New Judgment: Hastings v Finsbury Orthopaedics Ltd and another (Scotland) [2022] UKSC 19

On appeal from [2021] CSIH 6

This appeal is unusual in that the legal issues concerning the application of the CPA are largely agreed. The basic principles may be summarised as follows. The CPA (and the EU directive which it implemented) have introduced a system of no–fault liability in respect of defective products. The test of whether a product is defective is whether the safety of the product is not such as persons generally are entitled to expect. The burden of proof is on the consumer to establish a defect and a causal link to the injury.

The nature of the MITCH–Accolade product is such that there can be no entitlement to an absolute level of safety. The test of entitled expectation is whether the level of safety of the MITCH–Accolade product would not be worse, when measured by appropriate criteria, than existing non–MoM products that would otherwise have been used. On appeal, the sole criterion of entitled expectation relied upon is the revision rate.

The appellant failed to establish his case on a statistical basis. The question which now arises for consideration is whether the rejection of the statistical evidence nevertheless leaves prima facie evidence on which the appellant can rely to prove his case.

HELD – appeal dismissed.

The generalised expressions of professional concern do not assist the appellant in establishing that the MITCH–Accolade product was defective because they related to the performance of MoM prostheses in general. The first instance judge found that the withdrawal of the MITCH–Accolade product from the market was brought about by commercial considerations. As a result, the withdrawal does not provide any support for the appellant’s case that the product was defective. Nor do the notices and alerts issued by regulators and the respondents assist the appellant. The evidence on which these notices and alerts were based appears to support a failure to meet the applicable standard of entitled expectation. However, Professor Platt’s reasons for considering that the appellant’s case of a breach of entitled expectation was not made out on a statistical basis apply equally to this category of prima facie evidence. Professor Platt’s evidence contradicts the information which formed the basis of the alerts and safety notices. The appellant submits that because there is limited available data on revisions in respect of the MITCH-Accolade product the true revision rate could be considerably different from the estimates based on the available data. However, the first instance judge rejected the appellant’s arguments regarding the limited available data. The judge held that the appellant had failed to prove the existence of a defect. Ultimately, this appeal is no more than an attempt to appeal against the judge’s findings of fact which supported that conclusion. The appellant failed to provide any basis for the Supreme Court to interfere with those findings.

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Watch hearing

28 Apr 2022
Morning session
Afternoon session

This Week in the Supreme Court – week commencing 27th June 2022

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

On Wednesday 29thnd June, the Court will hand-down judgment in the case of Hastings v Finsbury Orthopaedics Ltd and another [2022] UKSC 19. This case concerns the meaning of the term ‘defective’ within the terms of the Consumer Protection Act 1987 in the context of a hip replacement. The Court will be particularly concerned with whether the lower courts erred in law by not holding that the hip replacement was defective. Hand-down will take place at 09:45 in Courtroom One.

The following Supreme Court judgments remain outstanding: (As of 29/6/22)

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
BTI 2014 LLC v Sequana SA and Ors, heard 4 May 2021
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
Basfar v Wong, heard 13th-14th October
Harpur Trust v Brazel, heard 9th November 2021
Guest and another v Guest heard 3rd December 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
Commissioners for Her Majesty’s Revenue and Customs v NCL Investments Ltd and another, heard 25th January 2022
DCM (Optical Holdings) Ltd v Commissioners for Her Majesty’s Revenue and Customs (Scotland), heard 8th February 2022
HA and RA (Iraq) v Secretary of State for the Home Department, heard 17th May 2022
AA (Nigeria) v Secretary of State for the Home Department, heard 17th May 2022
R v Luckhurst, heard 7th June 2022
Commissioners for Her Majesty’s Revenue and Customs v NHS Lothian Health Board, heard 8th June 2022
Canada Square Operations Ltd v Potter, heard 14th June 2022
R v Andrewes, heard 21st June 2022.

New Judgment: Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd, Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd and AP Wireless II (UK) Ltd, On Tower UK Ltd (formerly known as Arqiva Services Ltd) v AP Wireless II (UK) Ltd [2022] UKSC 18

On appeals from [2019] EWCA Civ 1755, [2021] EWCA Civ 90 and [2020] UKUT 0195 (LC)

These appeals concern the grant to telecommunications operators of “code rights” enabling them to install and operate their network electronic communications apparatus (“ECA”) on land not owned by them. The main issue is whether and how an operator who has already installed ECA on a site can acquire new or better code rights from the site owner.

Code rights are governed by the Electronic Communications Code contained in a schedule to the Communications Act 2003. Paragraph 9 of the new code states that “a code right in respect of land may only be conferred on an operator by an agreement between the occupier of the land and the operator”. Such an agreement can be made with the consent of the site owner or failing that, by an operator applying to the Upper Tribunal (Land Chamber) for the imposition of an agreement on the site owner.

The Court of Appeal concluded that when an operator has already installed ECA on land, it will often be both the “operator” and “occupier of the land” for the purposes of Paragraph 9. As an operator cannot enter into an agreement with itself, the Court of Appeal concluded that in those circumstances an operator is precluded from applying for new code rights.

All the appellants are operators of mobile telecoms networks. They installed ECA on land owned by the respondents many years ago. Some of the operators simply kept their ECA installed on the land after the agreement expired, without objection from the site owner. Now the operators want to improve the security of their position on the land by applying for new code rights. The appellants argue that on the true construction of Paragraph 9, an operator with ECA on land pursuant to code rights cannot be the “occupier of the land”, and therefore that the presence of an operator’s ECA on land should be disregarded for the purposes of Paragraph 9 so that they can apply to the site owner or to the tribunal for new code rights.

The respondent site owners say that the telecoms operators’ ability to change the rights they have only arises once Part 5 of the new code applies to them. Part 5 does contain provision for the renewal and modification of an existing code agreement but only once the initial period covered by the agreement comes to an end.

HELD – In a unanimous judgment, the Supreme Court: (1) dismissed the Compton Beauchamp appeal; (2) requested further submissions from the parties in Ashloch; and (3) allowed the On Tower appeal.

The “occupier of the land” issue

The main issue before the court is whether – in determining who is the “occupier of the land” in Paragraph 9 – the word “occupier” includes an operator who is presently on the site as a result of having installed and operated ECA there, or alternatively whether you must ignore the presence of that operator’s ECA.

The Supreme Court starts from the proposition that the word “occupier” has no fixed meaning but takes its content from the context in which it appears and the purpose of the provisions in which it is used. Looking at the new code as a whole, the Supreme Court holds that an operator which is already a party to a code agreement can only apply to the Tribunal to modify the terms of existing code rights it already has once Part 5 of the new code becomes available.

This does not, however, prevent an operator on site from being able to obtain additional code rights in respect of the same land. This is an industry where technology develops quickly and Government policy is to encourage the roll out of new digital infrastructure across the whole country. It would impede this policy if operators could not apply for the new rights they need for their network simply because their ECA is already installed on the site. The bar on applying for new rights would also operate in an arbitrary way because not every installation of ECA on a site by an operator would result in that operator becoming the ‘occupier’ of the site under the test applied by the Court of Appeal. The Supreme Court also found that there are other provisions of the new code which are drafted on the assumption that an operator can apply for new code rights even if they already have ECA installed on the site.

Outcome of the appeals

Although the Supreme Court therefore largely accepts the operators’ arguments this does not result in all the appeals being allowed. The Compton Beauchamp appeal is dismissed because it was Vodafone which was in occupation of the site not the site owner Compton Beauchamp. The On Tower appeal is allowed because On Tower’s occupation of the land by virtue of its ECA being installed falls to be disregarded and there is therefore no barrier to a code agreement being imposed under Paragraph 20.

As regards the Ashloch appeal, the distinctive feature in this appeal concerns the fact that the tenancy initially conferring code rights under the old code was protected by Part 2 of the Landlord and Tenant Act 1954. This gives security of tenure to business tenants and permits the tenant to apply to the court to renew the lease when its initial term expires. The Supreme Court agrees with the Upper Tribunal and Court of Appeal that the transitional provisions mean that an operator with a subsisting agreement protected under the 1954 Act does not have the option of renewing the rights under the new code. An operator in this position must instead exercise its rights under Part 2 of the 1954 Act. It is not apparent from the description of the background facts as set out in the judgments below whether the application made by Cornerstone covered new rights or rather sought to renew the rights that can only be renewed under the 1954 Act. The Supreme Court therefore invites submissions from the parties as to whether the appeal should be remitted to the Upper Tribunal to consider this.

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Watch hearing

1 Feb 2022
Morning session
Afternoon session

2 Feb 2022
Morning session
Afternoon session

3 Feb 2022
Morning session
Afternoon session

This Week in the Supreme Court – Week Commencing 20th June 2022

This Week in the Supreme Court – w/c 20th June 2022

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

On Wednesday 22nd June, the Supreme Court will hand down a judgment that combines three appeals: Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd, Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd and another, On Tower UK Ltd (formerly known as Arqiva Services Ltd) v AP Wireless II (UK) Ltd [2022] UKSC 18. This judgment will consider whether the Upper Tribunal has the jurisdiction to confer rights under the Electronic Communications Code in relation to a particular site in certain circumstances relating to each appeal. The Court will also consider the meaning and effect of paragraphs 20 and 27 of The Code. The judgments being appealed are 2019 EWCA Civ 1755, [2021] EWCA Civ 90 and [2020] UKUT 0195 (LC) respectively.

Later on Wednesday 22nd June, the Court will hear the case of R v Andrewes, on appeal from [2020] EWCA 1055. This appeal concerns the meaning of the word ‘disproportionate’ in s6(5) of the Proceeds of Crime Act 2002, in the context of confiscation orders and whether it would be disproportionate to require a defendant to repay the recoverable amount. This will take place at 10:30am in Courtroom One.

The following Supreme Court judgments remain outstanding: (As of 22/6/22)

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
BTI 2014 LLC v Sequana SA and Ors, heard 4 May 2021
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
Basfar v Wong, heard 13th-14th October
Harpur Trust v Brazel, heard 9th November 2021
Guest and another v Guest heard 3rd December 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
Commissioners for Her Majesty’s Revenue and Customs v NCL Investments Ltd and another, heard 25th January 2022
DCM (Optical Holdings) Ltd v Commissioners for Her Majesty’s Revenue and Customs (Scotland), heard 8th February 2022
Hastings v Finsbury Orthopaedics Ltd and another (Scotland), heard 28th April 2022
HA and RA (Iraq) v Secretary of State for the Home Department, heard 17th May 2022
AA (Nigeria) v Secretary of State for the Home Department, heard 17th May 2022
R v Luckhurst, heard 7th June 2022
Commissioners for Her Majesty’s Revenue and Customs v NHS Lothian Health Board, heard 8th June 2022
Canada Square Operations Ltd v Potter, heard 14th June 2022
R v Andrewes, heard 21st June 2022.

New Judgment: Secretary of State for the Home Department v SC (Jamaica) [2022] UKSC 15

On appeal from: [2017] EWCA Civ 2112

The Appellant is a Jamaican national, born in 1991. He came to the UK in December 2001 and has lived here since then. The Appellant’s mother is a lesbian who was persecuted by gang members in Jamaica, at whose hands both the Appellant and his mother suffered violence, harassment and assault. The Appellant and his mother were granted indefinite leave to remain in the UK as refugees in October 2003. The Appellant committed several criminal offences between 2005 and 2012. In June 2012, the Appellant was convicted of assault causing actual bodily harm for which he was sentenced to two years in a young offender’s institution. As a result, the Appellant is a foreign criminal who qualifies for automatic deportation under the UK Borders Act 2007.

There is a real risk to the Appellant of inhuman or degrading treatment, contrary to article 3 of the European Convention on Human Rights in urban but not rural parts of Jamaica. So, the Appellant’s deportation to Jamaica by the Secretary of State for the Home Department would be unlawful unless the Appellant “can reasonably be expected to stay” in the rural areas of Jamaica. This is known as “internal relocation”.

 

The issues in this case are as follows:

Whether the Appellant’s criminal conduct is a factor relevant to determining if he could reasonably be expected to stay in a rural area of Jamaica, based on a value judgment of what is “due” to him as a criminal.
Did the First–tier Tribunal Judge err in holding that the Appellant could not reasonably be expected to stay in a rural area of Jamaica?
Whether the First–tier Tribunal Judge erred in her assessment of sections 117C(4)(b)–(c) of the Nationality, Immigration and Asylum Act 2003 and para 399A(b)–(c) of the Immigration Rules in finding that the Appellant is socially and culturally integrated in the UK and there would be very significant obstacles to his integration in Jamaica.
Whether the First–tier Tribunal Judge erred in law in embarking on a freestanding assessment of article 8 ECHR applying the wrong test and failing to give sufficient weight to the public interest in the Appellant’s deportation.

 

Held – Appeal unanimously allowed.

 

Reasons for the Judgment:

In respect of the first issue, the Court found that the correct approach to the question of internal relocation is a holistic assessment involving specific reference to the individual’s personal circumstances, including past persecution, psychological and health conditions, family and social situation and survival capacities. It should not take into account what is “due” to the person as a criminal.

In respect of the second issue, the Court found that the First–tier Tribunal Judge did not err in holding that the Appellant could not reasonably be expected to stay in a rural area of Jamaica, since this was the logical consequence of her findings, based on medical evidence, that the Appellant was in need of long–term psychological treatment. The First–tier Tribunal Judge also relied on her findings that the Appellant had no family or personal connections anywhere in Jamaica, and no familiarity with anywhere outside of Kingston.

In respect of the third issue, the Court found that the First–tier Tribunal Judge did not err in relation to the Appellant’s social and cultural integration in the UK, as this is a fact–sensitive determination. Furthermore, the First–tier Tribunal Judge did not err in relation to the “very significant obstacles” to the Appellant’s integration in Jamaica, having considered in “meticulous detail” the Appellant’s history of mental illness and trauma, and need for long–term psychological care.

In respect of the fourth issue, the Court found no error of law by the First–tier Tribunal Judge on the basis that she is an “expert tribunal judge” who “in substance directed herself in accordance with the applicable statutory test”.

The Court allowed all grounds of this appeal.

 

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19 Oct 2021 Morning session Afternoon session

New Judgment: AIC Ltd v Federal Airports Authority of Nigeria [2022] UKSC 16

On appeal from [2020] EWCA Civ 1585

The appeal concerns the court’s discretion to reconsider a judgment and order after it has been given but before the formal order has been sealed by the court.

The Respondent was the successful claimant in a Nigeria–based arbitration with the Appellant. FAAN was ordered to pay US$48.13m to the respondent, plus interest at 18% per annum (“the Award”). FAAN continues to challenge the Award in the Nigerian courts (“the Nigerian Proceedings”).

The respondent sought permission from the High Court to enforce the Award in England and Wales. This was initially granted, however the High Court set this order aside and adjourned the claim pending developments in the Nigerian Proceedings. This was on the condition, however, that the appellant provide security of around US$24m by way of a bank guarantee.

The Guarantee was not provided on time. The High Court judge gave an oral judgment and made an order permitting the respondent to enforce the Award. However, the Enforcement Order was not sealed immediately.

The appellant obtained the Guarantee later the same day, provided it to the respondent and applied to re–open the judgment and set aside the Enforcement Order. The judge set aside the Enforcement Order and retrospectively extended time for the provision of the Guarantee.

The Court of Appeal allowed the appeal against the judge’s revised decision and reinstated the Enforcement Order. As a result, the respondent had both an unlimited right to enforce the Award and the benefit of the Guarantee as an asset against which to enforce. The respondent accordingly called on the Guarantee, which was paid in full by the appellant’s bank.

HELD – The Supreme Court unanimously allowed the appeal, although only in part.

The judge said that the application of the overriding objective in the context of deciding whether to re–consider an order not yet sealed was a question of balance. The Court of Appeal disagreed, ruling that a two–stage analysis was required: (1) whether it was right to entertain the application to re–consider at all; and, if it was, (2) consider the application on its merits.

The Supreme Court considers that both the judge and the Court of Appeal were only partly right. Previous caselaw shows that the task of a judge faced with an application to reconsider a judgment and/or order prior to sealing is to do justice in accordance with the overriding objective and the principle of finality. This principle holds that parties should not ordinarily be able to raise new arguments after an order has been made which it should have raised at the relevant hearing.

Therefore, when determining an application to reconsider a final judgment and/or order before the order has been sealed, a judge should not start from evenly–balanced scales as the judge did but should give great weight to the finality principle. However, although it will often be a useful mental discipline for a judge to ask whether the application should be entertained at all, there is no rule of law or practice that such an application must always be addressed by a two-stage process as held by the Court of Appeal. The finality principle is better reflected by recognition that it will always be a weighty matter in the balance against making a different order, rather than always requiring a two–stage process of analysis.

The Supreme Court accordingly rejects the Court of Appeal’s two–stage approach, but also finds that the judge did not give the finality principle the central importance which it deserved. It therefore falls to the Supreme Court to re-exercise the discretion afresh as to whether to re–open the High Court’s judgment and Enforcement Order. In doing so the Supreme Court also assesses whether the appellant satisfies the test to be granted relief from sanctions, despite its failure to comply with the timetable set by the High Court for provision of the Guarantee.

The Supreme Court concludes that the appeal should succeed, but only in part. The Enforcement Order as re-made by the Court of Appeal should be set aside, and the respondent’s application for leave to enforce the Award should be adjourned to await the outcome of the Nigerian Proceedings.

Two large factors weigh in the scales against the re–opening of the Enforcement Order: (1) the finality principle and (2) the delay in providing the Guarantee for which no good reason has been provided. Nonetheless, the fact that the Guarantee was provided to the respondent was an important change in circumstances. The respondent had therefore got the benefit of both the Enforcement Order as well as the Guarantee against which the Award could be enforced in part. In the circumstances, the judge’s view that justice demanded that this windfall should be undone commanded real respect.

Although not clear cut, the Supreme Court is persuaded on balance that the respondent should not retain the right to enforce the Award, pending the outcome of the Nigerian Proceedings. The Supreme Court therefore set aside the Enforcement Order and confirms the judge’s extension of time for the provision of the Guarantee.

Watch hearing

1 March 2022
Morning session
Afternoon session

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New Judgment: In the matter H-W (Children), In the matter H-W (Children) (No 2) [2022] UKSC 17

On appeal from: [2021] EWCA Civ 1451

These appeals concern care orders made in relation to three children, who are referred to as C, D and E to preserve their anonymity. C, D and E are now aged 14, 11 and nine respectively. The appellants are the children’s mother, M, and her partner, F3. In addition to C, D and E, M has three other children. The eldest are A, aged 22, and B, aged 19, both of whom are independent and live outside the family unit. M also has a young child with F3 who is referred to as F. The other children in the family unit have different fathers. C and D’s father is referred to as F1, whilst E’s father is F2. C, D and E live at home with their mother and F3, who acts as their stepfather.

The current proceedings were triggered by the conduct of A. He is a troubled young man and M was expected by social services to prevent A from staying in the family home and being unsupervised around the children. Nevertheless, A visited the house for short periods. When A was at the house on 18 November 2019, he sexually abused E whilst M and F3 were distracted. This was not reported to social services until 21 November 2019. In March 2020, court proceedings were issued by the local authority seeking care orders, and removal from the home, not only of C, D and E, but also of F. The local authority’s case against M and F3 was that they had failed to protect E and the other children from A and failed to notify the social services when he abused E in the home. The local authority’s initial application for an emergency protection order to remove C, D and E was refused. However, a non-molestation order was also made against A which (among other things) prevented him from coming to the family home.

The proceedings came to court for hearing before the judge. The judge made certain factual findings in relation to A’s assault on E in November 2019 at the threshold criteria stage. Thereafter, a welfare hearing took place. On 26 July 2021, the judge decided that care orders should be made for C, D and E but that the case of F should be adjourned. The Court of Appeal upheld the judge’s decision by a majority.

M and F3 appealed. Their grounds of appeal were refined by the Supreme Court into two questions concerning the making of the care orders for C, D and E.

In order to decide whether those orders were proportionate, was it necessary for the judge as a matter of law to assess the likelihood that if left in M’s care, (a) the children would suffer sexual harm; (b) the consequences of such harm arising; (c) the possibility of reducing or mitigating the risk of such harm; and (d) the comparative welfare advantages and disadvantages of the options presented.
Whether the judge erred in law by failing to make any or any proper assessment of those matters.

 

Held – Appeal unanimously allowed.

 

Legal principles:

Applications for a care order such as the present will require the judge to perform three stages of analysis. First, find the relevant primary facts. Second, determine whether the legal threshold for the making of a care order has been crossed under the Children Act 1989. Third, if that threshold has been crossed, decide the proper order to make. Where the judge is considering whether to make a care order in a case such as this, the judge must have regard to the matters set out in Section 1(3) of the Children Act 1989 (which are commonly referred to as the ‘welfare checklist’). These include, among other matters, any harm which the child has suffered or is at risk of suffering and the consideration of the range of powers available to the Court. The Court’s ability to make a care order is an intrusive power which engages article 8 of the European Convention on Human Rights (the right to private and family life). Accordingly, the Court may only make a care order if it is necessary and proportionate to do so. When deciding whether a care order is necessary and proportionate, the judge must evaluate all the available options for the child or children concerned. Where there is an appeal from a care order, the function of an appellate court is to review the judge’s findings and to intervene only if they are wrong or if the process of the judge’s reasoning was inadequate (as the Supreme Court held in In re B (A Child) (Care Proceedings: Threshold Criteria) [2013] UKSC 33; [2013] 1 WLR 1911). As explained by the majority in In re B, an appellate court is not required to conduct a fresh evaluation of whether a care order is necessary and proportionate.

 

This case:

The appellants, M and F3, argued that the decision of the judge to make the orders in relation to C, D and E was wrong because the judge failed to consider other less interventionist options which would mitigate the risk of sexual harm. The local authority accepted that the judge had not specifically considered the range of powers available to the Court (as required under the welfare checklist). However, the local authority contended that the judge’s decision read as whole confirmed that the judge had considered all possible options.

The present case does not involve any challenge to the judge’s findings of primary fact. Nor is there any challenge to the judge’s conclusion that the legal threshold for the making of a care order has been crossed. Instead, M and F3’s appeals concern whether the judge erred in the third stage of his analysis – namely in finding that the care orders were necessary and proportionate. The real issue is not whether the judge reached a conclusion that was wrong, but the adequacy of the judge’s process of reasoning in reaching his conclusion.

The first issue before the Court was whether it was necessary for the judge as a matter of law to assess matters (a) to (d) set out above. The Court has no hesitation in concluding that the judge was required to assess all four of those matters. Their pertinence is an inevitable consequence of a holistic evaluation in a case of this nature and specifically flow from consideration of the welfare checklist. The second issue before the Court concerns whether the judge erred in law by failing to make any proper assessment of those matters. There is no valid argument in relation to matters (a) to (b) (namely, whether the children would suffer sexual harm the consequences of such harm arising). This appeal boils down to matters (c) and (d), which concern mitigations and options. The judge’s treatment of the facts and evidence was thorough. However, the judge did not mention the efficacy of the injunction against F2 and the non-molestation order made against A. Moreover, his decision was insufficiently founded on the necessary analysis. Indeed, one looks in vain for the critical side-by-side analysis of the available options and for the evaluative, holistic assessment which the law requires of a judge in such proceedings such.

The process adopted by the judge was therefore flawed as it did not adequately assess the prospects of various options to mitigate the risk of sexual harm. An adjudicating court will need to scrutinise a revised plan and be satisfied as to any mitigations which might address the identified risks. This court is not equipped to conduct that exercise. It would be inappropriate for the Supreme Court as an appellate court to conduct a fresh proportionality assessment. Instead, the only realistic course is to remit the case for rehearing.

 

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Watch hearing:

22 March 2022 Morning session Afternoon session

 

 

This Week in the Supreme Court – Week Commencing 13th June 2022

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

On Tuesday 14th June, the Court will hear the case of Canada Square Operations Ltd v Potter. This case concerns the meaning and effect of section 32 of the Limitation Act 1980, which postpones the commencement of a limitation period where a fact relevant to the claimant’s claim has been “deliberately concealed” by the defendant. The Supreme Court is asked to decide:1. What does “deliberate” mean in this context? Is recklessness sufficient, or is actual knowledge required? 2. What does “conceal” mean in this context? Does it require the defendant to have breached a legal duty to disclose? The judgment being appealed is [2021] EWCA 339.

On Wednesday 15th June, the Court will hand down three judgments, starting at 09:45 in Courtroom One:

Secretary of State for the Home Department v SC (Jamaica) [2022] UKSC 15

This is an immigration matter in which the court will consider the reasonable expectation to stay in Jamaica and any significant obstacles, and the correct tests to be applied. The judgment being appealed is [2017] EWCA Civ 2112.

AIC Ltd v Federal Airports Authority of Nigeria [2022] UKSC 16

This is a permission to appeal the decision of [2020] EWCA Civ 1585, hoping to clarify the correct approach to an application to reconsider an order after it has been made, but before it has been sealed.

In the matter H-W (Children) and (No 2) [2022] UKSC 17

When an appellate court reviews a first instance decision concerning the proportionality of orders made under the courts’ obligations under the Human Rights Act 1998, is it necessary for the appellate court to undertake its own proportionality assessment of that decision? [2021] EWCA Civ 1451 is the judgment being appealed.

 

The following Supreme Court judgments remain outstanding: (As of 15/6/22)

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
BTI 2014 LLC v Sequana SA and Ors, heard 4 May 2021
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
Basfar v Wong, heard 13th-14th October
Harpur Trust v Brazel, heard 9th November 2021
Guest and another v Guest heard 3rd December 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
Commissioners for Her Majesty’s Revenue and Customs v NCL Investments Ltd and another, heard 25th January 2022
Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd, Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd and another and On Tower UK Ltd (formerly known as Arqiva Services Ltd) v AP Wireless II (UK) Ltd, heard 1st February 2022
DCM (Optical Holdings) Ltd v Commissioners for Her Majesty’s Revenue and Customs (Scotland), heard 8th February 2022
Hastings v Finsbury Orthopaedics Ltd and another (Scotland), heard 28th April 2022
HA and RA (Iraq) v Secretary of State for the Home Department, heard 17th May 2022
AA (Nigeria) v Secretary of State for the Home Department, heard 17th May 2022
R v Luckhurst, heard 7th June 2022
Commissioners for Her Majesty’s Revenue and Customs v NHS Lothian Health Board, heard 8th June 2022
Canada Square Operations Ltd v Potter, heard 14th June 2022

This Week in the Supreme Court – Week Commencing 6th June 2022

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

On Tuesday 7th June, the Court will hear the case of R v Luckhurst, on appeal from [2020] EWCA 1579. The appeal will consider the scope of permitted legal expenditure as an exception to a restraint order granted pursuant to section 41 of the Proceeds of Crime Act 2002. In particular, whether s41(4) prohibits an exception for reasonable legal expenses in respect of civil proceedings arising out of the same or similar facts as those that gave rise to the restraint order. The hearing will begin at 10am in Courtroom Two.

On Wednesday 8th June, the Court will hear Commissioners for Her Majesty’s Revenue and Customs v NHS Lothian Health Board. In appealing the judgment of  [2020] CSIH 14, the Court will hear submissions on the correct approach that should be taken by courts and tribunals regarding evidence that the burden and standard of proof in historical claims for the recovery of VAT.

The following Supreme Court judgments remain outstanding: (As of 08/06/22)

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
BTI 2014 LLC v Sequana SA and Ors, heard 4 May 2021
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
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Secretary of State for the Home Department v SC (Jamaica), heard 19th October
Harpur Trust v Brazel, heard 9th November 2021
Guest and another v Guest heard 3rd December 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
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Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd, Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd and another and On Tower UK Ltd (formerly known as Arqiva Services Ltd) v AP Wireless II (UK) Ltd, heard 1st February 2022
DCM (Optical Holdings) Ltd v Commissioners for Her Majesty’s Revenue and Customs (Scotland), heard 8th February 2022
Hastings v Finsbury Orthopaedics Ltd and another (Scotland), heard 28th April 2022
HA and RA (Iraq) v Secretary of State for the Home Department, heard 17th May 2022
AA (Nigeria) v Secretary of State for the Home Department, heard 17th May 2022
R v Luckhurst, heard 7th June 2022
Commissioners for Her Majesty’s Revenue and Customs v NHS Lothian Health Board, heard 8th June 2022

Case Preview: DCM (Optical Holdings) Ltd v Commissioners for Her Majesty’s Revenue and Customs (Scotland)

In this post, Neal Chandru, an associate in the Tax team at CMS, previews the decision awaited from the Supreme Court in DCM (Optical Holdings) Ltd v Commissioners for Her Majesty’s Revenue and Customs (Scotland) [2020] CSIH 60. The appeal was heard by the Supreme Court on 8 February 2022.

Background

DCM is an optician that sells spectacles and provides refractive eye surgery services.  Under the value added tax regime, it makes both taxable supplies of goods and exempt supplies of medical services.  The dual nature of its supplies creates difficulties in calculating the amount of VAT chargeable on its supplies and input tax recoverable on its acquisitions. In fact, from at least 2000, DCM had been in dispute with HMRC over a different input tax and output tax related issue.

In 2003, DCM

entered into a settlement agreement with HMRC under which it agreed that 64% of its supplies were exempt supplies and 36% were taxable supplies under a full cost apportionment methodology; and

notified HMRC that it had been using the standard method to apportion residual input tax between taxable and exempt supplies in proportion to the value of those supplies.

In the relevant periods, DCM acted contrary to the settlement agreement and the notification. In particular, it treated 70 % of its supplies as exempt and 30% of its supplies as taxable, and it did not use the standard method to apportion residual input tax but instead adopted a different method under which a greater percentage residual input tax was recovered.

Issues on Appeal

The first issue on appeal before the Supreme Court is whether tax assessments made by HMRC in 2005 through which HMRC sought to recover additional output tax on the basis of a 64/36 split between exempt supplies and taxable supplies (as opposed to the 70/30 split adopted by DCM) were made out of time and therefore time barred. The second issue is whether HMRC have an implied power to refuse to accept a sum claimed by a taxpayer by way of input tax.

With respect to the first issue, DCM argues that the 2005 assessments were issued out of time under s 73(6) of the Value Added Tax Act 1994 (‘VATA’). The section relevantly provides that the assessments issued in October 2005 shall not be made later than

one year after evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge’.

As HMRC knew from 29 January 2004 that DCM had not been using a full cost apportionment methodology to calculate the split between exempt and taxable supplies, DCM argued that 29 January 2005 was the last date on which the assessments could be raised. As they were raised on 20 October 2005, they were out of time.

With respect to the second issue, DCM argues that HMRC does not have an implied power to refuse to accept a sum claimed by a taxpayer by way of input tax. If DCM is right about this, then HMRC would have had no basis on which to refuse DCM’s input tax claim, given the time limits for making assessments, or issuing directions to a taxpayer to amend their return under regulation 35 of The Value Added Tax Regulations 1995, had expired.

Procedural History

The two issues on appeal had been decided adversely to DCM in the First-tier Tribunal (‘FTT’). The FTT decided that the 2005 assessments had been made in time and that HMRC had an implied power to refuse to accept a sum claimed by a taxpayer by way of input tax as it had a duty to investigate repayment claims.

In deciding that the 2005 assessment had been made in time, the FTT noted that it was only in August 2005, that is, not earlier than one year before the date the 2005 assessments had been made, that HMRC:

had been provided information relating to the percentage split used by DCM to calculate taxable outputs for the relevant periods; and
discovered that DCM had not been using the standard method to apportion residual input tax but had instead been using a different method under which a greater percentage of residual input tax was recovered.

As this information enabled HMRC to calculate the figures underpinning the 2005 assessment, the 2005 assessment had been made in time.  In coming to this conclusion, the FTT treated VAT assessments as “unitary” assessments.  This means that if HMRC discovers facts relating to a taxpayer’s overstated input tax, it can within one year not only make an assessment to counteract the overstated input tax but can also make an assessment to counteract any understated output tax for the same VAT accounting period.  The alternative approach would involve treating the elements of a VAT assessment as distinct.  The time limits for making VAT assessments under s 73(6) VATA would then have to be applied separately to the different components of the assessment.  On this alternative approach, HMRC’s discovery of facts relating to overstated input tax would not enable it to make an assessment relating to understated output tax. HMRC would be precluded from making an assessment relating to understated output tax because facts relating to understated output tax (as opposed to overstated input tax) would not have been discovered within the previous year.

On appeal, the Upper Tribunal agreed with the FTT that HMRC had an implied power to refuse to accept a sum claimed by a taxpayer by way of input tax, but it overturned the FTT’s decision that the 2005 assessments had been made in time. Those assessments were instead out of time to the extent they assessed DCM as having understated output tax. According to the Upper Tribunal, the only new information that had come into HMRC’s possession not earlier than one year before the date the 2005 assessments had been made related to overstated input tax.  In particular, it related to DCM’s failure to use the standard method to apportion residual input tax.  The information relating to understated output tax had, however, been known to HRMC since 29 January 2004.  In reaching the conclusion that the 2005 assessments were out of time to the extent they assessed DCM as having understated output tax, the Upper Tribunal in contrast to the FTT found that VAT assessments are not “unitary”.  The consequence of this is that HMRC’s discovery of facts relating to overstated input tax does not enable it to make an assessment relating to understated output tax and vice versa.

The Inner House of the Court of Session reinstated the relevant conclusions of the FTT.  It agreed with the FTT and the Upper Tribunal that HMRC had an implied power to refuse to accept a sum claimed by a taxpayer by way of input tax.  It agreed with the FTT, and thus disagreed with the Upper Tribunal, that the 2005 assessments had been made in time.  In coming to this conclusion, the Inner House stated that the Upper Tribunal had not been entitled to overturn the FTT’s finding of fact that the new information that had come into HMRC’s possession in August 2005 related to both overstated input tax and understated output tax, rather than just to overstated input tax.  As this new information had come into HMRC’s possession not earlier than one year before the date the 2005 assessments had been made, the 2005 assessments were in time.  The Inner House did not comment on whether the Upper Tribunal was right to conclude that VAT assessments are not unitary assessments as it was not necessary to do so to determine the appeal, and thus the Upper Tribunal’s conclusion in this respect remains good law.

Comment

DCM is a case of great significance.  The two issues to be decided by the Supreme Court are of central importance to the operation and administration of the value added tax regime.  Moreover, the Supreme Court will have the opportunity to determine an issue on which the FTT and Upper Tribunal reached opposite conclusions and on which the Inner House did not opine: that is, whether VAT assessments are unitary assessments.

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