court noted that such precedents may only be applied if both (a) the words used therein “taken as a whole”; and (b) the contractual context, are materially identical.

The court considered that a combination of the following language was critical in making this a demand guarantee:

The capitalised words “ABSOLUTELY and UNCONDITIONALLY” which in the court’s view would convey to a businessman that the obligations were not conditional on the liability of OT1.
The words “as the primary obligor and not merely as the surety”, which expressly state that the instrument is not merely a surety guarantee.
The language contained in Clause 4, including that “upon receipt by us of your first written demand, we shall immediately pay to you”, which indicates that: (a) a payment is to be made against a demand (which is a characteristic of a demand guarantee); and (b) it is to be made immediately without a need for a prior assessment of entitlement.

Taking into account the factors set out above, based on the construction of the Guarantee as a whole, the Court of Appeal decided in favour of the Shanghai Shipyard that this was a demand guarantee.

With regard to the second issue, the Court of Appeal noted that Clause 4 of the Guarantee defined the circumstances in which the demand guarantee ceases to be payable on demand, and instead, becomes payable against an arbitration award. Based on the natural meaning of the words in Clause 4, the guarantor is “entitled to withhold or defer payment” when a dispute is submitted to arbitration. However, this was only the case if the arbitration was commenced prior to a valid demand being made. This implied by Clause 4 (which provides that if a “default continues for a period of fifteen (15) days, then, upon receipt…of…first written demand”) that a right to payment under the Guarantee is “immediately” triggered. The court concluded that to divest a party of an accrued right would require clear language and such language was not contained in the proviso in Clause 4.

The 15-day timeframe to commence an arbitration was not uncommercially short and was intended to protect cash flow.

Reignwood appealed to the Supreme Court.

Comment

The Supreme Court’s judgment is eagerly anticipated. In simple terms, the Supreme Court has to decide whether on its language the Guarantee was a “demand” guarantee or a “see to it” (or surety) guarantee and if it is a demand guarantee, whether the obligation is a pay now, sue later one. These two issues of law often arise in practice and are fundamental to the efficacy of performance and refund guarantees which are used in many construction projects, not just shipbuilding. There is now some difference of opinion at the Court of Appeal level between the judgments in Shanghai Shipyard Co. Ltd v Reignwood International Investment (Group) Company Ltd and Wuhan Guoyo Logistics Group Co Ltd v. Emporiki Bank of Greece SA so it is hoped that the Supreme Court’s decision will provide further guidance as to the principles to be applied with regard to the construction of guarantees and the appropriate use (if any) of presumptions in this process.

On Wednesday 7th December the Supreme Court will hand down judgment in REFERENCE by the Attorney General for Northern Ireland – Abortion Services (Safe Access Zones) (Northern Ireland) Bill [2022] UKSC 32. This will consider the issue ‘Is clause 5(2)(a) of the Abortion Services (Safe Access Zones) (Northern Ireland) Bill outside the legislative competence of the Northern Ireland Assembly because it disproportionately interferes with the rights of persons who wish to express their opposition to the provision of abortion treatment services in Northern Ireland?’.

Later on Wednesday 7th December the Court will hear the case of R (on the application of Day) v Shropshire Council, on appeal from [2020] EWCA Civ 1751. This appeal concerns the following two questions: (1) When a local authority sells land which is subject to a statutory trust for public recreational purposes without complying with the relevant statutory requirements, does that trust continue or end? In either case, what are the legal implications for the authority and the buyer? (2) Are the existence of any (former) statutory trust and public recreation rights material considerations that need to be taken into account in granting planning permission? This will take place at 10:30am in Courtroom Two.

On Thursday 8th December the Court will hear the case of Aviva Investors Ground Rent GP Ltd and another v Williams and others, on appeal from [2021] EWCA Civ 21. The court will consider the extent to which a provision providing that the landlord may reasonably determine the tenant’s share of service charges in a residential lease is invalidated or affected by section 27A (6) of the Landlord and Tenant Act 1985. This will take place at 10:30am in Courtroom Two.

 

The following Supreme Court judgments remain outstanding: (As of 9/12/22)

The Law Debenture Trust Corporation plc v Ukraine (Represented by the Minister of Finance of Ukraine acting upon the instructions of the Cabinet of Ministers of Ukraine) Nos. 2 and 3, heard 9-12 December 2019
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
Fearn and others v Board of Trustees of the Tate Gallery heard 7th December 2021
Stanford International Bank Ltd (in liquidation) v HSBC Bank PLC, heard 19th January 2022
Canada Square Operations Ltd v Potter, heard 14th June 2022
DB Symmetry Ltd and another v Swindon Borough Council, heard 12th July 2022.
R (on the application of VIP Communications Ltd (In Liquidation)) v Secretary of State for the Home Department, heard 4th October 2022
McCue v Glasgow City Council, heard 18th October 2022
Unger and another (in substitution for Hasan) v Ul-Hasan (deceased) and another, heard 20th October 2022
In the matter of an application by Rosaleen Dalton for Judicial Review (Northern Ireland), heard 26th October 2022.
Brake and another v Chedington Court Estate Ltd, heard 1st November 2022
Barton and others v Morris and another in place of Gwyn–Jones, heard 3rd November 2022.
Sara & Hossein Asset Holdings Ltd (a company incorporated in the British Virgin Islands) v Blacks Outdoor Retail Ltd, heard 8th November 2022
R (on the application of Pearce and another) v Parole Board of England and Wales, heard 9th November 2022
News Corp UK & Ireland Ltd v Commissioners for His Majesty’s Revenue and Customs, heard 22nd November 2022
R (on the application of Maguire) v His Majesty’s Senior Coroner for Blackpool & Fylde and another, heard 22nd November 2022.
In the matter of an application by James Hugh Allister and others for Judicial Review  (Northern Ireland), In the matter of an application by Clifford Peoples for Judicial Review (Northern Ireland), heard 30th November – 1st December 2022
R (on the application of Day) v Shropshire Council, heard 7th December 2022.
Aviva Investors Ground Rent GP Ltd and another v Williams and others, heard 8th December 2022

 

 

 

 

 

 

 

 

 

In this post, Sophie Campbell, an Associate in the litigation team at CMS, previews the decision awaited from the Supreme Court in Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd.

Background

Blacks Outdoor Retail Ltd (“B”) was the tenant of commercial premises in Liverpool. B had leased the premises since 2012 and in 2016, Sara & Hossein Asset Holdings Ltd (“S&H”) was assigned the lease.

The case concerned two leases and the service charge provisions therein. The Supreme Court had to consider whether the construction of the provisions and whether S&H’s service charge certificate was payable by B and conclusive.

The Leases

Both leases included identical provisions in respect of the service charge owed by B to S&H. The relevant provisions of the lease were contained in schedule 6 and provided that:

“1. There shall be calculated by the Landlord as soon as practicable after the 31st day of December in each year the total reasonable and proper cost to the Landlord during the calendar year ending on such 31st day of December of the services and expenses specified in Part II of this Schedule (excluding costs and expenses met by the insurers under the policy of insurance effected by the Landlord hereinbefore mentioned)

2. The further rent payable by the Tenant shall be a sum equal to a fair and reasonable proportion of such total cost of the service [sic] and expenses specified in Part II of this Schedule and in the event of the Term commencing or determining during the course of the calendar year in question a corresponding proportion of such sum

3. The Landlord shall on each occasion furnish to the Tenant as soon as practicable after such total cost and the sum payable by the Tenant shall have been ascertained a certificate as to the amount of the total cost and the sum payable by the Tenant and in the absence of manifest or mathematical error or fraud such certificate shall be conclusive

6. The contribution payable by the Tenant of the total costs of the services and expenses incurred by the Landlord hereunder shall be the proportion which the net internal area of the Demised Premises bears to the net internal area of the aggregate of all areas of the Building which are let or intend to be let and any dispute between the parties as to the proportion shall be determined by Expert Determination.”

S&H served a service charge certificate on B in January 2019 for £400,000 in terms of paragraph 3 of schedule 6. This was comparatively higher than the previous service charge certificate that S&H had served on B. The previous certificate had only been for £55,000. Proceedings were then raised against B in April 2019 for unpaid service charge for the years 2017 to 2018 and 2018 to 2019.

Following this, B served a defence and counterclaim on S&H setting out that some of the works included in the service charge certificate were unnecessary. B also claimed that the included works did not fit the definition of the repair works as set out in the repairing covenants of the lease. The counterclaim further sought to set-off liability by demonstrating that S&H had failed to carry out the works with reasonable speed and failed to remove scaffolding after the works were completed.

Thereafter, S&H applied for summary judgment arguing that the proper construction of the lease meant that the service charge certificates issued by it were conclusive, and that as a result, B was unable to rely on the defence it sought to advance.

At first instance, Deputy Master Bartlett dismissed S&H’s application. S&H then appealed.

High Court’s decision

In the High Court, Kelyn Bacon KC (now Bacon J) was persuaded by B’s counsel. Kelyn Bacon KC found that, in respect of the terms of paragraph 3 of schedule 6, the certificate was only conclusive as to the amount of the service charge incurred (absent misrepresentation, error or fraud). Whether or not the cost was something that fell within the scope of the service charge provisions under the lease remained open for determination and the certificate was not conclusive in that respect.

The High Court’s decision was influenced by the terms of paragraph 6 of schedule 6 and the reference to expert determination. Kelyn Bacon KC held that the existence of the dispute resolution mechanism was incompatible with the view that the service charge certificate prepared by the landlord was conclusive.

Court of Appeal’s decision

The Court of Appeal disagreed with the approach of Kelyn Bacon KC. David Richards LJ was not persuaded by the view that paragraph 3 of schedule 6 comprised of the two distinct elements. Instead, the Court of Appeal took the view that based on the ordinary meaning of the language used in schedule 6, those two elements were unable to be separated.

The Court of Appeal found that the High Court had been influenced by the idea that if the service charge certificate was found to be conclusive, the landlord would be the “judge in his own cause.” In recognising this, the Court of Appeal stated that a clause such as this would be one in which a tenant should consider carefully before entering into. However, with reference to the decision in Arnold v Britton [2015] UKSC 36, the court considered that it is not its job to rescue a tenant from an “imprudent term” in a lease.

In considering the wording of paragraph 3 of schedule 6, the court confirmed that it could understand why a landlord might be inclined to include such a term in a lease, and for it to be treated as conclusive. This would avoid long and drawn-out disputes over whether works included in the service charge certificate were those which the tenant was responsible for.

Ultimately, the Court of Appeal disagreed with the approach adopted by the High Court and found that S&H were entitled to summary judgment. The Court of Appeal was not asked to opine on whether B’s’ counterclaim could proceed considering its decision. David Richards LJ remitted the counterclaim to the Chancery Division.

Comment

It remains to be seen whether the Supreme Court will be influenced by David Richards LJ’s construction of schedule 6 of the lease, with judgment expected in the first few months of next year. But, given how common these types of clauses are in commercial leases, both landlords and tenants will be readily awaiting the decision of the Supreme Court.

On Wednesday 30th November and Thursday 1st December, the Court will hear the conjoined appeals In the matter of an application by James Hugh Allister and others for Judicial Review  (Northern Ireland), In the matter of an application by Clifford Peoples for Judicial Review (Northern Ireland). In these conjoined appeals, the appellants challenge the lawfulness and constitutionality of the respondents’ decisions and actions in the negotiation, implementation, and operation of the Northern Ireland Protocol. The issues raised concern the constitutional settlement of the UK, the operation and interpretation of the Belfast Agreement, and the effect of the Withdrawal Agreement between the UK and the EU and the Protocol in domestic law. The judgment on appeal is [2022] NICA 15.  

The following Supreme Court judgments remain outstanding: (As of 2/12/22)

The Law Debenture Trust Corporation plc v Ukraine (Represented by the Minister of Finance of Ukraine acting upon the instructions of the Cabinet of Ministers of Ukraine) Nos. 2 and 3, heard 9-12 December 2019
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
Fearn and others v Board of Trustees of the Tate Gallery heard 7th December 2021
Stanford International Bank Ltd (in liquidation) v HSBC Bank PLC, heard 19th January 2022
Canada Square Operations Ltd v Potter, heard 14th June 2022
DB Symmetry Ltd and another v Swindon Borough Council, heard 12th July 2022.
Reference by the Attorney General for Northern Ireland – Abortion Services (Safe Access Zones) (Northern Ireland) Bill, heard 19th July 2022
R (on the application of VIP Communications Ltd (In Liquidation)) v Secretary of State for the Home Department, heard 4th October 2022
McCue v Glasgow City Council, heard 18th October 2022
Unger and another (in substitution for Hasan) v Ul-Hasan (deceased) and another, heard 20th October 2022
In the matter of an application by Rosaleen Dalton for Judicial Review (Northern Ireland), heard 26th October 2022.
Brake and another v Chedington Court Estate Ltd, heard 1st November 2022
Barton and others v Morris and another in place of Gwyn–Jones, heard 3rd November 2022.
Sara & Hossein Asset Holdings Ltd (a company incorporated in the British Virgin Islands) v Blacks Outdoor Retail Ltd, heard 8th November 2022
R (on the application of Pearce and another) v Parole Board of England and Wales, heard 9th November 2022
News Corp UK & Ireland Ltd v Commissioners for His Majesty’s Revenue and Customs, heard 22nd November 2022
R (on the application of Maguire) v His Majesty’s Senior Coroner for Blackpool & Fylde and another, heard 22nd November 2022.
In the matter of an application by James Hugh Allister and others for Judicial Review  (Northern Ireland), In the matter of an application by Clifford Peoples for Judicial Review (Northern Ireland), heard 30 November – 1 December

In this post, Sarah Collins, Senior Associate in the Real Estate team at CMS, previews the case of Aviva Investors Ground Rent GP Ltd and Anor v Williams and Ors, which is scheduled to be heard on 8 December 2022.

Factual Background

The respondents in this appeal (Aviva) own the freehold of a block of flats in Southsea (the “Block”). The appellants each own a flat in the Block on a long lease. By virtue of the leases, Aviva are required to maintain the structure and common parts of the Block, whilst the flat owners are required to contribute towards the cost of the same via the service charge mechanism.

Each lease sets out the proportion of the maintenance costs that the leaseholder should pay, which are expressed as a percentage or such other proportion “as the Landlord may otherwise reasonably determine”.

Section 27A(6) of the Landlord and Tenant Act 1985 (the “1985 Act”) provides:

“(6) An agreement by the tenant of a dwelling (other than a post-dispute arbitration agreement) is void in so far as it purports to provide for a determination—

(a) in a particular
(b) on particular evidence

of any question which may be the subject of an application under subsection (1) or (3).”

The matters at subsections (1) and (3) relate to the Tribunal’s jurisdiction to determine whether a service charge is payable and its amount.

In an earlier decision of the Upper Tribunal (Windermere Marina Village Ltd v Wild [2014] UKUT 163 (LC)), it was held that it is within the jurisdiction of the First-tier Tribunal (the “FTT”) to determine apportionments of expenditure under section 27A(1) of the 1985 Act, such that lease clauses purporting to allow a landlord or other party to determine the service charge proportion is void. This decision was subsequently approved by the Court of Appeal in Oliver v Sheffield City Council [2017] EWCA Civ 225.

Section 27A(4) of the 1985 Act prevents a party from applying to the appropriate Tribunal in circumstances where the subject matter has been agreed. Given a fixed percentage is written into the lease, it follows that the percentage has been agreed and accordingly the FTT has no jurisdiction to determine it. Aviva v Williams, however, deals with a hybrid clause such that it expresses a percentage (which would deprive the FTT of jurisdiction), but also allows for the landlord to determine a proportion (which only the FTT has jurisdiction to decide). Aviva have been demanding service charges in proportions which differ to the fixed proportions for several years.

The question before the Supreme Court is therefore the correct interpretation of the clause containing the proportion. Is the effect of section 27A(6) of the 1985 Act to remove the variable element (resulting in the fixed percentages being the only proportions that can be applied) or is it only the part relating to the landlord’s determination that becomes void (resulting in the FTT having jurisdiction to vary the proportions in place of Aviva)?

Appellate History

At first instance, the FTT held that it retained a jurisdiction to determine the proportions, whilst the Upper Tribunal determined that the provision for landlord determination was removed in its entirety such that the fixed percentages needed to be charged.

The Decision of the Court of Appeal

The Court of Appeal agreed with the FTT. Having considered Windermere and subsequent cases, it reiterated that section 27A(6) of the 1985 Act is concerned “with no more than removing the landlord’s role (or that of another third party) from the decision making process, in order not to deprive the FTT of jurisdiction under Section 27A(1)”. The statutory objective is satisfied if the landlord’s role is transferred to the FTT (as opposed to eliminating the clause completely). The Court of Appeal also expressed a view that there is no issue in principle in retaining a flexible approach to service charge proportions, providing the decision as to apportionments is taken by the FTT.

It making its decision, the Court of Appeal reiterated that the Upper Tribunal’s decision had the effect of depriving the FTT of all jurisdiction over the apportionment of service charges, which was not what section 27A(6) of the 1985 Act had intended to achieve.

Comment

When granted, most residential flat leases are for a term in excess of 99 years, some as long as 999 years. It is therefore feasible that during the term, circumstances may change where some or all parties would benefit from a reallocation of service charge proportions. With the popularity of rooftop development, for example, where additional flats are built on top of those which originally existed, it would seem fair in the circumstances that additional owners contribute to the service charges and thus reduce the existing owners contributions. If the Supreme Court allows the leaseholders’ appeal, the flexibility to reallocate contributions will be removed from similar leases. There are only limited circumstances where proportions could otherwise be varied outside of the lease terms (for example, if the percentages do not add up to 100% an application can be made under the Landlord and Tenant Act 1987), meaning change of circumstances cannot easily be accounted for.

A degree of flexibility is a useful tool in addressing any imbalance caused by a change of circumstances. Of course, however, there are circumstances where leaseholders may not agree with a reallocation and section 27A(6) of the 1985 Act and its subsequent interpretation in Windermere, contains useful protection for those leaseholders. Aviva v Williams will confirm whether a de facto ability to vary the service charge proportions can still be taken advantage of by landlords or leaseholders alike (subject to determination by the FTT), or whether the fixed percentages agreed, sometimes many years ago, are to be retained.

Whilst the leaseholders in this case are arguing in favour of a fixed percentage, there will of course be situations where leaseholders are in favour of a reallocation (for example, if it results in a reduction of their charges). Either way, clarification from the Supreme Court will be welcomed.

The Scottish Government drafted a Scottish Independence Referendum Bill which makes provision for a referendum on the question, “Should Scotland be an independent country?”. Under the Scotland Act 1998 (“the Scotland Act”), the power of the Scottish Parliament to make legislation (or its “legislative competence”) is limited. A provision of a Bill will be outside the legislative competence of the Scottish Parliament and therefore not law if it relates to the matters which have been reserved to the United Kingdom Parliament in Westminster (sections 29(1) and (2)(b)). These reserved matters include “the Union of the Kingdoms of Scotland and England” and “the Parliament of the United Kingdom” (Schedule 5, paragraphs 1(b) and (c)).

In this reference, the Lord Advocate (the senior law officer of the Scottish Government) asks the Court whether the provision of the proposed Bill which provides for a referendum on Scottish independence would be outside the legislative competence of the Scottish Parliament because it relates to either or both of the reserved matters of the Union or the United Kingdom Parliament. This is a legal question about the Scottish Parliament’s power to make legislation under the Scotland Act. The Court is not being and could not be asked to give a view on the distinct political question of whether Scotland should become independent from the rest of the United Kingdom.

The powers of the Scottish Parliament were not in issue during the 2014 referendum on Scottish independence. This is because, in 2013, an Order in Council under section 30(2) of the Scotland Act modified the definition of reserved matters to enable the Scottish Parliament to pass the 2014 referendum legislation. The United Kingdom Government is currently unwilling to agree to the making of another Order in Council to facilitate another referendum on Scottish independence.

The Lord Advocate’s reference was made under paragraph 34 of Schedule 6 to the Scotland Act. The Advocate General for Scotland (the Scottish law officer of the United Kingdom Government) raises two preliminary issues, namely, whether the Court can and should answer the reference. There are consequently three questions which the Court must consider. First, is the question referred by the Lord Advocate a “devolution issue”? If not, it cannot be the subject of a reference under paragraph 34 of Schedule 6, which would mean that the Court does not have jurisdiction to decide it. Secondly, even if it is a devolution issue, should the Court exercise its discretion to decline to accept the reference? Thirdly, if the Court accepts the reference, how should it answer the question the Lord Advocate has referred to it?

 

HELD: The Supreme Court unanimously dismissed this appeal.

In a unanimous judgment, the Court answers the questions before it as follows. First, the question referred by the Advocate General is a devolution issue, which means that that the Court has jurisdiction to decide it. Secondly, the Court should accept the reference. Thirdly, the provision of the proposed Bill which makes provision for a referendum on the question, “Should Scotland be an independent country?” does relate to matters which have been reserved to the Parliament of the United Kingdom under the Scotland Act. In particular, it relates to the reserved matters of the Union of the Kingdoms of Scotland and England and the Parliament of the United Kingdom. Accordingly, in the absence of any modification of the definition of reserved matters (by an Order in Council or otherwise), the Scottish Parliament does not have the power to legislate for a referendum on Scottish independence.

Issue 1: Is the question referred by the Lord Advocate a devolution issue?

Only a “devolution issue” can be referred to the Court under paragraph 34 of Schedule 6 to the Scotland Act. The term “devolution issue” is defined by paragraph 1 of Schedule 6. Under paragraph 1(f), it includes “any other question arising by virtue of this Act about reserved matters”. The Court concludes that the question referred by the Lord Advocate falls within this description and is therefore a devolution issue which the Court has jurisdiction to decide.

In reaching this conclusion, the Court holds, first, that the question referred is one “arising by virtue of” the Scotland Act because it is a question which arises under section 31(1) for the person wishing to introduce the Bill into the Scottish Parliament. That person is required, on or before the Bill’s introduction, to give a statement confirming that, in their view, the provisions of the Bill would be within the legislative competence of the Scottish Parliament. Secondly, the existence of the separate scheme for the scrutiny of Bills for legislative competence by the Court in section 33 of the Scotland Act does not prevent a reference from being made under paragraph 34 of Schedule 6 in relation to a proposed Bill, before it is introduced. Thirdly, the terms of paragraph 1(f) of Schedule 6 are very wide. They are intended to sweep up any questions arising under the Scotland Act about reserved matters which are not covered elsewhere. Fourthly, it is consistent with the rule of law and with the intention of the Scotland Act that the Lord Advocate should be able to obtain an authoritative judicial decision on the legislative competence of the Scottish Parliament in advance of the introduction of a Bill.

Issue 2: Should the Court decline to accept the Lord Advocate’s reference?

The Court concludes that it should accept the reference. The reference has been made in order to obtain an authoritative ruling on a question of law which has already arisen as a matter of public importance. The Court’s answer will determine whether the proposed Bill is introduced into the Scottish Parliament. The reference is not therefore hypothetical, academic or premature [53].

Issue 3: Does the proposed Bill relate to reserved matters?

The question whether the provision of the proposed Bill which provides for a referendum on Scottish independence would relate to matters which have been reserved to the United Kingdom Parliament under the Scotland Act (section 29(2)(b)) is to be determined by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances (section 29(3).

A provision will relate to a reserved matter if it has something more than a loose or consequential connection with it. The purpose and effect of the provision may be derived from a consideration of both the purpose of those introducing the legislation and the objective effect of its terms. Its effect is not restricted to its legal consequences.

Applying this test, the reserved matters which are relevant here are “the Union of the Kingdoms of Scotland and England” and “the Parliament of the United Kingdom” (Schedule 5, paragraphs 1(b) and (c)). The latter reservation includes the sovereignty of the United Kingdom Parliament. The purpose of the proposed Bill is to hold a lawful referendum on the question of whether Scotland should become an independent country, that is, on ending the Union and the sovereignty of the United Kingdom Parliament over Scotland. The Bill’s effect will not be confined to the holding of the referendum. Even if the referendum has no immediate legal consequences, it would be a political event with important political consequences. It is therefore clear that the proposed Bill has more than a loose or consequential connection with the reserved matters of the Union of Scotland and England and the sovereignty of the United Kingdom Parliament. Accordingly, the proposed Bill relates to reserved matters and is outside the legislative competence of the Scottish Parliament.

The Scottish National Party (intervening) made further written submissions founded on the right to self–determination in international law and the principle of legality in domestic law. The Court rejects these submissions, holding that the right to self–determination is not in issue here and does not require a narrow reading of “relates to” in section 29(2)(b) so as to limit the scope of the matters reserved to the United Kingdom Parliament under the Scotland Act. Similarly, the allocation of powers between the United Kingdom and Scotland under the Scotland Act does not infringe the principle of legality.

 

For the judgment, please see:

Judgment (PDF)

For the Press Summary, please see:

Press summary (HTML version)

Watch hearing

11 Oct 2022 Morning session Afternoon session

12 Oct 2022 Morning session Afternoon session

Hearings in the Supreme Court are now shown live on the Court’s website.

The Court will be hearing two cases this week, starting on Tuesday 22nd until Wednesday 23rd:

News Corp UK & Ireland Ltd v Commissioners for His Majesty’s Revenue and Customs – This case considers whether the Court of Appeal erred in finding that News UK’s supplies of digital issues of The Times, The Sunday Times and The Sun were not supplies of “newspapers” within the meaning of the Value Added Tax Act 1994 (VATA) such that they could not be zero–rated for VAT. On appeal from [2021] EWCA Civ 91.

R (on the application of Maguire) v His Majesty’s Senior Coroner for Blackpool & Fylde and another – Whether the death of a disabled woman who was deprived of her liberty engaged the state’s obligation to protect life under Article 2 of the European Convention on Human Rights, therefore requiring an inquest jury to make findings regarding the circumstances by which the death occurred. On appeal from [2020] EWCA Civ 738.

On Wednesday 23rd November, the Court will hand down judgment in the Reference by the Lord Advocate of devolution issues under paragraph 34 of Schedule 6 to the Scotland Act 1998 [2022] UKSC 31. The Court was asked to consider a number of issues relating to the proposed Scotland Independence Reference Bill, starting with whether it had the jurisdiction to decide the reference at all.

 

The following Supreme Court judgments remain outstanding: (As of 23/11/22)

The Law Debenture Trust Corporation plc v Ukraine (Represented by the Minister of Finance of Ukraine acting upon the instructions of the Cabinet of Ministers of Ukraine) Nos. 2 and 3, heard 9-12 December 2019
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
Fearn and others v Board of Trustees of the Tate Gallery heard 7th December 2021
Stanford International Bank Ltd (in liquidation) v HSBC Bank PLC, heard 19th January 2022
Canada Square Operations Ltd v Potter, heard 14th June 2022
DB Symmetry Ltd and another v Swindon Borough Council, heard 12th July 2022.
Reference by the Attorney General for Northern Ireland – Abortion Services (Safe Access Zones) (Northern Ireland) Bill, heard 19th July 2022
R (on the application of VIP Communications Ltd (In Liquidation)) v Secretary of State for the Home Department, heard 4th October 2022
McCue v Glasgow City Council, heard 18th October 2022
Unger and another (in substitution for Hasan) v Ul-Hasan (deceased) and another, heard 20th October 2022
In the matter of an application by Rosaleen Dalton for Judicial Review (Northern Ireland), heard 26th October 2022.
Brake and another v Chedington Court Estate Ltd, heard 1st November 2022
Barton and others v Morris and another in place of Gwyn–Jones, heard 3rd November 2022.
Sara & Hossein Asset Holdings Ltd (a company incorporated in the British Virgin Islands) v Blacks Outdoor Retail Ltd, heard 8th November 2022
R (on the application of Pearce and another) v Parole Board of England and Wales, heard 9th November 2022
News Corp UK & Ireland Ltd v Commissioners for His Majesty’s Revenue and Customs, heard 22nd November 2022
R (on the application of Maguire) v His Majesty’s Senior Coroner for Blackpool & Fylde and another, heard 22nd November 2022.